<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED
FEBRUARY 1, 1997
COMMISSION FILE NUMBER
1-13536
FEDERATED DEPARTMENT STORES, INC.
151 WEST 34TH STREET
NEW YORK, NEW YORK 10001
(212) 695-4400
AND
7 WEST SEVENTH STREET
CINCINNATI, OHIO 45202
(513) 579-7000
INCORPORATED IN DELAWARE I.R.S. NO. 13-3324058
------------------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
- ------------------------------------------------------------- -------------------------
<S> <C>
Common Stock, par value $.01 per share New York Stock Exchange
Rights to Purchase Series A Junior Participating Preferred
Stock New York Stock Exchange
Series C Warrants New York Stock Exchange
Series D Warrants New York Stock Exchange
10% Senior Notes due 2001 New York Stock Exchange
8.125% Senior Notes due 2002 New York Stock Exchange
5% Convertible Notes due 2003 New York Stock Exchange
8.5% Senior Notes due 2003 New York Stock Exchange
</TABLE>
------------------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
None
The Company has filed all reports required to be filed by Section 12, 13,
or 15(d) of the Act during the preceding 12 months and has been subject to such
filing requirements for the past 90 days.
Disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is
contained in a definitive proxy statement incorporated by reference in Part III
of this Form 10-K.
There were 208,379,561 shares of the Company's Common Stock outstanding as
of April 4, 1997, excluding shares held in the treasury of the Company or by
subsidiaries of the Company. The aggregate market value of the shares of such
Common Stock, excluding shares held in the treasury of the Company or by
subsidiaries of the Company, based upon the last sale price as reported on the
New York Stock Exchange Composite Tape on April 4, 1997, was approximately
$6,980,700,000.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the definitive proxy statement (the "Proxy Statement") relating
to the Company's Annual Meeting of Stockholders to be held on May 16, 1997 (the
"Annual Meeting"), are incorporated by reference in Part III hereof.
<PAGE> 2
Unless the context otherwise requires, (i) references herein to the
"Company" are, for all periods prior to December 19, 1994 (the "Merger Date"),
references to Federated Department Stores, Inc. ("Federated") and its
subsidiaries and their respective predecessors, and, for all periods following
the merger (the "Merger") of Federated and R.H. Macy & Co., Inc. ("Macy's") on
the Merger Date, references to the surviving corporation in the Merger and its
subsidiaries, and (ii) references to "1996", "1995", "1994", "1993" and "1992"
are references to the Company's fiscal years ended February 1, 1997, February 3,
1996, January 28, 1995, January 29, 1994, and January 30, 1993, respectively.
ITEM 1. BUSINESS.
General. The Company is one of the leading operators of full-line
department stores in the United States, with 411 department stores in 33 states
as of February 1, 1997. The Company's department stores sell a wide range of
merchandise, including men's, women's and children's apparel and accessories,
cosmetics, home furnishings and other consumer goods, and are diversified by
size of store, merchandising character and character of community served. The
Company's department stores are located at urban or suburban sites, principally
in densely populated areas across the United States. The Company also operates
more than 150 specialty stores under the names "Aeropostale" and "Charter Club",
and a mail order catalog business under the name "Bloomingdale's By Mail".
The following table sets forth certain information with respect to each of
the Company's retail operating divisions:
<TABLE>
<CAPTION>
FEBRUARY 1, 1997 FEBRUARY 3, 1996
------------------------- -------------------------
GROSS GROSS
NUMBER OF SQUARE NUMBER OF SQUARE
STORES FEET(A) STORES FEET(A)
--------- ----------- --------- -----------
(THOUSANDS) (THOUSANDS)
<S> <C> <C> <C> <C>
Bloomingdale's................................ 21 5,578 17 4,689
The Bon Marche................................ 42 5,038 41 4,960
Burdines...................................... 48 7,942 47 7,884
Macy's East................................... 90 23,673 89 23,355
Macy's West................................... 109 21,093 116 22,518
Rich's/Lazarus/Goldsmith's.................... 76 14,780 75 14,672
Stern's....................................... 25 4,915 27 5,425
Macy's Specialty.............................. 153 561 153 555
--- ------ --- ------
Total............................... 564 83,580 565 84,058
=== ====== === ======
</TABLE>
- ---------------
(a) Reflects total square footage of store locations, including office, storage,
service and other support space that is not dedicated to direct merchandise
sales, but excluding warehouses and distribution terminals not located at
store sites.
In general, each of the Company's retail operating divisions is a separate
subsidiary of the Company. However, the Macy's West division and the
Rich's/Lazarus/Goldsmith's division each comprises three separate subsidiaries
of the Company.
The Company provides electronic data processing and other support functions
to its retail operating divisions on an integrated, Company-wide basis. In
addition, the Company's financial and credit services subsidiary, FACS Group,
Inc. ("FACS"), which is based near Cincinnati, Ohio, establishes and monitors
credit policies on a Company-wide basis. FACS also provides proprietary credit
services, including credit authorizations, new account development and
processing, and customer service, to each retail operating
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division of the Company and collection services to each of the retail operating
divisions that were divisions of Federated prior to the Merger and in respect of
the "Macy's" credit card accounts owned by the Company. GE Capital Consumer Card
Co. ("GE Bank"), which purchased all of the "Macy's" credit card accounts owned
by Macy's prior to the Merger (and with which the Company has an agreement
regarding the allocation of the ownership of "Macy's" credit card accounts
originated subsequent to the Merger) provides statement processing and mailing
to each retail operating division of the Company and collection services in
respect of the GE Bank-owned "Macy's" credit card accounts. The Company's data
processing subsidiary, Federated Systems Group, Inc. ("FSG"), which is based
near Atlanta, Georgia, provides (directly and pursuant to outsourcing
arrangements with third parties) operational electronic data processing and
management information services to each of the Company's retail operating
divisions. In addition, a specialized staff maintained in the Company's
corporate offices in Cincinnati provides services for all divisions in such
areas as store design and construction, accounting, real estate, insurance and
supply purchasing, as well as various other corporate office functions. FACS,
FSG, a specialized service subsidiary and certain departments in the Company's
corporate offices offer their services to unrelated third parties as well.
Federated Merchandising Group, a division of the Company based in New York City,
helps the Company to centrally develop and execute consistent merchandise
strategies while retaining the ability to tailor merchandise assortments and
merchandising strategies to the particular character and customer base of the
Company's various department store franchises. Federated Merchandising Group is
also responsible for the private label development of the Company's retail
operating divisions except for Bloomingdale's (which has its own private label
program) and Stern's (which sources its private label merchandise through
Associated Merchandising Corporation). Federated Logistics, a division of
Federated Corporate Services, Inc., a subsidiary of the Company, based in
Secaucus, New Jersey, provides warehousing and merchandise distribution services
for the Company's retail operating divisions.
The Company and its predecessors have been operating department stores
since 1830. Federated was organized as a Delaware corporation in 1929. On
February 4, 1992, Allied Stores Corporation ("Allied") was merged into
Federated. On May 26, 1994, Federated acquired Joseph Horne Co., Inc. pursuant
to a subsidiary merger. On December 19, 1994, Federated acquired Macy's pursuant
to the Merger. On October 11, 1995, the Company acquired Broadway Stores, Inc.
("Broadway") pursuant to a subsidiary merger.
The Company's executive offices are located at 151 West 34th Street, New
York, New York 10001, telephone number: (212) 695-4400 and at 7 West Seventh
Street, Cincinnati, Ohio 45202, telephone number: (513) 579-7000.
Employees. As of February 1, 1997, the Company had approximately 117,100
regular full-time and part-time employees. Because of the seasonal nature of the
retail business, the number of employees peaks in the Christmas season.
Approximately 10% of the Company's employees as of February 1, 1997 were
represented by unions. Management considers its relations with employees to be
satisfactory.
Seasonality. The department store business is seasonal in nature with a
high proportion of sales and operating income generated in the months of
November and December. Working capital requirements fluctuate during the year,
increasing somewhat in mid-summer in anticipation of the fall merchandising
season and increasing substantially prior to the Christmas season when the
Company must carry significantly higher inventory levels.
Purchasing. The Company purchases merchandise from many suppliers, no one
of which accounted for more than 5% of the Company's net purchases during 1996.
The Company has no long-term purchase
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commitments or arrangements with any of its suppliers, and believes that it is
not dependent on any one supplier. The Company considers its relations with its
suppliers to be satisfactory.
Competition. The retailing industry, in general, and the department store
business, in particular, are intensely competitive. Generally, the Company's
stores are in competition not only with other department stores in the
geographic areas in which they operate but also with numerous other types of
retail outlets, including specialty stores, general merchandise stores,
off-price and discount stores, new and established forms of home shopping
(including mail order catalogs, television and computer services) and
manufacturers' outlets.
ITEM 1A. EXECUTIVE OFFICERS OF THE REGISTRANT.
The following table sets forth certain information regarding the executive
officers of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
------------------------- --- -------------------------------------------------------
<S> <C> <C>
Allen I. Questrom........ 57 Chairman of the Board and Chief Executive Officer;
Director
James M. Zimmerman....... 53 President and Chief Operating Officer; Director
Ronald W. Tysoe.......... 44 Vice Chairman of the Board and Chief Financial Officer;
Director
Thomas G. Cody........... 55 Executive Vice President -- Legal and Human Resources
Dennis J. Broderick...... 48 Senior Vice President, General Counsel and Secretary
Karen M. Hoguet.......... 40 Senior Vice President -- Planning and Treasurer
Joel A. Belsky........... 43 Vice President and Controller
</TABLE>
Allen I. Questrom has been Chairman of the Board and Chief Executive
Officer of the Company since February 1990. Mr. Questrom has announced his
decision to resign all his positions with the Company effective as of the close
of business on the day of the Annual Meeting.
James M. Zimmerman has been President and Chief Operating Officer of the
Company since May 1988. Mr. Zimmerman has been elected by the Board of Directors
of the Company as Chairman and Chief Executive Officer of the Company, effective
as of the close of business on the day of the Annual Meeting.
Ronald W. Tysoe has been Vice Chairman and Chief Financial Officer of the
Company since April 1990.
Thomas G. Cody has been Executive Vice President -- Legal and Human
Resources of the Company since May 1988.
Dennis J. Broderick has been Secretary of the Company since July 1993 and
Senior Vice President and General Counsel of the Company since January 1990.
Karen M. Hoguet has been Senior Vice President -- Planning of the Company
since April 1991 and Treasurer of the Company since January 1992.
Joel A. Belsky has been Vice President and Controller of the Company since
October 1996; prior thereto, he served as Divisional Vice President and Deputy
Controller of the Company since March 1993, and prior thereto as Vice President
of Finance and Chief Financial Officer of the Rich's/Goldsmith's division of the
Company (now Rich's/Lazarus/Goldsmith's).
Upon Mr. Questrom's retirement, effective as of the close of business on
the day of the Annual Meeting, Terry J. Lundgren will become President and Chief
Merchandising Officer of the Company and is expected to be elected as a director
following the Annual Meeting. Mr. Lundgren, age 44, has been Chairman of
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Federated Merchandising Group, a division of the Company, since February 1994;
prior thereto he was Chairman and Chief Executive Officer of The Neiman Marcus
Group, Inc. since February 1990.
ITEM 2. PROPERTIES.
The properties of the Company consist primarily of stores and related
retail facilities, including warehouses and distribution centers. The Company
also owns or leases other properties, including corporate office space in New
York and Cincinnati and other facilities at which centralized operational
support functions are conducted. As of February 1, 1997, the Company operated
411 department stores, of which 203 stores were entirely or mostly owned and 208
stores were entirely or mostly leased. The Company's interests in approximately
27% of its owned stores and approximately 6% of its leased stores are subject to
security interests in favor of certain third-party creditors. See "Mortgages"
and "Secured Promissory Note" in Note 9 to the Consolidated Financial
Statements. Pursuant to various shopping center agreements, the Company is
obligated to operate certain stores within the centers for periods of up to 20
years. Some of these agreements require that the stores be operated under a
particular name.
See "Item 1. Business" for information regarding the number of stores and
total gross square feet (in thousands) of store space, operated by the Company
as of the end of each of the last two fiscal years. Such information is
incorporated herein by reference.
ITEM 3. LEGAL PROCEEDINGS.
The Company and its subsidiaries are involved in various proceedings that
are incidental to the normal course of their businesses. The Company does not
expect that any of such proceedings will have a material adverse effect on the
Company's financial position or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS.
None.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Common Stock is listed on the New York Stock Exchange (the "NYSE")
under the trading symbol "FD." The following table sets forth for each fiscal
quarter during 1996 and 1995 the high and low sales prices per share of Common
Stock as reported on the NYSE Composite Tape:
<TABLE>
<CAPTION>
1996 1995
--------------- ---------------
LOW HIGH LOW HIGH
------ ------ ------ ------
<S> <C> <C> <C> <C>
1st Quarter.................................. 26.125 34.750 18.500 23.125
2nd Quarter.................................. 29.375 36.625 20.875 28.125
3rd Quarter.................................. 31.125 36.125 24.500 30.125
4th Quarter.................................. 30.000 37.000 25.000 29.750
</TABLE>
The Company has not paid any dividends on its Common Stock during its two
most recent fiscal years, and does not anticipate paying any dividends on the
Common Stock in the foreseeable future. In addition, the covenants in certain
debt instruments to which the Company is a party restrict the ability of the
Company to pay dividends.
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<PAGE> 6
ITEM 6. SELECTED FINANCIAL DATA
The selected financial data set forth below should be read in conjunction
with the Consolidated Financial Statements and the notes thereto and the other
information contained elsewhere in this report.
<TABLE>
<CAPTION>
52 WEEKS 53 WEEKS 52 WEEKS 52 WEEKS 52 WEEKS
ENDED ENDED ENDED ENDED ENDED
FEBRUARY 1, FEBRUARY 3, JANUARY 28, JANUARY 29, JANUARY 30,
1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
(THOUSANDS, EXCEPT PER SHARE DATA)
Consolidated Statement of Income Data:
Net sales, including leased department
sales................................... $15,228,999 $15,048,513 $ 8,315,877 $ 7,229,406 $ 7,079,941
----------- ----------- ----------- ---------- ----------
Cost of sales:
Recurring............................... 9,288,686 9,317,784 5,131,363 4,373,941 4,229,396
Inventory valuation adjustments related
to consolidation...................... 65,681 91,637 14,880 -- --
----------- ----------- ----------- ---------- ----------
Total cost of sales....................... 9,354,367 9,409,421 5,146,243 4,373,941 4,229,396
Selling, general and administrative
expenses:
Recurring............................... 4,738,483 4,748,331 2,549,122 2,323,546 2,420,684
Business integration and consolidation
expenses.............................. 242,950 202,293 70,987 -- --
Charitable contribution to Federated
Department Stores Foundation.......... -- 25,581 -- -- --
----------- ----------- ----------- ---------- ----------
Total selling, general and administrative
expenses................................ 4,981,433 4,976,205 2,620,109 2,323,546 2,420,684
Operating income.......................... 893,199 662,887 549,525 531,919 429,861
Interest expense.......................... (498,616) (508,132) (262,115) (213,544) (258,211)
Interest income........................... 46,852 47,104 43,874 49,405 60,357
----------- ----------- ----------- ---------- ----------
Income before income taxes and
extraordinary items..................... 441,435 201,859 331,284 367,780 232,007
Federal, state and local income tax
expense................................. (175,571) (127,306) (143,668) (170,987) (99,299)
Extraordinary items (a)................... -- -- -- (3,545) (19,699)
----------- ----------- ----------- ---------- ----------
Net income................................ $ 265,864 $ 74,553 $ 187,616 $ 193,248 $ 113,009
=========== =========== =========== ========== ==========
Earnings per Share of Common Stock:
Income before extraordinary items......... $ 1.28 $ .39 $ 1.41 $ 1.56 $ 1.19
Net income................................ 1.28 .39 1.41 1.53 1.01
Average number of shares outstanding........ 207,537 191,503 132,862 126,293 111,350
Depreciation and amortization............... $ 533,362 $ 496,911 $ 285,861 $ 229,781 $ 230,124
Capital expenditures........................ $ 846,016 $ 699,306 $ 397,664 $ 312,960 $ 207,931
Balance Sheet Data (at year end):
Cash...................................... $ 148,794 $ 172,518 $ 206,490 $ 222,428 $ 566,984
Working capital........................... 2,831,603 3,262,296 2,375,654 1,967,569 2,227,336
Total assets.............................. 14,264,143 14,295,050 12,276,990 7,419,427 7,019,770
Short-term debt........................... 1,094,557 733,115 463,042 10,099 12,944
Long-term debt............................ 4,605,916 5,632,232 4,529,220 2,786,724 2,809,757
Shareholders' equity...................... 4,669,154 4,273,686 3,639,610 2,278,244 2,074,980
</TABLE>
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(a) The extraordinary items for 1993 and 1992 were after-tax expenses associated
with debt prepayments.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The Company acquired Macy's on December 19, 1994 and effected other
acquisitions (and dispositions) during its 1994 fiscal year. Additionally, in
its 1995 fiscal year, the Company acquired Broadway and recorded the acquisition
as of July 29, 1995. Under the purchase method of accounting, the assets,
liabilities and results of operations associated with such acquired businesses
have been included in the Company's financial position and results of operations
since the respective dates of acquisition. Accordingly, the financial position
and results of operations of the Company presented and discussed herein are
generally not directly comparable between the periods presented. The following
discussion should be read in conjunction with the Consolidated Financial
Statements and the notes thereto contained elsewhere in this report.
RESULTS OF OPERATIONS
Comparison of the 52 Weeks Ended February 1, 1997 and the 53 Weeks Ended
February 3, 1996. Net sales for 1996 were $15,229.0 million compared to
$15,048.5 million for 1995, an increase of 1.2%. On a comparable store basis,
net sales for 1996 increased 3.1 percent compared to the first 52 weeks of 1995.
Net sales for 1996 were somewhat negatively impacted by the Company's efforts to
gradually reduce the degree to which it utilizes promotional selling practices
with respect to home-related merchandise.
Cost of sales was 61.4% of net sales for 1996, compared to 62.5% for 1995.
Cost of sales includes one-time inventory valuation adjustments related to
merchandise in lines of business that were eliminated or replaced in connection
with the consolidation of merchandise inventories for acquired and pre-existing
businesses. In 1996, cost of sales includes $65.7 million of inventory valuation
adjustments in connection with the integration of Broadway into the Company. In
1995, cost of sales includes $69.1 million of inventory valuation adjustments in
connection with the integration of Macy's into the Company and $22.5 million of
inventory valuation adjustments in connection with the consolidation of the
Company's Rich's/Goldsmith's and Lazarus divisions. Also, in 1995, cost of sales
was negatively impacted by greater markdowns at stores operated as Broadway
locations. Excluding these stores in 1995 and the inventory valuation
adjustments discussed above, cost of sales would have been 61.0% of net sales
for 1996, compared to 61.3% for 1995. The lower level of promotional activity
for home-related merchandise and increased sales of higher margin private label
merchandise contributed to the improvement for 1996. The valuation of
merchandise inventory on the last-in, first-out basis did not impact cost of
sales in either year.
Selling, general and administrative expenses were 32.7% of net sales for
1996, compared to 33.1% for 1995. Selling, general and administrative expenses
include one-time costs related to the integration and consolidation of acquired
and pre-existing businesses as business integration and consolidation expenses
("BICE"). In 1996, selling, general and administrative expenses include, under
the caption BICE, $167.7 million of costs associated with the integration of
Broadway into the Company, $33.7 million of costs related to the integration of
Macy's into the Company and $41.5 million of costs related to other support
operation restructurings, primarily the centralization of the Company's
merchandise distribution function. In 1995, selling, general and administrative
expenses include, under the caption BICE, $139.8 million of costs associated
with the integration of Macy's into the Company, $48.1 million of costs
associated with the integration of Broadway into the Company and $14.4 million
of costs related to the consolidation of the Company's Rich's/Goldsmith's and
Lazarus divisions, and also include a $25.6 million charitable contribution to
Federated Department Stores Foundation. Excluding these items for both 1996 and
1995, selling, general and administrative expenses would have been 31.1% of net
sales for 1996, compared to 31.6% for 1995. The improvement for 1996 primarily
reflects the operating efficiencies resulting from the integration of Macy's
into the Company in fiscal 1995 and other support operation restructurings
(primarily merchandise distribution).
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Selling, general and administrative expenses in 1996 reflect higher
expenses for doubtful customer accounts receivable, partially offset by higher
finance charge revenues. Amounts charged to expense for doubtful accounts
receivable were $171.9 million for 1996, compared to $126.9 million for 1995.
The increase reflects higher average accounts receivable balances, the
consolidation of certain credit card nameplates, the effects of closing stores
in certain markets and general economic conditions in the geographic areas in
which the Company operates. Partially offsetting the increase in amounts charged
to expense for doubtful accounts, finance charge income grew to $429.5 million
in 1996, compared to $405.2 million in 1995, primarily due to higher average
accounts receivable balances.
Net interest expense was $451.8 million for 1996 compared to $461.0 million
for 1995. The lower interest expense for 1996 is principally due to the lower
levels of borrowings.
The Company's effective income tax rate of 39.8% for 1996 differs from the
federal income tax statutory rate of 35.0% principally because of the effect of
state and local income taxes and permanent differences arising from the
amortization of intangible assets.
Comparison of the 53 Weeks Ended February 3, 1996 and the 52 Weeks Ended
January 28, 1995. Net sales for 1995 were $15,048.5 million compared to
$8,315.9 million for 1994, an increase of 81.0%. Including sales of the Macy's
stores that were open throughout both periods being compared, and adjusting for
the impact of the 53rd week in 1995, comparable store sales increased 2.7% in
1995. Net sales for 1995 included $1,050.3 million of Broadway sales.
Cost of sales was 62.5% of net sales for 1995, compared to 61.9% for 1994.
Cost of sales included one-time inventory valuation adjustments related to
merchandise in lines of business that were eliminated or replaced in connection
with the consolidation of merchandise inventories for acquired and pre-existing
businesses. In 1995, cost of sales included $69.1 million of inventory valuation
adjustments in connection with the integration of Macy's into the Company and
$22.5 million of inventory valuation adjustments in connection with the
consolidation of the Company's Rich's/Goldsmith's and Lazarus divisions. In
1994, cost of sales included $14.9 million of inventory valuation adjustments in
connection with the integration of Horne's into the Company's Lazarus division.
Also, in 1995, cost of sales was negatively impacted by markdowns at stores
operated as Broadway locations. Excluding these stores and the inventory
valuation adjustments discussed above, cost of sales would have been 61.3% of
net sales for 1995 and 61.7% for 1994. The valuation of merchandise inventory on
the last-in, first-out basis did not impact cost of sales in 1995 and resulted
in a credit of $11.3 million to cost of sales in 1994.
Selling, general and administrative expenses were 33.1% of net sales for
1995, compared to 31.5% for 1994. Selling, general and administrative expenses
included one-time costs related to the integration and consolidation of acquired
and pre-existing businesses under the caption BICE. In 1995, selling, general
and administrative expenses included, under the caption BICE, $139.8 million of
costs associated with the integration of Macy's into the Company, $48.1 million
of costs associated with the integration of Broadway into the Company and $14.4
million of costs related to the consolidation of the Company's
Rich's/Goldsmith's and Lazarus divisions, and also included a $25.6 million
charitable contribution to Federated Department Stores Foundation. In 1994,
selling, general and administrative expenses included, under the caption BICE,
$45.8 million of costs associated with the integration of Macy's into the
Company, $12.1 million of costs associated with the integration of Horne's into
the Company and $13.1 million of costs associated with the consolidation of the
Company's Rich's/Goldsmith's and Lazarus divisions. Excluding these items for
both 1995 and 1994, selling, general and administrative expenses would have been
31.6% of net sales for 1995, compared to 30.7% for 1994. Because the credit card
programs relating to Macy's are owned by
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a third party, revenue from credit operations decreased in 1995 as a percentage
of sales. Because selling, general and administrative expenses are reported net
of revenue from credit operations, such decrease was the major factor
contributing to the increase in 1995 in the selling, general and administrative
expense rate and more than offset the Company's improved expense control. In
addition, operating expenses were reduced by $23.8 million in 1994 as a result
of an adjustment for the favorable settlement of bankruptcy claims.
Selling, general and administrative expenses in 1995 reflected higher
finance charge income and increased expenses for doubtful customer accounts
receivable. Finance charge income was $405.2 million for 1995 compared to $320.3
million for 1994. The increase reflected higher average accounts receivable
balances. Amounts charged to expense for doubtful accounts receivable grew to
$126.9 million in 1995, compared to $66.5 million recorded in 1994. The increase
reflected the higher average accounts receivable balances, the consolidation of
certain credit card nameplates, the effects of closing stores in certain markets
and general economic conditions in the geographic areas in which the Company
operates.
Net interest expense was $461.0 million for 1995, compared to $218.2
million for 1994. The higher interest expense in 1995 was principally due to the
higher levels of borrowings resulting from the Macy's and Broadway acquisitions.
Cash interest payments, net of interest received, were $398.0 million for 1995
compared to $166.8 million for 1994.
The Company's effective income tax rate of 63.1% for 1995 differed from the
federal income tax statutory rate of 35.0% principally because of permanent
differences arising from the non-deductibility of approximately $65.0 million of
losses of Broadway and the amortization of intangible assets, and the effect of
state and local income taxes.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal sources of liquidity are cash on hand, cash from
operations and certain available credit facilities.
Net cash provided by operating activities in 1996 was $1,220.5 million, an
increase of $926.0 million from the net cash provided by operating activities in
1995 of $294.5 million. In addition to improved operating results, the primary
factors which contributed to this improvement were decreases in accounts
receivable and lower increases in merchandise inventories, both changes due to
Broadway store closings, and increases in non-merchandise payables and accrued
liabilities. Cash provided from operations in 1995 was negatively impacted by
higher payments of non-merchandise payables and accrued liabilities (including
liabilities related to the Macy's acquisition).
The Company is a party to a bank credit facility providing for up to $515.7
million of term borrowings and up to $2,000.0 million of revolving credit
borrowings (including a $500.0 million letter of credit subfacility). The
Company also has in effect a facility to finance its customer accounts
receivable which provides for, among other things, the issuance from time to
time of up to $375.0 million of receivables backed commercial paper. As of
February 1, 1997, the Company had $515.7 million of term borrowings, $310.0
million of revolving credit borrowings, $48.1 million of standby letters of
credit and $112.5 million of trade letters of credit outstanding under its bank
credit facility and $146.0 million of commercial paper borrowings outstanding
under its receivables backed commercial paper facility.
Net cash used in investing activities was $649.8 million in 1996 compared
to $633.2 million in 1995. In 1996, capital expenditures for property and
equipment were $846.0 million and dispositions of property and equipment,
principally Broadway stores and merchandise distribution facilities, totaled
$196.2 million. During
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<PAGE> 10
1996, the Company opened seven new department stores and two new furniture
galleries and closed ten stores, five of which were Broadway stores. In 1995,
capital expenditures for property and equipment were $696.5 million, and the
Company added $16.3 million in cash as a result of the acquisition of Broadway.
The total purchase price for Broadway, consisting solely of non-cash items, was
$1,620.0 million.
Net cash used by the Company for all financing activities was $594.4
million in 1996 compared to $304.8 million net cash provided for all financing
activities in 1995. During 1996, the Company incurred debt totaling $688.7
million and repaid debt totaling $1,334.9 million. Debt incurred consisted of
$450.0 million of 8 1/2% Senior Notes due 2003 and $238.8 million of
asset-backed certificates. The major components of debt repaid consisted of
$386.5 million of commercial paper borrowings under a receivables based credit
facility of a subsidiary of Broadway which was terminated on May 14, 1996, $64.0
million of asset-backed notes issued by a subsidiary of Broadway and $284.3
million of term borrowings and $530.0 million of revolving credit loans under
the Company's bank credit facility. In 1996, the Company issued 4.1 million
shares of common stock and received $99.0 million in proceeds upon the exercise
of its Series A Warrants, which expired on February 15, 1996. On January 22,
1997, the Company entered into an arrangement providing for off balance sheet
financing of up to $200.0 million of non-proprietary credit card receivables
arising under accounts owned by the Company. At February 1, 1997, $103.5 million
of borrowings were outstanding under this arrangement.
The Company intends to open six new department stores in 1997 and its
budgeted capital expenditures are approximately $2,300.0 million for the 1997 to
1999 period. Management presently anticipates funding such expenditures from
operations. In addition, the Company intends to close seven to ten department
stores in 1997.
Management believes the department store business will continue to
consolidate. Accordingly, the Company intends from time to time to consider
additional acquisitions of department store assets and companies.
Management of the Company believes that, with respect to its current
operations, cash on hand and funds from operations, together with its credit
facilities, will be sufficient to cover its reasonably foreseeable working
capital, capital expenditure and debt service requirements. Acquisition
transactions, if any, are expected to be financed through a combination of cash
on hand and from operations and the possible issuance from time to time of
long-term debt or other securities. Depending upon conditions in the capital
markets and other factors, the Company will from time to time consider the
issuance of debt or other securities, or other possible capital markets
transactions, the proceeds of which could be used to refinance current
indebtedness or for other corporate purposes.
9
<PAGE> 11
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Information called for by this item is set forth in the Company's
Consolidated Financial Statements and supplementary data contained in this
report and is incorporated herein by this reference. Specific financial
statements and supplementary data can be found at the pages listed in the
following index.
<TABLE>
<CAPTION>
INDEX PAGE
- -------------------------------------------------------------------------------------- ----
<S> <C>
Management's Report................................................................... F-2
Independent Auditors' Report.......................................................... F-3
Consolidated Statements of Income for the 52 weeks ended February 1, 1997, the 53
weeks ended February 3, 1996 and the 52 weeks ended January 28, 1995................ F-4
Consolidated Balance Sheets at February 1, 1997 and February 3, 1996.................. F-5
Consolidated Statements of Cash Flows for the 52 weeks ended February 1, 1997, the 53
weeks ended February 3, 1996 and the 52 weeks ended January 28, 1995................ F-6
Notes to Consolidated Financial Statements............................................ F-7
</TABLE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
10
<PAGE> 12
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Information called for by this item is set forth under Item 1 "Election of
Directors" and "Compliance with Section 16(a) of the Securities and Exchange Act
of 1934" in the Proxy Statement, and in Item 1A "Executive Officers of the
Registrant," and incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION.
Information called for by this item is set forth under "Executive
Compensation" and "Compensation Committee Report on Executive Compensation" in
the Proxy Statement and incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP AND CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Information called for by this item is set forth under "Stock Ownership" in
the Proxy Statement and incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information called for by this item is set forth under "Compensation
Committee Interlocks and Insider Participation" and under "Certain Relationships
and Related Transactions" in the Proxy Statement and incorporated herein by
reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
1. FINANCIAL STATEMENTS:
The list of financial statements required by this item is set forth in Item
8 "Consolidated Financial Statements and Supplementary Data" and is incorporated
herein by reference.
2. FINANCIAL STATEMENT SCHEDULES:
All schedules are omitted because they are inapplicable, not required, or
the information is included elsewhere in the Consolidated Financial Statements
or the notes thereto.
3. EXHIBITS:
The following exhibits are filed herewith or incorporated by reference as
indicated below.
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION DOCUMENT IF INCORPORATED BY REFERENCE
- -------------- ------------------------------------- -------------------------------------
<C> <S> <C>
3.1 Certificate of Incorporation Exhibit 3.1 to the Company's Annual
Report on Form 10-K for the fiscal
year ended January 28, 1995 (the
"1994 Form 10-K")
</TABLE>
11
<PAGE> 13
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION DOCUMENT IF INCORPORATED BY REFERENCE
- -------------- ------------------------------------- -------------------------------------
<S> <C> <C>
3.1.1 Certificate of Designations of Series Exhibit 3.1.1 to the 1994 Form 10-K
A Junior Participating Preferred
Stock
3.2 By-Laws Exhibit 3.2 to the 1994 Form 10-K
4.1 Certificate of Incorporation See Exhibit 3.1
4.2 By-Laws See Exhibit 3.2
4.3 Rights Agreement, dated as of Decem- Exhibit 4.3 to the 1994 Form 10-K
ber 15, 1994, between the Company and
the Bank of New York, as rights agent
4.4 Indenture, dated as of December 15, Exhibit 4.1 to the Company's
1994, between the Company and State Registration Statement on Form S-3
Street Bank and Trust Company (Registration No. 33-88328) filed on
(successor to The First National Bank January 9, 1995 (the "S-3
of Boston), as Trustee Registration Statement")
4.4.1 Third Supplemental Indenture, dated Exhibit 4.4.1 to the 1994 Form 10-K
as of January 23, 1995, between the
Company and State Street Bank and
Trust Company (successor to The First
National Bank of Boston), as Trustee
4.4.2 Fourth Supplemental Indenture, dated Exhibit 4.2 to the Company's
as of September 27, 1995, between the Registration Statement on Form 8-A,
Company and State Street Bank and dated November 29, 1995
Trust Company (successor to The First
National Bank of Boston), as Trustee
4.4.3 Fifth Supplemental Indenture, dated Exhibit 2 to the Company's
as of October 6, 1995, between the Registration Statement on Form 8-A,
Company and State Street Bank and dated October 4, 1995
Trust Company (successor to The First
National Bank of Boston), as Trustee
4.4.4 Sixth Supplemental Indenture, dated Exhibit 4.4.4 to the Company's Annual
as of February 1, 1996, between the Report on Form 10-K for the fiscal
Company and State Street Bank and year ended January 28, 1995 (the 1995
Trust Company (successor to The First Form 10-K")
National Bank of Boston), as Trustee
4.4.5 Seventh Supplemental Indenture, dated Exhibit 4.2 to the Company's
as of May 22, 1996, between the Quarterly Report on Form 10-Q for the
Company and State Street Bank and period ended May 4, 1996 (the "May
Trust Company (successor to The First 1996 Form 10-Q")
National Bank of Boston), as Trustee
4.5 Series C Warrant Agreement Exhibit 4.6 to the 1994 Form 10-K
4.6 Series D Warrant Agreement Exhibit 4.7 to the 1994 Form 10-K
4.7 Series E Warrant Agreement Exhibit 4.9 to the 1995 Form 10-K
</TABLE>
12
<PAGE> 14
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION DOCUMENT IF INCORPORATED BY REFERENCE
- -------------- ------------------------------------- -------------------------------------
<S> <C> <C>
4.8 Warrant Agreement Exhibit 4.1 to Broadway's Annual
Report on Form 10-K (File No. 1-8765)
for the fiscal year ended January 30,
1993 (the "Broadway 1992 Form 10-K")
4.8.1 Letter Agreement, dated October 11, Exhibit 4.5.1 to the October 1995
1995, between Broadway and The Bank Form 10-Q
of New York
4.9 Series B Warrant Agreement Exhibit 10.7 to the Company's
Registration Statement on Form 10
(File No. 1-10951), filed November
27, 1991, as amended (the "Form 10")
10.1 Credit Agreement, dated as of Decem- Exhibit 10.3 to the 1994 Form 10-K
ber 19, 1994, among the Company, Ci-
tibank, N.A., The Chase Manhattan
Bank, successor to Chemical Bank
("Chase Bank"), Citicorp Securities,
Inc., Chase Securities, Inc.,
successor to Chemical Securities,
Inc., and the initial lenders named
therein (the "Working Capital Credit
Agreement")
10.1.1 Amendment #2 and Waiver, dated as of Exhibit 10.5 to the October 1995 Form
August 30, 1995, to the Working 10-Q
Capital Credit Agreement
10.1.2 Amendment #3, dated as of April 26, Exhibit 4.1 to the May 1996 Form 10-Q
1996, to the Working Capital Credit
Agreement
10.1.3 Amendment #4, dated as of September
9, 1996, to the Working Capital
Credit Agreement
10.1.4 Amendment #5, dated as of January 6,
1997, to the Working Capital Credit
Agreement
10.2 Loan Agreement, dated as of December Exhibit 10.12 to Allied's Annual
30, 1987 (the "Prudential Loan Agree- Report on Form 10-K (File No. 1-970)
ment"), among Prudential, Allied for the fiscal year ended January 2,
Stores Corporation ("Allied"), and 1988
certain subsidiaries of Allied named
therein
10.2.1 Amendment No. 1, dated as of Decem- Exhibit 10.9.1 to Form 10
ber 29, 1988, to the Prudential Loan
Agreement
10.2.2 Amendment No. 2, dated as of Novem- Exhibit 10.9.2 to Form 10
ber 17, 1989, to the Prudential Loan
Agreement
</TABLE>
13
<PAGE> 15
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION DOCUMENT IF INCORPORATED BY REFERENCE
- -------------- ------------------------------------- -------------------------------------
<S> <C> <C>
10.2.3 Amendment No. 3, dated as of February Exhibit 10.9.3 to Form 10
5, 1992, to the Prudential Loan
Agreement
10.3 Loan Agreement, dated as of May 26, Exhibit 10.47 to the 1994 S-4
1994 (the "Lazarus PA Mortgage Term Registration Statement
Loan"), among Lazarus PA, Inc.
(formerly Joseph Horne Co., Inc.),
the banks listed thereon, and PNC
Bank, Ohio, National Association, as
Agent ("PNC")
10.3.1 First Amendment to the Lazarus PA Exhibit 10.6 to the October 1995 Form
Mortgage Term Loan 10-Q
10.4 Guaranty Agreement, dated as of May Exhibit 10.48 to the 1994 S-4
26, 1994, made by the Company in Registration Statement
favor of the banks listed on the
Lazarus PA Mortgage Term Loan and PNC
10.4.1 Amendment #1 to Guaranty Agreement, Exhibit 10.7.1 to the 1994 Form 10-K
dated as of February 28, 1995, made
by the Company in favor of the banks
listed on the Lazarus PA Mortgage
Term Loan and PNC
10.5 Amended and Restated Term Loan Agree- Exhibit 4.23 to Broadway's Annual
ment, dated as of October 8, 1992, by Report on Form 10-K (File No. 1-8765)
and among the Banks party thereto, for the fiscal year ended January 30,
Bank of America National Trust and 1993, as amended (the "Broadway 1992
Savings Association as Agent for 10-K")
Banks and Carter Hawley Hale Stores,
Inc.
10.5.1 Master Capitalized Interest Note, Exhibit 4.24 to the Broadway 1992
dated as of October 8, 1992, in favor 10-K
of Bank of America National Trust and
Savings Association as Agent for
certain banks in the amount of
$10,750,830.46
10.5.2 Master Principal Note, dated as of Exhibit 4.25 to the Broadway 1992
October 8, 1992, in favor of Bank of 10-K
America National Trust and Savings
Association as Agent for certain
banks in the amount of $89,662,770.00
10.5.3 First Amendment to Amended and Re- Exhibit 10.2.3 to the October 1995
stated Term Loan Agreement, dated as Form 10-Q
of October 11, 1995, by and among
Broadway, the Banks party thereto and
Bank of America National Trust and
Savings Association, as Agent for
Banks
</TABLE>
14
<PAGE> 16
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION DOCUMENT IF INCORPORATED BY REFERENCE
- -------------- ------------------------------------- -------------------------------------
<S> <C> <C>
10.5.4 Second Amendment to Amended and Re- Exhibit 10.5.4 to the 1995 Form 10-K
stated Term Loan Agreement, dated as
of December 1, 1995, by and among
Broadway, the Banks party thereto and
Bank of America National Trust and
Savings Association, as Agent for
Banks
10.6 Amended and Restated Pooling and Ser- Exhibit 4.10 to Prime's Current
vicing Agreement, dated as of Decem- Report on Form 8-K (File No. 0-2118),
ber 15, 1992 (the "Pooling and dated March 29, 1993
Servicing Agreement"), among the
Company, Prime Receivables
Corporation ("Prime") and The Chase
Manhattan Bank, successor to Chemical
Bank, as Trustee
10.6.1 First Amendment, dated as of December Exhibit 10.10.1 to the Company's
1, 1993, to the Pooling and Servicing Annual Report on Form 10-K (File No.
Agreement 1-10951) for the fiscal year ended
January 29, 1994 (the "1993 Form
10-K")
10.6.2 Second Amendment, dated as of Febru- Exhibit 10.10.2 to the 1993 Form 10-K
ary 28, 1994, to the Pooling and
Servicing Agreement
10.6.3 Third Amendment, dated as of May 31, Exhibit 10.8.3 to the 1994 Form 10-K
1994, to the Pooling and Servicing
Agreement
10.6.4 Fourth Amendment, dated as of Janu- Exhibit 10.6.4 to the 1995 Form 10-K
ary 18, 1995, to the Pooling and
Servicing Agreement
10.6.5 Fifth Amendment, dated as of April Exhibit 10.6.5 to the 1995 Form 10-K
30, 1995, to the Pooling and
Servicing Agreement
10.6.6 Sixth Amendment, dated as of July 27, Exhibit 10.6.6 to the 1995 Form 10-K
1995, to the Pooling and Servicing
Agreement
10.6.7 Seventh Amendment, dated as of May
14, 1996, to the Pooling and
Servicing Agreement
10.6.8 Eighth Amendment, dated as of March
3, 1997, to the Pooling and Servicing
Agreement
10.7 Assumption Agreement under the Exhibit 10.10.3 to the 1993 Form 10-K
Pooling and Servicing Agreement,
dated as of September 15, 1993
</TABLE>
15
<PAGE> 17
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION DOCUMENT IF INCORPORATED BY REFERENCE
- -------------- ------------------------------------- -------------------------------------
<S> <C> <C>
10.8 Series 1992-1 Supplement, dated as of Exhibit 4.6 to Prime's Registration
December 15, 1992, to the Pooling and Statement on Form 8-A, filed January
Servicing Agreement 22, 1993, as amended ("Prime's Form
8-A")
10.9 Series 1992-2 Supplement, dated as of Exhibit 4.7 to Prime's Form 8-A
December 15, 1992, to the Pooling and
Servicing Agreement
10.10 Series 1992-3 Supplement, dated as of Exhibit 4.8 to Prime's Current Report
January 5, 1993, to the Pooling and on Form 8-K (File No. 0-2118), dated
Servicing Agreement January 29, 1993
10.11 Series 1995-1 Supplement, dated as of Exhibit 4.7 to Prime's Registration
July 27, 1995, to the Pooling and Statement on Form S-1, filed July 14,
Servicing Agreement 1995, as amended
10.12 Series 1996-1 Supplement, dated as of Exhibit 4 to the May 1996 Prime 8-K
May 14, 1996, to the Pooling and
Servicing Agreement
10.13 Receivables Purchase Agreement, dated Exhibit 10.2 to Prime's Form 8-A
as of December 15, 1992 (the
"Receivables Purchase Agreement"),
among Abraham & Straus, Inc.,
Bloomingdale's, Inc., Burdines, Inc.,
Jordan Marsh Stores Corporation,
Lazarus, Inc., Rich's Department
Stores, Inc., Stern's Department
Stores, Inc., The Bon, Inc. and Prime
10.13.1 First Amendment, dated as of June 23, Exhibit 10.14.1 to 1993 Form 10-K
1993, to the Receivables Purchase
Agreement
10.13.2 Second Amendment, dated as of Decem- Exhibit 10.14.2 to 1993 Form 10-K
ber 1, 1993, to the Receivables
Purchase Agreement
10.13.3 Third Amendment, dated as of Febru- Exhibit 10.14.3 to 1993 Form 10-K
ary 28, 1994, to the Receivables
Purchase Agreement
10.13.4 Fourth Amendment, dated as of May 31, Exhibit 10.13.4 to the 1994 Form 10-K
1994, to the Receivables Purchase
Agreement
10.13.5 Fifth Amendment, dated as of April Exhibit 10.12.5 to the 1995 Form 10-K
30, 1995, to the Receivables Purchase
Agreement
10.13.6 Sixth Amendment, dated as of August
26, 1995, to the Receivables Purchase
Agreement
</TABLE>
16
<PAGE> 18
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION DOCUMENT IF INCORPORATED BY REFERENCE
- -------------- ------------------------------------- -------------------------------------
<S> <C> <C>
10.13.7 Seventh Amendment, dated as of Au-
gust 26, 1995, to the Receivables
Purchase Agreement
10.13.8 Eighth Amendment, dated as of May 14,
1996, to the Receivables Purchase
Agreement
10.13.9 Ninth Amendment, dated as of March 3,
1997, to the Receivables Purchase
Agreement
10.13.10 First Supplement, dated as of Septem- Exhibit 10.14.4 to 1993 Form 10-K
ber 15, 1993, to the Receivables
Purchase Agreement
10.13.11 Second Supplement, dated as of May Exhibit 10.12.7 to the 1995 Form 10-K
31, 1994, to the Receivables Purchase
Agreement
10.14 Depository Agreement, dated as of Exhibit 10.15 to Company's Annual
December 31, 1992, among Deerfield Report on Form 10-K (File No.
Funding Corporation, now known as 1-10951) for the fiscal year ended
Seven Hills Funding Corporation January 30, 1993 ("1992 Form 10-K")
("Seven Hills"), the Company, and
Chase Bank, as Depository
10.15 Liquidity Agreement, dated as of Exhibit 10.16 to 1992 Form 10-K
December 31, 1992, among Seven Hills,
the Company, the financial
institutions named therein, and
Credit Suisse, New York Branch, as
Liquidity Agent
10.16 Pledge and Security Agreement, dated Exhibit 10.17 to 1992 Form 10-K
as of December 31, 1992, among Seven
Hills, the Company, Chase Bank, as
Depository and Collateral Agent, and
the Liquidity Agent
10.17 Commercial Paper Dealer Agreement, Exhibit 10.18 to 1992 Form 10-K
dated as of December 31, 1992, among
Seven Hills, the Company, and Goldman
Sachs Money Markets, L.P.
10.18 Commercial Paper Dealer Agreement, Exhibit 10.19 to 1992 Form 10-K
dated as of December 31, 1992, among
Seven Hills, the Company, and
Shearson Lehman Brothers, Inc.
10.19 Receivables Purchase Agreement, dated
as of January 22, 1997, among FDS
National Bank and Prime II
Receivables Corporation ("Prime II")
</TABLE>
17
<PAGE> 19
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION DOCUMENT IF INCORPORATED BY REFERENCE
- -------------- ------------------------------------- -------------------------------------
<S> <C> <C>
10.20 Class A Certificate Purchase
Agreement, dated as of January 22,
1997, among Prime II, FDS National
Bank, The Class A Purchasers Parties
thereto and Credit Suisse First
Boston, New York Branch, as Agent
10.21 Class B Certificate Purchase
Agreement, dated as of January 22,
1997, among Prime II, FDS National
Bank, The Class B Purchasers Parties
thereto and Credit Suisse First
Boston, New York Branch, as Agent
10.22 Pooling and Servicing Agreement,
dated as of January 22, 1997, (the
"Prime II Pooling and Servicing
Agreement") among Prime II, FDS
National Bank and The Chase Manhattan
Bank, as Trustee
10.23 Series 1997-1 Supplement, dated as of
January 22, 1997, to the Prime II
Pooling and Servicing Agreement
10.24 Commercial Paper Dealer Agreement,
dated as of January 30, 1997, between
the Company and Citicorp Securities,
Inc.
10.25 Commercial Paper Issuing and Paying
Agent Agreement, dated as of January
30, 1997, between Citibank, N.A. and
the Company
10.26 Commercial Paper Dealer Agreement,
dated as of January 30, 1997, between
the Company and Lehman Brothers, Inc
10.27 Tax Sharing Agreement Exhibit 10.10 to Form 10
10.28 Ralphs Tax Indemnification Agreement Exhibit 10.1 to Form 10
10.29 Account Purchase Agreement dated as Exhibit 19.2 to Macy's Quarterly
of May 10, 1991 by and among Monogram Report on Form 10-Q for the fiscal
Bank, USA, Macy's, Macy Credit Corpo- quarter ended May 4, 1991 (File No.
ration, Macy Funding, Macy's 33-6192), as amended under cover of
California, Inc., Macy's Northeast, Form 8, dated October 3, 1991
Inc., Macy's South, Inc., Bullock's ("Macy's May 1991 Form 10-Q")
Inc., I. Magnin, Inc., Form 10-Q")
Master Servicer, and Macy Specialty
Stores, Inc.**
</TABLE>
18
<PAGE> 20
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION DOCUMENT IF INCORPORATED BY REFERENCE
- -------------- ------------------------------------- -------------------------------------
<S> <C> <C>
10.30 Amended and Restated Credit Card Pro- Exhibit 10.1 to the Company's
gram Agreement, dated as of June 4, Quarterly Report on Form 10-Q for the
1996, among GE Capital Consumer Card period ended August 3, 1996 (the
Co. ("GE Bank"), FDS National Bank, "August 1996 Form 10-Q")
Macy's East, Inc., Macy's West, Inc.,
Bullock's, Inc., Broadway Stores,
Inc., FACS Group, Inc., and
MSS-Delaware, Inc.**
10.31 Amended and Restated Trade Name and Exhibit 10.2 to the August 1996 Form
Service Mark License Agreement, dated 10-Q
as of June 4, 1996, among the
Company, GE Bank and General Electric
Capital Corporation ("GE Capital")
10.32 FACS Credit Services and License Exhibit 10.3 to the August 1996 Form
Agreement, dated as of June 4, 1996, 10-Q
by and among GE Bank, GE Capital and
FACS Group, Inc.**
10.33 FDS Guaranty, dated as of June 4, Exhibit 10.4 to the August 1996 Form
1996 10-Q
10.34 GE Capital Credit Services and Exhibit 10.5 to the August 1996 Form
License Agreement, dated as of June 10-Q
4, 1996, among GE Capital, FDS
National Bank, the Company and FACS
Group, Inc.**
10.35 GE Capital/GE Bank Credit Services Exhibit 10.6 to the August 1996 Form
Agreement, dated as of June 4, 1996, 10-Q
among GE Capital and GE Bank**
10.36 Amended and Restated Commercial Ac- Exhibit 10.7 to the August 1996 Form
counts Agreement, dated as of June 4, 10-Q
1996, among GE Capital, the Company,
FDS National Bank, Macy's East, Inc.,
Macy's West, Inc., Bullock's, Inc.,
Broadway Stores, Inc., FACS Group,
Inc. and MSS-Delaware, Inc.**
10.37 1992 Executive Equity Incentive Plan* Exhibit 10.12 to Form 10
10.38 1995 Executive Equity Incentive Plan,
as amended and restated as of
February 28, 1997*
10.39 1992 Incentive Bonus Plan* Exhibit 10.12 to Form 10
10.40 Form of Severance Agreement* Exhibit 10.33 to the 1994 Form 10-K
10.41 Form of Indemnification Agreement* Exhibit 10.14 to Form 10
10.42 Senior Executive Medical Plan* Exhibit 10.1.7 to 1989 Form 10-K
10.43 Employment Agreement, dated as of Exhibit 10.59 to the 1994 S-4
June 24, 1994, between Allen I. Registration Statement
Questrom and the Company*
</TABLE>
19
<PAGE> 21
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION DOCUMENT IF INCORPORATED BY REFERENCE
- -------------- ------------------------------------- -------------------------------------
<S> <C> <C>
10.44 Employment Agreement, dated as of
March 10, 1997, between James M. Zim-
merman and the Company*
10.45 Form of Employment Agreement for Exhibit 10.31 to 1993 Form 10-K
Executives and Key Employees*
10.46 Supplementary Executive Retirement
Plan, as amended and restated as of
January 1, 1997*
10.47 Executive Deferred Compensation Plan*
10.48 Profit Sharing 401(k) Investment Plan
(amending and restating the
Retirement Income and Thrift
Incentive Plan) effective as of April
1, 1997*
10.49 Cash Account Pension Plan (amending
and restating The Federated Pension
Plan) effective as of January 1,
1997*
11 Statement Regarding Computation of
Earnings
21 Subsidiaries
23 Consent of KPMG Peat Marwick LLP
24 Powers of Attorney
27 Financial Data Schedule
</TABLE>
- ---------------
* Constitutes a compensatory plan or arrangement.
** Confidential portions of this Exhibit were omitted and filed separately with
the SEC pursuant to Rule 24b-2 under the Exchange Act.
20
<PAGE> 22
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
FEDERATED DEPARTMENT STORES, INC.
By: /s/ DENNIS J. BRODERICK
------------------------------------
Dennis J. Broderick
Senior Vice President, General
Counsel and Secretary
Date: April 17, 1997
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES INDICATED ON APRIL 17, 1997.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ------------------------------------------------- ---------------------------------------------------
<S> <C>
* Chairman of the Board and Chief Executive Officer
- ------------------------------------------------- (principal executive officer) and Director
Allen I. Questrom
* Vice Chairman and Chief Financial Officer
- ------------------------------------------------- (principal financial officer) and Director
Ronald W. Tysoe
* Vice President and Controller
- ------------------------------------------------- (principal accounting officer)
Joel A. Belsky
* Director
- -------------------------------------------------
Lyle Everingham
* Director
- -------------------------------------------------
Meyer Feldberg
* Director
- -------------------------------------------------
Earl G. Graves, Sr.
* Director
- -------------------------------------------------
George V. Grune
* Director
- -------------------------------------------------
Joseph Neubauer
* Director
- -------------------------------------------------
Paul W. Van Orden
* Director
- -------------------------------------------------
Karl M. von der Heyden
* Director
- -------------------------------------------------
Craig E. Weatherup
* Director
- -------------------------------------------------
Marna C. Whittington
* Director
- -------------------------------------------------
James M. Zimmerman
</TABLE>
*The undersigned, by signing his name hereto, does sign and execute this
Annual Report on Form 10-K pursuant to the Powers of Attorney executed by the
above-named officers and directors and filed herewith.
By: /s/ DENNIS J. BRODERICK
------------------------------------
Dennis J. Broderick
Attorney-in-Fact
21
<PAGE> 23
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Management's Report................................................ F-2
Independent Auditors' Report....................................... F-3
Consolidated Statements of Income for the 52 weeks ended February
1, 1997, the 53 weeks ended February 3, 1996 and the 52 weeks
ended January 28, 1995........................................... F-4
Consolidated Balance Sheets at February 1, 1997 and February 3,
1996............................................................. F-5
Consolidated Statements of Cash Flows for the 52 weeks ended
February 1, 1997, the 53 weeks ended February 3, 1996 and the 52
weeks ended January 28, 1995..................................... F-6
Notes to Consolidated Financial Statements......................... F-7
</TABLE>
F-1
<PAGE> 24
MANAGEMENT'S REPORT
To the Shareholders of
Federated Department Stores, Inc.:
The integrity and consistency of the consolidated financial statements of
Federated Department Stores, Inc. and subsidiaries, which were prepared in
accordance with generally accepted accounting principles, are the responsibility
of management and properly include some amounts that are based upon estimates
and judgments.
The Company maintains a system of internal accounting controls, which is
supported by a program of internal audits with appropriate management follow-up
action, to provide reasonable assurance, at appropriate cost, that the Company's
assets are protected and transactions are properly recorded. Additionally, the
integrity of the financial accounting system is based on careful selection and
training of qualified personnel, organizational arrangements which provide for
appropriate division of responsibilities and communication of established
written policies and procedures.
The consolidated financial statements of the Company have been audited by
KPMG Peat Marwick LLP, independent certified public accountants. Their report
expresses their opinion as to the fair presentation, in all material respects,
of the financial statements and is based upon their independent audits conducted
in accordance with generally accepted auditing standards.
The Audit Review Committee, composed solely of outside directors, meets
periodically with the independent certified public accountants, the internal
auditors and representatives of management to discuss auditing and financial
reporting matters. In addition, the independent certified public accountants and
the Company's internal auditors meet periodically with the Audit Review
Committee without management representatives present and have free access to the
Audit Review Committee at any time. The Audit Review Committee is responsible
for recommending to the Board of Directors the engagement of the independent
certified public accountants, which is subject to shareholder approval, and the
general oversight review of management's discharge of its responsibilities with
respect to the matters referred to above.
Allen I. Questrom
Chairman and Chief Executive Officer
James M. Zimmerman
President and Chief Operating Officer
Ronald W. Tysoe
Vice Chairman and Chief Financial Officer
Joel A. Belsky
Vice President and Controller
F-2
<PAGE> 25
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Federated Department Stores, Inc.:
We have audited the accompanying consolidated balance sheets of Federated
Department Stores, Inc. and subsidiaries as of February 1, 1997 and February 3,
1996, and the related consolidated statements of income and cash flows for the
fifty-two week period ended February 1, 1997, the fifty-three week period ended
February 3, 1996 and the fifty-two week period ended January 28, 1995. These
consolidated financial statements are the responsibility of management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Federated
Department Stores, Inc. and subsidiaries as of February 1, 1997 and February 3,
1996, and the results of their operations and their cash flows for the fifty-two
week period ended February 1, 1997, the fifty-three week period ended February
3, 1996 and the fifty-two week period ended January 28, 1995, in conformity with
generally accepted accounting principles.
KPMG PEAT MARWICK LLP
Cincinnati, Ohio
March 4, 1997
F-3
<PAGE> 26
FEDERATED DEPARTMENT STORES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(THOUSANDS, EXCEPT PER SHARE DATA)
================================================================================
<TABLE>
<CAPTION>
52 WEEKS 53 WEEKS 52 WEEKS
ENDED ENDED ENDED
FEBRUARY 1, FEBRUARY 3, JANUARY 28,
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Net sales, including leased department sales..... $15,228,999 $15,048,513 $8,315,877
----------- ----------- ----------
Cost of sales:
Recurring...................................... 9,288,686 9,317,784 5,131,363
Inventory valuation adjustments related to
consolidation............................... 65,681 91,637 14,880
----------- ----------- ----------
Total cost of sales.............................. 9,354,367 9,409,421 5,146,243
Selling, general and administrative expenses:
Recurring...................................... 4,738,483 4,748,331 2,549,122
Business integration and consolidation
expenses.................................... 242,950 202,293 70,987
Charitable contribution to Federated Department
Stores Foundation........................... -- 25,581 --
----------- ----------- ----------
Total selling, general and administrative
expenses....................................... 4,981,433 4,976,205 2,620,109
----------- ----------- ----------
Operating income................................. 893,199 662,887 549,525
Interest expense................................. (498,616) (508,132) (262,115)
Interest income.................................. 46,852 47,104 43,874
----------- ----------- ----------
Income before income taxes....................... 441,435 201,859 331,284
Federal, state and local income tax expense...... (175,571) (127,306) (143,668)
----------- ----------- ----------
Net income....................................... $ 265,864 $ 74,553 $ 187,616
=========== =========== ==========
Earnings per share............................... $ 1.28 $ .39 $ 1.41
=========== =========== ==========
</TABLE>
The accompanying notes are an integral part of these Consolidated Financial
Statements.
F-4
<PAGE> 27
FEDERATED DEPARTMENT STORES, INC.
CONSOLIDATED BALANCE SHEETS
(THOUSANDS)
================================================================================
<TABLE>
<CAPTION>
FEBRUARY 1, 1997 FEBRUARY 3, 1996
---------------- ----------------
<S> <C> <C>
ASSETS
Current Assets:
Cash........................................................... $ 148,794 $ 172,518
Accounts receivable............................................ 2,834,321 2,842,077
Merchandise inventories........................................ 3,245,996 3,094,848
Supplies and prepaid expenses.................................. 109,678 176,411
Deferred income tax assets..................................... 88,513 74,511
------------ ------------
Total Current Assets................................... 6,427,302 6,360,365
Property and Equipment -- net.................................... 6,524,757 6,305,167
Intangible Assets -- net......................................... 717,404 744,689
Notes Receivable................................................. 204,400 415,066
Other Assets..................................................... 390,280 469,763
------------ ------------
Total Assets........................................... $ 14,264,143 $ 14,295,050
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Short-term debt................................................ $ 1,094,557 $ 733,115
Accounts payable and accrued liabilities....................... 2,492,195 2,358,543
Income taxes................................................... 8,947 6,411
------------ ------------
Total Current Liabilities.............................. 3,595,699 3,098,069
Long-Term Debt................................................... 4,605,916 5,632,232
Deferred Income Taxes............................................ 830,943 732,936
Other Liabilities................................................ 562,431 558,127
Shareholders' Equity............................................. 4,669,154 4,273,686
------------ ------------
Total Liabilities and Shareholders' Equity............. $ 14,264,143 $ 14,295,050
============ ============
</TABLE>
The accompanying notes are an integral part of these Consolidated Financial
Statements.
F-5
<PAGE> 28
FEDERATED DEPARTMENT STORES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(THOUSANDS)
================================================================================
<TABLE>
<CAPTION>
52 WEEKS ENDED 53 WEEKS ENDED
FEBRUARY 1, FEBRUARY 3, 52 WEEKS ENDED
1997 1996 JANUARY 28, 1995
-------------- -------------- ----------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income...................................................... $ 265,864 $ 74,553 $ 187,616
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization of property and equipment..... 504,119 444,830 260,485
Amortization of intangible assets........................... 27,285 47,451 22,662
Amortization of financing costs............................. 26,762 21,702 11,468
Amortization of original issue discount..................... 459 1,202 29,435
Amortization of unearned restricted stock................... 1,958 4,630 2,714
Changes in assets and liabilities, net of effects of
acquisition of companies:
(Increase) decrease in accounts receivable.............. 222,828 (21,098) (310,934)
(Increase) decrease in merchandise inventories.......... (151,148) (361,991) 28,620
(Increase) decrease in supplies and prepaid expenses.... 66,731 (67,745) 2,450
(Increase) decrease in other assets not separately
identified............................................ (11,608) 61,483 2,697
Increase (decrease) in accounts payable and accrued
liabilities not separately identified................. 176,691 (83,220) (124,662)
Increase (decrease) in current income taxes............. 2,536 (45,437) 61,149
Increase (decrease) in deferred income taxes............ 84,005 192,079 (12,057)
Increase (decrease) in other liabilities not separately
identified............................................ 4,005 26,068 (184)
----------- ----------- -----------
Net cash provided by operating activities........... 1,220,487 294,507 161,459
----------- ----------- -----------
Cash flows from investing activities:
Acquisition of companies, net of cash acquired.................. -- 16,262 (575,408)
Purchase of property and equipment.............................. (846,016) (696,488) (386,847)
Disposition of property and equipment........................... 196,222 46,992 8,723
----------- ----------- -----------
Net cash used by investing activities............... (649,794) (633,234) (953,532)
----------- ----------- -----------
Cash flows from financing activities:
Debt issued..................................................... 688,665 1,347,106 2,526,861
Financing costs................................................. (11,120) (27,236) (66,602)
Debt repaid..................................................... (1,334,898) (1,020,117) (1,594,136)
Decrease in outstanding checks.................................. (65,010) (9,647) (95,010)
Acquisition of treasury stock................................... (1,415) (1,006) (354)
Issuance of common stock........................................ 129,361 15,655 5,376
----------- ----------- -----------
Net cash provided (used) by financing activities.... (594,417) 304,755 776,135
----------- ----------- -----------
Net decrease in cash.............................................. (23,724) (33,972) (15,938)
Cash beginning of period.......................................... 172,518 206,490 222,428
----------- ----------- -----------
Cash end of period................................................ $ 148,794 $ 172,518 $ 206,490
=========== =========== ===========
Supplemental cash flow information:
Interest paid................................................... $ 465,360 $ 444,398 $ 211,457
Interest received............................................... 45,637 46,445 44,675
Income taxes paid (net of refunds received)..................... 21,124 35,103 93,647
Schedule of noncash investing and financing activities:
Capital lease obligations for new store fixtures............ -- 2,818 10,817
Common stock issued for the Executive Deferred Compensation
Plan...................................................... 2,926 2,501 2,070
Debt and merger related liabilities issued, reinstated or
assumed in acquisition.................................... -- 1,267,074 1,414,969
Equity issued in acquisition................................ -- 352,902 1,166,014
Debt and equity issued for purchase of debt................. -- 429,665 --
</TABLE>
The accompanying notes are an integral part of these Consolidated Financial
Statements.
F-6
<PAGE> 29
FEDERATED DEPARTMENT STORES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Federated Department Stores, Inc. (the "Company") is a retail organization
operating department stores that sell a wide range of merchandise, including
women's, men's and children's apparel, cosmetics, home furnishings and other
consumer goods.
The Consolidated Financial Statements include the accounts of the Company
and its subsidiaries. All significant intercompany transactions have been
eliminated. The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Such estimates and assumptions are subject to inherent
uncertainties, which may result in actual amounts differing from reported
amounts.
Cash includes cash and liquid investments with original maturities of three
months or less.
Installments of deferred payment accounts receivable maturing after one
year are included in current assets in accordance with industry practice. Such
accounts are accepted on customary revolving credit terms and offer the customer
the option of paying the entire balance on a 25-day basis without incurring
finance charges. Alternatively, customers may make scheduled minimum payments
and incur competitive finance charges. Minimum payments vary from 2.5% to 100.0%
of the account balance, depending on the size of the balance. Profits on
installment sales are included in income when the sales are made. Finance charge
income is included as a reduction of selling, general and administrative
expenses.
Substantially all merchandise inventories are valued by the retail method
and stated on the LIFO (last-in, first-out) basis, which is generally lower than
market.
Depreciation and amortization are provided primarily on a straight-line
basis over the shorter of estimated asset lives or related lease terms.
Estimated asset lives range from 15 to 50 years for buildings and building
equipment and 3 to 15 years for store fixtures and equipment. Real estate taxes
and interest on construction in progress and land under development are
capitalized. Amounts capitalized are amortized over the estimated lives of the
related depreciable assets.
Intangible assets are amortized on a straight-line basis over their
estimated lives (see Note 7). The carrying value of intangible assets is
periodically reviewed by the Company and impairments are recognized when the
present value of the expected future operating cash flows derived from such
intangible assets is less than their carrying value.
Advertising and promotional costs, which are generally expensed as
incurred, amounted to $617.6 million for the 52 weeks ended February 1, 1997,
$633.2 million for the 53 weeks ended February 3, 1996 and $347.5 million for
the 52 weeks ended January 28, 1995.
Financing costs are amortized over the life of the related debt.
Income taxes are accounted for under the asset and liability method.
Deferred income tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial
F-7
<PAGE> 30
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
================================================================================
statement carrying amounts of existing assets and liabilities and their
respective tax bases, and net operating loss and tax credit carryforwards.
Deferred income tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred
income tax assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.
The cost of postretirement benefits other than pensions is recognized in
the financial statements over an employee's term of service with the Company.
The Company accounts for its stock-based employee compensation plan in
accordance with Accounting Principles Board Opinion No. 25 ("APB No. 25") and
related Interpretations (see Note 14).
Earnings per share are computed on the basis of daily average number of
shares outstanding during the year. Any dilution from the potential issuance of
shares under warrant agreements or stock option plans would be less than 3.0%.
Fully diluted earnings per share include the effect of the potential issuance of
shares under warrant agreements or stock option plans, as well as for
convertible debt and, unless disclosed, any such dilution would be less than
3.0%.
Certain reclassifications were made to prior years' amounts to conform with
the classifications of such amounts for the most recent year.
2. ACQUISITION OF COMPANIES
The Company completed its acquisition of Broadway Stores, Inc. ("Broadway")
pursuant to an Agreement and Plan of Merger dated August 14, 1995. The total
purchase price of the Broadway acquisition was approximately $1,620.0 million,
consisting of (i) 12.6 million shares of common stock and options to purchase an
additional 1.5 million shares of common stock valued at $352.9 million and (ii)
$1,267.1 million of Broadway debt. In addition, a wholly owned subsidiary of the
Company purchased $422.3 million of mortgage indebtedness of Broadway for 6.8
million shares of common stock of the Company and a $242.3 million promissory
note.
The Broadway acquisition was accounted for under the purchase method and,
accordingly, the results of operations of Broadway have been included in the
Company's results of operations since July 29, 1995 and the purchase price has
been allocated to Broadway's assets and liabilities based on the estimated fair
value of these assets and liabilities as of that date.
The following unaudited pro forma condensed statement of income gives
effect to the Broadway acquisition and related financing transactions as if such
transactions had occurred at the beginning of the period presented.
<TABLE>
<CAPTION>
53 WEEKS ENDED
FEBRUARY 3, 1996
---------------------------------
(MILLIONS, EXCEPT PER SHARE DATA)
<S> <C>
Net sales.............................................. $15,933.1
Net income............................................. 24.3
Earnings per share..................................... .12
</TABLE>
F-8
<PAGE> 31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
================================================================================
The foregoing unaudited pro forma condensed statement of income gives
effect to, among other pro forma adjustments, the following:
(i) Interest expense on debt incurred in connection with the acquisition, the
reversal of certain of Broadway's historical interest expense;
(ii) Amortization, over 20 years, of the excess of cost over net assets
acquired;
(iii) Depreciation and amortization adjustments related to the fair market value
of assets acquired;
(iv) Adjustments to income tax expense related to the above; and
(v) Adjustments for shares issued.
The foregoing unaudited pro forma information is provided for illustrative
purposes only and does not purport to be indicative of results that actually
would have been achieved had the acquisition been consummated on the first day
of the period presented.
On December 19, 1994, the Company acquired R. H. Macy & Co., Inc.
("Macy's") pursuant to a Plan of Reorganization of Macy's and substantially all
of its subsidiaries. The total purchase price of the Macy's acquisition was
approximately $3,815.9 million.
The Macy's acquisition was accounted for under the purchase method and,
accordingly, the results of operations of Macy's have been included in the
Company's results of operations since the date of acquisition and the purchase
price has been allocated to Macy's assets and liabilities based on the estimated
fair value of these assets and liabilities at the date of acquisition.
On May 26, 1994, the Company purchased Joseph Horne Co., Inc. ("Horne's"),
a department store retailer operating ten stores in Pittsburgh and Erie,
Pennsylvania for approximately $116.0 million, including the assumption of $40.0
million of mortgage debt and transaction costs. The acquisition was accounted
for under the purchase method of accounting and the purchase price approximated
the estimated fair value of the assets and liabilities acquired. Results of
operations for the stores acquired are included in the Consolidated Financial
Statements from the date of acquisition.
3. INVENTORY VALUATION ADJUSTMENTS RELATED TO CONSOLIDATION AND BUSINESS
INTEGRATION AND CONSOLIDATION EXPENSES
In connection with the consolidation of merchandise inventories for
acquired and pre-existing businesses, the Company recorded one-time inventory
valuation adjustments related to merchandise in lines of business that were
eliminated or replaced as a separate component of cost of sales. For the 52
weeks ended February 1, 1997, the amount recorded related to the consolidation
of Broadway into the Company's Macy's West division. For the 53 weeks ended
February 3, 1996, $69.1 million related to the integration of Macy's into the
Company including the consolidation of the Macy's East division with the
Company's Abraham & Straus/Jordan Marsh division and $22.5 million related to
the consolidation of the Company's Rich's/Goldsmith's and Lazarus divisions. For
the 52 weeks ended January 28, 1995, the amount recorded related to the
consolidation of Horne's into the Company's Lazarus division.
F-9
<PAGE> 32
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
================================================================================
Additionally, the Company incurred certain one-time costs related to the
integration and consolidation of acquired and pre-existing businesses and
classified such costs as business integration and consolidation expenses as a
separate component of selling, general and administrative expenses.
During the 52 weeks ended February 1, 1997, the Company recorded $242.9
million of business integration and consolidation expenses, consisting of $167.7
million of costs associated with the integration of Broadway into the Company,
$33.7 million of costs related to the integration of Macy's into the Company and
$41.5 million of costs related to other support operation restructurings. The
major components of the Broadway integration expenses were $90.4 million of
costs associated with converting the Broadway stores to other nameplates of the
Company (including advertising, credit card issuance and promotion and other
name change expenses), $28.6 million of costs associated with operating Broadway
central office functions for a transitional period and $48.7 million of other
costs and expenses associated with the integration of Broadway into the Company,
including the disposition of properties. The costs associated with the
integration of Macy's into the Company primarily related to the administration
and integration of Company-wide policies and procedures and the elimination of
duplicative or non-continuing facilities. The costs associated with other
support operation restructurings primarily related to the closure and
disposition of warehouses and distribution centers in connection with the
centralization of the Company's merchandise distribution function.
During the 53 weeks ended February 3, 1996, the Company recorded $202.3
million of business integration and consolidation expenses associated with the
integration of Macy's and Broadway into the Company ($139.8 million and $48.1
million, respectively) and the consolidation of the Company's Rich's/Goldsmith's
and Lazarus divisions ($14.4 million). The primary components of the Macy's
integration expenses were $31.1 million of costs to close and sell certain
stores, $38.4 million of costs to convert a number of stores to other
nameplates, $30.8 million of severance costs and $39.5 million of other costs
and expenses associated with integrating Macy's into the Company. The major
components of the Broadway integration expenses were $23.3 million of costs to
close certain stores, $8.7 million of costs to refinance certain indebtedness
and $16.1 million of other costs and expenses associated with integrating
Broadway into the Company.
The Company recorded a $45.8 million charge in the 52 weeks ended January
28, 1995 for the integration of Macy's into the Company, including the
consolidation of the Macy's East division with the Company's Abraham &
Straus/Jordan Marsh division and the consolidation of central merchandising
divisions. The major components of the charge include $13.0 million in severance
expenses for Abraham & Straus/Jordan Marsh employees, $12.3 million in penalties
associated with terminating certain merchandise purchasing agreements and $14.1
million of losses incurred on stores closed and property writedowns related to
stores sold as a result of the Macy's acquisition.
The Company also recorded $12.1 million of costs in the 52 weeks ended
January 28, 1995 for the integration of the ten Horne's department stores and
related facilities and merchandising and operating functions into the Company,
including the costs of operating the Horne's central office during a
transitional period and the incremental costs associated with converting the
Horne's stores to Lazarus stores (including advertising, credit card issuance
and promotion, data processing conversion and other name change expenses).
F-10
<PAGE> 33
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
================================================================================
Finally, as a result of the consolidation of the Company's
Rich's/Goldsmith's and Lazarus divisions, the Company recorded a $13.1 million
charge in the 52 weeks ended January 28, 1995 for severance related to the
elimination of duplicative positions.
4. ACCOUNTS RECEIVABLE
<TABLE>
<CAPTION>
FEBRUARY 1, FEBRUARY 3,
1997 1996
----------- -----------
(MILLIONS)
<S> <C> <C>
Due from customers............................... $ 2,523.4 $ 2,698.8
Less allowance for doubtful accounts............. 96.2 83.5
--------- ---------
2,427.2 2,615.3
Other receivables................................ 407.1 226.8
--------- ---------
Net receivables.................................. $ 2,834.3 $ 2,842.1
========= =========
</TABLE>
Sales through the Company's credit plans were $4,191.3 million for the 52
weeks ended February 1, 1997, $4,323.8 million for the 53 weeks ended February
3, 1996 and $3,916.9 million for the 52 weeks ended January 28, 1995,
respectively. The credit plans relating to operations of the Company that were
previously conducted through divisions of Macy's are owned by a third party. As
of February 1, 1997, other receivables includes $200.0 million of a note
receivable maturing on May 3, 1997 (see Note 8).
Finance charge income amounted to $429.5 million for the 52 weeks ended
February 1, 1997, $405.2 million for the 53 weeks ended February 3, 1996 and
$320.3 million for the 52 weeks ended January 28, 1995, respectively.
Changes in allowance for doubtful accounts are as follows:
<TABLE>
<CAPTION>
52 WEEKS ENDED 53 WEEKS ENDED 52 WEEKS ENDED
FEBRUARY 1, 1997 FEBRUARY 3, 1996 JANUARY 28, 1995
---------------- ---------------- ----------------
(MILLIONS)
<S> <C> <C> <C>
Balance, beginning of year......... $ 83.5 $ 44.9 $ 36.9
Charged to costs and expenses...... 171.9 126.9 66.5
Acquired........................... -- 16.8 --
Net uncollectible balances written
off.............................. (159.2) (105.1) (58.5)
-------- -------- ------
Balance, end of year............... $ 96.2 $ 83.5 $ 44.9
======== ======== ======
</TABLE>
5. INVENTORIES
Merchandise inventories were $3,246.0 million at February 1, 1997, compared
to $3,094.8 million at February 3, 1996. At these dates, the cost of inventories
using the LIFO method approximates the cost of such inventories using the
first-in, first-out method. The application of the LIFO method did not impact
the 52 weeks ended February 1, 1997 or the 53 weeks ended February 3, 1996 and
resulted in a pre-tax credit of $11.3 million for the 52 weeks ended January 28,
1995.
F-11
<PAGE> 34
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
================================================================================
6. PROPERTIES AND LEASES
<TABLE>
<CAPTION>
FEBRUARY 1, FEBRUARY 3,
1997 1996
----------- -----------
(MILLIONS)
<S> <C> <C>
Land.......................................................... $ 1,047.6 $ 1,050.6
Buildings on owned land....................................... 2,307.0 2,400.4
Buildings on leased land and leasehold improvements........... 1,547.0 1,389.0
Store fixtures and equipment.................................. 2,917.5 2,352.1
Leased properties under capitalized leases.................... 78.0 80.6
--------- ---------
7,897.1 7,272.7
Less accumulated depreciation and amortization................ 1,372.3 967.5
--------- ---------
$ 6,524.8 $ 6,305.2
========= =========
</TABLE>
In connection with various shopping center agreements, the Company is
obligated to operate certain stores within the centers for periods of up to 20
years. Some of these agreements require that the stores be operated under a
particular name.
The Company leases a portion of the real estate and personal property used
in its operations. Most leases require the Company to pay real estate taxes,
maintenance and other executory costs; some also require additional payments
based on percentages of sales and some contain purchase options.
Minimum rental commitments (excluding executory costs) at February 1, 1997,
for noncancellable leases are:
<TABLE>
<CAPTION>
CAPITALIZED OPERATING
LEASES LEASES TOTAL
----------- --------- --------
(MILLIONS)
<S> <C> <C> <C>
Fiscal year:
1997.............................................. $ 13.6 $ 174.6 $ 188.2
1998.............................................. 13.1 151.4 164.5
1999.............................................. 12.6 139.0 151.6
2000.............................................. 12.6 132.8 145.4
2001.............................................. 12.1 128.7 140.8
After 2001........................................ 86.6 1,167.4 1,254.0
------- --------- --------
Total minimum lease payments........................ 150.6 $ 1,893.9 $2,044.5
========= ========
Less amount representing interest................... 72.0
-------
Present value of net minimum capitalized lease
payments.......................................... $ 78.6
=======
</TABLE>
Capitalized leases are included in the Consolidated Balance Sheets as
property and equipment while the related obligation is included in short-term
($5.4 million) and long-term ($73.2 million) debt. Amortization of assets
subject to capitalized leases is included in depreciation and amortization
expense. Total minimum lease payments shown above have not been reduced by
minimum sublease rentals of approximately $8.2 million on capitalized leases and
$17.8 million on operating leases.
F-12
<PAGE> 35
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
================================================================================
Rental expense consists of:
<TABLE>
<CAPTION>
52 WEEKS ENDED 53 WEEKS ENDED
FEBRUARY 1, FEBRUARY 3, 52 WEEKS ENDED
1997 1996 JANUARY 28, 1995
-------------- -------------- ----------------
(MILLIONS)
<S> <C> <C> <C>
Real estate (excluding executory costs)
Capitalized leases --
Contingent rentals................ $ 3.8 $ 4.4 $ 3.3
Operating leases --
Minimum rentals................... 150.9 137.4 78.9
Contingent rentals................ 21.0 19.6 10.4
------ ------ ------
175.7 161.4 92.6
------ ------ ------
Less income from subleases --
Capitalized leases................ 0.6 0.7 0.6
Operating leases.................. 2.7 1.7 0.9
------ ------ ------
3.3 2.4 1.5
------ ------ ------
$172.4 $159.0 $ 91.1
====== ====== ======
Personal property --
Operating leases.................. $ 59.7 $ 63.5 $ 37.4
====== ====== ======
</TABLE>
7. INTANGIBLE ASSETS
<TABLE>
<CAPTION>
FEBRUARY 1, FEBRUARY 3,
1997 1996
----------- -----------
(MILLIONS)
<S> <C> <C>
Reorganization value in excess of amount allocable to
identifiable assets......................................... $ 100.2 $ 100.2
Excess of cost over net assets acquired....................... 294.1 294.1
Tradenames.................................................... 458.0 458.0
------- -------
852.3 852.3
Less accumulated amortization................................. 134.9 107.6
------- -------
Intangible assets -- net...................................... $ 717.4 $ 744.7
======= =======
</TABLE>
Intangible assets are being amortized on a straight-line basis over 20
years, except for tradenames which are being amortized over 40 years.
F-13
<PAGE> 36
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
================================================================================
8. NOTES RECEIVABLE
<TABLE>
<CAPTION>
FEBRUARY 1, FEBRUARY 3,
1997 1996
----------- -----------
(MILLIONS)
<S> <C> <C>
9.5% note relating to the sale of certain divisions in 1988
and maturing in two equal installments on May 3, 1997 and
May 3, 1998................................................. $ 200.0 $ 400.0
Other......................................................... 4.4 15.1
------- -------
$ 204.4 $ 415.1
======= =======
</TABLE>
The $400.0 million note, which is supported by a letter of credit, was
transferred to a grantor trust which borrowed $352.0 million under a note
monetization facility and transferred such proceeds to the Company (see Note 9).
The portion of the note maturing on May 3, 1997, $200.0 million, is classified
in accounts receivable as of February 1, 1997 (see Note 4).
9. FINANCING
<TABLE>
<CAPTION>
FEBRUARY 1, FEBRUARY 3,
1997 1996
----------- -----------
(MILLIONS)
<S> <C> <C>
Short-term debt:
Receivables backed certificates............................. $ 529.0 $ --
Note monetization facility.................................. 176.0 --
Receivables backed commercial paper......................... 146.0 117.0
Bank credit facility........................................ 131.4 100.0
Current portion of long-term debt........................... 112.2 65.6
Broadway receivables based financing........................ -- 450.5
--------- ---------
Total short-term debt.................................... $ 1,094.6 $ 733.1
========= =========
Long-term debt:
Receivables backed certificates............................. 1,364.5 1,654.3
Bank credit facility........................................ 694.3 1,540.0
10.0% Senior notes due 2001................................. 450.0 450.0
8.5% Senior notes due 2003.................................. 450.0 --
8.125% Senior notes due 2002................................ 400.0 400.0
Mortgages................................................... 370.4 455.7
Convertible subordinated notes.............................. 350.0 350.0
Secured promissory note..................................... 220.8 242.3
Note monetization facility.................................. 176.0 352.0
Capitalized leases.......................................... 73.2 81.1
Other....................................................... 56.7 106.8
--------- ---------
Total long-term debt..................................... $ 4,605.9 $ 5,632.2
========= =========
</TABLE>
F-14
<PAGE> 37
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
================================================================================
Interest and financing costs were as follows:
<TABLE>
<CAPTION>
52 WEEKS ENDED 53 WEEKS ENDED
FEBRUARY 1, FEBRUARY 3, 52 WEEKS ENDED
1997 1996 JANUARY 28, 1995
-------------- -------------- ----------------
(MILLIONS)
<S> <C> <C> <C>
Interest on debt....................... $463.9 $478.2 $244.9
Amortization of financing costs........ 26.8 21.7 11.5
Interest on capitalized leases......... 8.8 9.1 6.2
------ ------ ------
Subtotal............................. 499.5 509.0 262.6
Less:
Interest capitalized on
construction...................... (0.9) (0.9) (0.5)
Interest income...................... (46.8) (47.1) (43.9)
------ ------ ------
$451.8 $461.0 $218.2
====== ====== ======
</TABLE>
Future maturities of long-term debt, other than capitalized leases and
including unamortized original issue discount of $1.3 million, are shown below:
<TABLE>
<CAPTION>
(MILLIONS)
<S> <C>
Fiscal year:
1998..................................................... $ 390.3
1999..................................................... 816.7
2000..................................................... 564.9
2001..................................................... 704.9
2002..................................................... 1,239.8
After 2002............................................... 817.4
</TABLE>
On May 14, 1996, Prime Receivables Corporation, a wholly owned subsidiary
of the Company ("Prime"), issued $238.8 million of asset-backed certificates and
the Company terminated the receivables based credit facility of Broadway
Receivables Inc., another wholly owned subsidiary.
On May 22, 1996, the Company issued $450.0 million of 8.5% Senior Notes due
2003, and subsequently prepaid $195.4 million of term borrowings under its bank
credit facility. The total payments, in 1996, with respect to the term
borrowings under the bank credit facility were $284.3 million including required
principal payments.
The following summarizes certain provisions of the Company's debt:
RECEIVABLES BACKED CERTIFICATES
On December 15, 1992, Prime issued $981.0 million ($979.1 million
discounted amount) of asset-backed certificates in four separate classes to
finance purchases of revolving consumer credit card receivables generated by the
Company's department store operations. The four classes of certificates are: (i)
$450.0 million in aggregate principal amount of 7.05% Class A-1 Asset-Backed
Certificates, Series 1992-1 due December 15, 1997; (ii) $450.0 million in
aggregate principal amount of 7.45% Class A-2 Asset-Backed Certificates, Series
1992-2 due December 15, 1999; (iii) $40.5 million in aggregate principal amount
of 7.55%
F-15
<PAGE> 38
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
================================================================================
Class B-1 Asset-Backed Certificates, Series 1992-1 due January 15, 1998; and
(iv) $40.5 million in aggregate principal amount of 7.95% Class B-2 Asset-Backed
Certificates, Series 1992-2 due January 18, 2000. On January 20, 1995 Prime
entered into an agreement pursuant to which it effectively sold an additional
$77.0 million of asset-backed certificates to a third party, with such
certificates bearing interest at the purchaser's commercial paper rate plus 0.9%
and maturing as to $38.5 million in 1998 and $38.5 million in 2000. The $77.0
million of certificates are subject to interest rate caps intended to
effectively limit the rate of interest thereon to 11.0% per annum. On July 27,
1995, Prime issued an additional $598.0 million of asset-backed certificates in
two separate classes. The two classes are: (i) $546.0 million in aggregate
principal amount of 6.75% Class A Asset-Backed Certificates, Series 1995-1 due
August 15, 2002 and (ii) $52.0 million in aggregate principal amount of 6.90%
Class B Asset-Backed Certificates, Series 1995-1 due September 15, 2002. On May
14, 1996, Prime issued an additional $238.8 million of asset-backed certificates
in two separate classes. The two classes are: (i) $218.0 million in aggregate
principal amount of 6.70% Class A Asset-Backed Certificates Series 1996-1 due
May 1, 2001, and (ii) $20.8 million in aggregate principal amount of 6.85% Class
B Asset-Backed Certificates, Series 1996-1 due June 1, 2001. All of the
foregoing certificates represent undivided interests in the assets of a master
trust originated by Prime.
BANK CREDIT FACILITY
The Bank Credit Facility consists of a $2,000.0 million revolving credit
facility (the "Revolving Loan Facility") and $515.7 million term loan facility
(the "Term Loan Facility").
The Revolving Loan Facility provides for revolving credit loans ("Revolving
Loans" and, together with the loans under the Term Loan Facility, the "Loans")
of up to $2,000.0 million, of which an aggregate of $1,100.0 million is
available for seasonal working capital purposes (including a letter of credit
subfacility). For 30 consecutive calendar days during the period from December 1
to March 1, commencing December 1, 1995, total borrowings plus the aggregate
stated amounts of stand-by letters of credit under the Revolving Loan Facility
may not exceed $1,000.0 million ($1,350.0 million in the case of the period from
December 1, 1995 to March 1, 1996). The Company's ability to effect borrowings
under the Revolving Loan Facility is not subject to any borrowing base
requirements or limitations. The Revolving Loan Facility matures on March 31,
2000, with the Revolving Loans then outstanding to be repaid in full on such
date.
The Term Loan Facility matures on January 29, 2000. However, the Company is
required to make quarterly amortization payments totaling, on an annual basis,
$131.4 million, $175.3 million and $209.0 million for the 52 weeks ended January
31, 1998, January 30, 1999 and January 29, 2000, respectively, subject to
adjustment in certain circumstances. The Company is permitted by the terms of
the Credit Agreement to make voluntary prepayments of amounts outstanding under
the Term Loan Facility at any time without penalty or premium. Until such time
as the Company has obtained an investment grade rating with respect to its
long-term senior unsecured debt, repayments of certain amounts outstanding under
the Term Loan Facility are required upon the occurrence of certain events.
Loans under the Bank Credit Facility (other than "competitive bid loans,"
if any) bear interest at a rate equal to, at the Company's option, (i) the
administrative agent's Base Rate (as defined in the bank credit agreement) in
effect from time to time or (ii) the administrative agent's Eurodollar rate
(adjusted for reserves) plus 0.75% subject to adjustment based on the Company's
long-term debt rating and interest
F-16
<PAGE> 39
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
================================================================================
coverage ratio. The Company is able to borrow up to $1,000.0 million under the
Revolving Loan Facility in competitive bid loans at either fixed rates or
Eurodollar-based rates as bid by the lenders in the Revolving Loan Facility. The
Company pays a commitment fee of 0.25% per annum, subject to adjustment, on the
unused portion of the Revolving Loan Facility.
The Company has purchased interest rate caps covering an aggregate notional
amount of $1,400.0 million for a period of three years from December 15, 1994.
Pursuant to such caps, the Eurodollar rate with reference to which interest on
$500.0 million of the Company's variable rate indebtedness is determined is
effectively limited to a maximum rate of 8% per annum throughout such three-year
period and the Eurodollar rate with reference to which interest on $900.0
million of the Company's variable rate indebtedness is determined is effectively
limited to a maximum rate of 7% per annum in the first year of such three-year
period, 8% per annum in the second year of such three-year period and 9% per
annum thereafter. The Company has also entered into interest rate swap
agreements covering an aggregate notional amount of $400.0 million. The
Eurodollar rate with reference to which interest on the Company's variable rate
indebtedness is determined is effectively converted to a fixed rate of 5.3275%
on $100.0 million of borrowings from January 9, 1996 to January 9, 1998, 5.2625%
on $100.0 million of borrowings from January 23, 1996 to January 25, 1999,
5.225% on $100.0 million of borrowings from January 18, 1996 to January 18, 1998
and 5.01% on $100.0 million of borrowings from February 12, 1996 to February 12,
1998.
UNSECURED COMMERCIAL PAPER
On January 30, 1997, the Company established a facility for the issuance
from time to time of unsecured commercial paper. The maximum principal amount of
commercial paper that may be outstanding under the facility at any particular
time is $400.0 million. The issuance of commercial paper under the facility will
have the effect, while such commercial paper is outstanding, of reducing the
Company's borrowing capacity under the Revolving Loan Facility by an amount
equal to the principal amount of such commercial paper. As of February 1, 1997,
no such commercial paper was outstanding.
SENIOR NOTES
The Senior Notes are unsecured obligations of the Company, are not
redeemable at the option of the Company prior to maturity and are not subject to
a sinking fund.
MORTGAGES
Certain of the Company's real estate subsidiaries are parties to a mortgage
loan facility providing for secured borrowings. Borrowings under the facility
will mature in 2002 and bear interest at 9.99% per annum. Borrowings under the
facility are secured by liens on certain real property. The outstanding balance
under the mortgage loan facility was $345.1 million ($60.5 million included in
short-term debt) as of February 1, 1997 and $345.1 million as of February 3,
1996.
In addition to the mortgage indebtedness described above, the Company and
certain of its subsidiaries are obligated under certain other mortgage notes,
which are secured by liens on certain real property of the Company's
subsidiaries. The aggregate principal amount of such mortgage notes was $93.8
million ($8.0 mil-
F-17
<PAGE> 40
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
================================================================================
lion included in short-term debt) as of February 1, 1997 and $118.8 million
($8.2 million included in short-term debt) as of February 3, 1996.
CONVERTIBLE SUBORDINATED NOTES
On September 27, 1995, the Company issued Convertible Subordinated Notes
which are unsecured obligations of the Company and are subordinate to all
existing and future Senior Debt of the Company and all indebtedness and other
liabilities of the Company's subsidiaries. The Convertible Subordinated Notes
mature on October 1, 2003 and bear interest at the rate of 5% per annum from
September 27, 1995, payable in arrears on October 1 and April 1 of each year,
commencing April 1, 1996.
At any time prior to maturity, unless previously redeemed or repurchased,
each holder of Convertible Subordinated Notes will have the right to convert the
principal of such holder's Convertible Subordinated Notes into fully-paid and
non-assessable shares of Common Stock at the rate of 29.2547 shares of Common
Stock for each $1,000 stated principal amount of Convertible Subordinated Notes,
provided that such conversion rate will be appropriately adjusted in order to
prevent dilution of such conversion right in the event of certain changes in or
events affecting the Common Stock and certain consolidations, mergers, sales,
leases, transfers, or other dispositions to which the Company is a party. In
addition, the Convertible Subordinated Notes will be redeemable at the Company's
option, in whole or in part, at anytime on or after October 1, 1998, at
specified redemption prices plus accrued interest to the date of redemption. The
Convertible Subordinated Notes are not subject to a sinking fund.
SECURED PROMISSORY NOTE
The Secured Promissory Note bears interest at 8.2%, matures in October 2000
and is secured by liens on certain real property and the stock of a special
purpose subsidiary of the Company.
NOTE MONETIZATION FACILITY
On May 3, 1988, the Company sold certain divisions for consideration which
included a $400.0 million promissory note. The Company subsequently transferred
the note to a grantor trust of which it is the beneficiary. The trust borrowed
$352.0 million under a note monetization facility, using the note as collateral,
and distributed the proceeds of such borrowing to the Company. The borrowing
under the note monetization facility matures in two equal installments on May 3,
1997 and 1998, and bears interest at a variable interest rate based on LIBOR,
subject to certain adjustments. An interest rate swap agreement was entered into
for the note monetization facility which, in effect, converted the variable
interest rate to a fixed rate of 10.344%. The Company is not an obligor on the
borrowing under the note monetization facility or the interest rate swap
agreement, and the lender's recourse thereunder is limited to the trust's assets
and the Company's interest in the trust.
RECEIVABLES BACKED COMMERCIAL PAPER
On January 5, 1993, an indirect wholly owned special purpose financing
subsidiary of the Company entered into a liquidity facility with a syndicate of
banks providing for the issuance of up to $375.0 million of receivables backed
commercial paper. Borrowings under the liquidity facility are secured by an
interest in the
F-18
<PAGE> 41
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
================================================================================
master trust originated by Prime and are subject to interest rate caps
effectively limiting the rate of interest thereon to 10% per annum. As of
February 1, 1997 and February 3, 1996 there was $146.0 million and $117.0
million of such commercial paper outstanding, respectively.
OTHER FINANCING ARRANGEMENT
In addition to the financing arrangements discussed above, on January 22,
1997, the Company entered into an arrangement providing for off balance sheet
financing of up to $200.0 million of non-proprietary credit card receivables
arising under accounts owned by the Company. At February 1, 1997, $103.5 million
of borrowings were outstanding under this arrangement.
10. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
<TABLE>
<CAPTION>
FEBRUARY 1, FEBRUARY 3,
1997 1996
----------- -----------
(MILLIONS)
<S> <C> <C>
Merchandise and expense accounts payable...................... $ 1,698.8 $ 1,592.7
Business integration and consolidation expenses............... 34.2 13.0
Merger related liabilities.................................... 46.6 64.4
Taxes other than income taxes................................. 119.5 94.6
Accrued wages and vacation.................................... 78.2 81.4
Accrued interest.............................................. 62.4 64.3
Other......................................................... 452.5 448.1
--------- ---------
$ 2,492.2 $ 2,358.5
========= =========
</TABLE>
11. TAXES
Income tax expense is as follows:
<TABLE>
<CAPTION>
52 WEEKS ENDED 53 WEEKS ENDED 52 WEEKS ENDED
FEBRUARY 1, 1997 FEBRUARY 3, 1996 JANUARY 28, 1995
--------------------------- --------------------------- ---------------------------
CURRENT DEFERRED TOTAL CURRENT DEFERRED TOTAL CURRENT DEFERRED TOTAL
------- -------- ------ ------- -------- ------ ------- -------- ------
(MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Federal.................... $176.1 $(30.9) $145.2 $ 91.1 $ 13.5 $104.6 $ 82.0 $ 31.4 $113.4
State and local............ 35.9 (5.5) 30.4 19.5 3.2 22.7 21.2 9.1 30.3
------ ------ ------ ------ ------ ------ ------ ------ ------
$212.0 $(36.4) $175.6 $110.6 $ 16.7 $127.3 $103.2 $ 40.5 $143.7
====== ====== ====== ====== ====== ====== ====== ====== ======
</TABLE>
The income tax expense reported differs from the expected tax computed by
applying the federal income tax statutory rate of 35% for the 52 weeks ended
February 1, 1997, the 53 weeks ended February 3, 1996 and
F-19
<PAGE> 42
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
================================================================================
the 52 weeks ended January 28, 1995 to income before income taxes. The reasons
for this difference and their tax effects are as follows:
<TABLE>
<CAPTION>
52 WEEKS ENDED 53 WEEKS ENDED
FEBRUARY 1, FEBRUARY 3, 52 WEEKS ENDED
1997 1996 JANUARY 28, 1995
-------------- -------------- ----------------
(MILLIONS)
<S> <C> <C> <C>
Expected tax........................... $154.5 $ 70.7 $115.9
State and local income taxes, net of
federal income tax expense........... 19.7 14.7 19.7
Permanent difference arising from
amortization of intangible assets.... 9.5 16.6 7.9
Permanent difference resulting from
Broadway acquisition................. -- 22.7 --
Other.................................. (8.1) 2.6 0.2
------ ------ ------
$175.6 $127.3 $143.7
====== ====== ======
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities are as follows:
<TABLE>
<CAPTION>
FEBRUARY 1, FEBRUARY 3,
1997 1996
----------- -----------
(MILLIONS)
<S> <C> <C>
Deferred tax assets:
Operating loss carryforwards................................ $ 327.8 $ 417.0
Accrued liabilities accounted for on a cash basis for tax
purposes................................................. 189.5 160.4
Postretirement benefits other than pensions................. 179.1 179.5
Capitalized lease debt...................................... 31.2 34.6
Allowance for doubtful accounts............................. 38.4 31.7
Alternative minimum tax credit carryforwards................ 52.7 48.9
Other....................................................... 147.6 133.8
---------- ----------
Total gross deferred tax assets.......................... 966.3 1,005.9
---------- ----------
Deferred tax liabilities:
Excess of book basis over tax basis of property and
equipment................................................ (1,376.3) (1,335.7)
Prepaid pension expense..................................... (67.4) (71.8)
Deferred gain from sale of divisions........................ (81.6) (81.6)
Merchandise inventories..................................... (115.3) (131.6)
Other....................................................... (68.1) (43.8)
---------- ----------
Total gross deferred tax liabilities..................... (1,708.7) (1,664.5)
---------- ----------
Net deferred tax liability............................... $ (742.4) $ (658.6)
========== ==========
</TABLE>
In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred tax
assets will not be realized. The ultimate realization of deferred
F-20
<PAGE> 43
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
================================================================================
tax assets is dependent upon the generation of future taxable income during the
periods in which those temporary differences become deductible. Management
considers the scheduled reversal of deferred tax liabilities and tax planning
strategies in making this assessment. Because tax law limits the use of an
acquired enterprise's net operating loss carryforwards to subsequent taxable
income of the acquired enterprise in a consolidated tax return for the combined
enterprise, management had recorded a valuation allowance of $114.7 million to
reflect the estimated amount of deferred tax assets related to Macy's net
operating loss carryforwards (the "Macy's NOLs") that may not be realized.
During the year ended February 3, 1996, management reassessed the realizability
of the Macy's NOLs and determined, based upon the Company's then-current tax
planning strategies and other available information, that the portion of the
Company's future taxable income attributable to the acquired Macy's enterprise
would more likely than not be sufficient to utilize the entire amount of the
deferred tax asset related to Macy's NOLs. Consequently, the $114.7 million
valuation allowance was eliminated through a reduction in excess of cost over
net assets acquired.
As of February 1, 1997, the Company estimated that the Macy's NOLs, which
are available to offset future taxable income of the acquired Macy's enterprise
through 2008, were approximately $554.7 million and that Broadway's net
operating loss carryforwards, which are available to offset future taxable
income of the acquired Broadway enterprise through 2009, were approximately
$302.6 million. The Company also had alternative minimum tax credit
carryforwards of $52.7 million, which are available to reduce future income
taxes, if any, over an indefinite period.
In connection with the joint plan of reorganization ("POR") of Federated
Stores, Inc. ("FSI"), the former parent of the Company and certain of its
subsidiaries, the FSI consolidated tax group (which, with respect to periods
prior to February 4, 1992, included the Company and such subsidiaries) triggered
certain gains (the "Gains") estimated at approximately $1,800.0 million. The
Company believed that net operating and capital losses ("NOLs") sufficient to
offset the Gains were available at the time the Gains were triggered and,
accordingly, that the Company would have no regular federal income tax liability
in respect thereof and that it had adequately provided for its estimated
alternative minimum tax liability. During the year ended January 28, 1995, the
Company recorded $75.0 million of tax benefits related to NOLs generated prior
to February 4, 1992 and reduced reorganization value in excess of amounts
allocable to identifiable assets accordingly. The remaining issues related to
the Gains and the POR were resolved on January 5, 1996 and the Company recorded
$200.0 million of tax benefits related to such NOLs as a reduction of
reorganization value in excess of amounts allocable to identifiable assets.
In connection with their respective reorganization proceedings, the
Internal Revenue Service ("IRS") audited the tax returns of the Company and
certain of its subsidiaries and the FSI consolidated tax group for tax years
1984 through 1989 and asserted certain claims against the Company and such
subsidiaries and other members of the FSI consolidated tax group. All of the
issues raised by the IRS audit have been resolved, except for an issue involving
the deductibility of approximately $176.3 million of so-called "break-up fees."
This issue was resolved in favor of the Company by the Bankruptcy Court for the
Southern District of Ohio, the decision of which was affirmed by the United
States District Court for the Southern District of Ohio. Thereafter, the IRS
filed an appeal of such decision in the United States Court of Appeals for the
Sixth Circuit, where such appeal currently is pending. Management believes that
the ultimate resolution of this issue will not have a material adverse effect on
the Company's financial position or results of operations.
F-21
<PAGE> 44
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
================================================================================
12. RETIREMENT PLANS
The Company has defined benefit plans ("Pension Plans") and defined
contribution plans ("Savings Plans") which cover substantially all employees who
work 1,000 hours or more in a year. In addition, the Company has defined benefit
supplementary retirement plans which include benefits, for certain employees, in
excess of qualified plan limitations. For the 52 weeks ended February 1, 1997,
the 53 weeks ended February 3, 1996 and the 52 weeks ended January 28, 1995, net
retirement expense for these plans totaled $29.2 million, $21.8 million and $3.0
million, respectively.
Measurements of plan assets and obligations for the Pension Plans and the
defined benefit supplementary retirement plans are calculated as of December 31
of each year. The discount rates used to determine the actuarial present value
of projected benefit obligations under such plans were 7.75% as of December 31,
1996 and 7.25% as of December 31, 1995. The assumed average rate of increase in
future compensation levels under such plans was 5.0% as of December 31, 1996 and
December 31, 1995. The long-term rate of return on assets (Pension Plans only)
was 9.75% as of December 31, 1996 and December 31, 1995.
Effective January 1, 1997, the Company amended and merged its Pension Plans
and supplementary retirement plans and, during the first quarter of fiscal 1997,
amended and merged its Savings Plans. These amendments and mergers are not
expected to have a material impact on net retirement expense.
PENSION PLANS
Net pension expense (income) for the Company's Pension Plans included the
following actuarially determined components:
<TABLE>
<CAPTION>
52 WEEKS ENDED 53 WEEKS ENDED
FEBRUARY 1, FEBRUARY 3, 52 WEEKS ENDED
1997 1996 JANUARY 28, 1995
-------------- -------------- ----------------
(MILLIONS)
<S> <C> <C> <C>
Service cost......................... $ 36.2 $ 31.3 $ 19.9
Interest cost........................ 93.6 82.6 39.9
Actual return on assets.............. (192.7) (243.2) 5.1
Net amortization and deferrals....... 74.4 134.5 (73.7)
-------- -------- ------
$ 11.5 $ 5.2 $ (8.8)
======== ======== ======
</TABLE>
F-22
<PAGE> 45
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
================================================================================
The following table sets forth the projected actuarial present value of
benefit obligations and funded status at December 31, 1996 and 1995, for the
Pension Plans:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1996 1995
------------ ------------
(MILLIONS)
<S> <C> <C>
Net accumulated benefit obligations, including vested
benefits of $1,163.6 million and $1,213.2 million,
respectively........................................... $1,189.6 $1,244.5
Projected compensation increases......................... 91.6 97.8
-------- --------
Projected benefit obligations............................ 1,281.2 1,342.3
-------- --------
Plan assets (primarily stocks, bonds and U.S. government
securities)............................................ 1,468.6 1,363.4
Unrecognized (gain) loss................................. (15.5) 162.9
Unrecognized prior service cost.......................... 3.9 1.9
Unrecognized net asset................................... -- 0.9
-------- --------
1,457.0 1,529.1
-------- --------
Prepaid pension expense.................................. $ 175.8 $ 186.8
======== ========
</TABLE>
The Company's policy is to fund the Pension Plans at or above the minimum
required by law. At December 31, 1996 and 1995, the Company had met the full
funding limitation. Plan assets are held by independent trustees.
SUPPLEMENTARY RETIREMENT PLANS
Net pension expense for the supplementary retirement plans included the
following actuarially determined components:
<TABLE>
<CAPTION>
52 WEEKS ENDED 53 WEEKS ENDED
FEBRUARY 1, FEBRUARY 3, 52 WEEKS ENDED
1997 1996 JANUARY 28, 1995
-------------- -------------- ----------------
(MILLIONS)
<S> <C> <C> <C>
Service cost......................... $ 1.9 $ 1.6 $ 0.8
Prior service cost................... -- 1.1 --
Interest cost on projected benefit
obligations........................ 4.9 3.0 1.7
Net amortization and deferral........ .8 0.7 1.0
------ ------ ------
$ 7.6 $ 6.4 $ 3.5
====== ====== ======
</TABLE>
F-23
<PAGE> 46
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
================================================================================
The following table sets forth the projected actuarial present value of
unfunded benefit obligations at December 31, 1996 and 1995, for the
supplementary retirement plans:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1996 1995
------------ ------------
(MILLIONS)
<S> <C> <C>
Accumulated benefit obligations, including vested
benefits of $65.1 million and $68.4 million,
respectively........................................... $ 66.1 $ 69.9
Projected compensation increases......................... 9.1 16.1
------ ------
Projected benefit obligations............................ 75.2 86.0
Unrecognized gain (loss)................................. 6.1 (6.2)
Unrecognized prior service cost.......................... (5.5) (6.5)
------ ------
Accrued supplementary retirement obligation.............. $ 75.8 $ 73.3
====== ======
</TABLE>
SAVINGS PLANS
The Savings Plans include a voluntary savings feature for eligible
employees. For one plan, the Company's contribution is based on the Company's
annual earnings and the minimum Company contribution is 20% of an employee's
eligible savings. For the other plans, the Company's contribution is based on a
percentage of employee savings. Expense for the Savings Plans amounted to $10.1
million for the 52 weeks ended February 1, 1997, $10.2 million for the 53 weeks
ended February 3, 1996 and $8.3 million for the 52 weeks ended January 28, 1995.
DEFERRED COMPENSATION PLAN
The Company has a deferred compensation plan wherein eligible executives
may elect to defer a portion of their compensation each year as either stock
credits or cash credits. The Company transfers shares to a trust to cover the
number it estimates will be needed for distribution on account of stock credits
currently outstanding. At February 1, 1997, February 3, 1996 and January 28,
1995, the liability under the plan, which is reflected in other liabilities, was
$11.8 million, $7.5 million and $3.9 million, respectively. Expense for the 52
weeks ended February 1, 1997, the 53 weeks ended February 3, 1996 and the 52
weeks ended January 28, 1995 was immaterial.
13. POSTRETIREMENT HEALTH CARE AND LIFE INSURANCE BENEFITS
In addition to pension and other supplemental benefits, certain retired
employees currently are provided with specified health care and life insurance
benefits. Eligibility requirements for such benefits vary by division and
subsidiary, but generally state that benefits are available to eligible
employees who retire after a certain age with specified years of service.
Certain employees are subject to having such benefits modified or terminated.
F-24
<PAGE> 47
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
================================================================================
Net postretirement benefit expense included the following actuarially
determined components:
<TABLE>
<CAPTION>
52 WEEKS ENDED 53 WEEKS ENDED
FEBRUARY 1, FEBRUARY 3, 52 WEEKS ENDED
1997 1996 JANUARY 28, 1995
-------------- -------------- ----------------
(MILLIONS)
<S> <C> <C> <C>
Service cost......................... $ 4.9 $ 5.5 $ 0.7
Interest cost........................ 27.2 28.9 9.1
Net amortization and deferral........ (6.6) (6.8) (5.8)
------ ------ ------
$ 25.5 $ 27.6 $ 4.0
====== ====== ======
</TABLE>
The measurement of the postretirement benefit obligations is calculated as
of December 31. The following table sets forth the projected actuarial present
value of unfunded postretirement benefit obligations at December 31, 1996 and
1995:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1996 1995
------------ ------------
(MILLIONS)
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees................................................. $280.0 $292.7
Fully eligible active plan participants.................. 38.9 47.1
Other active plan participants........................... 45.2 56.3
------ ------
Accumulated postretirement benefit obligation............ 364.1 396.1
Unrecognized net gain.................................... 69.4 35.5
Unrecognized prior service cost.......................... 16.0 18.6
------ ------
Accrued postretirement benefit obligation................ $449.5 $450.2
====== ======
</TABLE>
The discount rate used in determining the actuarial present value of
unfunded postretirement benefit obligations was 7.75% as of December 31, 1996
and 7.25% as of December 31, 1995.
The future medical benefits provided by the Company for certain employees
are based on a fixed amount per year of service, and the accumulated
postretirement benefit obligation is not affected by increases in health care
costs. However, the future medical benefits provided by the Company for certain
other employees are affected by increases in health care costs. For purposes of
determining the present values of unfunded postretirement benefit obligations,
the annual growth rate in the per capita cost of various components of such
medical benefit obligations was assumed to range from 5.5% to 10.5% in the first
year, and to decrease gradually for each such component to 5.5% by 2003 and to
remain at that level thereafter. The foregoing growth-rate assumption has a
significant effect on such determination. To illustrate, increasing such assumed
growth rates by one percentage point would increase the present value of
unfunded postretirement benefit obligation as of December 31, 1996 by $22.8
million.
14. EQUITY PLAN
The Company has adopted an equity plan intended to provide an equity
interest in the Company to key management personnel and thereby provide
additional incentives for such persons to devote themselves to the
F-25
<PAGE> 48
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
================================================================================
maximum extent practicable to the businesses of the Company and its
subsidiaries. The equity plan is administered by the Compensation Committee of
the Board of Directors (the "Compensation Committee"). The Compensation
Committee is authorized to grant options, stock appreciation rights and
restricted stock to officers and key employees of the Company and its
subsidiaries. The equity plan also provides for the award of options to
non-employee directors.
Stock option transactions are as follows:
<TABLE>
<CAPTION>
52 WEEKS ENDED 53 WEEKS ENDED 52 WEEKS ENDED
FEBRUARY 1, 1997 FEBRUARY 3, 1996 JANUARY 28, 1995
------------------------ ------------------------ ------------------------
SHARES GRANT PRICE SHARES GRANT PRICE SHARES GRANT PRICE
------- -------------- ------- -------------- ------- --------------
<S> <C> <C> <C> <C> <C> <C>
(SHARES IN THOUSANDS)
Outstanding, beginning
of year.............. 7,415.7 $11.625-28.500 6,151.5 $11.625-25.000 3,038.5 $11.625-25.000
Granted................ 3,057.8 33.125-34.625 2,291.1 19.000-28.500 3,597.4 18.625-23.625
Canceled............... (403.9) 15.625-33.125 (435.6) 16.000-23.625 (218.2) 11.625-23.625
Exercised.............. (929.4) 11.625-25.000 (591.3) 15.625-23.625 (266.2) 11.625-20.875
------- -------------- ------- -------------- ------- --------------
Outstanding, end of
year................. 9,140.2 $11.625-34.625 7,415.7 $11.625-28.500 6,151.5 $11.625-25.000
======= ============== ======= ============== ======= ==============
Exercisable, end of
year................. 3,136.8 $11.625-28.500 2,750.2 $11.625-25.000 1,904.1 $11.625-25.000
======= ============== ======= ============== ======= ==============
</TABLE>
As of February 1, 1997, 6,922,400 shares of Common Stock were available for
additional grants pursuant to the Company's equity plan, of which 204,900 shares
were available for grant in the form of restricted stock. No shares of Common
Stock were granted in the form of restricted stock during the 52 weeks ended
February 1, 1997 or the 53 weeks ended February 3, 1996. During the 52 weeks
ended January 28, 1995, 418,000 shares of Common Stock were granted in the form
of restricted stock at market values ranging from $18.625-$23.625 with vesting
periods ranging from immediate to five years. Compensation expense is recorded
for all restricted stock grants based on the amortization of the fair market
value at the time of grant of the restricted stock over the period the
restrictions lapse (see Note 15). There have been no grants of stock
appreciation rights under the equity plan.
The Company applies Accounting Principles Board Opinion No. 25 and related
Interpretations in accounting for compensation cost under its equity plan. Had
compensation cost for the Company's equity plan been determined consistent with
Statement of Financial Accounting Standards No. 123 for options granted
subsequent to January 28, 1995, the Company's net income and earnings per share
would have been reduced to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
52 WEEKS ENDED 53 WEEKS ENDED
FEBRUARY 1, FEBRUARY 3,
1997 1996
-------------- --------------
(MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Net income As Reported............................ $265.9 $ 74.6
Pro forma.............................. 257.5 71.6
Earnings As Reported............................ 1.28 .39
per share Pro forma.............................. 1.24 .37
</TABLE>
F-26
<PAGE> 49
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
================================================================================
The fair value of each option grant subsequent to January 28, 1995 is
estimated on the date of grant using the Black-Scholes option-pricing model with
the following weighted-average assumptions used.
<TABLE>
<CAPTION>
52 WEEKS ENDED 53 WEEKS ENDED
FEBRUARY 1, FEBRUARY 3,
1997 1996
-------------- --------------
<S> <C> <C>
Dividend yield....................................... -- --
Expected volatility.................................. 25.2% 31.5%
Risk-free interest rate.............................. 6.1% 7.0%
Expected life........................................ 6 years 6 years
</TABLE>
Subsequent to January 28, 1995, option awards have been granted with an
exercise price equal to 100% of fair market value at the time of grant, with a
10-year term and vesting either ratably over three or four years or vesting
entirely at the end of three or four years. A summary of stock option
transactions for stock options granted subsequent to January 28, 1995 is shown
below:
<TABLE>
<CAPTION>
52 WEEKS ENDED 53 WEEKS ENDED
FEBRUARY 1, 1997 FEBRUARY 3, 1996
------------------ ------------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
EXERCISE EXERCISE
SHARES PRICE SHARES PRICE
------- -------- ------- --------
<S> <C> <C> <C> <C>
(SHARES IN THOUSANDS)
Outstanding, beginning of year............................. 2,187.9 $21.790 -- $ --
Granted.................................................... 3,057.8 33.138 2,291.1 21.816
Canceled................................................... (212.5) 28.156 (103.2) 22.375
Exercised.................................................. (66.2) 22.375 -- --
------- ------- ------- -------
Outstanding, end of year................................... 4,967.0 $28.496 2,187.9 $21.790
======= ======= ======= =======
Exercisable, end of year................................... 334.1 $22.480 -- $ --
======= ======= ======= =======
Weighted average fair value of options granted during
year..................................................... $13.037 $ 9.887
======= =======
</TABLE>
The following summarizes information about stock options granted subsequent
to January 28, 1995, which remain outstanding as of February 1, 1997:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
----------------------------------------------------- OPTIONS EXERCISABLE
RANGE WEIGHTED AVERAGE --------------------------------
OF NUMBER REMAINING WEIGHTED AVERAGE NUMBER WEIGHTED AVERAGE
EXERCISE PRICES OUTSTANDING CONTRACTUAL LIFE EXERCISE PRICE EXERCISABLE EXERCISE PRICE
- --------------- ----------- ---------------- ---------------- ----------- ----------------
(THOUSANDS) (THOUSANDS)
<S> <C> <C> <C> <C> <C>
$ 19.000-28.500 2,006.8 8 years $ 21.647 334.1 $ 22.480
33.125-34.625 2,960.2 9 years 33.139 -- --
</TABLE>
15. SHAREHOLDERS' EQUITY
The authorized shares of the Company consist of 125.0 million shares of
preferred stock ("Preferred Stock"), par value of $.01 per share, with no shares
issued, and 500.0 million shares of Common Stock, par
F-27
<PAGE> 50
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
================================================================================
value of $.01 per share, with 237.8 million shares of Common Stock issued and
208.0 million shares of Common Stock outstanding at February 1, 1997, 232.4
million shares of Common Stock issued and 202.7 million shares of Common Stock
outstanding at February 3, 1996, and 212.2 million shares of Common Stock issued
and 182.6 million shares outstanding at January 28, 1995 (with shares held in
the Company's treasury or by subsidiaries of the Company being treated as
issued, but not outstanding).
COMMON STOCK
The holders of the Common Stock are entitled to one vote for each share
held of record on all matters submitted to a vote of shareholders. Subject to
preferential rights that may be applicable to any Preferred Stock, holders of
Common Stock are entitled to receive ratably such dividends as may be declared
by the Board of Directors out of funds legally available therefor. However, it
is not presently anticipated that dividends will be paid on Common Stock in the
foreseeable future and certain of the debt instruments to which the Company is a
party restrict the payment of dividends.
PREFERRED SHARE PURCHASE RIGHTS
Each share of Common Stock is accompanied by one right (a "Right") issued
pursuant to the Share Purchase Rights Agreement between the Company and The Bank
of New York, as Rights Agent. Each Right entitles the registered holder thereof
to purchase from the Company one one-hundredth of a share of Series A Junior
Participating Preferred Stock, par value $.01 per share (the "Series A Preferred
Shares"), of the Company at a price (the "Purchase Price") of $62.50 per one
one-hundredth of a Series A Preferred Share (subject to adjustment).
In general, the Rights will not become exercisable or transferable apart
from the shares of Common Stock with which they were issued unless a person or
group of affiliated or associated persons becomes the beneficial owner of, or
commences a tender offer that would result in beneficial ownership of, 20% or
more of the outstanding shares of Common Stock (any such person or group of
persons being referred to as an "Acquiring Person"). Thereafter, under certain
circumstances, each Right (other than any Rights that are or were beneficially
owned by an Acquiring Person, which Rights will be void) could become
exercisable to purchase at the Purchase Price a number of shares of Common Stock
having a market value equal to two times the Purchase Price. The Rights will
expire on February 4, 2002, unless earlier redeemed by the Company at a
redemption price of $.03 per Right (subject to adjustment).
FUTURE STOCK ISSUANCES
The Company is authorized to issue 10.2 million shares of Common Stock
(subject to adjustment) upon the conversion of the Convertible Subordinated
Notes, 1.0 million shares of Common Stock (subject to adjustment) upon the
exercise of the Company's Series B Warrants, 9.0 million shares of Common Stock
(subject to adjustment) upon the exercise of the Company's Series C Warrants,
9.0 million shares of Common Stock (subject to adjustment) upon the exercise of
the Company's Series D Warrants and
F-28
<PAGE> 51
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
================================================================================
0.2 million shares of Common Stock (subject to adjustment) upon the exercise of
the Company's Series E Warrants. The warrants have the following terms:
<TABLE>
<CAPTION>
SHARES PER EXERCISE EXPIRATION
WARRANT PRICE DATE
---------- ---------- ----------
<S> <C> <C> <C>
Series B...................... 1.047 $35.00 2/15/00
Series C...................... 1.000 25.93 12/19/99
Series D...................... 1.000 29.92 12/19/01
Series E...................... 0.270 17.00 10/08/99
</TABLE>
In addition to the stock options described in Note 14, the Company issued
options to purchase 1.5 million shares of Common Stock at prices ranging from
$14.81 to $51.85 in connection with the acquisition of Broadway (of which
options to purchase 0.6 million shares of Common Stock remained outstanding as
of February 1, 1997).
F-29
<PAGE> 52
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
================================================================================
Shareholders' Equity consists of the following:
<TABLE>
<CAPTION>
52 WEEKS ENDED 53 WEEKS ENDED
FEBRUARY 1, FEBRUARY 3, 52 WEEKS ENDED
1997 1996 JANUARY 28, 1995
-------------- -------------- ----------------
(MILLIONS)
<S> <C> <C> <C>
Preferred stock.................................. $ -- $ -- $ --
-------- -------- --------
Common stock:
Balance, beginning of year.................. $ 2.3 $ 2.1 $ 1.3
Issuance of common stock.................... 0.1 0.2 0.8
-------- -------- --------
Balance, end of year........................ 2.4 2.3 2.1
-------- -------- --------
Additional paid-in capital:
Balance, beginning of year.................. 4,268.4 3,711.3 1,975.7
Issuance of common stock.................... 131.3 557.1 1,617.7
Issuance of warrants........................ -- -- 118.4
Cancellation of treasury stock.............. -- -- (0.5)
-------- -------- --------
Balance, end of year........................ 4,399.7 4,268.4 3,711.3
-------- -------- --------
Unearned restricted stock:
Balance, beginning of year.................. (3.2) (8.5) (4.1)
Cancellation (issuance) of common stock..... 0.2 0.7 (7.1)
Amortization................................ 1.9 4.6 2.7
-------- -------- --------
Balance, end of year........................ (1.1) (3.2) (8.5)
-------- -------- --------
Treasury stock:
Balance, beginning of year.................. (562.2) (559.1) (0.9)
Additions................................... (4.3) (3.1) (558.7)
Deductions.................................. 0.4 -- --
Cancellations............................... -- -- 0.5
-------- -------- --------
Balance, end of year........................ (566.1) (562.2) (559.1)
-------- -------- --------
Accumulated equity:
Balance, beginning of year.................. 568.4 493.8 306.2
Net income.................................. 265.9 74.6 187.6
-------- -------- --------
Balance, end of year........................ 834.3 568.4 493.8
-------- -------- --------
Total shareholders' equity....................... $4,669.2 $4,273.7 $3,639.6
======== ======== ========
</TABLE>
F-30
<PAGE> 53
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
================================================================================
Changes in the number of shares held in the treasury are as follows:
<TABLE>
<CAPTION>
52 WEEKS ENDED 53 WEEKS ENDED
FEBRUARY 1, FEBRUARY 3,
1997 1996
-------------- --------------
(THOUSANDS)
<S> <C> <C>
Balance, beginning of year............... 29,728.9 29,604.7
Additions:
Restricted stock.................... 41.9 40.8
Deferred compensation plan.......... 90.6 83.4
Distributions from deferred compensation
plan................................... (18.9) --
-------- --------
Balance, end of year..................... 29,842.5 29,728.9
======== ========
</TABLE>
In connection with the acquisition of Macy's, 29.5 million shares were
issued to wholly owned subsidiaries of the Company and are reflected as treasury
shares in the Consolidated Financial Statements. Additions to treasury stock for
restricted stock represent shares accepted in lieu of cash to cover employee tax
liability upon lapse of restrictions. Under the deferred compensation plan,
shares are maintained in a trust to cover the number estimated to be needed for
distribution on account of stock credits currently outstanding.
16. FINANCIAL INSTRUMENTS AND CONCENTRATIONS OF CREDIT RISK
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to estimate
that value:
Cash and short-term investments
The carrying amount approximates fair value because of the short maturity
of these instruments.
Accounts receivable
The carrying amount approximates fair value because of the short average
maturity of the instruments, and because the carrying amount reflects a
reasonable estimate of losses from doubtful accounts.
Notes receivable
The fair value of notes receivable is estimated using discounted cash flow
analysis, based on estimated market discount rates.
Other assets
Other assets primarily represent investments in joint ventures accounted
for on the equity basis. Based on recent appraisals, the carrying value of such
investments approximates their fair value.
F-31
<PAGE> 54
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
================================================================================
Long-term debt
The fair values of the Company's long-term debt are estimated based on the
quoted market prices for publicly traded debt or by using discounted cash flow
analysis, based on the Company's current incremental borrowing rates for similar
types of borrowing arrangements.
Interest rate cap agreements
The fair values of the interest rate cap agreements are estimated based on
current settlement prices of comparable contracts obtained from dealer quotes.
Interest rate swap agreements
The fair values of the interest rate swap agreements are obtained from
dealer quotes. The values represent the estimated amount the Company would pay
to terminate the agreements at the reporting date, taking into account current
interest rates and the current creditworthiness of the swap counterparties. The
interest rate swap agreements pertain to the note monetization and working
capital facilities and, although currently in net payable positions, management
intends to hold these agreements to their maturity dates.
The estimated fair values of the Company's financial instruments are as
follows:
<TABLE>
<CAPTION>
FEBRUARY 1, 1997 FEBRUARY 3, 1996
--------------------- ---------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- -------- -------- --------
(MILLIONS)
<S> <C> <C> <C> <C>
Cash and short-term investments........... $ 148.8 $ 148.8 $ 172.5 $ 172.5
Notes receivable.......................... 204.4 203.3 415.1 422.3
Other assets.............................. 16.9 16.9 30.4 30.4
Long-term debt............................ 4,532.7 4,702.6 5,551.1 5,747.3
Interest rate cap agreements.............. 7.5 0.2 15.8 0.8
Interest rate swap agreements............. -- (8.3) -- (30.9)
</TABLE>
F-32
<PAGE> 55
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
================================================================================
The estimated fair values and related unrecognized loss of the Company's
interest rate cap and swap agreements are as follows:
<TABLE>
<CAPTION>
FEBRUARY 1, 1997 FEBRUARY 3, 1996
------------------------------------ ------------------------------------
NOTIONAL CARRYING FAIR UNRECOGNIZED CARRYING FAIR UNRECOGNIZED
AMOUNT RATE TERM VALUE VALUE GAIN (LOSS) VALUE VALUE GAIN (LOSS)
- -------- ------- --------------------- -------- ------ ------------ -------- ------ ------------
(MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest Rate Caps:
$500.0 8% 12/15/94 to 12/15/97 $2.2 $ -- $ (2.2) $4.7 $ 0.1 $ (4.6)
$900.0 7% 12/15/94 to 12/15/95
8% 12/15/95 to 12/15/96
9% 12/15/96 to 12/15/97 3.6 -- (3.6) 7.8 0.1 (7.7)
$375.0 10% 02/03/95 to 01/03/01 1.5 0.2 (1.3) 3.0 0.4 (2.6)
$ 38.5 11% 01/20/95 to 03/15/98 -- -- 0.1 0.1 --
$ 38.5 11% 01/20/95 to 03/15/00 0.2 -- (0.2) 0.2 0.1 (0.1)
Interest Rate Swaps:
$352.0 9.9440% $176.0 to 5/3/97 and
$176.0 to 5/3/98 -- (11.7) (11.7) -- (29.9) (29.9)
$100.0 5.3275% 1/9/96 to 1/9/98 -- 0.5 0.5 -- (0.5) (0.5)
$100.0 5.2625% 1/23/96 to 1/25/99 -- 1.5 1.5 -- (0.2) (0.2)
$100.0 5.2250% 1/18/96 to 1/18/98 -- 0.5 0.5 -- (0.3) (0.3)
$100.0 5.0100% 2/12/96 to 2/12/98 -- 0.9 0.9 -- -- --
</TABLE>
The interest rate cap agreements in effect at February 1, 1997 are used to
hedge interest rate risk related to variable rate indebtedness under the
Company's bank credit facility and receivables backed commercial paper program,
as well as certain asset-backed certificates. These interest rate cap agreements
are recorded at cost and are amortized on a straight-line basis over the life of
the cap.
The interest rate swap agreements described in the foregoing table relate
to the note monetization and bank credit facilities. The note monetization
facility bears interest based on LIBOR, subject to certain adjustments. The
interest rate swap agreement for the note monetization facility effectively
converts this variable rate debt (LIBOR plus 0.40%) to a fixed rate of 10.344%
(9.944% fixed rate plus 0.40%). The trust that is the borrower under the note
monetization facility receives fixed-rate interest on the promissory note
constituting such trust's principal asset. The other interest rate swap
agreements are used, in effect, to fix the interest on a portion of the debt
outstanding under the bank credit facilities.
Commitments to extend credit under revolving agreements relate primarily to
the aggregate unused credit limits and unused lines of credit for the Company's
credit plans. These commitments generally can be terminated at the option of the
Company. It is unlikely that the total commitment amount will represent future
cash requirements. The Company evaluates each customer's creditworthiness on a
case-by-case basis.
Financial instruments that potentially subject the Company to
concentrations of credit risk consist principally of temporary cash investments
and trade receivables. The Company places its temporary cash investments in what
it believes to be high credit quality financial instruments. Credit risk with
respect to trade receivables is concentrated in the geographic regions in which
the Company operates stores. Such concentrations, however, are considered to be
limited because of the Company's large number of customers and their dispersion
across many regions.
F-33
<PAGE> 56
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
================================================================================
17. QUARTERLY RESULTS (UNAUDITED)
Unaudited quarterly results for the 52 weeks ended February 1, 1997 and the
53 weeks ended February 3, 1996, were as follows:
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
-------- -------- -------- --------
(MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
52 Weeks Ended February 1, 1997:
Net sales............................... $3,300.7 $3,284.2 $3,609.1 $5,035.0
Operating income........................ 55.3 75.8 187.3 574.8
Net income (loss)....................... (37.9) (27.2) 41.8 289.2
Earnings (Loss) per share............... (.18) (.13) .20 1.39
Fully diluted earnings (loss) per
share................................ (.18) (.13) .20 1.32
53 Weeks Ended February 3, 1996:
Net sales............................... $2,988.0 $3,047.2 $3,748.4 $5,264.9
Operating income........................ 10.8 1.8 105.0 545.3
Net income (loss)....................... (57.0) (66.9) (46.4) 244.9
Earnings (Loss) per share............... (.31) (.37) (.24) 1.21
Fully diluted earnings (loss) per
share................................ (.31) (.36) (.23) 1.15
</TABLE>
F-34
<PAGE> 1
Exhibit 10.1.3
AMENDMENT NO. 4 TO THE CREDIT AGREEMENT
Dated as of September 9, 1996
AMENDMENT NO. 4 TO THE CREDIT AGREEMENT among Federated
Department Stores, Inc., a Delaware corporation (the "BORROWER"), the banks,
financial institutions and other institutional lenders parties to the Credit
Agreement referred to below (collectively, the "LENDER PARTIES"), Citibank,
N.A., as administrative agent (the "ADMINISTRATIVE AGENT") for the Lender
Parties and The Chase Manhattan Bank, N.A. (formerly known as Chemical Bank), as
agent (the "AGENT").
PRELIMINARY STATEMENTS:
(1) The Borrower, the Lender Parties, the Administrative Agent
and the Agent have entered into a Credit Agreement dated as of December 19, 1994
(such Credit Agreement, as amended, supplemented or otherwise modified through
the date hereof, the "CREDIT AGREEMENT"). Capitalized terms not otherwise
defined in this Amendment have the same meanings as specified in the Credit
Agreement.
(2) The Borrower and the Required Lenders have agreed to
further amend the Credit Agreement as hereinafter set forth.
SECTION 1. AMENDMENTS TO THE CREDIT AGREEMENT. The Credit
Agreement is, effective as of the date hereof and subject to the satisfaction of
the conditions precedent set forth in Section 2 below, hereby amended as
follows:
(a) Section 2.03(a) is hereby amended by deleting all of the
first proviso through the number "$50,000,000." and substituting therefor a new
proviso to read as follows:
"PROVIDED that (x) such Competitive Bid Borrowing shall not
exceed an amount equal to the aggregate Unused Working Capital
Commitments of the Lenders in effect immediately prior to
giving effect to such Competitive Bid Borrowing LESS (I) the
Documentary L/C Amount at such time and (II) the aggregate
amount of outstanding commercial paper permitted pursuant to
Section 5.02(b)(i)(F) and (y) following the making of each
Competitive Bid Borrowing, the aggregate amount of the
Competitive Bid Advances of all Lenders then outstanding plus
the aggregate amount of outstanding commercial paper permitted
pursuant to Section 5.02(b)(i)(F) shall not exceed
$1,000,000,000.".
(b) Section 2.03(a)(ii) is hereby amended by deleting the
phrase ", subject to the proviso to the first sentence of this Section
2.03(a),".
(c) Section 2.03 is hereby further amended by adding,
immediately following each occurrence of the phrase "Competitive Bid Note" the
phrase ", if any,".
(d) Section 2.08(a) is amended by deleting the phrase "and,
thereafter, quarterly on the last Business Day of each March, June, September
and December, and on the Termination Date;" occurring immediately before the
first proviso, and substituting therefor the following:
"and thereafter calculated for the quarterly period ending on
the last Business
<PAGE> 2
Day of each March, June, September and December and payable in
arrears on the fifth Business Day following each such period,
and payable in arrears on the Termination Date;".
(e) Section 2.08(b) is amended in full to read as
follows:
"(b) UTILIZATION FEE. During each Non-Investment
Grade Period, for each day on which the sum of the aggregate
outstanding Advances PLUS the aggregate Available Amount of
outstanding Letters of Credit PLUS the aggregate Available
Amount of outstanding Documentary L/Cs PLUS the aggregate
amount of outstanding commercial paper permitted pursuant to
Section 5.02(b)(i)(F) exceeds 50% of the sum of (i) the Term
Commitments on such day PLUS (ii) the Working Capital
Commitments on such day, the Borrower shall pay to the
Administrative Agent for the account of each Lender (other
than the Designated Bidders) a utilization fee on the sum of
such Lender's Pro Rata Share of the aggregate amount of the
Advances outstanding PLUS such Lender's Pro Rata Share of the
aggregate Available Amount of all outstanding Standby Letters
of Credit at the rate of 0.25% per annum, payable in arrears
on March 31, 1995, and thereafter calculated for the quarterly
period ending on the last Business Day of each March, June,
September and December and payable in arrears on the fifth
Business Day following each such period, and payable in
arrears on the Termination Date; PROVIDED, HOWEVER, that any
utilization fee accrued with respect to any Defaulting
Lender's Pro Rata Share of the Advances during the period
prior to the time such Lender became a Defaulting Lender and
unpaid at such time shall not be payable by the Borrower so
long as such Lender shall be a Defaulting Lender except to the
extent that such utilization fee shall otherwise have been due
and payable by the Borrower prior to such time; and PROVIDED
FURTHER that no utilization fee shall accrue with respect to
any Defaulting Lenders' Pro Rata Share of the Advances of so
long as such Lender shall be a Defaulting Lender."
(f) Section 2.14(f)(i) is amended by deleting from the end
thereof the phrase "in each case payable in arrears quarterly on the last
Business Day of each March, June, September and December, commencing March 31,
1995, and on the Termination Date." and substituting for such phrase the
following:
"payable in arrears on March 31, 1995, and thereafter
calculated for the quarterly period ending on the last
Business Day of each March, June, September and December and
payable in arrears on the fifth Business Day following each
such period, and payable in arrears on the Termination Date;".
(g) Article II is further amended by adding thereto a
new Section 2.17, to read as follows:
"SECTION 2.17. EVIDENCE OF DEBT. (a) Each Lender
shall maintain in accordance with its usual practice an account or accounts
evidencing the indebtedness of the Borrower to such Lender resulting from each
Advance owing to such Lender from time to time, including the amounts of
principal and interest payable and paid to such Lender from time to time
hereunder. The Borrower agrees that upon notice by any Lender to the Borrower
(with a copy of such notice to the Administrative Agent) to the effect that a
promissory note or other evidence of indebtedness is required or appropriate in
order for such Lender to evidence (whether for purposes of pledge, enforcement
or otherwise) the Advances owing to, or to be made by, such Lender, the Borrower
shall promptly execute and deliver to such Lender a Note, payable to the order
of such Lender in a principal amount equal to the Commitment of
<PAGE> 3
such Lender; PROVIDED, HOWEVER, that, notwithstanding anything to the contrary
contained in this Agreement, the execution and delivery of such Note shall not
be a condition precedent to the making of any Advance under this Agreement.
(b) The Register maintained by the Administrative
Agent pursuant to Section 8.07 shall include a control account, and a subsidiary
account for each Lender, in which accounts (taken together) shall be recorded
(i) the date and amount of each Borrowing made hereunder, the Type of Advances
comprising such Borrowing and, if appropriate, the Interest Period applicable
thereto, (ii) the terms of each Assignment and Acceptance delivered to and
accepted by it, (iii) the amount of any principal or interest due and payable or
to become due and payable from the Borrower to each Lender hereunder, and (iv)
the amount of any sum received by the Administrative Agent from the Borrower
hereunder and each Lender's share thereof.
(c) Notwithstanding anything to the contrary
contained in this Agreement, entries made in good faith by the Administrative
Agent in the Register pursuant to subsection (b) above, and by each Lender in
its account or accounts pursuant to subsection (a) above, shall be prima facie
evidence of the amount of principal and interest due and payable or to become
due and payable from the Borrower to, in the case of the Register, each Lender
and, in the case of such account or accounts, such Lender, under this Agreement,
absent manifest error; PROVIDED, HOWEVER, that the failure of the Administrative
Agent or such Lender to make an entry, or any finding that an entry is
incorrect, in the Register or such account or accounts shall not limit or
otherwise affect the obligations of the Borrower under this Agreement.".
(h) Section 3.02(a)(iii) is hereby amended by
deleting the semicolon at the end thereof and substituting therefor the
following:
"and LESS the aggregate amount of outstanding commercial paper
permitted pursuant to Section 5.02(b)(i)(F);".
(i) Section 3.03(d) is hereby amended by deleting the period
at the end thereof and substituting therefor the following:
"and LESS the aggregate amount of outstanding commercial paper
permitted pursuant to Section 5.02(b)(i)(F).".
(j) Section 5.02(b)(i) is hereby amended by (x) deleting the
word "and" at the end of clause (E) thereof and (y) adding to the end
thereof new subsections (F) and (G) to read as follows:
"(F) unsecured Debt consisting of commercial paper
issued in the ordinary course of business and aggregating at
any time outstanding not more than the lesser of $400,000,000
and the amount of Unused Working Capital Commitments of the
Working Capital Lenders at such time; and
(G) any Debt extending the maturity of, or refunding
or refinancing, in whole or in part, (I) any Debt permitted
pursuant to subsection (C), (D) or (E) of this Section
5.02(b)(i) or (II) any extension, refunding or refinancing of
such Debt permitted pursuant to this subsection (G); PROVIDED
that the terms (including, without limitation, principal
amount, interest rate, limitations on liens, if any and
subordination terms, if any) taken as a whole of any such
extending, refunding or refinancing Debt, and of any agreement
entered into and of any instrument issued in connection
therewith, are no less favorable to the
<PAGE> 4
Loan Parties or the Lender Parties, as determined by the
Administrative Agent in its reasonable discretion, than the
terms governing the Debt so extended, refunded or refinanced
(PROVIDED that no unsecured Debt shall be refunded or
refinanced by secured Debt); PROVIDED, HOWEVER, that any such
refunding or refinancing Debt may provide for an earlier
maturity than the Debt being so refunded or refinanced so long
as such earlier maturity is no earlier than six months after
the Termination Date; PROVIDED FURTHER that the principal
amount of such Debt permitted pursuant to this Section
5.02(b)(i)(G) shall not be increased above the principal
amount of Debt outstanding immediately prior to such
extension, refunding or refinancing, and the direct and
contingent obligors therefor shall not be changed, as a result
of or in connection with such extension, refunding or
refinancing; and".
(k) Section 5.02(b)(iii)(D) is amended by deleting the phrase
"any Surviving Debt;" immediately before the first proviso and
substituting for such phrase the following:
"(I) any Surviving Debt or (II) any extension, refunding or
refinancing of such Surviving Debt which extension, refunding
or refinancing was effected in accordance with this subsection
(D);".
(l) Section 8.07(e) is amended by deleting the third and
fourth sentences thereof in full.
SECTION 2. CONDITIONS OF EFFECTIVENESS. This Amendment shall
become effective as of the date first above written when, and only when, on or
before September 9, 1996 (or such later date as the Administrative Agent and the
Borrower shall agree), the Administrative Agent shall have received counterparts
of this Amendment executed by the Borrower and the Required Lenders and each of
the consents attached hereto executed by each Guarantor and each Pledgor, as
applicable. This Amendment is subject to the provisions of Section 8.01 of the
Credit Agreement.
SECTION 3. REFERENCE TO AND EFFECT ON THE CREDIT AGREEMENT AND
THE LOAN DOCUMENTS. (a) On and after the effectiveness of this Amendment, each
reference in the Credit Agreement to "this Agreement", "hereunder", "hereof" or
words of like import referring to the Credit Agreement, and each reference in
any outstanding Notes and each of the other Loan Documents to "the Credit
Agreement", "thereunder", "thereof" or words of like import referring to the
Credit Agreement, shall mean and be a reference to the Credit Agreement, as
amended by this Amendment.
(b) The Credit Agreement, any outstanding Notes and each of
the other Loan Documents, as specifically amended by this Amendment, are and
shall continue to be in full force and effect and are hereby in all respects
ratified and confirmed. Without limiting the generality of the foregoing, the
Collateral Documents and all of the Collateral described therein do and shall
continue to secure the payment of all Obligations of the Loan Parties under the
Loan Documents, in each case as amended by this Amendment.
(c) The execution, delivery and effectiveness of this
Amendment shall not, except as expressly provided herein, operate as a waiver of
any right, power or remedy of any Lender or the Administrative Agent under any
of the Loan Documents, nor constitute a waiver of any provision of any of the
Loan Documents.
SECTION 4. EXECUTION IN COUNTERPARTS. This Amendment may be
executed
<PAGE> 5
in any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same agreement.
Delivery of an executed counterpart of a signature page to this Amendment by
telecopier shall be effective as delivery of a manually executed counterpart of
this Amendment.
SECTION 5. GOVERNING LAW. This Amendment shall be governed by,
and construed in accordance with, the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed by their respective officers thereunto duly authorized,
as of the date first above written.
FEDERATED DEPARTMENT STORES, INC.
By: /s/ Karen M. Hoguet
------------------------------------
Name: Karen M. Hoguet
Title: Senior VP and Treasurer
CITIBANK, N.A.,
as Administrative Agent and as Lender
By: /s/ Allen Fisher
------------------------------------
Name: Allen Fisher
Title: Vice President
THE CHASE MANHATTAN BANK, N.A.
(formerly known as Chemical Bank), as
Agent and as Lender
By: /s/ Ellen L. Gertzog
------------------------------------
Name: Ellen L. Gertzog
Title: Vice President
ALLIED IRISH BANKS, PLC
By: /s/ William I. Strickland
------------------------------------
Name: William I. Strickland
Title: Senior Vice President
By: /s/ Marcia Meeker
------------------------------------
Name: Marcia Meeker
Title: Vice President
AERIES FINANCE LTD.
By: /s/ Andreian Wignall
------------------------------------
Name: Andreian Wignall
Title: Director
<PAGE> 6
ARAB BANK PLC, GRAND CAYMAN
By: /s/
------------------------------------
Name:
Title: EVP/Branch Manager
ARAB BANKING CORPORATION
By: /s/ Sheldon Tilney
------------------------------------
Name: Sheldon Tilney
Title: Deputy General Manager
THE ASAHI BANK, LTD.
By: /s/
------------------------------------
Name:
Title:
PT. BANK NEGARA INDONESIA (PERSERO)
By: /s/Debra Sothapa
------------------------------------
Name: Debra Sothapa
Title: General Manager
BANK OF AMERICA ILLINOIS
By: /s/ M A Detrick
------------------------------------
Name: M A Detrick
Title: Vice President
BANK OF IRELAND
By: /s/ Paddy Dowling
------------------------------------
Name: Paddy Dowling
Title: Account Manager
BANK OF MONTREAL
By: /s/ Thomas H. Peer
------------------------------------
Name: Thomas H. Peer
Title: Director
<PAGE> 7
THE BANK OF NEW YORK
By: /s/ Paula DiPonzio
------------------------------------
Name: Paula DiPonzio
Title: Vice President
BANK ONE, COLUMBUS, N.A.
By: /s/ Wendy C. Mayhew
------------------------------------
Name: Wendy C. Mayhew
Title: Vice President
BANK POLSKA OPIEKI, S.A.
By: /s/
------------------------------------
Name:
Title:
BANK OF SCOTLAND
By: /s/ Catherine M. Oniferey
------------------------------------
Name: Catherine M. Oniferey
Title: Vice President
THE BANK OF TOKYO - MITSUBISHI LTD.
By: /s/ Minoru Wada
------------------------------------
Name: Minoru Wada
Title: Deputy General Manager
BANQUE PARIBAS
By: /s/ Mary T. Finnegan
Name: Mary T. Finnegan
Title: Group Vice President
------------------------------------
By: /s/ Ann C. Pifer
Name: Ann C. Pifer
Title: Vice President
BEAR STEARNS & CO. INC.
By: /s/
------------------------------------
Name:
Title:
<PAGE> 8
BERLINER HANDELS-UND FRANKFURTER
BANK (n/k/a BHF-Bank AG)
By: /s/ John Sykes
------------------------------------
Name: John Sykes
Title: Assistant Vice President
By: /s/ Robert Scehnholz
------------------------------------
Name: Robert Scehnholz
Title: Assistant General Manager/Senior
Vice President
CAISSE NATIONALE DE CREDIT AGRICOLE
By: /s/ Alain Butzbach
------------------------------------
Name: Alain Butzbach
Title: Executive Vice President/Deputy General
Manager - USA
CANADIAN IMPERIAL BANK OF COMMERCE
By: /s/ John J. Mack
------------------------------------
Name: John J. Mack
Title: Authorized Signatory
CAPTIVA FINANCE LTD.
By: /s/ Elizabeth Kearns
------------------------------------
Name: Elizabeth Kearns
Title: Director
CERES FINANCE
By: /s/ Elizabeth Kearns
------------------------------------
Name: Elizabeth Kearns
Title: Director
THE CHASE MANHATTAN BANK, N.A.
By: /s/
------------------------------------
Name:
Title:
<PAGE> 9
By: /s/
------------------------------------
Name:
Title:
CITICORP SECURITIES, INC.
By: /s/
------------------------------------
Name:
Title:
COMERICA BANK
By: /s/ Hugh G. Porter
------------------------------------
Name: Hugh G. Porter
Title: Vice President
CREDIT LYONNAIS CAYMAN ISLAND BRANCH
By: /s/
------------------------------------
Name:
Title:
CREDIT SUISSE
By: /s/ Chris T. Horgan
------------------------------------
Name: Chris T. Horgan
Title: Associate
DEUTSCHE BANK AG NEW YORK
AND/OR CAYMAN ISLAND BRANCHES
By: /s/ David H. Kahn
------------------------------------
Name: David H. Kahn
Title: Assistant Vice President
By: /s/ James Fox
------------------------------------
Name: James Fox
Title: Assistant Vice President
COMMERZBANK AKTIENGESELLSCHAFT
GRAND CAYMAN BRANCH
By: /s/ Mark Monson
------------------------------------
Name: Mark Monson
Title: Vice President
By: /s/ Dr. Helmut R. Tollner
------------------------------------
<PAGE> 10
Name: Dr. Helmut R. Tollner
Title: Executive Vice President
THE FIFTH THIRD BANK
By: /s/ Robert C. Ries
------------------------------------
Name: Robert C. Ries
Title: Vice President
THE FIRST NATIONAL BANK OF BOSTON
By: /s/ Rod Guinn
------------------------------------
Name: Rod Guinn
Title: Director
THE FIRST NATIONAL BANK OF CHICAGO
By: /s/ Paul E. Rigby
------------------------------------
Name: Paul E. Rigby
Title: Managing Director
THE FIRST NATIONAL BANK OF MARYLAND
By: /s/ Andrew W. Fish
------------------------------------
Name: Andrew W. Fish
Title: Vice President
FLEET NATIONAL BANK
By: /s/ Kathleen Dimock
------------------------------------
Name: Kathleen Dimock
Title: Assistant Vice President
THE FUJI BANK, LIMITED, NEW YORK BRANCH
By: /s/ Teiji Teramoto
------------------------------------
Name: Teiji Teramoto
Title: Vice President and Manager
GULF INTERNATIONAL BANK
By: /s/ Abdel-Fattah Tahoun
------------------------------------
Name: Abdel-Fattah Tahoun
Title: Senior Vice President
<PAGE> 11
By: /s/ Thomas E. Fitzherbert
------------------------------------
Name: Thomas E. Fitzherbert
Title: Vice President
THE INDUSTRIAL BANK OF JAPAN, LTD.
By: /s/ Junri Oda
------------------------------------
Name: Junri Oda
Title: Senior Vice President and Senior Manager
ING CAPITAL ADVISORS, INC.
By: /s/ Kathleen A. Lenarcic
------------------------------------
Name: Kathleen A. Lenarcic
Title: Vice President & Portfolio Manager
INTERNATIONALE NEDERLANDEN BANK (U.S.) CAPITAL CORP.
By: /s/ Joan M. Chiappe
------------------------------------
Name: Joan M. Chiappe
Title: Vice President
LEHMAN COMMERCIAL PAPER
By: /s/ Michele Swanson
------------------------------------
Name: Michele Swanson
Title: Authorized Signatory
MELLON BANK, N.A.
By: /s/ Manbeth Donnely
------------------------------------
Name: Manbeth Donnely
Title: Vice President
MERITA BANK, LTD.
By: /s/
------------------------------------
Name:
Title:
MERRILL LYNCH PRIME RATE PORTFOLIO
By: Merrill Lynch Asset Management, L.P.,
as Investment Advisor
By: /s/ Gilles Marchand
------------------------------------
<PAGE> 12
Name: Gilles Marchand, CFA
Title: Authorized Signatory
MERRILL LYNCH SENIOR FLOATING RATE
FUND, INC.
By: /s/ Gilles Marchand
------------------------------------
Name: Gilles Marchand, CFA
Title: Authorized Signatory
SENIOR HIGH INCOME PORTFOLIO, INC.
By: /s/ Gilles Marchand
------------------------------------
Name: Gilles Marchand, CFA
Title: Authorized Signatory
MITSUBISHI TRUST
By: /s/ Hachiro Hosoda
------------------------------------
Name: Hachiro Hosoda
Title: Senior Vice President
THE MITSUI TRUST & BANKING CO., LTD.
By: /s/ Margaret Holloway
------------------------------------
Name: Margaret Holloway
Title: Vice President and Manager
MORGAN GUARANTY TRUST COMPANY OF NEW YORK
By: /s/
------------------------------------
Name:
Title:
NATIONAL WESTMINSTER BANK PLC
By: /s/ Phillip Knoll
------------------------------------
Name: Phillip Knoll
Title: Vice President
NATIONSBANK, N.A.
By: /s/ Philip S. Durand
------------------------------------
Name: Philip S. Durand
Title: Vice President
<PAGE> 13
THE NIPPON CREDIT BANK, LTD.
By: /s/ Barry S. Fein
------------------------------------
Name: Barry S. Fein
Title: Assistant Vice President
PNC BANK, OHIO, NATIONAL ASSOCIATION
By: /s/ Bruce A. Kintner
------------------------------------
Name: Bruce A. Kintner
Title: Vice President
PROSPECT STREET SENIOR PORTFOLIO, L.P.
By Prospect Street Senior Loan Corp.
By: /s/ Paula M. St. Amand
------------------------------------
Name: Paula M. St. Amand
Title: Assistant Secretary
RESTRUCTURED OBLIGATIONS BACKED BY
SENIOR ASSETS B.V.
By: Chancellor Senior Secured Management, Inc.
as Portfolio Advisor
By: /s/ Christopher E. Jansen
------------------------------------
Name: Christopher E. Jansen
Title: Managing Director
STICHTING RESTRUCTURED OBLIGATIONS
BACKED BY SENIOR ASSETS2 (ROSA2)
By: Chancellor Senior Secured Management, Inc.
as Portfolio Advisor
By: /s/ Christopher E. Jansen
------------------------------------
Name: Christopher E. Jansen
Title: Managing Director
THE SANWA BANK, LIMITED, NEW YORK BRANCH
By: /s/ Jean-Michael Fatovu
------------------------------------
Name: Jean-Michael Fatovu
Title: Vice President
SENIOR DEBT PORTFOLIO
<PAGE> 14
By Boston Management and Research,
as Investment Advisor
By: /s/ Barbara Campbell
------------------------------------
Name: Barbara Campbell
Title: Assistant Treasurer
SOCIETE GENERALE
By: /s/ Eric E.O. Siebert, Jr.
------------------------------------
Name: Eric E.O. Siebert, Jr.
Title: Corporate Banking Manager
SOCIETY NATIONAL BANK
By: /s/
------------------------------------
Name:
Title:
STAR BANK, N.A.
By: /s/ Douglas V. Wyatt
------------------------------------
Name: Douglas V. Wyatt
Title: Vice President
STRATA FUNDING
By: /s/ Elizabeth Kearns
------------------------------------
Name: Elizabeth Kearns
Title: Director
THE SUMITOMO BANK, LTD. NEW YORK BRANCH
By: /s/
------------------------------------
Name:
Title:
THE SUMITOMO TRUST & BANKING
CO., LTD., NEW YORK BRANCH
By: /s/ Suraj P. Bhatia
------------------------------------
Name: Suraj P. Bhatia
Title: Senior Vice President
<PAGE> 15
SUNTRUST BANK
CENTRAL FLORIDA, N.A.
By: /s/ J. Carol Doyle
------------------------------------
Name: J. Carol Doyle
Title: First Vice President
TORONTO-DOMINION BANK
By: /s/
------------------------------------
Name:
Title:
THE TRAVELER'S INSURANCE COMPANY
By: /s/
------------------------------------
Name:
Title:
UNION BANK OF CALIFORNIA
By: /s/ Timothy P. Sterb
------------------------------------
Name: Timothy P. Sterb
Title: Vice President
VAN KAMPEN AMERICAN CAPITAL PRIME RATE INCOME TRUST
By: /s/ Brian W. Good
------------------------------------
Name: Brian W. Good
Title: Vice President
WACHOVIA BANK OF GEORGIA, N.A.
By: /s/ Michael Ripps
------------------------------------
Name: Michael Ripps
Title: Assistant Vice President
BANKERS TRUST
By: /s/
------------------------------------
Name:
Title:
<PAGE> 16
CONSENT
Dated as of September 9, 1996
Each of the undersigned, as a Guarantor under the
Guaranty dated as of December 19, 1994 (the "GUARANTY") in favor of the
Administrative Agent, for its benefit and the benefit of the Lender
Parties party to the Credit Agreement referred to in the foregoing
Amendment, hereby consents to such Amendment and hereby confirms and
agrees that notwithstanding the effectiveness of such Amendment, the
Guaranty is, and shall continue to be, in full force and effect and is
hereby ratified and confirmed in all respects, except that, on and
after the effectiveness of such Amendment, each reference in the
Guaranty to the "Credit Agreement", "thereunder", "thereof" or words of
like import shall mean and be a reference to the Credit Agreement, as
amended by such Amendment.
BLOOMINGDALE'S, INC.
BLOOMINGDALE'S BY MAIL LTD.
THE BON, INC.
BROADWAY STORES, INC.
BULLOCK'S, INC.
BURDINES, INC.
FEDERATED REAL ESTATE, INC.
FEDERATED RETAIL HOLDINGS, INC.
LAZARUS, INC.
LAZARUS PA, INC.
MACY'S CLOSE-OUT, INC.
MACY'S EAST, INC.
MACY'S REAL ESTATE, INC.
MACY'S SPECIALTY STORES, INC.
MACY'S WEST, INC.
RICH'S DEPARTMENT STORES, INC.
STERN'S DEPARTMENT STORES, INC.
By: /s/ Karen M. Hoguet
--------------------------------------------
Name: Karen M. Hoguet
Title: Senior Vice President and Treasurer
Address of Chief Executive Office and for Notices:
7 West Seventh Street
Cincinnati, OH 45202
Attention: Chief Financial Officer
(with a copy to General Counsel)
<PAGE> 17
CONSENT
Dated as of September 9, 1996
Each of the undersigned, as a Pledgor under the Security
Agreement dated as of December 19, 1994 (the "SECURITY AGREEMENT") in favor of
the Administrative Agent, for its benefit and the benefit of the Lender Parties
party to the Credit Agreement referred to in the foregoing Amendment, hereby
consents to such Amendment and hereby confirms and agrees that (a)
notwithstanding the effectiveness of such Amendment, the Security Agreement is,
and shall continue to be, in full force and effect and is hereby ratified and
confirmed in all respects, except that, on and after the effectiveness of such
Amendment, each reference in the Security Agreement to the "Credit Agreement",
"thereunder", "thereof" or words of like import shall mean and be a reference to
the Credit Agreement, as amended by such Amendment, and (b) the Collateral
Documents to which such Pledgor is a party and all of the Collateral described
therein do, and shall continue to, secure the payment of all of the Secured
Obligations (in each case, as defined therein).
FEDERATED DEPARTMENT STORES, INC.
By: /s/ Karen M. Hoguet
------------------------------------------
Title: Senior Vice President and Treasurer
Address of Chief Executive Office and for Notices:
7 West Seventh Street
Cincinnati, OH 45202
Attention: Chief Financial Officer
(with a copy to General Counsel)
FEDERATED RETAIL HOLDINGS, INC.
By: /s/ Karen M. Hoguet
------------------------------------------
Title: Senior Vice President and Treasurer
Address of Chief Executive Office and for Notices:
7 West Seventh Street
Cincinnati, OH 45202
Attention: Chief Financial Officer
(with a copy to General Counsel)
<PAGE> 1
Exhibit 10.1.4
AMENDMENT NO. 5 TO THE CREDIT AGREEMENT
Dated as of January 6, 1997
AMENDMENT NO. 5 TO THE CREDIT AGREEMENT among Federated
Department Stores, Inc., a Delaware corporation (the "BORROWER"), the banks,
financial institutions and other institutional lenders parties to the Credit
Agreement referred to below (collectively, the "LENDER PARTIES"), Citibank,
N.A., as administrative agent (the "ADMINISTRATIVE AGENT") for the Lender
Parties and The Chase Manhattan Bank, N.A. (formerly known as Chemical Bank), as
agent (the "AGENT").
PRELIMINARY STATEMENTS:
(1) The Borrower, the Lender Parties, the Administrative Agent
and the Agent have entered into a Credit Agreement dated as of December 19, 1994
(such Credit Agreement, as amended, supplemented or otherwise modified through
the date hereof, the "CREDIT AGREEMENT"). Capitalized terms not otherwise
defined in this Amendment have the same meanings as specified in the Credit
Agreement.
(2) The Borrower and the Required Lenders have agreed to
further amend the Credit Agreement as hereinafter set forth.
SECTION 1. AMENDMENTS TO THE CREDIT AGREEMENT. The Credit
Agreement is, effective as of the date hereof and subject to the satisfaction of
the conditions precedent set forth in Section 2 below, hereby amended as
follows:
(a) The definition of "RECEIVABLES FINANCING FACILITY"
contained in Section 1.01 is hereby amended by inserting immediately
after the words "replacement thereof" occurring in the second line of
such definition, the phrase "or other receivables financing".
(b) Section 5.02(d)(v) is hereby amended by deleting the
phrase "substantially as conducted on the date hereof" occurring in the
third line thereof.
SECTION 2. CONDITIONS OF EFFECTIVENESS. This Amendment shall
become effective as of the date first above written when, and only when, on or
before January 15, 1997 (or such later date as the Administrative Agent and the
Borrower shall agree), the Administrative Agent shall have received counterparts
of this Amendment executed by the Borrower and the Required Lenders and each of
the consents attached hereto executed by each Guarantor and each Pledgor, as
applicable. This Amendment is subject to the provisions of Section 8.01 of the
Credit Agreement.
SECTION 3. REFERENCE TO AND EFFECT ON THE CREDIT AGREEMENT AND
THE LOAN DOCUMENTS. (a) On and after the effectiveness of this Amendment, each
reference in the Credit Agreement to "this Agreement", "hereunder", "hereof" or
words of like import referring to the Credit Agreement, and each reference in
any outstanding Notes and each of the other Loan Documents to "the Credit
Agreement", "thereunder", "thereof" or words of like import referring to the
Credit Agreement, shall mean and be a reference to the Credit Agreement, as
amended by this Amendment.
(b) The Credit Agreement, any outstanding Notes and each of
the other Loan Documents, as specifically amended by this Amendment, are and
shall continue to be in full force and effect and are hereby in all respects
ratified and confirmed. Without limiting the
<PAGE> 2
generality of the foregoing, the Collateral Documents and all of the Collateral
described therein do and shall continue to secure the payment of all Obligations
of the Loan Parties under the Loan Documents, in each case as amended by this
Amendment.
(c) The execution, delivery and effectiveness of this
Amendment shall not, except as expressly provided herein, operate as a waiver of
any right, power or remedy of any Lender or the Administrative Agent under any
of the Loan Documents, nor constitute a waiver of any provision of any of the
Loan Documents.
SECTION 4. EXECUTION IN COUNTERPARTS. This Amendment may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement. Delivery of an executed counterpart of a signature page to this
Amendment by telecopier shall be effective as delivery of a manually executed
counterpart of this Amendment.
SECTION 5. GOVERNING LAW. This Amendment shall be governed
by, and construed in accordance with, the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed by their respective officers thereunto duly authorized,
as of the date first above written.
FEDERATED DEPARTMENT STORES, INC.
By: /s/ Karen M. Hoguet
-------------------------------------------
Name: Karen M. Hoguet
Title: Senior Vice President and Treasurer
<PAGE> 3
CITIBANK, N.A.,
as Administrative Agent and as Lender
By: /s/ Allen Fisher
-------------------------------------------
Name: Allen Fisher
Title: Vice President
THE CHASE MANHATTAN BANK, N.A.
(formerly known as Chemical Bank), as
Agent and as Lender
By: /s/ Ellen L. Gertzog
-------------------------------------------
Name: Ellen L. Gertzog
Title: Vice President
ALLIED IRISH BANKS, PLC
By: /s/ William I. Strickland
-------------------------------------------
Name: William I. Strickland
Title: Senior Vice President
By: /s/ Marcia Meeker
-------------------------------------------
Name: Marcia Meeker
Title: Vice President
AERIES FINANCE LTD.
By: /s/
-------------------------------------------
Name:
Title:
ARAB BANK PLC, GRAND CAYMAN
By: /s/
-------------------------------------------
Name:
Title:
ARAB BANKING CORPORATION
By: /s/ Grant E. McDonald
-------------------------------------------
Name: Grant E. McDonald
Title: Vice President
<PAGE> 4
THE ASAHI BANK, LTD.
By: /s/
-------------------------------------------
Name:
Title:
PT. BANK NEGARA INDONESIA (PERSERO)
By: /s/Debra Sothapa
-------------------------------------------
Name: Debra Sothapa
Title: General Manager
BANK OF AMERICA ILLINOIS
By: /s/ M A Detrick
-------------------------------------------
Name: M A Detrick
Title: Vice President
BANK OF IRELAND
By
-------------------------------------------
Name:
Title:
BANK OF MONTREAL
By: /s/ Thomas H. Peer
-------------------------------------------
Name: Thomas H. Peer
Title: Director
THE BANK OF NEW YORK
By: /s/ Paula DiPonzio
-------------------------------------------
Name: Paula DiPonzio
Title: Vice President
BANK ONE, COLUMBUS, N.A.
By: /s/ Wendy Mayhew Kephart
-------------------------------------------
Name: Wendy Mayhew Kephart
Title: Vice President
BANK POLSKA KASA OPIEKI, S.A.,
NEW YORK BRANCH
By: /s/ Hussein B. El-Tawil
-------------------------------------------
<PAGE> 5
Name: Hussein B. El-Tawil
Title: Vice President
BANK OF SCOTLAND
By: /s/ Catherine M. Oniferey
-------------------------------------------
Name: Catherine M. Oniferey
Title: Vice President
THE BANK OF TOKYO - MITSUBISHI LTD.
By: /s/ Noboru Kobayashi
-------------------------------------------
Name: Noboru Kobayashi
Title: Deputy General Manager
BANKERS TRUST
By
-------------------------------------------
Name:
Title:
BANQUE PARIBAS
By: /s/ Mary T. Finnegan
-------------------------------------------
Name: Mary T. Finnegan
Title: Group Vice President
By: /s/ Heather Zimmermann
-------------------------------------------
Name: Heather Zimmermann
Title: Assistant Vice President
BARCLAYS BANK PLC
By: /s/ Paresh Kanaw
-------------------------------------------
Name: Paresh Kanaw
Title: Associate Director
BEAR STEARNS & CO. INC.
By: /s/
-------------------------------------------
Name:
Title:
<PAGE> 6
BHF BANK AKTIENGESELLSCHAFT
Grand Cayman Branch
(f/k/a Berliner Handels-Und Frankfurter
Bank)
By: /s/ John Sykes
-------------------------------------------
Name: John Sykes
Title: Assistant Vice President
By: /s/ Evon Contos
-------------------------------------------
Name: Evon Contos
Title: Vice President
CAISSE NATIONALE DE CREDIT AGRICOLE
By: /s/ David Bouhl
-------------------------------------------
Name: David Bouhl
Title: Head of Corporate Banking - Chicago
CANADIAN IMPERIAL BANK OF COMMERCE
By: /s/ Cheryl L. Root
-------------------------------------------
Name: Cheryl L. Root
Title: Director, CIBC Wood Gundy Securities
Corp., as Agent
CAPTIVA FINANCE LTD.
By: /s/
-------------------------------------------
Name:
Title:
CERES FINANCE LTD.
By: /s/
-------------------------------------------
Name:
Title:
THE CHASE MANHATTAN BANK
By: /s/ Ellen L. Gertzog
-------------------------------------------
Name: Ellen L. Gertzog
Title: Vice President
<PAGE> 7
CITICORP SECURITIES, INC.
By: /s/ Allen Fisher
-------------------------------------------
Name: Allen Fisher
Title: Vice President
COMERICA BANK
By: /s/ Hugh G. Porter
-------------------------------------------
Name: Hugh G. Porter
Title: Vice President
COMMERZBANK AKTIENGESELLSCHAFT,
GRAND CAYMAN BRANCH
By: /s/ Mark Monson
-------------------------------------------
Name: Mark Monson
Title: Vice President
By: /s/ William J. Binder
-------------------------------------------
Name: William J. Binder
Title: Assistant Vice President
CREDIT LYONNAIS CAYMAN ISLAND BRANCH
By: /s/
-------------------------------------------
Name:
Title:
CREDIT SUISSE
By: /s/
-------------------------------------------
Name:
Title:
DEUTSCHE BANK AG NEW YORK
AND/OR CAYMAN ISLAND BRANCHES
By: /s/ David H. Kahn
-------------------------------------------
Name: David H. Kahn
Title: Assistant Vice President
By: /s/ Jean Hannigan
-------------------------------------------
Name: Jean Hannigan
Title: Vice President
<PAGE> 8
DLJ CAPITAL FUNDING, INC.
By: /s/ Stephen P. Hickey
-------------------------------------------
Name: Stephen P. Hickey
Title: Managing Director
THE FIFTH THIRD BANK
By: /s/ Robert C. Ries
-------------------------------------------
Name: Robert C. Ries
Title: Vice President
THE FIRST NATIONAL BANK OF BOSTON
By: /s/
-------------------------------------------
Name:
Title:
THE FIRST NATIONAL BANK OF CHICAGO
By: /s/ Tara W. Clark
-------------------------------------------
Name: Tara W. Clark
Title: Vice President
THE FIRST NATIONAL BANK OF MARYLAND
By: /s/ Clinton S. Lucas
-------------------------------------------
Name: Clinton S. Lucas
Title: Vice President
FLEET NATIONAL BANK
By: /s/ Richard Seafert
-------------------------------------------
Name: Richard Seafert
Title: Vice President
FLEET BANK N.A.
By: /s/ Richard Seafert
-------------------------------------------
Name: Richard Seafert
Title: Vice President
THE FUJI BANK, LIMITED, NEW YORK BRANCH
By: /s/ Teiji Teramoto
-------------------------------------------
<PAGE> 9
Name: Teiji Teramoto
Title: Vice President and Manager
GULF INTERNATIONAL BANK
By: /s/ Abdel-Fattah Tahoun
-------------------------------------------
Name: Abdel-Fattah Tahoun
Title: Senior Vice President
By: /s/ Thomas E. Fitzherbert
-------------------------------------------
Name: Thomas E. Fitzherbert
Title: Vice President
THE INDUSTRIAL BANK OF JAPAN, LTD.
By: /s/ Takuya Honjo
-------------------------------------------
Name: Takuya Honjo
Title: Senior Vice President
INTERNATIONALE NEDERLANDEN BANK (U.S.) CAPITAL
CORP.
By: /s/
-------------------------------------------
Name:
Title:
KEYBANK NATIONAL ASSOCIATION
By: /s/
-------------------------------------------
Name:
Title:
LEHMAN COMMERCIAL PAPER
By: /s/
-------------------------------------------
Name:
Title:
MELLON BANK, N.A.
By: /s/ Joan W. Bird
-------------------------------------------
Name: Joan W. Bird
Title: Vice President
MERITA BANK, LTD.
<PAGE> 10
By: /s/
-------------------------------------------
Name:
Title:
MERRILL LYNCH PRIME RATE PORTFOLIO
By: Merrill Lynch Asset Management, L.P.,
as Investment Advisor
By: /s/ Gilles Marchand
-------------------------------------------
Name: Gilles Marchand, CFA
Title: Authorized Signatory
MERRILL LYNCH SENIOR FLOATING RATE FUND, INC.
By: /s/ Gilles Marchand
-------------------------------------------
Name: Gilles Marchand, CFA
Title: Authorized Signatory
SENIOR HIGH INCOME PORTFOLIO, INC.
By: /s/ Gilles Marchand
-------------------------------------------
Name: Gilles Marchand, CFA
Title: Authorized Signatory
MITSUBISHI TRUST
By: /s/ Patricia Loret De Mola
-------------------------------------------
Name: Patricia Loret De Mola
Title: Senior Vice President
THE MITSUI TRUST & BANKING CO., LTD.
By: /s/ Margaret Holloway
-------------------------------------------
Name: Margaret Holloway
Title: Vice President and Manager
MS SENIOR FUNDING, INC.
By: /s/
-------------------------------------------
Name:
Title:
NATIONAL WESTMINSTER BANK PLC
By: /s/ W. Wakefield Smith
-------------------------------------------
<PAGE> 11
Name: W. Wakefield Smith
Title: Vice President
NATIONSBANK, N.A.
By: /s/ Michael D. McKay
-------------------------------------------
Name: Michael D. McKay
Title: Senior Vice President
THE NIPPON CREDIT BANK, LTD.
By: /s/ Barry S. Fein
-------------------------------------------
Name: Barry S. Fein
Title: Assistant Vice President
PNC BANK, OHIO, NATIONAL ASSOCIATION
By: /s/ Bruce A. Kintner
-------------------------------------------
Name: Bruce A. Kintner
Title: Vice President
RESTRUCTURED OBLIGATIONS BACKED BY
SENIOR ASSETS B.V.
By: Chancellor LGT Senior Secured Management, Inc.
as Portfolio Advisor
By: /s/ Stephen M. Alfieri
-------------------------------------------
Name: Christopher E. Jansen
Title: Managing Director
STICHTING RESTRUCTURED OBLIGATIONS
BACKED BY SENIOR ASSETS2 (ROSA2)
By: Chancellor LGT Senior Secured Management, Inc.
as Portfolio Advisor
By: /s/ Stephen M. Alfieri
-------------------------------------------
Name: Stephen M. Alfieri
Title: Managing Director
THE SANWA BANK, LIMITED, NEW YORK BRANCH
By: /s/ Jean-Michel Fatovic
-------------------------------------------
Name: Jean-Michel Fatovic
Title: Vice President
<PAGE> 12
SENIOR DEBT PORTFOLIO
By Boston Management and Research, as
Investment Advisor
By: /s/ Payson F. Swaffield
-------------------------------------------
Name: Payson F. Swaffield
Title: Vice President
SOCIETE GENERALE
By: /s/ E. Bellaiche
-------------------------------------------
Name: E. Bellaiche
Title: Vice President
STAR BANK, N.A.
By: /s/ William J. Goodwin
-------------------------------------------
Name: William J. Goodwin
Title: Senior Vice President
STRATA FUNDING LTD.
By: /s/
-------------------------------------------
Name:
Title:
THE SUMITOMO BANK, LTD. NEW YORK BRANCH
By: /s/ Yoshinori Kawamura
-------------------------------------------
Name: Yoshinori Kawmura
Title: Joint General Manager, Management
THE SUMITOMO TRUST & BANKING
CO., LTD., NEW YORK BRANCH
By: /s/ Suraj P. Bhatia
-------------------------------------------
Name: Suraj P. Bhatia
Title: Manager, Corporate Finance Department
SUNTRUST BANK
CENTRAL FLORIDA, N.A.
By: /s/ Janet P. Sammons
-------------------------------------------
Name: Janet P. Sammons
Title: Vice President
<PAGE> 13
THE TRAVELER'S INSURANCE COMPANY
By: /s/
-------------------------------------------
Name:
Title:
UNION BANK OF CALIFORNIA
By: /s/ Timothy P. Sterb
-------------------------------------------
Name: Timothy P. Sterb
Title: Vice President
VAN KAMPEN AMERICAN CAPITAL PRIME RATE INCOME TRUST
By: /s/ Jeffrey W. Maillet
-------------------------------------------
Name: Jeffrey W. Maillet
Title: Senior Vice President & Director
WACHOVIA BANK OF GEORGIA, N.A.
By: /s/
-------------------------------------------
Name:
Title:
MASSACHUSETTS MUTUAL LIFE
INSURANCE COMPANY
By: /s/ Mark A. Ahmed
-------------------------------------------
Name: Mark A. Ahmed
Title: Managing Director
<PAGE> 14
CONSENT
Dated as of January 6, 1997
Each of the undersigned, as a Guarantor under the
Guaranty dated as of December 19, 1994 (the "GUARANTY") in favor of the
Administrative Agent, for its benefit and the benefit of the Lender
Parties party to the Credit Agreement referred to in the foregoing
Amendment, hereby consents to such Amendment and hereby confirms and
agrees that notwithstanding the effectiveness of such Amendment, the
Guaranty is, and shall continue to be, in full force and effect and is
hereby ratified and confirmed in all respects, except that, on and
after the effectiveness of such Amendment, each reference in the
Guaranty to the "Credit Agreement", "thereunder", "thereof" or words of
like import shall mean and be a reference to the Credit Agreement, as
amended by such Amendment.
BLOOMINGDALE'S, INC.
BLOOMINGDALE'S BY MAIL LTD.
THE BON, INC.
BROADWAY STORES, INC.
BULLOCK'S, INC.
BURDINES, INC.
FEDERATED REAL ESTATE, INC.
FEDERATED RETAIL HOLDINGS, INC.
LAZARUS, INC.
LAZARUS PA, INC.
MACY'S CLOSE-OUT, INC.
MACY'S EAST, INC.
MACY'S REAL ESTATE, INC.
MACY'S SPECIALTY STORES, INC.
MACY'S WEST, INC.
RICH'S DEPARTMENT STORES, INC.
STERN'S DEPARTMENT STORES, INC.
By: /s/ Karen M. Hoguet
-----------------------------------------------
Name: Karen M. Hoguet
Title: Senior Vice President and Treasurer
Address of Chief Executive Office and for Notices:
7 West Seventh Street
Cincinnati, OH 45202
Attention: Chief Financial Officer
(with a copy to General Counsel)
<PAGE> 15
CONSENT
Dated as of January 6, 1997
Each of the undersigned, as a Pledgor under the Security
Agreement dated as of December 19, 1994 (the "SECURITY AGREEMENT") in favor of
the Administrative Agent, for its benefit and the benefit of the Lender Parties
party to the Credit Agreement referred to in the foregoing Amendment, hereby
consents to such Amendment and hereby confirms and agrees that (a)
notwithstanding the effectiveness of such Amendment, the Security Agreement is,
and shall continue to be, in full force and effect and is hereby ratified and
confirmed in all respects, except that, on and after the effectiveness of such
Amendment, each reference in the Security Agreement to the "Credit Agreement",
"thereunder", "thereof" or words of like import shall mean and be a reference to
the Credit Agreement, as amended by such Amendment, and (b) the Collateral
Documents to which such Pledgor is a party and all of the Collateral described
therein do, and shall continue to, secure the payment of all of the Secured
Obligations (in each case, as defined therein).
FEDERATED DEPARTMENT STORES, INC.
By: /s/ Karen M. Hoguet
-----------------------------------------------
Name: Karen M. Hoguet
Title: Senior Vice President and Treasurer
Address of Chief Executive Office and for Notices:
7 West Seventh Street
Cincinnati, OH 45202
Attention:Chief Financial Officer
(with a copy to General Counsel)
FEDERATED RETAIL HOLDINGS, INC.
By: /s/ Karen M. Hoguet
-----------------------------------------------
Name: Karen M. Hoguet
Title: Senior Vice President and Treasurer
Address of Chief Executive Office and for Notices:
7 West Seventh Street
Cincinnati, OH 45202
Attention: Chief Financial Officer
(with a copy to General Counsel)
<PAGE> 1
Exhibit 10.6.7
SEVENTH AMENDMENT TO
AMENDED AND RESTATED POOLING AND SERVICING AGREEMENT
This Seventh Amendment to the Amended and Restated Pooling and
Servicing Agreement, made as of May 14, 1996 (this "Amendment"), is among Prime
Receivables Corporation (the "Transferor"), FDS National Bank (successor
servicer to Federated Department Stores, Inc.), as servicer (in such capacity,
the "Servicer"), and Chemical Bank, as trustee (the "Trustee"). Capitalized
terms used in this Amendment and not otherwise defined have the meanings
assigned to such terms in the Pooling and Servicing Agreement (as defined
below).
PRELIMINARY STATEMENTS:
-----------------------
1. The Purchaser, the Servicer and the Trustee are parties to
the Amended and Restated Pooling and Servicing Agreement dated as of December
15, 1992 (as amended, restated, supplemented or otherwise modified from time to
time, the "Pooling and Servicing Agreement").
2. The Transferor, the Servicer and the Trustee desire to
amend the Pooling and Servicing Agreement to revise Schedule II attached
thereto.
3. Section 13.01 of the Pooling and Servicing Agreement
permits the amendment of Schedules subject to certain conditions.
AGREEMENT
---------
The Transferor, the Servicer and the Trustee agree to the
following terms and conditions:
1. AMENDMENT. Schedule II to the Pooling and Servicing
Agreement is hereby deleted in its entirety and replaced with SCHEDULE II
attached to this Amendment.
2. CONDITIONS PRECEDENT. Attached to this Amendment as EXHIBIT
A is an Opinion of Counsel stating that the amendment to the Pooling and
Servicing Agreement effected by this Amendment does not adversely affect in any
material respect the Interests of any of the Investor Certificateholders, which
Opinion of Counsel is required to be delivered under Section 13.01 of the
Pooling and Servicing Agreement.
3. CONTINUING AGREEMENT. The Receivables Purchase Agreement,
as amended by this Amendment, continues in full force and effect among the
Transferor, the Servicer and the Trustee.
<PAGE> 2
Delivered as of the day and year above first written.
PRIME RECEIVABLES CORPORATION
By: /s/ Susan R. Robinson
--------------------------------------
Name: Susan R. Robinson
Title: President
FDS NATIONAL BANK
By: /s/ JAMES R. GUDMENS
--------------------------------------
Name: James R. Gudmens
Title: President
CHEMICAL BANK
By: /s/ DENNIS KILDEA
--------------------------------------
Name: Dennis Kildea
Title: Trust Officer
<PAGE> 3
SCHEDULE II
<TABLE>
<CAPTION>
LIST OF LOCK-BOX ACCOUNTS
-------------------------
<S> <C> <C>
Star Bank Corporation Burdines 480-366-723
P.O. Box 1038 Dept. 4500
425 Walnut Street Cincinnati, OH
Cincinnati, OH 45274-4500
45201-1036
Jordan Marsh 480-381-1425
P.O. Box 8079
Mason, Ohio
45040-8079
PNC Bank The Bon Marche 426-002-7019
201 East 5th Street P.O. Box 8080
Cincinnati, OH Mason, Ohio
45201-1198 45040-8080
Stern's 419-000-2709
P.O. Box 8081
Mason, Ohio
45040-8081
Lazarus 411-017-5133
P.O. Box 4504
Mason, Ohio
45040-4504
Macy's West 300-1544986
P.O. Box 8021
Mason, Ohio
45040-8021
Broadway Stores 300-154-4994
P.O. Box 8022
Mason, Ohio
45040-8022
AmSouth Bank, N.A. Bloomingdale's 88-419-622
1900 Fifth Ave., North P.O. Box 11407
Birmingham, AL Drawer 0018
35203 Birmingham, AL
</TABLE>
<PAGE> 4
<TABLE>
<S> <C> <C>
35242-0018
Rich's 01-579-282
P.O. Box 11407
Drawer 0001
Birmingham, AL
35245-0001
Goldsmith's 73-233-579
P.O. Box 11407
Drawer 0012
Birmingham, AL
35245-0012
Abraham & Straus 69-116-059
P.O. Box 11407
Drawer 0008
Birmingham, AL
35245-0008
The Fifth Third Bank Lazarus 715-27336
38 Fountain Square Plaza P.O. Box 0064
Cincinnati, OH Cincinnati, OH
45263 45274-0064
</TABLE>
<PAGE> 5
EXHIBIT A
---------
OPINION OF COUNSEL
------------------
May 14, 1996
Prime Receivables Corporation Chemcial Bank, as Trustee
4705 Duke Drive 450 West 33rd Street
Mason, Ohio 45220 New York, NY 10001
Re: Prime Receivables, Inc. Amended and Restated Pooling & Servicing
Agreement dated as of December 15, 1992 (the "Agreement")
Ladies and Gentlemen:
As General Counsel of Federated Department Stores, Inc., a
Delaware corporation, the ultimate parent of Prime Receivables Corporation, a
Delaware corporation ("Prime"), I have acted as counsel to Prime in connection
with the Seventh Amendment to the Agreement and the substitution of Schedule II
of the Agreement.
I have examined such documents, records and matters of law as I
have deemed necessary for purposes of this opinion. Based thereon, I am of the
opinion that the Seventh Amendment to the Agreement and the deletion of the
current Schedule II to the Agreement and substitution therefor with an amended
Schedule II do not, in accordance with Section 13.01 of the Agreement, adversely
affect in any material respect the interest of any of the Investor
Certificateholders, as such term is defined in the Agreement.
Very truly yours,
/s/ Dennis J. Broderick
Dennis J. Broderick
<PAGE> 1
Exhibit 10.6.8
EIGHTH AMENDMENT
TO
AMENDED AND RESTATED POOLING AND SERVICING AGREEMENT
This Eighth Amendment dated as of March 3, 1997 to the Amended and
Restated Pooling and Servicing Agreement dated as of December 15, 1992 is among
PRIME RECEIVABLES CORPORATION (the "TRANSFEROR"), FDS NATIONAL BANK, a national
banking corporation (the "SERVICER") and THE CHASE MANHATTAN BANK, as successor
in interest to Chemical Bank, as Trustee (in such capacity, the "TRUSTEE").
W I T N E S S E T H
WHEREAS, the Transferor, the Servicer and the Trustee entered into an
Amended and Restated Pooling and Servicing Agreement as of December 15, 1992, as
amended from time to time (the "Pooling and Servicing Agreement");
WHEREAS, the Transferor, the Servicer and the Trustee wish to amend
Schedule II of the Pooling and Servicing Agreement;
WHEREAS, Section 13.01 of the Pooling and Servicing Agreement permits
the amendment of Schedules subject to certain conditions;
NOW THEREFORE, in consideration of the premises and of the mutual
agreements contained herein, the parties hereto hereby agree as follows:
1. Schedule II as attached to the Pooling and Servicing Agreement is
hereby deleted in its entirety and Schedule II attached hereto is substituted
therefor.
2. Attached hereto is an Opinion of Counsel stating that the amendment
to the Pooling and Servicing Agreement effected by this Eighth Amendment does
not adversely affect in any material respect the interests of the
Certificateholders, as defined in the Pooling and Servicing Agreement.
3. The Pooling and Servicing Agreement, as amended by this Eighth
Amendment, shall continue in full force and effect among the parties hereto.
<PAGE> 2
IN WITNESS WHEREOF, the parties hereto have caused this Eighth
Amendment to be executed by their respective officers thereunto duly authorized,
as of the date first above written.
PRIME RECEIVABLES CORPORATION
By: /s/ Susan P. Storer
-------------------------------
Title: President
FDS NATIONAL BANK
By: /s/ Susan R. Robinson
-------------------------------
Title: Treasurer
THE CHASE MANHATTAN BANK
By: /s/ Dennis Kildea
-------------------------------
Title: Trust Officer
<PAGE> 3
EXHIBIT A
---------
OPINION OF COUNSEL
------------------
March 3, 1997
Prime Receivables Corporation The Chase Manhattan Bank,
as Trustee
4705 Duke Drive 450 West 33rd Street
Mason, Ohio 45220 New York, NY 10001
Re: Prime Receivables, Inc. Amended and Restated Pooling & Servicing
Agreement dated as of December 15, 1992 (the "Agreement")
Ladies and Gentlemen:
As General Counsel of Federated Department Stores, Inc., a
Delaware corporation, the ultimate parent of Prime Receivables Corporation, a
Delaware corporation ("Prime"), I have acted as counsel to Prime in connection
with the Eighth Amendment to the Agreement and the substitution of Schedule II
of the Agreement.
I have examined such documents, records and matters of law as I
have deemed necessary for purposes of this opinion. Based thereon, I am of the
opinion that the Eighth Amendment to the Agreement and the deletion of the
current Schedule II to the Agreement and substitution therefor with an amended
Schedule II do not, in accordance with Section 13.01 of the Agreement, adversely
affect in any material respect the interest of any of the Investor
Certificateholders, as such term is defined in the Agreement.
Very truly yours,
/s/ Dennis J. Broderick
Dennis J. Broderick
<PAGE> 4
Schedule 2
3/3/97
<TABLE>
<CAPTION>
List of Lock-Box Accounts
-------------------------
<S> <C> <C>
Star Bank Corporation Burdines 480-366-723
P.O. Box 1038 Dept. 4500
425 Walnut Street Cincinnati, OH
Cincinnati, OH 45274-4500
45201-1036
Macy's East, Inc., 480-381-1425
as successor in interest to,
Jordan Marsh
P.O. Box 8079
Mason, Ohio
45040-8079
PNC Bank The Bon Marche 426-002-7019
201 East 5th Street P.O. Box 8080
Cincinnati, OH Mason, Ohio
45201-1198 45040-8080
Stern's 419-000-2709
P.O. Box 8081
Mason, Ohio
45040-8081
Lazarus 411-017-5133
P.O. Box 4504
Mason, Ohio
45040-4504
Macy's West 300-1544986
P.O. Box 8021
Mason, Ohio
45040-8021
Broadway Stores 300-154-4994
P.O. Box 8022
Mason, Ohio
45040-8022
</TABLE>
<PAGE> 5
<TABLE>
<S> <C> <C>
AmSouth Bank, N.A. Bloomingdale's 88-419-622
1900 Fifth Ave., North P.O. Box 11407
Birmingham, AL Drawer 0018
35203 Birmingham, AL
35242-0018
Rich's 01-579-282
P.O. Box 11407
Drawer 0001
Birmingham, AL
35245-0001
Goldsmith's 73-233-579
P.O. Box 11407
Drawer 0012
Birmingham, AL
35245-0012
Macy's East, Inc., 69-116-059
as successor in interest to,
Abraham & Straus
P.O. Box 11407
Drawer 0008
Birmingham, AL
35245-0008
The Fifth Third Bank Lazarus 715-27336
38 Fountain Square Plaza P.O. Box 0064
Cincinnati, OH Cincinnati, OH
45263 45274-0064
Bank of America Illinois All Originators 7118821
231 South LaSalle Street
Chicago, IL 60697
</TABLE>
<PAGE> 1
Exhibit 10.13.6
SIXTH AMENDMENT
TO
RECEIVABLES PURCHASE AGREEMENT
------------------------------
This Sixth Amendment to Receivables Purchase Agreement dated as of
August 26, 1995 (this "Sixth Amendment"), is among THE ORIGINATORS listed on the
signature page hereof (collectively, the "Originators") and PRIME RECEIVABLES
CORPORATION, a Delaware corporation (the "Purchaser").
W I T N E S S E T H:
--------------------
WHEREAS, the Originators and the Purchaser entered into a Receivables
Purchase Agreement dated as of December 15, 1992 (the "Purchase Agreement")
pursuant to which the Purchaser purchased Receivables (as defined in the
Purchase Agreement) from the Originators on the terms and conditions set forth
in the Purchase Agreement;
WHEREAS, all the Originators are wholly owned subsidiaries of Federated
Department Stores, Inc. ("Federated") and wish to effect, from time to time,
mergers and consolidations among the Originators;
WHEREAS, the Originators and the Purchaser wish to amend the Purchase
Agreement to permit such mergers and consolidations and the consequences
thereof;
WHEREAS, Section 8.01 of the Purchase Agreement permits the Originators
and the Purchaser to amend the Purchase Agreement subject to certain conditions;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements contained herein, the parties hereto agree as follows:
1. Capitalized terms used herein and not otherwise defined have the
meanings assigned such terms in the Purchase Agreement.
2. Section 5.01(h) of the Purchase Agreement is hereby amended by
inserting the following phrase in the fourth line thereof, after the word
"Agreement,":
1
<PAGE> 2
"or as a result of a transaction that effects a merger of an Originator
into or with another Originator or a consolidation among two or more
Originators,". . .
3. Attached hereto as Exhibit A is a certificate by an officer of FDS
National Bank, as Servicer, stating that the amendment to the Purchase Agreement
effected by this Sixth Amendment does not adversely affect in any material
respect the interests of any of the Investor Certificateholders, which
certificate is required to be delivered to the Trustee pursuant to Section 8.01
of the Purchase Agreement.
4. Attached hereto as Exhibit B is an Opinion of Counsel evidencing
that the amendment to the Purchase Agreement effected by this Sixth Amendment
shall not cause the Trust to be characterized for federal income tax purposes as
an association taxable as a corporation or otherwise have a material adverse
impact on the federal income taxation of any outstanding Series of Investor
Certificates or any Certificate of Owner, which Opinion of Counsel is required
to be provided pursuant to Section 8.01 of the Purchase Agreement.
5. The Purchase Agreement, as amended by this Sixth Amendment, shall
continue in full force and effect among the parties hereto.
IN WITNESS WHEREOF, the parties hereto have caused this Sixth Amendment
to be executed by their respective officers thereunto duly authorized, as of the
date first above written.
THE ORIGINATORS:
ABRAHAM & STRAUS, INC.
By: /s/ Dennis J. Broderick
-------------------------------
Title: Vice President
-----------------------------
BLOOMINGDALE'S, INC.
By: /s/ Dennis J. Broderick
-------------------------------
Title: Vice President
-----------------------------
BURDINES, INC.
By: /s/ Dennis J. Broderick
-------------------------------
Title: Vice President
2
<PAGE> 3
JORDAN MARSH STORES CORPORATION
By: /s/ Dennis J. Broderick
-------------------------------
Title: Vice President
LAZARUS, INC.
By: /s/ Dennis J. Broderick
-------------------------------
Title: Vice President
----------------------------
LAZARUS PA, INC.
By: /s/ Dennis J. Broderick
-------------------------------
Title: Vice President
----------------------------
STERN'S DEPARTMENT STORES, INC.
By: /s/ Dennis J. Broderick
--------------------------------
Title: Vice President
-----------------------------
RICH'S DEPARTMENT STORES, INC.
By: /s/ Dennis J. Broderick
------------------------------
Title: Vice President
---------------------------
THE BON, INC.
By: /s/ Dennis J. Broderick
-------------------------------
Title: Vice President
---------------------------
FDS NATIONAL BANK
Date: 8/26/95 By: /s/ Susan P. Storer
------------------ -----------------------------------
Title: CFO & Treasurer
---------------------------------
THE PURCHASER:
PRIME RECEIVABLES CORPORATION
Date: 8/26/95 By: /s/ Susan R. Robinson
------------------ -----------------------------------
Title: President
--------------------------------
3
<PAGE> 4
EXHIBIT A
FDS NATIONAL BANK
OFFICER'S CERTIFICATE
---------------------
Pursuant to Section 8.01 (a) of the Receivables Purchase Agreement
dated as of December 15, 1992 (the "Purchase Agreement") among the Originators
listed therein and Prime Receivables Corporation, as amended, FDS National Bank,
a national banking association, as Servicer, certifies that the amendment to the
Purchase Agreement effected by the Sixth Amendment To Receivables Purchase
Agreement dated as of August 26, 1995 will not adversely effect in any material
respect the interests of any of the Investor Certificateholders (as defined in
the Purchase Agreement).
/s/ Susan P. Storer
-------------------------
FDS National Bank
as Servicer
August 26, 1995 Name: Susan P. Storer
---------------
Title: CFO & Treasurer
----------------
4
<PAGE> 1
Exhibit 10.13.7
SEVENTH AMENDMENT
TO
RECEIVABLES PURCHASE AGREEMENT
------------------------------
This Seventh Amendment to Receivables Purchase Agreement dated as of
August 26, 1995 (this "Seventh Amendment"), is amount THE ORIGINATORS listed on
the signature page hereof (collectively, the "Originators") and PRIME
RECEIVABLES CORPORATION, a Delaware corporation (the "Purchaser").
W I T N E S S E T H:
WHEREAS, the Originators and the Purchaser entered into a Receivables
Purchase Agreement dated as of December 15, 1992 (the "Purchase Agreement")
pursuant to which the Purchaser purchased Receivables (as defined in the
Purchase Agreement) from the Originators on the terms and conditions set forth
in the Purchase Agreement;
WHEREAS, the Originators and the Purchaser wish to amend the Purchase
Agreement to revise Schedules I, II, III and V attached to the Purchase
Agreement;
WHEREAS, Section 8.01 of the Purchase Agreement permits the Originators
and the Purchaser to amend the Purchase Agreement subject to certain conditions;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements contained herein, the parties hereto agree as follows:
1. Schedules I, II, III and V attached to the Purchase Agreement are
hereby deleted in their entirety and Schedules I, II, III and V attached hereto
are substituted therefor.
2. Attached hereto as Exhibit A is a certificate by an officer of FDS
National Bank, as Servicer, stating that the amendment to the Purchase Agreement
effected by this Seventh Amendment does not adversely affect in any material
respect the interests of any of the Investor Certificateholders (as defined in
the Purchase Agreement), which certificate is required to be delivered to the
Trustee (as defined in the Purchase Agreement) pursuant to Section 8.01 of the
Purchase Agreement.
1
<PAGE> 2
3. The Purchase Agreement, as amended by this Seventh Amendment shall
continue in full force and effect among the parties hereto.
IN WITNESS WHEREOF, the parties hereto have caused this Seventh
Amendment to be executed by their respective officers thereunto duly authorized,
as of the date first above written.
THE ORIGINATORS:
BLOOMINGDALE'S, INC.
By: /s/ Dennis J. Broderick
------------------------------
Title: Vice President
---------------------------
BURDINES, INC.
By: /s/ Dennis J. Broderick
------------------------------
Title: Vice President
---------------------------
LAZARUS, INC.
By: /s/ Dennis J. Broderick
------------------------------
Title: Vice President
---------------------------
LAZARUS PA, INC.
By: /s/ Dennis J. Broderick
------------------------------
Title: Vice President
---------------------------
MACY'S EAST, INC. (as successor in interest
to Abraham & Straus, Inc. and
Jordan Marsh Stores Corporation)
By: /s/ John R. Sims
------------------------------
Title: Vice President
---------------------------
2
<PAGE> 3
STERN'S DEPARTMENT STORES, INC.
By: /s/ Dennis J. Broderick
------------------------------
Title: Vice President
---------------------------
RICH'S DEPARTMENT STORES, INC.
By: /s/ Dennis J. Broderick
------------------------------
Title: Vice President
---------------------------
THE BON, INC.
By: /s/ Dennis J. Broderick
------------------------------
Title: Vice President
---------------------------
FDS NATIONAL BANK
Date: 8/26/95 By: /s/ Susan P. Storer
----------------------- ------------------------------
Title: CFO & Treasurer
THE PURCHASER:
PRIME RECEIVABLES CORPORATION
Date: 8/26/95 By: /s/ Susan R. Robinson
----------------------- ------------------------------
Title: President
3
<PAGE> 4
EXHIBIT A
FDS NATIONAL BANK
OFFICER'S CERTIFICATE
---------------------
Pursuant to Section 8.01 (a) of the Receivables Purchase Agreement
dated as of December 15, 1992 among the Originators listed therein and Prime
Receivables Corporation, FDS National Bank, as Servicer, certifies that the
amendment dated as of August 26, 1995 to Schedules I, II, III and V of
Receivables Purchase Agreement does not adversely affect in any material respect
the interests of any of the Investor Certificateholders.
/s/ Susan P. Storer
-----------------------------
FDS National Bank
as Servicer
August 26, 1995 Name: Susan P. Storer
------------------------
Title: CFO & Treasurer
-----------------------
4
<PAGE> 5
SCHEDULE I
<TABLE>
<CAPTION>
LIST OF ORIGINATORS
-------------------
Jurisdiction Chief Place of Business
of Chief Executive Office
Name of Originator Incorporation and Mailing Address
- ------------------ ------------- -------------------
<S> <C> <C>
Bloomingdale's, Inc. Ohio 1000 Third Avenue
New York, NY 11201
Burdines, Inc. Ohio 22 East Flagler Street
Miami, FL 33131
Lazarus, Inc. Ohio 699 Race Street
Cincinnati, OH 45202
Lazarus PA, Inc. Ohio 699 Race Street
Cincinnati, OH 45202
Macy's East, Inc. Ohio 151 W. 34th Street
New York, NY 10001
Rich's Department Ohio 219 Perimeter Center
Stores, Inc. Parkway
Atlanta, GA 30346
Stern's Department Ohio Bergen Mall, Route 4,
Stores, Inc. East
Paramus, NJ 07652
The Bon, Inc. Ohio Third Avenue and Pine
Street
Seattle, WA 98181
</TABLE>
5
<PAGE> 6
SCHEDULE II
<TABLE>
<CAPTION>
AUTHORIZED OFFICERS OF ORIGINATORS
----------------------------------
Seller Name Title
- ------ ---- -----
<S> <C> <C>
Bloomingdale's, Inc. James M. Zimmerman Chairman
Michael Gould President
John R. Sims Vice President
Karen M. Hoguet Treasurer
Dennis J. Broderick Vice President
Jack B. Cox Assistant Secretary
Burdines, Inc. James M. Zimmerman Chairman
Howard Socol President
John R. Sims Secretary
Karen M. Hoguet Treasurer
Dennis J. Broderick Vice President
Jack B. Cox Assistant Secretary
Lazarus, Inc. James M. Zimmerman Chairman
Russell Stravitz President
John R. Sims Secretary
Karen M. Hoguet Treasurer
Dennis J. Broderick Vice President
Jack B. Cox Assistant Secretary
Lazarus PA, Inc. James M. Zimmerman Chairman
Russell Stravitz President
John R. Sims Secretary
Karen M. Hoguet Treasurer
Dennis J. Broderick Vice President
Jack B. Cox Assistant Secretary
Macy's East, Inc. James M. Zimmerman Chairman
Harold D. Kahn President
John R. Sims Secretary
Karen M. Hoguet Treasurer
Dennis J. Broderick Vice President
Jack B. Cox Assistant Secretary
Rich's Department James M. Zimmerman Chairman
Stores, Inc. Russell Stravitz President
John R. Sims Secretary
Karen M. Hoguet Treasurer
</TABLE>
6
<PAGE> 7
<TABLE>
<S> <C> <C>
Dennis J. Broderick Vice President
Jack B. Cox Assistant Secretary
Stern's Department James M. Zimmerman Chairman
Stores, Inc. Matthew D. Serra President
John R. Sims Secretary
Karen M. Hoguet Treasurer
Dennis J. Broderick Vice President
Jack B. Cox Assistant Secretary
The Bon, Inc. James M. Zimmerman Chairman
Thomas P. Harville President
John R. Sims Secretary
Karen M. Hoguet Treasurer
Dennis J. Broderick Vice President
Jack B. Cox Assistant Secretary
</TABLE>
7
<PAGE> 8
SCHEDULE III
Offices Where Books, Records, Etc.
Evidencing Receivables Are Kept
-------------------------------
Bloomingdale's, Inc.
- --------------------
1000 Third Avenue
New York, NY 10022
155 East 60th Street (10th Floor)
New York, NY 10022
1400 Northern Boulevard
Manhasset, NY 11030
132 West 31st Street (9th Floor)
New York, NY 10005
FACS Group, Inc.
9111 Duke Boulevard
Mason, OH 45040-8999
Federated Systems Group, Inc.
6801 Governors Parkway
Bldg. 200, Suite 500
Norcross, GA 30071
Burdines, Inc.
- --------------
22 East Flagler Street
Miami, FL 33131
Federated Systems Group, Inc.
6801 Governors Parkway
Bldg. 200, Suite 500
Norcross, GA 30071
FACS Group, Inc.
9111 Duke Boulevard
Mason, OH 45040-8999
FACS South
4130 Gandy Boulevard
Tampa, FL 33620
8
<PAGE> 9
Lazarus, Inc. and Lazarus PA, Inc.
- ----------------------------------
7th and Race Street
Cincinnati, OH 45202
Federated Systems Group, Inc.
6801 Governors Parkway
Bldg. 200, Suite 500
Norcross, GA 30071
FACS Group, Inc.
9111 Duke Boulevard
Mason, OH 45040-8999
Macy's East, Inc.
- -----------------
151 W, 34th Street
New York, NY 10001
422 Fulton Street
Brooklyn, NY 11201
150 Fulton Avenue
Hempstead, NY 11550
Federated Systems Group, Inc.
6801 Governors Parkway
Bldg. 200, Suite 500
Norcross, GA 30071
FACS Group, Inc.
9111 Duke Boulevard
Mason, OH 45040-8999
Rich's Department Stores, Inc.
- ------------------------------
219 Perimeter Center Parkway
Atlanta, GA 30346
Federated Systems Group, Inc.
6801 Governors Parkway
Bldg. 200, Suite 500
Norcross, GA 30071
9
<PAGE> 10
FACS Group, Inc.
9111 Duke Boulevard
Mason, OH 45040-8999
FACS South
4130 Gandy Boulevard
Tampa, FL 33620
Stern's Department Stores, Inc.
- -------------------------------
Bergen Mall, Route 4
Paramus, NJ 07652
South 60, Route 17 North
Paramus, NJ 07652
Federated Systems Group, Inc.
6801 Governors Parkway
Bldg. 200, Suite 500
Norcross, GA 30071
FACS Group, Inc.
9111 Duke Boulevard
Mason, OH 45040-8999
The Bon, Inc.
- -------------
Third Avenue and Pine Street
Seattle, WA 98181
Federated Systems Group, Inc.
6801 Governors Parkway
Bldg. 200, Suite 500
Norcross, GA 30071
FACS Group, Inc.
9111 Duke Boulevard
Mason, OH 45040-8999
10
<PAGE> 11
SCHEDULE V
ADDRESS OF SERVICER
FDS National Bank, Inc.
9111 Duke Boulevard
Mason, OH 45040-8999
Attention: Chief Financial Officer
General Counsel
<PAGE> 1
Exhibit 10.13.8
EIGHTH AMENDMENT TO RECEIVABLES PURCHASE AGREEMENT
This Eighth Amendment to Receivables Purchase Agreement, made as of May
14, 1996 (this "Amendment"), is among companies listed as Originators on the
signature pages to this Amendment (collectively, the "Originators") and Prime
Receivables Corporation (the "Purchaser"). Capitalized terms used in this
Amendment and not otherwise defined have the meanings assigned to such terms in
the Receivables Purchase Agreement (as defined below).
PRELIMINARY STATEMENTS:
1. Federated Department Stores, Inc. ("Federated"), the
Originators and the Purchaser, a wholly owned special purpose subsidiary of
Federated, are parties to the Receivables Purchase Agreement dated as of
December 15, 1992 (as amended, restated, supplemented or otherwise modified from
time to time, the "Receivables Purchase Agreement"), under which the Purchaser
agreed to purchase Receivables from the Originators on the terms and subject
conditions set forth in the Receivables Purchase Agreement.
2. The Originators and the Purchaser desire to amend the
Receivables Purchase Agreement to revise Schedules I, II, III and IV attached
thereto.
3. Section 8.01(a) of the Receivables Purchase Agreement
permits the Originators and the Purchaser to amend the Receivables Purchase
Agreement subject to certain conditions.
AGREEMENT
The Originators and the Purchaser agree to the following terms
and conditions:
1. AMENDMENT. Schedules I, II, III and IV to the Receivables
Purchase Agreement are deleted in their entirety and replaced with Schedules I,
II, III and IV attached to this Amendment.
2. CONDITIONS PRECEDENT. Attached to this Amendment as Exhibit
A is a Certificate by an officer of FDS National Bank, as servicer, stating that
the amendments to the Receivables Purchase Agreement effected by this Amendment
does not adversely affect in any material respect the Interests of any of the
Investor Certificateholders, which certificate is required to be delivered to
the Trustee under Section 8.01(a) of the Receivables Purchase Agreement.
<PAGE> 2
3. CONTINUING AGREEMENT. The Receivables Purchase Agreement,
as amended by this Amendment, continues in full force and effect among the
Originators and the Purchaser.
Delivered as of the day and year above first written.
BLOOMINGDALE'S, INC., as an Originator
By: /s/ Karen M. Hoguet
------------------------------------------
Name: Karen M. Hoguet
Title: Treasurer and Assistant Secretary
BROADWAY STORES, INC., as an Originator
By: /s/ Karen M. Hoguet
------------------------------------------
Name: Karen M. Hoguet
Title: Treasurer and Assistant Secretary
BURDINES, INC., as an Originator
By: /s/ Karen M. Hoguet
------------------------------------------
Name: Karen M. Hoguet
Title: Treasurer and Assistant Secretary
FDS NATIONAL BANK, as an Originator
By: /s/ James R. Gudmens
------------------------------------------
Name: James R. Gudmens
Title: President
LAZARUS, INC., as an Originator
By: /s/ Karen M. Hoguet
------------------------------------------
Name: Karen M. Hoguet
Title: Treasurer and Assistant Secretary
<PAGE> 3
LAZARUS PA, INC., as an Originator
By: /s/ Karen M. Hoguet
------------------------------------------
Name: Karen M. Hoguet
Title: Treasurer and Assistant Secretary
MACY'S EAST, INC., (as successor in interest
to Abraham & Straus, Inc. and Jordan Marsh
Stores Corporation), as an Originator
By: /s/ Karen M. Hoguet
------------------------------------------
Name: Karen M. Hoguet
Title: Treasurer and Assistant Secretary
RICH'S DEPARTMENT STORES, INC.,
as an Originator
By: /s/ Karen M. Hoguet
------------------------------------------
Name: Karen M. Hoguet
Title: Treasurer and Assistant Secretary
STERN'S DEPARTMENT STORES, INC.,
as an Originator
By: /s/ Karen M. Hoguet
------------------------------------------
Name: Karen M. Hoguet
Title: Treasurer and Assistant Secretary
THE BON, INC., as an Originator
By: /s/ Karen M. Hoguet
------------------------------------------
Name: Karen M. Hoguet
Title: Treasurer and Assistant Secretary
PRIME RECEIVABLES CORPORATION,
as the Purchaser
By: /s/ Susan R. Robinson
------------------------------------------
Name: Susan R. Robinson
Title: President
<PAGE> 4
SCHEDULE I
<TABLE>
<CAPTION>
LIST OF ORIGINATORS
-------------------
Jurisdiction Chief Place of Business
of Chief Executive Office
Name of Originator Incorporation and Mailing Address
- ------------------ ------------- -------------------
<S> <C> <C>
Bloomingdale's, Inc. Ohio 1000 Third Avenue
New York, NY 11201
Broadway Stores, Inc. Delaware 50 O'Farrell Street
San Francisco, CA 94102
Burdines, Inc. Ohio 22 East Flagler Street
Miami, FL 33131
Lazarus, Inc. Ohio 219 Perimeter Center
Parkway
Atlanta, GA 30346
Macy's East, Inc. Ohio 151 W. 34th Street
New York, NY 10001
Rich's Department Ohio 219 Perimeter Center
Stores, Inc. Parkway
Atlanta, GA 30346
Stern's Department Ohio Bergen Mall, Route 4,
Stores, Inc. East
Paramus, NJ 07652
The Bon, Inc. Ohio Third Avenue and Pine
Street
Seattle, WA 98181
</TABLE>
<PAGE> 5
SCHEDULE II
AUTHORIZED OFFICERS OF ORIGINATORS
----------------------------------
<TABLE>
<CAPTION>
Seller Name Title
- ------ ---- -----
<S> <C> <C>
Bloomingdale's, Inc. James M. Zimmerman Chairman
Michael Gould President
John R. Sims Vice President
Karen M. Hoguet Treasurer
Dennis J. Broderick Vice President
Jack B. Cox Assistant Secretary
Broadway Stores, Inc. James M. Zimmerman Chairman
Michael Steinberg President
John E. Brown Vice President
Karen M. Hoguet Treasurer
Dennis J. Broderick Vice President
Jack B. Cox Assistant Secretary
Burdines, Inc. James M. Zimmerman Chairman
Howard Socol President
John R. Sims Vice President
Karen M. Hoguet Treasurer
Dennis J. Broderick Vice President
Jack B. Cox Assistant Secretary
Lazarus, Inc. James M. Zimmerman Chairman
Russell Stravitz President
John R. Sims Vice President
Karen M. Hoguet Treasurer
Dennis J. Broderick Vice President
Jack B. Cox Assistant Secretary
Macy's East, Inc. James M. Zimmerman Chairman
Harold D. Kahn President
John R. Sims Vice President
Karen M. Hoguet Treasurer
Dennis J. Broderick Vice President
Jack B. Cox Assistant Secretary
</TABLE>
<PAGE> 6
<TABLE>
<CAPTION>
AUTHORIZED OFFICERS OF ORIGINATORS (Con't)
<S> <C> <C>
Rich's Department James M. Zimmerman Chairman
Stores, Inc. Russell Stravitz President
John R. Sims Vice President
Karen M. Hoguet Treasurer
Dennis J. Broderick Vice President
Jack B. Cox Assistant Secretary
Stern's Department James M. Zimmerman Chairman
Stores, Inc. Matthew D. Serra President
John R. Sims Vice President
Karen M. Hoguet Treasurer
Dennis J. Broderick Vice President
Jack B. Cox Assistant Secretary
The Bon, Inc. James M. Zimmerman Chairman
Thomas P. Harville President
John R. Sims Vice President
Karen M. Hoguet Treasurer
Dennis J. Broderick Vice President
Jack B. Cox Assistant Secretary
</TABLE>
<PAGE> 7
SCHEDULE III
Offices Where Books, Records, Etc.
Evidencing Receivables Are Kept
-------------------------------
Bloomingdale's, Inc.
- --------------------
1000 Third Avenue
New York, NY 10022
155 East 60th Street (10th Floor)
New York, NY 10022
1400 Northern Boulevard
Manhasset, NY 11030
132 West 31st Street (9th Floor)
New York, NY 10005
FACS Group, Inc.
9111 Duke Boulevard
Mason, OH 45040-8999
Federated Systems Group, Inc.
6801 Governors Parkway
Bldg. 200, Suite 500
Norcross, GA 30071
Broadway Stores, Inc.
- ---------------------
50 O'Farrell Street
San Francisco, CA 94102
Federated Systems Group, Inc.
6801 Governors Parkway
Bldg. 200, Suite 500
Norcross, GA 30071
FACS Group, Inc.
9111 Duke Boulevard
Mason, OH 45040-8999
FACS West
1344 S. 52nd Street
Tempe, AZ 85281
<PAGE> 8
Burdines, Inc.
- --------------
22 East Flagler Street
Miami, FL 33131
Federated Systems Group, Inc.
6801 Governors Parkway
Bldg. 200, Suite 500
Norcross, GA 30071
FACS Group, Inc.
9111 Duke Boulevard
Mason, OH 45040-8999
FACS South
4130 Gandy Boulevard
Tampa, FL 33620
Lazarus, Inc.
- -------------
7th and Race Street
Cincinnati, OH 45202
Federated Systems Group, Inc.
6801 Governors Parkway
Bldg. 200, Suite 500
Norcross, GA 30071
FACS Group, Inc.
9111 Duke Boulevard
Mason, OH 45040-8999
FACS South
4130 Gandy Boulevard
Tampa, FL 33620
Macy's East, Inc.
- -----------------
151 W, 34th Street
New York, NY 10001
422 Fulton Street
Brooklyn, NY 11201
<PAGE> 9
150 Fulton Avenue
Hempstead, NY 11550
Federated Systems Group, Inc.
6801 Governors Parkway
Bldg. 200, Suite 500
Norcross, GA 30071
FACS Group, Inc.
9111 Duke Boulevard
Mason, OH 45040-8999
Rich's Department Stores, Inc.
- ------------------------------
219 Perimeter Center Parkway
Atlanta, GA 30346
Federated Systems Group, Inc.
6801 Governors Parkway
Bldg. 200, Suite 500
Norcross, GA 30071
FACS Group, Inc.
9111 Duke Boulevard
Mason, OH 45040-8999
FACS South
4130 Gandy Boulevard
Tampa, FL 33620
Stern's Department Stores, Inc.
- -------------------------------
Bergen Mall, Route 4
Paramus, NJ 07652
South 60, Route 17 North
Paramus, NJ 07652
Federated Systems Group, Inc.
6801 Governors Parkway
Bldg. 200, Suite 500
Norcross, GA 30071
FACS Group, Inc.
9111 Duke Boulevard
<PAGE> 10
Mason, OH 45040-8999
The Bon, Inc.
- -------------
Third Avenue and Pine Street
Seattle, WA 98181
Federated Systems Group, Inc.
6801 Governors Parkway
Bldg. 200, Suite 500
Norcross, GA 30071
FACS Group, Inc.
9111 Duke Boulevard
Mason, OH 45040-8999
FACS West
1344 S. 52nd Street
Tempe, AZ 85281
<PAGE> 11
SCHEDULE IV
<TABLE>
<CAPTION>
List of Lock-box Accounts
-------------------------
<S> <C> <C>
Star Bank Corporation Burdines 480-366-723
P.O. Box 1038 Dept. 4500
425 Walnut Street Cincinnati, OH
Cincinnati, OH 45274-4500
45201-1036
Jordan Marsh 480-381-1425
P.O. Box 8079
Mason, Ohio
45040-8079
PNC Bank The Bon Marche 426-002-7019
201 East 5th Street P.O. Box 8080
Cincinnati, OH Mason, Ohio
45201-1198 45040-8080
Stern's 419-000-2709
P.O. Box 8081
Mason, Ohio
45040-8081
Lazarus 411-017-5133
P.O. Box 4504
Mason, Ohio
45040-4504
Macy's West 300-1544986
P.O. Box 8021
Mason, Ohio
45040-8021
Broadway Stores 300-154-4994
P.O. Box 8022
Mason, Ohio
45040-8022
AmSouth Bank, N.A. Bloomingdale's 88-419-622
1900 Fifth Ave., North P.O. Box 11407
Birmingham, AL Drawer 0018
35203 Birmingham, AL
35242-0018
</TABLE>
<PAGE> 12
<TABLE>
<S> <C> <C>
Rich's 01-579-282
P.O. Box 11407
Drawer 0001
Birmingham, AL
35245-0001
Goldsmith's 73-233-579
P.O. Box 11407
Drawer 0012
Birmingham, AL
35245-0012
Abraham & Straus 69-116-059
P.O. Box 11407
Drawer 0008
Birmingham, AL
35245-0008
The Fifth Third Bank Lazarus 715-27336
38 Fountain Square Plaza P.O. Box 0064
Cincinnati, OH Cincinnati, OH
45263 45274-0064
</TABLE>
<PAGE> 13
EXHIBIT A
FDS NATIONAL BANK
OFFICER'S CERTIFICATE
Pursuant to Section 8.01 (a) of the Receivables Purchase
Agreement dated as of December 15, 1992 (as amended, restated, supplemented or
otherwise modified from time to time), among the companies listed therein as
Originators and Prime Receivables Corporation, FDS National Bank, as servicer,
certifies that the amendments to the Receivables Purchase Agreement dated as of
May 14, 1996, do not adversely effect in any material respect the Interests of
any of the Investor Certificateholders.
Dated: May 14, 1996 FDS NATIONAL BANK, as servicer
/s/ James R. Gudmens
------------------------------
Name: James R. Gudmens
Title: President
<PAGE> 1
Exhibit 10.13.9
NINTH AMENDMENT
TO
RECEIVABLES PURCHASE AGREEMENT
This Ninth Amendment to Receivables Purchase Agreement dated as of
March 3, 1997 (this "Amendment"), is among THE ORIGINATORS listed on the
signature page hereof (collectively, the "Originators") and PRIME RECEIVABLES
CORPORATION, a Delaware corporation (the "Purchaser").
W I T N E S S E T H:
WHEREAS, the Originators and the Purchaser entered into a Receivables
Purchase Agreement dated as of December 15, 1992, as amended from time to time,
(the "Purchase Agreement") pursuant to which the Purchaser purchased Receivables
(as defined in the Purchase Agreement) from the Originators on the terms and
conditions set forth in the Purchase Agreement;
WHEREAS, the Originators and the Purchaser wish to amend the Purchase
Agreement to revise Schedule IV attached to the Purchase Agreement;
WHEREAS, Section 8.01 of the Purchase Agreement permits the Originators
and the Purchaser to amend the Purchase Agreement subject to certain conditions;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements contained herein, the parties hereto agree as follows:
1. Schedule IV attached to the Purchase Agreement is hereby deleted in
its entirety and Schedule IV attached hereto is substituted therefor.
2. Attached hereto as Exhibit A is a certificate by an officer of FDS
National Bank, as Servicer, stating that the amendment to the Purchase Agreement
effected by this Ninth Amendment does not adversely affect in any material
respect the interests of any of the Investor Certificateholders (as defined in
the Purchase Agreement), which certificate is required to be delivered to the
Trustee (as defined in the Purchase Agreement) pursuant to Section 8.01 of the
Purchase Agreement.
3. The Purchase Agreement, as amended by this Ninth Amendment shall
continue in full force and effect among the parties hereto.
<PAGE> 2
IN WITNESS WHEREOF, the parties hereto have caused this Ninth Amendment
to be executed by their respective officers thereunto duly authorized, as of the
date first above written.
THE ORIGINATORS:
BLOOMINGDALE'S, INC.
By: /s/ Dennis J. Broderick
--------------------------------------
Title: Vice President
BURDINES, INC.
By: /s/ Dennis J. Broderick
--------------------------------------
Title: Vice President
LAZARUS, INC.
By: /s/ Dennis J. Broderick
--------------------------------------
Title: Vice President
RICH'S DEPARTMENT STORES, INC.
By: /s/ Dennis J. Broderick
--------------------------------------
Title: Vice President
STERN'S DEPARTMENT STORES, INC.
By: /s/ Dennis J. Broderick
--------------------------------------
Title: Vice President and General Counsel
<PAGE> 3
THE BON, INC.
By: /s/ Dennis J. Broderick
--------------------------------------
Title: Vice President and General Counsel
BROADWAY STORES, INC.
By: /s/ Dennis J. Broderick
--------------------------------------
Title: Vice President
MACY'S EAST, INC.,
as successor in interest to Abraham & Straus
and Jordan Marsh Stores Corporation
By: /s/ Dennis J. Broderick
--------------------------------------
Title: Vice President
FDS NATIONAL BANK
Date: 3/3/97 By: /s/ Susan R. Robinson
----------------- --------------------------------------
Title: Treasurer
THE PURCHASER:
PRIME RECEIVABLES CORPORATION
Date: 3/3/97 By: /s/ Susan P. Storer
----------------- --------------------------------------
Title: President
<PAGE> 4
SCHEDULE IV
3/3/97
<TABLE>
<CAPTION>
List of Lock-box Accounts
-------------------------
<S> <C> <C>
Star Bank Corporation Burdines 480-366-723
P.O. Box 1038 Dept. 4500
425 Walnut Street Cincinnati, OH
Cincinnati, OH 45274-4500
45201-1036
Macy's East, Inc., 480-381-1425
as successor in interest to,
Jordan Marsh
P.O. Box 8079
Mason, Ohio
45040-8079
PNC Bank The Bon Marche 426-002-7019
201 East 5th Street P.O. Box 8080
Cincinnati, OH Mason, Ohio
45201-1198 45040-8080
Stern's 419-000-2709
P.O. Box 8081
Mason, Ohio
45040-8081
Lazarus 411-017-5133
P.O. Box 4504
Mason, Ohio
45040-4504
Macy's West 300-1544986
P.O. Box 8021
Mason, Ohio
45040-8021
Broadway Stores 300-154-4994
P.O. Box 8022
Mason, Ohio
45040-8022
</TABLE>
<PAGE> 5
<TABLE>
<S> <C> <C>
AmSouth Bank, N.A. Bloomingdale's 88-419-622
1900 Fifth Ave., North P.O. Box 11407
Birmingham, AL Drawer 0018
35203 Birmingham, AL
35242-0018
Rich's 01-579-282
P.O. Box 11407
Drawer 0001
Birmingham, AL
35245-0001
Goldsmith's 73-233-579
P.O. Box 11407
Drawer 0012
Birmingham, AL
35245-0012
Macy's East, Inc., 69-116-059
as successor in interest to,
Abraham & Straus
P.O. Box 11407
Drawer 0008
Birmingham, AL
35245-0008
The Fifth Third Bank Lazarus 715-27336
38 Fountain Square Plaza P.O. Box 0064
Cincinnati, OH Cincinnati, OH
45263 45274-0064
Bank of America Illinois All Originators 7118821
231 South LaSalle Street
Chicago, IL 60697
</TABLE>
<PAGE> 6
EXHIBIT A
FDS NATIONAL BANK
OFFICER'S CERTIFICATE
Pursuant to Section 8.01 (a) of the Receivables Purchase Agreement
dated as of December 15, 1992, among the Originators listed therein and Prime
Receivables Corporation, FDS National Bank, as Servicer, certifies that the
amendment dated as of March 3, 1997 to Schedule IV of the Receivables Purchase
Agreement does not adversely affect in any material respect the interests of any
of the Invester Certificateholders.
FDS National Bank
As Servicer
/s/ Susan R. Robinson
Date 3/3/97 Name: Susan R. Robinson
------------------ -----------------------------
Title: Treasurer
<PAGE> 1
Exhibit 10.19
RECEIVABLES PURCHASE AGREEMENT
BETWEEN
FDS NATIONAL BANK, A NATIONAL BANKING
ASSOCIATION, AS ORIGINATOR
AND
PRIME II RECEIVABLES CORPORATION,
A DELAWARE CORPORATION,
AS PURCHASER
DATED AS OF JANUARY 22, 1997
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
----
<S> <C> <C>
ARTICLE I DEFINITIONS ...................................................................................... 1
Section 1.01. Certain Defined Terms.............................................................. 1
Section 1.02. Accounting and UCC Terms........................................................... 6
ARTICLE II. AMOUNTS AND TERMS OF THE PURCHASES ............................................................... 6
Section 2.01. The Purchases...................................................................... 6
Section 2.02. Delivery of Receivables and Payments............................................... 6
Section 2.03. Payments and Computations.......................................................... 7
Section 2.04. Repurchase of Receivables.......................................................... 9
Section 2.05. Customer Service Adjustments....................................................... 9
Section 2.06. Addition of Originators............................................................ 9
Section 2.07. Application of Collections......................................................... 10
ARTICLE III CONDITIONS TO PURCHASES .......................................................................... 10
Section 3.01. Conditions Precedent to the Purchaser's Initial Purchase........................... 10
Section 3.02. Conditions Precedent to the Originator's Initial Sale.............................. 11
Section 3.03. Conditions Precedent to All Sales.................................................. 11
ARTICLE IV REPRESENTATIONS AND WARRANTIES ................................................................... 11
Section 4.01. Representations and Warranties of the Purchaser.................................... 11
Section 4.02. Representations and Warranties of the Originator................................... 13
Section 4.03. Representations and Warranties of the Originator
Relating to this Agreement and the Receivables................................. 15
ARTICLE V GENERAL COVENANTS ................................................................................ 18
Section 5.01. Covenants of the Originator........................................................ 18
ARTICLE VI PURCHASE TERMINATION EVENTS ...................................................................... 22
Section 6.01. Purchase Termination Events........................................................ 22
ARTICLE VII INDEMNIFICATION .................................................................................. 23
Section 7.01. Indemnities by the Originator...................................................... 23
Section 7.02. Indemnities by the Purchaser....................................................... 24
ARTICLE VIII MISCELLANEOUS .................................................................................... 24
Section 8.01. Amendment.......................................................................... 24
Section 8.02. Notices, Etc....................................................................... 26
Section 8.03. No Waiver; Remedies................................................................ 26
Section 8.04. Binding Effect..................................................................... 26
Section 8.05. Governing Law...................................................................... 26
Section 8.06. Costs, Expenses and Taxes.......................................................... 27
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C> <C>
Section 8.07. Acknowledgment of Assignments...................................................... 27
Section 8.08. No Petition in Bankruptcy.......................................................... 27
EXHIBIT A Form of Settlement Statement
SCHEDULE I Authorized Officers
SCHEDULE II Offices Where Books, Records, Etc.
Evidencing Receivables Are Kept
SCHEDULE III Discount Factor Formula
ANNEX 1 Form of Lock-Box Agreement
</TABLE>
ii
<PAGE> 4
RECEIVABLES PURCHASE AGREEMENT
This RECEIVABLES PURCHASE AGREEMENT dated as of January 22,
1997 (this "AGREEMENT"), is between FDS NATIONAL BANK, a national banking
association (the "ORIGINATOR") and PRIME II RECEIVABLES CORPORATION, a Delaware
corporation (the "PURCHASER").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Originator intends to sell Receivables to the
Purchaser on the terms and subject to the conditions set forth in this
Agreement;
WHEREAS, the Purchaser desires to purchase Receivables from
the Originator on the terms and subject to the conditions set forth in this
Agreement; and
WHEREAS, to obtain the necessary funds to purchase such
Receivables, the Purchaser has entered into the Pooling and Servicing Agreement;
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants and agreements contained herein, the parties hereto agree as
follows:
ARTICLE I.
DEFINITIONS
SECTION 1.01. CERTAIN DEFINED TERMS. As used in this
Agreement, the following terms have the following meanings (such meanings to be
equally applicable to both the singular and plural forms of the terms defined):
"ADDITIONAL ORIGINATOR" has the meaning specified in SECTION
2.06.
"AUTHORIZED OFFICERS" means those officers of the Persons
designated in SCHEDULE I hereto (or in such other Schedule as may be delivered
to the parties hereto from time to time) as duly authorized to execute and
deliver this Agreement and any instruments or documents in connection herewith
on behalf of such Persons and to take, from time to time, all other actions on
behalf of the Originator in connection herewith.
"BUSINESS DAY" means any day other than a Saturday, a Sunday
or a day on which banking institutions in New York, New York (or, with respect
to any Series, any additional city specified in the related Supplement) are
authorized or obligated by law or executive order to be closed.
"CHARGE ACCOUNT AGREEMENT" means an agreement, which shall
comply with the Federal Truth In Lending Act, for Visa and Mastercard credit
card accounts between
<PAGE> 5
any Obligor and the Originator, as such agreements may be amended, modified or
otherwise changed from time to time.
"CLOSING DATE" means the date of the initial issuance of the
Certificates.
"COMPANY" means Federated Department Stores, Inc., a Delaware
corporation.
"CREDIT AND COLLECTION POLICY" means the credit, collection,
customer relations and service policies that apply to Eligible Accounts, as such
policies currently exist and as such policies may be amended, modified or
supplemented from time to time subject to SECTION 5.01(C).
"CUSTODIAN" means the bailee of the Trustee.
"DEFAULTED RECEIVABLE" means a Receivable in a Defaulted
Account.
"DISCOUNT FACTOR" means the discount factor determined in
accordance with SCHEDULE III hereto.
"ELIGIBLE RECEIVABLE" means a Receivable that satisfies each
of the following criteria:
(a) it arises under an Eligible Account;
(b) except as permitted in the Pooling and Servicing
Agreement, it is not sold or pledged to any other party;
(c) it constitutes an "account" or a "general intangible" as
each is defined in Article 9 of the UCC as then in effect in each
Relevant UCC State;
(d) it is the legal, valid and binding obligation of a Person
who (i) is living, (ii) is not a minor under the laws of his/her state
of residence and (iii) is competent to enter into a contract and incur
debt;
(e) neither it nor the underlying Charge Account Agreement
contravenes in any material respect any laws, rules or regulations
applicable thereto (including, without limitation, rules and
regulations relating to truth in lending, fair credit billing, fair
credit reporting, equal credit opportunity, fair debt collection
practices and privacy) that could reasonably be expected to have an
adverse impact on the amount of Collections thereunder, and the
Originator is not in violation of any such laws, rules or regulations
in any respect material to such Charge Account Agreement;
(f) all material consents, licenses, or authorizations of, or
registrations with, any governmental authority required to be obtained
or given in connection with the creation of such Receivable or the
execution, delivery, creation and performance
2
<PAGE> 6
of the underlying Charge Account Agreement have been duly obtained or
given and are in full force and effect as the date of the creation of
such Receivable;
(g) at the time of its transfer to the Trust, the Purchaser or
the Trust will have good and marketable title free and clear of all
liens and security interests arising under or through the Purchaser
(other than Permitted Liens);
(h) it is not a Defaulted Receivable; and
(i) it arises under a Charge Account Agreement that has been
duly authorized and which, together with such Receivable, is in full
force and effect and constitutes the legal, valid and binding
obligation of the Obligor enforceable against such Obligor in
accordance with its terms and is not subject to any dispute, offset,
counterclaim or defense whatsoever (except the discharge in bankruptcy
of the Obligor).
"INCIPIENT PURCHASE TERMINATION EVENT" means any condition,
act or event specified in SECTION 6.01 that, with the giving of notice or the
lapse of time, or both, would become a Purchase Termination Event.
"INITIAL OUTSTANDING BALANCE" of a Receivable means the
Outstanding Balance of such Receivable on the Initiation Date of such
Receivable.
"INITIATION DATE" means, with respect to any Receivable, the
date of the transaction that gave rise to the original Outstanding Balance of
such Receivable.
"IN-STORE PAYMENT" means any payment made by an Obligor with
respect to a Receivable by delivery of cash, a check or money order, or any
other form of payment to a cashier or other employee of any Federated retail
operating subsidiary.
"INTERCHANGE" means interchange fees payable to the
Originator in its capacity as credit card issuer through VISA U.S.A., Inc. and
Mastercard International Incorporated.
"LATE FEES" has, with respect to any Account, the meaning
specified in the Charge Account Agreement applicable to such Account for late
fees or similar charges.
"LIEN" means any mortgage, deed of trust, pledge,
hypothecation, assignment, participation or equity interest, deposit
arrangement, encumbrance, lien (statutory or other), preference, priority or
other security agreement or preferential arrangement of any kind or nature
whatsoever, including, without limitation, any conditional sale or other title
retention agreement, any financing lease having substantially the same economic
effect as any of the foregoing and the filing of any financing statement under
the UCC (other than any such financing statement filed for informational
purposes only) or comparable law of any jurisdiction to evidence any of the
foregoing; PROVIDED, HOWEVER, that any assignment pursuant to Section 7.2 of the
Pooling and Servicing Agreement shall not be deemed to constitute a Lien.
3
<PAGE> 7
"LOCK-BOX ACCOUNT" means an account in the name of the Trustee
with a Lock-Box Bank.
"LOCK-BOX AGREEMENT" has the meaning specified in SECTION
3.01.
"LOCK-BOX BANK" means any bank that holds one or more Lock-Box
Accounts for receiving Collections, pursuant to a Lock-Box Agreement.
"NET OWNERSHIP INTEREST" means, with respect to any
Receivable, an amount equal to the aggregate Initial Outstanding Balance of such
Receivable, plus interest or finance charges accrued on such Receivable to such
time less the cumulative amount of Collections with respect to such Receivable
actually received by the Purchaser or the Originator prior to such time, as such
Net Ownership Interest may be adjusted pursuant to SECTION 2.05.
"OBLIGOR" means a Person obligated to make payments with
respect to a Receivable arising under an Account pursuant to a Charge Account
Agreement.
"OUTSTANDING BALANCE" means, with respect to a Receivable on
any day, the aggregate amount owed by the Obligor thereunder as of the close of
business on the prior Business Day (net of returns and adjustments).
"PERIODIC FINANCE CHARGES" has, with respect to any Account,
the meaning specified in the Charge Account Agreement applicable to such Account
for finance charges (due to periodic rate) or any similar term.
"PERSON" means any legal person, including an individual,
corporation, partnership, association, joint venture, joint-stock company,
trust, unincorporated organization, governmental entity or other entity of a
similar nature.
"POOLING AND SERVICING AGREEMENT" means the Pooling and
Servicing Agreement dated as of January 22, 1997, among the Purchaser, the
Servicer, and the Trustee, as such agreement may be amended, supplemented,
waived, or otherwise modified from time to time.
"PURCHASE CONSIDERATION" means, with respect to each purchase
of newly created Receivables from the Originator on the Initiation Date of such
Receivables, the aggregate consideration payable by the Purchaser to the
Originator equal to the Purchase Price of such Receivables, which shall be paid
pursuant to SECTION 2.03, either in cash, by Subordinated Purchase Note, or by a
combination thereof.
"PURCHASE DATE" has the meaning specified in SECTION 2.01(a).
"PURCHASE PRICE" means the product of (i) the Outstanding
Balance of each Receivable tendered to the Purchaser pursuant to SECTION 2.02(a)
and (ii) a percentage equal to 100% minus the Discount Factor for the purchase
of such Receivable.
4
<PAGE> 8
"PURCHASE TERMINATION DATE" means the date on which the
Purchaser's obligation to purchase Receivables shall terminate pursuant to
SECTION 6.01.
"PURCHASE TERMINATION EVENT" has the meaning specified in
SECTION 6.01.
"PURCHASES" has the meaning specified in SECTION 2.01(a).
"RECEIVABLE" means any amount owing by any Obligor, including,
without limitation, amounts owing for the payment of goods and services, annual
membership fees, Periodic Finance Charges, Late Fees, cash advances, access
checks, cash advance fees and Special Fees, if any, including credit insurance
premiums.
"RECEIVABLES TRANSMITTAL" has the meaning specified in SECTION
2.02(a).
"RELEVANT UCC STATE" means each jurisdiction in which the
filing of a UCC financing statement is necessary to perfect the ownership
interest and security interest of the Originator pursuant to this Agreement.
"SETTLEMENT DATE" means the date upon which the Purchaser and
the Originator shall reconcile any amounts owed to each other, except amounts
payable in respect of Purchases of Receivables, which date shall occur at least
once each fiscal month.
"SETTLEMENT PERIOD" means a period from and including a
Settlement Date to but excluding the next following Settlement Date.
"SETTLEMENT STATEMENT" means a statement, dated the last day
of each Settlement Period, reflecting the adjustments and credits pursuant to
SECTION 2.05 for such Settlement Period and for any Receivables being sold or
repurchased by the Originator on the date thereof, substantially in the form of
EXHIBIT A hereto, signed by an Authorized Officer of the Purchaser.
"SPECIAL FEES" means any fees which are not now but from time
to time may be assessed on the Accounts.
"SUBORDINATED PURCHASE NOTE" has the meaning specified in
SECTION 2.03(a).
"UCC" means the Uniform Commercial Code, as amended from time
to time, as in effect in the applicable jurisdiction.
"U.S. GAAP" has the meaning specified in SECTION 1.02.
All capitalized terms used herein and not otherwise defined
have the meanings assigned such terms in the Pooling and Servicing Agreement.
The definitions contained in this SECTION 1.01 are applicable to the singular as
well as the plural forms of such terms.
5
<PAGE> 9
SECTION 1.02. ACCOUNTING AND UCC TERMS. All accounting terms
not specifically defined herein shall be construed in accordance with United
States generally accepted accounting principles ("U.S. GAAP"); and all terms
used in Article 9 of the UCC that are used but not specifically defined herein
are used herein as defined therein.
ARTICLE II.
AMOUNTS AND TERMS OF THE PURCHASES
SECTION 2.01. THE PURCHASES.
(a) The Originator does hereby sell, transfer,
assign, and otherwise convey to the Purchaser, without recourse, all of
its right, title and interest in, to and under (i) the Receivables now
existing and hereafter created and arising in connection with the
Accounts, including, without limitation, all accounts, general
intangibles, contract rights, and other obligations of any Obligor with
respect to the Receivables, now or hereafter existing, (ii) all monies
and investments due or to become due with respect thereto (including,
without limitation, the right to any Finance Charge Receivables,
including any Recoveries), (iii) all Interchange arising upon the
creation of such Receivables, (iv) all proceeds of such Receivables and
(v) the Charge Account Agreements relating to such Accounts
(collectively, the "PURCHASES") on the Closing Date and on the
Initiation Date of any such subsequently created Receivable during the
period from the Closing Date until the Purchase Termination Date (each
such date, including the Closing Date, being a "PURCHASE DATE").
(b) The parties to this Agreement intend that the
transactions contemplated hereby shall be, and shall be treated as, a
purchase by the Purchaser and a sale by the Originator of the
Receivables and not as a lending transaction. The sale of Receivables
by the Originator hereunder shall be without recourse to, or
representation or warranty of any kind (express or implied) by, the
Originator, except as otherwise specifically provided herein. If this
Agreement does not constitute a valid sale, transfer and assignment of
all right, title and interest of the Originator in such property
despite the intent of the parties hereto, the Originator hereby grants
the Purchaser a "security interest" (as defined in the UCC as in effect
in the Relevant UCC State) in such property to the Purchaser and the
parties agree that this Agreement shall constitute a security agreement
under the UCC in effect in the Relevant UCC State.
SECTION 2.02. DELIVERY OF RECEIVABLES AND PAYMENTS.
(a) On each Business Day prior to the Purchase
Termination Date, the Originator shall deliver all of its Receivables
to the Purchaser by delivering to the Purchaser a receivables
transmittal (a "RECEIVABLES TRANSMITTAL") specifying to the Purchaser
the aggregate Outstanding Balance of such Receivables and the portion
of the Purchase Price of such Receivables the Originator desires to
receive in cash
6
<PAGE> 10
(it being understood that any portion of the Purchase Price that the
Originator does not elect to receive in cash shall be reflected as a
subordinated loan from the Originator to the Purchaser and evidenced by
a Subordinated Purchase Note). Notwithstanding the foregoing or any
other provision of this Agreement, the Originator may not sell any
Receivables or any portion of any thereof to the Purchaser for cash on
any Business Day on which the Originator has requested the Purchaser to
repay any outstanding principal amount of any Subordinated Purchase
Note unless and until the Purchaser has tendered the amount of such
requested repayment to the Originator.
(b) Upon the fulfillment of the conditions set forth
in ARTICLE III and the receipt by the Originator on any Purchase Date
of the Purchase Consideration for the Receivables to be sold by the
Originator on such date, all of the Originator's right, title and
interest in and to such Receivables shall have been sold, assigned,
transferred, conveyed and set over to the Purchaser. Each such sale
shall be evidenced by the Originator's delivery to the Purchaser of a
Receivables Transmittal and the receipt by the Originator of the
Purchase Consideration for the Receivables represented thereby.
SECTION 2.03. PAYMENTS AND COMPUTATIONS.
(a) The Purchase Price for Receivables shall be paid
or provided for on the Purchase Date of such Receivables in either of
the following ways, at the election of the Originator: (i) by payment
in cash in immediately available funds; or (ii) in the event that the
total Purchase Price is not paid in full in cash by the Purchaser on
the date of Purchase, the Originator shall receive a subordinated
unsecured promissory note (each such note, a "SUBORDINATED PURCHASE
NOTE") from the Purchaser in an original principal amount equal to the
portion of such cash shortfall owed to the Originator. The
characteristics of each Subordinated Purchase Note shall be as follows:
(i) interest shall accrue on the outstanding
principal amount of each Subordinated Purchase Note at a per
annum rate of interest (calculated on the basis of a 360-day
year of twelve 30-day months) equal to the equivalent of the
rate for commercial paper having a maturity of 30 days
reported on such day by the Board of Governors of the Federal
Reserve System in "Statistical Release H.15 (519), Selected
Interest Rates", or any successor thereto, under the heading
"Commercial Paper", converted to a money market yield, or, if
no such rate for commercial paper is reported on such date,
the applicable rate in effect with respect to the most recent
day on which such rate was reported, plus 1.5%;
(ii) the outstanding principal of and
accrued interest on each Subordinated Purchase Note shall be
payable as, if and when the Purchaser receives any of the
following amounts (net of expenses of the Purchaser) from the
Trustee or the Servicer: (i) payments with respect to
Principal Receivables
7
<PAGE> 11
allocable to the Exchangeable Transferor Certificate; (ii)
payments of any portion of the Finance Charge Receivables paid
with respect to the Exchangeable Transferor Certificate,
representing an amount equal to any Default Amount allocable
to the Exchangeable Transferor Certificate; and (iii) the
proceeds arising from the sale by the Purchaser of any
Investor Certificates, including proceeds received upon an
exchange of the Exchangeable Transferor Certificate;
(iii) all amounts paid with respect to an
outstanding Subordinated Purchase Note shall be allocated
first to accrued interest until all such interest is paid, and
then to outstanding principal;
(iv) the obligation of the Purchaser to
repay Subordinated Purchase Notes issued to the Originator
from the amounts paid to such Purchaser with respect to
Finance Charge Receivables, Principal Receivables, and other
sources of funds described in clause (ii) of this SECTION 2.03
in the manner prescribed herein, together with any capital or
surplus of the Transferor remaining after all Secured
Obligations under the Pooling and Servicing Agreement are
repaid in full and the Trust Termination Date has occurred,
shall be the sole and exclusive remedy available to the
Originator, and to the extent that such payments are
insufficient to pay such amounts, the Originator shall not
have any claim against the Purchaser for such amounts and no
further or additional recourse shall be available against the
Purchaser and any such Subordinated Purchase Note shall be
fully subordinated to any rights of Certificateholders under
the Pooling and Servicing Agreement, shall not evidence any
rights in the Receivables or the Exchangeable Transferor
Certificate, shall be an obligation of the Purchaser solely by
its execution hereof and need not be evidenced by any separate
instrument of the Purchaser;
(v) no Subordinated Purchase Note may be
sold, transferred, assigned, pledged, hypothecated,
participated or otherwise conveyed, nor may the Originator
grant any security interest in any Subordinated Purchase Note;
and
(vi) the Purchaser may offset any amount due
and owing by the Originator against any amount due and owing
by the Purchaser to the Originator under the terms of the
Subordinated Purchase Note.
The Purchaser, at its option, may repay all or any portion of the accrued
interest on and principal of any Subordinated Purchase Note at any time.
(b) The Purchaser shall pay all amounts to be paid in
cash with respect to the Purchases to the Originator on the date of the
Purchase thereof and shall pay all amounts in respect of principal of
and interest on any Subordinated Purchase Note in accordance with the
terms thereof.
8
<PAGE> 12
(c) All payments hereunder shall be made not later
than the close of business (New York City time) on the date specified
therefor in lawful money of the United States of America in same day
funds to the bank account designated in writing by the Originator to
the Purchaser from time to time.
(d) Whenever any payment to be made hereunder shall
be stated to be due on a day other than a Business Day, such payment
shall be made on the next succeeding Business Day.
SECTION 2.04. REPURCHASE OF RECEIVABLES.
(a) If any of the representations or warranties of
the Originator contained in SECTIONS 4.02 or 4.03 hereof was not true
with respect to the Originator or any Receivable, as applicable, at the
time such representation or warranty was made, and as a result thereof
(i) the Purchaser is required to repurchase any Receivable from the
Trust pursuant to Section 2.4(d) of the Pooling and Servicing Agreement
or (ii) any Receivable is designated an "Ineligible Receivable"
pursuant to Section 2.4(c) of the Pooling and Servicing Agreement, then
the Originator shall be obligated to pay to the Purchaser immediately
upon the Purchaser's demand therefor an amount equal to the amount of
all losses, damages and liabilities of the Purchaser that result from
such breach, including but not limited to the cost of the Purchaser's
repurchase obligations pursuant to Section 2.4(d) of the Pooling and
Servicing Agreement.
(b) Upon any exercise by the Purchaser of its right
to designate Removed Accounts pursuant to Section 2.7(d) of the Pooling
and Servicing Agreement and the removal of any Receivables from the
Trust pursuant thereto, the Originator will immediately repurchase such
Receivables from the Purchaser by tendering to the Purchaser an amount
in immediately available funds equal to the amount the Purchaser
remitted to the Trust (calculated as set forth in Section 2.7 of the
Pooling and Servicing Agreement) in consideration of the transfer of
the removed Receivables from the Trust to the Purchaser.
SECTION 2.05. CUSTOMER SERVICE ADJUSTMENTS. The Originator
may make an adjustment in the principal amount or finance or other charges
accrued or payable with respect to the account of a customer who has obtained
credit under a Charge Account Agreement, PROVIDED that such adjustment is
permitted under the Originator's Credit and Collection Policy. The aggregate
amount of all such adjustments made by the Originator during any Settlement
Period shall be payable to the Purchaser by the Originator and shall be due no
later than the Settlement Date that occurs at the end of such Settlement Period.
SECTION 2.06. ADDITION OF ORIGINATORS. Notwithstanding
anything to the contrary in this Agreement, any direct or indirect wholly owned
subsidiary of the Company (whether now in existence or acquired or created after
the date hereof) may at any time become an Originator hereunder, whether in
addition to or in substitution for one or more
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then existing Originators (each such additional or substitute Originator, an
"ADDITIONAL ORIGINATOR"), PROVIDED that, (i) at the time such direct or indirect
wholly owned subsidiary becomes an Additional Originator, such direct or
indirect wholly owned subsidiary (a) agrees in writing to sell Receivables to
the Purchaser on terms and subject to the conditions set forth in this
Agreement, (b) complies with the conditions set forth in SECTION 3.01(b), (c)
makes the representations and warranties set forth in SECTIONS 4.02 and 4.03 and
(d) agrees in writing to comply with the covenants set forth in ARTICLE V and
(ii) the Purchaser shall have received notice from each Rating Agency that the
inclusion of the Additional Originator pursuant to this SECTION 2.06 will not
result in a reduction or withdrawal of its then existing rating of any Class of
Investor Certificates then issued and outstanding. Following the addition or
substitution of any Additional Originator, the term "ORIGINATOR" as used in this
Agreement shall include for all purposes such Additional Originator.
SECTION 2.07. APPLICATION OF COLLECTIONS. For purposes of
determining the Outstanding Balances of Receivables, upon receipt by the
Servicer of Collections with respect to any Receivable, such Collections shall
be applied to the Outstanding Balances of Receivables in order of their
Initiation Dates, beginning with the Receivables having the earliest Initiation
Date.
ARTICLE III.
CONDITIONS TO PURCHASES
SECTION 3.01. CONDITIONS PRECEDENT TO THE PURCHASER'S
INITIAL PURCHASE. The obligation of the Purchaser to purchase Receivables
hereunder on the Initiation Date from the Originator is subject to the
conditions precedent that (a) the Pooling and Servicing Agreement shall be in
full force and effect, (b) the Servicer shall have delivered a letter signed by
it to each Lock-Box Bank of the Servicer, such letter to be in substantially the
form of ANNEX L to this Agreement (each, a "LOCK-BOX AGREEMENT"), and (c) the
Purchaser shall have received on or before the date of such Purchase the
following, each (unless otherwise indicated) dated the day of such sale and in
form and substance satisfactory to the Purchaser:
(i) a copy of duly adopted resolutions of
the Board of Directors of the Originator authorizing this
Agreement, the documents to be delivered by the Originator
hereunder and the transactions contemplated hereby, certified
by the Secretary or Assistant Secretary of the Originator;
(ii) a duly executed certificate of the
Secretary or an Assistant Secretary of the Originator
certifying the names and true signatures of the Authorized
Officers authorized on behalf of the Originator to sign this
Agreement or any instruments or documents in connection with
this Agreement; and
(iii) (A) executed Financing Statements
(Forms UCC-1) with respect to the Receivables, naming the
Originator as seller and the Purchaser
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as purchaser, in proper form for filing in each jurisdiction
in which the Purchaser deems it necessary or desirable to
perfect the Purchaser's ownership thereof under the Uniform
Commercial Code or comparable law of such jurisdiction and (B)
evidence that all other actions necessary or, in the opinion
of the Purchaser, desirable or required to perfect the
Purchaser's ownership of the Receivables sold hereunder have
been duly taken.
SECTION 3.02. CONDITIONS PRECEDENT TO THE ORIGINATOR'S
INITIAL SALE. The obligation of the Originator to make its initial sale of
Receivables hereunder is subject to the condition precedent that the Originator
shall have received on or before the date of such sale the following, each
(unless otherwise indicated) dated the day of such initial sale and in form and
substance satisfactory to the Originator:
(a) a copy of duly adopted resolutions of the Board
of Directors of the Purchaser authorizing this Agreement, the documents
to be delivered by the Purchaser hereunder and the transactions
contemplated hereby, certified by the Secretary or Assistant Secretary
of the Purchaser; and
(b) a duly executed certificate of the Secretary or
Assistant Secretary of the Purchaser certifying the names and true
signatures of the officers authorized on its behalf to sign this
Agreement and the other documents to be delivered by it hereunder.
SECTION 3.03. CONDITIONS PRECEDENT TO ALL SALES. The
obligation of the Originator to make any sale (including the initial sale) of
Receivables hereunder shall be subject to the further condition precedent that
on the date for such sale the following statements shall be true (and the
payment by the Purchaser of the Purchase Price shall constitute a representation
and warranty by the Purchaser that on such date such statements are true):
(a) the representations and warranties of the
Purchaser contained in SECTION 4.01 are correct on and as of such
Purchase Date as though made on and as of such date; and
(b) no event has occurred and is continuing that
constitutes a Trust Pay Out Event.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. REPRESENTATIONS AND WARRANTIES OF THE
PURCHASER. The Purchaser represents and warrants as to itself as follows:
(a) It (i) is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation, and is duly qualified
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as a foreign corporation and is in good standing in each jurisdiction
in which the failure to so qualify would have a material adverse effect
on its condition (financial or otherwise), operations, properties or
prospects, (ii) has the requisite corporate power and authority to
effect the transactions contemplated hereby, and (iii) has all
requisite corporate power and authority and the legal right to own,
pledge, mortgage and operate its properties, and to conduct its
business as now or currently proposed to be conducted.
(b) The execution, delivery and performance by the
Purchaser of this Agreement and all instruments and documents to be
delivered hereunder by it, and the transactions contemplated hereby and
thereby, (i) are within its corporate powers, have been duly authorized
by all necessary corporate action, including the consent of
shareholders where required, and do not (A) contravene its charter or
by-laws, (B) violate any law or regulation or any order or decree of
any court or governmental instrumentality, (C) conflict with or result
in the breach of, or constitute a default under, any indenture,
mortgage or deed of trust or any material lease, agreement or other
instrument binding on or affecting it or any of its subsidiaries or any
of its properties or (D) result in or require the creation or
imposition of any Lien as created or imposed hereunder or under the
Pooling and Servicing Agreement, and no transaction contemplated hereby
requires compliance on its part with any bulk sales act or similar law,
and (ii) do not require the consent, authorization by or approval of or
notice to or filing or registration with, any governmental body,
agency, authority, regulatory body or any other Person other than those
which have been obtained EXCEPT for the filing of the Financing
Statements referred to in SECTION 3.01 hereof, which filing the
Originator hereby represents shall have been duly made prior to or
substantially contemporaneously with any Purchases and shall at all
times be in full force and effect (except as they may be terminated by
the Purchaser).
(c) This Agreement has been duly executed and
delivered by the Purchaser and constitutes the legal, valid and binding
obligation of the Purchaser, enforceable against the Purchaser in
accordance with its terms, except (i) as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect affecting
the enforcement of creditors' rights in general, and (ii) as such
enforceability may be limited by general principles of equity (whether
considered in a suit at law or in equity).
(d) There is no pending or, to its knowledge after
due inquiry, threatened action or proceeding affecting it or any of its
subsidiaries before any court, governmental agency or arbitrator that
may reasonably be expected to materially and adversely affect its
condition (financial or otherwise), operations, properties or
prospects, or that purports to affect the legality, validity or
enforceability of this Agreement, and none of the transactions
contemplated hereby is or to its knowledge is threatened to be
restrained or enjoined (temporarily, preliminarily or permanently).
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SECTION 4.02. REPRESENTATIONS AND WARRANTIES OF THE
ORIGINATOR. The Originator hereby represents and warrants to the Purchaser that,
as of the Initial Closing Date and as to matters involving (x) Supplemental
Accounts, as of the applicable Addition Date and (y) Automatic Additional
Accounts, as of the date the Receivables of such Accounts are designated for
inclusion in the Trust:
(a) ORGANIZATION AND GOOD STANDING. The Originator is
a national banking association duly organized and validly existing in
good standing under the laws of the United States and has full
corporate power, authority and legal right to own its properties and
conduct its business as such properties are presently owned and such
business is presently conducted, and to execute, deliver and perform
its obligations under this Agreement.
(b) DUE QUALIFICATION. The Originator is duly
qualified to do business and is in good standing (or is exempt from
such requirement) in any state required in order to conduct business,
and has obtained all necessary licenses and approvals with respect to
the Originator required under federal and applicable state law.
(c) DUE AUTHORIZATION. The execution and delivery of
this Agreement and the consummation of the transactions provided for in
this Agreement have been duly authorized by the Originator by all
necessary corporate action on its part and this Agreement will remain,
from the time of its execution, an official record of the Originator.
(d) BINDING OBLIGATION. This Agreement, and the
consummation of the transactions provided for herein, constitutes a
legal, valid and binding obligation of the Originator, enforceable in
accordance with its terms, except as (i) enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws now or hereinafter in effect, affecting the
enforcement of creditors' rights in general and (ii) as such
enforceability may be limited by general principles of equity (whether
considered in a proceeding at law or in equity).
(e) NO CONFLICTS. The execution, delivery and
performance of this Agreement, the performance of the transactions
contemplated by this Agreement, and the fulfillment of the terms hereof
by the Originator, do not (i) contravene its charter or By-Laws, (ii)
violate any provision of, or require any filing (except for the filings
under the UCC required by this Agreement, each of which has been duly
made and is in full force and effect), registration, consent or
approval under, any law, rule, regulation, order, writ, judgment,
injunction, decree, determination or award presently in effect having
applicability to the Originator, except for such filings,
registrations, consents or approvals as have already been obtained and
are in full force and effect, (iii) result in a breach of or constitute
a default or require any consent under any indenture or loan or credit
agreement or any other agreement, lease or instrument to which the
Originator is a party or by which it or its properties
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may be bound or affected except those as to which a consent or waiver
has been obtained and is in full force and effect and an executed copy
of which has been delivered to the Purchaser, or (iv) result in, or
require, the creation or imposition of any lien upon or with respect to
any of the properties now owned or hereafter acquired by the Originator
other than as specifically contemplated by this Agreement.
(f) TAXES. The Originator has filed all tax returns
(federal, state and local) required to be filed and has paid or made
adequate provision for the payment of all taxes, assessments and other
governmental charges due from the Originator or is contesting any such
tax, assessment or other governmental charge in good faith through
appropriate proceedings. The Originator knows of no basis for any
material additional tax assessment for any fiscal year for which
adequate reserves have not been established.
(g) NO VIOLATION. The execution and delivery of this
Agreement, the performance of the transactions contemplated by this
Agreement and the fulfillment of the terms hereof will not conflict
with or violate any Requirements of Law applicable to the Originator.
(h) NO PROCEEDINGS. There are no proceedings or
investigations pending or, to the knowledge of the Originator,
threatened against the Originator before any court, regulatory body,
administrative agency, or other tribunal or governmental
instrumentality (i) asserting the invalidity of this Agreement, (ii)
seeking to prevent the consummation of any of the transactions
contemplated by this Agreement, (iii) seeking any determination or
ruling that, in the reasonable judgment of the Originator, would
materially and adversely affect the performance by the Originator of
its obligations under this Agreement or (iv) seeking any determination
or ruling that would materially and adversely affect the validity or
enforceability of this Agreement.
(i) ALL CONSENTS REQUIRED. All approvals,
authorizations, consents, orders or other actions of any Person or of
any governmental body or official required in connection with the
execution and delivery of this Agreement, the performance of the
transactions contemplated by this Agreement and the fulfillment of the
terms hereof, have been obtained.
(j) BONA FIDE RECEIVABLES. Each Receivable is or will
be an account receivable arising out of the Originator's performance in
accordance with the terms of the Charge Account Agreement giving rise
to such Receivable. The Originator has no knowledge of any fact which
should have led it to expect at the time of the initial creation of an
interest in any Eligible Receivable hereunder that such Eligible
Receivable would not be paid in full when due. Each Receivable
classified as an "Eligible Receivable" by the Originator in any
document or report delivered hereunder satisfies the requirements of
eligibility contained in the definition of Eligible Receivable.
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(k) PLACE OF BUSINESS. The principal place of
business of the Originator is as indicated in SECTION 8.02, and the
offices where the Originator keeps its records concerning the
Receivables and related contracts are as indicated on SCHEDULE II
hereto.
(l) USE OF PROCEEDS. No proceeds of the sale of
any Receivables will be used by the Originator to purchase or carry any
margin security.
(m) PURCHASE TERMINATION EVENT. As of the Initial
Closing Date, no Purchase Termination Event or Incipient Purchase
Termination Event has occurred and is continuing.
(n) NOT AN INVESTMENT COMPANY. The Originator is
not an "investment company" within the meaning of the Investment
Company Act, or is exempt from all provisions of such Act.
(o) SOLVENCY. The Originator is not insolvent and
will not be rendered insolvent upon the transfer of the Receivables to
the Purchaser.
The representations and warranties set forth in this
SECTION 4.02 shall survive the transfer and assignment of the
respective Receivables to the Purchaser pursuant to this Agreement.
Upon discovery by the Originator or the Purchaser of a breach of any of
the foregoing representations and warranties, the party discovering
such breach shall give prompt written notice to the other.
SECTION 4.03. REPRESENTATIONS AND WARRANTIES OF THE
ORIGINATOR RELATING TO THIS AGREEMENT AND THE RECEIVABLES.
(a) BINDING OBLIGATION; VALID TRANSFER AND
ASSIGNMENT. The Originator hereby represents and warrants to the
Purchaser that, as of the Initial Closing Date and with respect to any
Series of Certificates, as of the date of its related Supplement and
Closing Date, and, with respect to any Series and matters involving (x)
Supplemental Accounts, as of the applicable Addition Date and (y)
Automatic Additional Accounts, as of the date the Receivables of such
Accounts are designated for inclusion in the Trust:
(i) This Agreement constitutes the legal,
valid and binding obligation of the Originator, enforceable
against the Originator in accordance with its terms, except
(A) as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect affecting the
enforcement of creditors' rights in general, and (B) as such
enforceability may be limited by general principles of equity
(whether considered in a suit at law or in equity).
(ii) This Agreement constitutes either (A) a
valid transfer, assignment, set-over and conveyance to the
Purchaser of all right, title and
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interest of the Originator in and to the Purchases, and such
Purchases will be held by the Purchaser free and clear of any
Lien of any Person claiming through or under the Originator or
any of its Affiliates except for Permitted Liens or (B) a
grant of a security interest (as defined in the UCC as in
effect in the Relevant UCC State) in, to and under the
Purchases, which grant is enforceable with respect to the
existing Receivables and the proceeds thereof upon execution
and delivery of this Agreement, and which will be enforceable
with respect to such Receivables hereafter created and the
proceeds thereof, upon such creation. If this Agreement
constitutes the grant of a security interest to the Purchaser
in such property, upon the filing of the financing statement
described in SECTION 3.01(c) and in the case of the
Receivables hereafter created and proceeds thereof, upon such
creation, the Purchaser shall have a first priority perfected
security interest in such property, except for Permitted
Liens.
(iii) The Originator is not insolvent.
(iv) The Originator is the legal and
beneficial owner of all right, title and interest in and to
each Receivable and each Receivable has been or will be
transferred to the Purchaser free and clear of any Lien other
than Permitted Liens.
(v) All consents, licenses, approvals or
authorizations of or registrations or declarations with any
Governmental Authority required to be obtained, effected or
given by the Originator in connection with the transfer of
Purchases to the Purchaser have been duly obtained, effected
or given and are in full force and effect.
(vi) The Originator has clearly and
unambiguously marked all its computer records and all its
microfiche storage files regarding the Receivables as the
property of the Purchaser and shall maintain such records in a
manner such that the Purchaser shall have a perfected security
interest in such Receivables.
(vii) As of the Initial Closing Date, on
the Business Day following the date the Servicer receives a
Termination Notice pursuant to Section 10.1 of the Pooling and
Servicing Agreement and on the Business Day following any
Amortization Period Commencement Date, Schedule 1 to the
Pooling and Servicing Agreement is and will be an accurate and
complete listing of all Accounts in all material respects as
of such day and the information contained therein with respect
to the identity of each Account and the aggregate unpaid
balance of the Receivables existing thereunder is and will be
true and correct in all material respects as of such day.
(viii) Each Account classified as an
"Eligible Account" by the Originator in any document or report
delivered hereunder will satisfy the
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requirements contained in the definition of Eligible Account
and each Receivable classified as an "Eligible Receivable" by
the Originator in any document or report delivered hereunder
will satisfy the requirements contained in the definition of
Eligible Receivable.
(ix) All material information with respect
to the Accounts and the Receivables provided to the Purchaser
by the Originator was true and correct as of the Closing Date,
or as of the day Receivables arising under each such Account
are designated for inclusion in the Purchases, as the case may
be.
(x) Each Receivable then existing has been
conveyed to the Purchaser free and clear of any Lien of any
Person claiming through or under the Originator or any of its
Affiliates (other than Permitted Liens) and in compliance in
all material respects, with all Requirements of Law applicable
to the Originator.
(xi) With respect to each Receivable then
existing, all consents, licenses, approvals or authorizations
of or registrations or declarations with any Governmental
Authority required to be obtained, effected or given by the
Originator in connection with the conveyance of such
Receivable to the Purchaser have been duly obtained, effected
or given and are in full force and effect.
(xii) On each day on which any new
Receivable arises and is transferred to the Purchaser pursuant
to this Agreement, the Originator shall be deemed to represent
and warrant to the Purchaser that (A) each Receivable
transferred to the Purchaser on such day has been conveyed to
the Purchaser in compliance, in all material respects, with
all Requirements of Law applicable to the Originator and free
and clear of any Lien of any Person claiming through or under
the Originator or any of its Affiliates (other than Permitted
Liens) and (B) with respect to each such Receivable, all
consents, licenses, approvals or authorizations of or
registrations or declarations with, any Governmental Authority
required to be obtained, effected or given by the Originator
in connection with the conveyance of such Receivable to the
Purchaser have been duly obtained, effected or given and are
in full force and effect.
(b) NOTICE OF BREACH. The representations and
warranties set forth in this SECTION 4.03 shall survive the transfer
and assignment of the respective Receivables to the Purchaser. Upon
discovery by the Originator or the Purchaser of a breach of any of the
representations and warranties set forth in this SECTION 4.03, the
party discovering such breach shall give prompt written notice to the
other party mentioned above. The Originator agrees to cooperate with
the Purchaser in attempting to cure any such breach.
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ARTICLE V.
GENERAL COVENANTS
SECTION 5.01. COVENANTS OF THE ORIGINATOR. So long as the
Purchaser shall have any Net Ownership Interest in any Receivables sold by the
Originator or until the Purchase Termination Date shall have occurred, whichever
is later, the Originator covenants that:
(a) RECEIVABLES TO BE ACCOUNTS OR GENERAL
INTANGIBLES. The Originator will take no action to cause any Receivable
to be evidenced by any instrument (as defined in the UCC as in effect
in the Relevant UCC State). The Originator will take no action to cause
any Receivable to be anything other than an "account" or a "general
intangible" (each as defined in the UCC as in effect in the Relevant
UCC State).
(b) SECURITY INTERESTS. Except for the conveyances
hereunder, the Originator will not sell, pledge, assign or transfer to
any other Person, or grant, create, incur, assume or suffer to exist
any Lien on any Receivable, whether now existing or hereafter created,
or any interest therein; the Originator will immediately notify the
Purchaser of the existence of any Lien on any Receivable; and the
Originator shall defend the right, title and interest of the Purchaser
in, to and under the Receivables, whether now existing or hereafter
created, against all claims of third parties claiming through or under
the Originator; PROVIDED, HOWEVER, that nothing in this SECTION 5.01(b)
shall prevent or be deemed to prohibit the Originator from suffering to
exist upon any of the Receivables any Permitted Lien.
(c) CHARGE ACCOUNT AGREEMENTS AND CREDIT AND
COLLECTION POLICIES. The Originator shall comply with and perform its
obligations under the Charge Account Agreements relating to the
Accounts and the Credit and Collection Policy except insofar as any
failure to comply or perform would not materially and adversely affect
the rights of the Trust or the Certificateholders under the Pooling and
Servicing Agreement or under the Certificates. The Originator may
change the terms and provisions of the Charge Account Agreements or the
Credit and Collection Policy in any respect (including, without
limitation, the reduction of the required minimum monthly payment, the
calculation of the amount, or the timing, of charge-offs and the
Periodic Finance Charges and other fees to be assessed thereon) only if
such change (i) would not, in the reasonable belief of the Originator,
cause, immediately or with the passage of time, a Pay Out Event to
occur and (ii) (A) if it owns a comparable segment of charge card
accounts, such change is made applicable to the comparable segment of
the revolving credit card accounts owned by the Originator, if any,
which have characteristics, the same as, or substantially similar to,
the Accounts that are the subject of such change and (B) if it does not
own such a comparable segment, it will not make any such change with
the intent to materially benefit the Originator over the Investor
Certificateholders, except as otherwise restricted by an endorsement,
sponsorship, or other agreement between the
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Originator and an unrelated third party or by the terms of the Charge
Account Agreements.
(d) DELIVERY OF COLLECTIONS. If the Originator
receives Collections, the Originator agrees to pay to the Servicer all
payments received by the Originator in respect of the Receivables as
soon as practicable after receipt thereof by the Originator.
(e) CONVEYANCE OF ACCOUNTS. The Originator covenants
and agrees that it will not convey, assign, exchange or otherwise
transfer any Account to any Person prior to the termination of this
Agreement; PROVIDED, HOWEVER, that the Originator shall not be
prohibited hereby from conveying, assigning, exchanging or otherwise
transferring an Account of the Originator in connection with a
transaction contemplated by, or in which the Originator and its
successor agree to comply with provisions substantially similar to the
provisions of, either Section 2.7 or Section 7.2 of the Pooling and
Servicing Agreement.
(f) NOTICE OF LIENS. The Originator shall notify the
Purchaser promptly after becoming aware of any Lien on any Receivable
other than Permitted Liens.
(g) COMPLIANCE WITH LAWS, ETC. The Originator shall
comply in all material respects with all applicable laws, rules,
regulations and orders applicable to the Receivables, including,
without limitation, rules and regulations relating to truth in lending,
fair credit billing, fair credit reporting, equal credit opportunity,
fair debt collection practices and privacy, where failure so to comply
could reasonably be expected to have an adverse impact on the amount of
Collections thereunder.
(h) PRESERVATION OF CORPORATE EXISTENCE. Except in
connection with a transaction contemplated by either Section 2.7 or
Section 7.2 of the Pooling and Servicing Agreement or as a result of a
transaction that effects a merger of the Originator into or with
another Affiliate of the Company or a consolidation among two or more
Affiliates of the Company, the Originator shall preserve and maintain
in all material respects its corporate existence, corporate rights
(charter and statutory) and corporate franchises.
(i) VISITATION RIGHTS. At any reasonable time during
normal business hours and from time to time, the Originator shall
permit (i) the Purchaser, or any of its agents or representatives, to
examine and make copies of and abstracts from the records, books of
account and documents (including, without limitation, computer tapes
and disks) of the Originator relating to Receivables owned or to be
purchased by the Purchaser hereunder and to the underlying Charge
Account Agreements and (ii) the Purchaser, or any of its agents or
representatives, or the Trustee (upon the giving of appropriate notice
to the Purchaser) to visit the properties of the Originator for the
purpose of examining such records, books of account and documents,
and to discuss the affairs, finances and accounts of the Originator
relating to the Receivables
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or to the Originator's performance hereunder with any of its
officers or directors and with its independent certified public
accountants.
(j) KEEPING OF RECORDS AND BOOKS OF ACCOUNT. The
Originator shall maintain and implement, or cause to be maintained or
implemented, administrative and operating procedures reasonably
necessary or advisable for the collection of all such Receivables, and,
until the delivery to the Purchaser, keep and maintain, or cause to be
kept and maintained, all documents, books, records and other
information reasonably necessary or advisable for the collection of all
such Receivables.
(k) PERFORMANCE AND COMPLIANCE WITH RECEIVABLES AND
CHARGE ACCOUNT AGREEMENTS. The Originator shall at its expense take all
actions on its part reasonably necessary to maintain in full force and
effect its rights under all Charge Account Agreements to which the
Originator is a party.
(l) LOCATION OF RECORDS. The Originator shall keep
its chief place of business and chief executive office, and the offices
where it keeps the records concerning the Receivables and all
underlying Charge Account Agreements (and all original documents
relating thereto), at the address or addresses of the Originator
specified in SCHEDULE II hereto or upon written notice to the
Purchaser, at such other locations in a jurisdiction where all action
required by SECTION 5.01(o) shall have been taken and completed and be
in full force and effect.
(m) FURNISHING COPIES. ETC. The Originator shall
furnish to the Purchaser: (i) upon the Purchaser's request, a
certificate of the chief financial officer of the Originator
certifying, as of the date thereof, that no Purchase Termination Event
has occurred and is continuing and setting forth the computations used
by the chief financial officer of the Originator in making such
determination; (ii) as soon as possible and in any event within five
(5) days after the occurrence of any Purchase Termination Event or
Incipient Purchase Termination Event, a statement of the chief
financial officer of the Originator setting forth details of such
Purchase Termination Event or Incipient Purchase Termination Event and
the action that the Originator proposes to take or has taken with
respect thereto; (iii) promptly after obtaining knowledge that a
Receivable was, at the time of the Purchaser's purchase thereof, not an
Eligible Receivable, notice thereof; and (iv) promptly following the
Purchaser's request therefor, such other information, documents,
records or reports with respect to the Receivables or the underlying
Charge Account Agreements or the conditions or operations, financial or
otherwise, of the Originator, as the Purchaser may from time to time
reasonably request.
(n) OBLIGATION TO RECORD AND REPORT. The Originator
shall, to the fullest extent permitted by U.S. GAAP and by applicable
law, record each Purchase as a sale on its books and records, reflect
each Purchase in its financial statements and tax returns as a sale and
recognize gain or loss, as the case may be, on each Purchase.
20
<PAGE> 24
(o) CONTINUING COMPLIANCE WITH THE UNIFORM COMMERCIAL
CODE. The Originator shall, without limiting the requirements of
SECTION 5.01(r), at its expense, preserve, continue, and maintain or
cause to be preserved, continued, and maintained the Purchaser's valid
and properly protected title to each Receivable purchased hereunder,
including, without limitation, filing or recording Uniform Commercial
Code financing statements in each relevant jurisdiction.
(p) PROCEEDS OF RECEIVABLES. The Originator shall
cause all payments (other than In-Store Payments) made by Obligors in
respect of purchased Receivables to be made to (i) a Lock-Box Account
or (ii) a post office box under the control of employees of the
Servicer, provided that payments may be made to such a post office box
only if employees of the Servicer (A) handle the processing of all
amounts so received and (B) deposit or otherwise credit, or cause to be
deposited or otherwise credited, as soon as reasonably practicable but
in any event not later than the close of business in New York City on
the third Business Day following the date of such receipt, to a
Lock-Box Account, the entire amount so received.
(q) LOCK-BOX AGREEMENTS. The Originator shall, within
60 days of the date of this Agreement, deliver to the Purchaser a
Lock-Box Agreement, duly countersigned and agreed to by each bank
holding a lock-box account of the Originator or, if any such bank fails
to agree to the terms thereof, by such other bank as shall agree to
become a Lock-Box Bank for the Originator on the terms and conditions
set forth in such Lock-Box Agreement.
(r) FURTHER ACTION EVIDENCING PURCHASES.
(i) The Originator agrees that from time to
time, at its expense, it will promptly execute and deliver all
further instruments and documents, and take all further
action, that may be necessary or desirable or that the
Purchaser may reasonably request, to protect or more fully
evidence the Purchaser's ownership, right, title and interest
in the Receivables sold by the Originator and its rights under
the Charge Account Agreements with respect thereto, or to
enable the Purchaser to exercise or enforce any such rights.
Without limiting the generality of the foregoing, the
Originator will upon the request of the Purchaser (A) execute
and file such financing or continuation statements, or
amendments thereto, and such other instruments or notices, as
may be necessary or, in the opinion of the Purchaser,
desirable, (B) indicate on its books and records (including,
without limitation, originals and copies of sales slips and
billing statements, to the extent practicable) that
Receivables have been sold and assigned to the Purchaser, and
provide to the Purchaser, upon request, copies of any such
records and (C) contact customers to confirm and verify
Receivables.
(ii) The Originator hereby irrevocably
authorizes the Purchaser to file one or more financing or
continuation statements, and amendments thereto, relative to
all or any part of the Receivables sold by the Originator,
21
<PAGE> 25
or the underlying Charge Account Agreements with respect
thereto, without the signature of the Originator where
permitted by law.
(iii) If the Originator fails to perform any
of its agreements or obligations under this Agreement, the
Purchaser may (but shall not be required to) perform, or cause
performance of, such agreements or obligations, and the
expenses of the Purchaser incurred in connection therewith
shall be payable by the Originator as provided in SECTION
8.06.
(s) CHANGE IN BUSINESS. The Originator shall not make
any change in the nature of its business as conducted on the date
hereof that could reasonably be expected to have a material adverse
effect on the value or collectibility of the Receivables.
(t) IN-STORE PAYMENTS. In the event that the
Originator or any Federated retail operating subsidiary receives any
amounts in respect of collections of Receivables, including, without
limitation, all In-Store Payments, such Originator or Federated retail
operating subsidiary shall deposit or otherwise credit, or cause to be
deposited or otherwise credited, as soon as reasonably practicable but
in any event not later than the close of business in New York City on
the second Business Day following the Date of Processing of such
Collections, to a Lock-Box Account or the Collection Account, the
entire amount so received and hold such amount in trust for the
Servicer pending such remittance.
ARTICLE VI.
PURCHASE TERMINATION EVENTS
SECTION 6.01. PURCHASE TERMINATION EVENTS. If any of the
following events (each, a "PURCHASE TERMINATION EVENT") shall occur and be
continuing:
(a) The Originator 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 proceeding, or
for the winding-up or liquidation of its affairs, shall have been
entered against the Originator and such decree or order shall have
remained in force discharged or unstayed for a period of 60 days, or
the Originator shall admit in writing its inability to pay its debts
generally as they become due, file a petition to take advantage of any
applicable insolvency or reorganization statute, make an assignment for
the benefit of its creditors or voluntarily suspend payment of its
obligation or the Originator shall become unable for any reason to
22
<PAGE> 26
transfer Receivables to the Purchaser in accordance with the provisions
of this Agreement; or
(b) a Trust Pay Out Event occurs;
then the Purchaser's obligation to purchase Receivables from the Originator
shall automatically be terminated.
ARTICLE VII.
INDEMNIFICATION
SECTION 7.01. INDEMNITIES BY THE ORIGINATOR. Without
limiting any other rights that the Purchaser may have hereunder or under
applicable law, the Originator hereby agrees to indemnify the Purchaser from and
against any and all claims, losses and liabilities (including reasonable
attorneys' fees) (all the foregoing being collectively referred to as
"INDEMNIFIED AMOUNTS") arising out of or resulting from this Agreement or in
respect of any Receivable or any Charge Account Agreement, excluding, however,
Indemnified Amounts to the extent resulting from gross negligence or willful
misconduct on the part of the Purchaser; PROVIDED, HOWEVER, that, except as
expressly provided in subparagraph (a) of this SECTION 7.01, in no event will
the Originator have any indemnity or other obligation hereunder or otherwise
with respect to any loss suffered in respect of any Eligible Receivable
transferred to the Purchaser in accordance with this Agreement, the parties
hereby acknowledging that such transfers are to be without recourse. Without
limiting or being limited by the foregoing but subject to the proviso in the
immediately proceeding sentence, the Originator shall pay on demand to the
Purchaser any and all amounts necessary to indemnify the Purchaser from and
against any and all Indemnified Amounts relating to or resulting from:
(a) reliance on any representation or warranty or
statement made or deemed made by the Originator (or any of its
officers) under or in connection with this Agreement or in any
certificate delivered pursuant hereto that, in either case, shall have
been false or incorrect in any material respect when made or deemed
made;
(b) the failure by the Originator to comply with any
applicable law, rule or regulation of any governmental authority with
respect to any Receivable or the related Charge Account Agreement of
the Originator, or the nonconformity of any Receivable or the related
Charge Account Agreement of the Originator with any such applicable
law, rule or regulation;
(c) the failure to have filed, or any delay in
filing, financing statements or other similar instruments or documents
under the Uniform Commercial Code of any applicable jurisdiction or
other applicable laws with respect to any Receivables of the
Originator;
23
<PAGE> 27
(d) any dispute, claim, offset or defense (other than
discharge in bankruptcy of the Obligor) of the Obligor to the payment
of any Receivable of the Originator (including, without limitation, a
defense based on such Receivable or the related Charge Account
Agreement not being a legal, valid and binding obligation of such
Obligor enforceable against such Obligor in accordance with its terms),
or any other claim resulting from the sale of the merchandise or
services related to any such Receivable or the furnishing or failure to
furnish such merchandise or services;
(e) any failure of the Originator to perform its
duties or obligations under this Agreement or the applicable Charge
Account Agreement;
(f) any products liability claim arising out of or in
connection with merchandise, insurance or services that are the subject
of any charge pursuant to any Charge Account Agreement of the
Originator;
(g) the commingling of Collections of Receivables
at any time with other funds of the Originator; or
(h) any investigation, litigation or proceeding
related to this Agreement or in respect of any Receivable or any Charge
Account Agreement of the Originator.
Notwithstanding the foregoing, the Originator shall
in no circumstances be required to indemnify the Purchaser for any
Indemnified Amounts that result from any delay in the collection of any
Receivables or any default by an Obligor with respect to any
Receivables.
SECTION 7.02. INDEMNITIES BY THE PURCHASER. Without limiting
any other rights that the Originator may have hereunder or under applicable law,
the Purchaser hereby agrees to indemnify the Originator from and against any and
all claims, losses and liabilities (including reasonable attorneys' fees)
arising out of or resulting from the Originator's reliance on any representation
or warranty made by the Purchaser in this Agreement or in any certificate
delivered pursuant hereto that, in either case, shall have been false or
incorrect in any material respect when made or deemed made.
ARTICLE VIII.
MISCELLANEOUS
SECTION 8.01. AMENDMENT.
(a) This Agreement may be amended from time to time
by the Originator and the Purchaser to cure any ambiguity, to revise
any exhibits or schedules, to correct or supplement any provisions
herein or thereon that may be inconsistent with any other provisions
herein or thereon or to add any other provisions with respect to
matters or questions raised under this Agreement that shall
24
<PAGE> 28
not be inconsistent with the provisions of this Agreement; PROVIDED,
HOWEVER, that such action shall not, as evidenced by an Officer's
Certificate of the Servicer delivered to the Trustee, adversely affect
in any material respect the interests of any of the Investor
Certificateholders.
This Agreement, including any schedule or exhibit
thereto, may also be amended from time to time by the Originator and
the Purchaser for the purpose of adding any provisions to or changing
in any manner or eliminating any of the provisions of this Agreement;
provided that (i) the Servicer shall have provided an Officer's
Certificate to the Trustee to the effect that such amendment will not
materially and adversely affect the interests of the Investor
Certificateholders, (ii) such amendment shall not, as evidenced by an
Opinion of Counsel, cause the Trust to be characterized for U.S.
federal income tax purposes as an association taxable as a corporation
or otherwise have any material adverse impact on the U.S. federal
income taxation of any outstanding Series of Investor Certificates or
any Certificateholder and (iii) the Servicer shall have provided at
least ten Business Days prior written notice to each Rating Agency of
such amendment and shall not have received notice from any Rating
Agency to the effect that the current rating of any Series or any class
of any Series would be reduced as a result of such amendment.
(b) This Agreement may also be amended from time to
time by the Originator and the Purchaser with the consent of the
Holders of Investor Certificates evidencing undivided Interests
aggregating not less than 66-2/3% of the Invested Amount of each and
every Series adversely affected, for the purpose of adding any
provisions to or changing in any manner or eliminating any of the
provisions of this Agreement or of modifying in any manner the rights
herein of the Investor Certificateholders of any Series then issued and
outstanding; PROVIDED, HOWEVER, that no such amendment under this
subsection shall (i) reduce in any manner the amount of, or delay the
timing of, distributions that are required to be made on any Investor
Certificate of such Series without the consent of all of the related
Investor Certificateholders; or (ii) reduce the aforesaid percentage
required to consent to any such amendment, in each case without the
consent of all such Investor Certificateholders.
(c) Promptly after the execution of any such
amendment (other than an amendment pursuant to paragraph (a)), the
Trustee shall furnish notification of the substance of such amendment
to each Investor Certificateholder of each Series adversely affected
and ten Business Days prior to the proposed effective date for such
amendment the Servicer shall furnish notification of the substance of
such amendment to each Rating Agency providing a rating for such
Series.
(d) It shall not be necessary to obtain the consent
of Investor Certificateholders under this SECTION 8.01 to approve the
particular form of any proposed amendment, but it shall be sufficient
if such consent shall approve the substance thereof. The manner of
obtaining such consents and of evidencing the
25
<PAGE> 29
authorization of the execution thereof by Investor Certificateholders
shall be subject to such reasonable requirements as the Trustee may
prescribe.
SECTION 8.02. NOTICES, ETC. All notices and other
communications provided for hereunder shall be in writing (including
telegraphic, telex, facsimile or cable communication) and mailed, telegraphed,
telexed, transmitted, cabled or delivered, if to the Originator, at 9111 Duke
Boulevard, Mason, Ohio 45040 Attention: President, if to the Purchaser, at its
address at 9111 Duke Boulevard, Mason, Ohio 45040 Attention: President (with a
copy to the Servicer as hereinafter provided); and if to the Servicer, at 9111
Duke Boulevard, Mason, Ohio 45040 Attention: President, or, as to each party, at
such other address as shall be designated by such party in a written notice to
the other parties. All such notices and communications shall when mailed,
telegraphed, telexed, transmitted or cabled be effective when deposited in the
mails, delivered to the telegraph company, confirmed by telex answerback,
transmitted by telecopier or delivered to the cable company, respectively,
except that notices to the Purchaser pursuant to ARTICLE II shall not be
effective until received by the Purchaser.
SECTION 8.03. NO WAIVER; REMEDIES. No failure on the part
of the Purchaser to exercise, and no delay in exercising, any right under this
Agreement shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right preclude any other or further exercise thereof or the
exercise of any other right. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law.
SECTION 8.04. BINDING EFFECT. This Agreement shall be
binding upon and inure to the benefit of the Originator and the Purchaser and
their respective successors and assigns, except that the Originator shall not
have the right to assign its rights hereunder or any interest herein without the
prior written consent of the Purchaser. This Agreement shall create and
constitute the continuing obligations of the parties hereto in accordance with
its terms, and shall remain in full force and effect as between the Purchaser
and the Originator until such time, after the Purchase Termination Date
applicable to the Originator, as the Purchaser shall not have any net ownership
interest in any Receivables; PROVIDED, HOWEVER, that the indemnification
provisions of ARTICLE VII shall be continuing and shall survive any termination
of this Agreement.
SECTION 8.05. GOVERNING LAW. THIS AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS,
RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE
WITH SUCH LAWS, EXCEPT AS REQUIRED BY MANDATORY PROVISIONS OF LAW AND EXCEPT TO
THE EXTENT THAT THE VALIDITY OR PROTECTION OF THE PURCHASER'S OWNERSHIP OF THE
PURCHASED RECEIVABLES, OR REMEDIES HEREUNDER IN RESPECT THEREOF, MAY BE GOVERNED
BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK.
26
<PAGE> 30
SECTION 8.06. COSTS, EXPENSES AND TAXES. In addition to the
limited rights of indemnification granted to the Purchaser under ARTICLE VII
hereof, the Originator agrees to pay on demand all costs and expenses of the
Purchaser in connection with the preparation, execution and delivery of this
Agreement and the documents to be delivered hereunder, including, without
limitation, the reasonable fees and out-of-pocket expenses of counsel for the
Purchaser with respect thereto and with respect to advising the Purchaser as to
its rights and remedies under this Agreement, and all costs and expenses
(including, without limitation, reasonable counsel fees and expenses), in
connection with the enforcement (whether through negotiations, legal proceedings
or otherwise) of this Agreement and the documents to be delivered hereunder. In
addition, the Originator agrees to pay any and all stamp and other taxes and
fees payable or determined to be payable in connection with the execution,
delivery, filing and recording of this Agreement or the other documents to be
delivered hereunder, and agree to hold the Purchaser harmless from and against
any and all liabilities with respect to or resulting from any delay in paying or
omitting to pay such taxes and fees.
SECTION 8.07. ACKNOWLEDGMENT OF ASSIGNMENTS. The Originator
hereby acknowledges and consents to the assignment by the Purchaser of
Receivables and the rights of the Purchaser under this Agreement pursuant to the
Pooling and Servicing Agreement.
SECTION 8.08. NO PETITION IN BANKRUPTCY. The Originator
covenants and agrees that prior to the date that is one year and a day after the
Purchase Termination Date, it will not institute against or join any other
Person in instituting against the Purchaser any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings or other similar proceeding
under the laws of the United States or any State of the United States.
[The remainder of this page is intentionally left blank.]
27
<PAGE> 31
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunto duly authorized,
as of the date first above written.
THE ORIGINATOR:
FDS NATIONAL BANK, a national
banking association
By: /s/ Susan R. Robinson
-----------------------------
Name: Susan R. Robinson
Title: Treasurer
THE PURCHASER:
PRIME II RECEIVABLES
CORPORATION, a Delaware
corporation
By: /s/ Karen M. Hoguet
------------------------------
Name: Karen M. Hoguet
Title: Chairman of the Board
24
<PAGE> 32
EXHIBIT A
FORM OF SETTLEMENT STATEMENT
----------------------------
<PAGE> 33
PRIME CREDIT CARD
MASTER TRUST II
SERIES 1997-1 MONTHLY CERTIFICATEHOLDERS STATEMENT
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Distribution Date: 01-Jan-97
Monthly Period: January
01-Jan-97
01-Jan-97
(i) Net Principal Collections/Allocation 0.00
Class A Allocation 0.00
Class B Allocation 0.00
Class C Allocation 0.00
(ii) Total Finance Charge Collections/Allocation 0.00
Of Which Interchange 0.00
Class A Allocation 0.00
Class B Allocation 0.00
Class C Allocation 0.00
(iii) Principal Receivables 01-Jan-97 0.00
Invested Amount 0.00
Class A 0.00
Class B 0.00
Class C 0.00
Transferor Amount 0.00
Percentage 0.00%
Fixed/Floating Allocation Percentage 0.00
Class A 0.00%
Class B 0.00%
Class C 0.00%
(iv) Delinquency
Current 0.00 0.00%
30 Days 0.00 0.00%
60 Days 0.00 0.00%
90 Days 0.00 0.00%
120 Days 0.00 0.00%
150 Days 0.00 0.00%
180 Days + 0.00 0.00%
Total 0.00 0.00%
(v) Aggregate Investor Default Amount 0.00
Percentage of Average Invested Amount 0.00%
(vi) Aggregate Investor Uncovered Dilution 0.00
(vii) Investor Charge Offs/Recoveries 0.00
Class A Charge Offs 0.00
Class A Charge Off Recoveries 0.00
Class B Charge Offs 0.00
Class B Charge Off Recoveries 0.00
Class C Charge Offs 0.00
Class C Charge Off Recoveries 0.00
(viii) Monthly Servicing Fee 0.00
Average of 6 Months Average of 3 Months Current Month
(ix) Payment Rate Percentage 0.00% 0.00% 0.00%
Excess Spread Percentage 0.00% 0.00% 0.00%
(x) Reserve Account:
Required Reserve Account Percentage 0.00%
Opening Balance 0.00
Deposits 0.00
Disbursement 0.00
Closing Balance 0.00
(xi) Portfolio Yield 0.00%
Average Base Rate 0.00%
</TABLE>
<PAGE> 34
<TABLE>
<CAPTION>
PRIME CREDIT CARD
MASTER TRUST II
SETTLEMENT STATEMENT
<S> <C> <C>
Distribution Date: 15-Jan-97
Monthly Period: December 1996
1-Dec-96
4-Jan-97
(i) Collections 0.00
Finance Charge 0.00
Interchange 0.00
Principal 0.00
(ii) Investor Percentage - Principal Collections
Series 1997-1 0.00%
A 0.00%
B 0.00%
C 0.00%
Investor Percentage - Finance Charge Collections
and Receivables in Defaulted Accounts
Series 1997-1 0.00%
A 0.00%
B 0.00%
C 0.00%
(iii) Distribution Amount per $1,000
Series 1997-1
A 0.00
B 0.00
C 0.00
Total $'s Distributed
Series 1997-1 0.00
(iv) Allocation to Principal per $1,000
Series 1997-1
A 0.00
B 0.00
C 0.00
Total $'s Distributed
Series 1997-1 0.00
(v) Allocation to Interest per $1,000
Series 1997-1
A 0.00
B 0.00
C 0.00
</TABLE>
Page 1
<PAGE> 35
<TABLE>
<CAPTION>
PRIME CREDIT CARD
MASTER TRUST II
SETTLEMENT STATEMENT
<S> <C> <C>
Total $'s Distributed
Series 1997-1 0.00
(vi) Investor Default Amount
Series 1997-1 0.00
A 0.00
B 0.00
C 0.00
(vii) Investor Charge Offs and Reinbursements
Series 1997-1 Charge Offs 0.00
A 0.00
B 0.00
C 0.00
Series 1997-1 Reimbusements 0.00
A 0.00
B 0.00
C 0.00
(viii) Servicing Fees
Series 1997-1 0.00
A 0.00
B 0.00
C 0.00
(ix) Deficit Controlled Amortization Amount
Series 1997-1 0.00
A 0.00
B 0.00
C 0.00
(x) Receivables in Trust 0.00
(xi) Invested Amount
Series 1997-1 0.00
A 0.00
B 0.00
C 0.00
(xii) Enhancement 0.00
(xiii) Pool Factor 0.00
(xiv) Yield Factor 0.00
Finance Charge Receivables Factor 0.00
(xv) Payout Event NO
</TABLE>
Page 2
<PAGE> 36
<TABLE>
<CAPTION>
SCHEDULE I
AUTHORIZED OFFICERS OF ORIGINATOR
---------------------------------
Name Title
---- -----
<S> <C>
James J. Amann Chairman and Chief Executive Officer
John E. Brown President
Stephen C. Baldridge Chief Financial Officer
Susan R. Robinson Treasurer
David L. Faulk Vice President
</TABLE>
<PAGE> 37
SCHEDULE II
Offices Where Books, Records, Etc.
----------------------------------
Evidencing Receivables Are Kept
-------------------------------
9111 Duke Boulevard
Mason, Ohio 45040
First Data Resources, Inc.
10815 South Old Mill Road
Omaha, Nebraska 61854-2607
Attention: Federated Services Team
9
<PAGE> 38
SCHEDULE III
Discount Factor Formula
-----------------------
For any Monthly Period, the "DISCOUNT FACTOR" is defined as the sum of the
Series Discount Factor (as defined below) for each Series whose Series Discount
Factor is greater than zero.
The "SERIES DISCOUNT FACTOR"
for each Series is defined as: ((A + B - C)/D) * E
WHERE:
- ------
A = Base Rate for such Series
B = 1%
C = Net Finance Charge Portfolio Yield for such Series
D = Annual Portfolio Turnover Rate
E = Investor Percentage for such Series applicable to Finance Charge
Collections
<PAGE> 39
ANNEX 1
Form of Lock-Box Agreement
--------------------------
<PAGE> 40
PRIME II RECEIVABLES CORPORATION
9111 Duke Boulevard
Mason, OH 45040
January 22, 1997
Star Bank, N.A.
P.O. Box 1038
Location 9125
Cincinnati, OH 45201
Attn: Ms. Jayne Ross
Re: ACCOUNT OWNERSHIP MODIFICATION
Prime II Receivables Corporation
Tax I.D.: Unassigned
Account #: N/A
Premier Visa Lockbox Account
Acting under the authority granted by the Board of Directors of Prime II
Receivables Corporation (the "Company") on January 21, 1997, Star Bank, N.A. is
hereby authorized to act as a bank of the Company. You are instructed to operate
the account in accordance with the following instructions. Any previous
instructions on file are superseded by the following:
NAME CHANGE
Effective the close of business January 22, 1997, the name on this account
should be changed to "The Chase Manhattan Bank as Trustee of Prime Credit Card
Master Trust II."
SIGNATORY AUTHORIZATION
I hereby designate the following as authorized signatories with respect to the
above account:
No signatories
WIRE TRANSFERS
The only disbursements on this account shall be made by wire transfer to the
following trustee account:
ACCOUNT # BANK NAME ABA ROUTING #
--------- ------------------ -------------
N/A Chase Manhattan Bank N/A
AUTOMATED CLEARING HOUSE TRANSACTIONS (ACH)/DEPOSITORY TRANSFER CHECKS (DTC)
The use of any form of automated clearing house transactions or depository
transfer check, whether or not initiated, signed or approved by an authorized
signatory, is expressly prohibited.
<PAGE> 41
MAILING INSTRUCTIONS
Monthly bank statements and bank analysis statements should be mailed as
follows:
Prime II Receivables Corporation
9111 Duke Boulevard
Mason, OH 45040
Attn: David W. Dawson
STATEMENT CUT-OFF DATES
Please cut off monthly bank statements at the end of each calendar month.
SPECIAL INSTRUCTIONS
All rights and privileges of FDS National Bank pertaining to the
above-referenced account are terminated.
The tax I.D. number of Prime II Receivables Corporation will be provided when
assigned.
Please direct any inquiries regarding this communication to Jason Bruewer at
(513) 579-7364.
Please acknowledge receipt of this letter by signing and returning to the
undersigned the enclosed copy. A self addressed, stamped envelope is enclosed
for your convenience. Thank you for your assistance in this matter.
Sincerely,
/s/ Susan P. Storer
-------------------------
Susan P. Storer
President
Acknowledged By: /s/ Jayne M. Ross Date: 1/22/97
--------------------------- -------------------
<PAGE> 1
Exhibit 10.20
CLASS A CERTIFICATE PURCHASE AGREEMENT
Dated as of January 22, 1997
among
PRIME II RECEIVABLES CORPORATION,
as Transferor,
FDS NATIONAL BANK,
as Servicer,
THE CLASS A PURCHASERS PARTIES HERETO,
and
CREDIT SUISSE FIRST BOSTON, NEW YORK BRANCH,
as Agent and Administrative Agent
<PAGE> 2
<TABLE>
TABLE OF CONTENTS
-----------------
<CAPTION>
PAGE
----
<S> <C> <C>
SECTION 1. DEFINITIONS.........................................................................................1
1.1 Definitions.......................................................................................1
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS....................................................................10
2.1 Purchases........................................................................................10
2.2 Reductions and Increases of Commitments.........................................................13
2.3 Fees, Expenses, Payments, Etc....................................................................14
2.4 Requirements of Law..............................................................................15
2.5 Taxes............................................................................................17
2.6 Non-recourse.....................................................................................19
2.7 Indemnification..................................................................................20
2.8 Termination Events................................................................................21
SECTION 3. CONDITIONS PRECEDENT...............................................................................23
3.1 Condition to Initial Purchase....................................................................23
3.2 Condition to Additional Purchase.................................................................24
SECTION 4. REPRESENTATIONS AND WARRANTIES.....................................................................25
4.1 Representations and Warranties of the Transferor.................................................25
4.2 Representations and Warranties of FDSNB..........................................................27
4.3 Representations and Warranties of the Agent and the Class A Purchasers...........................28
SECTION 5. COVENANTS..........................................................................................29
5.1 Covenants of the Transferor and FDSNB............................................................29
SECTION 6. MUTUAL COVENANTS REGARDING CONFIDENTIALITY...................................................32
6.1 Covenants of Transferor, Etc.....................................................................32
6.2 Covenants of Class A Purchasers..................................................................32
SECTION 7. THE AGENTS.........................................................................................33
7.1 Appointment......................................................................................33
7.2 Delegation of Duties.............................................................................33
7.3 Exculpatory Provisions...........................................................................33
7.4 Reliance by Agent................................................................................34
7.5 Notices..........................................................................................34
7.6 Non-Reliance on Agent and Other Class A Purchasers...............................................34
7.7 Indemnification..................................................................................35
7.8 Agents in Their Individual Capacities............................................................35
7.9 Successor Agent..................................................................................36
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
SECTION 8. SECURITIES LAWS; TRANSFERS; TAX TREATMENT....................................................36
8.1 Transfers of Class A Certificates................................................................36
8.2 Tax Characterization of the Class A Certificates.................................................41
SECTION 9. MISCELLANEOUS......................................................................................41
9.1 Amendments and Waivers...........................................................................41
9.2 Notices..........................................................................................42
9.3 No Waiver; Cumulative Remedies...................................................................44
9.4 Successors and Assigns...........................................................................44
9.5 Successors to Servicer...........................................................................44
9.6 Counterparts.....................................................................................45
9.7 Severability.....................................................................................46
9.8 Integration......................................................................................46
9.9 Governing Law....................................................................................46
9.10 Termination.....................................................................................46
9.11 Action by Servicer..............................................................................46
9.12 Limited Recourse; No Proceedings................................................................46
9.13 Survival of Representations and Warranties......................................................47
9.14 Submission to Jurisdiction; Waivers.............................................................47
9.15 WAIVERS OF JURY TRIAL...........................................................................48
LIST OF EXHIBITS
----------------
EXHIBIT A......... Form of Investment Letter
EXHIBIT B......... Form of Joinder Supplement
EXHIBIT C......... Form of Transfer Supplement
</TABLE>
(ii)
<PAGE> 4
CLASS A CERTIFICATE PURCHASE AGREEMENT, dated as of January
22, 1997, by and among PRIME II RECEIVABLES CORPORATION, a Delaware corporation
("PRIME II RECEIVABLES CORPORATION"), as Transferor (the "TRANSFEROR"), FDS
NATIONAL BANK, a national banking association ("FDSNB"), as Servicer (the
"SERVICER"), the CLASS A PURCHASERS from time to time parties hereto and CREDIT
SUISSE FIRST BOSTON, a Swiss banking corporation acting through its New York
Branch, as Agent for the Class A Purchasers (in such capacity, the "AGENT") and
as Administrative Agent for the Class A Purchasers and the Class B Purchasers
(in such capacity, the "ADMINISTRATIVE AGENT").
W I T N E S S E T H:
WHEREAS, Prime II Receivables Corporation, as Transferor,
FDSNB, as Servicer, and the Trustee are parties to a certain Pooling and
Servicing Agreement dated as of January 22, 1997 (as the same may from time to
time be amended or otherwise modified, the "MASTER POOLING AND SERVICING
AGREEMENT"), and a Series 1997-1 Variable Funding Supplement thereto, dated as
of January 22, 1997 (as the same may from time to time be amended or otherwise
modified, the "SUPPLEMENT" and, together with the Master Pooling and Servicing
Agreement, the "POOLING AND SERVICING AGREEMENT");
WHEREAS, the Trust proposes to issue its Class A Variable
Funding Certificates, Series 1997-1 (the "CLASS A CERTIFICATES") and its Class B
Variable Funding Certificates, Series 1997-1 (the "CLASS B CERTIFICATES" and,
together with the Class A Certificates, the "SERIES 1997-1 VARIABLE FUNDING
CERTIFICATES") pursuant to the Pooling and Servicing Agreement;
WHEREAS, the Trust also proposes to issue its Class C
Certificates, Series 1997-1 (the "CLASS C CERTIFICATES" and, together with the
Series 1997-1 Variable Funding Certificates, the "SERIES 1997-1 CERTIFICATES")
pursuant to the Pooling and Servicing Agreement; and
WHEREAS, the Class A Purchasers are willing to purchase the
Class A Certificates on the Closing Date and from time to time thereafter to
purchase VFC Additional Class A Invested Amounts thereunder on the terms and
conditions provided for herein;
NOW THEREFORE, in consideration of the mutual covenants herein
contained, and other good and valuable consideration, the receipt and adequacy
of which are hereby expressly acknowledged, the parties hereto agree as follows:
SECTION 1. DEFINITIONS
1.1 DEFINITIONSDEFINITIONS. All capitalized terms used herein
as defined terms and not defined herein shall have the meanings given to them in
the Pooling and Servicing Agreement. Each capitalized term defined herein shall
relate only to the Series 1997-1 Certificates and to no other Series of
Certificates issued by the Trust.
"ACT" has the meaning specified in subsection 2.7(a) of this
Agreement.
<PAGE> 5
"ADJUSTED EURODOLLAR RATE" for any Fixed Period shall mean the
rate (rounded upwards if necessary to the nearest whole multiple of 1/16th of
one percent per annum) of interest per annum (the "LIBO RATE") for deposits in
United States dollars offered by the principal office of Credit Suisse in
London, England to prime banks in the London interbank market in an amount of
not less than $1,000,000 for a period equal to such Fixed Period, PLUS the
remainder obtained by subtracting (i) the LIBO Rate for such Fixed Period from
(ii) the rate obtained by dividing such LIBO Rate by the percentage equal to
100% MINUS the "Eurodollar Reserve Percentage" (as defined in the succeeding
sentence) for such Fixed Period. The "EURODOLLAR RESERVE PERCENTAGE" for a Class
A Purchaser for any Fixed Period shall mean the reserve percentage applicable
during such Fixed Period (or, if more than one such percentage shall be so
applicable, the daily average of such percentages for those days in such Fixed
Period during which any such percentage shall be so applicable) under
regulations issued from time to time by the Board of Governors of the Federal
Reserve System (or any successor) for determining the maximum reserve
requirement (including, without limitation, any marginal emergency, supplemental
or any reserve requirement) for such Class A Purchaser in respect of liabilities
or assets consisting of or including Eurocurrency Liabilities (as that term is
used in Regulation D of the Board of Governors of the Federal Reserve System as
in effect from time to time) having a term equal to such Fixed Period.
"AFFECTED PARTY" shall mean, with respect to any Structured
Purchaser, any Support Bank of such Structured Purchaser.
"AGENT" shall mean Credit Suisse, in its capacity as Agent for
the Class A Purchasers, or any successor agent hereunder.
"AGENT BASE RATE" shall mean, for any day, the higher of (i)
the base commercial lending rate per annum announced from time to time by the
Agent in New York in effect on such day, or (ii) the interest rate per annum
quoted by the Agent at approximately 11:00 a.m., New York City time, on such
day, to dealers in the New York Federal funds market for the overnight offering
of Dollars by the Agent plus one-half of one percent (0.50%). (The Agent Base
Rate is not intended to represent the lowest rate charged by the Agent for
extensions of credit.)
"AGREEMENT" shall mean this Class A Certificate Purchase
Agreement, as amended, modified or otherwise supplemented from time to time.
"ALTERNATE RATE" shall mean, for any Fixed Period with respect
to the portion of the Class A Investor Principal Balance owed to a Class A
Purchaser, an interest rate per annum equal to 0.75% per annum above the
Adjusted Eurodollar Rate for such Fixed Period; PROVIDED, HOWEVER, that in the
case of (i) any Fixed Period on or prior to the date on which such Class A
Purchaser shall have notified the Agent that the introduction of or any change
in or in the interpretation of any law or regulation makes it unlawful, or any
central bank or other Governmental Authority asserts that it is unlawful for
such Class A Purchaser (or, in the case of a Structured Purchaser, for any
entity providing funds to such Structured Purchaser at an interest rate
determined by reference to the Adjusted Eurodollar Rate or a similar rate) to
fund such portion of the Class A Investor Principal Balance at the Alternate
Rate described above (and such Class A Purchaser shall not have subsequently
notified the Agent that such circumstances no longer exist), (ii) any Fixed
Period of less than 30 days, or (iii) any Fixed Period applicable to a portion
of the Class A Investor Principal
-2-
<PAGE> 6
Balance of less than $500,000 in the aggregate owed to all Class A Purchasers,
the "ALTERNATE RATE" for such Fixed Period for such Class A Purchaser shall be a
variable interest rate per annum equal to the Agent Base Rate from time to time
in effect during such Fixed Period.
"ASSIGNEE" and "ASSIGNMENT" have the respective meanings
specified in subsection 8.1(e) of this Agreement.
"BUSINESS DAY" means any day on which (i) banks are not
authorized or required to close in New York City and (ii) if such term is used
in connection with the Adjusted Eurodollar Rate, dealings are carried out in the
London interbank market.
"CLASS A CERTIFICATES" has the meaning specified in the
recitals to this Agreement.
"CLASS A FEE LETTER" shall mean that certain letter agreement,
designated therein as the Series 1997-1 Class A Fee Letter and dated as of the
date hereof, among the Agent, the Transferor and the Servicer, as such letter
agreement may be amended or otherwise modified from time to time.
"CLASS A INVESTOR PRINCIPAL BALANCE" shall mean, when used
with respect to any Business Day, an aggregate amount equal to (a) the Class A
Initial Invested Amount, PLUS (b) the aggregate VFC Additional Class A Invested
Amounts purchased by the Class A Certificateholders through the end of the
preceding Business Day pursuant to Section 6.15 of the Pooling and Servicing
Agreement, MINUS (c) the aggregate amount of principal payments made to the
Class A Certificateholders prior to such Business Day.
"CLASS A OWNERS" shall mean, with respect to any Class A
Certificate held by the Class A Agent hereunder for the benefit of Class A
Purchasers, the owners of the Class A Invested Amount represented by such Class
A Certificate as reflected on the books of the Class A Agent in accordance with
this Agreement.
"CLASS A PROGRAM FEE" shall mean the ongoing fees payable to
the Agent or the Class A Purchasers in the amounts and on the dates set forth in
the Class A Fee Letter.
"CLASS A REPAYMENT AMOUNT" shall mean the sum of all amounts
payable with respect to the principal amount of the Class A Certificates and
interest on the Class A Certificates and all other amounts (other than amounts
payable pursuant to subsection 2.3(b) or (c), the last sentence of subsection
2.6(a) and Section 2.7 hereof unless such amounts are not paid by the Servicer
pursuant to this Agreement) owing to the Class A Purchasers hereunder.
"CLASS B CERTIFICATES" has the meaning specified in the
recitals to this Agreement.
"CLASS C CERTIFICATES" has the meaning specified in the
recitals to this Agreement.
"CLOSING DATE" shall mean January 23, 1997.
"CODE" shall mean the Internal Revenue Code of 1986, as
amended.
-3-
<PAGE> 7
"COMMERCIAL PAPER RATE" for any Fixed Period for any portion
of the Class A Investor Principal Balance shall mean, to the extent a Structured
Purchaser funds such portion for such Fixed Period by issuing commercial paper,
the sum of (i) the rate (or if more than one rate, the weighted average of the
rates) at which commercial paper notes of such Structured Purchaser having a
term equal to such Fixed Period and to be issued to fund such portion may be
sold by any placement agent or commercial paper dealer selected by or on behalf
of such Structured Purchaser, as agreed between each such agent or dealer and
such Structured Purchaser; PROVIDED that if the rate (or rates) as agreed
between any such agent or dealer and such Structured Purchaser for any Fixed
Period is a discount rate (or rates), then such rate shall be the rate (or if
more than one rate, the weighted average of the rates) resulting from converting
such discount rate (or rates) to an interest-bearing equivalent rate per annum,
plus (ii) 0.05% in respect of dealer fees and commissions (to the extent not
included in the rate or rates described in clause (i)).
"COMMITTED CLASS A PURCHASER" shall mean any Class A Purchaser
which has a Commitment, as set forth in its respective Joinder Supplement and
any Assignee of such Class A Purchaser to the extent of the portion of such
Commitment assumed by such Assignee pursuant to its respective Transfer
Supplement.
"COMMITMENT" shall mean, for any Committed Class A Purchaser,
the maximum amount of such Committed Class A Purchaser's commitment to purchase
a portion the Class A Invested Amount, as set forth in the Joinder Supplement or
the Transfer Supplement by which such Committed Class A Purchaser became a party
to this Agreement or assumed the Commitment (or a portion thereof) of another
Committed Class A Purchaser, as such amount may be adjusted from time to time
pursuant to Transfer Supplement(s) executed by such Committed Class A Purchaser
and its Assignee and delivered pursuant to Section 8.1 of this Agreement or
pursuant to Section 2.2 of this Agreement.
"COMMITMENT EXPIRATION DATE" shall mean, for a Committed Class
A Purchaser, the date set forth in the Joinder Supplement or the Transfer
Supplement by which such Committed Class A Purchaser became a party to this
Agreement or assumed the Commitment (or a portion thereof) of another Committed
Class A Purchaser, as such date may be extended from time to time by mutual
agreement of all Class A Purchasers, the Agent and the Transferor.
"COMMITMENT PERCENTAGE" shall mean, for a Committed Class A
Purchaser, such Class A Purchaser's Commitment as a percentage of the aggregate
Commitments of all Committed Class A Purchasers.
"CREDIT SUISSE" shall mean Credit Suisse First Boston, a Swiss
banking corporation acting through its New York Branch.
"DEFAULTING PURCHASER" has the meaning specified in
subsection 2.1(e) of this Agreement.
"DOWNGRADED PURCHASER" has the meaning specified in
subsection 8.1(k).
-4-
<PAGE> 8
"ELIGIBLE ASSIGNEE" shall mean Credit Suisse and each other
Person listed in a letter from the Agent to the Transferor dated the Closing
Date, as such list may be augmented from time to time with the consent of the
Agent and the Transferor.
"EXCLUDED TAXES" has the meaning specified in subsection
2.5(a) of this Agreement.
"FDSNB" has the meaning specified in the preamble to this
Agreement.
"FIXED PERIOD" shall mean with respect to a Class A Purchaser
and any portion of the Class A Investor Principal Balance owed to such Class A
Purchaser:
(a) initially the period commencing on the date of
purchase of such portion of the Class A Investor Principal Balance and
ending such number of days as the Transferor shall select and, in the
case of a Structured Purchaser, the Agent, acting at the direction of
such Structured Purchaser, shall approve pursuant to Section 2.1 up to
69 days from such date; PROVIDED that the initial Fixed Period for any
portions of the Class A Investor Principal Balance purchased by a
Committed Class A Purchaser shall be one day; and
(b) thereafter each period commencing on the last day
of the immediately preceding Fixed Period for such portion of the Class
A Investor Principal Balance and ending such number of days (not to
exceed 69 days) as the Transferor shall select and, in the case of a
Structured Purchaser, the Agent, acting at the direction of such
Structured Purchaser, shall approve on notice by the Transferor
received by the Agent (including notice by telephone, confirming in
writing) not later than 4:00 p.m. (New York City time) on such last
day, EXCEPT that if the Agent shall not have received such notice or
approved such period on or before 4:00 p.m. (New York City time) on
such last day, such period shall be one day;
PROVIDED that
(i) any Fixed Period in respect of which Yield is
computed by reference to the Alternate Rate shall be a period from one
to and including 29 days, or a period of one month, as the Transferor
may select as provided above; PROVIDED that in the case of a Fixed
Period of one month in respect of which the Alternate Rate is computed
by reference to the Adjusted Eurodollar Rate, each affected Class A
Purchaser shall have received at least two Business Days' prior notice
of such selection;
(ii) any Fixed Period (other than one day) which
would otherwise end on a day which is not a Business Day shall be
extended to the next succeeding Business Day (PROVIDED, HOWEVER, if
Yield in respect of such Fixed Period is computed by reference to the
Adjusted Eurodollar Rate, and such Fixed Period would otherwise end on
a day which is not a Business Day, and there is no subsequent Business
Day in the same calendar month as such day, such Fixed Period shall end
on the next preceding Business Day);
(iii) in the case of any Fixed Period of one day, (A)
if such Fixed Period is the initial Fixed Period for a portion of the
Class A Investor Principal Balance such Fixed Period shall be the day
of purchase of such portion; (B) any subsequently occurring Fixed
-5-
<PAGE> 9
Period which is one day shall, if the immediately preceding Fixed
Period is more than one day, be the last day of such immediately
preceding Fixed Period, and, if the immediately preceding Fixed Period
is one day, be the day next following such immediately preceding Fixed
Period; and (C) if such Fixed Period occurs on a day immediately
preceding a day which is not a Business Day, such Fixed Period shall be
extended to the next succeeding Business Day; and
(iv) in the case of any Fixed Period for any portion
of the Class A Principal Balance which commences before the Termination
Date and would otherwise end on a date occurring after the Termination
Date, such Fixed Period shall end on the Termination Date and the
duration of each Fixed Period which commences on or after the
Termination Date shall be of such duration as shall be selected by the
Agent.
"GOVERNMENTAL AUTHORITY" shall mean any nation or government,
any state or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"INDEMNITEE" has the meaning specified in subsection 2.7(a)
of this Agreement.
"INDEMNIFYING PARTY" has the meaning specified in subsection
2.7(b) of this Agreement.
"INVESTING OFFICE" shall mean initially, the office of any
Class A Purchaser (if any) designated as such, in the case of any initial Class
A Purchaser, in its Joinder Supplement and, in the case of any Assignee, in the
related Transfer Supplement, and thereafter, such other office of such Class A
Purchaser or such Assignee which shall be a beneficial holder of a portion of
the Class A Certificate as may be designated in writing to the Agent, the
Transferor, the Servicer and the Trustee by such Class A Purchaser or Assignee.
"INVESTMENT LETTER" has the meaning specified in subsection
8.1(a) of this Agreement.
"JOINDER SUPPLEMENT" has the meaning specified in subsection
2.2(d) of this Agreement.
"LIQUIDATION DAY" shall mean, for any Class A Purchaser and
any portion of the Class A Investor Principal Balance owed to such Purchaser,
any day other than the last day of such Class A Purchaser's Fixed Period
applicable to such portion of the Class A Investor Principal Balance (without
taking into account any shortened duration of such Fixed Period pursuant to
clause (iv) of the definition thereof), on which a reduction of such portion of
the Class A Investor Principal Balance occurs.
"LIQUIDATION FEE" shall mean, for any Class A Purchaser and
for any Liquidation Day, the amount, if any, by which (i) the additional Yield
(calculated without taking into account any Liquidation Fee) which would have
accrued during the current Fixed Period on the portion of the Class A Investor
Principal Balance owed to such Purchaser which is reduced on such day,
-6-
<PAGE> 10
exceeds (ii) the income, if any, received by such Class A Purchaser from
investing the proceeds of such reduction of the Class A Investor Principal
Balance.
"MASTER POOLING AND SERVICING AGREEMENT" has the meaning
specified in the recitals to this Agreement.
"MOODY'S" shall mean Moody's Investors Service, Inc.
"NONCOMMITTED CLASS A PURCHASER" shall mean a Class A
Purchaser which is not a Committed Class A Purchaser.
"NONCOMMITTED PURCHASER PERCENTAGE" shall mean for each Class
A Purchaser which is not a Committed Class A Purchaser, the percentage set forth
in its Joinder Supplement or the Transfer Supplement by which such Class A
Purchaser became a party to this Agreement, as such percentage may be adjusted
from time to time pursuant to Transfer Supplement(s) executed by such Class A
Purchaser and any Assignee and delivered pursuant to Section 8.1 of this
Agreement.
"NONDEFAULTING PURCHASER" has the meaning specified in
subsection 2.1(e) of this Agreement.
"PARTICIPANT" has the meaning specified in subsection 8.1(d)
of this Agreement.
"PARTICIPATION" has the meaning specified in subsection 8.1(d)
of the Agreement.
"PERCENTAGE INTEREST" shall mean, for a Class A Purchaser, (a)
the sum of (i) the portion of the Class A Initial Invested Amount (if any)
purchased by such Class A Purchaser, PLUS (ii) the aggregate VFC Additional
Class A Invested Amounts (if any) purchased by such Class A Purchaser through
the end of the preceding Business Day pursuant to Section 6.15 of the Pooling
and Servicing Agreement, PLUS (iii) any portion of the Class A Investor
Principal Balance acquired by such Class A Purchaser as an Assignee from another
Class A Purchaser pursuant to a Transfer Supplement executed and delivered
pursuant to Section 8.1 of this Agreement, MINUS (iv) the aggregate amount of
principal payments made to such Class A Purchaser prior to such Business Day,
MINUS (v) any portion of the Class A Investor Principal Balance assigned by such
Class A Purchaser to an Assignee pursuant to a Transfer Supplement executed and
delivered pursuant to Section 8.1 of this Agreement, as a percentage of (b) the
aggregate Class A Investor Principal Balance.
"POOLING AND SERVICING AGREEMENT" has the meaning specified in
the recitals to this Agreement.
"PURCHASE DATE" shall mean the Closing Date and each date on
which a purchase of a VFC Additional Class A Invested Amount is to occur in
accordance with Section 6.15 of the Pooling and Servicing Agreement and Section
2.1 hereof.
"RATING AGENCY" shall mean each of Moody's and Standard &
Poor's.
-7-
<PAGE> 11
"REDUCTION AMOUNT" has the meaning specified in subsection
2.6(a) of this Agreement.
"REGULATORY CHANGE" shall mean, as to each Class A Purchaser,
any change occurring after the date of the execution and delivery of the Joinder
Supplement or the Transfer Supplement by which it became party to this
Agreement; in the case of a Participant, the date on which its Participation
became effective or, in the case of an Affected Party, the date it became such
an Affected Party, in any (or the adoption after such date of any new):
(i) United States Federal or state law or foreign law
applicable to such Class A Purchaser, Affected Party or Participant;
or
(ii) regulation, interpretation, directive, guideline or
request (whether or not having the force of law) applicable to such
Class A Purchaser, Affected Party or Participant of any court or other
judicial authority or any Governmental Authority charged with the
interpretation or administration of any law referred to in clause (i)
or of any fiscal, monetary or other authority or central bank having
jurisdiction over such Class A Purchaser, Affected Party or
Participant.
"RELATED DOCUMENTS" shall mean, collectively, this Agreement
(including the Class A Fee Letter and all Joinder Supplements and Transfer
Supplements), the Master Pooling and Servicing Agreement, the Supplement, the
Series 1997-1 Certificates, and the Receivables Purchase Agreement.
"REPLACEMENT PURCHASER" has the meaning specified in
subsection 2.4(c) of this Agreement.
"REQUIRED CLASS A OWNERS" shall mean, at any time, Class A
Purchasers having Percentage Interests aggregating at least 50.1%.
"REQUIRED CLASS A PURCHASERS" shall mean, at any time,
Committed Class A Purchasers having Commitments aggregating at least 50.1% of
the aggregate Commitments of all Committed Class A Purchasers.
"REQUIREMENT OF LAW" shall mean, as to any Person, any law,
treaty, rule or regulation, or determination of an arbitrator or Governmental
Authority, in each case applicable to or binding upon such Person or to which
such Person is subject, whether federal, state or local (including, without
limitation, usury laws, the Federal Truth in Lending Act and Regulation Z and
Regulation B of the Board of Governors of the Federal Reserve System).
"RESERVE ACCOUNT INCREASE NOTICE" shall mean a notice
delivered by the Administrative Agent in accordance with Section 2.8 hereof.
"SERIES 1997-1 VARIABLE FUNDING CERTIFICATES" has the meaning
specified in the recitals to this Agreement.
-8-
<PAGE> 12
"SERVICER" has the meaning specified in the preamble to this
Agreement.
"STANDARD & POOR'S" shall mean Standard & Poor's Ratings
Services, a division of The McGraw-Hill Companies, Inc.
"STRUCTURED PURCHASER" shall mean any Class A Purchaser whose
principal business consists of issuing commercial paper, medium term notes or
other securities to fund its acquisition and maintenance of receivables,
accounts, instruments, chattel paper, general intangibles and other similar
assets or interests therein and which is required by any nationally recognized
rating agency which is rating such securities to obtain from its principal
debtors an agreement such as that set forth in subsection 9.12(b) of this
Agreement in order to maintain such rating.
"SUPPLEMENT" has the meaning specified in the recitals to this
Agreement.
"SUPPORT BANK" shall mean any bank or other financial
institution extending or having a commitment to extend funds to or for the
account of any Structured Purchaser (including by agreement to purchase an
assignment of, or participation in Class A Certificates) under a liquidity or
credit support agreement which relates to this Agreement.
"TAXES" has the meaning specified in subsection 2.5(a) of this
Agreement.
"TERMINATION DATE" shall mean the Amortization Period
Commencement Date.
"TERMINATION EVENT" has the meaning specified in Section 2.8
hereof.
"TRANSFER" has the meaning specified in subsection 8.1(c) of
this Agreement.
"TRANSFER SUPPLEMENT" has the meaning specified in subsection
8.1(e) of this Agreement.
"TRANSFEROR" has the meaning specified in the preamble to this
Agreement.
"TRUST" shall mean the Prime Credit Card Master Trust II.
"TRUSTEE" shall mean The Chase Manhattan Bank, a banking
corporation organized and existing under the laws of the State of New York, in
its capacity as Trustee under the Pooling and Servicing Agreement, together with
its successors in such capacity.
"WRITTEN" or "IN WRITING" (and other variations thereof) shall
mean any form of written communication or a communication by means of telex,
telecopier device, telegraph or cable.
"YIELD" shall mean, for any Business Day the aggregate of the
following amounts:
(i) for each portion of the Class A Investor
Principal Balance owed to a Structured Purchaser to the extent that
such Structured Purchaser has funded such portion through the issuance
of commercial paper notes on the immediately preceding Business Day,
-9-
<PAGE> 13
PB x CPR x ED + LF
--
360
and
(ii) for each remaining portion of the Class A
Investor Principal Balance,
PB x AR x ED + LF
--
TD
where:
PB = the relevant portion of the Class A
Investor Principal Balance
CPR = the Commercial Paper Rate then
applicable to the relevant portion
of the Class A Investor Principal
Balance
AR = the Alternate Rate then applicable
to the relevant portion of the
Class A Investor Principal Balance
ED = the number of days elapsed since the
immediately preceding Business Day
TD = 360 if AR is the Adjusted Eurodollar
Rate, or 365 or 366, as applicable,
if AR is the Agent Base Rate
LF = the Liquidation Fee, if any, for
such Business Day.
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS
2.1 PURCHASES. (a) On and subject to the terms and conditions
of this Agreement, each Noncommitted Class A Purchaser which is a party hereto
on the Closing Date, severally, agrees to acquire its Noncommitted Purchaser
Percentage of the Class A Certificates on the Closing Date for a purchase price
equal to its Noncommitted Purchaser Percentage of the Initial Class A Invested
Amount, which shall not be less than $500,000, and each Committed Class A
Purchaser which is a party hereto on the Closing Date, severally, agrees to
acquire its Commitment Percentage of the Class A Certificates not so acquired by
Noncommitted Class A Purchasers on the Closing Date for a purchase price equal
to the portion of the Initial Class A Invested Amount represented thereby on the
Closing Date. Such purchase price shall be made available to the Transferor,
subject to the satisfaction of the conditions specified in Section 3 hereof, at
or prior to 1:00 p.m. New York City time on the Closing Date, at an account of
the Transferor specified in writing by the Transferor to the Agent in funds
immediately available to the Transferor. The Class A Purchasers hereby direct
that the Class A Certificates be registered in the name of the Agent, on behalf
of the Class A Owners from time to time hereunder.
(b) On and subject to the terms and conditions of this
Agreement and prior to the Termination Date, (i) each Noncommitted Class A
Purchaser may purchase its Noncommitted Purchaser Percentage of any VFC
Additional Class A Invested Amount offered for purchase by the
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<PAGE> 14
Transferor pursuant to Section 6.15 of the Pooling and Servicing Agreement in an
amount of not less than $500,000, and (ii) each Committed Class A Purchaser,
severally, agrees to purchase a portion of such VFC Additional Class A Invested
Amount which is not purchased by Noncommitted Class A Purchasers pursuant to
clause (i) in an amount equal to the lesser of (A) its Commitment Percentage
thereof, or (B) the excess of its Commitment over its Percentage Interest of the
Class A Investor Principal Balance (determined prior to giving effect to such
purchase), in either case for a purchase price equal to the VFC Additional Class
A Invested Amount so purchased. Such purchase price shall be made available to
the Trustee in immediately available funds, for the account of the Transferor,
subject to the satisfaction of the conditions specified in Section 3 hereof, at
or prior to 1:00 p.m. New York City time on the applicable Purchase Date
specified pursuant to subsection 2.1(c), for deposit in the Proceeds Account
held by the Trustee pursuant to the Supplement. Each Noncommited Class A
Purchaser which is a Structured Purchaser confirms by becoming a party to this
Agreement that, subject to the terms and conditions of this Agreement, it
currently intends to purchase its Noncommitted Purchaser Percentage of any VFC
Additional Class A Invested Amount offered for purchase by the Transferor
pursuant to Section 6.15 of the Pooling and Servicing Agreement to the extent
that, at the time of such purchase, it is permitted and able in the ordinary
course of its business to issue commercial paper which is rated not lower than
the respective ratings assigned by Moody's and Standard & Poor's on the date on
which such Structured Purchaser became a Class A Purchaser (without increasing
or otherwise modifying any letter of credit or other enhancement provided to
such Structured Purchaser or any liquidity support provided to such Structured
Purchaser by Affected Parties) in sufficient amounts fully to fund such
purchase.
(c) The purchase of the Initial Class A Invested Amount shall
be made on prior notice from the Transferor to the Agent received by the Agent
not later than 9:30 a.m. New York City time on the Closing Date, and each
purchase of any VFC Additional Class A Invested Amount on the applicable
Purchase Date shall be made on prior notice from the Transferor to the Agent
received by the Agent not later than 4:00 p.m. New York City time on the
Business Day immediately preceding such Purchase Date. Each such notice shall be
irrevocable and shall specify (i) the aggregate VFC Additional Class A Invested
Amount to be purchased, (ii) the applicable Purchase Date (which shall be a
Business Day), and (iii) the desired duration of the initial Fixed Period for
the Class A Investor Principal Balance of each applicable Purchaser. The Agent
shall promptly forward a copy of such notice to each Class A Purchaser. In the
case of the purchase of a VFC Additional Class A Invested Amount, each
Noncommitted Class A Purchaser shall notify the Agent by 10:45 a.m., New York
City time, on the applicable Purchase Date whether it has determined to make
such purchase and, if so, whether all of the terms specified by the Transferor
are acceptable to such Noncommitted Class A Purchaser. In the event that a
Noncommitted Class A Purchaser shall not have timely provided such notice, it
shall be deemed to have determined not to make such purchase. The Agent shall
notify the Transferor and each Committed Class A Purchaser on or prior to 11:00
a.m., New York City time, on the applicable Purchase Date of whether each
Noncommitted Class A Purchaser has so determined to purchase its share of such
VFC Additional Class A Invested Amount and, in the event that Noncommitted Class
A Purchasers have not determined to purchase the entire VFC Additional Class A
Invested Amount, the Agent shall specify in such notice (i) the portion of the
VFC Additional Class A Invested Amount to be purchased by each Committed Class A
Purchaser, (ii) the applicable Purchase Date (which shall be a Business Day),
and (iii) the duration of the initial Fixed Period for the Class A Investor
Principal Balance of each Committed Class A Purchaser.
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<PAGE> 15
(d) In no event may the Transferor offer any VFC Additional
Class A Invested Amount for purchase hereunder or under Section 6.15 of the
Pooling and Servicing Agreement, nor shall any Committed Class A Purchaser be
obligated to purchase any VFC Additional Class A Invested Amount, to the extent
that such VFC Additional Class A Invested Amount, when aggregated with the Class
A Investor Principal Balance determined prior to giving effect to the issuance
thereof, would exceed the aggregate Commitments.
(e) In the event that one or more Committed Class A Purchasers
(the "DEFAULTING PURCHASERS") fails to fund its Committed Percentage of any
purchase of a VFC Additional Class A Invested Amount by 1:00 p.m., New York City
time, on the applicable Purchase Date and the Servicer shall have notified the
Agent of such failure by not later than 1:30 p.m., New York City time, on such
Purchase Date, the Agent shall so notify each of the other Committed Class A
Purchasers (the "NONDEFAULTING PURCHASERS") not later than 2:30 p.m., New York
City time, on such Purchase Date, and each Nondefaulting Purchaser shall,
subject to the satisfaction of the conditions specified in Section 3 hereof,
purchase a portion of the aggregate VFC Additional Class A Invested Amount which
was to be purchased by the Defaulting Purchasers equal to the lesser of (i) its
Commitment Percentage thereof as a percentage of the aggregate Commitment
Percentages of all Nondefaulting Purchasers, and (ii) the excess of its
Commitment over its Percentage Interest of the Class A Investor Principal
Balance (determined prior to giving effect to such purchase), in either case for
a purchase price equal to the VFC Additional Class A Invested Amount so
purchased, by making such purchase price available to the Trustee for the
account of the Transferor at or prior to 5:00 p.m. New York City time, on such
Purchase Date for deposit in the Proceeds Account in immediately available
funds. No such purchase by Nondefaulting Purchasers shall relieve any Defaulting
Purchaser of its obligations to make purchases hereunder, and each Defaulting
Purchaser shall from and after the applicable Purchase Date be obligated to
purchase the portion of any VFC Additional Class A Invested Amount which such
Defaulting Purchaser was required to purchase hereunder and which was purchased
by a Nondefaulting Purchaser from such Nondefaulting Purchaser at a purchase
price equal to (i) the portion of the Class A Investor Principal Balance
represented thereby, plus (ii) accrued and unpaid interest thereon at the
applicable Class A Certificate Rate, plus (iii) an amount calculated at the rate
of 1.0% per annum from the applicable Purchase Date for such VFC Additional
Class A Invested Amount through the date of such purchase by the Defaulting
Purchaser. The Transferor shall have the right to replace any Defaulting
Purchaser hereunder with a Replacement Purchaser, and the Agent, acting at the
request of the Required Class A Purchasers, shall have the right to replace such
Defaulting Purchaser with a Replacement Purchaser which is an Eligible Assignee
or is otherwise reasonably acceptable to the Transferor; PROVIDED, that (x) such
replacement shall not affect the Defaulting Purchaser's right to receive any
amounts otherwise owed to it hereunder, when and as the same would have been due
and payable without regard to such replacement (subject to the rights of the
other parties hereto with respect to such Defaulting Purchaser), and (y) such
Replacement Purchaser shall, concurrently with its becoming a Committed Class A
Purchaser hereunder, purchase the portion of any VFC Additional Class A Invested
Amount at the time required to be purchased by the Defaulting Purchaser pursuant
to the preceding sentence for a purchase price equal to (i) the portion of the
Class A Investor Principal Balance represented thereby, plus (ii) accrued and
unpaid interest thereon at the applicable Class A Certificate Rate; PROVIDED
FURTHER, that upon any such replacement and purchase by a Replacement Purchaser,
any amounts owing to Nondefaulting Purchasers by such Defaulting
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<PAGE> 16
Purchaser under clause (iii) of the preceding sentence shall remain an
obligation of such Defaulting Purchaser.
(f) The Class A Certificates shall be paid as provided in the
Pooling and Servicing Agreement. The Agent shall allocate each payment in
reduction of the Class A Investor Principal Balance to the Class A Owners PRO
RATA based on their respective Percentage Interests, and shall allocate each
payment of Class A Interest for any Business Day to the Class A Owners PRO RATA
based on the Yield on such Class A Owner's portion of the Class A Investor
Principal Balance for such Business Day. Amounts so allocated by the Agent shall
be distributed by the Agent to the respective Class A Owners when and as
received by the Agent from the Trust.
2.2 REDUCTIONS AND INCREASES OF COMMITMENTS. (a) At any time
the Transferor may, upon at least five Business Days' prior written notice to
the Agent, terminate in whole or reduce in part the portion of the Commitments
which exceed the then outstanding Class A Investor Principal Balance (after
adjustments thereto occurring on the date of such termination or reduction).
Each such partial reduction shall be in an aggregate amount of $10,000,000 or
integral multiples thereof. On the Termination Date, the aggregate Commitments
shall automatically reduce to an amount equal to the Class A Investor Principal
Balance on such day, and on each Business Day thereafter shall be further
reduced by an amount equal to the reduction in the Class A Investor Principal
Balance (if any) on such day. Reductions of the aggregate Commitments pursuant
to this subsection 2.2(a) shall be allocated to the PRO RATA to the Commitments
of each Committed Class A Purchaser based on its respective Commitment
Percentage.
(b) The Transferor may, upon at least two Business Days' prior
written notice to the Agent, terminate in whole or reduce in part the Commitment
of any Defaulting Purchaser or Downgraded Purchaser to an amount not less than
such Class A Purchaser's Percentage Interest of the Class A Investor Principal
Balance. Each such partial reduction shall be in an aggregate amount of
1,000,000 or integral multiples thereof. No such termination of reduction shall
relieve such Defaulting Purchaser of its obligations to Nondefaulting Purchasers
pursuant to subsection 2.1(e) hereof.
(c) The aggregate Commitments of the Committed Class A
Purchasers may be increased from time to time through the increase of the
Commitment of one or more Committed Class A Purchasers; PROVIDED, HOWEVER, that
no such increase shall have become effective unless (i) the Agent and the
Transferor shall have given their written consent thereto, (ii) such increasing
Committed Class A Purchaser shall have entered into an appropriate amendment or
supplement to this Agreement reflecting such increased Commitment and (iii) such
conditions, if any, as the Agent shall have required in connection with its
consent (including, without limitation, the delivery of legal opinions with
respect to such Committed Class A Purchaser, the agreement of such Committed
Class A Purchaser to become a Support Bank for one or more Structured Purchasers
having a support commitment corresponding to its Commitment hereunder and
approvals from the Rating Agency) shall have been satisfied. The Transferor may
also increase the aggregate Commitments of the Committed Class A Purchasers from
time to time by adding additional Committed Class A Purchasers in accordance
with subsection 2.2(d).
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(d) Subject to the provisions of subsections 8.1(a) and 8.1(b)
applicable to initial purchasers of Class A Certificates, a Person having
short-term credit ratings of not lower than P-1 from Moody's and A-1 from
Standard & Poor's may from time to time with the consent of the Agent and the
Transferor become a party to this Agreement as an initial or an additional
Noncommitted Class A Purchaser or an initial or an additional Committed Class A
Purchaser by (i) delivering to the Transferor an Investment Letter and (ii)
entering into an agreement substantially in the form attached hereto as EXHIBIT
B hereto (a "JOINDER SUPPLEMENT"), with the Agent and the Transferor,
acknowledged by the Servicer, which shall specify (A) the name and address of
such Person for purposes of Section 9.2 hereof, (B) whether such Person will be
a Noncommitted Class A Purchaser or Committed Class A Purchaser and, if such
Person will be a Committed Class A Purchaser, its Commitment, and (C) the other
information provided for in such form of Joinder Supplement. Upon its receipt of
a duly executed Joinder Supplement, the Agent shall on the effective date
determined pursuant thereto give notice of such effectiveness to the Transferor,
the Servicer and the Trustee, and the Servicer will provide notice thereof to
each Rating Agency (if required). If, at the time the effectiveness of the
Joinder Supplement for an additional Committed Class A Purchaser, the other
Committed Class A Purchasers are Class A Owners, it shall be a condition to such
effectiveness that such additional Committed Class A Purchaser purchase from
each other Class A Purchaser an interest in the Class A Certificates in an
amount equal to (i) such other Class A Purchaser's Percentage Interest of the
Class A Investor Principal Balance, times (ii) a fraction, the numerator of
which equals the Commitment of such additional Class A Purchaser, and the
denominator of which equals the aggregate Commitments of the Class A Purchasers
(determined after giving effect to the additional Commitment of the additional
Class A Purchaser as set forth in such Joinder Supplement), for a purchase price
equal to the portion of the Class A Investor Principal Balance purchased.
2.3 FEES, EXPENSES, PAYMENTS, ETC. (a) Subject to the
provisions of subsection 9.12(a) hereof, the Transferor agrees to pay to the
Agent for the account of the Class A Purchasers the fees set forth in the Class
A Fee Letter at the times specified therein.
(b) Subject to the provisions of subsection 9.12(a) hereof in
the case of the Transferor, the Transferor and FDSNB, jointly and severally,
shall be obligated to pay on demand to (i) the Agent and the initial Class A
Purchasers all reasonable costs and expenses in connection with the preparation,
execution, delivery and administration (including any requested amendments,
waivers or consents of any of the Related Documents) of this Agreement, and the
other documents to be delivered hereunder or in connection herewith, including,
without limitation, the reasonable fees and out-of-pocket expenses of counsel
for the Agent and each of the initial Class A Purchasers with respect thereto
and (ii) the Agent and each Class A Purchaser, all reasonable costs and
expenses, if any, in connection with the enforcement of any of the Related
Documents, and the other documents delivered thereunder or in connection
therewith.
(c) Subject to the provisions of subsection 9.12(a) hereof in
the case of the Transferor, the Transferor and FDSNB, jointly and severally,
shall be obligated to pay on demand any and all stamp and other taxes (other
than Taxes covered by Section 2.5) and fees payable in connection with the
execution, delivery, filing and recording of this Agreement, the Class A
Certificates, any of the other Related Documents or the other documents and
agreements to be delivered hereunder and thereunder, and agree to save each
Class A Purchaser and the Agent
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<PAGE> 18
harmless from and against any liabilities with respect to or resulting from any
delay by the Transferor or FDSNB in paying or omission to pay such taxes and
fees.
(d) Yield calculated by reference to the Adjusted Eurodollar
Rate shall be calculated on the basis of a 360-day year for the actual days
elapsed. Any Yield or interest accruing at the Agent Base Rate shall be
calculated on the basis of a 365- or 366-day year, as applicable, for the actual
days elapsed. Fees or other periodic amounts payable hereunder shall be
calculated, unless otherwise specified in the Class A Fee Letter, on the basis
of a 360-day year and for the actual days elapsed.
(e) Each determination of Yield by the Agent pursuant to any
provision of this Agreement shall be conclusive and binding on the Class A
Purchasers, the Transferor, the Servicer and the Trustee in the absence of
manifest error.
(f) All payments to be made hereunder, whether on account of
principal, interest, fees or otherwise, shall be made without setoff or
counterclaim and shall be made prior to 2:30 p.m., New York City time, on the
due date thereof to the Agent's account specified in subsection 9.2(b) hereof,
in United States dollars and in immediately available funds. Notwithstanding
anything herein to the contrary, if any payment due hereunder becomes due and
payable on a day other than a Business Day, the payment date thereof shall be
extended to the next succeeding Business Day and interest shall accrue thereon
at the applicable rate during such extension. To the extent that (i) the
Trustee, FDSNB, the Transferor or the Servicer makes a payment to the Agent or a
Class A Purchaser or (ii) the Agent or a Class A Purchaser receives or is deemed
to have received any payment or proceeds for application to an obligation, which
payment or proceeds or any part thereof are subsequently invalidated, declared
to be fraudulent or preferential, set aside or required to be repaid to a
trustee, receiver or any other party under any bankruptcy or insolvency law,
state or Federal law, common law, or for equitable cause, then, to the extent
such payment or proceeds are set aside, the obligation or part thereof intended
to be satisfied shall be revived and continue in full force and effect, as if
such payment or proceeds had not been received or deemed received by the Agent
or the Class A Purchaser, as the case may be.
2.4 REQUIREMENTS OF LAW. (a) In the event that any Class A
Purchaser shall have reasonably determined that any Regulatory Change shall:
(i) subject such Class A Purchaser to any tax of any
kind whatsoever with respect to this Agreement, its Commitment or its
beneficial interest in the Class A Certificates, or change the basis of
taxation of payments in respect thereof (except for Taxes covered by
Section 2.5 and taxes included in the definition of Excluded Taxes in
subsection 2.5(a) and changes in the rate of tax on the overall net
income of such Class A Purchaser); or
(ii) impose, modify or hold applicable any reserve,
special deposit, compulsory loan or similar requirement against assets
held by, deposits or other liabilities in or for the account of,
advances, loans or other extensions of credit by, or any other
acquisition of funds by, such Class A Purchaser;
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<PAGE> 19
and the result of any of the foregoing is to increase the cost to such Class A
Purchaser, by an amount which such Class A Purchaser, in its reasonable
judgment, deems to be material, of maintaining its Commitment or its beneficial
interest in the Class A Certificates or to reduce any amount receivable in
respect thereof, THEN, in any such case, after submission by such Class A
Purchaser to the Agent of a written request therefor and the submission by the
Agent to the Transferor, the Trustee and the Servicer of such written request
therefor, (subject to subsection 9.12(a) hereof) the Transferor shall pay to the
Agent for the account of such Class A Purchaser any additional amounts necessary
to compensate such Class A Purchaser for such increased cost or reduced amount
receivable, together with interest on each such amount from the day which is ten
Business Days after the date such request for compensation under this subsection
2.4(a) is received by the Transferor until payment in full thereof (after as
well as before judgment) at the Agent Base Rate in effect from time to time.
(b) In the event that any Class A Purchaser shall have
reasonably determined that any Regulatory Change regarding capital adequacy has
the effect of reducing the rate of return on such Class A Purchaser's capital or
on the capital of any corporation controlling such Class A Purchaser as a
consequence of its obligations hereunder or its maintenance of its Commitment or
its beneficial interest in the Class A Certificates to a level below that which
such Class A Purchaser or such corporation could have achieved but for such
Regulatory Change (taking into consideration such Class A Purchaser's or such
corporation's policies with respect to capital adequacy) by an amount reasonably
deemed by such Class A Purchaser to be material, THEN, from time to time, after
submission by such Class A Purchaser to the Agent of a written request therefor
and submission by the Agent to the Transferor and the Servicer of such written
request therefor, (subject to subsection 9.12(a) hereof) the Transferor shall
pay to the Agent for the account of such Class A Purchaser such additional
amount or amounts as will compensate such Class A Purchaser for such reduction,
together with interest on each such amount from the day which is ten Business
Days after the date such request for compensation under this subsection 2.4(b)
is received by the Transferor until payment in full thereof (after as well as
before judgment) at the Agent Base Rate in effect from time to time.
(c) Each Class A Purchaser agrees that it shall use its
reasonable efforts to reduce or eliminate any claim for compensation pursuant to
subsections 2.4(a) and 2.4(b), including but not limited to designating a
different Investing Office for its Class A Certificates (or any interest
therein) if such designation will avoid the need for, or reduce the amount of,
any increased amounts referred to in subsection 2.4(a) or 2.4(b) and will not,
in the reasonable opinion of such Class A Purchaser, be disadvantageous to such
Class A Purchaser or inconsistent with its policies or result in an unreimbursed
cost or expense to such Class A Purchaser or in an increase in the aggregate
amount payable under both subsections 2.4(a) and 2.4(b). If any increased
amounts referred to in subsection 2.4(a) or 2.4(b) shall not be eliminated or
reduced by the designation of a different Investing Office and payment thereof
hereunder shall not be waived by such Class A Purchaser, the Transferor shall
have the right to replace such Class A Purchaser hereunder with a new purchaser
reasonably acceptable to the Agent ("REPLACEMENT PURCHASER") that shall succeed
to the rights of such Class A Purchaser under this Agreement and such Class A
Purchaser shall assign its beneficial interest in the Class A Certificates to
such Replacement Purchaser in accordance with the provisions of Section 8.1,
PROVIDED, that (i) such Class A Purchaser shall not be replaced hereunder with a
new investor until such Class A Purchaser has been paid in full its Percentage
Interest of the Class A Investor Principal Balance and all accrued and unpaid
Yield (including any Liquidation Fee determined for
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<PAGE> 20
the replacement date) thereon by such new investor and all other amounts
(including all amounts owing under this Section 2.4) owed to it pursuant to this
Agreement and (ii) if the Class A Purchaser to be replaced is the Agent or the
Administrative Agent or, unless the Agent and the Administrative Agent otherwise
agree, a Structured Purchaser sponsored or administered by the Administrative
Agent or the Agent (in its individual capacity), a replacement Agent or
Administrative Agent, as the case may be, shall have been appointed in
accordance with Section 7.9 and the Agent or Administrative Agent, as the case
may be, to be replaced shall have been paid all amounts owing to it as Agent or
Administrative Agent, as the case may be, pursuant to this Agreement; PROVIDED,
FURTHER, that the Transferor shall provide such Class A Purchaser with an
Officer's Certificate stating that such new investor is not subject to, or has
agreed not to seek, such increased amount.
(d) Each Class A Purchaser claiming increased amounts
described in subsection 2.4(a) or 2.4(b) will furnish to the Agent (together
with its request for compensation) a certificate setting forth any actions taken
by such Class A Purchaser to reduce or eliminate such increased amounts pursuant
to subsection 2.4(c) and the basis and the calculation of the amount (in
reasonable detail) of each request by such Class A Purchaser for any such
increased amounts referred to in subsection 2.4(a) or 2.4(b), such certificate
to be conclusive as to the factual information set forth therein absent manifest
error.
2.5 TAXES. (a) All payments made to the Class A Purchasers or
the Agent under this Agreement and the Pooling and Servicing Agreement
(including all amounts payable with respect to the Class A Certificates) shall,
to the extent allowed by law, be made free and clear of, and without deduction
or withholding for or on account of, any present or future income, stamp or
other taxes, levies, imposts, duties, charges, fees, deductions or withholdings,
now or hereafter imposed, levied, collected, withheld or assessed by any
Governmental Authority (collectively, "TAXES"), excluding (i) income taxes
(including, without limitation, branch profit taxes, minimum taxes and taxes
computed under alternative methods, at least one of which is based on or
measured by net income), franchise taxes (imposed in lieu of income taxes), or
any other taxes based on or measured by the net income of the Class A Purchaser
or the gross receipts or income of the Class A Purchaser; (ii) any Taxes that
would not have been imposed but for the failure of such Class A Purchaser or the
Agent, as applicable, to provide and keep current (to the extent legally able)
any certification or other documentation required to qualify for an exemption
from, or reduced rate of, any such Taxes or required by this Agreement to be
furnished by such Class A Purchaser or the Agent, as applicable; (iii) any Taxes
imposed as a result of a change by any Class A Purchaser of the Investing Office
(other than changes mandated by this Agreement, including subsection 2.4(c)
hereof, or required by law); and (iv) any Taxes imposed as a result of the
Transfer by any Class A Purchaser of its interest hereunder other than in
accordance with Section 8.1 (all such excluded taxes being hereinafter called
"EXCLUDED TAXES"). If any Taxes, other than Excluded Taxes, are required to be
withheld from any amounts payable to a Class A Purchaser or the Agent hereunder
or under the Pooling and Servicing Agreement, THEN after submission by any Class
A Purchaser to the Agent (in the case of an amount payable to a Class A
Purchaser) and by the Agent to the Transferor and the Servicer of a written
request therefor, the amounts so payable to such Class A Purchaser or the Agent,
as applicable, shall be increased and the Transferor shall be liable to pay to
the Agent for the account of such Class A Purchaser or for its own account, as
applicable, the amount of such increase) to the extent necessary to yield to
such Class A Purchaser or the Agent, as applicable (after payment of all such
Taxes) interest or any such other amounts payable hereunder or thereunder at the
rates or in the amounts
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specified in this Agreement and the Pooling and Servicing Agreement; PROVIDED,
HOWEVER, that the amounts so payable to such Class A Purchaser or the Agent
shall not be increased pursuant to this subsection 2.5(a) if such requirement to
withhold results from the failure of such Person to comply with subsection
2.5(c) hereof. Whenever any Taxes are payable on or with respect to amounts
distributed to a Class A Purchaser or the Agent, as promptly as possible
thereafter the Servicer shall send to the Agent, on behalf of such Class A
Purchaser (if applicable), a certified copy of an original official receipt
showing payment thereof. If the Trustee, upon the direction of the Servicer,
fails to pay any Taxes when due to the appropriate taxing authority or fails to
remit to the Agent, on behalf of such Class A Purchaser (if applicable), the
required receipts or other required documentary evidence, subject to subsection
9.12(a), the Transferor shall pay to the Agent on behalf of such Class A
Purchaser or for its own account, as applicable, any incremental taxes, interest
or penalties that may become payable by such Class A Purchaser or the Agent, as
applicable, as a result of any such failure. If any increased amounts payable
under this subsection 2.5(a) shall not be waived by the applicable Class A
Purchaser, the Transferor shall have the right to replace the Class A Purchaser
hereunder with a Replacement Purchaser that will succeed to the rights of such
Class A Purchaser under this Agreement; PROVIDED, that (i) such Class A
Purchaser shall not be replaced hereunder with a new investor until such Class A
Purchaser has been paid in full its Percentage Interest of the Class A Investor
Principal Balance and all accrued and unpaid Yield (including any Liquidation
Fee determined for the replacement date) thereon and all other amounts
(including all amounts owing under this Section 2.5) owed to it pursuant to this
Agreement and (ii) if the Class A Purchaser to be replaced is the Agent or
Administrative Agent, or, unless the Agent and the Administrative Agent
otherwise agree, a Structured Purchaser sponsored or administered by the
Administrative Agent or the Agent (in its individual capacity), a replacement
Agent or Administrative Agent, as the case may be, shall have been appointed in
accordance with Section 7.9 and the Agent or Administrative Agent, as the case
may be, to be replaced shall have been paid all amounts owing to it as Agent or
Administrative Agent, as the case may be, pursuant to this Agreement; PROVIDED,
FURTHER, that the Transferor shall provide such Class A Purchaser with an
Officer's Certificate stating that such new investor is not subject to such
Taxes or that such new investor is subject to a lesser amount of Taxes than the
Class A Purchaser.
(b) A Class A Purchaser claiming increased amounts under
subsection 2.5(a) for Taxes paid or payable by such Class A Purchaser (or the
Agent for its own account) will furnish to the Agent who will furnish to the
Transferor and the Servicer a certificate, setting forth the basis and amount of
each request by such Class A Purchaser for such Taxes, such certificate to be
conclusive as to the factual information set forth therein absent manifest
error. All such amounts shall be due and payable to the Agent on behalf of such
Class A Purchaser or for its own account, as the case may be, on the succeeding
Distribution Date following receipt by the Transferor of such certificate at
least 10 days prior to such Distribution Date, in each case if then incurred by
such Class A Purchaser and otherwise shall be due and payable on the following
Distribution Date (or, if earlier, on the Series 1997-1 Termination Date).
(c) Each Class A Purchaser and each Participant holding an
interest in Class A Certificates agrees that prior to the date on which the
first interest payment hereunder is due thereto, it will deliver to the Servicer
and the Trustee (i) if such Class A Purchaser or Participant is not incorporated
under the laws of the United States or any State thereof, two duly completed
copies of the U.S. Internal Revenue Service Form 4224 or successor applicable
forms required to evidence that
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<PAGE> 22
the Class A Purchaser's or Participant's income from this Agreement or the Class
A Certificates is "effectively connected" with the conduct of a trade or
business in the United States as the case may be and (ii) a U.S. Internal
Revenue Service Form W-8 or W-9 or successor applicable or required forms. Each
Class A Purchaser or Participant holding an interest in Class A Certificates
also agrees to deliver to the Servicer and the Trustee two further copies of
said Form 4224 and Form W-8 or W-9, or such successor applicable forms or other
manner of certification, as the case may be, on or before the date that any such
form expires or becomes obsolete or after the occurrence of any event requiring
a change in the most recent form previously delivered by it to the Servicer and
the Trustee, and such extensions or renewals thereof as may reasonably be
requested by the Servicer, unless in any such case, solely as a result of a
change in treaty, law or regulation occurring prior to the date on which any
such delivery would otherwise be required, and assuming that Section 1446 of the
Code does not apply, the Class A Purchaser is no longer eligible to deliver the
then-applicable form set forth above. Each Class A Purchaser certifies,
represents and warrants and each Participant acquiring an interest in a Class A
Certificate or Class A Purchaser which is an Assignee shall certify, represent
and warrant as a condition of acquiring its Participation or beneficial interest
in the Class A Certificates (x) that its income from this Agreement or the Class
A Certificates is effectively connected with a United States trade or business
and (y) that it is entitled to an exemption from United States backup
withholding tax. Further, each Class A Purchaser covenants and each Participant
acquiring an interest in a Class A Certificate that for so long as it shall hold
such Participation or Class A Certificates it shall be held in such manner that
the income therefrom shall be effectively connected with the conduct of a United
States trade or business. The Servicer and the Trustee shall be entitled to
withhold or cause such withholding, and additional amounts in respect of Taxes
need not be paid to a Class A Purchaser or Participant in the event of a breach
of the certifications, representations, warranties or covenants set forth in
this subsection 2.5(c) by such Class A Purchaser or Participant.
(d) In the event that any Class A Purchaser or Participant
holding an interest in Class A Certificates shall breach the certifications,
representations, warranties or covenants set forth in this Section 2.5, the
Transferor shall have the right to replace such Class A Purchaser or such
Participant's lead Class A Purchaser hereunder with a Replacement Purchaser that
shall succeed to the rights of such Class A Purchaser under this Agreement and,
subject to compliance with the provisos to the last sentence of subsection
2.5(a), such Class A Purchaser shall assign its interest in this Agent and any
Class A Certificates owned by it to such Replacement Purchaser in accordance
with the provisions of Section 8.1.
2.6 NON-RECOURSE. (a) Except to the extent provided in this
Section 2.6, the obligation to repay the Class A Repayment Amount shall be
without recourse to the Transferor, the Servicer (or any Person acting on behalf
of any of them), the Holder of the Exchangeable Transferor Certificate, the
Trust (except to the extent specifically provided for herein or in the Pooling
and Servicing Agreement), the Trustee, the Certificateholders or any Affiliate
of any of them, and shall be limited solely to amounts payable to the Series
1997-1 Certificateholders under the Pooling and Servicing Agreement. To the
extent that such amounts are insufficient to pay the Class A Repayment Amount,
the obligation to pay the Class A Repayment Amount shall not constitute a claim
against the Transferor, the Servicer (or any Person acting on behalf of any of
them), the Holder of the Exchangeable Transferor Certificate, the Trust (except
to the extent specifically provided for herein or in the Pooling and Servicing
Agreement), the Trustee, the Certificateholders or any Affili-
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ate of any of them. Notwithstanding anything to the contrary contained herein,
if the Transferor or the Servicer shall fail to make any payment, deposit or
transfer relating to the Series 1997-1 Certificates required to be made
pursuant to the Pooling and Servicing Agreement and, as a result of such
failure, the amount available to be applied to the Class A Certificates
pursuant to the Pooling and Servicing Agreement is reduced to an amount which
is less than the amount which otherwise would have been available had such
payment, deposit or transfer been made (the amount of any such reduction
hereinafter referred to as a "REDUCTION AMOUNT"), the Transferor or the
Servicer, as the case may be, shall repay the Class A Investor Principal
Balance, together with interest due thereon in accordance with the Pooling and
Servicing Agreement, to the extent of (i) such Reduction Amount and (ii)
interest on the portion of the Class A Investor Charge-Offs, if any, which
results from the existence of any Reduction Amount at the Agent Base Rate plus
2.00% per annum.
(b) Subject to and without limiting the foregoing provisions
of this Section 2.6, the obligations of the Transferor and the Servicer under
this Agreement shall be absolute, unconditional and irrevocable and shall be
performed strictly in accordance with the terms of this Agreement, irrespective
of any of the following circumstances:
(i) any lack of validity or enforceability of this
Agreement, the Pooling and Servicing Agreement, the Series 1997-1
Certificates or the Supplement;
(ii) any amendment to or waiver of, or consent to or
departure from, this Agreement, the Series 1997-1 Certificates, the
Pooling and Servicing Agreement or the Supplement, unless agreed to by
the Required Class A Owners and the Required Class A Purchasers or all
the Class A Owners and the Required Class A Purchasers if required
hereunder;
(iii) the existence of any claim, setoff, defense or
other right which the Transferor, the Servicer or the Trustee may have
at any time against each other, the Agent, the Administrative Agent or
any Class A Purchaser, as the case may be, or any other Person, whether
in connection with this Agreement, the Class A Certificates, the
Pooling and Servicing Agreement or any unrelated transactions;
(iv) the bankruptcy or insolvency of the Trust or
with respect to any party jointly and severally liable with another
party hereto, of such other party; or
(v) any other circumstances or happening whatsoever,
whether or not similar to any of the foregoing; PROVIDED, that, with
respect to obligations owing to any Class A Purchaser, the same shall
not have constituted gross negligence or willful misconduct of such
Class A Purchaser.
2.7 INDEMNIFICATION. (a) Subject to subsection 9.12(a) hereof
in the case of the Transferor, the Transferor and FDSNB, jointly and severally,
agree to indemnify and hold harmless the Agent, the Administrative Agent and
each Class A Purchaser and any directors, officers, employees, attorneys,
auditors or accountants of such Agent, the Administrative Agent or Class A
Purchaser (each such person being referred to as an "INDEMNITEE") from and
against any and all claims, damages, losses, liabilities, costs or expenses
whatsoever which such Indemnitee may incur (or which may
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<PAGE> 24
be claimed against such Indemnitee) by reason of or in connection with the
execution and delivery of, or payment under, this Agreement, the Pooling and
Servicing Agreement, the Series 1997-1 Certificates, except (i) to the extent
that any such claim, damage, loss, liability, cost or expense shall be caused by
the willful misconduct or gross negligence of such Indemnitee, (ii) to the
extent that any such claim, damage, loss, liability, cost or expense relates to
any Excluded Taxes, (iii) to the extent that any such claim, damage, loss,
liability, cost or expense relates to disclosure made by the Agent or a Class A
Purchaser in connection with an Assignment or Participation pursuant to Section
8.1 of this Agreement which disclosure is not based on information given to the
Agent by or on behalf of the Transferor, the Servicer or the Trustee or (iv) to
the extent that such claim, damage, loss, liability, cost or expense shall be
caused by a charge off of Receivables. The foregoing indemnity shall include any
claims, damages, losses, liabilities, costs or expenses to which any such
Indemnitee may become subject under the Securities Act of 1933, as amended (the
"ACT"), the Securities Exchange Act of 1934, as amended, the Investment Company
Act of 1940, as amended, or other federal or state law or regulation arising out
of or based upon any untrue statement or alleged untrue statement of a material
fact in any disclosure document relating to the Class A Certificates or the
Class B Certificates, or any amendments thereof or supplements thereto or
arising out of, or based upon, the omission or the alleged omission to state a
material fact necessary to make the statements therein or any amendment thereof
or supplement thereto, in light of the circumstances in which they were made,
not misleading.
(b) Promptly after the receipt by an Indemnitee of a notice of
the commencement of any action against an Indemnitee, such Indemnitee will
notify the Agent and the Agent will, if a claim in respect thereof is to be made
against the Transferor pursuant to subsection 2.7(a) (the "INDEMNIFYING PARTY"),
notify the Indemnifying Party in writing of the commencement thereof; but the
omission so to notify such party will not relieve such party from any liability
which it may have to such Indemnitee pursuant to subsection 2.7(a). Upon receipt
of such notice, the Indemnifying Party shall assume the defense of such action
or proceeding, including the employment of counsel satisfactory to the
Indemnitee in its reasonable judgment and the payment of all related expenses.
Each Indemnitee shall have the right to employ separate counsel in any such
action or proceeding and to participate in (but not control) the defense
thereof, but the fees and expenses of such counsel shall be at its own expense
unless (a) the Indemnifying Party shall have failed to assume or continue to
defend such action or proceeding, (b) the named parties to any such action or
proceeding (including any impleaded parties) include both such Indemnitee and
either the Transferor or another person or entity that may be entitled to
indemnification from the Transferor (by virtue of this Agreement or otherwise)
and such Indemnitee shall have been advised by counsel that there may be one or
more legal defenses available to such Indemnitee which are different from or
additional to those available to the Transferor or such other party or shall
otherwise have reasonably determined that the co-representation would present
such counsel with a conflict of interest, or (c) the Indemnifying Party and the
Indemnitee shall have mutually agreed to the retention of separate counsel.
Anything contained in this Agreement to the contrary notwithstanding, the
Transferor shall not be entitled to assume the defense of any part of a Third
Party Claim that specifically seeks an order, injunction or other equitable
relief or relief for other than money damages against the Indemnitee.
2.8 TERMINATION EVENTS. In the event that any one or more of
the following (each, a "TERMINATION EVENT") shall have occurred:
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<PAGE> 25
(a) the failure of the Transferor, the Servicer or
the Trustee to make a deposit, payment or withdrawal required hereunder
or under any Related Document (determined without regard to the failure
of the Servicer to deliver any statement or certificate required
hereunder or under the Supplement in order for such deposit, payment or
withdrawal to be made) when and as required and such failure continues
for five Business Days; PROVIDED that the failure of the Transferor to
make additional payments pursuant to subsection 2.4(a) or 2.4(b) or
Section 2.5 hereof shall not constitute a Termination Event unless such
failure continues after the last Business Day of the Monthly Period
which follows the Monthly Period in which the Transferor received a
request for such payment pursuant to such subsection;
(b) any representation or warranty made herein or in
connection with this Agreement by the Transferor, the Servicer or the
Trustee shall prove to have been incorrect in any material respect when
made, and continues to be incorrect in any material respect for a
period of sixty (60) days after receipt of written notice thereof,
requiring the same to be remedied, by the Transferors and the Servicer
from the Agent and as a result the interests of the Class A Purchasers
or any other them are and continue to be materially and adversely
affected;
(c) the failure by the Transferor or the Servicer or,
if such failure is reasonably expected to have a material adverse
effect on the Class A Investors, by the Trustee, to duly observe or
perform any term or provision of this Agreement (except as described in
clause (a) above) which is not cured within 60 days after written
notice of such failure is given to the defaulting party by the Agent;
(d) the occurrence (whether occurring before or after
the commencement of an Amortization Period) of a Trust Pay Out Event, a
Series 1997-1 Pay Out Event or a Servicer Default, or the occurrence of
an event or condition which would be a Trust Pay Out Event, a Series
1997-1 Pay Out Event or a Servicer Default but for a waiver of or
failure to declare or determine such event by the Certificateholders or
the Trustee; or
(e) the Commitment Expiration Date;
THEN, in the event of a Termination Event described in any of clauses (a)
through (d) above, in addition to any other rights or remedies of the Class A
Purchasers hereunder or under any Related Documents, (A) the Administrative
Agent, at the direction of the Required Class A Owners and of the Required Class
A Purchasers (and without regard to whether a similar direction shall have been
given pursuant to the Class B Certificate Purchase Agreement) in their
discretion, shall deliver a Reserve Account Increase Notice to the Servicer as
contemplated by the Supplement, and/or (B) the Administrative Agent, at the
direction of the Required Class A Owners and of the Required Class A Purchasers
(and without regard to whether a similar direction shall have been given
pursuant to the Class B Certificate Purchase Agreement) in their discretion,
shall deliver a notice to the Trustee and the Servicer that such Termination
Event has occurred and directing that such Termination Event constitute a Series
1997-1 Pay Out Event under subsection 10(g) of the Supplement. In the event that
a Termination Event described in clause (e) above shall have occurred, the Agent
shall give notice thereof to the Administrative Agent, which shall, without
further direction, deliver
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<PAGE> 26
prompt notice to the Trustee and the Servicer that such Termination Event has
occurred and directing that such Termination Event constitute a Series 1997-1
Pay Out Event under subsection 10(g) of the Supplement.
SECTION 3. CONDITIONS PRECEDENT
3.1 CONDITION TO INITIAL PURCHASE. As a condition precedent
to the initial purchase by any Class A Purchasers of the Class A Certificates,
(i) the Agent on behalf of the Class A Purchasers shall have received on the
Closing Date the following items, each of which shall be in form and substance
satisfactory to the Agent:
(a) the favorable written opinion of counsel for
each of Prime II Receivables Corporation and FDSNB addressed to the Agent and
the Class A Purchasers and dated the Closing Date, covering general corporate
matters and the due execution and delivery of, and the enforceability of, each
of the Related Documents to which it is party and such other matters as the
Agent may request;
(b) a copy of (i) the corporate charter and by-laws
of, and an incumbency certificate with respect to its officers executing any of
the Related Documents on the Closing Date on behalf of, each of Prime II
Receivables Corporation and FDSNB, certified by an authorized officer of each
such entity, (ii) good standing certificates from the appropriate Governmental
Authority as of a recent date with respect to each of Prime II Receivables
Corporation and FDSNB and (iii) resolutions of the Board of Director (or an
authorized committee thereof) of each of Prime II Receivables Corporation and
FDSNB with respect to the Related Documents to which it is party, certified by
an authorized officer of each such entity;
(c) the representations and warranties of the
Transferor set forth or referred to in Section 4.1 hereof and the
representations and warranties of FDSNB set forth or referred to in Section 4.2
hereof shall be true and correct in all material respects on Closing Date as
though made on and as of the Closing Date, and the Agent shall have received an
Officer's Certificate of the Transferor and of FDSNB, respectively, confirming
the satisfaction of the condition set forth in this clause (c);
(d) customary sale/security interest, tax,
bankruptcy and non-consolidation opinions, addressed to the Agent and the Class
A Purchasers;
(e) an agreed procedures letter from the
independent certified public accountants of FDSNB and a certificate of an
authorized officer of FDSNB with respect to the accuracy of data previously
furnished to the Agent with respect to the Receivables in the Trust, in each
case in form and scope satisfactory to the Agent;
(f) an executed copy of the Pooling and Servicing
Agreement, the Receivables Purchase Agreement and the Supplement;
(g) evidence satisfactory to the Agent that the
Class B Certificates having a Class B Initial Invested Amount at least equal to
the Required Class B Invested Amount and the Class C Certificates having a
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<PAGE> 27
Class C Initial Invested Amount at least equal to the Required Class C Invested
Amount shall have been duly issued;
(h) evidence satisfactory to the Agent that the
initial deposit (if any) in the Reserve Account required by Section 4.9(a) of
the Pooling and Servicing Agreement shall have been made;
(i) evidence satisfactory to the Agent of the due
execution and delivery of the Related Documents to which it is party by the
Trustee; and
(j) all up front fees and expenses agreed and
specified in the Class A Fee Letter shall have been paid by the Transferor on
the Closing Date; and
(ii) all representations and warranties of the Transferor and the Servicer
contained herein shall be true and correct in all material respects on the
Closing Date (and after giving effect to the transactions contemplated hereby)
and no event which of itself or with the giving of notice or lapse of time, or
both, would permit the furnishing of a Reserve Account Increase Notice has
occurred and is continuing and the Agent shall have received an Officer's
Certificate of each of the Transferor and the Servicer to such effect.
3.2 CONDITION TO ADDITIONAL PURCHASES. The following shall be
conditions precedent to each purchase by any Class A Purchasers of VFC
Additional Class A Invested Amounts hereunder:
(a) the Transferor shall have timely delivered a
notice of purchase pursuant to subsection 2.1(c) of this Agreement;
(b) no Termination Event shall have occurred;
(c) after giving effect to such purchase of VFC
Additional Class A Invested Amount, the aggregate Class A Investor
Principal Balance shall not exceed the aggregate Commitments of the
Committed Class A Purchasers minus the aggregate Commitments of all
Defaulting Purchasers;
(d) the conditions set forth in Section 6.15 of the
Pooling and Servicing Agreement to the issuance of such VFC Additional
Class A Invested Amount shall have been satisfied; and
(e) the representations and warranties of the
Transferor contained in Section 4.1 and of FDSNB contained in Section
4.2 shall be true and correct in all material respects on and as of the
applicable Purchase Date, as though made on and as of such date, other
than the representations and warranties of FDSNB contained in the last
sentence of subsection 4.2(f) or in subsection 4.2(h), which shall have
been true and correct in all material respects when made and as of the
Closing Date, and other than the representations and warranties of the
Transferor and of FDSNB set forth in subsection 4.1(l) and subsection
4.2(g),
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<PAGE> 28
respectively, which shall have been true and correct on all
material respects on or as of the respective dates specified therein.
SECTION 4. REPRESENTATIONS AND WARRANTIES
4.1 REPRESENTATIONS AND WARRANTIES OF THE TRANSFEROR. The
Transferor repeats and reaffirms to the Class A Purchasers and the Agent the
representations and warranties of the Transferor set forth in Sections 2.3 and
2.4 of the Pooling and Servicing Agreement and represents and warrants that such
representations and warranties are true and correct as of the date hereof. The
Transferor further represents and warrants to, and agrees with, the Agent and
each Class A Purchaser that, as of the date hereof:
(a) The Transferor has been duly organized and is
validly existing and in good standing as a corporation under the laws of the
State of Delaware, with corporate power and authority to own its properties and
to transact the business in which it is now engaged, and the Transferor is duly
qualified to do business and is in good standing in each State of the United
States where the nature of its business requires it to be so qualified.
(b) The Transferor has the full corporate power,
authority and legal right to make, execute, deliver and perform the Related
Documents to which it is party and all of the transactions contemplated thereby
and to issue the Series 1997-1 Certificates from the Trust and has taken all
necessary corporate action to authorize the execution, delivery and performance
of the Related Documents to which it is party and such issuance. Each of the
Related Documents to which it is party constitutes the legal, valid and binding
agreement of the Transferor enforceable in accordance with its terms (subject to
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting the enforcement of the rights of creditors generally and except
as such enforceability may be limited by general principles of equity, whether
considered in a proceeding at law or in equity).
(c) The Transferor is not required to obtain the
consent of any other party or any consent, license, approval or authorization
of, or registration with, any Governmental Authority in connection with the
execution, delivery or performance of each of the Related Documents to which it
is party that has not been duly obtained and which is not and will not be in
full force and effect on the Closing Date.
(d) The execution, delivery and performance of the
Related Documents to which it is party by the Transferor do not violate or
conflict with any provision of any existing law or regulation applicable to the
Transferor or any order or decree of any court to which the Transferor is
subject or the Certificate of Incorporation or Bylaws of the Transferor, or any
mortgage, security agreement, indenture, contract or other agreement to which
the Transferor is a party or by which the Transferor or any significant portion
of its properties is bound.
(e) There is no litigation, investigation or
administrative proceeding before any court, tribunal, regulatory body or
governmental body presently pending, or, to the knowledge of the Transferor,
threatened, with respect to any of the Related Documents, the transactions
contemplated thereby, or the issuance of the Series 1997-1 Certificates and
there is no such litigation or pro-
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<PAGE> 29
ceeding against the Transferor or any significant portion of its properties
which would, individually or in the aggregate, have a material adverse effect on
the transactions contemplated by any of the Related Documents or the ability of
the Transferor to perform its obligations thereunder.
(f) The Transferor is not insolvent or the subject
of any voluntary or involuntary bankruptcy proceedings.
(g) No Pay Out Event, Servicer Default, Termination
Event or event permitting the furnishing of a Reserve Account Increase Notice
has occurred and is continuing, and no event, act or omission has occurred and
is continuing which, with the lapse of time, the giving of notice, or both,
would constitute such an event or default.
(h) The Pooling and Servicing Agreement is not
required to be qualified under the Trust Indenture Act of 1939, as amended, and
neither the Trust nor the Transferor is required to be registered under the
Investment Company Act of 1940, as amended.
(i) The Receivables conveyed by the Transferor to the
Trust under the Pooling and Servicing Agreement are in an aggregate amount,
determined as of January 22, 1997, of $122,771,932.29. The Receivables Purchase
Agreement is in full force and effect on the date hereof and no material default
by any party exists thereunder.
(j) The Trust is duly created and existing under the
laws of the State of New York. Simultaneous with the closing hereunder, all
conditions to the issuance and sale of the Series 1997-1 Certificates set forth
in the Pooling and Servicing Agreement have been satisfied and the Series 1997-1
Certificates have been duly issued by the Trust.
(k) Neither the Transferor nor any of its
Affiliates has directly, or through any agent, (i) sold, offered for sale,
solicited offers to buy or otherwise negotiated in respect of, any "security"
(as defined in the Act) that is or will be integrated with the sale of the any
Series 1997-1 Certificates in a manner that would require the registration
under the Act of the offering of the Series 1997-1 Certificates or (ii) engaged
in any form of general solicitation or general advertising in connection with
the offering of the Series 1997-1 Certificates (as those terms are used in
Regulation D under the Act) or in any manner involving a public offering within
the meaning of Section 4(2) of the Act. Assuming the accuracy of the
representations and warranties of each Class A Purchaser in its Investment
Letter and of each purchaser of Class B Certificates and Class C Certificate in
their respective investment letters, the offer and sale of the Series 1997-1
Certificates are transactions which are exempt from the registration
requirements of the Act.
(l) All written factual information heretofore
furnished by the Transferor to, or for delivery to, the Agent for purposes of or
in connection with this Agreement, including, without limitation, information
relating to the Accounts and Receivables and the Transferor's and FDSNB's credit
card businesses, was true and correct in all material respects on the date as of
which such information was stated or certified and remains true and correct in
all material respects (unless such information specifically relates to an
earlier date in which case such information shall have been true and correct in
all material respects on such earlier date).
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<PAGE> 30
4.2 REPRESENTATIONS AND WARRANTIES OF FDSNB. FDSNB repeats
and reaffirms to the Class A Purchasers and the Agent the representations and
warranties of the Servicer set forth in Section 3.3 of the Pooling and
Servicing Agreement and represents and warrants that such representations and
warranties are true and correct as of the date hereof. FDSNB further represents
and warrants to, and agrees with, the Agent and each Class A Purchaser that, as
of the date hereof:
(a) FDSNB has been duly organized and is validly
existing and in good standing as a national banking association under the laws
of the United States of America, with corporate power and authority to own its
properties and to transact the business in which it is now engaged, and FDSNB is
duly qualified to do business (or is exempt from such qualification) and is in
good standing in each State of the United States where the nature of its
business requires it to be so qualified. FDSNB is an insured depository
institution under Section 4(a) of the Federal Deposit Insurance Act.
(b) FDSNB has the full corporate power, authority
and legal right to make, execute, deliver and perform the Related Documents to
which it is party and all the transactions contemplated thereby and has taken
all necessary corporate action to authorize the execution, delivery and
performance of the Related Documents to which it is party. Each of the Related
Documents to which it is party constitutes the legal, valid and binding
agreement of FDSNB enforceable in accordance with its terms (subject to
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting the enforcement of the rights of creditors generally and the
rights of creditors of national banking associations and except as such
enforceability may be limited by general principles of equity, whether
considered in a proceeding at law or in equity).
(c) FDSNB is not required to obtain the consent of
any other party or any consent, license, approval or authorization of, or
registration with, any Governmental Authority in connection with the execution,
delivery or performance of each of the Related Documents to which it is party
that has not been duly obtained and which is not and will not be in full force
and effect on the Closing Date.
(d) The execution, delivery and performance of each
of the Related Documents to which it is party by FDSNB do not violate or
conflict with any provision of any existing law or regulation applicable to
FDSNB or any order or decree of any court to which FDSNB is subject or the
Articles of Association or Bylaws of FDSNB, or any mortgage, security agreement,
indenture, contract or other agreement to which FDSNB is a party or by which
FDSNB or any significant portion of FDSNB's properties is bound.
(e) There is no litigation, investigation or
administrative proceeding before any court, tribunal, regulatory body or
governmental body presently pending, or, to the knowledge of FDSNB, threatened,
with respect to the Related Documents, the transactions contemplated thereby, or
the issuance of the Series 1997-1 Certificates, and there is no such litigation
or proceeding against FDSNB or any significant portion of its properties which
would, individually or in the aggregate, have a material adverse effect on the
transactions contemplated by any of the Related Documents or the ability of
FDSNB, in its capacity as Servicer or otherwise, to perform its obligations
thereunder.
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<PAGE> 31
(f) FDSNB is not insolvent or the subject of any
insolvency or liquidation proceeding. The financial statements of FDSNB
delivered to the Agent are complete and correct in all material respects and
fairly present the financial condition of FDSNB as of date of such statements
and the results of operations of FDSNB for the period then ended, all in
accordance with regulatory accounting principles consistently applied. Since the
date of the most recent audited financial statements of FDSNB delivered to the
Agent, there has not been any material adverse change in the condition
(financial or otherwise) of FDSNB.
(g) All written factual information heretofore
furnished by FDSNB to, or for delivery to, the Agent for purposes of or in
connection with this Agreement, including, without limitation, information
relating to the Accounts and Receivables and the Transferor's and FDSNB's
VISA(R) credit card businesses, was truE and correct in all material respects on
the date as of which such information was stated or certified and remains true
and correct in all material respects (unless such information specifically
relates to an earlier date in which case such information shall have been true
and correct in all material respects on such earlier date).
(h) There are no outstanding comments from the most
recent report prepared by FDSNB's (in its capacity as Servicer) independent
public accountants in connection with its VISA(R) credit card receivables.
(i) No Pay Out Event, Servicer Default, Termination
Event or event permitting the furnishing of a Reserve Account Increase Notice
has occurred and is continuing, and no event, act or omission has occurred and
is continuing which, with the lapse of time, the giving of notice, or both,
would constitute such an event or default.
4.3 REPRESENTATIONS AND WARRANTIES OF THE AGENT AND THE
CLASS A PURCHASERS. Each of the Agent and the Class A Purchasers represents and
warrants to, and agrees with, the Transferor and the Servicer, that:
(a) It is duly authorized to enter into and perform
this Agreement and to purchase its Commitment Percentage (if any) of the Class A
Certificates, and has duly executed and delivered this Agreement; and the person
signing this Agreement on behalf of such Class A Purchaser has been duly
authorized by such Class A Purchaser to do so.
(b) This Agreement constitutes the legal, valid and
binding obligation of such Class A Purchaser, enforceable in accordance with its
terms, except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, conservatorship or other similar laws
now or hereafter in effect affecting the enforcement of creditors' rights in
general, and except as such enforceability may be limited by general principles
of equity (whether considered in a proceeding at law or in equity).
(c) No registration with or consent or approval of or
other action by any state or local governmental authority or regulatory body
having jurisdiction over such Class A Purchaser is required in connection with
the execution, delivery or performance by such Class A Purchaser of this
Agreement other than as may be required under the blue sky laws of any state.
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SECTION 5. COVENANTS
5.1 COVENANTS OF THE TRANSFEROR AND FDSNBCOVENANTS OF THE
TRANSFEROR AND FDSNB. Each of the Transferor and FDSNB (individually or, as set
forth below, as the Servicer) covenants and agrees, so long as any amount of the
Class A Investor Principal Balance shall remain outstanding or any monetary
obligation arising hereunder shall remain unpaid, unless the Required Class A
Owners and the Required Class A Purchasers shall otherwise consent in writing,
that:
(a) each of the Transferor and the Servicer shall
perform in all material respects each of the respective agreements, warranties
and indemnities applicable to it and comply in all material respects with each
of the respective terms and provisions applicable to it hereunder and under the
other Related Documents to which it is party, which agreements are hereby
incorporated by reference into this Agreement as if set forth herein in full;
and each of the Transferor and the Servicer shall take all reasonable action to
enforce the obligations of each of the other parties to such Related Documents
which are contained therein;
(b) the Transferor and the Servicer shall furnish to
the Agent (i) a copy of each opinion, certificate, report, statement, notice or
other communication (other than investment instructions) relating to the Series
1997-1 Certificates which is furnished by or on behalf of either of them to
Certificateholders, to any Rating Agency or to the Trustee and furnish to the
Agent after receipt thereof, a copy of each notice, demand or other
communication relating to the Series 1997-1 Certificates, this Agreement or the
Pooling and Servicing Agreement received by the Transferor or the Servicer from
the Trustee, any Rating Agency or 15% or more of the Series 1997-1
Certificateholders (to the extent such notice, demand or communication relates
to the Accounts, the Receivables, any Servicer Default or any Pay Out Event);
and (ii) such other information, documents records or reports respecting the
Trust, the Receivables, the Transferor, FDSNB or the Servicer as the Agent may
from time to time reasonably request without unreasonable expense to the
Transferor or the Servicer;
(c) the Servicer shall furnish to the Agent on or
before the date such reports are due under the Pooling and Servicing Agreement
copies of each of the reports and certificates required by subsection 3.4(b) and
Sections 3.5 and 3.6 of the Pooling and Servicing Agreement;
(d) the Servicer shall promptly furnish to the Agent
a copy, addressed to the Agent, of each opinion of counsel delivered to the
Trustee pursuant to Section 13.2(d) of the Pooling and Servicing Agreement;
(e) FDSNB shall furnish to the Agent (i) a copy of
its annual Call Report promptly after it becomes available, (ii) an annual
certificate dated within 90 days after the end each of its fiscal years stating
its compliance (or failure to comply) with each minimum ratio of total capital
and core capital to risk-weighted assets required by Governmental Authorities in
accordance with the implementation of the Basle Accord;
(f) the Servicer shall furnish to the Agent a
certificate concurrently with its delivery of its annual certificate pursuant to
Section 3.5 of the Pooling and Servicing Agreement stating that no Termination
Event (other than a Termination Event described in clause (e) of
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subsection 2.8) or event or condition which with the passage of time or the
giving of notice, or both, would constitute such a Termination Event or, if such
Termination Event, event or condition has occurred, identifying the same in
reasonable detail;
(g) the Transferor shall not exercise its right to
accept optional reassignment of the Receivables or repurchase the Series 1997-1
Certificates pursuant to Sections 10.2 or 12.2 of the Pooling and Servicing
Agreement or Section 3 of the Supplement, unless the Class A Purchasers have
been paid, or will be paid upon such repurchase or in connection with such
optional reassignment, the Class A Investor Principal Balance, all interest
thereon and all other amounts owing hereunder in full;
(h) the Transferor and the Servicer shall at any
time from time to time during regular business hours, on reasonable notice to
the Transferor or the Servicer, as the case may be, permit the Agent, or its
agents or representatives to:
(i) examine all books, records and documents
(including computer tapes and disks) in its possession or under its control
relating to the Receivables, and
(ii) visit its offices and property for
the purpose of examining such materials described in clause (i) above.
The information obtained by the Agent or any Class A Purchaser pursuant to this
subsection shall be held in confidence in accordance with Section 6.2 hereof;
(i) the Servicer shall furnish to the Agent,
promptly after the occurrence of any Servicer Default, Termination Event, Pay
Out Event or any event which would permit the furnishing of a Reserve Account
Increase Notice, a certificate of an appropriate officer of the Servicer
setting forth the circumstances of such Servicer Default, Pay Out Event,
Termination Event or event and any action taken or proposed to be taken by the
Servicer or the Transferor with respect thereto;
(j) the Transferor and the Servicer shall timely
make all payments, deposits or transfers and give all instructions to transfer
required by this Agreement and the Pooling and Servicing Agreement;
(k) the Transferor shall not terminate (except in
accordance with the terms thereof), amend, waive or otherwise modify the Pooling
and Servicing Agreement or the Supplement unless (i) such amendment, waiver or
modification shall not, as evidenced by an Officer's Certificate of the
Transferor delivered to the Agent, adversely affect in any material respect the
interests of the Agent or the Class A Purchasers under this Agreement or the
Pooling and Servicing Agreement, and will not result in a reduction or
withdrawal of the then current rating by any Rating Agency of any commercial
paper notes issued by any Structured Purchaser; (ii) all of the provisions of
Section 13.1 of the Pooling and Servicing Agreement have been complied with and
(iii) in the case of any amendment of the Supplement, any amendment to be
effected pursuant to subsection 13.1(b) of the Pooling and Servicing Agreement
or any amendment to the interest rate to be borne by the Class B
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Certificates or the Class C Certificates, the prior written consent thereto
shall have been provided by the Required Class A Owners and the Required Class A
Purchasers;
(l) the Transferor and the Servicer shall execute
and deliver to the Agent all such documents and instruments and do all such
other acts and things as may be necessary or reasonably required by the Agent
or the Trustee to enable the Trustee or the Agent to exercise and enforce their
respective rights under this Agreement and the Pooling and Servicing Agreement
and to realize thereon, and record and file and rerecord and refile all such
documents and instruments, at such time or times, in such manner and at such
place or places, all as may be necessary or required by the Trustee or the
Agent to validate, preserve, perfect and protect the position of the Trustee
under the Pooling and Servicing Agreement;
(m) without the prior written consent of the
Required Class A Owners and the Required Class A Purchasers, the Transferor
will not appoint (or cause to be appointed) a successor Trustee;
(n) neither the Transferor nor the Servicer will
consolidate with or merge into any other Person or convey or transfer its
properties and assets substantially as an entirety to any Person, except (i) in
accordance with Section 7.2 or 8.2 of the Pooling and Servicing Agreement, with
respect to the Transferor or the Servicer, respectively, and (ii) so long as (A)
the obligations of the Transferor or the Servicer, as the case may be, under
this Agreement and any other document executed and delivered in connection
herewith shall be expressly assumed in writing by the transferee, purchaser or
successor corporation, (B) the Transferor or the Servicer, as the case may be,
has delivered to the Agent an Officer's Certificate of the Transferor or the
Servicer and an Opinion of Counsel addressed to the Agent and each Class A
Purchaser meeting the requirements of subsection 7.2(a)(ii) or 8.2(ii) of the
Pooling and Servicing Agreement, as appropriate, as provided in such agreement,
(C) the Transferor or the Servicer, as the case may be, has delivered to the
Agent a copy of the notice to the Rating Agencies delivered pursuant to
subsection 7.2(a)(iii) or 8.2(iii) of the Pooling and Servicing Agreement, and
(D) such consolidation, merger or transfer, in the reasonable judgment of the
Transferor and the Servicer, will not have a material adverse effect on the
interests of the Class A Purchasers hereunder or under the Pooling and Servicing
Agreement;
(o) the Transferor shall not reduce or withdraw any
Discount Percentage then in effect unless such reduction or withdrawal (i) would
not in the reasonable belief of the Transferor cause a Pay Out Event with
respect to the Series 1997-1 Certificates or an event which, with notice or
lapse of time or both, would constitute such a Pay Out Event to occur or (ii) is
consented to by the Required Class A Owners and the Required Class A Purchasers;
(p) the Transferor and FDSNB will not make any
material amendment, modification or change to, or provide any waiver under, the
Receivables Purchase Agreement without the prior written consent of the Required
Class A Owners and the Required Class A Purchasers;
(q) the Transferor will not incur, permit or suffer
to exist any lien, charge or other adverse claim on the Minimum Transferor
Amount in the Trust;
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(r) the Transferor will not engage in any business
other than the transactions contemplated by this Agreement and the Related
Documents;
(s) the Transferor will not (i) incur any
liabilities or indebtedness, other than pursuant to this Agreement and the
Related Documents or reasonably related thereto, (ii) incur or permit or suffer
to exist any lien, charge or encumbrance on any of its properties or assets,
other than as provided for in the Pooling and Servicing Agreement, (iii) make
any investments other than in Cash Equivalents or (iv) make any capital
expenditures other than those reasonably required for its performance of its
obligations hereunder and under the Related Documents; and
(t) the Transferor will not amend, modify or
otherwise make any change to its Certificate of Incorporation if such amendment,
modification or other change would have a material adverse effect on the
interests of the Class A Purchasers, would affect any provisions thereof
relating to the commencement of a voluntary bankruptcy proceeding or which is
inconsistent with the assumptions set forth in the legal opinion of Jones, Day,
Reavis & Pogue, counsel to FDSNB and the Transferor, issued in connection with
this Agreement and the transactions contemplated hereby and relating to the
issues of substantive consolidation.
SECTION 6. MUTUAL COVENANTS REGARDING CONFIDENTIALITY
6.1 COVENANTS OF TRANSFEROR, ETC. The Transferor and the
Servicer shall hold in confidence, and not disclose to any Person, the terms of
any fees payable in connection with this Agreement except they may disclose such
information (i) to their officers, directors, employees, agents, counsel,
accountants, auditors, advisors or representatives, (ii) with the consent of the
Required Class A Purchasers and Agent, or (iii) to the extent the Transferor or
the Servicer or any Affiliate of either of them should be required by any law or
regulation applicable to it or requested by any Governmental Authority to
disclose such information; PROVIDED, that, in the case of clause (iii), the
Transferor or the Servicer, as the case may be, will use all reasonable efforts
to maintain confidentiality and will (unless otherwise prohibited by law) notify
the Agent of its intention to make any such disclosure prior to making such
disclosure.
6.2 COVENANTS OF CLASS A PURCHASERS. The Agent and each
Class A Purchaser covenants and agrees that any information obtained by the
Agent or such Class A Purchaser pursuant to this Agreement shall be held in
confidence (it being understood that documents provided to the Agent hereunder
may in all cases be distributed by the Agent to the Class A Purchasers) except
that the Agent or such Class A Purchaser may disclose such information (i) to
its officers, directors, employees, agents, counsel, accountants, auditors,
advisors or representatives, (ii) to the extent such information has become
available to the public other than as a result of a disclosure by or through the
Agent or such Class A Purchaser, (iii) to the extent such information was
available to the Agent or such Class A Purchaser on a nonconfidential basis
prior to its disclosure to the Agent or such Class A Purchaser hereunder, (iv)
with the consent of the Transferor, (v) to the extent permitted by Section 8.1,
(vi) to the extent the Agent or such Class A Purchaser should be (A) required in
connection with any legal or regulatory proceeding or (B) requested by any
Governmental Authority to disclose such information or (vii) in the case of any
Class A Purchaser that is a Structured Lender, to rating agencies, placement
agents and providers of liquidity and credit support who agree to hold such
information in confidence; PROVIDED, that, in the case of clause (vi) above, the
Agent or such
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Class A Purchaser, as applicable, will use all reasonable efforts to maintain
confidentiality and, in the case of clause (vi)(A) above, will (unless otherwise
prohibited by law) notify the Transferor of its intention to make any such
disclosure prior to making any such disclosure.
SECTION 7. THE AGENTS
7.1 APPOINTMENT. (a) Each Class A Purchaser hereby
irrevocably designates and appoints the Agent as the agent of such Class A
Purchaser under this Agreement, and each such Class A Purchaser irrevocably
authorizes the Agent, as the agent for such Class A Purchaser, to take such
action on its behalf under the provisions of the Related Documents and to
exercise such powers and perform such duties thereunder as are expressly
delegated to the Agent by the terms of this Agreement, together with such other
powers as are reasonably incidental thereto. Notwithstanding any provision to
the contrary elsewhere in this Agreement, the Agent shall not have any duties or
responsibilities, except those expressly set forth herein, or any fiduciary
relationship with any Class A Purchaser, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or otherwise exist against the Agent.
(b) Each Class A Purchaser hereby irrevocably designates and
appoints the Administrative Agent as the agent of such Class A Purchaser under
the Pooling and Servicing Agreement, and each such Class A Purchaser irrevocably
authorizes the Administrative Agent, as the agent for such Class A Purchaser, to
take such action on its behalf under the provisions of the Pooling and Servicing
Agreement and to exercise such powers thereunder as are expressly granted to the
Administrative Agent by the terms of the Pooling and Servicing Agreement,
subject to the terms and conditions of this Agreement, together with such other
powers as are reasonably incidental thereto. Notwithstanding any provision to
the contrary elsewhere in this Agreement, the Administrative Agent shall not
have any duties or responsibilities, except those expressly set forth herein or
in the Pooling and Servicing Agreement, or any fiduciary relationship with any
Class A Purchaser, and no implied covenants, functions, responsibilities,
duties, obligations or liabilities shall be read into this Agreement or
otherwise exist against the Administrative Agent.
7.2 DELEGATION OF DUTIES. The Agent and the Administrative
Agent may execute any of its duties under this Agreement or any of the other
Related Documents by or through agents or attorneys-in-fact and shall be
entitled to advice of counsel concerning all matters pertaining to such duties.
Neither the Agent nor the Administrative Agent shall be responsible for the
negligence or misconduct of any agents or attorneys-in-fact selected by it with
reasonable care.
7.3 EXCULPATORY PROVISIONS. Neither the Agent nor the
Administrative Agent nor any of their respective officers, directors, employees,
agents, attorneys-in-fact or Affiliates shall be (a) liable to any of the Class
A Purchasers for any action lawfully taken or omitted to be taken by it or such
Person under or in connection with this Agreement or any of the other Related
Documents (except for its or such Person's own gross negligence or willful
misconduct) or (b) responsible in any manner to any of the Class A Purchasers
for any recitals, statements, representations or warranties made by the
Transferor, the Servicer or the Trustee or any officer thereof contained in this
Agreement or any of the other Related Documents or in any certificate, report,
statement or other document referred to or provided for in, or received by the
Agent or the Administrative Agent under or in connection with, this Agreement or
any of the other Related Documents or for the value, validi-
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ty, effectiveness, genuineness, enforceability or sufficiency of this Agreement
or any of the other Related Documents or for any failure of the Transferor, the
Servicer or the Trustee to perform its obligations hereunder or thereunder.
Neither the Agent nor the Administrative Agent shall be under any obligation to
any Class A Purchaser to ascertain or to inquire as to the observance or
performance of any of the agreements contained in, or conditions of, this
Agreement or any of the other Related Documents, or to inspect the properties,
books or records of the Transferor, the Servicer, the Trustee or the Trust.
7.4 RELIANCE BY AGENT. The Agent and the Administrative Agent
shall be entitled to rely, and shall be fully protected in relying, upon any
writing, resolution, notice, consent, certificate, affidavit, letter, cablegram,
telegram, telecopy, telex or teletype message, written statement, order or other
document or conversation believed by it to be genuine and correct and to have
been signed, sent or made by the proper Person or Persons and upon advice and
statements of legal counsel (including, without limitation, counsel to the Agent
or the Administrative Agent), independent accountants and other experts selected
by the Agent or the Administrative Agent. The Agent and the Administrative Agent
shall be fully justified in failing or refusing to take any action under this
Agreement or any of the other Related Documents unless it shall first receive
such advice or concurrence of the Required Class A Purchasers as it deems
appropriate or it shall first be indemnified to its satisfaction by the Class A
Purchasers or of the Committed Class A Purchasers against any and all liability
and expense which may be incurred by it by reason of taking or continuing to
take any such action. The Agent and the Administrative Agent shall in all cases
be fully protected in acting, or in refraining from acting, under this Agreement
or any of the other Related Documents in accordance with a request of the
Required Class A Owners and the Required Class A Purchasers and such request and
any action taken or failure to act pursuant thereto shall be binding upon all
present and future Class A Purchasers.
7.5 NOTICES. The Agent shall not be deemed to have knowledge
or notice of the occurrence of any breach of this Agreement or the occurrence of
any Pay Out Event or any Termination Event unless the Agent has received notice
from the Transferor, the Servicer, the Trustee or any Class A Purchaser
referring to this Agreement, describing such event. In the event that the Agent
receives such a notice, the Agent promptly shall give notice thereof to the
Class A Owners and the Required Class A Purchasers. The Agent shall take such
action with respect to such event as shall be reasonably directed by the
Required Class A Owners and the Required Class A Purchasers; PROVIDED that
unless and until the Agent shall have received such directions, the Agent may
(but shall not be obligated to) take such action, or refrain from taking such
action, with respect to such event as it shall deem advisable in the best
interests of the Class A Purchasers.
7.6 NON-RELIANCE ON AGENT AND OTHER CLASS A PURCHASERS. Each
Class A Purchaser expressly acknowledges that neither the Agent nor the
Administrative Agent nor any of their respective officers, directors, employees,
agents, attorneys-in-fact or Affiliates has made any representations or
warranties to it and that no act by the Agent or the Administrative Agent
hereafter taken, including any review of the affairs of the Transferor, the
Servicer, the Trustee or the Trust shall be deemed to constitute any
representation or warranty by the Agent or the Administrative Agent to any Class
A Purchaser. Each Class A Purchaser represents to the Agent and the
Administrative Agent that it has, independently and without reliance upon the
Agent or any other Class A Purchaser, and based on such documents and
information as it has deemed appropriate,
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made its own appraisal of and investigation into the business, operations,
property, financial and other condition and creditworthiness of the Trust, the
Trustee, the Transferor and the Servicer and made its own decision to purchase
its Class A Certificate hereunder and enter into this Agreement. Each Class A
Purchaser also represents that it will, independently and without reliance upon
the Agent or the Administrative Agent or any other Class A Purchaser, and based
on such documents and information as it shall deem appropriate at the time,
continue to make its own analysis, appraisals and decisions in taking or not
taking action under this Agreement or any of the other Related Documents, and to
make such investigation as it deems necessary to inform itself as to the
business, operations, property, financial and other condition and
creditworthiness of the Trust, the Trustee, the Transferor and the Servicer.
Except for notices, reports and other documents received by the Agent under
Section 5 hereof, the Agent shall not have any duty or responsibility to provide
any Class A Purchaser with any credit or other information concerning the
business, operations, property, condition (financial or otherwise), prospects or
creditworthiness of the Trust, the Trustee, the Transferor or the Servicer which
may come into the possession of the Agent or any of its officers, directors,
employees, agents, attorneys-in-fact or Affiliates.
7.7 INDEMNIFICATION. The Committed Class A Purchasers agree
to indemnify the Agent and the Administrative Agent in its capacity as such
(without limiting the obligation of the Transferor, the Trust or the Servicer to
reimburse the Agent or the Administrative Agent for any such amounts), ratably
according to their respective Commitment Percentages, from and against any and
all liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind whatsoever which may at any
time (including, without limitation, at any time following the payment of the
obligations under this Agreement, including the Class A Invested Amount) be
imposed on, incurred by or asserted against the Agent or the Administrative
Agent in any way relating to or arising out of this Agreement, or any documents
contemplated by or referred to herein or the transactions contemplated hereby or
any action taken or omitted by the Agent or the Administrative Agent under or in
connection with any of the foregoing; PROVIDED that no Class A Purchaser shall
be liable for the payment of any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of the Agent or the Administrative Agent resulting from its own
gross negligence or willful misconduct. The agreements in this subsection shall
survive the payment of the obligations under this Agreement, including the Class
A Invested Amount.
7.8 AGENTS IN THEIR INDIVIDUAL CAPACITIES. The Agent, the
Administrative Agent and their Affiliates may make loans to, accept deposits
from and generally engage in any kind of business with the Trust, the Trustee,
the Servicer and the Transferor as though the Agent and the Administrative Agent
were not the agents hereunder. Each Class A Purchaser acknowledges that Credit
Suisse may act (i) as administrator and agent for one or more Structured
Purchasers and in such capacity acts and may continue to act on behalf of each
such Structured Purchaser in connection with its business and (ii) as the agent
for certain financial institutions under the liquidity and credit enhancement
agreements relating to this Agreement to which any such Structured Purchaser is
party and in various other capacities relating to the business of any such
Structured Purchaser under various agreements. Credit Suisse in its capacity as
the Agent shall not, by virtue of its acting in any such other capacities, be
deemed to have duties or responsibilities hereunder or be held to a standard of
care in connection with the performance of its duties as the Agent or the
Administrative Agent other than as expressly provided in this Agreement. Credit
Suisse may act
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as the Agent and the Administrative Agent without regard to and without
additional duties or liabilities arising from its role as such administrator or
agent or arising from its acting in any such other capacity.
7.9 SUCCESSOR AGENT. (a) The Agent may resign as Agent upon
ten days' notice to the Class A Purchasers, the Trustee, the Transferor and the
Servicer with such resignation becoming effective upon a successor agent
succeeding to the rights, powers and duties of the Agent pursuant to this
subsection 7.9(a). If the Agent shall resign as Agent under this Agreement, then
the Required Class A Purchasers and the Required Class A Owners shall appoint
from among the Committed Class A Purchasers a successor agent for the Class A
Purchasers. The successor agent shall succeed to the rights, powers and duties
of the Agent, and the term "Agent" shall mean such successor agent effective
upon its appointment, and the former Agent's rights, powers and duties as Agent
shall be terminated, without any other or further act or deed on the part of
such former Agent or any of the parties to this Agreement. After the retiring
Agent's resignation as Agent, the provisions of this Section 7 shall inure to
its benefit as to any actions taken or omitted to be taken by it while it was
Agent under this Agreement.
(b) The Administrative Agent may resign as Administrative
Agent upon ten days' notice to the Class A Purchasers, the Class B Purchasers
(as defined in the Class B Certificate Purchase Agreement), the Trustee, the
Transferor and the Servicer with such resignation becoming effective upon a
successor agent succeeding to the rights, powers and duties of the
Administrative Agent pursuant to this subsection 7.9(b). If the Administrative
Agent shall resign as Administrative Agent under this Agreement, then the
Required Class A Purchasers and the Required Class A Owners shall appoint from
among the Committed Class A Purchasers hereunder or under the Class B
Certificate Purchase Agreement a successor Administrative Agent of the Class A
Certificateholders and Class B Certificateholders as provided in the Supplement;
PROVIDED that no such appointment shall be effective unless such successor is
also appointed as successor Administrative Agent under the Class B Certificate
Purchase Agreement. The successor agent shall succeed to the rights, powers and
duties of the Administrative Agent, and the term "Administrative Agent" shall
mean such successor agent effective upon its appointment, and the former
Administrative Agent's rights, powers and duties as Administrative Agent shall
be terminated, without any other or further act or deed on the part of such
former Administrative Agent or any of the parties to this Agreement. After the
retiring Administrative Agent's resignation as Administrative Agent, the
provisions of this Section 7 shall inure to its benefit as to any actions taken
or omitted to be taken by it while it was Administrative Agent under this
Agreement.
SECTION 8. SECURITIES LAWS; TRANSFERS; TAX TREATMENT
8.1 TRANSFERS OF CLASS A CERTIFICATES. (a) Each Class A Owner
agrees that the beneficial interest in the Class A Certificates purchased by it
will be acquired for investment only and not with a view to any public
distribution thereof, and that such Class A Owner will not offer to sell or
otherwise dispose of any Class A Certificate acquired by it (or any interest
therein) in violation of any of the registration requirements of the Act or any
applicable state or other securities laws. Each Class A Owner acknowledges that
it has no right to require the Transferor to register, under the Act or any
other securities law, the Class A Certificates (or the beneficial interest
therein) acquired by it pursuant to this Agreement or any Transfer Supplement.
Each Class A Owner hereby
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confirms and agrees that in connection with any transfer or syndication by it of
an interest in the Class A Certificates, such Class A Owner has not engaged and
will not engage in a general solicitation or general advertising including
advertisements, articles, notices or other communications published in any
newspaper, magazine or similar media or broadcast over radio or television, or
any seminar or meeting whose attendees have been invited by any general
solicitation or general advertising. Each initial Class A Owner agrees with the
Transferor that it will execute and deliver to the Transferor, the Servicer and
the Trustee on or before the Closing Date a letter in the form attached hereto
as EXHIBIT A (an "INVESTMENT LETTER") with respect to the purchase by such Class
A Owner of a beneficial interest in the Class A Certificates.
(b) Each initial purchaser of a Class A Certificate
or any interest therein and any Assignee thereof or Participant therein shall
certify to the Transferor, the Servicer and the Trustee that it is either (A)(i)
a citizen or resident of the United States, (ii) a corporation or other entity
organized in or under the laws of the United States or any political subdivision
thereof which, if such entity is a tax-exempt entity, recognizes that payments
with respect to the Class A Certificates may constitute unrelated business
taxable income or (iii) a person not described in (i) or (ii) whose income from
the Class A Certificates is and will be effectively connected with the conduct
of a trade or business within the United States (within the meaning of the Code)
and whose ownership of any interest in a Class 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) and who will furnish to the Servicer and the Trustee,
and to the Class A Owner making the Transfer a properly executed U.S. Internal
Revenue Service Form 4224 (and to agree (to the extent legally able) to provide
a new Form 4224 upon the expiration or obsolescence of any previously delivered
form and comparable statements in accordance with applicable United States laws)
or (B) an estate or trust the income of which is includible in gross income for
United States federal income tax purposes.
(c) Any sale, transfer, assignment, participation,
pledge, hypothecation or other disposition (a "TRANSFER") of a Class A
Certificate or any interest therein may be made only in accordance with this
Section 8.1 and in accordance with and subject to the applicable limitations set
forth in Section 6.18 of the Pooling and Servicing Agreement. Any Transfer of an
interest in a Class A Certificate, a Commitment or any Noncommitted Purchaser
Percentage, when combined with any substantially concurrent Transfers hereunder
between the same parties and any substantially concurrent Transfer of an
interest in a Class B Certificate or a Commitment or Noncommitted Purchaser
Percentage (as such terms are defined for purposes of the Class B Certificate
Purchase Agreement) between the same parties, shall be in respect of (i) in the
case of a Committed Class A Purchaser, at least $5,000,000 in the aggregate,
which may be composed of any one or more of (A) Class A Invested Amount, (B) to
the extent in excess of the Class A Invested Amount subject to such Transfer,
Commitment hereunder, (C) Class B Invested Amount, and (D) to the extent in
excess of the Class B Invested Amount subject to such concurrent Transfer,
Commitment under the Class B Certificate Purchase Agreement, or (ii) in the case
of a Noncommitted Class A Purchaser, at least $5,000,000 in the aggregate, which
may be composed of any one or more of (A) Class A Invested Amount, (B) to the
extent in excess of the Class A Invested Amount subject to such Transfer, the
product of the Noncommitted Purchaser Percentage subject to such Transfer times
the aggregate Commitments hereunder, (C) Class B Invested Amount and (D) to the
extent in excess of the Class B Invested Amount subject to such concurrent
Transfer,
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the product of the Noncommitted Purchaser Percentage under the Class B
Certificate Purchase Agreement subject to such Transfer times the aggregate
Commitments under the Class B Certificate Purchase Agreement. Any Transfer of an
interest in a Class A Certificate otherwise permitted by this Section 8.1 will
be permitted only if it consists of a PRO RATA percentage interest in all
payments made with respect to the Class A Purchaser's beneficial interest in
such Class A Certificate. No Class A Certificate or any interest therein may be
Transferred by assignment or Participation to any Person (each, a "TRANSFEREE")
unless prior to the transfer the Transferee shall have executed and delivered to
the Agent and the Transferor an Investment Letter and, except for any Transfer
to an Eligible Transferee, each of the Transferor and the Servicer shall have
granted its prior consent thereto; PROVIDED that in the event of a Transfer from
a Class A Purchaser to one of its Affiliates or to a Person which, prior to such
Transfer, is a Class A Purchaser of all of its interest in the Class A
Certificates the transferring Class A Purchaser shall provide the Transferor and
the Servicer with five (5) Business Days prior written notice thereof and the
prior consent of the Transferor and the Servicer shall not be required for such
Transfer.
Each of the Transferor and the Servicer authorizes
each Class A Purchaser to disclose to any Transferee and Support Bank and any
prospective Transferee or Support Bank any and all financial information in the
Class A Purchaser's possession concerning the Trust, the Transferor or the
Servicer which has been delivered to the Agent or such Class A Purchaser by or
on behalf of the Trust or the Transferor or the Servicer pursuant to this
Agreement (including information obtained pursuant to rights of inspection
granted hereunder) or the other Related Documents or which has been delivered to
such Class A Purchaser by or on behalf of the Trust, the Transferor or the
Servicer in connection with such Class A Purchaser's credit evaluation of the
Trust, the Transferor or the Servicer prior to becoming a party to, or
purchasing an interest in this Agreement or the Class A Certificates; PROVIDED
that prior to any such disclosure, such Transferee or Support Bank or
prospective Transferee or Support Bank shall have executed an agreement agreeing
to be bound by the provisions of Section 6.2 hereof.
(d) Each Class A Purchaser may, in accordance with
applicable law, at any time grant participations in all or part of its interest
in its Commitment or in the Class A Certificates including the payments due to
it under this Agreement and the Pooling and Servicing Agreement (each, a
"PARTICIPATION") to any Person (each, a "PARTICIPANT"); PROVIDED, HOWEVER, that
no Participation shall be granted to any Person unless and until the Agent shall
have consented thereto and the conditions to Transfer specified in this
Agreement and the Pooling and Servicing Agreement, including in subsection
8.1(c) hereof and Section 6.18 of the Pooling and Servicing Agreement, shall
have been satisfied and that such Participation consists of a PRO RATA
percentage interest in all payments made with respect to such Class A
Purchaser's beneficial interest (if any) in the Class A Certificates. In
connection with any such Participation, the Agent shall maintain a register of
each Participant and the amount of each Participation. Each Class A Purchaser
hereby acknowledges and agrees that (A) any such Participation will not alter or
affect such Class A Purchaser's direct obligations hereunder, and (B) neither
the Trustee, the Transferor nor the Servicer shall have any obligation to have
any communication or relationship with any Participant. Each Class A Purchaser
and each Participant shall comply with the provisions of subsection 2.5(c). No
Participant shall be entitled to Transfer all or any portion of its
Participation, without the prior written consent of the Agent. The Transferor
shall be obligated to indemnify a Participant for all amounts owing to it under
Sections 2.4, 2.5 and 2.7 as if such Participant were a Class A Purchaser
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hereunder, but, in the case of Sections 2.4 and 2.5, only in an amount not in
excess of the amounts which would have been owing thereunder had such
Participation not been granted and, in the case of Section 2.5, provided that
such Participant has complied with the provisions of subsection 2.5(c) as if it
were a Class A Purchaser. Each Class A Purchaser shall give the Agent notice of
the consummation of any sale by it of a Participation and the Agent (upon
receipt of notice from the related Class A Purchaser) shall promptly notify the
Transferor, the Servicer and the Trustee.
(e) Each Class A Purchaser may, with the consent of
the Agent and in accordance with applicable law, sell or assign (each, an
"ASSIGNMENT"), to any Person (each, an "ASSIGNEE") which is an Eligible Assignee
(or is otherwise consented to in writing by the Transferor and the Servicer) all
or any part of its interest in its Commitment or in the Class A Certificates and
its rights and obligations under this Agreement and the Pooling and Servicing
Agreement pursuant to an agreement substantially in the form attached hereto as
EXHIBIT C hereto (a "TRANSFER SUPPLEMENT"), executed by such Assignee and the
Class A Purchaser and delivered to the Agent for its acceptance and consent;
PROVIDED, HOWEVER, that no such assignment or sale shall be effective unless and
until the conditions to Transfer specified in this Agreement and the Pooling and
Servicing Agreement, including in subsection 8.1(c) hereof and Section 6.18 of
the Pooling and Servicing Agreement, shall have been satisfied; and PROVIDED
FURTHER, HOWEVER, that no such assignment or sale to an Assignee which would
become a Committed Class A Purchaser shall be effective unless either (i) the
commercial paper notes or the short-term obligations of such Assignee are rated
at least A-1 by Standard & Poor's and P-1 by Moody's or (ii) such assignment or
sale shall have been consented to by all Class A Purchasers. From and after the
effective date determined pursuant to such Transfer Supplement, (x) the Assignee
thereunder shall be a party hereto and, to the extent provided in such Transfer
Supplement, have the rights and obligations of a Class A Purchaser hereunder as
set forth therein and (y) the transferor Class A Purchaser shall, to the extent
provided in such Transfer Supplement, be released from its Commitment and other
obligations under this Agreement; PROVIDED, HOWEVER, that after giving effect to
each such Assignment, the obligations released by any such Class A Purchaser
shall not exceed the obligations assumed by an Assignee or Assignees. Such
Transfer Supplement shall be deemed to amend this Agreement to the extent, and
only to the extent, necessary to reflect the addition of such Assignee and the
resulting adjustment of Percentage Interests, Noncommitted Purchaser Percentages
or Commitment Percentages arising from the Assignment. Upon its receipt of a
duly executed Transfer Supplement, the Agent shall on the effective date
determined pursuant thereto give notice of such acceptance to the Transferor,
the Servicer and the Trustee and the Servicer will provide notice thereof to
each Rating Agency (if required).
Upon surrender for registration of transfer of a
Class A Purchaser's beneficial interest in the Class A Certificates (or portion
thereof) and delivery to the Transferor and the Trustee of an Investment Letter,
executed by the registered owner (and the beneficial owner if it is a Person
other than the registered owner), and receipt by the Trustee of a copy of the
duly executed related Transfer Supplement and such other documents as may be
required under this Agreement, such beneficial interest in the Class A
Certificates (or portion thereof) shall be transferred in the records of the
Trustee and the Agent and, if requested by the Assignee, new Class A
Certificates shall be issued to the Assignee and, if applicable, the transferor
Class A Purchaser in amounts reflecting such Transfer as provided in the Pooling
and Servicing Agreement. Such Transfers of Class A Certificates (and interests
therein) shall be subject to this Section 8.1 in lieu of any regulations which
may
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be prescribed under Section 6.3 of the Pooling and Servicing Agreement.
Successive registrations of Transfers as aforesaid may be made from time to time
as desired, and each such registration of a transfer to a new registered owner
shall be noted on the Certificate Register.
(f) Each Class A Purchaser may pledge its interest
in the Class A Certificates to any Federal Reserve Bank as collateral in
accordance with applicable law.
(g) Any Class A Purchaser shall have the option to
change its Investing Office, PROVIDED that such Class A Purchaser shall have
prior to such change in office complied with the provisions of subsection 2.5(c)
and PROVIDED FURTHER that such Class A Purchaser shall not be entitled to any
amounts otherwise payable under Section 2.4 or 2.5 resulting solely from such
change in office unless such change in office was mandated by applicable law or
by such Class A Purchaser's compliance with the provisions of this Agreement.
(h) Each Affected Party which, on the date it
became an Affected Party, was an Eligible Assignee or was consented to by the
Transferor and the Servicer shall be entitled to receive additional payments
pursuant to Sections 2.4, 2.5 and 2.7 hereof as though it were a Class A
Purchaser and such Section applied to its interest in or commitment to acquire
an interest in the Class A Certificates; PROVIDED that such Affected Party
shall not be entitled to additional payments pursuant to (i) Section 2.4 by
reason of Regulatory Changes which occurred prior to the date it became an
Affected Party or (ii) Section 2.5 attributable to its failure to satisfy the
requirements of subsection 2.5(c) as if it were a Class A Purchaser.
(i) If any increased amounts referred to in Sections
2.4 or 2.5 owing to any Affected Party are not eliminated or reduced by the
designation of a different Investing Office or other actions taken pursuant to
subsection 2.4(c) and payment thereof hereunder is not waived by such Affected
Party within 45 days after the Transferor or the Servicer shall have given
notice to such Affected Party, its related Class A Purchaser and the Agent of
the intent of the Transferor to exercise its rights under this sentence, the
Transferor shall have the right to replace such related Class A Purchaser
hereunder with a Replacement Purchaser; PROVIDED, that (x) such related Class A
Purchaser shall not be replaced hereunder until such related Class A Purchaser
has been paid in full all amounts owed to it hereunder and with respect to its
interest in the Class A Certificates and (y) if the related Class A Purchaser is
the Agent or the Administrative Agent or, unless otherwise agreed by the Agent
and the Administrative Agent, a Structured Purchaser sponsored or administered
by the Administrative Agent or the Agent (in its individual capacity), a
replacement Agent and Administrative Agent shall have been appointed in
accordance with Section 7.9 and the Agent and the Administrative Agent to be
replaced shall have been paid in full all amounts owed to it hereunder.
(j) Each Affected Party claiming increased amounts
described in Sections 2.4 or 2.5 shall furnish, through its related Structured
Purchaser, to the Trustee, the Agent, the Servicer and the Transferor a
certificate setting forth any action taken by such Affected Party to reduce or
eliminate such increased amounts pursuant to subsection 2.4(c) and the basis and
amount of each request by such Affected Party for any such amounts referred to
in Sections 2.4 or 2.5, such certificate to be conclusive with respect to the
factual information set forth therein absent manifest error.
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(k) In the event that a Committed Class A Purchaser
was at any time a Defaulting Purchaser or is a Downgraded Purchaser, the
Transferor shall have the right and to replace such Class A Purchaser hereunder
with a Replacement Purchaser, and the Agent, acting at the request of the
Required Class A Purchasers or the Required Class A Owners, shall have the right
to replace such Committed Class A Purchaser with a Replacement Purchaser which
is an Eligible Assignee or is otherwise reasonably acceptable to the Transferor,
which Replacement Purchaser shall succeed to the rights of such Committed Class
A Purchaser under this Agreement, and such Committed Class A Purchaser shall
assign its beneficial interest in the Class A Certificates to such Replacement
Purchaser in accordance with the provisions of this Section 8.1; PROVIDED, that
(A) such Committed Class A Purchaser shall not be replaced hereunder with a new
investor until such Committed Class A Purchaser has been paid in full its
Percentage Interest of the Class A Investor Principal Balance and all accrued
and unpaid Yield (including any Liquidation Fee determined for the replacement
date) thereon by such new investor and all other amounts (including all amounts
owing under Sections 2.4 and 2.5) owed to it and to all Participants and
Affected Parties with respect to such Class A Purchaser pursuant to this
Agreement and (ii) if the Class A Purchaser to be replaced is the Agent or the
Administrative Agent or, unless the Agent and the Administrative Agent otherwise
agree, a Structured Purchaser sponsored or administered by the Administrative
Agent or the Agent (in its individual capacity), a replacement Agent or
Administrative Agent, as the case may be, shall have been appointed in
accordance with Section 7.9 and the Agent or Administrative Agent, as the case
may be, to be replaced shall have been paid all amounts owing to it as Agent or
Administrative Agent, as the case may be, pursuant to this Agreement. For
purposes of this subsection, a Committed Class A Purchaser shall be a
"DOWNGRADED PURCHASER" if and so long as the credit rating assigned to its
short-term obligations by Moody's or Standard & Poor's on the date on which it
became a party to this Agreement shall have been reduced or withdrawn.
8.2 TAX CHARACTERIZATION OF THE CLASS A CERTIFICATES. It is
the intention of the parties hereto that the Class A Certificates be treated for
tax purposes as indebtedness. In the event that the Class A Certificates are not
so treated, it is the intention of the parties that such Class A Certificates be
treated as an interest in a partnership that owns the Receivables. In the event
that the Class A Certificates are treated as an interest in a partnership, it is
the intention of the parties that interest payable on such Class A Certificates
be treated as guaranteed payment and, if for any reason it is not so treated,
that the holders of such Class A Certificates be specially allocated gross
interest income equal to the interest accrued during each applicable accrual
period on such Class A Certificates.
SECTION 9. MISCELLANEOUS
9.1 AMENDMENTS AND WAIVERS. This Agreement may not be
amended, supplemented or modified nor may any provision hereof be waived
except in accordance with the provisions of this Section 9.1. With the written
consent of the Required Class A Owners and the Required Class A Purchasers, the
Agent, the Transferor and the Servicer may, from time to time, enter into
written amendments, supplements, waivers or modifications hereto for the
purpose of adding any provisions to this Agreement or changing in any manner
the rights of any party hereto or waiving, on such terms and conditions as may
be specified in such instrument, any of the requirements of this Agreement;
PROVIDED, HOWEVER, that no such amendment, supplement, waiver or modification
shall (i) reduce the amount of or extend the maturity of any Class A
Certificate or reduce the rate or extend
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the time of payment of interest thereon, or reduce or alter the timing of any
other amount payable to any Class A Purchaser hereunder or under the Supplement,
in each case without the consent of the Class A Purchaser affected thereby, (ii)
amend, modify or waive any provision of this Section 9.1, or, if such amendment
would have a material adverse effect on the Class A Purchasers, the definition
of "Class A Invested Amount", or reduce the percentage specified in the
definition of Required Class A Owners or Required Class A Purchasers, in each
case without the written consent of all Class A Purchasers or (iii) amend,
modify or waive any provision of Section 7 of this Agreement without the written
consent of the Agent, the Administrative Agent, the Required Class A Owners and
Required Class A Purchasers. Any waiver of any provision of this Agreement shall
be limited to the provisions specifically set forth therein for the period of
time set forth therein and shall not be construed to be a waiver of any other
provision of this Agreement.
Each party hereto agrees, at the request of the Agent from
time to time to enter into or to consent to, as applicable, any amendments or
other modifications to this Agreement or the Related Documents, other than those
requiring the consent of all Class A Purchasers as provided above in this
subsection, and the Transferor agrees to cause its Certificate of Incorporation
and Bylaws to be amended or otherwise modified, as shall reasonably be
determined by the Agent to be required for any initial Class A Purchaser which
is a Structured Purchaser to obtain or maintain an informal rating of the Class
A Certificates which will permit such Structured Purchaser's commercial paper
notes to maintain at least the rating from Standard & Poor's and Moody's as in
effect immediately prior to such Structured Purchaser's becoming a Class A
Purchaser after giving effect to its initial purchase of the Class A
Certificates and to purchases from time to time by such Structured Purchaser of
VFC Additional Class A Invested Amounts as contemplated by this Agreement,
without giving effect to any increase in any letter of credit or other
enhancement provided to such Structured Purchaser (other than liquidity support
provided to such Structured Purchaser by Affected Parties).
The Administrative Agent may cast any vote or give any
direction under the Pooling and Servicing Agreement on behalf of the Class A
Certificateholders if it has been directed to do so by (i) the Required Class A
Owners, (ii) the Required Class A Purchasers, and (iii) by the Class B
Purchasers (as defined in the Class B Certificate Purchase Agreement) required
under the terms of Section 9.1 of the Class B Certificate Purchase Agreement.
9.2 NOTICES. (a) All notices, requests and demands to or upon
the respective parties hereto to be effective shall be in writing (including by
telecopy, telegraph or telex), and, unless otherwise expressly provided herein,
shall be deemed to have been duly given or made when delivered by hand, or, in
the case of mail or telecopy notice, when received, or, in the case of
telegraphic notice, when delivered to the telegraph company, or, in the case of
telex notice, when sent, answer back received, addressed as follows or, with
respect to a Class A Purchaser, as set forth in its respective Joinder
Supplement or Transfer Supplement, or to such other address as may be hereafter
notified by the respective parties hereto:
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The Transferor: Prime II Receivables Corporation
9111 Duke Boulevard
Mason, Ohio 45040
Attention: President
Telephone: (513) 573-2048
Telefax: (513) 573-2039
The Servicer: FDS National Bank
9111 Duke Boulevard
Mason, Ohio 45040
Attention: Chief Financial Officer
Telephone: (513) 573-2265
Telefax: (513) 573-2720
With a copy to:
Federated Department Stores, Inc.
7 West Seventh Street
Cincinnati, Ohio 45202
Attention: General Counsel
Telephone: (513) 579-7000
Telefax: (513) 579-7462
The Trustee: The Chase Manhattan Bank
450 West 33rd Street
New York, New York 10001
Attention: Corporate Trustee Administration
Department
Telephone: (212) 946-8608
Telefax: (212) 946-3240
The Agent Credit Suisse First Boston, New York Branch
or the Eleven Madison Avenue
Administrative New York, New York 10010
Agent: Attention: Asset Finance Department
Telephone: (212) 325-9077
Telefax: (212) 325-6677
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Moody's: Moody's Investors Service, Inc.
99 Church Street
New York, New York 10007
Attention: ABS Monitoring Department,
4th Floor
Telephone: (212) 553-3607
Telefax: (212) 553-4773
Standard Standard & Poor's Ratings Services
& Poor's: 26 Broadway, 15th Floor
New York, New York 10004
Attention: Asset-Backed Surveillance
Department
Telephone: (212) 208-1892
Telefax: (212) 412-0323
(b) All payments to be made to the Agent or any Class A
Purchaser hereunder shall be made in United States dollars and in immediately
available funds not later than 2:30 p.m. New York City time on the date payment
is due, and, unless otherwise specifically provided herein, shall be made to the
Agent, for the account of one or more of the Class A Purchasers or for its own
account, as the case may be. Unless otherwise directed by the Agent, all
payments to it shall be made by federal wire (ABA #0260-0917-9) and telegraph
name (CR SUISSE NY), to account number 930539-05, reference Prime Credit Card
Master Trust II, Series 1997-1, with telephone notice (including federal wire
number) to the Asset Finance Department of Credit Suisse (212-325-9077).
9.3 NO WAIVER; CUMULATIVE REMEDIES. No failure to exercise
and no delay in exercising, on the part of the Agent or any Class A Purchaser,
any right, remedy, power or privilege hereunder or under any of the other
Related Documents shall operate as a waiver thereof; nor shall any single or
partial exercise of any right, remedy, power or privilege hereunder or under
any of the other Related Documents preclude any other or further exercise
thereof or the exercise of any other right, remedy, power or privilege. The
rights, remedies, powers and privileges provided herein and in the other
Related Documents are cumulative and not exclusive of any rights, remedies,
powers and privileges provided by law.
9.4 SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and inure to the benefit of the Transferor, the Servicer, the Agent, the
Administrative Agent, the Class A Purchasers, any Assignee and their respective
successors and assigns, except that the Transferor and the Servicer may not
assign or transfer any of their respective rights or obligations under this
Agreement except as provided herein and in the Pooling and Servicing Agreement,
without the prior written consent of the Required Class A Owners and the
Required Class A Purchasers.
9.5 SUCCESSORS TO SERVICER. (a) In the event that a transfer
of servicing occurs under Article VIII or Article X of the Pooling and Servicing
Agreement, (i) from and after the effective date of such transfer, the Successor
Servicer shall be the successor in all respects to the Servicer and shall be
responsible for the performance of all functions to be performed by the Servicer
from and after such date, except as provided in the Pooling and Servicing
Agreement, and shall be subject to
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all the responsibilities, duties and liabilities relating thereto placed on the
Servicer by the terms and provisions hereof, and all references in this
Agreement to the Servicer shall be deemed to refer to the Successor Servicer,
and (ii) as of the date of such transfer, the Successor Servicer shall be deemed
to have made with respect to itself the representations and warranties made by
the Servicer in Section 4.2 (in the case of subsection 4.2(a) with appropriate
factual changes); PROVIDED, however, that the references to the Servicer
contained in Section 5.1 of this Agreement shall be deemed to refer to the
Servicer with respect to responsibilities, duties and liabilities arising out of
an act or acts, or omission, or an event or events giving rise to such
responsibilities, duties and liabilities and occurring during such time that the
Servicer was Servicer under this Agreement and shall be deemed to refer to the
Successor Servicer with respect to responsibilities, duties and liabilities
arising out of an act or acts, or omission, or an event or events giving rise to
such responsibilities, duties and liabilities and occurring during such time
that the Successor Servicer acts as Servicer under this Agreement; PROVIDED,
HOWEVER, to the extent that an obligation to indemnify the Class A Purchasers
under Section 2.7 arises as a result of any act or failure to act of any
Successor Servicer in the performance of servicing obligations under the Pooling
and Servicing Agreement or the Supplement, such indemnification obligation shall
be of the Successor Servicer and not FDSNB. Upon the transfer of servicing to a
Successor Servicer, such Successor Servicer shall furnish to the Agent copies of
its audited annual financial statements for each of the three preceding fiscal
years or if the Trustee or any other banking institution becomes the Successor
Servicer, such Successor Servicer shall provide, in lieu of the audited
financial statements required in the immediately preceding clause, complete and
correct copies of the publicly available portions of its Consolidated Reports of
Condition and Income as submitted to the Federal Deposit Insurance Corporation
for the two most recent year end periods.
(b) In the event that any Person becomes the
successor to the Transferor pursuant to Article VII of the Pooling and Servicing
Agreement, from and after the effective date of such transfer, such successor to
the Transferor shall be the successor in all respects to the Transferor and
shall be responsible for the performance of all functions to be performed by the
Transferor from and after such date, except as provided in the Pooling and
Servicing Agreement, and shall be subject to all the responsibilities, duties
and liabilities relating thereto placed on the Transferor by the terms and
provisions hereof, and all references in this Agreement to the Transferor shall
be deemed to refer to the successor to the Transferor; PROVIDED, HOWEVER, that
the references to the Transferor contained in Sections 2.5, 2.7 and 5.1 of this
Agreement shall be deemed to refer to Prime II Receivables Corporation with
respect to responsibilities, duties and liabilities arising out of an act or
acts, or omission, or an event or events giving rise to such responsibilities,
duties and liabilities and occurring during such time that Prime II Receivables
Corporation was Transferor under this Agreement and shall be deemed to refer to
the successor to Prime II Receivables Corporation as Transferor with respect to
responsibilities, duties and liabilities arising out of an act or acts, or
omission, or an event or events giving rise to such responsibilities, duties and
liabilities and occurring during such time that the successor to Prime II
Receivables Corporation acts as Transferor under this Agreement.
9.6 COUNTERPARTS. This Agreement may be executed by one or
more of the parties to this Agreement on any number of separate counterparts,
and all of said counterparts taken together shall be deemed to constitute one
and the same instrument.
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9.7 SEVERABILITY. Any provisions of this Agreement which are
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provisions in any other jurisdiction.
9.8 INTEGRATION. This Agreement and the Class A Fee Letter
represent the agreement of the Agent, the Administrative Agent, the Transferor,
the Servicer and the Class A Purchasers with respect to the subject matter
hereof, and there are no promises, undertakings, representations or warranties
by the Class A Purchasers, the Agent or the Administrative Agent relative to
subject matter hereof not expressly set forth or referred to herein or therein.
FDSNB shall retain a copy of each of the above-referenced agreements as part of
its official records.
9.9 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
9.10 TERMINATION. This Agreement shall remain in full force
and effect until the earlier to occur of (a) payment in full of the Class A
Repayment Amount and all other amounts payable to the Class A Purchasers, the
Agent and the Administrative Agent hereunder and the termination of all
Commitments and (b) the Series 1997-1 Termination Date; PROVIDED, HOWEVER, that
if the Class A Repayment Amount and all other amounts payable to the Class A
Purchasers hereunder are paid in full and all Commitments have terminated prior
to the Series 1997-1 Termination Date, the Agent shall notify the Trustee that
thereafter all amounts otherwise payable to the Class A Purchasers hereunder
shall be payable to the Transferor or any Person designated thereby; and
PROVIDED, FURTHER, that the provisions of Sections 2.4, 2.5, 2.6, 2.7 and 7.7
and subsections 9.12(a) and 9.12(b) shall survive termination of this Agreement
and amounts payable to the Class A Purchasers thereunder shall remain payable to
the Class A Purchasers.
9.11 ACTION BY SERVICER. Wherever the Trustee or the Trust is
authorized or required to take an action or give a notice pursuant to this
Agreement and if the Trustee fails timely to take such action or give such
notice pursuant to this Agreement after being requested to do so by the
Servicer, the Servicer shall take such action or give such notice on behalf of
the Trustee or the Trust.
9.12 LIMITED RECOURSE; NO PROCEEDINGS. (a) The obligations of
the Transferor and the Servicer under this Agreement are several (except as
specifically provided herein) and are solely the corporate obligations of the
Transferor and the Servicer. No recourse shall be had for the payment of any fee
or other obligation or claim arising out of or relating to this Agreement or any
other agreement, instrument, document or certificate executed and delivered or
issued by the Transferor and the Servicer or any officer of any of them in
connection therewith, against any stockholder, employee, officer, director or
incorporator of the Transferor or the Servicer, and neither the Agent nor any
Class A Purchaser shall look to any property or assets of the Transferor, other
than to (a) amounts payable to the Transferor under the Receivables Purchase
Agreement, any Supplement or the Pooling and Servicing Agreement and (b) any
other assets of the Transferor not pledged to third parties or otherwise
encumbered in any manner permitted by the Transferor's
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Certificate of Incorporation. Each Class A Purchaser and the Agent hereby agrees
that to the extent such funds are insufficient or unavailable to pay any amounts
owing to it by the Transferor pursuant to this Agreement, prior to the earlier
of the Trust Termination Date or the commencement of a bankruptcy or insolvency
proceeding by or against the Transferor, it shall not constitute a claim against
the Transferor. Nothing in this paragraph shall limit or otherwise affect the
liability of the Servicer with respect to any amounts owing by it hereunder or
the right of the Agent or any Class A Purchaser to enforce such liability
against the Servicer or any of its assets.
(b) Each of the Transferor, the Servicer and the
Trustee hereby agrees that it shall not institute or join against any Structured
Lender any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceeding, or other proceeding under any federal or state bankruptcy or similar
law, for one year and a day after the latest maturing commercial paper note,
medium term note or other debt security issued by such Structured Lender is
paid. The foregoing shall not limit the Transferor's, the Servicer's or the
Trustee's right to file any claim in or otherwise take any action with respect
to any such bankruptcy, reorganization, arrangement, insolvency or liquidation
proceeding that was instituted by any Person other than the Transferor, the
Servicer or the Trustee.
9.13 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties made hereunder and in any document, certificate
or statement delivered pursuant hereto or in connection herewith shall survive
the execution and delivery of this Agreement, the purchase of the Class A
Certificates hereunder and the termination of this Agreement.
9.14 SUBMISSION TO JURISDICTION; WAIVERS. EACH OF THE
TRANSFEROR, THE ADMINISTRATIVE AGENT, THE SERVICER, THE TRUST, THE TRUSTEE, THE
AGENT AND EACH CLASS A PURCHASER HEREBY IRREVOCABLY AND UNCONDITIONALLY:
(A) SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT TO WHICH IT IS A PARTY,
OR FOR RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT IN RESPECT
THEREOF, TO THE NON-EXCLUSIVE GENERAL JURISDICTION OF THE
COURTS OF THE STATE OF NEW YORK AND THE UNITED STATES OF
AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND APPELLATE
COURTS FROM ANY THEREOF;
(B) CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY BE BROUGHT
IN SUCH COURTS AND WAIVES ANY OBJECTION THAT IT MAY NOW OR
HEREAFTER HAVE TO THE VENUE OF ANY SUCH ACTION OR PROCEEDING
IN ANY SUCH COURT OR THAT SUCH ACTION OR PROCEEDING WAS
BROUGHT IN AN INCONVENIENT COURT AND AGREES NOT TO PLEAD OR
CLAIM THE SAME;
-47-
<PAGE> 51
(C) AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR
PROCEEDING MAY BE EFFECTED BY MAILING A COPY THEREOF BY
REGISTERED OR CERTIFIED MAIL (OR ANY SUBSTANTIALLY SIMILAR
FORM OF MAIL), POSTAGE PREPAID, TO SUCH PARTY AT ITS ADDRESS
SET FORTH IN SECTION 9.2 OR AT SUCH OTHER ADDRESS OF WHICH THE
AGENT SHALL HAVE BEEN NOTIFIED PURSUANT THERETO; AND
(D) AGREES THAT NOTHING HEREIN SHALL AFFECT THE RIGHT TO
EFFECT SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW
OR SHALL LIMIT THE RIGHT TO SUE IN ANY OTHER JURISDICTION.
9.15 WAIVERS OF JURY TRIAL. THE TRANSFEROR, THE SERVICER, THE
TRUST, THE TRUSTEE, THE AGENT AND THE CLASS A PURCHASERS HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING
TO THIS AGREEMENT OR ANY OTHER DOCUMENT OR INSTRUMENT RELATED HERETO AND FOR ANY
COUNTERCLAIM THEREIN.
-48-
<PAGE> 52
IN WITNESS WHEREOF, the parties hereto have caused this
Certificate Purchase Agreement to be duly executed by their respective officers
as of the day and year first above written.
PRIME II RECEIVABLES CORPORATION,
as Transferor
By: /S/ KAREN M. HOGUET
----------------------------
Name: Karen M. Hoguet
Title: Chairman of the Board
FDS NATIONAL BANK
By: /S/ SUSAN R. ROBINSON
----------------------------
Name: Susan R. Robinson
Title: Treasurer
CREDIT SUISSE FIRST BOSTON, NEW YORK
BRANCH,
as Agent and as Administrative Agent
By: /S/ THOMAS MEIER
----------------------------
Name: Thomas Meier
Title: Associate
By: /S/ THOMAS A. CARROLL
----------------------------
Name: Thomas A. Carroll
Title: Associate
<PAGE> 53
EXHIBIT A
---------
FORM OF INVESTMENT LETTER
-------------------------
[Date]
Prime II Receivables Corporation
9111 Duke Boulevard
Mason, Ohio 45040
Attention: President
Re Prime Credit Card Master Trust II Class A
Variable Funding Certificates, Series 1997-1
--------------------------------------------
Ladies and Gentlemen:
This letter (the "Investment Letter") is delivered by the
undersigned (the "Purchaser") pursuant to subsection 8.1(a) of the Class A
Certificate Purchase Agreement dated as of January 22, 1997 (as in effect, the
"Certificate Purchase Agreement"), among the Transferor, FDS National Bank, as
Servicer, the Class A Purchasers parties thereto and Credit Suisse First Boston,
New York Branch, as Agent and Administrative Agent. Capitalized terms used
herein without definition shall have the meanings set forth in the Certificate
Purchase Agreement. The Purchaser represents to and agrees with the Transferor
as follows:
(a) The Purchaser is authorized [to enter into the Certificate
Purchase Agreement and to perform its obligations thereunder and to
consummate the transactions contemplated thereby] [to purchase a
participation in obligations under the Certificate Purchase Agreement].
(b) The Purchaser has such knowledge and experience in
financial and business matters as to be capable of evaluating the
merits and risks of its investment in the Class A Certificates and is
able to bear the economic risk of such investment. The Purchaser has
been afforded the opportunity to ask such questions as it deems
necessary to make an investment decision, and has received all
information it has requested in connection with making such investment
decision. The Purchaser has, independently and without reliance upon
the Agent, the Administrative Agent or any other Class A Purchaser, and
based on such documents and information as it has deemed appropriate,
made is own appraisal of and investigation into the business,
operations, property, financial and other condition and
creditworthiness of the Trust, the Transferor and the Servicer and made
its own decision to purchase its interest in the Class A Certificates,
and will, independently and without reliance upon the Agent, the
Administrative Agent or any other Class A Purchaser, and based on such
documents and information as it shall deem appropriate at the time,
continue to make its own analysis, appraisals and decisions
<PAGE> 54
in taking or not taking action under the Certificate Purchase
Agreement, and to make such investigation as it deems necessary to
inform itself as to the business, operations, property, financial and
other condition and creditworthiness of the Trust, the Transferor and
the Servicer.
(c) The Purchaser is an "accredited investor", as defined in
Rule 501, promulgated by the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the
"Securities Act"), or is a sophisticated institutional investor. The
Purchaser understands that the offering and sale of the Class A
Certificates has not been and will not be registered under the
Securities Act and has not and will not be registered or qualified
under any applicable "Blue Sky" law, and that the offering and sale of
the Class A Certificate has not been reviewed by, passed on or
submitted to any federal or state agency or commission, securities
exchange or other regulatory body.
(d) The Purchaser is acquiring an interest in Class A
Certificates without a view to any distribution, resale or other
transfer thereof except, with respect to any Class A Purchaser Interest
or any interest or participation therein, as contemplated in the
following sentence. The Purchaser will not resell or otherwise transfer
any interest or participation in the Class A Purchaser Interest, except
in accordance with Sections 8.1 of the Certificate Purchase Agreement
and (i) in a transaction exempt from the registration requirements of
the Securities Act of 1933, as amended, and applicable state securities
or "blue sky" laws; (ii) to the Transferor or any affiliate of the
Transferor; or (iii) to a person who the Purchaser reasonably believes
is a qualified institutional buyer (within the meaning thereof in Rule
144A under the Securities Act) that is aware that the resale or other
transfer is being made in reliance upon Rule 144A. In connection
therewith, the Purchaser hereby agrees that it will not resell or
otherwise transfer the Class A Certificates or any interest therein
unless the purchaser thereof provides to the addressee hereof a letter
substantially in the form hereof.
[(e) The Purchaser hereby certifies to the Transferor, the
Servicer and the Trustee that it has neither acquired nor will it sell,
trade or transfer any interest in a Class A Certificate or cause an
interest in a Class A Certificate to be marketed on or through 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. In addition, the Purchaser hereby certifies that it
is not and, for so long as it holds any interest in a Class A
Certificate will not become a partnership, Subchapter S corporation or
grantor trust for U.S. federal income tax purposes. The Purchaser
acknowledges that the opinion of counsel to the effect that the Trust
will not be treated as a publicly traded partnership taxable as a
corporation is dependent in part on the accuracy of the certifications
described in this paragraph.][To be included only if required by
Section 6.18 of the Pooling and Servicing Agreement.]
A-2
<PAGE> 55
[(e)][(f)] This Investment Letter has been duly executed and
delivered and constitutes the legal, valid and binding obligation of
the Purchaser, enforceable against the Purchaser in accordance with its
terms, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws or equitable
principles affecting the enforcement of creditors' rights generally and
general principles of equity.
Very truly yours,
[NAME OF PURCHASER]
By:
------------------------
Name:
Title:
A-3
<PAGE> 56
EXHIBIT B
---------
FORM OF JOINDER SUPPLEMENT
JOINDER SUPPLEMENT, dated as of the date set forth in Item 1
of Schedule I hereto, among Prime II Receivables Corporation (the "TRANSFEROR"),
the Class A Purchaser set forth in Item 2 of Schedule I hereto (the "ADDITIONAL
CLASS A PURCHASER"), and Credit Suisse First Boston, New York Branch, as Agent
for the Class A Purchasers under, and as defined in, the Certificate Purchase
Agreement described below (in such capacity, the "AGENT").
W I T N E S S E T H:
WHEREAS, this Supplement is being executed and delivered in
accordance with subsection 2.2(d) of the Class A Certificate Purchase Agreement,
dated as of January 22, 1997, among the Transferor, FDS National Bank, as
Servicer, the Class A Purchasers parties thereto, the Agent and Credit Suisse
First Boston, New York Branch, as Administrative Agent (as from time to time
amended, supplemented or otherwise modified in accordance with the terms
thereof, the "CERTIFICATE PURCHASE AGREEMENT"; unless otherwise defined herein,
terms defined in the Certificate Purchase Agreement are used herein as therein
defined); and
WHEREAS, the Additional Class A Purchaser (if it is not
already a Class A Purchaser party to the Certificate Purchase Agreement) wishes
to become a Class A Purchaser party to the Certificate Purchase Agreement;
NOW, THEREFORE, the parties hereto hereby agree as follows:
(a) Upon receipt by the Agent of five counterparts of this
Supplement, to each of which is attached a fully completed Schedule I and
Schedule II, each of which has been executed by the Additional Class A
Purchaser, the Transferor and the Agent, the Agent will transmit to the
Servicer, the Transferor, the Trustee, the Administrative Agent and the
Additional Class A Purchaser a Joinder Effective Notice, substantially in the
form of Schedule III to this Supplement (a "JOINDER EFFECTIVE NOTICE"). Such
Joinder Effective Notice shall be executed by the Agent and shall set forth,
INTER ALIA, the date on which the transfer effected by this Supplement shall
become effective (the "JOINDER EFFECTIVE DATE"). From and after the Joinder
Effective Date, the Additional Class A Purchaser shall be a Class A Purchaser
party to the Certificate Purchase Agreement for all purposes thereof and shall
be a Noncommitted Class A Purchaser or Committed Class A Purchaser, as the case
may be, as set forth in Schedule II hereto, having an initial Noncommitted
Purchaser Percentage or Commited Purchaser Percentage, as applicable, and a
Commitment, if applicable, as set forth in such Schedule II.
(b) Concurrently with the execution and delivery hereof, the
Additional Class A Purchaser will deliver to the Transferor and the Trustee an
executed Investment Letter in the form of Exhibit A to the Certificate Purchase
Agreement.
<PAGE> 57
(c) Each of the parties to this Supplement agrees and
acknowledges that at any time and from time to time upon the written request of
any other party, it will execute and deliver such further documents and do such
further acts and things as such other party may reasonably request in order to
effect the purposes of this Supplement.
(d) By executing and delivering this Supplement, the
Additional Class A Purchaser confirms to and agrees with the Agent, the
Administrative Agent and the Class A Purchasers as follows: (i) neither the
Agent, the Administrative Agent nor any other Class A Purchaser makes any
representation or warranty or assumes any responsibility with respect to any
statements, warranties or representations made in or in connection with the
Certificate Purchase Agreement (other then representations or warranties made by
such respective parties) or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of the Certificate Purchase Agreement or any
other instrument or document furnished pursuant thereto, or with respect to the
Trust, the financial condition of the Servicer, the Transferor or the Trustee,
or the performance or observance by the Servicer, the Transferor or the Trustee
of any of their respective obligations under the Certificate Purchase Agreement
or the Pooling and Servicing Agreement or any other instrument or document
furnished pursuant hereto; (ii) the Additional Class A Purchaser confirms that
it has received a copy of such documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into this
Supplement; (iii) the Additional Class A Purchaser will, independently and
without reliance upon the Agent, the Administrative Agent or any other Class A
Purchaser and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under the Certificate Purchase Agreement; (iv) each Purchasing
Class A Purchaser appoints and authorizes the Agent and the Administrative Agent
to take such action as agent on its behalf and to exercise such powers under the
Certificate Purchase Agreement and the Supplement as are delegated to the Agent
or the Administrative Agent, as applicable, by the terms thereof, together with
such powers as are reasonably incidental thereto, all in accordance with Section
7 of the Certificate Purchase Agreement; and (vi) the Additional Class A
Purchaser agrees (for the benefit of the Agent, the Administrative Agent, the
other Class A Purchasers, the Trustee, the Servicer and the Transferor) that it
will perform in accordance with their terms all of the obligations which by the
terms of the Certificate Purchase Agreement are required to be performed by it
as a Class A Purchaser which is a Noncommitted Class A Purchaser or Committed
Class A Purchaser, as the case may be, as specified in Schedule II hereto.
(e) Schedule II hereto sets forth the Commitment and the
Commitment Expiration Date, if applicable, and the initial Investing Office of
the Additional Class A Purchaser, as well as administrative information with
respect to the Additional Class A Purchaser.
(f) This Supplement shall be governed by, and construed in
accordance with, the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this
Supplement to be executed by their respective duly authorized officers on
Schedule I hereto as of the date set forth in Item 1 of Schedule I hereto.
B-2
<PAGE> 58
SCHEDULE I TO
JOINDER SUPPLEMENT
------------------
COMPLETION OF INFORMATION AND
SIGNATURES FOR JOINDER SUPPLEMENT
Re: Class A Certificate Purchase Agreement, dated as of January
22, 1997, among Prime II Receivables Corporation, as
Transferor, FDS National Bank, as Servicer, the Class A
Purchasers party thereto and Credit Suisse First Boston, New
York Branch, as Agent and as Administrative Agent.
Item 1: Date of Joinder Supplement:
Item 2: Additional Class A Purchaser:
Item 3: Signatures of Parties to Agreement:
--------------------------------------
as Additional Class A Purchaser
By:
-----------------------------------
Name:
Title:
[By:
-----------------------------------
Name:
Title:]
PRIME II RECEIVABLES CORPORATION,
as Transferor
By:
-----------------------------------
Name:
Title:
B-3
<PAGE> 59
CREDIT SUISSE FIRST BOSTON, NEW YORK
BRANCH, as Agent
By:
-----------------------------------
Name:
Title:
By:
-----------------------------------
Name:
Title:
ACCEPTED BY:
CREDIT SUISSE FIRST BOSTON,
NEW YORK BRANCH, as Administrative Agent
By:
---------------------------
Name:
Title:
By:
---------------------------
Name:
Title:
FDS NATIONAL BANK, as Servicer
By:
---------------------------
Name:
Title:
B-4
<PAGE> 60
SCHEDULE II TO
JOINDER SUPPLEMENT
------------------
LIST OF INVESTING OFFICES, ADDRESSES
FOR NOTICES AND COMMITMENT
--------------------------
[Additional Class A Purchaser]
- ------------------------------
Noncommitted Class A Purchaser: Yes/No
_______________
Initial Noncommitted Purchaser Percentage: _______%
(if applicable)
Committed Class A Purchaser: Yes/No
_______________
Initial Committed Purchaser Percentage: _______%
(if applicable)
Commitment: $____________
Commitment Expiration Date: ____________
Address for Notices:
- --------------------
Investing Office:
- -----------------
B-5
<PAGE> 61
SCHEDULE III TO
JOINDER SUPPLEMENT
------------------
FORM OF
JOINDER EFFECTIVE NOTICE
------------------------
To: [Name and address of
Transferor, Servicer, Trustee, Administrative
Agent and Additional Class A Purchaser]
The undersigned, as Agent under the Class A Certificate
Purchase Agreement, dated as of January 22, 1997, among Prime II Receivables
Corporation, as Transferor, FDS National Bank, as Servicer, the Class A
Purchasers parties thereto and Credit Suisse First Boston, New York Branch, as
Agent for the Class A Purchasers and as Administrative Agent thereunder,
acknowledges receipt of five executed counterparts of a completed Joinder
Supplement. [Note: attach copies of Schedules I and II from such Agreement.]
Terms defined in such Supplement are used herein as therein defined.
Pursuant to such Supplement, you are advised that the Joinder
Effective Date will be _____________, 199_.
Very truly yours,
CREDIT SUISSE FIRST BOSTON,
NEW YORK BRANCK, as Agent
By:
------------------------------
Name:
Title:
By:
------------------------------
Name:
Title:
B-6
<PAGE> 62
EXHIBIT C
FORM OF TRANSFER SUPPLEMENT
TRANSFER SUPPLEMENT, dated as of the date set forth in Item 1
of Schedule I hereto, among the Transferor Class A Purchaser set forth in Item 2
of Schedule I hereto (the "TRANSFEROR CLASS A PURCHASER"), the Purchasing Class
A Purchaser set forth in Item 3 of Schedule I hereto (the "PURCHASING CLASS A
PURCHASER"), and Credit Suisse First Boston, New York Branch, as Agent for the
Class A Purchasers under, and as defined in, the Certificate Purchase Agreement
described below (in such capacity, the "AGENT").
W I T N E S S E T H:
WHEREAS, this Supplement is being executed and delivered in
accordance with subsection 8.1(e) of the Class A Certificate Purchase Agreement,
dated as of January 22, 1997, among Prime II Receivables Corporation, as
Transferor, FDS National Bank, as Servicer, the Class A Purchasers parties
thereto, the Agent and Credit Suisse First Boston, New York Branch, as
Administrative Agent (as from time to time amended, supplemented or otherwise
modified in accordance with the terms thereof, the "CERTIFICATE PURCHASE
AGREEMENT"; unless otherwise defined herein, terms defined in the Certificate
Purchase Agreement are used herein as therein defined);
WHEREAS, the Purchasing Class A Purchaser (if it is not
already a Class A Purchaser party to the Certificate Purchase Agreement) wishes
to become a Class A Purchaser party to the Certificate Purchase Agreement and
the Purchasing Class A Purchaser wishes to acquire and assume from the
Transferor Class A Purchaser, certain of the rights, obligations and commitments
under the Certificate Purchase Agreement; and
WHEREAS, the Transferor Class A Purchaser wishes to sell and
assign to the Purchasing Class A Purchaser, certain of its rights, obligations
and commitments under the Certificate Purchase Agreement.
NOW, THEREFORE, the parties hereto hereby agree as follows:
(a) Upon receipt by the Agent of five counterparts of this
Supplement, to each of which is attached a fully completed Schedule I and
Schedule II, each of which has been executed by the Transferor Class A
Purchaser, the Purchasing Class A Purchaser and the Agent, the Agent will
transmit to the Servicer, the Transferor, the Trustee, the Transferor Class A
Purchaser and the Purchasing Class A Purchaser a Transfer Effective Notice,
substantially in the form of Schedule III to this Supplement (a "TRANSFER
EFFECTIVE NOTICE"). Such Transfer Effective Notice shall be executed by the
Agent and shall set forth, INTER ALIA, the date on which the transfer effected
by this Supplement shall become effective (the "TRANSFER EFFECTIVE DATE").
Subject to the prior written consent, if applicable, of the Transferor and the
Servicer to such transfer in the form of Schedule IV to this Supplement, from
and after the Transfer Effective Date the Purchasing Class A Purchaser shall be
a Class A Purchaser party to the Certificate
<PAGE> 63
Purchase Agreement for all purposes thereof as a Noncommitted Class A Purchaser
or Committed Class A Purchaser, as specified on Schedule II to this Supplement.
(b) At or before 12:00 Noon, local time of the Transferor
Class A Purchaser, on the Transfer Effective Date, the Purchasing Class A
Purchaser shall pay to the Transferor Class A Purchaser, in immediately
available funds, an amount equal to the purchase price, as agreed between the
Transferor Class A Purchaser and such Purchasing Class A Purchaser (the
"PURCHASE PRICE"), of the portion set forth on Schedule II hereto being
purchased by such Purchasing Class A Purchaser of the outstanding Class A
Invested Amount under the Class A Variable Funding Certificate owned by the
Transferor Class A Purchaser (such Purchasing Class A Purchaser's "PURCHASE
PERCENTAGE") and other amounts owing to the Transferor Class A Purchaser under
the Certificate Purchase Agreement or otherwise in respect of the Class A
Variable Funding Certificates. Effective upon receipt by the Transferor Class A
Purchaser of the Purchase Price from the Purchasing Class A Purchaser, the
Transferor Class A Purchaser hereby irrevocably sells, assigns and transfers to
the Purchasing Class A Purchaser, without recourse, representation or warranty,
and the Purchasing Class A Purchaser hereby irrevocably purchases, takes and
assumes from the Transferor Class A Purchaser, the Purchasing Class A
Purchaser's Purchase Percentage of (i) the presently outstanding Class A
Invested Amount under the Class A Variable Funding Certificates owned by the
Transferor Class A Purchaser and other amounts owing to the Transferor Class A
Purchaser in respect of the Class A Variable Funding Certificates, together with
all instruments, documents and collateral security pertaining thereto, and (ii)
the Purchasing Purchaser's Purchase Percentage of (A) if the Transferor Class A
Purchaser is a Noncommitted Class A Purchaser, the Noncommitted Purchaser
Percentage of the Transferor Class A Purchaser and the other rights and duties
of the Transferor Class A Purchaser under the Certificate Purchase Agreement, or
(B) if the Transferor Class A Purchaser is a Committed Class A Purchaser, the
Committed Purchaser Percentage and the Commitment of the Transferor Class A
Purchaser and other rights, duties and obligations of the Transferor Class A
Purchaser under the Certificate Purchase Agreement. This Supplement is intended
by the parties hereto to effect a purchase by the Purchasing Class A Purchaser
and sale by the Transferor Class A Purchaser of interests in the Class A
Variable Funding Certificates, and it is not to be construed as a loan or a
commitment to make a loan by the Purchasing Class A Purchaser to the Transferor
Class A Purchaser. The Transferor Class A Purchaser hereby confirms that the
amount of the Class A Invested Amount is $______________ and its Percentage
Interest thereof is ___%, which equals $____________ as of _______ , 199_. Upon
and after the Transfer Effective Date (until further modified in accordance with
the Certificate Purchase Agreement), the Noncommitted Purchaser Percentage or
Commited Purchaser Percentage, as applicable of the Transferor Class A Purchaser
and the Purchasing Class A Purchaser and the Commitment, if any, of the
Transferor Class A Purchaser and the Purchasing Class A Purchaser shall be as
set forth in Schedule II to this Supplement.
(c) The Transferor Class A Purchaser has made arrangements
with the Purchasing Class A Purchaser with respect to (i) the portion, if any,
to be paid, and the date or dates for payment, by the Transferor Class A
Purchaser to the Purchasing Class A Purchaser of any fees heretofore received by
the Transferor Class A Purchaser pursuant to the Certificate Purchase Agreement
prior to the Transfer Effective Date and (ii) the portion, if any, to be paid,
and the date or dates for payment, by the Purchasing Class A Purchaser to the
Transferor Class A
C-2
<PAGE> 64
Purchaser of fees or interest received by the Purchasing Class A Purchaser
pursuant to the Certificate Purchase Agreement or otherwise in respect of the
Class A Variable Funding Certificates from and after the Transfer Effective
Date.
(d) (i) All principal payments that would otherwise be payable
from and after the Transfer Effective Date to or for the account of the
Transferor Class A Purchaser in respect of the Class A Variable Funding
Certificates shall, instead, be payable to or for the account of the Transferor
Class A Purchaser and the Purchasing Class A Purchaser, as the case may be, in
accordance with their respective interests as reflected in this Supplement.
(ii) All interest, fees and other amounts that would
otherwise accrue for the account of the Transferor Class A Purchaser from and
after the Transfer Effective Date pursuant to the Certificate Purchase Agreement
or in respect of the Class A Variable Funding Certificates shall, instead,
accrue for the account of, and be payable to or for the account of, the
Transferor Class A Purchaser and the Purchasing Class A Purchaser, as the case
may be, in accordance with their respective interests as reflected in this
Supplement. In the event that any amount of interest, fees or other amounts
accruing prior to the Transfer Effective Date was included in the Purchase Price
paid by the Purchasing Class A Purchaser, the Transferor Class A Purchaser and
the Purchasing Class A Purchaser will make appropriate arrangements for payment
by the Transferor Class A Purchaser to the Purchasing Class A Purchaser of such
amount upon receipt thereof from the Agent.
(e) Concurrently with the execution and delivery hereof, the
Purchasing Class A Purchaser will deliver to the Transferor and the Trustee an
executed Investment Letter in the form of Exhibit A to the Certificate Purchase
Agreement.
(f) Each of the parties to this Supplement agrees and
acknowledges that (i) at any time and from time to time upon the written request
of any other party, it will execute and deliver such further documents and do
such further acts and things as such other party may reasonably request in order
to effect the purposes of this Supplement, and (ii) the Agent shall apply each
payment made to it under the Certificate Purchase Agreement, whether in its
individual capacity or as Agent, in accordance with the provisions of the
Certificate Purchase Agreement, as appropriate.
(g) By executing and delivering this Supplement, the
Transferor Class A Purchaser and the Purchasing Class A Purchaser confirm to and
agree with each other, the Administrative Agent and the Agent and the Class A
Purchasers as follows: (i) other than the representation and warranty that it is
the legal and beneficial owner of the interest being assigned hereby free and
clear of any adverse claim, the Transferor Class A Purchaser makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with the
Certificate Purchase Agreement or the Pooling and Servicing Agreement or the
execution, legality, validity, enforceability, genuineness, sufficiency or value
of the Certificate Purchase Agreement or any other instrument or document
furnished pursuant thereto; (ii) the Transferor Class A Purchaser makes no
representation or warranty and assumes no responsibility with respect to the
Trust, the financial condition of the Servicer, the Transferor or the Trustee,
or the performance or observance by the
C-3
<PAGE> 65
Servicer, the Transferor or the Trustee of any of their respective obligations
under the Certificate Purchase Agreement, the Pooling and Servicing Agreement or
any other instrument or document furnished pursuant hereto; (iii) each
Purchasing Class A Purchaser confirms that it has received a copy of such
documents and information as it has deemed appropriate to make its own credit
analysis and decision to enter into this Supplement; (iv) each Purchasing Class
A Purchaser will, independently and without reliance upon the Agent, the
Transferor Class A Purchaser or any other Class A Purchaser and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under the
Certificate Purchase Agreement or the Pooling and Servicing Agreement; (v) each
Purchasing Class A Purchaser appoints and authorizes the Agent and the
Administrative Agent to take such action as agent on its behalf and to exercise
such powers under the Certificate Purchase Agreement and the Pooling and
Servicing Agreement as are delegated to the Agent or the Administrative Agent,
as the case may be, by the terms thereof, together with such powers as are
reasonably incidental thereto, all in accordance with Section 7 of the
Certificate Purchase Agreement; and (vi) each Purchasing Class A Purchaser
agrees (for the benefit of the Transferor Class A Purchaser, the Agent, the
Administrative Agent, the Class A Purchasers, the Trustee, the Servicer and the
Transferor) that it will perform in accordance with their terms all of the
obligations which by the terms of the Certificate Purchase Agreement are
required to be performed by it as a Class A Purchaser.
(h) Schedule II hereto sets forth the revised Noncommitted
Purchaser Percentage or the revised Committed Purchaser Percentage and
Commitment of the Transferor Class A Purchaser, as applicable, the Noncommitted
Purchaser Percentage or the Committed Purchaser Percentage, Commitment and
Commitment Expiration Date of the Purchasing Class A Purchaser, as applicable,
and the initial Investing Office of the Purchasing Class A Purchaser, as well as
administrative information with respect to the Purchasing Class A Purchaser.
(i) This Supplement shall be governed by, and construed in
accordance with, the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this
Supplement to be executed by their respective duly authorized officers on
Schedule I hereto as of the date set forth in Item 1 of Schedule I hereto.
C-4
<PAGE> 66
SCHEDULE I TO
TRANSFER SUPPLEMENT
-------------------
COMPLETION OF INFORMATION AND
SIGNATURES FOR TRANSFER SUPPLEMENT
Re: Class A Certificate Purchase Agreement, dated as of January
22, 1997, among Prime II Receivables Corporation, as
Transferor, FDS National Bank, as Servicer, the Class A
Purchasers party thereto and Credit Suisse First Boston, New
York Branch, as Agent and as Administrative Agent.
Item 1: Date of Transfer Supplement:
Item 2: Transferor Class A Purchaser:
Item 3: Purchasing Class A Purchaser:
Item 4: Signatures of Parties to Agreement:
---------------------------------
as Transferor Class A Purchaser
By:
------------------------------
Name:
Title:
By:
------------------------------
Name:
Title:
C-5
<PAGE> 67
---------------------------------
as Purchasing Class A Purchaser
By:
------------------------------
Name:
Title:
By:
------------------------------
Name:
Title:
ACCEPTED BY:
CREDIT SUISSE FIRST BOSTON,
NEW YORK BRANCH, as Agent
By:
------------------------------
Name:
Title:
By:
------------------------------
Name:
Title:
C-6
<PAGE> 68
SCHEDULE II TO
TRANSFER SUPPLEMENT
-------------------
LIST OF INVESTING OFFICES, ADDRESSES
FOR NOTICES, ASSIGNED INTEREST,
PURCHASE PERCENTAGE AND PURCHASE PRICE
--------------------------------------
[Transferor Class A Purchaser]
A. Noncommitted Class A Purchaser: Yes/No
__________
If applicable:
Noncommitted Purchaser Percentage:
----------------------------------
Transferor Class A Purchaser
Noncommitted Purchaser Percentage
Prior to Sale: _____%
Noncommitted Purchaser Percentage Sold: _____%
Noncommitted Purchaser Percentage Retained: _____%
B. Committed Class A Purchaser: Yes/No
__________
If applicable:
Committed Purchaser Percentage:
-------------------------------
Transferor Class A Purchaser
Committed Purchaser Percentage
Prior to Sale: _____%
Committed Purchaser Percentage Sold: _____%
Committed Purchaser Percentage Retained: _____%
Commitment:
-----------
Transferor Class A Purchaser Commitment
Prior to Sale: $________
Commitment Sold: $________
C-7
<PAGE> 69
Commitment Retained: $________
C. Class A Invested Amount:
------------------------
Transferor Class A Purchaser
Class A Invested Amount Prior to Sale: $________
Class A Invested Amount Sold: $________
Class A Invested Amount Retained: $________
D. Purchase Percentage: -----%
-------------------
[Purchasing Class A Purchaser]
A. Noncommitted Class A Purchaser: Yes/No
__________
If applicable:
Initial Noncommitted Purchaser Percentage: _____%
-----------------------------------------
B. Committed Class A Purchaser: Yes/No
__________
If applicable:
Committed Purchaser Percentage: _____%
------------------------------
Commitment: $________
----------
Commitment Expiration Date: ____________
C. Class A Invested Amount Owned Immediately
After Sale: $________
-----------------------------------------
Address for Notices:
- --------------------
Investing Office:
- -----------------
C-8
<PAGE> 70
SCHEDULE III TO
TRANSFER SUPPLEMENT
-------------------
Form of
TRANSFER EFFECTIVE NOTICE
-------------------------
To: [Name and address of
Transferor, Servicer, Trustee, the Transferor Class A
Purchaser and the Purchasing Class A Purchaser]
The undersigned, as Agent under the Class A Certificate
Purchase Agreement, dated as of January 22, 1997, among Prime II Receivables
Corporation, as Transferor, FDS National Bank, as Servicer, the Class A
Purchasers parties thereto and Credit Suisse First Boston, New York Branch, as
Agent for the Class A Purchasers and as Administrative Agent thereunder,
acknowledges receipt of five executed counterparts of a completed Transfer
Supplement. [Note: attach copies of Schedules I and II from such Agreement.]
Terms defined in such Supplement are used herein as therein defined.
Pursuant to such Supplement, you are advised that the Transfer
Effective Date will be _____________, 199_.
Very truly yours,
CREDIT SUISSE FIRST BOSTON,
NEW YORK BRANCK, as Agent
By:
------------------------------
Name:
Title:
By:
------------------------------
Name:
Title:
C-9
<PAGE> 71
SCHEDULE IV TO
TRANSFER SUPPLEMENT
-------------------
Form of
CONSENT OF TRANSFEROR
---------------------
To: The Chase Manhattan Bank, as Trustee
Credit Suisse First Boston, New York Branch, as Agent
The undersigned hereby consents to the transfer, as of the
Transfer Effective Date, of a [Noncommitted Purchaser Percentage/Committed
Purchaser Percentage] equal to ____% [representing a Commitment in the amount of
$__________] and a Class A Invested Amount under the Prime Credit Card Master
Trust II Class A Variable Funding Certificates, Series 1997-1, in the amount of
$_________, by _______________ to _______________, pursuant to the Class A
Certificate Purchase Agreement, dated as of January 22, 1997, among Prime II
Receivables Corporation, FDS National Bank, as Servicer, the Class A Purchasers
parties thereto and Credit Suisse First Boston, New York Branch, as Agent and as
Administrative Agent.
Very truly yours,
PRIME II RECEIVABLES
CORPORATION
By:
-------------------------
Name:
Title:
FDS NATIONAL BANK,
as Servicer
By:
-------------------------
Name:
Title:
Dated: _________________
cc: Purchasing Class A Purchaser
C-10
<PAGE> 1
Exhibit 10.21
------------------------------------------------------------
CLASS B CERTIFICATE PURCHASE AGREEMENT
Dated as of January 22, 1997
among
PRIME II RECEIVABLES CORPORATION,
as Transferor,
FDS NATIONAL BANK,
as Servicer,
THE CLASS B PURCHASERS PARTIES HERETO,
and
CREDIT SUISSE FIRST BOSTON, NEW YORK BRANCH,
as Agent and Administrative Agent
------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
-----------------
Page
SECTION ...................................................................... 1
SECTION 1. DEFINITIONS....................................................... 1
1.1 Definitions......................................................... 1
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS.................................. 10
2.1 Purchases.......................................................... 10
2.2 Reductions and Increases of Commitments............................ 13
2.3 Fees, Expenses, Payments, Etc...................................... 14
2.4 Requirements of Law................................................ 15
2.5 Taxes.............................................................. 17
2.6 Non-recourse....................................................... 19
2.7 Indemnification.................................................... 20
2.8 Termination Events.................................................. 21
SECTION 3. CONDITIONS PRECEDENT............................................. 23
3.1 Condition to Initial Purchase...................................... 23
3.2 Condition to Additional Purchase................................... 24
SECTION 4. REPRESENTATIONS AND WARRANTIES................................... 25
4.1 Representations and Warranties of the Transferor................... 25
4.2 Representations and Warranties of FDSNB............................ 27
4.3 Representations and Warranties of the Agent and the
Class B Purchasers................................................28
SECTION 5. COVENANTS........................................................ 29
5.1 Covenants of the Transferor and FDSNB.............................. 29
SECTION 6. MUTUAL COVENANTS REGARDING CONFIDENTIALITY....................... 32
6.1 Covenants of Transferor, Etc....................................... 32
6.2 Covenants of Class B Purchasers.................................... 32
SECTION 7. THE AGENTS....................................................... 33
7.1 Appointment........................................................ 33
7.2 Delegation of Duties............................................... 33
7.3 Exculpatory Provisions............................................. 33
7.4 Reliance by Agent.................................................. 34
7.5 Notices............................................................ 34
7.6 Non-Reliance on Agent and Other Class B Purchasers................. 34
7.7 Indemnification.................................................... 35
7.8 Agents in Their Individual Capacities.............................. 35
7.9 Successor Agent.................................................... 36
<PAGE> 3
SECTION 8. SECURITIES LAWS; TRANSFERS; TAX TREATMENT........................ 36
8.1 Transfers of Class B Certificates.................................. 36
8.2 Tax Characterization of the Class B Certificates................... 41
SECTION 9. MISCELLANEOUS.................................................... 41
9.1 Amendments and Waivers............................................. 41
9.2 Notices............................................................ 42
9.3 No Waiver; Cumulative Remedies..................................... 44
9.4 Successors and Assigns............................................. 44
9.5 Successors to Servicer............................................. 44
9.6 Counterparts....................................................... 45
9.7 Severability....................................................... 46
9.8 Integration........................................................ 46
9.9 Governing Law...................................................... 46
9.10 Termination....................................................... 46
9.11 Action by Servicer................................................ 46
9.12 Limited Recourse; No Proceedings.................................. 46
9.13 Survival of Representations and Warranties........................ 47
9.14 Submission to Jurisdiction; Waivers............................... 47
9.15 WAIVERS OF JURY TRIAL............................................. 48
LIST OF EXHIBITS
----------------
EXHIBIT A......... Form of Investment Letter
EXHIBIT B......... Form of Joinder Supplement
EXHIBIT C......... Form of Transfer Supplement
(ii)
<PAGE> 4
CLASS B CERTIFICATE PURCHASE AGREEMENT, dated as of January
22, 1997, by and among PRIME II RECEIVABLES CORPORATION, a Delaware corporation
("PRIME II RECEIVABLES CORPORATION"), as Transferor (the "TRANSFEROR"), FDS
NATIONAL BANK, a national banking association ("FDSNB"), as Servicer (the
"SERVICER"), the CLASS B PURCHASERS from time to time parties hereto and CREDIT
SUISSE FIRST BOSTON, a Swiss banking corporation acting through its New York
Branch, as Agent for the Class B Purchasers (in such capacity, the "AGENT") and
as Administrative Agent for the Class B Purchasers and the Class A Purchasers
(in such capacity, the "ADMINISTRATIVE AGENT").
W I T N E S S E T H:
WHEREAS, Prime II Receivables Corporation, as Transferor,
FDSNB, as Servicer, and the Trustee are parties to a certain Pooling and
Servicing Agreement dated as of January 22, 1997 (as the same may from time to
time be amended or otherwise modified, the "MASTER POOLING AND SERVICING
AGREEMENT"), and a Series 1997-1 Variable Funding Supplement thereto, dated as
of January 22, 1997 (as the same may from time to time be amended or otherwise
modified, the "SUPPLEMENT" and, together with the Master Pooling and Servicing
Agreement, the "POOLING AND SERVICING AGREEMENT");
WHEREAS, the Trust proposes to issue its Class A Variable
Funding Certificates, Series 1997-1 (the "CLASS A CERTIFICATES") and its Class B
Variable Funding Certificates, Series 1997-1 (the "CLASS B CERTIFICATES" and,
together with the Class A Certificates, the "SERIES 1997-1 VARIABLE FUNDING
CERTIFICATES") pursuant to the Pooling and Servicing Agreement;
WHEREAS, the Trust also proposes to issue its Class C
Certificates, Series 1997-1 (the "CLASS C CERTIFICATES" and, together with the
Series 1997-1 Variable Funding Certificates, the "SERIES 1997-1 CERTIFICATES")
pursuant to the Pooling and Servicing Agreement; and
WHEREAS, the Class B Purchasers are willing to purchase the
Class B Certificates on the Closing Date and from time to time thereafter to
purchase VFC Additional Class B Invested Amounts thereunder on the terms and
conditions provided for herein;
NOW THEREFORE, in consideration of the mutual covenants herein
contained, and other good and valuable consideration, the receipt and adequacy
of which are hereby expressly acknowledged, the parties hereto agree as follows:
SECTION 1. DEFINITIONS
1.1 DEFINITIONS. All capitalized terms used herein as
defined terms and not defined herein shall have the meanings given to them in
the Pooling and Servicing Agreement. Each capitalized term defined herein shall
relate only to the Series 1997-1 Certificates and to no other Series of
Certificates issued by the Trust.
"ACT" has the meaning specified in subsection 2.7(a) of this
Agreement.
<PAGE> 5
"ADJUSTED EURODOLLAR RATE" for any Fixed Period shall mean the
rate (rounded upwards if necessary to the nearest whole multiple of 1/16th of
one percent per annum) of interest per annum (the "LIBO RATE") for deposits in
United States dollars offered by the principal office of Credit Suisse in
London, England to prime banks in the London interbank market in an amount of
not less than $1,000,000 for a period equal to such Fixed Period, plus the
remainder obtained by subtracting (i) the LIBO Rate for such Fixed Period from
(ii) the rate obtained by dividing such LIBO Rate by the percentage equal to
100% MINUS the "Eurodollar Reserve Percentage" (as defined in the succeeding
sentence) for such Fixed Period. The "EURODOLLAR RESERVE PERCENTAGE" for a Class
B Purchaser for any Fixed Period shall mean the reserve percentage applicable
during such Fixed Period (or, if more than one such percentage shall be so
applicable, the daily average of such percentages for those days in such Fixed
Period during which any such percentage shall be so applicable) under
regulations issued from time to time by the Board of Governors of the Federal
Reserve System (or any successor) for determining the maximum reserve
requirement (including, without limitation, any marginal emergency, supplemental
or any reserve requirement) for such Class B Purchaser in respect of liabilities
or assets consisting of or including Eurocurrency Liabilities (as that term is
used in Regulation D of the Board of Governors of the Federal Reserve System as
in effect from time to time) having a term equal to such Fixed Period.
"AFFECTED PARTY" shall mean, with respect to any Structured
Purchaser, any Support Bank of such Structured Purchaser.
"AGENT" shall mean Credit Suisse, in its capacity as Agent for
the Class B Purchasers, or any successor agent hereunder.
"AGENT BASE RATE" shall mean, for any day, the higher of (i)
the base commercial lending rate per annum announced from time to time by the
Agent in New York in effect on such day, or (ii) the interest rate per annum
quoted by the Agent at approximately 11:00 a.m., New York City time, on such
day, to dealers in the New York Federal funds market for the overnight offering
of Dollars by the Agent plus one-half of one percent (0.50%). (The Agent Base
Rate is not intended to represent the lowest rate charged by the Agent for
extensions of credit.)
"AGREEMENT" shall mean this Class B Certificate Purchase
Agreement, as amended, modified or otherwise supplemented from time to time.
"ALTERNATE RATE" shall mean, for any Fixed Period with respect
to the portion of the Class B Investor Principal Balance owed to a Class B
Purchaser, an interest rate per annum equal to 0.75% per annum above the
Adjusted Eurodollar Rate for such Fixed Period; PROVIDED, HOWEVER, that in the
case of (i) any Fixed Period on or prior to the date on which such Class B
Purchaser shall have notified the Agent that the introduction of or any change
in or in the interpretation of any law or regulation makes it unlawful, or any
central bank or other Governmental Authority asserts that it is unlawful for
such Class B Purchaser (or, in the case of a Structured Purchaser, for any
entity providing funds to such Structured Purchaser at an interest rate
determined by reference to the Adjusted Eurodollar Rate or a similar rate) to
fund such portion of the Class B Investor Principal Balance at the Alternate
Rate described above (and such Class B Purchaser shall not have subsequently
notified the Agent that such circumstances no longer exist), (ii) any Fixed
Period of less than 30 days, or (iii) any Fixed Period applicable to a portion
of the Class B Investor Principal
-2-
<PAGE> 6
Balance of less than $100,000 in the aggregate owed to all Class B Purchasers,
the "ALTERNATE RATE" for such Fixed Period for such Class B Purchaser shall be a
variable interest rate per annum equal to the Agent Base Rate from time to time
in effect during such Fixed Period.
"ASSIGNEE" and "ASSIGNMENT" have the respective meanings
specified in subsection 8.1(e) of this Agreement.
"BUSINESS DAY" means any day on which (i) banks are not
authorized or required to close in New York City and (ii) if such term is used
in connection with the Adjusted Eurodollar Rate, dealings are carried out in the
London interbank market.
"CLASS A CERTIFICATES" has the meaning specified in the
recitals to this Agreement.
"CLASS B CERTIFICATES" has the meaning specified in the
recitals to this Agreement.
"CLASS B FEE LETTER" shall mean that certain letter agreement,
designated therein as the Series 1997-1 Class B Fee Letter and dated as of the
date hereof, among the Agent, the Transferor and the Servicer, as such letter
agreement may be amended or otherwise modified from time to time.
"CLASS B INVESTOR PRINCIPAL BALANCE" shall mean, when used
with respect to any Business Day, an aggregate amount equal to (a) the Class B
Initial Invested Amount, plus (b) the aggregate VFC Additional Class B Invested
Amounts purchased by the Class B Certificateholders through the end of the
preceding Business Day pursuant to Section 6.15 of the Pooling and Servicing
Agreement, MINUS (c) the aggregate amount of principal payments made to the
Class B Certificateholders prior to such Business Day.
"CLASS B OWNERS" shall mean, with respect to any Class B
Certificate held by the Class B Agent hereunder for the benefit of Class B
Purchasers, the owners of the Class B Invested Amount represented by such Class
B Certificate as reflected on the books of the Class B Agent in accordance with
this Agreement.
"CLASS B PROGRAM FEE" shall mean the ongoing fees payable to
the Agent or the Class B Purchasers in the amounts and on the dates set forth in
the Class B Fee Letter.
"CLASS B REPAYMENT AMOUNT" shall mean the sum of all amounts
payable with respect to the principal amount of the Class B Certificates and
interest on the Class B Certificates and all other amounts (other than amounts
payable pursuant to subsection 2.3(b) or (c), the last sentence of subsection
2.6(a) and Section 2.7 hereof unless such amounts are not paid by the Servicer
pursuant to this Agreement) owing to the Class B Purchasers hereunder.
"CLASS C CERTIFICATES" has the meaning specified in the
recitals to this Agreement.
"CLOSING DATE" shall mean January 23, 1997.
"CODE" shall mean the Internal Revenue Code of 1986, as
amended.
-3-
<PAGE> 7
"COMMERCIAL PAPER RATE" for any Fixed Period for any portion
of the Class B Investor Principal Balance shall mean, to the extent a Structured
Purchaser funds such portion for such Fixed Period by issuing commercial paper,
the sum of (i) the rate (or if more than one rate, the weighted average of the
rates) at which commercial paper notes of such Structured Purchaser having a
term equal to such Fixed Period and to be issued to fund such portion may be
sold by any placement agent or commercial paper dealer selected by or on behalf
of such Structured Purchaser, as agreed between each such agent or dealer and
such Structured Purchaser; PROVIDED that if the rate (or rates) as agreed
between any such agent or dealer and such Structured Purchaser for any Fixed
Period is a discount rate (or rates), then such rate shall be the rate (or if
more than one rate, the weighted average of the rates) resulting from converting
such discount rate (or rates) to an interest-bearing equivalent rate per annum,
plus (ii) 0.05% in respect of dealer fees and commissions (to the extent not
included in the rate or rates described in clause (i)).
"COMMITTED CLASS B PURCHASER" shall mean any Class B Purchaser
which has a Commitment, as set forth in its respective Joinder Supplement and
any Assignee of such Class B Purchaser to the extent of the portion of such
Commitment assumed by such Assignee pursuant to its respective Transfer
Supplement.
"COMMITMENT" shall mean, for any Committed Class B Purchaser,
the maximum amount of such Committed Class B Purchaser's commitment to purchase
a portion the Class B Invested Amount, as set forth in the Joinder Supplement or
the Transfer Supplement by which such Committed Class B Purchaser became a party
to this Agreement or assumed the Commitment (or a portion thereof) of another
Committed Class B Purchaser, as such amount may be adjusted from time to time
pursuant to Transfer Supplement(s) executed by such Committed Class B Purchaser
and its Assignee and delivered pursuant to Section 8.1 of this Agreement or
pursuant to Section 2.2 of this Agreement.
"COMMITMENT EXPIRATION DATE" shall mean, for a Committed Class
B Purchaser, the date set forth in the Joinder Supplement or the Transfer
Supplement by which such Committed Class B Purchaser became a party to this
Agreement or assumed the Commitment (or a portion thereof) of another Committed
Class B Purchaser, as such date may be extended from time to time by mutual
agreement of all Class B Purchasers, the Agent and the Transferor.
"COMMITMENT PERCENTAGE" shall mean, for a Committed Class B
Purchaser, such Class B Purchaser's Commitment as a percentage of the aggregate
Commitments of all Committed Class B Purchasers.
"CREDIT SUISSE" shall mean Credit Suisse First Boston, a Swiss
banking corporation acting through its New York Branch.
"DEFAULTING PURCHASER" has the meaning specified in subsection
2.1(e) of this Agreement.
"DOWNGRADED PURCHASER" has the meaning specified in subsection
8.1(k).
-4-
<PAGE> 8
"ELIGIBLE ASSIGNEE" shall mean Credit Suisse and each other
Person listed in a letter from the Agent to the Transferor dated the Closing
Date, as such list may be augmented from time to time with the consent of the
Agent and the Transferor.
"EXCLUDED TAXES" has the meaning specified in subsection
2.5(a) of this Agreement.
"FDSNB" has the meaning specified in the preamble to this
Agreement.
"FIXED PERIOD" shall mean with respect to a Class B Purchaser
and any portion of the Class B Investor Principal Balance owed to such Class B
Purchaser:
(a) initially the period commencing on the date of
purchase of such portion of the Class B Investor Principal Balance and
ending such number of days as the Transferor shall select and, in the
case of a Structured Purchaser, the Agent, acting at the direction of
such Structured Purchaser, shall approve pursuant to Section 2.1 up to
69 days from such date; provided that the initial Fixed Period for any
portions of the Class B Investor Principal Balance purchased by a
Committed Class B Purchaser shall be one day; and
(b) thereafter each period commencing on the last day
of the immediately preceding Fixed Period for such portion of the Class
B Investor Principal Balance and ending such number of days (not to
exceed 69 days) as the Transferor shall select and, in the case of a
Structured Purchaser, the Agent, acting at the direction of such
Structured Purchaser, shall approve on notice by the Transferor
received by the Agent (including notice by telephone, confirming in
writing) not later than 4:00 p.m. (New York City time) on such last
day, EXCEPT that if the Agent shall not have received such notice or
approved such period on or before 4:00 p.m. (New York City time) on
such last day, such period shall be one day;
PROVIDED that
(i) any Fixed Period in respect of which Yield is
computed by reference to the Alternate Rate shall be a period from one
to and including 29 days, or a period of one month, as the Transferor
may select as provided above; PROVIDED that in the case of a Fixed
Period of one month in respect of which the Alternate Rate is computed
by reference to the Adjusted Eurodollar Rate, each affected Class B
Purchaser shall have received at least two Business Days' prior notice
of such selection;
(ii) any Fixed Period (other than one day) which
would otherwise end on a day which is not a Business Day shall be
extended to the next succeeding Business Day (PROVIDED, HOWEVER, if
Yield in respect of such Fixed Period is computed by reference to the
Adjusted Eurodollar Rate, and such Fixed Period would otherwise end on
a day which is not a Business Day, and there is no subsequent Business
Day in the same calendar month as such day, such Fixed Period shall end
on the next preceding Business Day);
(iii) in the case of any Fixed Period of one day, (A)
if such Fixed Period is the initial Fixed Period for a portion of the
Class B Investor Principal Balance such Fixed Period shall be the day
of purchase of such portion; (B) any subsequently occurring Fixed
-5-
<PAGE> 9
Period which is one day shall, if the immediately preceding Fixed
Period is more than one day, be the last day of such immediately
preceding Fixed Period, and, if the immediately preceding Fixed Period
is one day, be the day next following such immediately preceding Fixed
Period; and (C) if such Fixed Period occurs on a day immediately
preceding a day which is not a Business Day, such Fixed Period shall be
extended to the next succeeding Business Day; and
(iv) in the case of any Fixed Period for any portion
of the Class B Principal Balance which commences before the Termination
Date and would otherwise end on a date occurring after the Termination
Date, such Fixed Period shall end on the Termination Date and the
duration of each Fixed Period which commences on or after the
Termination Date shall be of such duration as shall be selected by the
Agent.
"GOVERNMENTAL AUTHORITY" shall mean any nation or government,
any state or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"INDEMNITEE" has the meaning specified in subsection 2.7(a) of
this Agreement.
"INDEMNIFYING PARTY" has the meaning specified in subsection
2.7(b) of this Agreement.
"INVESTING OFFICE" shall mean initially, the office of any
Class B Purchaser (if any) designated as such, in the case of any initial Class
B Purchaser, in its Joinder Supplement and, in the case of any Assignee, in the
related Transfer Supplement, and thereafter, such other office of such Class B
Purchaser or such Assignee which shall be a beneficial holder of a portion of
the Class B Certificate as may be designated in writing to the Agent, the
Transferor, the Servicer and the Trustee by such Class B Purchaser or Assignee.
"INVESTMENT LETTER" has the meaning specified in subsection
8.1(a) of this Agreement.
"JOINDER SUPPLEMENT" has the meaning specified in subsection
2.2(d) of this Agreement.
"LIQUIDATION DAY" shall mean, for any Class B Purchaser and
any portion of the Class B Investor Principal Balance owed to such Purchaser,
any day other than the last day of such Class B Purchaser's Fixed Period
applicable to such portion of the Class B Investor Principal Balance (without
taking into account any shortened duration of such Fixed Period pursuant to
clause (iv) of the definition thereof), on which a reduction of such portion of
the Class B Investor Principal Balance occurs.
"LIQUIDATION FEE" shall mean, for any Class B Purchaser and
for any Liquidation Day, the amount, if any, by which (i) the additional Yield
(calculated without taking into account any Liquidation Fee) which would have
accrued during the current Fixed Period on the portion of the Class B Investor
Principal Balance owed to such Purchaser which is reduced on such day,
-6-
<PAGE> 10
exceeds (ii) the income, if any, received by such Class B Purchaser from
investing the proceeds of such reduction of the Class B Investor Principal
Balance.
"MASTER POOLING AND SERVICING AGREEMENT" has the meaning
specified in the recitals to this Agreement.
"MOODY'S" shall mean Moody's Investors Service, Inc.
"NONCOMMITTED CLASS B PURCHASER" shall mean a Class B
Purchaser which is not a Committed Class B Purchaser.
"NONCOMMITTED PURCHASER PERCENTAGE" shall mean for each Class
B Purchaser which is not a Committed Class B Purchaser, the percentage set forth
in its Joinder Supplement or the Transfer Supplement by which such Class B
Purchaser became a party to this Agreement, as such percentage may be adjusted
from time to time pursuant to Transfer Supplement(s) executed by such Class B
Purchaser and any Assignee and delivered pursuant to Section 8.1 of this
Agreement.
"NONDEFAULTING PURCHASER" has the meaning specified in
subsection 2.1(e) of this Agreement.
"PARTICIPANT" has the meaning specified in subsection 8.1(d)
of this Agreement.
"PARTICIPATION" has the meaning specified in subsection 8.1(d)
of the Agreement.
"PERCENTAGE INTEREST" shall mean, for a Class B Purchaser, (a)
the sum of (i) the portion of the Class B Initial Invested Amount (if any)
purchased by such Class B Purchaser, plus (ii) the aggregate VFC Additional
Class B Invested Amounts (if any) purchased by such Class B Purchaser through
the end of the preceding Business Day pursuant to Section 6.15 of the Pooling
and Servicing Agreement, plus (iii) any portion of the Class B Investor
Principal Balance acquired by such Class B Purchaser as an Assignee from another
Class B Purchaser pursuant to a Transfer Supplement executed and delivered
pursuant to Section 8.1 of this Agreement, minus (iv) the aggregate amount of
principal payments made to such Class B Purchaser prior to such Business Day,
minus (v) any portion of the Class B Investor Principal Balance assigned by such
Class B Purchaser to an Assignee pursuant to a Transfer Supplement executed and
delivered pursuant to Section 8.1 of this Agreement, as a percentage of (b) the
aggregate Class B Investor Principal Balance.
"POOLING AND SERVICING AGREEMENT" has the meaning specified in
the recitals to this Agreement.
"PURCHASE DATE" shall mean the Closing Date and each date on
which a purchase of a VFC Additional Class B Invested Amount is to occur in
accordance with Section 6.15 of the Pooling and Servicing Agreement and Section
2.1 hereof.
"RATING AGENCY" shall mean each of Moody's and Standard &
Poor's.
-7-
<PAGE> 11
"REDUCTION AMOUNT" has the meaning specified in subsection
2.6(a) of this Agreement.
"REGULATORY CHANGE" shall mean, as to each Class B Purchaser,
any change occurring after the date of the execution and delivery of the Joinder
Supplement or theTransfer Supplement by which it became a party to this
Agreement; in the case of a Participant, the date on which its Participation
became effective or, in the case of an Affected Party, the date it became such
an Affected Party, in any (or the adoption after such date of any new):
(i) United States Federal or state law or foreign law
applicable to such Class B Purchaser, Affected Party or Participant; or
(ii) regulation, interpretation, directive, guideline or
request (whether or not having the force of law) applicable to such
Class B Purchaser, Affected Party or Participant of any court or other
judicial authority or any Governmental Authority charged with the
interpretation or administration of any law referred to in clause (i)
or of any fiscal, monetary or other authority or central bank having
jurisdiction over such Class B Purchaser, Affected Party or
Participant.
"RELATED DOCUMENTS" shall mean, collectively, this Agreement
(including the Class B Fee Letter and all Joinder Supplements and Transfer
Supplements), the Master Pooling and Servicing Agreement, the Supplement, the
Series 1997-1 Certificates and the Receivables Purchase Agreement.
"REPLACEMENT PURCHASER" has the meaning specified in
subsection 2.4(c) of this Agreement.
"REQUIRED CLASS B OWNERS" shall mean, at any time, Class B
Purchasers having Percentage Interests aggregating at least 50.1%.
"REQUIRED CLASS B PURCHASERS" shall mean, at any time,
Committed Class B Purchasers having Commitments aggregating at least 50.1% of
the aggregate Commitments of all Committed Class B Purchasers.
"REQUIREMENT OF LAW" shall mean, as to any Person, any law,
treaty, rule or regulation, or determination of an arbitrator or Governmental
Authority, in each case applicable to or binding upon such Person or to which
such Person is subject, whether federal, state or local (including, without
limitation, usury laws, the Federal Truth in Lending Act and Regulation Z and
Regulation B of the Board of Governors of the Federal Reserve System).
"RESERVE ACCOUNT INCREASE NOTICE" shall mean a notice
delivered by the Administrative Agent in accordance with Section 2.8 hereof.
"SERIES 1997-1 VARIABLE FUNDING CERTIFICATES" has the meaning
specified in the recitals to this Agreement.
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<PAGE> 12
"SERVICER" has the meaning specified in the preamble to this
Agreement.
"STANDARD & POOR'S" shall mean Standard & Poor's Ratings
Services, a division of The McGraw-Hill Companies, Inc.
"STRUCTURED PURCHASER" shall mean any Class B Purchaser whose
principal business consists of issuing commercial paper, medium term notes or
other securities to fund its acquisition and maintenance of receivables,
accounts, instruments, chattel paper, general intangibles and other similar
assets or interests therein and which is required by any nationally recognized
rating agency which is rating such securities to obtain from its principal
debtors an agreement such as that set forth in subsection 9.12(b) of this
Agreement in order to maintain such rating.
"SUPPLEMENT" has the meaning specified in the recitals to this
Agreement.
"SUPPORT BANK" shall mean any bank or other financial
institution extending or having a commitment to extend funds to or for the
account of any Structured Purchaser (including by agreement to purchase an
assignment of, or participation in Class B Certificates) under a liquidity or
credit support agreement which relates to this Agreement.
"TAXES" has the meaning specified in subsection 2.5(a) of this
Agreement.
"TERMINATION DATE" shall mean the Amortization Period
Commencement Date.
"TERMINATION EVENT" has the meaning specified in Section 2.8
hereof.
"TRANSFER" has the meaning specified in subsection 8.1(c) of
this Agreement.
"TRANSFER Supplement" has the meaning specified in subsection
8.1(e) of this Agreement.
"TRANSFEROR" has the meaning specified in the preamble to this
Agreement.
"TRUST" shall mean the Prime Credit Card Master Trust II.
"TRUSTEE" shall mean The Chase Manhattan Bank, a banking
corporation organized and existing under the laws of the State of New York, in
its capacity as Trustee under the Pooling and Servicing Agreement, together with
its successors in such capacity.
"WRITTEN" or "IN WRITING" (and other variations thereof) shall
mean any form of written communication or a communication by means of telex,
telecopier device, telegraph or cable.
"YIELD" shall mean, for any Business Day the aggregate of the
following amounts:
(i) for each portion of the Class B Investor
Principal Balance owed to a Structured Purchaser to the extent that
such Structured Purchaser has funded such portion through the issuance
of commercial paper notes on the immediately preceding Business Day,
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<PAGE> 13
PB x CPR x ED + LF
--
360
and
(ii) for each remaining portion of the Class B
Investor Principal Balance,
PB x AR x ED + LF
--
TD
where:
PB = the relevant portion of the Class B
Investor Principal Balance
CPR = the Commercial Paper Rate then
applicable to the relevant portion
of the Class B Investor Principal Balance
AR = the Alternate Rate then applicable to the
relevant portion of the Class B Investor
Principal Balance
ED = the number of days elapsed since the
immediately preceding Business Day
TD = 360 if AR is the Adjusted Eurodollar Rate,
or 365 or 366, as applicable, if AR is the
Agent Base Rate
LF = the Liquidation Fee, if any, for such Business
Day
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS
2.1 PURCHASES. (a) On and subject to the terms and conditions
of this Agreement, each Noncommitted Class B Purchaser which is a party hereto
on the Closing Date, severally, agrees to acquire its Noncommitted Purchaser
Percentage of the Class B Certificates on the Closing Date for a purchase price
equal to its Noncommitted Purchaser Percentage of the Initial Class B Invested
Amount, which shall not be less than $62,500, and each Committed Class B
Purchaser which is a party hereto on the Closing Date, severally, agrees to
acquire its Commitment Percentage of the Class B Certificates not so acquired by
Noncommitted Class B Purchasers on the Closing Date for a purchase price equal
to the portion of the Initial Class B Invested Amount represented thereby on the
Closing Date. Such purchase price shall be made available to the Transferor,
subject to the satisfaction of the conditions specified in Section 3 hereof, at
or prior to 1:00 p.m. New York City time on the Closing Date, at an account of
the Transferor specified in writing by the Transferor to the Agent in funds
immediately available to the Transferor. The Class B Purchasers hereby direct
that the Class B Certificates be registered in the name of the Agent, on behalf
of the Class B Owners from time to time hereunder.
(b) On and subject to the terms and conditions of this
Agreement and prior to the Termination Date, (i) each Noncommitted Class B
Purchaser may purchase its Noncommitted Purchaser Percentage of any VFC
Additional Class B Invested Amount offered for purchase by the
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<PAGE> 14
Transferor pursuant to Section 6.15 of the Pooling and Servicing Agreement in an
amount of not less than $62,500, and (ii) each Committed Class B Purchaser,
severally, agrees to purchase a portion of such VFC Additional Class B Invested
Amount which is not purchased by Noncommitted Class B Purchasers pursuant to
clause (i) in an amount equal to the lesser of (A) its Commitment Percentage
thereof, or (B) the excess of its Commitment over its Percentage Interest of the
Class B Investor Principal Balance (determined prior to giving effect to such
purchase), in either case for a purchase price equal to the VFC Additional Class
B Invested Amount so purchased. Such purchase price shall be made available to
the Trustee in immediately available funds, for the account of the Transferor,
subject to the satisfaction of the conditions specified in Section 3 hereof, at
or prior to 1:00 p.m. New York City time on the applicable Purchase Date
specified pursuant to subsection 2.1(c), for deposit in the Proceeds Account
held by the Trustee pursuant to the Supplement. Each Noncommited Class B
Purchaser which is a Structured Purchaser confirms by becoming a party to this
Agreement that, subject to the terms and conditions of this Agreement, it
currently intends to purchase its Noncommitted Purchaser Percentage of any VFC
Additional Class B Invested Amount offered for purchase by the Transferor
pursuant to Section 6.15 of the Pooling and Servicing Agreement to the extent
that, at the time of such purchase, it is permitted and able in the ordinary
course of its business to issue commercial paper which is rated not lower than
the respective ratings assigned by Moody's and Standard & Poor's on the date on
which such Structured Purchaser became a Class B Purchaser (without increasing
or otherwise modifying any letter of credit or other enhancement provided to
such Structured Purchaser or any liquidity support provided to such Structured
Purchaser by Affected Parties) in sufficient amounts fully to fund such
purchase.
(c) The purchase of the Initial Class B Invested Amount shall
be made on prior notice from the Transferor to the Agent received by the Agent
not later than 9:30 a.m. New York City time on the Closing Date, and each
purchase of any VFC Additional Class B Invested Amount on the applicable
Purchase Date shall be made on prior notice from the Transferor to the Agent
received by the Agent not later than 4:00 p.m. New York City time on the
Business Day immediately preceding such Purchase Date. Each such notice shall be
irrevocable and shall specify (i) the aggregate VFC Additional Class B Invested
Amount to be purchased, (ii) the applicable Purchase Date (which shall be a
Business Day), and (iii) the desired duration of the initial Fixed Period for
the Class B Investor Principal Balance of each applicable Purchaser. The Agent
shall promptly forward a copy of such notice to each Class B Purchaser. In the
case of the purchase of a VFC Additional Class B Invested Amount, each
Noncommitted Class B Purchaser shall notify the Agent by 10:45 a.m., New York
City time, on the applicable Purchase Date whether it has determined to make
such purchase and, if so, whether all of the terms specified by the Transferor
are acceptable to such Noncommitted Class B Purchaser. In the event that a
Noncommitted Class B Purchaser shall not have timely provided such notice, it
shall be deemed to have determined not to make such purchase. The Agent shall
notify the Transferor and each Committed Class B Purchaser on or prior to 11:00
a.m., New York City time, on the applicable Purchase Date of whether each
Noncommitted Class B Purchaser has so determined to purchase its share of such
VFC Additional Class B Invested Amount and, in the event that Noncommitted Class
B Purchasers have not determined to purchase the entire VFC Additional Class B
Invested Amount, the Agent shall specify in such notice (i) the portion of the
VFC Additional Class B Invested Amount to be purchased by each Committed Class B
Purchaser, (ii) the applicable Purchase Date (which shall be a Business Day),
and (iii) the duration of the initial Fixed Period for the Class B Investor
Principal Balance of each Committed Class B Purchaser.
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<PAGE> 15
(d) In no event may the Transferor offer any VFC Additional
Class B Invested Amount for purchase hereunder or under Section 6.15 of the
Pooling and Servicing Agreement, nor shall any Committed Class B Purchaser be
obligated to purchase any VFC Additional Class B Invested Amount, to the extent
that such VFC Additional Class B Invested Amount, when aggregated with the Class
B Investor Principal Balance determined prior to giving effect to the issuance
thereof, would exceed the aggregate Commitments.
(e) In the event that one or more Committed Class B Purchasers
(the "DEFAULTING PURCHASERS") fails to fund its Committed Percentage of any
purchase of a VFC Additional Class B Invested Amount by 1:00 p.m., New York City
time, on the applicable Purchase Date and the Servicer shall have notified the
Agent of such failure by not later than 1:30 p.m., New York City time, on such
Purchase Date, the Agent shall so notify each of the other Committed Class B
Purchasers (the "NONDEFAULTING PURCHASERS") not later than 2:30 p.m., New York
City time, on such Purchase Date, and each Nondefaulting Purchaser shall,
subject to the satisfaction of the conditions specified in Section 3 hereof,
purchase a portion of the aggregate VFC Additional Class B Invested Amount which
was to be purchased by the Defaulting Purchasers equal to the lesser of (i) its
Commitment Percentage thereof as a percentage of the aggregate Commitment
Percentages of all Nondefaulting Purchasers, and (ii) the excess of its
Commitment over its Percentage Interest of the Class B Investor Principal
Balance (determined prior to giving effect to such purchase), in either case for
a purchase price equal to the VFC Additional Class B Invested Amount so
purchased, by making such purchase price available to the Trustee for the
account of the Transferor at or prior to 5:00 p.m. New York City time, on such
Purchase Date for deposit into the Proceeds Account in immediately available
funds. No such purchase by Nondefaulting Purchasers shall relieve any Defaulting
Purchaser of its obligations to make purchases hereunder, and each Defaulting
Purchaser shall from and after the applicable Purchase Date be obligated to
purchase the portion of any VFC Additional Class B Invested Amount which such
Defaulting Purchaser was required to purchase hereunder and which was purchased
by a Nondefaulting Purchaser from such Nondefaulting Purchaser at a purchase
price equal to (i) the portion of the Class B Investor Principal Balance
represented thereby, plus (ii) accrued and unpaid interest thereon at the
applicable Class B Certificate Rate, plus (iii) an amount calculated at the rate
of 1.0% per annum from the applicable Purchase Date for such VFC Additional
Class B Invested Amount through the date of such purchase by the Defaulting
Purchaser. The Transferor shall have the right to replace any Defaulting
Purchaser hereunder with a Replacement Purchaser, and the Agent, acting at the
request of the Required Class B Purchasers, shall have the right to replace such
Defaulting Purchaser with a Replacement Purchaser which is an Eligible Assignee
or is otherwise reasonably acceptable to the Transferor; PROVIDED, that (x) such
replacement shall not affect the Defaulting Purchaser's right to receive any
amounts otherwise owed to it hereunder, when and as the same would have been due
and payable without regard to such replacement (subject to the rights of the
other parties hereto with respect to such Defaulting Purchaser), and (y) such
Replacement Purchaser shall, concurrently with its becoming a Committed Class B
Purchaser hereunder, purchase the portion of any VFC Additional Class B Invested
Amount at the time required to be purchased by the Defaulting Purchaser pursuant
to the preceding sentence for a purchase price equal to (i) the portion of the
Class B Investor Principal Balance represented thereby, plus (ii) accrued and
unpaid interest thereon at the applicable Class B Certificate Rate; PROVIDED
FURTHER, that upon any such replacement and purchase by a Replacement Purchaser,
any amounts owing to Nondefaulting Purchasers by such Defaulting
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<PAGE> 16
Purchaser under clause (iii) of the preceding sentence shall remain an
obligation of such Defaulting Purchaser.
(f) The Class B Certificates shall be paid as provided in the
Pooling and Servicing Agreement. The Agent shall allocate each payment in
reduction of the Class B Investor Principal Balance to the Class B Owners PRO
RATA based on their respective Percentage Interests, and shall allocate each
payment of Class B Interest for any Business Day to the Class B Owners PRO RATA
based on the Yield on such Class B Owner's portion of the Class B Investor
Principal Balance for such Business Day. Amounts so allocated by the Agent shall
be distributed by the Agent to the respective Class B Owners when and as
received by the Agent from the Trust.
2.2 REDUCTIONS AND INCREASES OF COMMITMENTS. (a) At any time
the Transferor may, upon at least five Business Days' prior written notice to
the Agent, terminate in whole or reduce in part the portion of the Commitments
which exceed the then outstanding Class B Investor Principal Balance (after
adjustments thereto occurring on the date of such termination or reduction).
Each such partial reduction shall be in an aggregate amount of $1,250,000 or
integral multiples thereof. On the Termination Date, the aggregate Commitments
shall automatically reduce to an amount equal to the Class B Investor Principal
Balance on such day, and on each Business Day thereafter shall be further
reduced by an amount equal to the reduction in the Class B Investor Principal
Balance (if any) on such day. Reductions of the aggregate Commitments pursuant
to this subsection 2.2(a) shall be allocated to the PRO RATA to the Commitments
of each Committed Class B Purchaser based on its respective Commitment
Percentage.
(b) The Transferor may, upon at least two Business Days' prior
written notice to the Agent, terminate in whole or reduce in part the Commitment
of any Defaulting Purchaser or Downgraded Purchaser to an amount not less than
such Class A Purchaser's Percentage Interest of the Class A Principal Balance.
Each such partial reduction shall be in an aggregate amount of $125,000 or
integral multiples thereof. No such termination of reduction shall relieve such
Defaulting Purchaser of its obligations to Nondefaulting Purchasers pursuant to
subsection 2.1(e) hereof.
(c) The aggregate Commitments of the Committed Class B
Purchasers may be increased from time to time through the increase of the
Commitment of one or more Committed Class B Purchasers; PROVIDED, HOWEVER, that
no such increase shall have become effective unless (i) the Agent and the
Transferor shall have given their written consent thereto, (ii) such increasing
Committed Class B Purchaser shall have entered into an appropriate amendment or
supplement to this Agreement reflecting such increased Commitment and (iii) such
conditions, if any, as the Agent shall have required in connection with its
consent (including, without limitation, the delivery of legal opinions with
respect to such Committed Class B Purchaser, the agreement of such Committed
Class B Purchaser to become a Support Bank for one or more Structured Purchasers
having a support commitment corresponding to its Commitment hereunder and
approvals from the Rating Agency) shall have been satisfied. The Transferor may
also increase the aggregate Commitments of the Committed Class B Purchasers from
time to time by adding additional Committed Class B Purchasers in accordance
with subsection 2.2(d).
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<PAGE> 17
(d) Subject to the provisions of subsections 8.1(a) and 8.1(b)
applicable to initial purchasers of Class B Certificates, a Person having
short-term credit ratings of not lower than P-1 from Moody's and A-1 from
Standard & Poor's may from time to time with the consent of the Agent and the
Transferor become a party to this Agreement as an initial or an additional
Noncommitted Class B Purchaser or an initial or an additional Committed Class B
Purchaser by (i) delivering to the Transferor an Investment Letter and (ii)
entering into an agreement substantially in the form attached hereto as EXHIBIT
B hereto (a "JOINDER SUPPLEMENT"), with the Agent and the Transferor,
acknowledged by the Servicer, which shall specify (A) the name and address of
such Person for purposes of Section 9.2 hereof, (B) whether such Person will be
a Noncommitted Class B Purchaser or Committed Class B Purchaser and, if such
Person will be a Committed Class B Purchaser, its Commitment, and (C) the other
information provided for in such form of Joinder Supplement. Upon its receipt of
a duly executed Joinder Supplement, the Agent shall on the effective date
determined pursuant thereto give notice of such effectiveness to the Transferor,
the Servicer and the Trustee, and the Servicer will provide notice thereof to
each Rating Agency (if required). If, at the time the effectiveness of the
Joinder Supplement for an additional Committed Class B Purchaser, the other
Committed Class B Purchasers are Class B Owners, it shall be a condition to such
effectiveness that such additional Committed Class B Purchaser purchase from
each other Class B Purchaser an interest in the Class B Certificates in an
amount equal to (i) such other Class B Purchaser's Percentage Interest of the
Class B Investor Principal Balance, times (ii) a fraction, the numerator of
which equals the Commitment of such additional Class B Purchaser, and the
denominator of which equals the aggregate Commitments of the Class B Purchasers
(determined after giving effect to the additional Commitment of the additional
Class B Purchaser as set forth in such Joinder Supplement), for a purchase price
equal to the portion of the Class B Investor Principal Balance purchased.
2.3 FEES, EXPENSES, PAYMENTS, Etc. (a) Subject to the
provisions of subsection 9.12(a) hereof, the Transferor agrees to pay to the
Agent for the account of the Class B Purchasers the fees set forth in the Class
B Fee Letter at the times specified therein.
(b) Subject to the provisions of subsection 9.12(a) hereof in
the case of the Transferor, the Transferor and FDSNB, jointly and severally,
shall be obligated to pay on demand to (i) the Agent and the initial Class B
Purchasers all reasonable costs and expenses in connection with the preparation,
execution, delivery and administration (including any requested amendments,
waivers or consents of any of the Related Documents) of this Agreement, and the
other documents to be delivered hereunder or in connection herewith, including,
without limitation, the reasonable fees and out-of-pocket expenses of counsel
for the Agent and each of the initial Class B Purchasers with respect thereto
and (ii) the Agent and each Class B Purchaser, all reasonable costs and
expenses, if any, in connection with the enforcement of any of the Related
Documents, and the other documents delivered thereunder or in connection
therewith.
(c) Subject to the provisions of subsection 9.12(a) hereof in
the case of the Transferor, the Transferor and FDSNB, jointly and severally,
shall be obligated to pay on demand any and all stamp and other taxes (other
than Taxes covered by Section 2.5) and fees payable in connection with the
execution, delivery, filing and recording of this Agreement, the Class B
Certificates, any of the other Related Documents or the other documents and
agreements to be delivered hereunder and thereunder, and agree to save each
Class B Purchaser and the Agent
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<PAGE> 18
harmless from and against any liabilities with respect to or resulting from any
delay by the Transferor or FDSNB in paying or omission to pay such taxes and
fees.
(d) Yield calculated by reference to the Adjusted Eurodollar
Rate shall be calculated on the basis of a 360-day year for the actual days
elapsed. Any Yield or interest accruing at the Agent Base Rate shall be
calculated on the basis of a 365- or 366-day year, as applicable, for the actual
days elapsed. Fees or other periodic amounts payable hereunder shall be
calculated, unless otherwise specified in the Class B Fee Letter, on the basis
of a 360-day year and for the actual days elapsed.
(e) Each determination of Yield by the Agent pursuant to any
provision of this Agreement shall be conclusive and binding on the Class B
Purchasers, the Transferor, the Servicer and the Trustee in the absence of
manifest error.
(f) All payments to be made hereunder, whether on account of
principal, interest, fees or otherwise, shall be made without setoff or
counterclaim and shall be made prior to 2:30 p.m., New York City time, on the
due date thereof to the Agent's account specified in subsection 9.2(b) hereof,
in United States dollars and in immediately available funds. Notwithstanding
anything herein to the contrary, if any payment due hereunder becomes due and
payable on a day other than a Business Day, the payment date thereof shall be
extended to the next succeeding Business Day and interest shall accrue thereon
at the applicable rate during such extension. To the extent that (i) the
Trustee, FDSNB, the Transferor or the Servicer makes a payment to the Agent or a
Class B Purchaser or (ii) the Agent or a Class B Purchaser receives or is deemed
to have received any payment or proceeds for application to an obligation, which
payment or proceeds or any part thereof are subsequently invalidated, declared
to be fraudulent or preferential, set aside or required to be repaid to a
trustee, receiver or any other party under any bankruptcy or insolvency law,
state or Federal law, common law, or for equitable cause, then, to the extent
such payment or proceeds are set aside, the obligation or part thereof intended
to be satisfied shall be revived and continue in full force and effect, as if
such payment or proceeds had not been received or deemed received by the Agent
or the Class B Purchaser, as the case may be.
2.4 REQUIREMENTS OF LAW. (a) In the event that any Class B
Purchaser shall have reasonably determined that any Regulatory Change shall:
(i) subject such Class B Purchaser to any tax of any
kind whatsoever with respect to this Agreement, its Commitment or its
beneficial interest in the Class B Certificates, or change the basis of
taxation of payments in respect thereof (except for Taxes covered by
Section 2.5 and taxes included in the definition of Excluded Taxes in
subsection 2.5(a) and changes in the rate of tax on the overall net
income of such Class B Purchaser); or
(ii) impose, modify or hold applicable any reserve,
special deposit, compulsory loan or similar requirement against assets
held by, deposits or other liabilities in or for the account of,
advances, loans or other extensions of credit by, or any other
acquisition of funds by, such Class B Purchaser;
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<PAGE> 19
and the result of any of the foregoing is to increase the cost to such Class B
Purchaser, by an amount which such Class B Purchaser, in its reasonable
judgment, deems to be material, of maintaining its Commitment or its beneficial
interest in the Class B Certificates or to reduce any amount receivable in
respect thereof, then, in any such case, after submission by such Class B
Purchaser to the Agent of a written request therefor and the submission by the
Agent to the Transferor, the Trustee and the Servicer of such written request
therefor, (subject to subsection 9.12(a) hereof) the Transferor shall pay to the
Agent for the account of such Class B Purchaser any additional amounts necessary
to compensate such Class B Purchaser for such increased cost or reduced amount
receivable, together with interest on each such amount from the day which is ten
Business Days after the date such request for compensation under this subsection
2.4(a) is received by the Transferor until payment in full thereof (after as
well as before judgment) at the Agent Base Rate in effect from time to time.
(b) In the event that any Class B Purchaser shall
have reasonably determined that any Regulatory Change regarding capital adequacy
has the effect of reducing the rate of return on such Class B Purchaser's
capital or on the capital of any corporation controlling such Class B Purchaser
as a consequence of its obligations hereunder or its maintenance of its
Commitment or its beneficial interest in the Class B Certificates to a level
below that which such Class B Purchaser or such corporation could have achieved
but for such Regulatory Change (taking into consideration such Class B
Purchaser's or such corporation's policies with respect to capital adequacy) by
an amount reasonably deemed by such Class B Purchaser to be material, then, from
time to time, after submission by such Class B Purchaser to the Agent of a
written request therefor and submission by the Agent to the Transferor and the
Servicer of such written request therefor, (subject to subsection 9.12(a)
hereof) the Transferor shall pay to the Agent for the account of such Class B
Purchaser such additional amount or amounts as will compensate such Class B
Purchaser for such reduction, together with interest on each such amount from
the day which is ten Business Days after the date such request for compensation
under this subsection 2.4(b) is received by the Transferor until payment in full
thereof (after as well as before judgment) at the Agent Base Rate in effect from
time to time.
(c) Each Class B Purchaser agrees that it shall use its
reasonable efforts to reduce or eliminate any claim for compensation pursuant to
subsections 2.4(a) and 2.4(b), including but not limited to designating a
different Investing Office for its Class B Certificates (or any interest
therein) if such designation will avoid the need for, or reduce the amount of,
any increased amounts referred to in subsection 2.4(a) or 2.4(b) and will not,
in the reasonable opinion of such Class B Purchaser, be disadvantageous to such
Class B Purchaser or inconsistent with its policies or result in an unreimbursed
cost or expense to such Class B Purchaser or in an increase in the aggregate
amount payable under both subsections 2.4(a) and 2.4(b). If any increased
amounts referred to in subsection 2.4(a) or 2.4(b) shall not be eliminated or
reduced by the designation of a different Investing Office and payment thereof
hereunder shall not be waived by such Class B Purchaser, the Transferor shall
have the right to replace such Class B Purchaser hereunder with a new purchaser
reasonably acceptable to the Agent ("REPLACEMENT PURCHASER") that shall succeed
to the rights of such Class B Purchaser under this Agreement and such Class B
Purchaser shall assign its beneficial interest in the Class B Certificates to
such Replacement Purchaser in accordance with the provisions of Section 8.1,
PROVIDED, that (i) such Class B Purchaser shall not be replaced hereunder with a
new investor until such Class B Purchaser has been paid in full its Percentage
Interest of the Class B Investor Principal Balance and all accrued and unpaid
Yield (including any Liquidation Fee determined for
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<PAGE> 20
the replacement date) thereon by such new investor and all other amounts
(including all amounts owing under this Section 2.4) owed to it pursuant to this
Agreement and (ii) if the Class B Purchaser to be replaced is the Agent or the
Administrative Agent or, unless the Agent and the Administrative Agent otherwise
agree, a Structured Purchaser sponsored or administered by the Administrative
Agent or the Agent (in its individual capacity), a replacement Agent or
Administrative Agent, as the case may be, shall have been appointed in
accordance with Section 7.9 and the Agent or Administrative Agent, as the case
may be, to be replaced shall have been paid all amounts owing to it as Agent or
Administrative Agent, as the case may be, pursuant to this Agreement; PROVIDED,
FURTHER, that the Transferor shall provide such Class B Purchaser with an
Officer's Certificate stating that such new investor is not subject to, or has
agreed not to seek, such increased amount.
(d) Each Class B Purchaser claiming increased amounts
described in subsection 2.4(a) or 2.4(b) will furnish to the Agent (together
with its request for compensation) a certificate setting forth any actions taken
by such Class B Purchaser to reduce or eliminate such increased amounts pursuant
to subsection 2.4(c) and the basis and the calculation of the amount (in
reasonable detail) of each request by such Class B Purchaser for any such
increased amounts referred to in subsection 2.4(a) or 2.4(b), such certificate
to be conclusive as to the factual information set forth therein absent manifest
error.
2.5 TAXES. (a) All payments made to the Class B Purchasers or
the Agent under this Agreement and the Pooling and Servicing Agreement
(including all amounts payable with respect to the Class B Certificates) shall,
to the extent allowed by law, be made free and clear of, and without deduction
or withholding for or on account of, any present or future income, stamp or
other taxes, levies, imposts, duties, charges, fees, deductions or withholdings,
now or hereafter imposed, levied, collected, withheld or assessed by any
Governmental Authority (collectively, "TAXES"), excluding (i) income taxes
(including, without limitation, branch profit taxes, minimum taxes and taxes
computed under alternative methods, at least one of which is based on or
measured by net income), franchise taxes (imposed in lieu of income taxes), or
any other taxes based on or measured by the net income of the Class B Purchaser
or the gross receipts or income of the Class B Purchaser; (ii) any Taxes that
would not have been imposed but for the failure of such Class B Purchaser or the
Agent, as applicable, to provide and keep current (to the extent legally able)
any certification or other documentation required to qualify for an exemption
from, or reduced rate of, any such Taxes or required by this Agreement to be
furnished by such Class B Purchaser or the Agent, as applicable; (iii) any Taxes
imposed as a result of a change by any Class B Purchaser of the Investing Office
(other than changes mandated by this Agreement, including subsection 2.4(c)
hereof, or required by law); and (iv) any Taxes imposed as a result of the
Transfer by any Class B Purchaser of its interest hereunder other than in
accordance with Section 8.1 (all such excluded taxes being hereinafter called
"EXCLUDED TAXES"). If any Taxes, other than Excluded Taxes, are required to be
withheld from any amounts payable to a Class B Purchaser or the Agent hereunder
or under the Pooling and Servicing Agreement, then after submission by any Class
B Purchaser to the Agent (in the case of an amount payable to a Class B
Purchaser) and by the Agent to the Transferor and the Servicer of a written
request therefor, the amounts so payable to such Class B Purchaser or the Agent,
as applicable, shall be increased and the Transferor shall be liable to pay to
the Agent for the account of such Class B Purchaser or for its own account, as
applicable, the amount of such increase) to the extent necessary to yield to
such Class B Purchaser or the Agent, as applicable (after payment of all such
Taxes) interest or any such other amounts payable hereunder or thereunder at the
rates or in the amounts
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specified in this Agreement and the Pooling and Servicing Agreement; PROVIDED,
HOWEVER, that the amounts so payable to such Class B Purchaser or the Agent
shall not be increased pursuant to this subsection 2.5(a) if such requirement to
withhold results from the failure of such Person to comply with subsection
2.5(c) hereof. Whenever any Taxes are payable on or with respect to amounts
distributed to a Class B Purchaser or the Agent, as promptly as possible
thereafter the Servicer shall send to the Agent, on behalf of such Class B
Purchaser (if applicable), a certified copy of an original official receipt
showing payment thereof. If the Trustee, upon the direction of the Servicer,
fails to pay any Taxes when due to the appropriate taxing authority or fails to
remit to the Agent, on behalf of such Class B Purchaser (if applicable), the
required receipts or other required documentary evidence, subject to subsection
9.12(a), the Transferor shall pay to the Agent on behalf of such Class B
Purchaser or for its own account, as applicable, any incremental taxes, interest
or penalties that may become payable by such Class B Purchaser or the Agent, as
applicable, as a result of any such failure. If any increased amounts payable
under this subsection 2.5(a) shall not be waived by the applicable Class B
Purchaser, the Transferor shall have the right to replace the Class B Purchaser
hereunder with a Replacement Purchaser that will succeed to the rights of such
Class B Purchaser under this Agreement; PROVIDED, that (i) such Class B
Purchaser shall not be replaced hereunder with a new investor until such Class B
Purchaser has been paid in full its Percentage Interest of the Class B Investor
Principal Balance and all accrued and unpaid Yield (including any Liquidation
Fee determined for the replacement date) thereon and all other amounts
(including all amounts owing under this Section 2.5) owed to it pursuant to this
Agreement and (ii) if the Class B Purchaser to be replaced is the Agent or
Administrative Agent, or, unless the Agent and the Administrative Agent
otherwise agree, a Structured Purchaser sponsored or administered by the
Administrative Agent or the Agent (in its individual capacity), a replacement
Agent or Administrative Agent, as the case may be, shall have been appointed in
accordance with Section 7.9 and the Agent or Administrative Agent, as the case
may be, to be replaced shall have been paid all amounts owing to it as Agent or
Administrative Agent, as the case may be, pursuant to this Agreement; PROVIDED,
FURTHER, that the Transferor shall provide such Class B Purchaser with an
Officer's Certificate stating that such new investor is not subject to such
Taxes or that such new investor is subject to a lesser amount of Taxes than the
Class B Purchaser.
(b) A Class B Purchaser claiming increased amounts under
subsection 2.5(a) for Taxes paid or payable by such Class B Purchaser (or the
Agent for its own account) will furnish to the Agent who will furnish to the
Transferor and the Servicer a certificate, setting forth the basis and amount of
each request by such Class B Purchaser for such Taxes, such certificate to be
conclusive as to the factual information set forth therein absent manifest
error. All such amounts shall be due and payable to the Agent on behalf of such
Class B Purchaser or for its own account, as the case may be, on the succeeding
Distribution Date following receipt by the Transferor of such certificate at
least 10 days prior to such Distribution Date, in each case if then incurred by
such Class B Purchaser and otherwise shall be due and payable on the following
Distribution Date (or, if earlier, on the Series 1997-1 Termination Date).
(c) Each Class B Purchaser and each Participant holding an
interest in Class B Certificates agrees that prior to the date on which the
first interest payment hereunder is due thereto, it will deliver to the Servicer
and the Trustee (i) if such Class B Purchaser or Participant is not incorporated
under the laws of the United States or any State thereof, two duly completed
copies of the U.S. Internal Revenue Service Form 4224 or successor applicable
forms required to evidence that
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the Class B Purchaser's or Participant's income from this Agreement or the Class
B Certificates is "effectively connected" with the conduct of a trade or
business in the United States as the case may be and (ii) a U.S. Internal
Revenue Service Form W-8 or W-9 or successor applicable or required forms. Each
Class B Purchaser or Participant holding an interest in Class B Certificates
also agrees to deliver to the Servicer and the Trustee two further copies of
said Form 4224 and Form W-8 or W-9, or such successor applicable forms or other
manner of certification, as the case may be, on or before the date that any such
form expires or becomes obsolete or after the occurrence of any event requiring
a change in the most recent form previously delivered by it to the Servicer and
the Trustee, and such extensions or renewals thereof as may reasonably be
requested by the Servicer, unless in any such case, solely as a result of a
change in treaty, law or regulation occurring prior to the date on which any
such delivery would otherwise be required, and assuming that Section 1446 of the
Code does not apply, the Class B Purchaser is no longer eligible to deliver the
then-applicable form set forth above. Each Class B Purchaser certifies,
represents and warrants and each Participant acquiring an interest in a Class B
Certificate or Class B Purchaser which is an Assignee shall certify, represent
and warrant as a condition of acquiring its Participation or beneficial interest
in the Class B Certificates (x) that its income from this Agreement or the Class
B Certificates is effectively connected with a United States trade or business
and (y) that it is entitled to an exemption from United States backup
withholding tax. Further, each Class B Purchaser covenants and each Participant
acquiring an interest in a Class B Certificate that for so long as it shall hold
such Participation or Class B Certificates it shall be held in such manner that
the income therefrom shall be effectively connected with the conduct of a United
States trade or business. The Servicer and the Trustee shall be entitled to
withhold or cause such withholding, and additional amounts in respect of Taxes
need not be paid to a Class B Purchaser or Participant in the event of a breach
of the certifications, representations, warranties or covenants set forth in
this subsection 2.5(c) by such Class B Purchaser or Participant.
(d) In the event that any Class B Purchaser or Participant
holding an interest in Class B Certificates shall breach the certifications,
representations, warranties or covenants set forth in this Section 2.5, the
Transferor shall have the right to replace such Class B Purchaser or such
Participant's lead Class B Purchaser hereunder with a Replacement Purchaser that
shall succeed to the rights of such Class B Purchaser under this Agreement and,
subject to compliance with the provisos to the last sentence of subsection
2.5(a), such Class B Purchaser shall assign its interest in this Agent and any
Class B Certificates owned by it to such Replacement Purchaser in accordance
with the provisions of Section 8.1.
2.6 NON-RECOURSE. (a) Except to the extent provided in this
Section 2.6, the obligation to repay the Class B Repayment Amount shall be
without recourse to the Transferor, the Servicer (or any Person acting on behalf
of any of them), the Holder of the Exchangeable Transferor Certificate, the
Trust (except to the extent specifically provided for herein or in the Pooling
and Servicing Agreement), the Trustee, the Certificateholders or any Affiliate
of any of them, and shall be limited solely to amounts payable to the Series
1997-1 Certificateholders under the Pooling and Servicing Agreement. To the
extent that such amounts are insufficient to pay the Class B Repayment Amount,
the obligation to pay the Class B Repayment Amount shall not constitute a claim
against the Transferor, the Servicer (or any Person acting on behalf of any of
them), the Holder of the Exchangeable Transferor Certificate, the Trust (except
to the extent specifically provided for herein or in the Pooling and Servicing
Agreement), the Trustee, the Certificateholders or any Affili-
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<PAGE> 23
ate of any of them. Notwithstanding anything to the contrary contained herein,
if the Transferor or the Servicer shall fail to make any payment, deposit or
transfer relating to the Series 1997-1 Certificates required to be made pursuant
to the Pooling and Servicing Agreement and, as a result of such failure, the
amount available to be applied to the Class B Certificates pursuant to the
Pooling and Servicing Agreement is reduced to an amount which is less than the
amount which otherwise would have been available had such payment, deposit or
transfer been made (the amount of any such reduction hereinafter referred to as
a "REDUCTION AMOUNT"), the Transferor or the Servicer, as the case may be, shall
repay the Class B Investor Principal Balance, together with interest due thereon
in accordance with the Pooling and Servicing Agreement, to the extent of (i)
such Reduction Amount and (ii) interest on the portion of the Class B Investor
Charge-Offs, if any, which results from the existence of any Reduction Amount at
the Agent Base Rate plus 2.00% per annum.
(b) Subject to and without limiting the foregoing provisions
of this Section 2.6, the obligations of the Transferor and the Servicer under
this Agreement shall be absolute, unconditional and irrevocable and shall be
performed strictly in accordance with the terms of this Agreement, irrespective
of any of the following circumstances:
(i) any lack of validity or enforceability of this
Agreement, the Pooling and Servicing Agreement, the Series
1997-1 Certificates or the Supplement;
(ii) any amendment to or waiver of, or consent to or
departure from, this Agreement, the Series 1997-1 Certificates, the
Pooling and Servicing Agreement or the Supplement, unless agreed to by
the Required Class B Owners and the Required Class B Purchasers or all
the Class B Owners and the Required Class B Purchasers if required
hereunder;
(iii) the existence of any claim, setoff, defense or
other right which the Transferor, the Servicer or the Trustee may have
at any time against each other, the Agent, the Administrative Agent or
any Class B Purchaser, as the case may be, or any other Person, whether
in connection with this Agreement, the Class B Certificates, the
Pooling and Servicing Agreement or any unrelated transactions;
(iv) the bankruptcy or insolvency of the Trust or
with respect to any party jointly and severally liable with another
party hereto, of such other party; or
(v) any other circumstances or happening whatsoever,
whether or not similar to any of the foregoing; PROVIDED, that, with
respect to obligations owing to any Class B Purchaser, the same shall
not have constituted gross negligence or willful misconduct of such
Class B Purchaser.
2.7 INDEMNIFICATION. (a) Subject to subsection 9.12(a) hereof
in the case of the Transferor, the Transferor and FDSNB, jointly and severally,
agree to indemnify and hold harmless the Agent, the Administrative Agent and
each Class B Purchaser and any directors, officers, employees, attorneys,
auditors or accountants of such Agent, the Administrative Agent or Class B
Purchaser (each such person being referred to as an "INDEMNITEE") from and
against any and all claims, damages, losses, liabilities, costs or expenses
whatsoever which such Indemnitee may incur (or which may
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<PAGE> 24
be claimed against such Indemnitee) by reason of or in connection with the
execution and delivery of, or payment under, this Agreement, the Pooling and
Servicing Agreement, the Series 1997-1 Certificates, except (i) to the extent
that any such claim, damage, loss, liability, cost or expense shall be caused by
the willful misconduct or gross negligence of such Indemnitee, (ii) to the
extent that any such claim, damage, loss, liability, cost or expense relates to
any Excluded Taxes, (iii) to the extent that any such claim, damage, loss,
liability, cost or expense relates to disclosure made by the Agent or a Class B
Purchaser in connection with an Assignment or Participation pursuant to Section
8.1 of this Agreement which disclosure is not based on information given to the
Agent by or on behalf of the Transferor, the Servicer or the Trustee or (iv) to
the extent that such claim, damage, loss, liability, cost or expense shall be
caused by a charge off of Receivables. The foregoing indemnity shall include any
claims, damages, losses, liabilities, costs or expenses to which any such
Indemnitee may become subject under the Securities Act of 1933, as amended (the
"ACT"), the Securities Exchange Act of 1934, as amended, the Investment Company
Act of 1940, as amended, or other federal or state law or regulation arising out
of or based upon any untrue statement or alleged untrue statement of a material
fact in any disclosure document relating to the Class B Certificates or the
Class A Certificates, or any amendments thereof or supplements thereto or
arising out of, or based upon, the omission or the alleged omission to state a
material fact necessary to make the statements therein or any amendment thereof
or supplement thereto, in light of the circumstances in which they were made,
not misleading.
(b) Promptly after the receipt by an Indemnitee of a notice of
the commencement of any action against an Indemnitee, such Indemnitee will
notify the Agent and the Agent will, if a claim in respect thereof is to be made
against the Transferor pursuant to subsection 2.7(a) (the "INDEMNIFYING PARTY"),
notify the Indemnifying Party in writing of the commencement thereof; but the
omission so to notify such party will not relieve such party from any liability
which it may have to such Indemnitee pursuant to subsection 2.7(a). Upon receipt
of such notice, the Indemnifying Party shall assume the defense of such action
or proceeding, including the employment of counsel satisfactory to the
Indemnitee in its reasonable judgment and the payment of all related expenses.
Each Indemnitee shall have the right to employ separate counsel in any such
action or proceeding and to participate in (but not control) the defense
thereof, but the fees and expenses of such counsel shall be at its own expense
unless (a) the Indemnifying Party shall have failed to assume or continue to
defend such action or proceeding, (b) the named parties to any such action or
proceeding (including any impleaded parties) include both such Indemnitee and
either the Transferor or another person or entity that may be entitled to
indemnification from the Transferor (by virtue of this Agreement or otherwise)
and such Indemnitee shall have been advised by counsel that there may be one or
more legal defenses available to such Indemnitee which are different from or
additional to those available to the Transferor or such other party or shall
otherwise have reasonably determined that the co-representation would present
such counsel with a conflict of interest, or (c) the Indemnifying Party and the
Indemnitee shall have mutually agreed to the retention of separate counsel.
Anything contained in this Agreement to the contrary notwithstanding, the
Transferor shall not be entitled to assume the defense of any part of a Third
Party Claim that specifically seeks an order, injunction or other equitable
relief or relief for other than money damages against the Indemnitee.
2.8 TERMINATION EVENTS. In the event that any one or more of
the following (each, a "TERMINATION EVENT") shall have occurred:
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<PAGE> 25
(a) the failure of the Transferor, the Servicer or
the Trustee to make a deposit, payment or withdrawal required hereunder
or under any Related Document (determined without regard to the failure
of the Servicer to deliver any statement or certificate required
hereunder or under the Supplement in order for such deposit, payment or
withdrawal to be made) when and as required and such failure continues
for five Business Days; PROVIDED that the failure of the Transferor to
make additional payments pursuant to subsection 2.4(a) or 2.4(b) or
Section 2.5 hereof shall not constitute a Termination Event unless such
failure continues after the last Business Day of the Monthly Period
which follows the Monthly Period in which the Transferor received a
request for such payment pursuant to such subsection;
(b) any representation or warranty made herein or in
connection with this Agreement by the Transferor, the Servicer or the
Trustee shall prove to have been incorrect in any material respect when
made, and continues to be incorrect in any material respect for a
period of sixty (60) days after receipt of written notice thereof,
requiring the same to be remedied, by the Transferors and the Servicer
from the Agent and as a result the interests of the Class B Purchasers
or any other them are and continue to be materially and adversely
affected;
(c) the failure by the Transferor or the Servicer or,
if such failure is reasonably expected to have a material adverse
effect on the Class B Investors, by the Trustee, to duly observe or
perform any term or provision of this Agreement (except as described in
clause (a) above) which is not cured within 60 days after written
notice of such failure is given to the defaulting party by the Agent;
(d) the occurrence (whether occurring before or after
the commencement of an Amortization Period) of a Trust Pay Out Event, a
Series 1997-1 Pay Out Event or a Servicer Default, or the occurrence of
an event or condition which would be a Trust Pay Out Event, a Series
1997-1 Pay Out Event or a Servicer Default but for a waiver of or
failure to declare or determine such event by the Certificateholders or
the Trustee; or
(e) the Commitment Expiration Date;
THEN, in the event of a Termination Event described in any of clauses (a)
through (d) above, in addition to any other rights or remedies of the Class B
Purchasers hereunder or under any Related Documents, (A) the Administrative
Agent, at the direction of the Required Class B Owners and of the Required Class
B Purchasers (and without regard to whether a similar direction shall have been
given pursuant to the Class A Certificate Purchase Agreement) in their
discretion, shall deliver a Reserve Account Increase Notice to the Servicer as
contemplated by the Supplement, and/or (B) the Administrative Agent, at the
direction of the Required Class B Owners and of the Required Class B Purchasers
(and without regard to whether a similar direction shall have been given
pursuant to the Class A Certificate Purchase Agreement) in their discretion,
shall deliver a notice to the Trustee and the Servicer that such Termination
Event has occurred and directing that such Termination Event constitute a Series
1997-1 Pay Out Event under subsection 10(g) of the Supplement. In the event that
a Termination Event described in clause (e) above shall have occurred, the Agent
shall give notice thereof to the Administrative Agent, which shall, without
further direction, deliver
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prompt notice to the Trustee and the Servicer that such Termination Event has
occurred and directing that such Termination Event constitute a Series 1997-1
Pay Out Event under subsection 10(g) of the Supplement.
SECTION 3. CONDITIONS PRECEDENT
3.1 CONDITION TO INITIAL PURCHASE. As a condition precedent
to the initial purchase by any Class B Purchasers of the Class B Certificates,
(i) the Agent on behalf of the Class B Purchasers shall have received on the
Closing Date the following items, each of which shall be in form and substance
satisfactory to the Agent:
(a) the favorable written opinion of counsel for
each of Prime II Receivables Corporation and FDSNB addressed to the Agent and
the Class B Purchasers and dated the Closing Date, covering general corporate
matters and the due execution and delivery of, and the enforceability of, each
of the Related Documents to which it is party and such other matters as the
Agent may request;
(b) a copy of (i) the corporate charter and by-laws
of, and an incumbency certificate with respect to its officers executing any of
the Related Documents on the Closing Date on behalf of, each of Prime II
Receivables Corporation and FDSNB, certified by an authorized officer of each
such entity, (ii) good standing certificates from the appropriate Governmental
Authority as of a recent date with respect to each of Prime II Receivables
Corporation and FDSNB and (iii) resolutions of the Board of Director (or an
authorized committee thereof) of each of Prime II Receivables Corporation and
FDSNB with respect to the Related Documents to which it is party, certified by
an authorized officer of each such entity;
(c) the representations and warranties of the
Transferor set forth or referred to in Section 4.1 hereof and the
representations and warranties of FDSNB set forth or referred to in Section 4.2
hereof shall be true and correct in all material respects on Closing Date as
though made on and as of the Closing Date, and the Agent shall have received an
Officer's Certificate of the Transferor and of FDSNB, respectively, confirming
the satisfaction of the condition set forth in this clause (c);
(d) customary sale/security interest, tax,
bankruptcy and non-consolidation opinions, addressed to the Agent and the
Class B Purchasers;
(e) an agreed procedures letter from the independent
certified public accountants of FDSNB and a certificate of an authorized officer
of FDSNB with respect to the accuracy of data previously furnished to the Agent
with respect to the Receivables in the Trust, in each case in form and scope
satisfactory to the Agent;
(f) an executed copy of the Pooling and Servicing
Agreement, the Receivables Purchase Agreement and the Supplement;
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<PAGE> 27
(g) evidence satisfactory to the Agent that the
Class C Certificates having a Class C Initial Invested Amount at least equal
to the Required Class C Invested Amount shall have been duly issued;
(h) evidence satisfactory to the Agent that the
initial deposit (if any) in the Reserve Account required by Section 4.9(a) of
the Pooling and Servicing Agreement shall have been made;
(i) evidence satisfactory to the Agent of the due
execution and delivery of the Related Documents to which it is party by the
Trustee; and
(j) all up front fees and expenses agreed and
specified in the Class B Fee Letter shall have been paid by the Transferor on
the Closing Date; and
(ii) all representations and warranties of the Transferor and the Servicer
contained herein shall be true and correct in all material respects on the
Closing Date (and after giving effect to the transactions contemplated hereby)
and no event which of itself or with the giving of notice or lapse of time, or
both, would permit the furnishing of a Reserve Account Increase Notice has
occurred and is continuing and the Agent shall have received an Officer's
Certificate of each of the Transferor and the Servicer to such effect.
3.2 CONDITION TO ADDITIONAL PURCHASE. The following shall be
conditions precedent to each purchase by any Class B Purchasers of VFC
Additional Class B Invested Amounts hereunder:
(a) the Transferor shall have timely delivered a
notice of purchase pursuant to subsection 2.1(c) of this Agreement;
(b) no Termination Event shall have occurred;
(c) after giving effect to such purchase of VFC
Additional Class B Invested Amount, the aggregate Class B Investor
Principal Balance shall not exceed the aggregate Commitments of the
Committed Class B Purchasers minus the aggregate Commitments of all
Defaulting Purchasers;
(d) the conditions set forth in Section 6.15 of the
Pooling and Servicing Agreement to the issuance of such VFC Additional
Class B Invested Amount shall have been satisfied; and
(e) the representations and warranties of the
Transferor contained in Section 4.1 and of FDSNB contained in Section
4.2 shall be true and correct in all material respects on and as of the
applicable Purchase Date, as though made on and as of such date, other
than the representations and warranties of FDSNB contained in the last
sentence of subsection 4.2(f) or in subsection 4.2(h), which shall have
been true and correct in all material respects when made and as of the
Closing Date, and other than the representations and warranties of the
Transferor and of FDSNB set forth in subsection 4.1(l) and subsection
4.2(g),
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respectively, which shall have been true and correct on all material
respects on or as of the respective dates specified therein.
SECTION 4. REPRESENTATIONS AND WARRANTIES
4.1 REPRESENTATIONS AND WARRANTIES OF THE TRANSFEROR. The
Transferor repeats and reaffirms to the Class B Purchasers and the Agent the
representations and warranties of the Transferor set forth in Sections 2.3 and
2.4 of the Pooling and Servicing Agreement and represents and warrants that such
representations and warranties are true and correct as of the date hereof. The
Transferor further represents and warrants to, and agrees with, the Agent and
each Class B Purchaser that, as of the date hereof:
(a) The Transferor has been duly organized and is
validly existing and in good standing as a corporation under the laws of the
State of Delaware, with corporate power and authority to own its properties and
to transact the business in which it is now engaged, and the Transferor is duly
qualified to do business and is in good standing in each State of the United
States where the nature of its business requires it to be so qualified.
(b) The Transferor has the full corporate power,
authority and legal right to make, execute, deliver and perform the Related
Documents to which it is party and all of the transactions contemplated thereby
and to issue the Series 1997-1 Certificates from the Trust and has taken all
necessary corporate action to authorize the execution, delivery and performance
of the Related Documents to which it is party and such issuance. Each of the
Related Documents to which it is party constitutes the legal, valid and binding
agreement of the Transferor enforceable in accordance with its terms (subject to
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting the enforcement of the rights of creditors generally and except
as such enforceability may be limited by general principles of equity, whether
considered in a proceeding at law or in equity).
(c) The Transferor is not required to obtain the
consent of any other party or any consent, license, approval or authorization
of, or registration with, any Governmental Authority in connection with the
execution, delivery or performance of each of the Related Documents to which it
is party that has not been duly obtained and which is not and will not be in
full force and effect on the Closing Date.
(d) The execution, delivery and performance of the
Related Documents to which it is party by the Transferor do not violate or
conflict with any provision of any existing law or regulation applicable to the
Transferor or any order or decree of any court to which the Transferor is
subject or the Certificate of Incorporation or Bylaws of the Transferor, or any
mortgage, security agreement, indenture, contract or other agreement to which
the Transferor is a party or by which the Transferor or any significant portion
of its properties is bound.
(e) There is no litigation, investigation or
administrative proceeding before any court, tribunal, regulatory body or
governmental body presently pending, or, to the knowledge of the Transferor,
threatened, with respect to any of the Related Documents, the transactions
contemplated thereby, or the issuance of the Series 1997-1 Certificates and
there is no such litigation or pro-
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<PAGE> 29
ceeding against the Transferor or any significant portion of its properties
which would, individually or in the aggregate, have a material adverse effect on
the transactions contemplated by any of the Related Documents or the ability of
the Transferor to perform its obligations thereunder.
(f) The Transferor is not insolvent or the subject
of any voluntary or involuntary bankruptcy proceedings.
(g) No Pay Out Event, Servicer Default, Termination
Event or event permitting the furnishing of a Reserve Account Increase Notice
has occurred and is continuing, and no event, act or omission has occurred and
is continuing which, with the lapse of time, the giving of notice, or both,
would constitute such an event or default.
(h) The Pooling and Servicing Agreement is not
required to be qualified under the Trust Indenture Act of 1939, as amended, and
neither the Trust nor the Transferor is required to be registered under the
Investment Company Act of 1940, as amended.
(i) The Receivables conveyed by the Transferor
to the Trust under the Pooling and Servicing Agreement are in an aggregate
amount, determined as of January 22, 1997, of $122,771,932.29. The Receivables
Purchase Agreement is in full force and effect on the date hereof and no
material default by any party exists thereunder.
(j) The Trust is duly created and existing under the
laws of the State of New York. Simultaneous with the closing hereunder, all
conditions to the issuance and sale of the Series 1997-1 Certificates set forth
in the Pooling and Servicing Agreement have been satisfied and the Series 1997-1
Certificates have been duly issued by the Trust.
(k) Neither the Transferor nor any of its
Affiliates has directly, or through any agent, (i) sold, offered for sale,
solicited offers to buy or otherwise negotiated in respect of, any "security"
(as defined in the Act) that is or will be integrated with the sale of the any
Series 1997-1 Certificates in a manner that would require the registration under
the Act of the offering of the Series 1997-1 Certificates or (ii) engaged in any
form of general solicitation or general advertising in connection with the
offering of the Series 1997-1 Certificates (as those terms are used in
Regulation D under the Act) or in any manner involving a public offering within
the meaning of Section 4(2) of the Act. Assuming the accuracy of the
representations and warranties of each Class B Purchaser in its Investment
Letter and of each purchaser of Class A Certificates and Class C Certificate in
their respective investment letters, the offer and sale of the Series 1997-1
Certificates are transactions which are exempt from the registration
requirements of the Act.
(l) All written factual information heretofore
furnished by the Transferor to, or for delivery to, the Agent for purposes of or
in connection with this Agreement, including, without limitation, information
relating to the Accounts and Receivables and the Transferor's and FDSNB's credit
card businesses, was true and correct in all material respects on the date as of
which such information was stated or certified and remains true and correct in
all material respects (unless such information specifically relates to an
earlier date in which case such information shall have been true and correct in
all material respects on such earlier date).
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<PAGE> 30
4.2 REPRESENTATIONS AND WARRANTIES OF FDSNB. FDSNB repeats
and reaffirms to the Class B Purchasers and the Agent the representations and
warranties of the Servicer set forth in Section 3.3 of the Pooling and Servicing
Agreement and represents and warrants that such representations and warranties
are true and correct as of the date hereof. FDSNB further represents and
warrants to, and agrees with, the Agent and each Class B Purchaser that, as of
the date hereof:
(a) FDSNB has been duly organized and is validly
existing and in good standing as a national banking association under the laws
of the United States of America, with corporate power and authority to own its
properties and to transact the business in which it is now engaged, and FDSNB is
duly qualified to do business (or is exempt from such qualification) and is in
good standing in each State of the United States where the nature of its
business requires it to be so qualified. FDSNB is an insured depository
institution under Section 4(a) of the Federal Deposit Insurance Act.
(b) FDSNB has the full corporate power, authority
and legal right to make, execute, deliver and perform the Related Documents to
which it is party and all the transactions contemplated thereby and has taken
all necessary corporate action to authorize the execution, delivery and
performance of the Related Documents to which it is party. Each of the Related
Documents to which it is party constitutes the legal, valid and binding
agreement of FDSNB enforceable in accordance with its terms (subject to
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting the enforcement of the rights of creditors generally and the
rights of creditors of national banking associations and except as such
enforceability may be limited by general principles of equity, whether
considered in a proceeding at law or in equity).
(c) FDSNB is not required to obtain the consent of
any other party or any consent, license, approval or authorization of, or
registration with, any Governmental Authority in connection with the execution,
delivery or performance of each of the Related Documents to which it is party
that has not been duly obtained and which is not and will not be in full force
and effect on the Closing Date.
(d) The execution, delivery and performance of each
of the Related Documents to which it is party by FDSNB do not violate or
conflict with any provision of any existing law or regulation applicable to
FDSNB or any order or decree of any court to which FDSNB is subject or the
Articles of Association or Bylaws of FDSNB, or any mortgage, security agreement,
indenture, contract or other agreement to which FDSNB is a party or by which
FDSNB or any significant portion of FDSNB's properties is bound.
(e) There is no litigation, investigation or
administrative proceeding before any court, tribunal, regulatory body or
governmental body presently pending, or, to the knowledge of FDSNB, threatened,
with respect to the Related Documents, the transactions contemplated thereby, or
the issuance of the Series 1997-1 Certificates, and there is no such litigation
or proceeding against FDSNB or any significant portion of its properties which
would, individually or in the aggregate, have a material adverse effect on the
transactions contemplated by any of the Related Documents or the ability of
FDSNB, in its capacity as Servicer or otherwise, to perform its obligations
thereunder.
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(f) FDSNB is not insolvent or the subject of any
insolvency or liquidation proceeding. The financial statements of FDSNB
delivered to the Agent are complete and correct in all material respects and
fairly present the financial condition of FDSNB as of date of such statements
and the results of operations of FDSNB for the period then ended, all in
accordance with regulatory accounting principles consistently applied. Since the
date of the most recent audited financial statements of FDSNB delivered to the
Agent, there has not been any material adverse change in the condition
(financial or otherwise) of FDSNB.
(g) All written factual information heretofore
furnished by FDSNB to, or for delivery to, the Agent for purposes of or in
connection with this Agreement, including, without limitation, information
relating to the Accounts and Receivables and the Transferor's and FDSNB's
VISA(R) credit card businesses, was true and correct in all material respects on
the date as of which such information was stated or certified and remains true
and correct in all material respects (unless such information specifically
relates to an earlier date in which case such information shall have been true
and correct in all material respects on such earlier date).
(h) There are no outstanding comments from the most
recent report prepared by FDSNB's (in its capacity as Servicer) independent
public accountants in connection with its VISA(R) credit card receivables.
(i) No Pay Out Event, Servicer Default,
Termination Event or event permitting the furnishing of a Reserve Account
Increase Notice has occurred and is continuing, and no event, act or omission
has occurred and is continuing which, with the lapse of time, the giving of
notice, or both, would constitute such an event or default.
4.3 REPRESENTATIONS AND WARRANTIES OF THE AGENT AND THE CLASS
B PURCHASERS. Each of the Agent and the Class B Purchasers represents and
warrants to, and agrees with, the Transferor and the Servicer, that:
(a) It is duly authorized to enter into and perform
this Agreement and to purchase its Commitment Percentage (if any) of the Class B
Certificates, and has duly executed and delivered this Agreement; and the person
signing this Agreement on behalf of such Class B Purchaser has been duly
authorized by such Class B Purchaser to do so.
(b) This Agreement constitutes the legal, valid and
binding obligation of such Class B Purchaser, enforceable in accordance with its
terms, except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, conservatorship or other similar laws
now or hereafter in effect affecting the enforcement of creditors' rights in
general, and except as such enforceability may be limited by general principles
of equity (whether considered in a proceeding at law or in equity).
(c) No registration with or consent or approval of
or other action by any state or local governmental authority or regulatory body
having jurisdiction over such Class B Purchaser is required in connection with
the execution, delivery or performance by such Class B Purchaser of this
Agreement other than as may be required under the blue sky laws of any state.
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SECTION 5. COVENANTS
5.1 COVENANTS OF THE TRANSFEROR AND FDSNB. Each of the
Transferor and FDSNB (individually or, as set forth below, as the Servicer)
covenants and agrees, so long as any amount of the Class B Investor Principal
Balance shall remain outstanding or any monetary obligation arising hereunder
shall remain unpaid, unless the Required Class B Owners and the Required Class B
Purchasers shall otherwise consent in writing, that:
(a) each of the Transferor and the Servicer shall
perform in all material respects each of the respective agreements, warranties
and indemnities applicable to it and comply in all material respects with each
of the respective terms and provisions applicable to it hereunder and under the
other Related Documents to which it is party, which agreements are hereby
incorporated by reference into this Agreement as if set forth herein in full;
and each of the Transferor and the Servicer shall take all reasonable action to
enforce the obligations of each of the other parties to such Related Documents
which are contained therein;
(b) the Transferor and the Servicer shall
furnish to the Agent (i) a copy of each opinion, certificate, report, statement,
notice or other communication (other than investment instructions) relating to
the Series 1997-1 Certificates which is furnished by or on behalf of either of
them to Certificateholders, to any Rating Agency or to the Trustee and furnish
to the Agent after receipt thereof, a copy of each notice, demand or other
communication relating to the Series 1997-1 Certificates, this Agreement or the
Pooling and Servicing Agreement received by the Transferor or the Servicer from
the Trustee, any Rating Agency or 15% or more of the Series 1997-1
Certificateholders (to the extent such notice, demand or communication relates
to the Accounts, the Receivables, any Servicer Default or any Pay Out Event);
and (ii) such other information, documents records or reports respecting the
Trust, the Receivables, the Transferor, FDSNB or the Servicer as the Agent may
from time to time reasonably request without unreasonable expense to the
Transferor or the Servicer;
(c) the Servicer shall furnish to the Agent on or
before the date such reports are due under the Pooling and Servicing Agreement
copies of each of the reports and certificates required by subsection 3.4(b) and
Sections 3.5 and 3.6 of the Pooling and Servicing Agreement;
(d) the Servicer shall promptly furnish to the
Agent a copy, addressed to the Agent, of each opinion of counsel delivered to
the Trustee pursuant to Section 13.2(d) of the Pooling and Servicing Agreement;
(e) FDSNB shall furnish to the Agent (i) a copy of
its annual Call Report promptly after it becomes available, (ii) an annual
certificate dated within 90 days after the end each of its fiscal years stating
its compliance (or failure to comply) with each minimum ratio of total capital
and core capital to risk-weighted assets required by Governmental Authorities in
accordance with the implementation of the Basle Accord;
(f) the Servicer shall furnish to the Agent a
certificate concurrently with its delivery of its annual certificate pursuant to
Section 3.5 of the Pooling and Servicing Agreement stating that no Termination
Event (other than a Termination Event described in clause (e) of
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subsection 2.8) or event or condition which with the passage of time or the
giving of notice, or both, would constitute such a Termination Event or, if such
Termination Event, event or condition has occurred, identifying the same in
reasonable detail;
(g) the Transferor shall not exercise its right to
accept optional reassignment of the Receivables or repurchase the Series 1997-1
Certificates pursuant to Sections 10.2 or 12.2 of the Pooling and Servicing
Agreement or Section 3 of the Supplement, unless the Class B Purchasers have
been paid, or will be paid upon such repurchase or in connection with such
optional reassignment, the Class B Investor Principal Balance, all interest
thereon and all other amounts owing hereunder in full;
(h) the Transferor and the Servicer shall at any
time from time to time during regular business hours, on reasonable notice to
the Transferor or the Servicer, as the case may be, permit the Agent, or its
agents or representatives to:
(i) examine all books, records and
documents (including computer tapes and disks) in its possession or
under its control relating to the Receivables, and
(ii) visit its offices and property
for the purpose of examining such materials described in clause (i)
above.
The information obtained by the Agent or any Class B Purchaser pursuant to this
subsection shall be held in confidence in accordance with Section 6.2 hereof;
(i) the Servicer shall furnish to the Agent,
promptly after the occurrence of any Servicer Default, Termination Event, Pay
Out Event or any event which would permit the furnishing of a Reserve Account
Increase Notice, a certificate of an appropriate officer of the Servicer setting
forth the circumstances of such Servicer Default, Pay Out Event, Termination
Event or event and any action taken or proposed to be taken by the Servicer or
the Transferor with respect thereto;
(j) the Transferor and the Servicer shall timely
make all payments, deposits or transfers and give all instructions to transfer
required by this Agreement and the Pooling and Servicing Agreement;
(k) the Transferor shall not terminate (except in
accordance with the terms thereof), amend, waive or otherwise modify the Pooling
and Servicing Agreement or the Supplement unless (i) such amendment, waiver or
modification shall not, as evidenced by an Officer's Certificate of the
Transferor delivered to the Agent, adversely affect in any material respect the
interests of the Agent or the Class B Purchasers under this Agreement or the
Pooling and Servicing Agreement, and will not result in a reduction or
withdrawal of the then current rating by any Rating Agency of any commercial
paper notes issued by any Structured Purchaser; (ii) all of the provisions of
Section 13.1 of the Pooling and Servicing Agreement have been complied with and
(iii) in the case of any amendment of the Supplement, any amendment to be
effected pursuant to subsection 13.1(b) of the Pooling and Servicing Agreement
or any amendment to the interest rate to be borne by the Class A
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Certificates or the Class C Certificates, the prior written consent thereto
shall have been provided by the Required Class B Owners and the Required Class B
Purchasers;
(l) the Transferor and the Servicer shall execute
and deliver to the Agent all such documents and instruments and do all such
other acts and things as may be necessary or reasonably required by the Agent
or the Trustee to enable the Trustee or the Agent to exercise and enforce their
respective rights under this Agreement and the Pooling and Servicing Agreement
and to realize thereon, and record and file and rerecord and refile all such
documents and instruments, at such time or times, in such manner and at such
place or places, all as may be necessary or required by the Trustee or the Agent
to validate, preserve, perfect and protect the position of the Trustee under the
Pooling and Servicing Agreement;
(m) without the prior written consent of the
Required Class B Owners and the Required Class B Purchasers, the Transferor will
not appoint (or cause to be appointed) a successor Trustee;
(n) neither the Transferor nor the Servicer will
consolidate with or merge into any other Person or convey or transfer its
properties and assets substantially as an entirety to any Person, except (i) in
accordance with Section 7.2 or 8.2 of the Pooling and Servicing Agreement, with
respect to the Transferor or the Servicer, respectively, and (ii) so long as (A)
the obligations of the Transferor or the Servicer, as the case may be, under
this Agreement and any other document executed and delivered in connection
herewith shall be expressly assumed in writing by the transferee, purchaser or
successor corporation, (B) the Transferor or the Servicer, as the case may be,
has delivered to the Agent an Officer's Certificate of the Transferor or the
Servicer and an Opinion of Counsel addressed to the Agent and each Class B
Purchaser meeting the requirements of subsection 7.2(a)(ii) or 8.2(ii) of the
Pooling and Servicing Agreement, as appropriate, as provided in such agreement,
(C) the Transferor or the Servicer, as the case may be, has delivered to the
Agent a copy of the notice to the Rating Agencies delivered pursuant to
subsection 7.2(a)(iii) or 8.2(iii) of the Pooling and Servicing Agreement, and
(D) such consolidation, merger or transfer, in the reasonable judgment of the
Transferor and the Servicer, will not have a material adverse effect on the
interests of the Class B Purchasers hereunder or under the Pooling and Servicing
Agreement;
(o) the Transferor shall not reduce or withdraw any
Discount Percentage then in effect unless such reduction or withdrawal (i) would
not in the reasonable belief of the Transferor cause a Pay Out Event with
respect to the Series 1997-1 Certificates or an event which, with notice or
lapse of time or both, would constitute such a Pay Out Event to occur or (ii) is
consented to by the Required Class B Owners and the Required Class B Purchasers;
(p) the Transferor and FDSNB will not make any
material amendment, modification or change to, or provide any waiver under, the
Receivables Purchase Agreement without the prior written consent of the Required
Class B Owners and the Required Class B Purchasers;
(q) the Transferor will not incur, permit or suffer
to exist any lien, charge or other adverse claim on the Minimum Transferor
Amount in the Trust;
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(r) the Transferor will not engage in any business
other than the transactions contemplated by this Agreement and the Related
Documents;
(s) the Transferor will not (i) incur any
liabilities or indebtedness, other than pursuant to this Agreement and the
Related Documents or reasonably related thereto, (ii) incur or permit or
suffer to exist any lien, charge or encumbrance on any of its properties or
assets, other than as provided for in the Pooling and Servicing Agreement,
(iii) make any investments other than in Cash Equivalents or (iv) make any
capital expenditures other than those reasonably required for its performance
of its obligations hereunder and under the Related Documents; and
(t) the Transferor will not amend, modify or
otherwise make any change to its Certificate of Incorporation if such amendment,
modification or other change would have a material adverse effect on the
interests of the Class B Purchasers, would affect any provisions thereof
relating to the commencement of a voluntary bankruptcy proceeding or which is
inconsistent with the assumptions set forth in the legal opinion of Jones, Day,
Reavis & Pogue, counsel to FDSNB and the Transferor, issued in connection with
this Agreement and the transactions contemplated hereby and relating to the
issues of substantive consolidation.
SECTION 6. MUTUAL COVENANTS REGARDING CONFIDENTIALITY
6.1 COVENANTS OF TRANSFEROR, ETC. The Transferor and the
Servicer shall hold in confidence, and not disclose to any Person, the terms of
any fees payable in connection with this Agreement except they may disclose such
information (i) to their officers, directors, employees, agents, counsel,
accountants, auditors, advisors or representatives, (ii) with the consent of the
Required Class B Purchasers and Agent, or (iii) to the extent the Transferor or
the Servicer or any Affiliate of either of them should be required by any law or
regulation applicable to it or requested by any Governmental Authority to
disclose such information; PROVIDED, that, in the case of clause (iii), the
Transferor or the Servicer, as the case may be, will use all reasonable efforts
to maintain confidentiality and will (unless otherwise prohibited by law) notify
the Agent of its intention to make any such disclosure prior to making such
disclosure.
6.2 COVENANTS OF CLASS B PURCHASERS. The Agent and each Class
B Purchaser covenants and agrees that any information obtained by the Agent or
such Class B Purchaser pursuant to this Agreement shall be held in confidence
(it being understood that documents provided to the Agent hereunder may in all
cases be distributed by the Agent to the Class B Purchasers) except that the
Agent or such Class B Purchaser may disclose such information (i) to its
officers, directors, employees, agents, counsel, accountants, auditors, advisors
or representatives, (ii) to the extent such information has become available to
the public other than as a result of a disclosure by or through the Agent or
such Class B Purchaser, (iii) to the extent such information was available to
the Agent or such Class B Purchaser on a nonconfidential basis prior to its
disclosure to the Agent or such Class B Purchaser hereunder, (iv) with the
consent of the Transferor, (v) to the extent permitted by Section 8.1, (vi) to
the extent the Agent or such Class B Purchaser should be (A) required in
connection with any legal or regulatory proceeding or (B) requested by any
Governmental Authority to disclose such information or (vii) in the case of any
Class B Purchaser that is a Structured Lender, to rating agencies, placement
agents and providers of liquidity and credit support who agree to hold such
information in confidence; PROVIDED, that, in the case of clause (vi) above, the
Agent or such
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Class B Purchaser, as applicable, will use all reasonable efforts to maintain
confidentiality and, in the case of clause (vi)(A) above, will (unless otherwise
prohibited by law) notify the Transferor of its intention to make any such
disclosure prior to making any such disclosure.
SECTION 7. THE AGENTS
7.1 APPOINTMENT. (a) Each Class B Purchaser hereby
irrevocably designates and appoints the Agent as the agent of such Class B
Purchaser under this Agreement, and each such Class B Purchaser irrevocably
authorizes the Agent, as the agent for such Class B Purchaser, to take such
action on its behalf under the provisions of the Related Documents and to
exercise such powers and perform such duties thereunder as are expressly
delegated to the Agent by the terms of this Agreement, together with such other
powers as are reasonably incidental thereto. Notwithstanding any provision to
the contrary elsewhere in this Agreement, the Agent shall not have any duties or
responsibilities, except those expressly set forth herein, or any fiduciary
relationship with any Class B Purchaser, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or otherwise exist against the Agent.
(b) Each Class B Purchaser hereby irrevocably designates and
appoints the Administrative Agent as the agent of such Class B Purchaser under
the Pooling and Servicing Agreement, and each such Class B Purchaser irrevocably
authorizes the Administrative Agent, as the agent for such Class B Purchaser, to
take such action on its behalf under the provisions of the Pooling and Servicing
Agreement and to exercise such powers thereunder as are expressly granted to the
Administrative Agent by the terms of the Pooling and Servicing Agreement,
subject to the terms and conditions of this Agreement, together with such other
powers as are reasonably incidental thereto. Notwithstanding any provision to
the contrary elsewhere in this Agreement, the Administrative Agent shall not
have any duties or responsibilities, except those expressly set forth herein or
in the Pooling and Servicing Agreement, or any fiduciary relationship with any
Class B Purchaser, and no implied covenants, functions, responsibilities,
duties, obligations or liabilities shall be read into this Agreement or
otherwise exist against the Administrative Agent.
7.2 DELEGATION OF DUTIES. The Agent and the Administrative
Agent may execute any of its duties under this Agreement or any of the other
Related Documents by or through agents or attorneys-in-fact and shall be
entitled to advice of counsel concerning all matters pertaining to such duties.
Neither the Agent nor the Administrative Agent shall be responsible for the
negligence or misconduct of any agents or attorneys-in-fact selected by it with
reasonable care.
7.3 EXCULPATORY PROVISIONS. Neither the Agent nor the
Administrative Agent nor any of their respective officers, directors, employees,
agents, attorneys-in-fact or Affiliates shall be (a) liable to any of the Class
B Purchasers for any action lawfully taken or omitted to be taken by it or such
Person under or in connection with this Agreement or any of the other Related
Documents (except for its or such Person's own gross negligence or willful
misconduct) or (b) responsible in any manner to any of the Class B Purchasers
for any recitals, statements, representations or warranties made by the
Transferor, the Servicer or the Trustee or any officer thereof contained in this
Agreement or any of the other Related Documents or in any certificate, report,
statement or other document referred to or provided for in, or received by the
Agent or the Administrative Agent under or in connection with, this Agreement or
any of the other Related Documents or for the value, validi-
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ty, effectiveness, genuineness, enforceability or sufficiency of this Agreement
or any of the other Related Documents or for any failure of the Transferor, the
Servicer or the Trustee to perform its obligations hereunder or thereunder.
Neither the Agent nor the Administrative Agent shall be under any obligation to
any Class B Purchaser to ascertain or to inquire as to the observance or
performance of any of the agreements contained in, or conditions of, this
Agreement or any of the other Related Documents, or to inspect the properties,
books or records of the Transferor, the Servicer, the Trustee or the Trust.
7.4 RELIANCE BY AGENT. The Agent and the Administrative Agent
shall be entitled to rely, and shall be fully protected in relying, upon any
writing, resolution, notice, consent, certificate, affidavit, letter, cablegram,
telegram, telecopy, telex or teletype message, written statement, order or other
document or conversation believed by it to be genuine and correct and to have
been signed, sent or made by the proper Person or Persons and upon advice and
statements of legal counsel (including, without limitation, counsel to the Agent
or the Administrative Agent), independent accountants and other experts selected
by the Agent or the Administrative Agent. The Agent and the Administrative Agent
shall be fully justified in failing or refusing to take any action under this
Agreement or any of the other Related Documents unless it shall first receive
such advice or concurrence of the Required Class B Purchasers as it deems
appropriate or it shall first be indemnified to its satisfaction by the Class B
Purchasers or of the Committed Class B Purchasers against any and all liability
and expense which may be incurred by it by reason of taking or continuing to
take any such action. The Agent and the Administrative Agent shall in all cases
be fully protected in acting, or in refraining from acting, under this Agreement
or any of the other Related Documents in accordance with a request of the
Required Class B Owners and the Required Class B Purchasers and such request and
any action taken or failure to act pursuant thereto shall be binding upon all
present and future Class B Purchasers.
7.5 NOTICES. The Agent shall not be deemed to have knowledge
or notice of the occurrence of any breach of this Agreement or the occurrence of
any Pay Out Event or any Termination Event unless the Agent has received notice
from the Transferor, the Servicer, the Trustee or any Class B Purchaser
referring to this Agreement, describing such event. In the event that the Agent
receives such a notice, the Agent promptly shall give notice thereof to the
Class B Owners and the Required Class B Purchasers. The Agent shall take such
action with respect to such event as shall be reasonably directed by the
Required Class B Owners and the Required Class B Purchasers; PROVIDED that
unless and until the Agent shall have received such directions, the Agent may
(but shall not be obligated to) take such action, or refrain from taking such
action, with respect to such event as it shall deem advisable in the best
interests of the Class B Purchasers.
7.6 NON-RELIANCE ON AGENT AND OTHER CLASS B PURCHASERS. Each
Class B Purchaser expressly acknowledges that neither the Agent nor the
Administrative Agent nor any of their respective officers, directors, employees,
agents, attorneys-in-fact or Affiliates has made any representations or
warranties to it and that no act by the Agent or the Administrative Agent
hereafter taken, including any review of the affairs of the Transferor, the
Servicer, the Trustee or the Trust shall be deemed to constitute any
representation or warranty by the Agent or the Administrative Agent to any Class
B Purchaser. Each Class B Purchaser represents to the Agent and the
Administrative Agent that it has, independently and without reliance upon the
Agent or any other Class B Purchaser, and based on such documents and
information as it has deemed appropriate,
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made its own appraisal of and investigation into the business, operations,
property, financial and other condition and creditworthiness of the Trust, the
Trustee, the Transferor and the Servicer and made its own decision to purchase
its Class B Certificate hereunder and enter into this Agreement. Each Class B
Purchaser also represents that it will, independently and without reliance upon
the Agent or the Administrative Agent or any other Class B Purchaser, and based
on such documents and information as it shall deem appropriate at the time,
continue to make its own analysis, appraisals and decisions in taking or not
taking action under this Agreement or any of the other Related Documents, and
to make such investigation as it deems necessary to inform itself as to the
business, operations, property, financial and other condition and
creditworthiness of the Trust, the Trustee, the Transferor and the Servicer.
Except for notices, reports and other documents received by the Agent under
Section 5 hereof, the Agent shall not have any duty or responsibility to
provide any Class B Purchaser with any credit or other information concerning
the business, operations, property, condition (financial or otherwise),
prospects or creditworthiness of the Trust, the Trustee, the Transferor or the
Servicer which may come into the possession of the Agent or any of its
officers, directors, employees, agents, attorneys-in-fact or Affiliates.
7.7 INDEMNIFICATION. The Committed Class B Purchasers agree
to indemnify the Agent and the Administrative Agent in its capacity as such
(without limiting the obligation of the Transferor, the Trust or the Servicer to
reimburse the Agent or the Administrative Agent for any such amounts), ratably
according to their respective Commitment Percentages, from and against any and
all liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind whatsoever which may at any
time (including, without limitation, at any time following the payment of the
obligations under this Agreement, including the Class B Invested Amount) be
imposed on, incurred by or asserted against the Agent or the Administrative
Agent in any way relating to or arising out of this Agreement, or any documents
contemplated by or referred to herein or the transactions contemplated hereby or
any action taken or omitted by the Agent or the Administrative Agent under or in
connection with any of the foregoing; provided that no Class B Purchaser shall
be liable for the payment of any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of the Agent or the Administrative Agent resulting from its own
gross negligence or willful misconduct. The agreements in this subsection shall
survive the payment of the obligations under this Agreement, including the Class
B Invested Amount.
7.8 AGENTS IN THEIR INDIVIDUAL CAPACITIES. The Agent, the
Administrative Agent and their Affiliates may make loans to, accept deposits
from and generally engage in any kind of business with the Trust, the Trustee,
the Servicer and the Transferor as though the Agent and the Administrative Agent
were not the agents hereunder. Each Class B Purchaser acknowledges that Credit
Suisse may act (i) as administrator and agent for one or more Structured
Purchasers and in such capacity acts and may continue to act on behalf of each
such Structured Purchaser in connection with its business and (ii) as the agent
for certain financial institutions under the liquidity and credit enhancement
agreements relating to this Agreement to which any such Structured Purchaser is
party and in various other capacities relating to the business of any such
Structured Purchaser under various agreements. Credit Suisse in its capacity as
the Agent shall not, by virtue of its acting in any such other capacities, be
deemed to have duties or responsibilities hereunder or be held to a standard of
care in connection with the performance of its duties as the Agent or the
Administrative Agent other than as expressly provided in this Agreement. Credit
Suisse may act
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as the Agent and the Administrative Agent without regard to and without
additional duties or liabilities arising from its role as such administrator or
agent or arising from its acting in any such other capacity.
7.9 SUCCESSOR AGENT. (a) The Agent may resign as Agent upon
ten days' notice to the Class B Purchasers, the Trustee, the Transferor and the
Servicer with such resignation becoming effective upon a successor agent
succeeding to the rights, powers and duties of the Agent pursuant to this
subsection 7.9(a). If the Agent shall resign as Agent under this Agreement, then
the Required Class B Purchasers and the Required Class B Owners shall appoint
from among the Committed Class B Purchasers a successor agent for the Class B
Purchasers. The successor agent shall succeed to the rights, powers and duties
of the Agent, and the term "Agent" shall mean such successor agent effective
upon its appointment, and the former Agent's rights, powers and duties as Agent
shall be terminated, without any other or further act or deed on the part of
such former Agent or any of the parties to this Agreement. After the retiring
Agent's resignation as Agent, the provisions of this Section 7 shall inure to
its benefit as to any actions taken or omitted to be taken by it while it was
Agent under this Agreement.
(b) The Administrative Agent may resign as Administrative
Agent upon ten days' notice to the Class B Purchasers, the Class A Purchasers
(as defined in the Class A Certificate Purchase Agreement), the Trustee, the
Transferor and the Servicer with such resignation becoming effective upon a
successor agent succeeding to the rights, powers and duties of the
Administrative Agent pursuant to this subsection 7.9(b). If the Administrative
Agent shall resign as Administrative Agent under this Agreement, then the
Required Class B Purchasers and the Required Class B Owners shall appoint from
among the Committed Class B Purchasers hereunder or under the Class B
Certificate Purchase Agreement a successor Administrative Agent of the Class B
Certificateholders and Class A Certificateholders as provided in the Supplement;
PROVIDED that no such appointment shall be effective unless such successor is
also appointed as successor Administrative Agent under the Class A Certificate
Purchase Agreement. The successor agent shall succeed to the rights, powers and
duties of the Administrative Agent, and the term "Administrative Agent" shall
mean such successor agent effective upon its appointment, and the former
Administrative Agent's rights, powers and duties as Administrative Agent shall
be terminated, without any other or further act or deed on the part of such
former Administrative Agent or any of the parties to this Agreement. After the
retiring Administrative Agent's resignation as Administrative Agent, the
provisions of this Section 7 shall inure to its benefit as to any actions taken
or omitted to be taken by it while it was Administrative Agent under this
Agreement.
SECTION 8. SECURITIES LAWS; TRANSFERS; TAX TREATMENT
8.1 TRANSFERS OF CLASS B CERTIFICATES. (a) Each Class B Owner
agrees that the beneficial interest in the Class B Certificates purchased by it
will be acquired for investment only and not with a view to any public
distribution thereof, and that such Class B Owner will not offer to sell or
otherwise dispose of any Class B Certificate acquired by it (or any interest
therein) in violation of any of the registration requirements of the Act or any
applicable state or other securities laws. Each Class B Owner acknowledges that
it has no right to require the Transferor to register, under the Act or any
other securities law, the Class B Certificates (or the beneficial interest
therein) acquired by it pursuant to this Agreement or any Transfer Supplement.
Each Class B Owner hereby
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confirms and agrees that in connection with any transfer or syndication by it of
an interest in the Class B Certificates, such Class B Owner has not engaged and
will not engage in a general solicitation or general advertising including
advertisements, articles, notices or other communications published in any
newspaper, magazine or similar media or broadcast over radio or television, or
any seminar or meeting whose attendees have been invited by any general
solicitation or general advertising. Each initial Class B Owner agrees with the
Transferor that it will execute and deliver to the Transferor, the Servicer and
the Trustee on or before the Closing Date a letter in the form attached hereto
as EXHIBIT A (an "INVESTMENT LETTER") with respect to the purchase by such Class
B Owner of a beneficial interest in the Class B Certificates.
(b) Each initial purchaser of a Class B Certificate
or any interest therein and any Assignee thereof or Participant therein shall
certify to the Transferor, the Servicer and the Trustee that it is either (A)(i)
a citizen or resident of the United States, (ii) a corporation or other entity
organized in or under the laws of the United States or any political subdivision
thereof which, if such entity is a tax-exempt entity, recognizes that payments
with respect to the Class B Certificates may constitute unrelated business
taxable income or (iii) a person not described in (i) or (ii) whose income from
the Class B Certificates is and will be effectively connected with the conduct
of a trade or business within the United States (within the meaning of the Code)
and whose ownership of any interest in a Class B 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) and who will furnish to the Servicer and the Trustee,
and to the Class B Owner making the Transfer a properly executed U.S. Internal
Revenue Service Form 4224 (and to agree (to the extent legally able) to provide
a new Form 4224 upon the expiration or obsolescence of any previously delivered
form and comparable statements in accordance with applicable United States laws)
or (B) an estate or trust the income of which is includible in gross income for
United States federal income tax purposes.
(c) Any sale, transfer, assignment, participation,
pledge, hypothecation or other disposition (a "TRANSFER") of a Class B
Certificate or any interest therein may be made only in accordance with this
Section 8.1 and in accordance with and subject to the applicable limitations set
forth in Section 6.18 of the Pooling and Servicing Agreement. Any Transfer of an
interest in a Class B Certificate, a Commitment or any Noncommitted Purchaser
Percentage, when combined with any substantially concurrent Transfers hereunder
between the same parties and any substantially concurrent Transfer of an
interest in a Class A Certificate or a Commitment or Noncommitted Purchaser
Percentage (as such terms are defined for purposes of the Class A Certificate
Purchase Agreement) between the same parties, shall be in respect of (i) in the
case of a Committed Class B Purchaser, at least $5,000,000 in the aggregate,
which may be composed of any one or more of (A) Class B Invested Amount, (B) to
the extent in excess of the Class B Invested Amount subject to such Transfer,
Commitment hereunder, (C) Class A Invested Amount, and (D) to the extent in
excess of the Class A Invested Amount subject to such concurrent Transfer,
Commitment under the Class A Certificate Purchase Agreement, or (ii) in the case
of a Noncommitted Class B Purchaser, at leat $5,000,000 in the aggregate, which
may be composed of any one or more of (A) Class B Invested Amount, (B) to the
extent in excess of the Class B Invested Amount subject to such Transfer, the
product of the Noncommitted Purchaser Percentage subject to such Transfer times
the aggregate Commitments hereunder, (C) Class A Invested Amount and (D) to the
extent in excess of the Class A Invested Amount subject to such concurrent
Transfer, the
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product of the Noncommitted Purchaser Percentage under the Class A Certificate
Purchase Agreement subject to such Transfer times the aggregate Commitments
under the Class A Certificate Purchase Agreement. Any Transfer of an interest in
a Class B Certificate otherwise permitted by this Section 8.1 will be permitted
only if it consists of a PRO RATA percentage interest in all payments made with
respect to the Class B Purchaser's beneficial interest in such Class B
Certificate. No Class B Certificate or any interest therein may be Transferred
by assignment or Participation to any Person (each, a "TRANSFEREE") unless prior
to the transfer the Transferee shall have executed and delivered to the Agent
and the Transferor an Investment Letter and, except for any Transfer to an
Eligible Transferee, each of the Transferor and the Servicer shall have granted
its prior consent thereto; PROVIDED that in the event of a Transfer from a Class
B Purchaser to one of its Affiliates or to a Person which, prior to such
Transfer, is a Class B Purchaser of all of its interest in the Class B
Certificates the transferring Class B Purchaser shall provide the Transferor and
the Servicer with five (5) Business Days prior written notice thereof and the
prior consent of the Transferor and the Servicer shall not be required for such
Transfer.
Each of the Transferor and the Servicer authorizes
each Class B Purchaser to disclose to any Transferee and Support Bank and any
prospective Transferee or Support Bank any and all financial information in the
Class B Purchaser's possession concerning the Trust, the Transferor or the
Servicer which has been delivered to the Agent or such Class B Purchaser by or
on behalf of the Trust or the Transferor or the Servicer pursuant to this
Agreement (including information obtained pursuant to rights of inspection
granted hereunder) or the other Related Documents or which has been delivered to
such Class B Purchaser by or on behalf of the Trust, the Transferor or the
Servicer in connection with such Class B Purchaser's credit evaluation of the
Trust, the Transferor or the Servicer prior to becoming a party to, or
purchasing an interest in this Agreement or the Class B Certificates; PROVIDED
that prior to any such disclosure, such Transferee or Support Bank or
prospective Transferee or Support Bank shall have executed an agreement agreeing
to be bound by the provisions of Section 6.2 hereof.
(d) Each Class B Purchaser may, in accordance with
applicable law, at any time grant participations in all or part of its interest
in its Commitment or in the Class B Certificates including the payments due to
it under this Agreement and the Pooling and Servicing Agreement (each, a
"PARTICIPATION") to any Person (each, a "PARTICIPANT"); PROVIDED, HOWEVER, that
no Participation shall be granted to any Person unless and until the Agent shall
have consented thereto and the conditions to Transfer specified in this
Agreement and the Pooling and Servicing Agreement, including in subsection
8.1(c) hereof and Section 6.18 of the Pooling and Servicing Agreement, shall
have been satisfied and that such Participation consists of a PRO RATA
percentage interest in all payments made with respect to such Class B
Purchaser's beneficial interest (if any) in the Class B Certificates. In
connection with any such Participation, the Agent shall maintain a register of
each Participant and the amount of each Participation. Each Class B Purchaser
hereby acknowledges and agrees that (A) any such Participation will not alter or
affect such Class B Purchaser's direct obligations hereunder, and (B) neither
the Trustee, the Transferor nor the Servicer shall have any obligation to have
any communication or relationship with any Participant. Each Class B Purchaser
and each Participant shall comply with the provisions of subsection 2.5(c). No
Participant shall be entitled to Transfer all or any portion of its
Participation, without the prior written consent of the Agent. The Transferor
shall be obligated to indemnify a Participant for all amounts owing to it under
Sections 2.4, 2.5 and 2.7 as if such Participant were a Class B Purchaser
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hereunder, but, in the case of Sections 2.4 and 2.5, only in an amount not in
excess of the amounts which would have been owing thereunder had such
Participation not been granted and, in the case of Section 2.5, provided that
such Participant has complied with the provisions of subsection 2.5(c) as if it
were a Class B Purchaser. Each Class B Purchaser shall give the Agent notice of
the consummation of any sale by it of a Participation and the Agent (upon
receipt of notice from the related Class B Purchaser) shall promptly notify the
Transferor, the Servicer and the Trustee.
(e) Each Class B Purchaser may, with the consent of
the Agent and in accordance with applicable law, sell or assign (each, an
"ASSIGNMENT"), to any Person (each, an "ASSIGNEE") which is an Eligible Assignee
(or is otherwise consented to in writing by the Transferor and the Servicer) all
or any part of its interest in its Commitment or in the Class B Certificates and
its rights and obligations under this Agreement and the Pooling and Servicing
Agreement pursuant to an agreement substantially in the form attached hereto as
EXHIBIT C hereto (a "TRANSFER SUPPLEMENT"), executed by such Assignee and the
Class B Purchaser and delivered to the Agent for its acceptance and consent;
PROVIDED, HOWEVER, that no such assignment or sale shall be effective unless and
until the conditions to Transfer specified in this Agreement and the Pooling and
Servicing Agreement, including in subsection 8.1(c) hereof and Section 6.18 of
the Pooling and Servicing Agreement, shall have been satisfied; and PROVIDED
FURTHER, HOWEVER, that no such assignment or sale to an Assignee which would
become a Committed Class B Purchaser shall be effective unless either (i) the
commercial paper notes or the short-term obligations of such Assignee are rated
at least A-1 by Standard & Poor's and P-1 by Moody's or (ii) such assignment or
sale shall have been consented to by all Class B Purchasers. From and after the
effective date determined pursuant to such Transfer Supplement, (x) the Assignee
thereunder shall be a party hereto and, to the extent provided in such Transfer
Supplement, have the rights and obligations of a Class B Purchaser hereunder as
set forth therein and (y) the transferor Class B Purchaser shall, to the extent
provided in such Transfer Supplement, be released from its Commitment and other
obligations under this Agreement; PROVIDED, HOWEVER, that after giving effect to
each such Assignment, the obligations released by any such Class B Purchaser
shall not exceed the obligations assumed by an Assignee or Assignees. Such
Transfer Supplement shall be deemed to amend this Agreement to the extent, and
only to the extent, necessary to reflect the addition of such Assignee and the
resulting adjustment of Percentage Interests, Noncommitted Purchaser Percentages
or Commitment Percentages arising from the Assignment. Upon its receipt of a
duly executed Transfer Supplement, the Agent shall on the effective date
determined pursuant thereto give notice of such acceptance to the Transferor,
the Servicer and the Trustee and the Servicer will provide notice thereof to
each Rating Agency (if required).
Upon surrender for registration of transfer of a
Class B Purchaser's beneficial interest in the Class B Certificates (or portion
thereof) and delivery to the Transferor and the Trustee of an Investment Letter,
executed by the registered owner (and the beneficial owner if it is a Person
other than the registered owner), and receipt by the Trustee of a copy of the
duly executed related Transfer Supplement and such other documents as may be
required under this Agreement, such beneficial interest in the Class B
Certificates (or portion thereof) shall be transferred in the records of the
Trustee and the Agent and, if requested by the Assignee, new Class B
Certificates shall be issued to the Assignee and, if applicable, the transferor
Class B Purchaser in amounts reflecting such Transfer as provided in the Pooling
and Servicing Agreement. Such Transfers of Class B Certificates (and interests
therein) shall be subject to this Section 8.1 in lieu of any regulations which
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may be prescribed under Section 6.3 of the Pooling and Servicing Agreement.
Successive registrations of Transfers as aforesaid may be made from time to time
as desired, and each such registration of a transfer to a new registered owner
shall be noted on the Certificate Register.
(f) Each Class B Purchaser may pledge its interest
in the Class B Certificates to any Federal Reserve Bank as collateral in
accordance with applicable law.
(g) Any Class B Purchaser shall have the option
to change its Investing Office, PROVIDED that such Class B Purchaser shall have
prior to such change in office complied with the provisions of subsection 2.5(c)
and PROVIDED FURTHER that such Class B Purchaser shall not be entitled to any
amounts otherwise payable under Section 2.4 or 2.5 resulting solely from such
change in office unless such change in office was mandated by applicable law or
by such Class B Purchaser's compliance with the provisions of this Agreement.
(h) Each Affected Party which, on the date it became
an Affected Party, was an Eligible Assignee or was consented to by the
Transferor and the Servicer shall be entitled to receive additional payments
pursuant to Sections 2.4, 2.5 and 2.7 hereof as though it were a Class B
Purchaser and such Section applied to its interest in or commitment to acquire
an interest in the Class B Certificates; PROVIDED that such Affected Party shall
not be entitled to additional payments pursuant to (i) Section 2.4 by reason of
Regulatory Changes which occurred prior to the date it became an Affected Party
or (ii) Section 2.5 attributable to its failure to satisfy the requirements of
subsection 2.5(c) as if it were a Class B Purchaser.
(i) If any increased amounts referred to in Sections
2.4 or 2.5 owing to any Affected Party are not eliminated or reduced by the
designation of a different Investing Office or other actions taken pursuant to
subsection 2.4(c) and payment thereof hereunder is not waived by such Affected
Party within 45 days after the Transferor or the Servicer shall have given
notice to such Affected Party, its related Class B Purchaser and the Agent of
the intent of the Transferor to exercise its rights under this sentence, the
Transferor shall have the right to replace such related Class B Purchaser
hereunder with a Replacement Purchaser; PROVIDED, that (x) such related Class B
Purchaser shall not be replaced hereunder until such related Class B Purchaser
has been paid in full all amounts owed to it hereunder and with respect to its
interest in the Class B Certificates and (y) if the related Class B Purchaser is
the Agent or the Administrative Agent or, unless otherwise agreed by the Agent
and the Administrative Agent, a Structured Purchaser sponsored or administered
by the Administrative Agent or the Agent (in its individual capacity), a
replacement Agent and Administrative Agent shall have been appointed in
accordance with Section 7.9 and the Agent and the Administrative Agent to be
replaced shall have been paid in full all amounts owed to it hereunder.
(j) Each Affected Party claiming increased amounts
described in Sections 2.4 or 2.5 shall furnish, through its related Structured
Purchaser, to the Trustee, the Agent, the Servicer and the Transferor a
certificate setting forth any action taken by such Affected Party to reduce or
eliminate such increased amounts pursuant to subsection 2.4(c) and the basis and
amount of each request by such Affected Party for any such amounts referred to
in Sections 2.4 or 2.5, such certificate to be conclusive with respect to the
factual information set forth therein absent manifest error.
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(k) In the event that a Committed Class B Purchaser
was at any time a Defaulting Purchaser or is a Downgraded Purchaser, the
Transferor shall have the right and to replace such Class B Purchaser hereunder
with a Replacement Purchaser, and the Agent, acting at the request of the
Required Class B Purchasers or the Required Class A Owners, shall have the right
to replace such Committed Class B Purchaser with a Replacement Purchaser which
is an Eligible Assignee or is otherwise reasonably acceptable to the Transferor,
which Replacement Purchaser shall succeed to the rights of such Committed Class
B Purchaser under this Agreement, and such Committed Class B Purchaser shall
assign its beneficial interest in the Class B Certificates to such Replacement
Purchaser in accordance with the provisions of this Section 8.1; PROVIDED, that
(A) such Committed Class B Purchaser shall not be replaced hereunder with a new
investor until such Committed Class B Purchaser has been paid in full its
Percentage Interest of the Class B Investor Principal Balance and all accrued
and unpaid Yield (including any Liquidation Fee determined for the replacement
date) thereon by such new investor and all other amounts (including all amounts
owing under Sections 2.4 and 2.5) owed to it and to all Participants and
Affected Parties with respect to such Class B Purchaser pursuant to this
Agreement and (ii) if the Class B Purchaser to be replaced is the Agent or the
Administrative Agent or, unless the Agent and the Administrative Agent otherwise
agree, a Structured Purchaser sponsored or administered by the Administrative
Agent or the Agent (in its individual capacity), a replacement Agent or
Administrative Agent, as the case may be, shall have been appointed in
accordance with Section 7.9 and the Agent or Administrative Agent, as the case
may be, to be replaced shall have been paid all amounts owing to it as Agent or
Administrative Agent, as the case may be, pursuant to this Agreement. For
purposes of this subsection, a Committed Class B Purchaser shall be a
"DOWNGRADED PURCHASER" if and so long as the credit rating assigned to its
short-term obligations by Moody's or Standard & Poor's on the date on which it
became a party to this Agreement shall have been reduced or withdrawn.
8.2 TAX CHARACTERIZATION OF THE CLASS B CERTIFICATES. It is
the intention of the parties hereto that the Class B Certificates be treated for
tax purposes as indebtedness. In the event that the Class B Certificates are not
so treated, it is the intention of the parties that such Class B Certificates be
treated as an interest in a partnership that owns the Receivables. In the event
that the Class B Certificates are treated as an interest in a partnership, it is
the intention of the parties that interest payable on such Class B Certificates
be treated as guaranteed payment and, if for any reason it is not so treated,
that the holders of such Class B Certificates be specially allocated gross
interest income equal to the interest accrued during each applicable accrual
period on such Class B Certificates.
SECTION 9. MISCELLANEOUS
9.1 AMENDMENTS AND WAIVERS. This Agreement may not be
amended, supplemented or modified nor may any provision hereof be waived
except in accordance with the provisions of this Section 9.1. With the written
consent of the Required Class B Owners and the Required Class B Purchasers,
the Agent, the Transferor and the Servicer may, from time to time, enter into
written amendments, supplements, waivers or modifications hereto for the
purpose of adding any provisions to this Agreement or changing in any manner
the rights of any party hereto or waiving, on such terms and conditions as may
be specified in such instrument, any of the requirements of this Agreement;
PROVIDED, HOWEVER, that no such amendment, supplement, waiver or modification
shall (i) reduce the amount of or extend the maturity of any Class B
Certificate or reduce the rate or extend
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the time of payment of interest thereon, or reduce or alter the timing of any
other amount payable to any Class B Purchaser hereunder or under the Supplement,
in each case without the consent of the Class B Purchaser affected thereby, (ii)
amend, modify or waive any provision of this Section 9.1, or, if such amendment
would have a material adverse effect on the Class B Purchasers, the definition
of "Class B Invested Amount", or reduce the percentage specified in the
definition of Required Class B Owners or Required Class B Purchasers, in each
case without the written consent of all Class B Purchasers or (iii) amend,
modify or waive any provision of Section 7 of this Agreement without the written
consent of the Agent, the Administrative Agent, the Required Class B Owners and
Required Class B Purchasers. Any waiver of any provision of this Agreement shall
be limited to the provisions specifically set forth therein for the period of
time set forth therein and shall not be construed to be a waiver of any other
provision of this Agreement.
Each party hereto agrees, at the request of the Agent from
time to time to enter into or to consent to, as applicable, any amendments or
other modifications to this Agreement or the Related Documents, other than those
requiring the consent of all Class B Purchasers as provided above in this
subsection, and the Transferor agrees to cause its Certificate of Incorporation
and Bylaws to be amended or otherwise modified, as shall reasonably be
determined by the Agent to be required for any initial Class B Purchaser which
is a Structured Purchaser to obtain or maintain an informal rating of the Class
B Certificates which will permit such Structured Purchaser's commercial paper
notes to maintain at least the rating from Standard & Poor's and Moody's as in
effect immediately prior to such Structured Purchaser's becoming a Class B
Purchaser after giving effect to its initial purchase of the Class B
Certificates and to purchases from time to time by such Structured Purchaser of
VFC Additional Class B Invested Amounts as contemplated by this Agreement,
without giving effect to any increase in any letter of credit or other
enhancement provided to such Structured Purchaser (other than liquidity support
provided to such Structured Purchaser by Affected Parties).
The Administrative Agent may cast any vote or give any
direction under the Pooling and Servicing Agreement on behalf of the Class B
Certificateholders if it has been directed to do so by (i) the Required Class B
Owners, (ii) the Required Class B Purchasers, and (iii) by the Class A
Purchasers (as defined in the Class A Certificate Purchase Agreement) required
under the terms of Section 9.1 of the Class A Certificate Purchase Agreement.
9.2 NOTICES. (a) All notices, requests and demands to or upon
the respective parties hereto to be effective shall be in writing (including by
telecopy, telegraph or telex), and, unless otherwise expressly provided herein,
shall be deemed to have been duly given or made when delivered by hand, or, in
the case of mail or telecopy notice, when received, or, in the case of
telegraphic notice, when delivered to the telegraph company, or, in the case of
telex notice, when sent, answer back received, addressed as follows or, with
respect to a Class B Purchaser, as set forth in its respective Joinder
Supplement or Transfer Supplement, or to such other address as may be hereafter
notified by the respective parties hereto:
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The Transferor: Prime II Receivables Corporation
9111 Duke Boulevard
Mason, Ohio 45040
Attention: President
Telephone: (513) 573-2048
Telefax: (513) 573-2039
The Servicer: FDS National Bank
9111 Duke Boulevard
Mason, Ohio 45040
Attention: Chief Financial Officer
Telephone: (513) 573-2265
Telefax: (513) 573-2720
With a copy to:
Federated Department Stores, Inc.
7 West Seventh Street
Cincinnati, Ohio 45202
Attention: General Counsel
Telephone: (513) 579-7000
Telefax: (513) 579-7462
The Trustee: The Chase Manhattan Bank
450 West 33rd Street
New York, New York 10001
Attention: Corporate Trustee Administration
Department
Telephone: (212) 946-8608
Telefax: (212) 946-3240
The Agent Credit Suisse First Boston, New York Branch
or the Eleven Madison Avenue
Administrative New York, New York 10010
Agent: Attention: Asset Finance Department
Telephone: (212) 325-9077
Telefax: (212) 325-6677
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Moody's:. Moody's Investors Service, Inc.
99 Church Street
New York, New York 10007
Attention: ABS Monitoring Department, 4th Floor
Telephone: (212) 553-3607
Telefax: (212) 553-4773
Standard. Standard & Poor's Ratings Services
& Poor's: 26 Broadway, 15th Floor
New York, New York 10004
Attention: Asset-Backed Surveillance Department
Telephone: (212) 208-1892
Telefax: (212) 412-0323
(b) All payments to be made to the Agent or any Class B
Purchaser hereunder shall be made in United States dollars and in immediately
available funds not later than 2:30 p.m. New York City time on the date payment
is due, and, unless otherwise specifically provided herein, shall be made to the
Agent, for the account of one or more of the Class B Purchasers or for its own
account, as the case may be. Unless otherwise directed by the Agent, all
payments to it shall be made by federal wire (ABA #0260-0917-9) and telegraph
name (CR SUISSE NY), to account number 930539-05, reference Prime Credit Card
Master Trust II, Series 1997-1, with telephone notice (including federal wire
number) to the Asset Finance Department of Credit Suisse (212-325-9077).
9.3 NO WAIVER; CUMULATIVE REMEDIES. No failure to exercise
and no delay in exercising, on the part of the Agent or any Class B Purchaser,
any right, remedy, power or privilege hereunder or under any of the other
Related Documents shall operate as a waiver thereof; nor shall any single or
partial exercise of any right, remedy, power or privilege hereunder or under
any of the other Related Documents preclude any other or further exercise
thereof or the exercise of any other right, remedy, power or privilege. The
rights, remedies, powers and privileges provided herein and in the other
Related Documents are cumulative and not exclusive of any rights, remedies,
powers and privileges provided by law.
9.4 SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and inure to the benefit of the Transferor, the Servicer, the Agent, the
Administrative Agent, the Class B Purchasers, any Assignee and their respective
successors and assigns, except that the Transferor and the Servicer may not
assign or transfer any of their respective rights or obligations under this
Agreement except, as provided herein and in the Pooling and Servicing Agreement,
without the prior written consent of the Required Class B Owners and the
Required Class B Purchasers.
9.5 SUCCESSORS TO SERVICER. (a) In the event that a transfer
of servicing occurs under Article VIII or Article X of the Pooling and Servicing
Agreement, (i) from and after the effective date of such transfer, the Successor
Servicer shall be the successor in all respects to the Servicer and shall be
responsible for the performance of all functions to be performed by the Servicer
from and after such date, except as provided in the Pooling and Servicing
Agreement, and shall be subject to
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all the responsibilities, duties and liabilities relating thereto placed on the
Servicer by the terms and provisions hereof, and all references in this
Agreement to the Servicer shall be deemed to refer to the Successor Servicer,
and (ii) as of the date of such transfer, the Successor Servicer shall be deemed
to have made with respect to itself the representations and warranties made by
the Servicer in Section 4.2 (in the case of subsection 4.2(a) with appropriate
factual changes); PROVIDED, HOWEVER, that the references to the Servicer
contained in Section 5.1 of this Agreement shall be deemed to refer to the
Servicer with respect to responsibilities, duties and liabilities arising out of
an act or acts, or omission, or an event or events giving rise to such
responsibilities, duties and liabilities and occurring during such time that the
Servicer was Servicer under this Agreement and shall be deemed to refer to the
Successor Servicer with respect to responsibilities, duties and liabilities
arising out of an act or acts, or omission, or an event or events giving rise to
such responsibilities, duties and liabilities and occurring during such time
that the Successor Servicer acts as Servicer under this Agreement; PROVIDED,
HOWEVER, to the extent that an obligation to indemnify the Class B Purchasers
under Section 2.7 arises as a result of any act or failure to act of any
Successor Servicer in the performance of servicing obligations under the Pooling
and Servicing Agreement or the Supplement, such indemnification obligation shall
be of the Successor Servicer and not FDSNB. Upon the transfer of servicing to a
Successor Servicer, such Successor Servicer shall furnish to the Agent copies of
its audited annual financial statements for each of the three preceding fiscal
years or if the Trustee or any other banking institution becomes the Successor
Servicer, such Successor Servicer shall provide, in lieu of the audited
financial statements required in the immediately preceding clause, complete and
correct copies of the publicly available portions of its Consolidated Reports of
Condition and Income as submitted to the Federal Deposit Insurance Corporation
for the two most recent year end periods.
(b) In the event that any Person becomes the
successor to the Transferor pursuant to Article VII of the Pooling and Servicing
Agreement, from and after the effective date of such transfer, such successor to
the Transferor shall be the successor in all respects to the Transferor and
shall be responsible for the performance of all functions to be performed by the
Transferor from and after such date, except as provided in the Pooling and
Servicing Agreement, and shall be subject to all the responsibilities, duties
and liabilities relating thereto placed on the Transferor by the terms and
provisions hereof, and all references in this Agreement to the Transferor shall
be deemed to refer to the successor to the Transferor; PROVIDED, HOWEVER, that
the references to the Transferor contained in Sections 2.5, 2.7 and 5.1 of this
Agreement shall be deemed to refer to Prime II Receivables Corporation with
respect to responsibilities, duties and liabilities arising out of an act or
acts, or omission, or an event or events giving rise to such responsibilities,
duties and liabilities and occurring during such time that Prime II Receivables
Corporation was Transferor under this Agreement and shall be deemed to refer to
the successor to Prime II Receivables Corporation as Transferor with respect to
responsibilities, duties and liabilities arising out of an act or acts, or
omission, or an event or events giving rise to such responsibilities, duties and
liabilities and occurring during such time that the successor to Prime II
Receivables Corporation acts as Transferor under this Agreement.
9.6 COUNTERPARTS. This Agreement may be executed by one or
more of the parties to this Agreement on any number of separate counterparts,
and all of said counterparts taken together shall be deemed to constitute one
and the same instrument.
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9.7 SEVERABILITY. Any provisions of this Agreement which are
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provisions in any other jurisdiction.
9.8 INTEGRATION. This Agreement and the Class B Fee Letter
represent the agreement of the Agent, the Administrative Agent, the Transferor,
the Servicer and the Class B Purchasers with respect to the subject matter
hereof, and there are no promises, undertakings, representations or warranties
by the Class B Purchasers, the Agent or the Administrative Agent relative to
subject matter hereof not expressly set forth or referred to herein or therein.
FDSNB shall retain a copy of each of the above-referenced agreements as part of
its official records.
9.9 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
9.10 TERMINATION. This Agreement shall remain in full force
and effect until the earlier to occur of (a) payment in full of the Class B
Repayment Amount and all other amounts payable to the Class B Purchasers, the
Agent and the Administrative Agent hereunder and the termination of all
Commitments and (b) the Series 1997-1 Termination Date; PROVIDED, HOWEVER, that
if the Class B Repayment Amount and all other amounts payable to the Class B
Purchasers hereunder are paid in full and all Commitments have terminated prior
to the Series 1997-1 Termination Date, the Agent shall notify the Trustee that
thereafter all amounts otherwise payable to the Class B Purchasers hereunder
shall be payable to the Transferor or any Person designated thereby; and
PROVIDED, FURTHER, that the provisions of Sections 2.4, 2.5, 2.6, 2.7 and 7.7
and subsections 9.12(a) and 9.12(b) shall survive termination of this Agreement
and amounts payable to the Class B Purchasers thereunder shall remain payable to
the Class B Purchasers.
9.11 ACTION BY SERVICER. Wherever the Trustee or the Trust is
authorized or required to take an action or give a notice pursuant to this
Agreement and if the Trustee fails timely to take such action or give such
notice pursuant to this Agreement after being requested to do so by the
Servicer, the Servicer shall take such action or give such notice on behalf of
the Trustee or the Trust.
9.12 LIMITED RECOURSE; NO PROCEEDINGS. (a) The obligations of
the Transferor and the Servicer under this Agreement are several (except as
specifically provided herein) and are solely the corporate obligations of the
Transferor and the Servicer. No recourse shall be had for the payment of any fee
or other obligation or claim arising out of or relating to this Agreement or any
other agreement, instrument, document or certificate executed and delivered or
issued by the Transferor and the Servicer or any officer of any of them in
connection therewith, against any stockholder, employee, officer, director or
incorporator of the Transferor or the Servicer, and neither the Agent nor any
Class B Purchaser shall look to any property or assets of the Transferor, other
than to (a) amounts payable to the Transferor under the Receivables Purchase
Agreement, any Supplement or the Pooling and Servicing Agreement and (b) any
other assets of the Transferor not pledged to third parties or otherwise
encumbered in any manner permitted by the Transferor's
-46-
<PAGE> 50
Certificate of Incorporation. Each Class B Purchaser and the Agent hereby agrees
that to the extent such funds are insufficient or unavailable to pay any amounts
owing to it by the Transferor pursuant to this Agreement, prior to the earlier
of the Trust Termination Date or the commencement of a bankruptcy or insolvency
proceeding by or against the Transferor, it shall not constitute a claim against
the Transferor. Nothing in this paragraph shall limit or otherwise affect the
liability of the Servicer with respect to any amounts owing by it hereunder or
the right of the Agent or any Class B Purchaser to enforce such liability
against the Servicer or any of its assets.
(b) Each of the Transferor, the Servicer and the
Trustee hereby agrees that it shall not institute or join against any Structured
Lender any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceeding, or other proceeding under any federal or state bankruptcy or similar
law, for one year and a day after the latest maturing commercial paper note,
medium term note or other debt security issued by such Structured Lender is
paid. The foregoing shall not limit the Transferor's, the Servicer's or the
Trustee's right to file any claim in or otherwise take any action with respect
to any such bankruptcy, reorganization, arrangement, insolvency or liquidation
proceeding that was instituted by any Person other than the Transferor, the
Servicer or the Trustee.
9.13 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties made hereunder and in any document, certificate
or statement delivered pursuant hereto or in connection herewith shall survive
the execution and delivery of this Agreement, the purchase of the Class B
Certificates hereunder and the termination of this Agreement.
9.14 SUBMISSION TO JURISDICTION; WAIVERS. EACH OF THE
TRANSFEROR, THE ADMINISTRATIVE AGENT, THE SERVICER, THE TRUST, THE TRUSTEE, THE
AGENT AND EACH CLASS B PURCHASER HEREBY IRREVOCABLY AND UNCONDITIONALLY:
(A) SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT TO WHICH IT IS A PARTY,
OR FOR RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT IN RESPECT
THEREOF, TO THE NON-EXCLUSIVE GENERAL JURISDICTION OF THE
COURTS OF THE STATE OF NEW YORK AND THE UNITED STATES OF
AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND APPELLATE
COURTS FROM ANY THEREOF;
(B) CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY BE BROUGHT
IN SUCH COURTS AND WAIVES ANY OBJECTION THAT IT MAY NOW OR
HEREAFTER HAVE TO THE VENUE OF ANY SUCH ACTION OR PROCEEDING
IN ANY SUCH COURT OR THAT SUCH ACTION OR PROCEEDING WAS
BROUGHT IN AN INCONVENIENT COURT AND AGREES NOT TO PLEAD OR
CLAIM THE SAME;
(C) AGREES THAT SERVICE OF PROCESS IN ANY SUCH
-47-
<PAGE> 51
ACTION OR PROCEEDING MAY BE EFFECTED BY MAILING A COPY
THEREOF BY REGISTERED OR CERTIFIED MAIL (OR ANY
SUBSTANTIALLY SIMILAR FORM OF MAIL), POSTAGE PREPAID, TO SUCH
PARTY AT ITS ADDRESS SET FORTH IN SECTION 9.2 OR AT SUCH
OTHER ADDRESS OF WHICH THE AGENT SHALL HAVE BEEN NOTIFIED
PURSUANT THERETO; AND
(D) AGREES THAT NOTHING HEREIN SHALL AFFECT THE RIGHT TO
EFFECT SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW
OR SHALL LIMIT THE RIGHT TO SUE IN ANY OTHER JURISDICTION.
9.15 WAIVERS OF JURY TRIAL. THE TRANSFEROR, THE SERVICER, THE
TRUST, THE TRUSTEE, THE AGENT AND THE CLASS B PURCHASERS HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING
TO THIS AGREEMENT OR ANY OTHER DOCUMENT OR INSTRUMENT RELATED HERETO AND FOR ANY
COUNTERCLAIM THEREIN.
-48-
<PAGE> 52
IN WITNESS WHEREOF, the parties hereto have caused this
Certificate Purchase Agreement to be duly executed by their respective officers
as of the day and year first above written.
PRIME II RECEIVABLES CORPORATION,
as Transferor
By: /s/ Karen M. Hoguet
---------------------------------
Name: Karen M. Hoguet
Title: Chairman of the Board
FDS NATIONAL BANK
By: /s/ Susan R. Robinson
---------------------------------
Name: Susan R. Robinson
Title: Treasurer
CREDIT SUISSE FIRST BOSTON, NEW YORK
BRANCH,
as Agent and as Administrative Agent
By: /s/ Thomas Meier
---------------------------------
Name: Thomas Meier
Title: Associate
By: /s/ Thomas A. Carroll
---------------------------------
Name: Thomas A. Carroll
Title: Associate
<PAGE> 53
EXHIBIT A
---------
FORM OF INVESTMENT LETTER
-------------------------
[Date]
Prime II Receivables Corporation
9111 Duke Boulevard
Mason, Ohio 45040
Attention: President
Re Prime Credit Card Master Trust II Class B
Variable Funding Certificates, Series 1997-1
--------------------------------------------
Ladies and Gentlemen:
This letter (the "Investment Letter") is delivered by the
undersigned (the "Purchaser") pursuant to subsection 8.1(a) of the Class B
Certificate Purchase Agreement dated as of January 22, 1997 (as in effect, the
"Certificate Purchase Agreement"), among the Transferor, FDS National Bank, as
Servicer, the Class B Purchasers parties thereto and Credit Suisse First Boston,
New York Branch, as Agent and Administrative Agent. Capitalized terms used
herein without definition shall have the meanings set forth in the Certificate
Purchase Agreement. The Purchaser represents to and agrees with the Transferor
as follows:
(a) The Purchaser is authorized [to enter into the Certificate
Purchase Agreement and to perform its obligations thereunder and to
consummate the transactions contemplated thereby] [to purchase a
participation in obligations under the Certificate Purchase Agreement].
(b) The Purchaser has such knowledge and experience in
financial and business matters as to be capable of evaluating the
merits and risks of its investment in the Class B Certificates and is
able to bear the economic risk of such investment. The Purchaser has
been afforded the opportunity to ask such questions as it deems
necessary to make an investment decision, and has received all
information it has requested in connection with making such investment
decision. The Purchaser has, independently and without reliance upon
the Agent, the Administrative Agent or any other Class B Purchaser, and
based on such documents and information as it has deemed appropriate,
made is own appraisal of and investigation into the business,
operations, property, financial and other condition and
creditworthiness of the Trust, the Transferor and the Servicer and made
its own decision to purchase its interest in the Class B Certificates,
and will, independently and without reliance upon the Agent, the
Administrative Agent or any other Class B Purchaser, and based on such
documents and information as it shall deem appropriate at the time,
continue to make its own analysis, appraisals and decisions
<PAGE> 54
in taking or not taking action under the Certificate Purchase
Agreement, and to make such investigation as it deems necessary to
inform itself as to the business, operations, property, financial and
other condition and creditworthiness of the Trust, the Transferor and
the Servicer.
(c) The Purchaser is an "accredited investor", as defined in
Rule 501, promulgated by the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the
"Securities Act"), or is a sophisticated institutional investor. The
Purchaser understands that the offering and sale of the Class B
Certificates has not been and will not be registered under the
Securities Act and has not and will not be registered or qualified
under any applicable "Blue Sky" law, and that the offering and sale of
the Class B Certificate has not been reviewed by, passed on or
submitted to any federal or state agency or commission, securities
exchange or other regulatory body.
(d) The Purchaser is acquiring an interest in Class B
Certificates without a view to any distribution, resale or other
transfer thereof except, with respect to any Class B Purchaser Interest
or any interest or participation therein, as contemplated in the
following sentence. The Purchaser will not resell or otherwise transfer
any interest or participation in the Class B Purchaser Interest, except
in accordance with Sections 8.1 of the Certificate Purchase Agreement
and (i) in a transaction exempt from the registration requirements of
the Securities Act of 1933, as amended, and applicable state securities
or "blue sky" laws; (ii) to the Transferor or any affiliate of the
Transferor; or (iii) to a person who the Purchaser reasonably believes
is a qualified institutional buyer (within the meaning thereof in Rule
144A under the Securities Act) that is aware that the resale or other
transfer is being made in reliance upon Rule 144A. In connection
therewith, the Purchaser hereby agrees that it will not resell or
otherwise transfer the Class B Certificates or any interest therein
unless the purchaser thereof provides to the addressee hereof a letter
substantially in the form hereof.
[(e) The Purchaser hereby certifies to the Transferor, the
Servicer and the Trustee that it has neither acquired nor will it sell,
trade or transfer any interest in a Class B Certificate or cause an
interest in a Class B Certificate to be marketed on or through 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. In addition, the Purchaser hereby certifies that it
is not and, for so long as it holds any interest in a Class B
Certificate will not become a partnership, Subchapter S corporation or
grantor trust for U.S. federal income tax purposes. The Purchaser
acknowledges that the opinion of counsel to the effect that the Trust
will not be treated as a publicly traded partnership taxable as a
corporation is dependent in part on the accuracy of the certifications
described in this paragraph.][To be included only if required by
Section 6.18 of the Pooling and Servicing Agreement.]
A-2
<PAGE> 55
[(e)][(f)] This Investment Letter has been duly executed and
delivered and constitutes the legal, valid and binding obligation of
the Purchaser, enforceable against the Purchaser in accordance with its
terms, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws or equitable
principles affecting the enforcement of creditors' rights generally and
general principles of equity.
Very truly yours,
[NAME OF PURCHASER]
By:
---------------------------------
Name:
Title:
A-3
<PAGE> 56
EXHIBIT B
---------
FORM OF JOINDER SUPPLEMENT
JOINDER SUPPLEMENT, dated as of the date set forth in Item 1
of Schedule I hereto, among Prime II Receivables Corporation (the "TRANSFEROR"),
the Class B Purchaser set forth in Item 2 of Schedule I hereto (the "ADDITIONAL
CLASS B PURCHASER"), and Credit Suisse First Boston, New York Branch, as Agent
for the Class B Purchasers under, and as defined in, the Certificate Purchase
Agreement described below (in such capacity, the "AGENT").
W I T N E S S E T H:
WHEREAS, this Supplement is being executed and delivered in
accordance with subsection 2.2(d) of the Class B Certificate Purchase Agreement,
dated as of January 22, 1997, among the Transferor, FDS National Bank, as
Servicer, the Class B Purchasers parties thereto, the Agent and Credit Suisse
First Boston, New York Branch, as Administrative Agent (as from time to time
amended, supplemented or otherwise modified in accordance with the terms
thereof, the "CERTIFICATE PURCHASE AGREEMENT"; unless otherwise defined herein,
terms defined in the Certificate Purchase Agreement are used herein as therein
defined); and
WHEREAS, the Additional Class B Purchaser (if it is not
already a Class B Purchaser party to the Certificate Purchase Agreement) wishes
to become a Class B Purchaser party to the Certificate Purchase Agreement;
NOW, THEREFORE, the parties hereto hereby agree as follows:
(a) Upon receipt by the Agent of five counterparts of this
Supplement, to each of which is attached a fully completed Schedule I and
Schedule II, each of which has been executed by the Additional Class B
Purchaser, the Transferor and the Agent, the Agent will transmit to the
Servicer, the Transferor, the Trustee, the Administrative Agent and the
Additional Class B Purchaser a Joinder Effective Notice, substantially in the
form of Schedule III to this Supplement (a "JOINDER EFFECTIVE NOTICE"). Such
Joinder Effective Notice shall be executed by the Agent and shall set forth,
INTER ALIA, the date on which the transfer effected by this Supplement shall
become effective (the "JOINDER EFFECTIVE DATE"). From and after the Joinder
Effective Date, the Additional Class B Purchaser shall be a Class B Purchaser
party to the Certificate Purchase Agreement for all purposes thereof and shall
be a Noncommitted Class B Purchaser or Committed Class B Purchaser, as the case
may be, as set forth in Schedule II hereto, having an initial Noncommitted
Purchaser Percentage or Commited Purchaser Percentage, as applicable, and a
Commitment, if applicable, as set forth in such Schedule II.
(b) Concurrently with the execution and delivery hereof, the
Additional Class B Purchaser will deliver to the Transferor and the Trustee an
executed Investment Letter in the form of Exhibit A to the Certificate Purchase
Agreement.
<PAGE> 57
(c) Each of the parties to this Supplement agrees and
acknowledges that at any time and from time to time upon the written request of
any other party, it will execute and deliver such further documents and do such
further acts and things as such other party may reasonably request in order to
effect the purposes of this Supplement.
(d) By executing and delivering this Supplement, the
Additional Class B Purchaser confirms to and agrees with the Agent, the
Administrative Agent and the Class B Purchasers as follows: (i) neither the
Agent, the Administrative Agent nor any other Class B Purchaser makes any
representation or warranty or assumes any responsibility with respect to any
statements, warranties or representations made in or in connection with the
Certificate Purchase Agreement (other then representations or warranties made by
such respective parties) or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of the Certificate Purchase Agreement or any
other instrument or document furnished pursuant thereto, or with respect to the
Trust, the financial condition of the Servicer, the Transferor or the Trustee,
or the performance or observance by the Servicer, the Transferor or the Trustee
of any of their respective obligations under the Certificate Purchase Agreement
or the Pooling and Servicing Agreement or any other instrument or document
furnished pursuant hereto; (ii) the Additional Class B Purchaser confirms that
it has received a copy of such documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into this
Supplement; (iii) the Additional Class B Purchaser will, independently and
without reliance upon the Agent, the Administrative Agent or any other Class B
Purchaser and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under the Certificate Purchase Agreement; (iv) each Purchasing
Class B Purchaser appoints and authorizes the Agent and the Administrative Agent
to take such action as agent on its behalf and to exercise such powers under the
Certificate Purchase Agreement and the Supplement as are delegated to the Agent
or the Administrative Agent, as applicable, by the terms thereof, together with
such powers as are reasonably incidental thereto, all in accordance with Section
7 of the Certificate Purchase Agreement; and (vi) the Additional Class B
Purchaser agrees (for the benefit of the Agent, the Administrative Agent, the
other Class B Purchasers, the Trustee, the Servicer and the Transferor) that it
will perform in accordance with their terms all of the obligations which by the
terms of the Certificate Purchase Agreement are required to be performed by it
as a Class B Purchaser which is a Noncommitted Class B Purchaser or Committed
Class B Purchaser, as the case may be, as specified in Schedule II hereto.
(e) Schedule II hereto sets forth the Commitment and the
Commitment Expiration Date, if applicable, and the initial Investing Office of
the Additional Class B Purchaser, as well as administrative information with
respect to the Additional Class B Purchaser.
(f) This Supplement shall be governed by, and construed in
accordance with, the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this
Supplement to be executed by their respective duly authorized officers on
Schedule I hereto as of the date set forth in Item 1 of Schedule I hereto.
B-2
<PAGE> 58
SCHEDULE I TO
JOINDER SUPPLEMENT
------------------
COMPLETION OF INFORMATION AND
SIGNATURES FOR JOINDER SUPPLEMENT
Re: Class B Certificate Purchase Agreement, dated as of January
22, 1997, among Prime II Receivables Corporation, as
Transferor, FDS National Bank, as Servicer, the Class B
Purchasers party thereto and Credit Suisse First Boston, New
York Branch, as Agent and as Administrative Agent.
Item 1: Date of Joinder Supplement:
Item 2: Additional Class B Purchaser:
Item 3: Signatures of Parties to Agreement:
-------------------------------------
as Additional Class B Purchaser
By:
--------------------------------
Name:
Title:
[By:
--------------------------------
Name:
Title:]
PRIME II RECEIVABLES CORPORATION,
as Transferor
By:
--------------------------------
Name:
Title:
B-3
<PAGE> 59
CREDIT SUISSE FIRST BOSTON, NEW YORK
BRANCH, as Agent
By:
--------------------------------
Name:
Title:
By:
--------------------------------
Name:
Title:
ACCEPTED BY:
CREDIT SUISSE FIRST BOSTON,
NEW YORK BRANCH, as Administrative Agent
By:
--------------------------------
Name:
Title:
By:
--------------------------------
Name:
Title:
FDS NATIONAL BANK, as Servicer
By:
--------------------------------
Name:
Title:
B-4
<PAGE> 60
SCHEDULE II TO
JOINDER SUPPLEMENT
------------------
LIST OF INVESTING OFFICES, ADDRESSES
FOR NOTICES AND COMMITMENT
--------------------------
[Additional Class B Purchaser]
- ------------------------------
Noncommitted Class B Purchaser: Yes/No
-----------
Initial Noncommitted Purchaser Percentage: _______%
(if applicable)
Committed Class B Purchaser: Yes/No
-------------
Initial Committed Purchaser Percentage: _______%
(if applicable)
Commitment: $____________
Commitment Expiration Date: _____________
Address for Notices:
- --------------------
Investing Office:
- -----------------
B-5
<PAGE> 61
SCHEDULE III TO
JOINDER SUPPLEMENT
------------------
FORM OF
JOINDER EFFECTIVE NOTICE
------------------------
To: [Name and address of
Transferor, Servicer, Trustee, Administrative
Agent and Additional Class B Purchaser]
The undersigned, as Agent under the Class B Certificate
Purchase Agreement, dated as of January 22, 1997, among Prime II Receivables
Corporation, as Transferor, FDS National Bank, as Servicer, the Class B
Purchasers parties thereto and Credit Suisse First Boston, New York Branch, as
Agent for the Class B Purchasers and as Administrative Agent thereunder,
acknowledges receipt of five executed counterparts of a completed Joinder
Supplement. [Note: attach copies of Schedules I and II from such Agreement.]
Terms defined in such Supplement are used herein as therein defined.
Pursuant to such Supplement, you are advised that the Joinder
Effective Date will be _____________, 199_.
CREDIT SUISSE FIRST BOSTON,
NEW YORK BRANCK, as Agent
By:
-------------------------------
Name:
Title:
By:
-------------------------------
Name:
Title:
B-6
<PAGE> 62
EXHIBIT C
---------
FORM OF TRANSFER SUPPLEMENT
TRANSFER SUPPLEMENT, dated as of the date set forth in Item 1
of Schedule I hereto, among the Transferor Class B Purchaser set forth in Item 2
of Schedule I hereto (the "TRANSFEROR CLASS B PURCHASER"), the Purchasing Class
B Purchaser set forth in Item 3 of Schedule I hereto (the "PURCHASING CLASS B
PURCHASER"), and Credit Suisse First Boston, New York Branch, as Agent for the
Class B Purchasers under, and as defined in, the Certificate Purchase Agreement
described below (in such capacity, the "AGENT").
W I T N E S S E T H:
WHEREAS, this Supplement is being executed and delivered in
accordance with subsection 8.1(e) of the Class B Certificate Purchase Agreement,
dated as of January 22, 1997, among Prime II Receivables Corporation, as
Transferor, FDS National Bank, as Servicer, the Class B Purchasers parties
thereto, the Agent and Credit Suisse First Boston, New York Branch, as
Administrative Agent (as from time to time amended, supplemented or otherwise
modified in accordance with the terms thereof, the "CERTIFICATE PURCHASE
AGREEMENT"; unless otherwise defined herein, terms defined in the Certificate
Purchase Agreement are used herein as therein defined);
WHEREAS, the Purchasing Class B Purchaser (if it is not
already a Class B Purchaser party to the Certificate Purchase Agreement) wishes
to become a Class B Purchaser party to the Certificate Purchase Agreement and
the Purchasing Class B Purchaser wishes to acquire and assume from the
Transferor Class B Purchaser, certain of the rights, obligations and commitments
under the Certificate Purchase Agreement; and
WHEREAS, the Transferor Class B Purchaser wishes to sell and
assign to the Purchasing Class B Purchaser, certain of its rights, obligations
and commitments under the Certificate Purchase Agreement.
NOW, THEREFORE, the parties hereto hereby agree as follows:
(a) Upon receipt by the Agent of five counterparts of this
Supplement, to each of which is attached a fully completed Schedule I and
Schedule II, each of which has been executed by the Transferor Class B
Purchaser, the Purchasing Class B Purchaser and the Agent, the Agent will
transmit to the Servicer, the Transferor, the Trustee, the Transferor Class B
Purchaser and the Purchasing Class B Purchaser a Transfer Effective Notice,
substantially in the form of Schedule III to this Supplement (a "TRANSFER
EFFECTIVE NOTICE"). Such Transfer Effective Notice shall be executed by the
Agent and shall set forth, INTER ALIA, the date on which the transfer effected
by this Supplement shall become effective (the "TRANSFER EFFECTIVE DATE").
Subject to the prior written consent, if applicable, of the Transferor and the
Servicer to such transfer in the form of Schedule IV to this Supplement, from
and after the Transfer Effective Date the Purchasing Class B Purchaser shall be
a Class B Purchaser party to the Certificate
<PAGE> 63
Purchase Agreement for all purposes thereof as a Noncommitted Class B Purchaser
or Committed Class B Purchaser, as specified on Schedule II to this Supplement.
(b) At or before 12:00 Noon, local time of the Transferor
Class B Purchaser, on the Transfer Effective Date, the Purchasing Class B
Purchaser shall pay to the Transferor Class B Purchaser, in immediately
available funds, an amount equal to the purchase price, as agreed between the
Transferor Class B Purchaser and such Purchasing Class B Purchaser (the
"PURCHASE PRICE"), of the portion set forth on Schedule II hereto being
purchased by such Purchasing Class B Purchaser of the outstanding Class B
Invested Amount under the Class B Variable Funding Certificate owned by the
Transferor Class B Purchaser (such Purchasing Class B Purchaser's "PURCHASE
PERCENTAGE") and other amounts owing to the Transferor Class B Purchaser under
the Certificate Purchase Agreement or otherwise in respect of the Class B
Variable Funding Certificates. Effective upon receipt by the Transferor Class B
Purchaser of the Purchase Price from the Purchasing Class B Purchaser, the
Transferor Class B Purchaser hereby irrevocably sells, assigns and transfers to
the Purchasing Class B Purchaser, without recourse, representation or warranty,
and the Purchasing Class B Purchaser hereby irrevocably purchases, takes and
assumes from the Transferor Class B Purchaser, the Purchasing Class B
Purchaser's Purchase Percentage of (i) the presently outstanding Class B
Invested Amount under the Class B Variable Funding Certificates owned by the
Transferor Class B Purchaser and other amounts owing to the Transferor Class B
Purchaser in respect of the Class B Variable Funding Certificates, together with
all instruments, documents and collateral security pertaining thereto, and (ii)
the Purchasing Purchaser's Purchase Percentage of (A) if the Transferor Class B
Purchaser is a Noncommitted Class B Purchaser, the Noncommitted Purchaser
Percentage of the Transferor Class B Purchaser and the other rights and duties
of the Transferor Class B Purchaser under the Certificate Purchase Agreement, or
(B) if the Transferor Class B Purchaser is a Committed Class B Purchaser, the
Committed Purchaser Percentage and the Commitment of the Transferor Class B
Purchaser and other rights, duties and obligations of the Transferor Class B
Purchaser under the Certificate Purchase Agreement. This Supplement is intended
by the parties hereto to effect a purchase by the Purchasing Class B Purchaser
and sale by the Transferor Class B Purchaser of interests in the Class B
Variable Funding Certificates, and it is not to be construed as a loan or a
commitment to make a loan by the Purchasing Class B Purchaser to the Transferor
Class B Purchaser. The Transferor Class B Purchaser hereby confirms that the
amount of the Class B Invested Amount is $____ and its Percentage Interest
thereof is ___%, which equals $____ as of ______________, 199_. Upon and after
the Transfer Effective Date (until further modified in accordance with the
Certificate Purchase Agreement), the Noncommitted Purchaser Percentage or
Commited Purchaser Percentage, as applicable of the Transferor Class B
Purchaser and the Purchasing Class B Purchaser and the Commitment, if any, of
the Transferor Class B Purchaser and the Purchasing Class B Purchaser shall be
as set forth in Schedule II to this Supplement.
(c) The Transferor Class B Purchaser has made arrangements
with the Purchasing Class B Purchaser with respect to (i) the portion, if any,
to be paid, and the date or dates for payment, by the Transferor Class B
Purchaser to the Purchasing Class B Purchaser of any fees heretofore received by
the Transferor Class B Purchaser pursuant to the Certificate Purchase Agreement
prior to the Transfer Effective Date and (ii) the portion, if any, to be paid,
and the date or dates for payment, by the Purchasing Class B Purchaser to the
Transferor Class B
C-2
<PAGE> 64
Purchaser of fees or interest received by the Purchasing Class B Purchaser
pursuant to the Certificate Purchase Agreement or otherwise in respect of the
Class B Variable Funding Certificates from and after the Transfer Effective
Date.
(d) (i) All principal payments that would otherwise be payable
from and after the Transfer Effective Date to or for the account of the
Transferor Class B Purchaser in respect of the Class B Variable Funding
Certificates shall, instead, be payable to or for the account of the Transferor
Class B Purchaser and the Purchasing Class B Purchaser, as the case may be, in
accordance with their respective interests as reflected in this Supplement.
(ii) All interest, fees and other amounts that
would otherwise accrue for the account of the Transferor Class B Purchaser
from and after the Transfer Effective Date pursuant to the Certificate
Purchase Agreement or in respect of the Class B Variable Funding Certificates
shall, instead, accrue for the account of, and be payable to or for the
account of, the Transferor Class B Purchaser and the Purchasing Class B
Purchaser, as the case may be, in accordance with their respective interests as
reflected in this Supplement. In the event that any amount of interest, fees or
other amounts accruing prior to the Transfer Effective Date was included in the
Purchase Price paid by the Purchasing Class B Purchaser, the Transferor Class B
Purchaser and the Purchasing Class B Purchaser will make appropriate
arrangements for payment by the Transferor Class B Purchaser to the Purchasing
Class B Purchaser of such amount upon receipt thereof from the Agent.
(e) Concurrently with the execution and delivery hereof, the
Purchasing Class B Purchaser will deliver to the Transferor and the Trustee an
executed Investment Letter in the form of Exhibit A to the Certificate Purchase
Agreement.
(f) Each of the parties to this Supplement agrees and
acknowledges that (i) at any time and from time to time upon the written request
of any other party, it will execute and deliver such further documents and do
such further acts and things as such other party may reasonably request in order
to effect the purposes of this Supplement, and (ii) the Agent shall apply each
payment made to it under the Certificate Purchase Agreement, whether in its
individual capacity or as Agent, in accordance with the provisions of the
Certificate Purchase Agreement, as appropriate.
(g) By executing and delivering this Supplement, the
Transferor Class B Purchaser and the Purchasing Class B Purchaser confirm to and
agree with each other, the Administrative Agent and the Agent and the Class B
Purchasers as follows: (i) other than the representation and warranty that it is
the legal and beneficial owner of the interest being assigned hereby free and
clear of any adverse claim, the Transferor Class B Purchaser makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with the
Certificate Purchase Agreement or the Pooling and Servicing Agreement or the
execution, legality, validity, enforceability, genuineness, sufficiency or value
of the Certificate Purchase Agreement or any other instrument or document
furnished pursuant thereto; (ii) the Transferor Class B Purchaser makes no
representation or warranty and assumes no responsibility with respect to the
Trust, the financial condition of the Servicer, the Transferor or the Trustee,
or the performance or observance by the
C-3
<PAGE> 65
Servicer, the Transferor or the Trustee of any of their respective obligations
under the Certificate Purchase Agreement, the Pooling and Servicing Agreement or
any other instrument or document furnished pursuant hereto; (iii) each
Purchasing Class B Purchaser confirms that it has received a copy of such
documents and information as it has deemed appropriate to make its own credit
analysis and decision to enter into this Supplement; (iv) each Purchasing Class
B Purchaser will, independently and without reliance upon the Agent, the
Transferor Class B Purchaser or any other Class B Purchaser and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under the
Certificate Purchase Agreement or the Pooling and Servicing Agreement; (v) each
Purchasing Class B Purchaser appoints and authorizes the Agent and the
Administrative Agent to take such action as agent on its behalf and to exercise
such powers under the Certificate Purchase Agreement and the Pooling and
Servicing Agreement as are delegated to the Agent or the Administrative Agent,
as the case may be, by the terms thereof, together with such powers as are
reasonably incidental thereto, all in accordance with Section 7 of the
Certificate Purchase Agreement; and (vi) each Purchasing Class B Purchaser
agrees (for the benefit of the Transferor Class B Purchaser, the Agent, the
Administrative Agent, the Class B Purchasers, the Trustee, the Servicer and the
Transferor) that it will perform in accordance with their terms all of the
obligations which by the terms of the Certificate Purchase Agreement are
required to be performed by it as a Class B Purchaser.
(h) Schedule II hereto sets forth the revised Noncommitted
Purchaser Percentage or the revised Committed Purchaser Percentage and
Commitment of the Transferor Class B Purchaser, as applicable, the Noncommitted
Purchaser Percentage or the Committed Purchaser Percentage, Commitment and
Commitment Expiration Date of the Purchasing Class B Purchaser, as applicable,
and the initial Investing Office of the Purchasing Class B Purchaser, as well as
administrative information with respect to the Purchasing Class B Purchaser.
(i) This Supplement shall be governed by, and construed in
accordance with, the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this
Supplement to be executed by their respective duly authorized officers on
Schedule I hereto as of the date set forth in Item 1 of Schedule I hereto.
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<PAGE> 66
SCHEDULE I TO
TRANSFER SUPPLEMENT
-------------------
COMPLETION OF INFORMATION AND
SIGNATURES FOR TRANSFER SUPPLEMENT
Re: Class B Certificate Purchase Agreement, dated as of January
22, 1997, among Prime II Receivables Corporation, as
Transferor, FDS National Bank, as Servicer, the Class B
Purchasers party thereto and Credit Suisse First Boston, New
York Branch, as Agent and as Administrative Agent.
Item 1: Date of Transfer Supplement:
Item 2: Transferor Class B Purchaser:
Item 3: Purchasing Class B Purchaser:
Item 4: Signatures of Parties to Agreement:
--------------------------------
as Transferor Class B Purchaser
By:
-----------------------------
Name:
Title:
By:
-----------------------------
Name:
Title:
C-5
<PAGE> 67
--------------------------------
as Purchasing Class B Purchaser
By:
-----------------------------
Name:
Title:
By:
-----------------------------
Name:
Title:
ACCEPTED BY:
CREDIT SUISSE FIRST BOSTON,
NEW YORK BRANCH, as Agent
By:
-----------------------------
Name:
Title:
By:
-----------------------------
Name:
Title:
C-6
<PAGE> 68
SCHEDULE II TO
TRANSFER SUPPLEMENT
-------------------
LIST OF INVESTING OFFICES, ADDRESSES
FOR NOTICES, ASSIGNED INTEREST,
PURCHASE PERCENTAGE AND PURCHASE PRICE
--------------------------------------
[Transferor Class B Purchaser]
A. Noncommitted Class B Purchaser: Yes/No
-----------
If applicable:
Noncommitted Purchaser Percentage:
----------------------------------
Transferor Class B Purchaser
Noncommitted Purchaser Percentage
Prior to Sale: _____%
Noncommitted Purchaser Percentage Sold: _____%
Noncommitted Purchaser Percentage Retained: _____%
B. Committed Class B Purchaser: Yes/No
-----------
If applicable:
Committed Purchaser Percentage:
-------------------------------
Transferor Class B Purchaser
Committed Purchaser Percentage
Prior to Sale: _____%
Committed Purchaser Percentage Sold: _____%
Committed Purchaser Percentage Retained: _____%
Commitment:
-----------
Transferor Class B Purchaser Commitment
Prior to Sale: $________
Commitment Sold: $________
C-7
<PAGE> 69
Commitment Retained: $________
C. Class B Invested Amount:
------------------------
Transferor Class B Purchaser
Class B Invested Amount Prior to Sale: $________
Class B Invested Amount Sold: $________
Class B Invested Amount Retained: $________
D. Purchase Percentage: _____%
-------------------
[Purchasing Class B Purchaser]
A. Noncommitted Class B Purchaser: Yes/No
--------
If applicable:
Initial Noncommitted Purchaser Percentage: _____%
------------------------------------------
B. Committed Class B Purchaser: Yes/No
--------
If applicable:
Committed Purchaser Percentage: _____%
-------------------------------
Commitment: $________
----------
Commitment Expiration Date: ____________
C. Class B Invested Amount Owned Immediately
-----------------------------------------
After Sale: $________
----------
Address for Notices:
- --------------------
Investing Office:
- -----------------
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<PAGE> 70
SCHEDULE III TO
TRANSFER SUPPLEMENT
-------------------
Form of
Transfer Effective Notice
-------------------------
To: [Name and address of
Transferor, Servicer, Trustee, the Transferor Class B
Purchaser and the Purchasing Class B Purchaser]
The undersigned, as Agent under the Class B Certificate
Purchase Agreement, dated as of January 22, 1997, among Prime II Receivables
Corporation, as Transferor, FDS National Bank, as Servicer, the Class B
Purchasers parties thereto and Credit Suisse First Boston, New York Branch, as
Agent for the Class B Purchasers and as Administrative Agent thereunder,
acknowledges receipt of five executed counterparts of a completed Transfer
Supplement. [Note: attach copies of Schedules I and II from such Agreement.]
Terms defined in such Supplement are used herein as therein defined.
Pursuant to such Supplement, you are advised that the Transfer
Effective Date will be _____________, 199_.
CREDIT SUISSE FIRST BOSTON,
NEW YORK BRANCK, as Agent
By:
-----------------------------
Name:
Title:
By:
-----------------------------
Name:
Title:
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<PAGE> 71
SCHEDULE IV TO
TRANSFER SUPPLEMENT
-------------------
Form of
Consent of Transferor
---------------------
To: The Chase Manhattan Bank, as Trustee
Credit Suisse First Boston, New York Branch, as Agent
The undersigned hereby consents to the transfer, as of the
Transfer Effective Date, of a [Noncommitted Purchaser Percentage/Committed
Purchaser Percentage] equal to ____% [representing a Commitment in the amount of
$__________] and a Class B Invested Amount under the Prime Credit Card Master
Trust II Class B Variable Funding Certificates, Series 1997-1, in the amount of
$_________, by _______________ to _______________, pursuant to the Class B
Certificate Purchase Agreement, dated as of January 22, 1997, among Prime II
Receivables Corporation, FDS National Bank, as Servicer, the Class B Purchasers
parties thereto and Credit Suisse First Boston, New York Branch, as Agent and as
Administrative Agent.
Very truly yours,
PRIME II RECEIVABLES
CORPORATION
By:_______________________
Name:
Title:
FDS NATIONAL BANK,
as Servicer
By:________________________
Name:
Title:
Dated: _________________
cc: Purchasing Class B Purchaser
C-10
<PAGE> 1
Exhibit 10.22
================================================================================
PRIME II RECEIVABLES CORPORATION
Transferor
FDS NATIONAL BANK
Servicer
and
THE CHASE MANHATTAN BANK
Trustee
on behalf of the Certificateholders
of the Prime Credit Card Master Trust II
-----------------------------------
POOLING AND SERVICING AGREEMENT
Dated as of January 22, 1997
================================================================================
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
----
<S> <C>
ARTICLE I
DEFINITIONS....................................................................................... 1
Section 1.1 Definitions................................................................. 1
Section 1.2 Other Definitional Provisions............................................... 29
ARTICLE II
CONVEYANCE OF RECEIVABLES;
ISSUANCE OF CERTIFICATES.......................................................................... 30
Section 2.1 Conveyance of Receivables................................................... 30
Section 2.2 Acceptance by Trustee....................................................... 32
Section 2.3 Representations and Warranties of
the Transferor ................................................................. 33
Section 2.4 Representations and Warranties of
the Transferor Relating to the Agreement
and the Receivables............................................................. 38
Section 2.5 Covenants of the Transferor................................................. 45
Section 2.6 Addition of Accounts........................................................ 49
Section 2.7 Removal of Accounts......................................................... 53
ARTICLE III
ADMINISTRATION AND SERVICING
OF RECEIVABLES.................................................................................... 56
Section 3.1 Acceptance of Appointment and Other
Matters Relating to the Servicer ............................................... 56
Section 3.2 Servicing Compensation...................................................... 59
Section 3.3 Representations and Warranties of the Servicer.............................. 60
Section 3.4 Reports and Records for the Trustee......................................... 63
Section 3.5 Annual Servicer's Certificate............................................... 65
Section 3.6 Annual Independent Accountants' Servicing Report............................ 66
Section 3.7 Tax Treatment............................................................... 67
Section 3.8 Adjustments................................................................. 68
Section 3.9 Notices to FDSNB............................................................ 69
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C>
ARTICLE IV
RIGHTS OF CERTIFICATEHOLDERS AND ALLOCATION
AND APPLICATION OF COLLECTIONS.................................................................... 69
Section 4.1 Rights of Certificateholders................................................ 69
Section 4.2 Establishment of Accounts................................................... 70
Section 4.3 Collections and Allocations................................................. 74
ARTICLE V
[ARTICLE V IS RESERVED AND SHALL BE
SPECIFIED IN ANY SUPPLEMENT WITH
RESPECT TO ANY SERIES)................................................ 80
ARTICLE VI
THE CERTIFICATES.................................................................................. 81
Section 6.1 The Certificates............................................................ 81
Section 6.2 Authentication of Certificates.............................................. 82
Section 6.3 Registration of Transfer and Exchange of Certificates....................... 82
Section 6.4 Mutilated, Destroyed, Lost or Stolen Certificates........................... 86
Section 6.5 Persons Deemed Owners....................................................... 87
Section 6.6 Appointment of Paying Agent................................................. 88
Section 6.7 Access to List of Certificateholders' Names and Addresses................... 89
Section 6.8 Authenticating Agent........................................................ 90
Section 6.9 Tender of Exchangeable Transferor Certificate............................... 92
Section 6.10 Book-Entry Certificates.................................................... 97
Section 6.11 Notices to Clearing Agency................................................. 98
Section 6.12 Definitive Certificates.................................................... 98
Section 6.13 Global Certificate; EuroCertificate Exchange Date.......................... 99
Section 6.14 Meetings of Certificateholders............................................. 99
Section 6.15 Uncertificated Classes .................................................... 99
ARTICLE VII
OTHER MATTERS RELATING TO THE TRANSFEROR......................................................... 100
Section 7.1 Liability of the Transferor................................................ 100
Section 7.2 Merger or Consolidation of, or Assumption of the Obligations of, the
Transferor..................................................................... 100
Section 7.3 Limitation on Liability.................................................... 102
Section 7.4 Liabilities................................................................ 102
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
Section 7.5 Transferor's Records....................................................... 104
ARTICLE VIII
OTHER MATTERS RELATING
TO THE SERVICER...................................................................................104
Section 8.1 Liability of the Servicer...................................................104
Section 8.2 Merger or Consolidation of, or Assumption of the Obligations of, the
Servicer........................................................................104
Section 8.3 Limitation on Liability of the Servicer and others..........................105
Section 8.4 Servicer Indemnification of the Transferor, the Trust and the Trustee.......106
Section 8.5 The Servicer Not to Resign..................................................108
Section 8.6 Access to Certain Documentation and Information Regarding the
Receivables.....................................................................108
Section 8.7 Delegation of Duties........................................................109
ARTICLE IX
PAY OUT EVENTS....................................................................................109
Section 9.1 Pay Out Events..............................................................109
Section 9.2 Additional Rights Upon the Occurrence of Certain Events.....................110
ARTICLE X
SERVICER DEFAULTS.................................................................................113
Section 10.1 Servicer Defaults..........................................................113
Section 10.2 Trustee to Act; Appointment of Successor...................................117
Section 10.3 Notification to Certificateholders.........................................119
Section 10.4 Waiver of Past Defaults....................................................120
ARTICLE XI
THE TRUSTEE.......................................................................................120
Section 11.1 Duties of Trustee..........................................................120
Section 11.2 Certain Matters Affecting the Trustee......................................123
Section 11.3 Trustee Not Liable for Recitals in Certificates............................125
Section 11.4 The Servicer to Pay Trustee's Fees and Expenses............................126
</TABLE>
iii
<PAGE> 5
<TABLE>
<S> <C>
Section 11.5 Eligibility Requirements for Trustee.......................................126
Section 11.6 Resignation or Removal of Trustee..........................................127
Section 11.7 Successor Trustee..........................................................128
Section 11.8 Merger or Consolidation of Trustee.........................................129
Section 11.9 Appointment of Co-Trustee or Separate Trustee..............................129
Section 11.10 Tax Returns................................................................131
Section 11.11 Trustee May Enforce Claims Without Possession of Certificates..............131
Section 11.12 Suits for Enforcement......................................................132
Section 11.13 Rights of Certificateholders to Direct Trustee.............................132
Section 11.14 Representations and Warranties of Trustee..................................133
Section 11.15 Maintenance of Office or Agency............................................134
ARTICLE XII
TERMINATION.......................................................................................134
Section 12.1 Termination of Trust........................................................134
Section 12.2 Optional Termination........................................................136
Section 12.3 Final Payment with Respect to any Series....................................137
Section 12.4 Termination Rights of Holder of Exchangeable Transferor Certificate.........138
ARTICLE XIII
MISCELLANEOUS PROVISIONS..........................................................................139
Section 13.1 Amendment..................................................................139
Section 13.2 Protection of Right, Title and Interest to Trust...........................142
Section 13.3 Limitation on Rights of Certificateholders.................................143
Section 13.4 Governing Law..............................................................145
Section 13.5 Notices....................................................................145
Section 13.6 Severability of Provisions.................................................146
Section 13.7 Assignment.................................................................146
Section 13.8 Certificates Non-Assessable and Fully Paid.................................146
Section 13.9 Further Assurances.........................................................146
Section 13.10 No Waiver; Cumulative Remedies.............................................147
Section 13.11 Counterparts...............................................................147
Section 13.12 Third-Party Beneficiaries..................................................147
Section 13.13 Actions by Certificateholders..............................................147
Section 13.14 Rule 144A Information......................................................148
Section 13.15 Merger and Integration.....................................................149
Section 13.16 Heading....................................................................149
</TABLE>
v
<PAGE> 6
POOLING AND SERVICING AGREEMENT, dated as of January 22, 1997
by and among PRIME II RECEIVABLES CORPORATION, a corporation organized and
existing under the laws of the State of Delaware, as Transferor, FDS NATIONAL
BANK, a national banking association, as Servicer, and THE CHASE MANHATTAN BANK,
a banking corporation organized and existing under the laws of the state of New
York, as Trustee.
In consideration of the mutual agreements herein contained,
each party agrees as follows for the benefit of the other parties and the
Certificateholders:
ARTICLE I
DEFINITIONS
Section 1.1 DEFINITIONS. Whenever used in this Agreement,
the following words and phrases shall have the following meanings:
"ACCOUNT INFORMATION" shall have the meaning specified in
subsection 2.2(b).
"ACCOUNT" shall mean (a) each VISA(R) or MasterCard(R) credit
card account established pursuant to a Charge Account Agreement between an
Originator and any Person, the Receivables from which are designated for sale by
an Originator to the Transferor pursuant to the Receivables Purchase Agreement,
which is identified by (i) an account number, (ii) the amount of Receivables
outstanding in such Account as of its Cut-Off Date and (iii) the amount of
Principal Receivables in such Account as of its Cut-Off Date, in each case in
the computer file or microfiche list delivered to the Trustee or the bailee of
the Trustee by the Transferor pursuant to this Agreement, (b) each Automatic
Additional Account, and (c) each Supplemental Account identified in each file or
list delivered to the Trustee or the bailee of the Trustee by the Transferor
pursuant to subsection 2.6(e) of this Agreement. The definition of Account shall
include each Transferred Account but shall not include any Purged Accounts. The
term "Account" shall be deemed to refer to a Supplemental Account only from and
after the Addition Date with respect thereto, and the term "Account" shall be
deemed to refer to any Removed Account only prior to the Removal Date with
respect thereto.
<PAGE> 7
"ADDITION CUT-OFF DATE" shall mean each date as of which
Supplemental Accounts shall be selected to be included as Accounts pursuant to
subsection 2.6(c) and (d).
"ADDITION DATE" shall mean each date as of which Receivables
under Supplemental Accounts are designated for inclusion in the Trust as
Accounts pursuant to subsection 2.6(c).
"ADJUSTED INVESTED AMOUNT" shall mean, with respect to any
Series or any Class, when used with respect to any Business Day, the Invested
Amount of such Series or Class, as applicable, MINUS any amounts then on deposit
in any principal funding account for such Series or Class, as applicable.
"ADJUSTMENT PAYMENT" shall have the meaning specified in
subsection 3.8(a).
"AFFILIATE" shall mean, with respect to a particular Person,
(a) any Person that, directly or indirectly, is in control of, is controlled by,
or is under common control with, such Person, or (b) any Person who is a
director or officer or general partner (i) of such Person, (ii) of any
subsidiary of such Person, or (iii) of any Person described in clause (a) above.
For purposes of this definition, control of a Person shall mean the power,
direct or indirect, (i) to vote 5% or more of the securities having ordinary
voting power to elect the directors of such Person, or (ii) to direct or cause
the direction of the management and policies of such Person whether by contract
or otherwise.
"AGGREGATE INVESTOR DEFAULT AMOUNT" shall have, with respect
to any Series of Certificates, the meaning stated in the related Supplement.
"AGGREGATE INVESTED AMOUNT" shall mean, as of any date of
determination, the sum of the Invested Amounts of all Series of Certificates
issued and outstanding on such date of determination.
"AGGREGATE INVESTOR PERCENTAGE" with respect to Principal
Collections, Finance Charge Collections and Receivables in Defaulted Accounts,
as the case may be,
2
<PAGE> 8
shall mean, as of any date of determination, the sum of such Investor
Percentages of all Series of Certificates issued and outstanding on such date of
determination; PROVIDED, HOWEVER, that the Aggregate Investor Percentage shall
not exceed 100%.
"AGGREGATE PRINCIPAL RECEIVABLES" shall mean, for any day in
any Monthly Period, the aggregate amount of Principal Receivables at the end of
such day.
"AGREEMENT" shall mean this Pooling and Servicing Agreement
and all amendments hereof and supplements hereto, including any Supplement.
"AMORTIZATION PERIOD" shall mean, with respect to any Series,
the period following the related Revolving Period, which shall be the
Accumulation Period, the Early Amortization Period, or other amortization or
accumulation period, in each case as defined with respect to such Series in the
related Supplement.
"AMORTIZATION PERIOD COMMENCEMENT DATE" shall mean, with
respect to any Series, the date on which the Amortization Period with respect
thereto commences.
"APPLICABLE TAX STATE" shall mean, as of any date of
determination, each state as to which any of the following is then applicable:
(a) the state in which the Trustee maintains its principal corporate trust
office, (b) the state in which the Transferor maintains its principal executive
offices, and (c) a state in which the Servicer regularly conducts servicing and
collection operations which are not limited to ministerial activities and which
relate to a material portion of the Receivables.
"APPLICANTS" shall have the meaning specified in Section 6.7.
"APPOINTMENT DAY" shall have the meaning specified in
subsection 9.2(a).
"ASSIGNMENT" shall have the meaning specified in subsection
2.6(e)(ii).
"AUTHENTICATING AGENT" shall have the meaning specified in
subsection 6.8(a).
3
<PAGE> 9
"AUTHORIZED NEWSPAPER" shall mean a newspaper of general
circulation in the Borough of Manhattan, The City of New York printed in the
English language and customarily published on each Business Day, whether or not
published on Saturdays, Sundays and holidays.
"AUTOMATIC ADDITIONAL ACCOUNT" shall mean those consumer
revolving credit card accounts coming into existence after the applicable
Cut-Off Date which meet the following criteria:
(a) a VISA or MasterCard credit card account (or any successor
credit card account designations used by the Transferor):
(i) which is originated by an Originator during the
normal operation of such Originator's credit card business and is not
acquired by the Transferor or such Originator from another credit card
issuer;
(ii) which was in existence and owned by such
Originator and the Receivables of which had been transferred to the
Transferor pursuant to the Receivables Purchase Agreement on the date
on which Receivables generated in such account are to be added to the
Trust and is in existence at the close of business on the date of its
designation for inclusion in the Trust;
(iii) which is payable in Dollars; and
(iv) the Receivables in which have not been charged
off prior to the date of their designation for inclusion in the Trust;
or
(b) any other consumer revolving credit card account,
Receivables from which each Rating Agency permits to be added automatically to
the Trust; PROVIDED, HOWEVER, that the Transferor shall have received notice
from each Rating Agency that the inclusion of such accounts as Automatic
Additional Accounts pursuant to this paragraph (b) will not result in the
reduction or withdrawal of its then existing rating of any Class of Investor
Certificates then issued and outstanding and shall have delivered such notice to
the Trustee.
4
<PAGE> 10
"BEARER CERTIFICATES" shall have the meaning specified in
Section 6.1.
"BEARER RULES" shall mean the provisions of the Internal
Revenue Code, in effect from time to time, governing the treatment of bearer
obligations, including sections 163(f), 871, 881, 1441, 1442 and 4701, and any
regulations thereunder including, to the extent applicable to any Series,
proposed or temporary regulations of the Internal Revenue Service.
"BILLED FINANCE CHARGES" shall mean with respect to any
Monthly Period the amount of finance charges, late fees and other fees and
charges billed to Obligors on the Receivables.
"BOOK-ENTRY CERTIFICATES" shall mean certificates evidencing a
beneficial interest in the Investor Certificates, ownership and transfers of
which shall be made through book entries by a Clearing Agency as described in
Section 6.10; PROVIDED, HOWEVER, that after the occurrence of a condition
whereupon book-entry registration and transfer are no longer authorized and
Definitive Certificates are to be issued to the Certificate Owners, such
certificates shall no longer be "Book-Entry Certificates."
"BUSINESS DAY" shall mean any day other than a Saturday, a
Sunday or a day on which banking institutions in New York, New York (or, with
respect to any Series, any additional city specified in the related Supplement)
are authorized or obligated by law or executive order to be closed, and such
other days in any year as may be designated by the Servicer in writing to the
Trustee by the first day of December in the preceding year.
"CASH EQUIVALENTS" shall mean, unless otherwise provided in
the Supplement with respect to any Series, (a) negotiable instruments or
securities represented by instruments in bearer or registered form which
evidence (i) obligations of or fully guaranteed by the United States of America;
(ii) time deposits, promissory notes, or certificates of deposit of any
depositary institution or trust company; PROVIDED, HOWEVER, that at the time
of the Trust's investment or contractual commitment to invest therein, the
certificates of deposit or short-term deposits of such depositary institution
or
5
<PAGE> 11
trust company shall have a credit rating from Moody's and Standard &
Poor's of P-1 and A-1+, respectively; (iii) commercial paper having, at the
time of the Trust's investment or contractual commitment to invest therein, a
rating from Moody's and Standard & Poor's of P-1 and A-1+, respectively; (iv)
bankers acceptances issued by any depositary institution or trust company
described in clause (a)(ii) above; and (v) investments in money market funds
rated AAA-m or AAA-mg by Standard & Poor's and P-1 by Moody's or otherwise
approved in writing by each Rating Agency; (b) time deposits and demand
deposits in the name of the Trust or the Trustee in any depositary institution
or trust company referred to in clause (a) (ii) above; (c) securities not
represented by an instrument that are registered in the name of the Trustee or
its nominee upon books maintained for that purpose by or on behalf of the
issuer thereof and identified on books maintained for that purpose by the
Trustee as held for the benefit of the Trust or the Certificateholders, and
consisting of (x) shares of an open end diversified investment company which is
registered under the Investment Company Act which (i) invests its assets
exclusively in obligations of or guaranteed by the United States of America or
any instrumentality or agency thereof having in each instance a final maturity
date of less than one year from their date of purchase or other Cash
Equivalents, (ii) seeks to maintain a constant net asset value per share, (iii)
has aggregate net assets of not less than $100,000,000 on the date of purchase
of such shares and (iv) which each Rating Agency designates in writing will not
result in a withdrawal or downgrading of its then current rating of any Series
rated by it or (y) Eurodollar time deposits of a depository institution or
trust company that have been rated P-1 by Moody's and A-1+ by Standard &
Poor's; PROVIDED, HOWEVER, that at the time of the Trust's investment or
contractual commitment to invest therein, the Eurodollar deposits of such
depositary institution or trust company shall have a credit rating from Moody's
and Standard & Poor's of P-1 and A-1+, respectively; (d) a guaranteed
investment contract (guaranteed as to timely payment) which each Rating Agency
designates in writing will not result in a withdrawal or downgrading of its
then current rating of any Series rated by it; (e) repurchase agreements
transacted with either (i) an entity subject to the United States federal
bankruptcy code; PROVIDED, HOWEVER, that (A) the term of the repurchase
agreement is consistent with the
6
<PAGE> 12
requirements with regard to the maturity of Cash Equivalents specified herein or
in the applicable Supplement for the applicable account or is due on demand, (B)
the Trustee or a third party (with a rating from Moody's and Standard & Poor's
of P-1 and A-1+, respectively) acting solely as agent for the Trustee has
possession of the collateral, (C) the Trustee on behalf of the Trust has a
perfected first priority security interest in the collateral, (D) the market
value of the collateral is maintained at the requisite collateral percentage of
the obligation in accordance with standards of the Rating Agencies, (E) the
failure to maintain the requisite collateral level will obligate the Trustee to
liquidate the collateral as promptly as practicable upon instructions from the
Servicer, (F) the securities subject to the repurchase agreement are either
obligations of, or fully guaranteed as to principal and interest by, the United
States of America or any agency or any instrumentality or agency thereof,
certificates of deposit or bankers acceptances and (G) the securities subject to
the repurchase agreement are free and clear of any third party lien or claim, or
(ii) a financial institution insured by the FDIC, or any broker-dealer with
"retail-customers" that is under the jurisdiction of the Securities Investors
Protection Corp. ("SIPC"); PROVIDED, HOWEVER, that (A) the market value of the
collateral is maintained at the requisite collateral percentage of the
obligation in accordance with the standards of the Rating Agencies, (B) the
Trustee or a third party (with a rating from Moody's and Standard & Poor's of
P-1 and A-1+, respectively) acting solely as agent for the Trustee has
possession of the collateral, (C) the collateral is free and clear of third
party liens and, in the case of an SIPC broker, was not acquired pursuant to a
repurchase or reverse repurchase agreement and (D) the failure to maintain the
requisite collateral percentage will obligate the Trustee to liquidate the
collateral upon instructions from the Servicer; PROVIDED, HOWEVER, that at the
time of the Trust's or the Trustee's investment or contractual commitment to
invest in any repurchase agreement, the short-term deposits or commercial paper
rating of such entity or institution in subsections (i) and (ii) above shall
have a credit rating of P-1 or A-1+ or their equivalent from each Rating Agency;
and (f) any other investment that converts to cash within a finite time period
if each Rating Agency confirms in writing that such invest-
7
<PAGE> 13
ment will not adversely affect its then current rating of the Investor
Certificates.
"CEDEL" shall mean Cedel Bank, societe anonyme.
"CERTIFICATE" shall mean any one of the Investor Certificates
of any Series or the Exchangeable Transferor Certificate.
"CERTIFICATEHOLDER" or "HOLDER" shall mean the Person in whose
name a Certificate is registered in the Certificate Register and, if applicable,
the holder of any Bearer Certificate or Coupon, as the case may be.
"CERTIFICATE INTEREST" shall mean interest payable in respect
of the Investor Certificates of any Series pursuant to Article IV of this
Agreement as supplemented by the Supplement for such Series.
"CERTIFICATE OWNER" shall mean, with respect to a Book-Entry
Certificate, the Person who is the beneficial owner of such Book-Entry
Certificate, as may be reflected on the books of the Clearing Agency, or on the
books of a Person maintaining an account with such Clearing Agency (directly or
as an indirect participant, in accordance with the rules of such Clearing
Agency).
"CERTIFICATE PRINCIPAL" shall mean principal payable in
respect of the Investor Certificates of any Series pursuant to Article IV of
this Agreement.
"CERTIFICATE RATE" shall mean, with respect to any Series of
Certificates (or, for any Series with more than one Class, for each Class of
such Series), the percentage (or formula on the basis of which such rate shall
be determined) stated in the related Supplement.
"CERTIFICATE REGISTER" shall mean the register maintained
pursuant to Section 6.3, providing for the registration of the Certificates and
transfers and exchanges thereof.
"CHARGE ACCOUNT AGREEMENT" shall mean an agreement, which
shall comply with the Federal Truth In Lending Act, for Visa or MasterCard
credit card accounts between any Obligor and an Originator as such agreements
8
<PAGE> 14
may be amended, modified or otherwise changed from time to time.
"CLASS" shall mean, with respect to any Series, any one of the
classes of Certificates of that Series as specified in the related Supplement.
"CLEARING AGENCY" shall mean an organization registered as a
"clearing agency" pursuant to Section 17A of the Securities Exchange Act of
1934, as amended.
"CLEARING AGENCY PARTICIPANT" shall mean a broker, dealer,
bank, other financial institution or other Person for whom from time to time a
Clearing Agency or Foreign Clearing Agency effects book-entry transfers and
pledges of securities deposited with the Clearing Agency or Foreign Clearing
Agency.
"CLOSING DATE" shall mean, with respect to any Series, the
date of issuance of such Series of Certificates, as specified in the related
Supplement.
"COLLECTION ACCOUNT" shall have the meaning specified in
subsection 4.2(a).
"COLLECTIONS" shall mean all payments received by the Servicer
in respect of the Receivables in the form of cash, checks or any other form of
payment in accordance with the Charge Account Agreement in effect from time to
time on any Receivables.
"CORPORATE TRUST OFFICE" shall mean the principal office of
the Trustee at which at any particular time its corporate trust business shall
be administered, which office at the date of the execution of this Agreement is
located at 450 West 33rd Street, New York, New York 10001, Attention: Structured
Products Group.
"COUPON" shall have the meaning specified in Section 6.1.
"CREDIT AND COLLECTION POLICY" shall mean the credit,
collection, customer relations and service policies that apply to Eligible
Accounts, as such policies currently exist and as such policies may be amended,
modified or supplemented from time to time subject to Section 5.01(c) of the
Receivables Purchase Agreement.
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<PAGE> 15
"CUT-OFF DATE" shall mean, for Receivables in Accounts owned
by each Originator, the date on which the last cycle of such Originator, was
billed in the November 1996 fiscal month.
"DAILY REPORT" shall mean a report showing the date and
setting forth the computations reflected in the form thereof attached as Exhibit
C hereto.
"DATE OF DETERMINATION" shall mean with respect to the Yield
Factor or the Finance Charge Receivable Factor, respectively, the date on which
such factor is determined which shall in no event be later than the tenth
Business Day from the end of the preceding Monthly Period.
"DATE OF PROCESSING" shall mean, with respect to any
transaction, the date on which such transaction is first recorded on the
Servicer's computer master file of consumer revolving credit card accounts
(without regard to the effective date of such recordation).
"DEFAULT AMOUNT" shall mean, on any Business Day, the product
of (i) the aggregate Outstanding Balances of Receivables in Accounts which
became Defaulted Accounts on such Business Day MINUS the Ineligible Default
Amount and (ii) one MINUS the Finance Charge Receivable Factor.
"DEFAULTED ACCOUNT" shall mean each Account with respect to
which, in accordance with the Credit and Collection Policy or the Servicer's
customary and usual servicing procedures, the Servicer has charged off the
Receivables in such Account as uncollectible; an Account shall become a
Defaulted Account on the day on which such Receivables are recorded as charged
off as uncollectible on the Servicer's computer master file of consumer credit
card revolving accounts. Notwithstanding any other provision hereof, any
Receivables in a Defaulted Account that are Ineligible Receivables shall be
treated as Ineligible Receivables rather than Receivables in Defaulted Accounts.
"DEFEASANCE ACCOUNT" shall have the meaning specified in the
applicable Supplement.
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<PAGE> 16
"DEFINITIVE CERTIFICATE" shall have the meaning specified in
Section 6.10.
"DELINQUENCY PERCENTAGE" shall mean with respect to any
Business Day the percentage equivalent of an amount determined on the preceding
Date of Determination (or on such Business Day with respect to each Date of
Determination) equal to (x) the product of (i) 0.1 and (ii) the aggregate
Outstanding Balance of all Receivables Retail Age 2 or greater (Receivables with
respect to which the related Obligor has failed to make two or more required
payments) divided by (y) the aggregate Outstanding Balance of all Receivables on
such Date of Determination.
"DEPOSITARY" shall have the meaning specified in Section 6.10.
"DEPOSITARY AGREEMENT" shall mean, with respect to each
Series, the agreement among the Transferor, the Trustee and the Clearing Agency,
or as otherwise provided in the related Supplement.
"DETERMINATION DATE" shall mean the second Business Day prior
to the earliest Distribution Date in each month for any Series then outstanding.
"DISTRIBUTION ACCOUNT" shall have the meaning specified in
subsection 4.2(c).
"DISTRIBUTION DATE" shall mean, with respect to any Series,
the date specified in the related Supplement.
"DOLLARS", "$" or "U.S. $" shall mean United States dollars.
"ELIGIBLE ACCOUNT" shall mean, as of the Initial Closing Date
(or, with respect to Supplemental Accounts as of each Addition Date and with
respect to Automatic Additional Accounts, as of the date the Receivables arising
in such Accounts are designated for inclusion in the Trust), each Account owned
by an originator:
(a) which is payable in Dollars;
(b) which has not been identified by such Originator in its
computer files as an account as to
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<PAGE> 17
which such Originator or the Servicer has any confirmed record of any
fraud-related activity by the Obligor;
(c) which has not been sold or pledged to any other party and
which does not have Receivables which have been sold or pledged to any other
party;
(d) which was created in accordance with the Credit and
Collection Policy of such Originator at the time of creation of such account or
the Receivables of which each Rating Agency permits to be added automatically to
the Trust; and
(e) the Receivables in which such Originator has not charged
off in its customary and usual manner for charging off Receivables in such
Accounts as of the Initial Closing Date (or, with respect to Supplemental
Accounts as of the Addition Date and with respect to Automatic Additional
Accounts, as of the date the Receivables of such Accounts are designated for
inclusion in the Trust) unless such Account is subsequently reinstated.
"ELIGIBLE RECEIVABLE" shall mean each Receivable that
satisfies each of the following criteria:
(a) it arises under an Eligible Account;
(b) except as permitted herein, it is not sold or pledged to
any other party;
(c) it constitutes an "account" or a "general intangible" as
each is defined in Article 9 of the UCC as then in effect in each Relevant UCC
State;
(d) it is the legal, valid and binding obligation of a Person
who (i) is living, (ii) is not a minor under the laws of his/her state of
residence and (iii) is competent to enter into a contract and incur debt;
(e) it and the underlying Charge Account Agreement do not
contravene in any material respect any laws, rules or regulations applicable
thereto (including, without limitation, rules and regulations relating to truth
in lending, fair credit billing, fair credit reporting, equal credit
opportunity, fair debt collection practices and privacy) that could reasonably
be expected to have an adverse impact on the amount of Collections
12
<PAGE> 18
thereunder, and the Originator under the underlying Charge Account Agreement is
not in violation of any such laws, rules or regulations in any respect material
to such Charge Account Agreement;
(f) all material consents, licenses, or authorizations of, or
registrations with, any governmental authority required to be obtained or given
in connection with the creation of such Receivable or the execution, delivery,
creation and performance of the underlying Charge Account Agreement have been
duly obtained or given and are in full force and effect as of the date of the
creation of such Receivables;
(g) at the time of its transfer to the Trust, the Transferor
or the Trust will have good and marketable title free and clear of all Liens and
security interests arising under or through the Transferor (other than Permitted
Liens);
(h) it is not, at the time of its transfer to the Trust, a
Receivable in a Defaulted Account; and
(i) it arises under a Charge Account Agreement that has been
duly authorized and which, together with such Receivable, is in full force and
effect and constitutes the legal, valid and binding obligation of the Obligor of
such Receivable enforceable against such Obligor in accordance with its terms
and is not subject to any dispute, offset, counterclaim or defense whatsoever
(except the discharge in bankruptcy of such Obligor).
"ENHANCEMENT" shall mean, with respect to any Series, any cash
collateral account, reserve account, cash collateral guaranty, collateral
invested amount, letter of credit, guaranteed rate agreement, maturity guaranty
facility, tax protection agreement, interest rate cap, interest rate swap or any
other contract or agreement for the benefit of the Certificateholders of such
Series (or Certificateholders of a Class within such Series) as designated in
the applicable Supplement.
"ENHANCEMENT PROVIDER" shall mean, with respect to any Series,
the Person, if any, designated as such in the related Supplement.
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<PAGE> 19
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended from time to time.
"EUROCLEAR OPERATOR" shall mean Morgan Guaranty Trust Company
of New York, Brussels, Belgium office, as operator of the Euroclear System.
"EXCESS FUNDING ACCOUNT" shall have the meaning specified in
subsection 4.2(d).
"EXCESS FUNDING ACCOUNT PERCENTAGE" shall mean, with respect
to any Series on any Business Day, the percentage equivalent of a fraction, the
numerator of which is equal to the Adjusted Invested Amount of such Series and
the denominator of which is equal to the sum of the Adjusted Invested Amounts of
all Series in Amortization Periods.
"EXCHANGE" shall mean either of the procedures described in
Section 6.9(b).
"EXCHANGEABLE TRANSFEROR CERTIFICATE" shall mean the
certificate executed by the Transferor and authenticated by the Trustee,
substantially in the form of Exhibit A and exchangeable as provided in Section
6.9; PROVIDED, HOWEVER, that at any time there shall be only one Exchangeable
Transferor Certificate.
"EXCHANGE DATE" shall have the meaning, with respect to any
Series issued pursuant to an Exchange, specified in subsection 6.9(b).
"EXCHANGE NOTICE" shall have the meaning, with respect to any
Series issued pursuant to an Exchange, specified in subsection 6.9(b).
"EXTENDED TRUST TERMINATION DATE" shall have the meaning
specified in subsection 12.1(a).
"FASIT" shall mean a "financial asset securitization
investment trust" as defined in Section 860L of the Code.
"FCHC" shall mean Federated Credit Holdings Corporation, or
any successor thereto, as owner of all of the outstanding common stock of the
Transferor.
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<PAGE> 20
"FDIC" shall mean the Federal Deposit Insurance Corporation,
or any successor thereto.
"FDSNB" shall mean FDS National Bank, a national banking
association, or any successor thereto.
"FEDERATED" shall mean Federated Department Stores, Inc., or
any successor thereto.
"FINANCE CHARGE COLLECTIONS" shall mean with respect to any
Business Day (a) the product of (i) Collections received with respect to the
Receivables MINUS Recoveries and (ii) the Yield Factor PLUS (b) any investment
earnings on amounts on deposit in the Excess Funding Account PLUS (c) Recoveries
PLUS (d) Interchange PLUS (e) amounts paid by the Transferor with respect to
Uncovered Dilution Amounts pursuant to Section 3.8 in accordance with the
proviso to the last sentence of such Section; PROVIDED, HOWEVER, that pursuant
to any Supplement such amount may be adjusted for purposes of allocations to the
related series pursuant to such Supplement.
"FINANCE CHARGE RECEIVABLE FACTOR" shall mean with respect to
any Date of Determination, the aggregate amount of finance charges, late fees
and other fees and charges outstanding on the last day of the preceding Monthly
Period DIVIDED by the aggregate Outstanding Balance of the Receivables on the
last day of such preceding Monthly Period.
"FINANCE CHARGE RECEIVABLES" shall mean for any Business Day,
the product of the Finance Charge Receivable Factor determined on the preceding
Date of Determination (or on such Business Day with respect to each Date of
Determination) and the aggregate Outstanding Balances of Eligible Receivables as
of such Business Day, determined in accordance with subsection 2.4(c).
"FINANCE CHARGE DEFAULT AMOUNT" shall mean with respect to any
Monthly Period the aggregate amount of Receivables arising from finance charges,
late fees and other fees and charges billed to Obligors which the Servicer
charged off as uncollectible on its computer master file of consumer credit card
revolving accounts pursuant to the applicable Credit and Collection Policy.
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<PAGE> 21
"FOREIGN CLEARING AGENCY" shall mean Cedel and the Euroclear
Operator.
"GLOBAL CERTIFICATE" shall have the meaning specified in
Section 6.13.
"GROUP" shall mean, with respect to any Series, the group of
Series in which the related Supplement specifies such Series is to be included.
"GOVERNMENTAL AUTHORITY" shall mean the United States of
America, any state or other political subdivision thereof and any entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
"HOLDER" or "CERTIFICATEHOLDER" shall mean the Person in whose
name a Certificate is registered in the Certificate Register, and if applicable,
the holder of any Bearer Certificate or Coupon, as the case may be.
"INELIGIBLE DEFAULT AMOUNT" shall mean, as of any Business
Day, the aggregate Outstanding Balance of Receivables in Accounts which are
identified on the Servicer's computer records as not being Eligible Accounts and
which are reported in the Servicer's computer records on such Business Day as
becoming Defaulted Accounts.
"INELIGIBLE RECEIVABLE" shall have the meaning specified in
subsection 2.4(c).
"INITIAL CLOSING DATE" shall mean January 23, 1997.
"INITIAL INVESTED AMOUNT" shall mean, with respect to any
Series of Certificates, the amount stated in the related Supplement.
"INSOLVENCY EVENT" shall have the meaning specified in
subsection 9.2(a).
"IN-STORE PAYMENTS" shall mean any payment made by an Obligor
with respect to a Receivable by delivery of cash, check, money order or any
other form of payment to a cashier or other employee of any Federated retail
operating subsidiary.
16
<PAGE> 22
"INTERCHANGE" shall mean interchange fees payable to an
Originator in its capacity as credit card issuer through VISA U.S.A., Inc. or
MasterCard International Incorporated and paid by such Originator to the
Transferor pursuant to the Receivables Purchase Agreement.
"INTEREST FUNDING ACCOUNT" shall have the meaning specified in
subsection 4.2(b).
"INTERNAL REVENUE CODE" shall mean the Internal Revenue Code
of 1986, as amended from time to time.
"INVESTED AMOUNT" shall have, with respect to any Series of
Certificates, the meaning stated in the related Supplement.
"INVESTMENT COMPANY ACT" shall mean the Investment Company Act
of 1940, as amended from time to time.
"INVESTOR ACCOUNT" shall mean each of the Interest Funding
Account, the Principal Account, the Excess Funding Account, the Distribution
Account and any Series Account.
"INVESTOR CERTIFICATE" shall mean any one of the certificates
(including, without limitation, the Bearer Certificates or the Registered
Certificates) executed by the Transferor and authenticated by the Trustee
substantially in the form (or forms in the case of a Series with multiple
classes) of the investor certificate or variable funding certificate attached to
the related Supplement.
"INVESTOR CERTIFICATEHOLDER" shall mean the Holder of an
Investor Certificate.
"INVESTOR CHARGE-OFF" shall have, with respect to each Series,
the meaning specified in the applicable Supplement.
"INVESTOR DEFAULT AMOUNT" shall have, with respect to any
Series of Certificates, the meaning stated in the related Supplement.
"INVESTOR EXCHANGE" shall have the meaning specified in
subsection 6.9(b).
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<PAGE> 23
"INVESTOR PERCENTAGE" shall mean, with respect to Principal
Collections, Finance Charge Collections and Receivables in Defaulted Accounts,
and with respect to any Series of Certificates, the percentages specified in the
applicable Supplement.
"LATE FEES" shall have, with respect to any Account, the
meaning specified in the Charge Account Agreement applicable to such Account for
late fees or similar charges.
"LIEN" shall mean any mortgage, deed of trust, pledge,
hypothecation, assignment, participation or equity interest, deposit
arrangement, encumbrance, lien (statutory or other), preference, priority or
other security agreement or preferential arrangement of any kind or nature
whatsoever, including, without limitation, any conditional sale or other title
retention agreement, any financing lease having substantially the same economic
effect as any of the foregoing and the filing of any financing statement under
the UCC (other than any such financing statement filed for informational
purposes only) or comparable law of any jurisdiction to evidence any of the
foregoing; PROVIDED, HOWEVER, that any assignment pursuant to Section 7.2 shall
not be deemed to constitute a Lien.
"LOCK-BOX ACCOUNT" shall mean an account in the name of the
Trustee with a Lock-Box Bank.
"LOCK-BOX AGREEMENT" shall mean each agreement between the
Servicer, the Trustee and the respective Lock-Box Bank, pursuant to which such
Lock-Box Bank receives Collections from time to time as provided therein.
"LOCK-BOX BANK" shall mean any bank that holds one or more
Lock-Box Accounts for receiving Collections, pursuant to a Lock-Box Agreement.
"MINIMUM AGGREGATE PRINCIPAL RECEIVABLES" shall mean, as of
any date of determination, the sum of the numerators used in the calculation of
the Investor Percentages for Principal Collections for all outstanding Series on
such date of determination, less the amount on deposit in the Excess Funding
Account as of such date of determination.
18
<PAGE> 24
"MINIMUM TRANSFEROR AMOUNT" shall mean, as of any date of
determination, the product of (i) the sum of (a) the aggregate Principal
Receivables and (b) the amounts on deposit in the Excess Funding Account and
(ii) the Minimum Transferor Percentage.
"MINIMUM TRANSFEROR PERCENTAGE" shall mean 2%.
"MONTHLY INVESTOR SERVICING FEE" shall mean the Servicing Fee
payable to the Servicer with respect to a Monthly Period.
"MONTHLY PERIOD" shall mean, unless otherwise defined with
respect to a Series in the related Supplement, the period from and including the
first day of each fiscal month of the Transferor to and including the last day
of such fiscal month.
"MOODY'S" shall mean Moody's Investors Service, Inc. or its
successors.
"NOTICE DATE" shall have the meaning specified in subsection
2.6(e)(i).
"OBLIGOR" shall mean a Person obligated to make payments with
respect to a Receivable arising under an Account pursuant to a Charge Account
Agreement.
"OFFICER'S CERTIFICATE" shall mean a certificate signed by any
Vice President, Treasurer or more senior officer of the Transferor or Servicer
and delivered to the Trustee.
"OPINION OF COUNSEL" shall mean a written opinion of counsel,
who may be counsel for or an employee of the Person providing the opinion, and
who shall be reasonably acceptable to the Trustee.
"ORIGINATOR" shall mean FDSNB and its successors or assigns
under the Receivables Purchase Agreement and any other originator of accounts
which enters into the Receivables Purchase Agreement in accordance with the
provisions of this Agreement.
"OUTSTANDING BALANCE" shall mean, with respect to a Receivable
on any day, the aggregate amount owed by
19
<PAGE> 25
the Obligor thereunder as of the close of business on the prior Business Day
(net of returns and adjustments).
"PAIRED SERIES" shall mean each Series which has been paired
with a prefunded Series, and such prefunded Series.
"PAYING AGENT" shall mean any paying agent appointed pursuant
to Section 6.6 and shall initially be the Trustee.
"PAY OUT COMMENCEMENT DATE" shall mean, with respect to each
Series, the date on which (a) a Trust Pay Out Event is deemed to occur pursuant
to Section 9.1 or (b) a Series Pay Out Event is deemed to occur pursuant to the
Supplement for such Series.
"PAY OUT EVENT" shall mean, with respect to each Series, a
Trust Pay Out Event or a Series Pay Out Event.
"PERIODIC FINANCE CHARGES" shall have, with respect to any
Account, the meaning specified in the Charge Account Agreement applicable to
such Account for finance charges (due to periodic rate) or any similar term.
"PERMITTED LIEN" shall mean with respect to the Receivables:
(i) Liens in favor of the Transferor created pursuant to the Receivables
Purchase Agreement assigned to the Trustee pursuant to this Agreement; (ii)
Liens in favor of the Trustee pursuant to this Agreement; and (iii) Liens which
secure the payment of taxes, assessments and governmental charges or levies, if
such taxes are either (a) not delinquent or (b) being contested in good faith by
appropriate legal or administrative proceedings and as to which adequate
reserves in accordance with generally accepted accounting principles shall have
been established.
"PERSON" shall mean any legal person, including any
individual, corporation, partnership, joint venture, association, joint-stock
company, trust, unincorporated organization, governmental entity or other entity
of similar nature.
20
<PAGE> 26
"POOL FACTOR" shall mean, as of any Record Date, a number
carried out to seven decimals representing the ratio of the applicable Invested
Amount as of such Record Date (determined after taking into account any
reduction in the Invested Amount which will occur on the following Distribution
Date) to the applicable Initial Invested Amount unless otherwise specified with
respect to a Series in the related Supplement.
"PRINCIPAL ACCOUNT" shall have the meaning specified in
subsection 4.2(b).
"PRINCIPAL COLLECTIONS" shall mean with respect to any
Business Day the product of (i) Collections received with respect to each
Receivable MINUS Recoveries and (ii) one MINUS the Yield Factor; PROVIDED,
HOWEVER, that pursuant to any Supplement such amount may be adjusted for
purposes of allocations to the related Series pursuant to such Supplement.
"PRINCIPAL RECEIVABLES" shall mean for any Business Day for
the purposes of this Agreement, the aggregate Outstanding Balance of Eligible
Receivables, determined in accordance with Subsection 2.4(c), as of such
Business Day MINUS the amount of Finance Charge Receivables on such Business Day
as shown on the Transferor's books and records.
"PRINCIPAL SHORTFALLS" shall mean, with respect to any
Business Day and any outstanding Series, the amount which the related Supplement
specifies as the "Principal Shortfall" for such Business Day.
"PRINCIPAL TERMS" shall have the meaning, with respect to any
Series issued pursuant to an Exchange, specified in subsection 6.9(c).
"PROSPECTIVE PAY OUT EVENT" shall have the meaning specified
in subsection 2.3(l).
"PUBLICATION DATE" shall have the meaning specified in
subsection 9.2(a).
"PURGED ACCOUNT" shall mean an Account that has an Outstanding
Balance of zero and has been terminated pursuant to the applicable Credit and
Collection Policy due to an extended period of inactivity.
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<PAGE> 27
"QUALIFIED INSTITUTION" shall mean:
(i) the corporate trust department of a depositary institution
or trust company (which may include the Trustee) organized under the
laws of the United States of America or any one of the states thereof
or the District of Columbia which has a long-term unsecured debt rating
of at least Aa3 from Moody's and AA- from Standard & Poor's whose
deposits are insured to the limits provided by law by the FDIC and
which has corporate trust powers and acts as trustee for funds
deposited therein; or
(ii) a depositary institution, which may include the Trustee,
which is acceptable to the Rating Agency.
"RATING AGENCY" shall mean, with respect to each Series, the
rating agency or agencies, if any, specified in the related Supplement.
"REASSIGNMENT" shall have the meaning specified in subsection
2.7(b)(i).
"REASSIGNMENT DATE" shall have the meaning specified in
subsection 2.4(d).
"RECEIVABLE" shall mean any amount owing by any Obligor to an
Originator under an Account, including, without limitation, amounts owing for
the payment of goods and services, annual membership fees, Periodic Finance
Charges, Late Fees, cash advances, access checks, cash advance fees and Special
Fees, if any, including any credit insurance premiums.
"RECEIVABLES PURCHASE AGREEMENT" shall mean the receivables
purchase agreement dated as of January 22, 1997 among the Originators, as
sellers, and the Transferor, as purchaser, as amended or otherwise modified from
time to time.
"RECORD DATE" shall mean, with respect to any Distribution
Date, unless otherwise specified in the applicable Supplement, the Business Day
preceding such Distribution Date, except that, with respect to any Definitive
Certificates, Record Date shall mean the fifteenth day preceding the applicable
Distribution Date.
22
<PAGE> 28
"RECOVERIES" shall mean any amounts received by the Servicer
with respect to Receivables in Accounts that previously became Defaulted
Accounts.
"REGISTERED CERTIFICATES" shall have the meaning specified in
Section 6.1.
"RELATED PERSON" shall mean a Person that is an Investor
Certificateholder, an Enhancement Provider, an Affiliate of FDSNB, or a Person
whose status would violate the conditions for a trustee contained in Section
(4)(i) of Rule 3a-7 under the Investment Company Act of 1940, as amended.
"RELEVANT UCC STATE" shall mean each jurisdictions in which
the filing of a UCC financing statement is necessary to perfect the ownership
interest and security interest of the Transferor pursuant to the Receivables
Purchase Agreement or the ownership or security interest of the Trustee
established under this Agreement.
"REMOVAL DATE" shall have the meaning specified in subsection
2.7(b).
"REMOVAL NOTICE DATE" shall mean the day, no later than the
fifth Business Day prior to a Removal Date, on which the Transferor gives notice
to the Trustee pursuant to Section 2.7(a) of its intention to remove Accounts
from the Trust.
"REMOVED ACCOUNTS" shall have the meaning specified in
subsection 2.7(a).
"REQUIREMENTS OF LAW" for any Person shall mean the
certificate of incorporation or articles of association and by-laws or other
organizational or governing documents of such Person, and any law, treaty, rule
or regulation, or determination of an arbitrator or Governmental Authority, in
each case applicable to or binding upon such Person or to which such Person is
subject, whether federal, state or local (including, without limitation, usury
laws, the federal Truth in Lending Act and Regulation Z and Regulation B of the
Board of Governors of the Federal Reserve System).
"RESPONSIBLE OFFICER" shall mean any officer within the
Corporate Trust Office (or any successor group
23
<PAGE> 29
of the Trustee) who shall have direct responsibility for the administration of
this Agreement, including any Vice President or any other officer of the Trustee
customarily performing functions similar to those performed by any person who at
the time shall be an above-designated officer.
"RETAINED INTEREST" shall mean, on any date of determination,
the sum of the Transferor Amount and the Invested Amount represented by any
Transferor Retained Certificate.
"RETAINED PERCENTAGE" shall mean, on any date of
determination, the percentage equivalent of a fraction the numerator of which is
the Retained Interest and the denominator of which is the aggregate amount of
Principal Receivables PLUS all amounts on deposit in the Excess Funding Account
(but not including investment earnings on such amounts) at the end of the day
immediately prior to such date of determination.
"REVOLVING PERIOD" shall have, with respect to each Series,
the meaning specified in the related Supplement.
"SECURED OBLIGATIONS" shall have the meaning specified in
Section 2.1.
"SECURITIES ACT" shall mean the Securities Act of 1933, as
amended from time to time.
"SERIES" shall mean any series of Investor Certificates, which
may include within any such Series a Class or Classes of Investor Certificates
subordinate to another such Class or Classes of Investor Certificates.
"SERIES ACCOUNT" shall mean any account or accounts
established pursuant to a Supplement for the benefit of the related Series.
"SERIES PAY OUT EVENT" shall have, with respect to any Series,
the meaning specified in the related Supplement.
"SERIES SERVICING FEE PERCENTAGE" shall mean, with respect to
any Series, the amount specified as such in the related Supplement.
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"SERIES TERMINATION DATE" shall mean, with respect to any
Series of Certificates, the date stated as such in the related Supplement.
"SERVICE TRANSACTION FEES" shall have, with respect to any
Account, the meaning specified in the Charge Account Agreement applicable to
such Account for any service transaction fees or similar terms.
"SERVICER" shall mean initially FDSNB and thereafter any
Person appointed as successor as herein provided to service the Receivables.
"SERVICER DEFAULT" shall have the meaning specified in Section
10.1.
"SERVICING FEE" shall have the meaning specified in Section
3.2.
"SETTLEMENT STATEMENT" shall mean a report showing the date
(which shall be a Determination Date) and setting forth the computations
reflected in the form thereof attached as Exhibit D hereto.
"SHARED PRINCIPAL COLLECTIONS" shall mean, with respect to any
Business Day, the aggregate amount of Principal Collections for all outstanding
Series that the related Supplements specify are to be treated as "Shared
Principal Collections" available to be allocated to other Series for such
Business Day.
"SPECIAL FEES" shall mean any fees which are not now but from
time to time may be assessed on the Accounts. On or after the date on which any
of such Special Fees begin to be assessed on the Accounts, the Transferor may
designate in an Officer's Certificate whether such Special Fees shall be treated
as Principal Receivables or Finance Charge Receivables.
"STANDARD & POOR'S" shall mean Standard & Poor's Ratings
Services or its successors.
"SUCCESSOR SERVICER" shall have the meaning specified in
subsection 10.2(a).
"SUPPLEMENT" shall mean, with respect to any Series, a
supplement to this Agreement complying with the
25
<PAGE> 31
terms of Section 6.9 of this Agreement, executed in conjunction with any
issuance of Certificates of such Series (or, in the case of the issuance of
Certificates on the Initial Closing Date, the supplement executed in connection
with the issuance of such Certificates).
"SUPPLEMENTAL ACCOUNTS" shall have the meaning specified in
subsection 2.6(c).
"SUPPLEMENTAL CERTIFICATE" shall have the meaning specified in
Section 6.9(d).
"TERMINATION NOTICE" shall have, with respect to any Series,
the meaning specified in Section 10.1.
"TRANSFER AGENT AND REGISTRAR" shall have the meaning
specified in Section 6.3 and shall initially be the Trustee.
"TRANSFER DATE" shall mean, with respect to any Series, the
Business Day immediately prior to each Distribution Date.
"TRANSFEROR" shall mean Prime II Receivables Corporation, a
corporation organized and existing under the laws of the State of Delaware, and
any successor thereto.
"TRANSFEROR AMOUNT" shall mean, on any date of determination,
the aggregate amount of Principal Receivables at the end of the day immediately
prior to such date of determination PLUS all amounts on deposit in the Excess
Funding Account (but not including investment earnings on such amounts) at the
end of such immediately preceding day, MINUS the Aggregate Invested Amount at
the end of such immediately preceding day.
"TRANSFEROR EXCHANGE" shall have the meaning specified in
subsection 6.9(b).
"TRANSFEROR FISCAL YEAR" shall mean the approximately twelve
month period ending on the last day of the January Monthly Period.
"TRANSFEROR INTEREST" shall have the meaning specified in
Section 4.1.
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"TRANSFEROR PERCENTAGE" shall mean, on any date of
determination, when used with respect to Principal Collections, Finance Charge
Collections and Receivables in Defaulted Accounts, a percentage equal to 100%
MINUS the Aggregate Investor Percentage with respect to such categories of
Receivables.
"TRANSFEROR RETAINED CERTIFICATES" shall mean Investor
Certificates of any Series retained by the Transferor.
"TRANSFEROR RETAINED CLASS" shall mean any Class of Investor
Certificates of any Series retained by the Transferor, which Class is designated
as a Retained Class pursuant to the related Supplement.
"TRANSFERRED ACCOUNT" shall mean an Account with respect to
which a new credit account number has been issued by the Servicer or the
Transferor under circumstances resulting from a lost or stolen credit card and
not requiring standard application and credit evaluation procedures under the
Credit and Collection Policy, and which can be traced or identified by reference
to or by way of the computer files or microfiche lists delivered to the Trustee
or the bailee of the Trustee pursuant to Section 2.1 or 2.6 as an account into
which an Account has been transferred.
"TRIGGER EVENT" shall have the meaning specified in subsection
9.2(a).
"TRUST" shall mean the trust created by this Agreement, the
corpus of which shall consist of the Trust Property.
"TRUST EXTENSION" shall have the meaning specified in
subsection 12.1(a).
"TRUST PAY OUT EVENT" shall have, with respect to each Series,
the meaning specified in Section 9.1.
"TRUST PROPERTY" shall have the meaning assigned in Section
2.1.
"TRUST TERMINATION DATE" shall mean the earliest to occur of
(i) unless a Trust Extension shall have occurred, the day after the Distribution
Date with re-
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<PAGE> 33
spect to any Series following the date on which funds shall have been deposited
in the Distribution Account or the applicable Series Account for the payment of
Investor Certificateholders of each Series then issued and outstanding
sufficient to pay in full the Aggregate Invested Amount PLUS interest accrued at
the applicable Certificate Rate through the end of the day prior to the
Distribution Date with respect to each such Series and certain other amounts as
may be specified in any Series Supplement, (ii) if a Trust Extension shall have
occurred, the Extended Trust Termination Date, and (iii) the date specified in
Section 12.1.
"TRUSTEE" shall mean The Chase Manhattan Bank and its
successors and any Person resulting from or surviving any consolidation or
merger to which it or its successors may be a party and any successor trustee
appointed as herein provided.
"UCC" shall mean the Uniform Commercial Code, as amended from
time to time, as in effect in the applicable jurisdiction.
"UNCOVERED DILUTION AMOUNT" shall mean, for any Business Day,
the amount by which the Transferor Amount would have been reduced below zero as
a result of adjustments to the Aggregate Principal Receivables pursuant to
Section 3.8, with respect to which the Transferor was obligated but failed to
make a deposit into the Excess Funding Account by the close of business on the
preceding Business Day.
"UNDIVIDED INTEREST" shall mean the undivided interest in the
Trust evidenced by an Investor Certificate.
"UNFUNDED CERTIFICATE" shall have the meaning specified in
Section 6.9(b).
"VARIABLE FUNDING CERTIFICATES" shall mean a Series of
Investor Certificates, in one or more Classes, issued pursuant to Section 6.9
and a Variable Funding Supplement hereto.
"VARIABLE FUNDING SUPPLEMENT" shall mean a Supplement executed
in connection with the issuance of Variable Funding Certificates.
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<PAGE> 34
"YIELD FACTOR" shall mean with respect to any Business Day the
percentage equivalent of a fraction, determined on the preceding Date of
Determination (or on such Business Day with respect to each Date of
Determination), the numerator of which is (x) the product of the Billed Finance
Charges for the Monthly Period preceding such Date of Determination and one
MINUS the Delinquency Percentage for the preceding Date of Determination (or on
such Business Day with respect to each Date of Determination) PLUS (y)
Recoveries for the Monthly Period preceding such Date of Determination, and the
denominator of which is the aggregate amount of Collections for the Monthly
Period preceding such Date of Determination.
Section 1.2 OTHER DEFINITIONAL PROVISIONS.
(a) All terms defined in any Supplement or this Agreement
shall have the defined meanings when used in any certificate or other document
made or delivered pursuant hereto unless otherwise defined therein.
(b) As used herein and in any certificate or other document
made or delivered pursuant hereto or thereto, accounting terms not defined in
Section 1.1, and accounting terms partially defined in Section 1.1 to the extent
not defined, shall have the respective meanings given to them under generally
accepted accounting principles. To the extent that the definitions of accounting
terms herein are inconsistent with the meanings of such terms under generally
accepted accounting principles, the definitions contained herein shall control.
(c) The agreements, representations and warranties of FDSNB in
this Agreement and in any Supplement in its capacity as Servicer and of Prime II
Receivables Corporation in its capacity as Transferor shall be deemed to be the
agreements, representations and warranties of FDSNB and Prime II Receivables
Corporation solely in each such capacity for so long as either of them acts in
each such capacity under this Agreement.
(d) The words "hereof," "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to any Supplement or this
Agreement as a whole and not to any particular provision of this Agreement or
any Supplement; and Section, subsection, Schedule and Exhibit references
contained in this Agree-
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<PAGE> 35
ment or any Supplement are references to Sections, subsections, Schedules and
Exhibits in or to this Agreement or any Supplement unless otherwise specified.
The Daily Report and Settlement Statement, the forms of which are attached as
Exhibits C and D to this Agreement, shall be in substantially the forms of
Exhibits C and D, with such changes as the Servicer may determine to be
necessary or desirable; PROVIDED, HOWEVER, that no such change shall serve to
exclude information required by this Agreement or any Supplement and each such
change shall be reasonably acceptable to the Trustee. The Servicer shall, upon
making such determination and receiving the consent of the Trustee to such
change, deliver to the Trustee and each Rating Agency an Officer's Certificate
to which shall be annexed the form of the related Exhibit, as so changed. Upon
the delivery of such Officer's Certificate to the Trustee, the related Exhibit,
as so changed, shall for all purposes of this Agreement constitute such Exhibit.
The Trustee may conclusively rely upon such Officer's Certificate in determining
whether the related Exhibit, as changed, conforms to the requirements of this
Agreement.
[End of Article I]
ARTICLE II
CONVEYANCE OF RECEIVABLES;
ISSUANCE OF CERTIFICATES
Section 2.1 CONVEYANCE OF RECEIVABLES. The Transferor does
hereby transfer, assign, set-over, and otherwise convey to the Trust for the
benefit of the Certificateholders, without recourse, all of its right, title and
interest in, to and under (i) the Receivables now existing and hereafter created
and arising in connection with the Accounts, including, without limitation, any
Automatic Additional Accounts and all accounts, general intangibles, contract
rights, and other obligations of any Obligor with respect to the Receivables,
now or hereafter existing, (ii) all monies and investments due or to become due
with respect thereto (including, without limitation, the right to any Finance
Charge Receivables, including any Recoveries), (iii) all proceeds of such
Receivables, and (iv) the Receivables Purchase Agreement. Such property,
together with all monies and investments on deposit, from time to time, in the
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<PAGE> 36
Collection Account, the Excess Funding Account, the Series Accounts maintained
for the benefit of the Certificateholders of any Series of Certificates, any
Enhancement and all monies available under any Enhancement, to be provided for
any Series for payment to the Certificateholders of such Series, shall
constitute the assets of the Trust (collectively, the "Trust Property"). The
foregoing transfer, assignment, set-over and conveyance does not constitute and
is not intended to result in a creation or an assumption by the Trust, the
Trustee or any Investor Certificateholder of any obligation of the Transferor,
the Servicer, the applicable Originator or any other Person in connection with
the Receivables or any agreement or instrument relating thereto, including,
without limitation, any obligation to any Obligors, merchant banks, merchant
clearance systems, VISA U.S.A., Inc., MasterCard International Incorporated or
insurers, or in connection with the Receivables Purchase Agreement.
In connection with such transfer, assignment, set-over and
conveyance, the Transferor agrees to record and file, at its own expense, one or
more financing statements (including any continuation statements with respect to
such financing statements when applicable) with respect to the Receivables now
existing and hereafter created for the transfer of accounts or general
intangibles (each as defined in Section 9-106 of the UCC as in effect in the
Relevant UCC State) meeting the requirements of applicable state law in such
manner and in such jurisdictions as are necessary to perfect the assignment of
the Receivables to the Trust, and to deliver file-stamped copies of such
financing statements or continuation statements or other evidence of such filing
(which may, for purposes of this Section 2.1, consist of facsimile confirmation
of such filing) to the Trustee on or prior to the date of issuance of the
Certificates, and in the case of any continuation statements filed pursuant to
this Section 2.1, as soon as practicable after receipt thereof by the
Transferor. The foregoing transfer, assignment, set-over and conveyance to the
Trust shall be made to the Trustee, on behalf of the Trust, and each reference
in this Agreement to such transfer, assignment, set-over and conveyance shall be
construed accordingly.
In connection with such transfer, the Transferor agrees, at
its own expense, on or prior to the Initial Closing Date (i) to annotate and
indicate in its computer
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files that Receivables created in connection with the Accounts have been
transferred to the Trust pursuant to this Agreement for the benefit of the
Certificateholders and (ii) to deliver to the Trustee or the bailee of the
Trustee a computer file or microfiche list containing a true and complete list
of all such Accounts, identified by account number and setting forth the
Outstanding Balance of each Receivable as of the Cut-Off Date. Such file or list
shall be marked as Schedule 1 to this Agreement, delivered to the Trustee or the
bailee of the Trustee as confidential and proprietary, and is hereby
incorporated into and made a part of this Agreement. The Transferor further
agrees not to alter the file designation referenced in clause (i) of this
paragraph with respect to any Account during the term of this Agreement unless
and until such Account becomes a Removed Account.
To the extent that the transfer of the Receivables from the
Transferor to the Trust hereunder may be characterized as a pledge rather than
as a sale, the Transferor hereby grants and transfers to the Trustee for the
benefit of the Certificateholders a first priority perfected security interest
in all of the Transferor's right, title and interest in, to and under the Trust
Property to secure a loan in an amount equal to the unpaid principal amount of
the Investor Certificates issued hereunder or to be issued pursuant to this
Agreement and the interest accrued thereon at the related Certificate Rate and
to secure all of the Transferor's and Servicer's obligations hereunder,
including, without limitation, the Transferor's obligation to transfer
Receivables hereafter created or acquired to the Trust (the "Secured
Obligations"), and agrees that this Agreement shall constitute a security
agreement under applicable law.
Section 2.2 ACCEPTANCE BY TRUSTEE.
(a) The Trustee hereby acknowledges its acceptance, on behalf
of the Trust, of all right, title and interest previously held by the Transferor
in, to and under the Trust Property and declares that it shall maintain such
right, title and interest, upon the Trust herein set forth, for the benefit of
all Certificateholders. The Trustee further acknowledges that, prior to or
simultaneously with the execution and delivery of this
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Agreement, the Transferor delivered to the Trustee or the bailee of the Trustee
the computer file or microfiche list that was represented as being the computer
file or microfiche list described in the third paragraph of Section 2.1.
(b) The Trustee hereby agrees not to disclose to any Person
any of the account numbers or other information contained in the computer files
or microfiche lists delivered to the Trustee or the bailee of the Trustee by the
Transferor pursuant to Sections 2.1, 2.6 and 2.7 ("Account Information") except
as is required in connection with the performance of its duties hereunder or in
enforcing the rights of the Certificateholders or to a Successor Servicer
appointed pursuant to Section 10.2, any successor trustee appointed pursuant to
Section 11.7, any co-trustee or separate trustee appointed pursuant to Section
11.9 or any other Person in connection with a UCC search or as mandated pursuant
to any Requirement of Law applicable to the Trustee. The Trustee agrees to take
such measures as shall be reasonably requested by the Transferor to protect and
maintain the security and confidentiality of such information, and, in
connection therewith, shall allow the Transferor to inspect the Trustee's or the
bailee of the Trustee's security and confidentiality arrangements from time to
time during normal business hours. In the event that the Trustee is required by
law to disclose any Account Information, the Trustee shall provide the
Transferor with prompt written notice, unless such notice is prohibited by law,
of any such request or requirement so that the Transferor may request a
protective order or other appropriate remedy. The Trustee shall use its best
efforts to provide the Transferor with written notice no later than five days
prior to any disclosure pursuant to this subsection 2.2(b).
(c) The Trustee shall have no power to create, assume or incur
indebtedness or other liabilities in the name of the Trust other than as
contemplated in this Agreement.
Section 2.3 REPRESENTATIONS AND WARRANTIES OF THE
TRANSFEROR. The Transferor hereby represents and warrants to the Trustee, on
behalf of the Trust, as of the Initial Closing Date and, with respect to any
Series
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of Certificates, as of the date of the related Supplement and the related
Closing Date:
(a) ORGANIZATION AND GOOD STANDING. The Transferor is a
corporation duly organized and validly existing in good standing under the laws
of the State of Delaware and has full corporate power, authority and legal right
to own its properties and conduct its business as such properties are presently
owned and such business is presently conducted, and to execute, deliver and
perform its obligations under this Agreement, any Supplement, the Receivables
Purchase Agreement and to execute and deliver to the Trustee the Certificates
pursuant hereto.
(b) DUE QUALIFICATION. The Transferor is duly qualified to do
business and is in good standing (or is exempt from such requirement) in any
state required in order to conduct business, and has obtained all necessary
licenses and approvals with respect to the Transferor required under federal and
Delaware law; PROVIDED, HOWEVER, that no representation or warranty is made with
respect to any qualifications, licenses or approvals which the Trustee would
have to obtain to do business in any state in which the Trustee seeks to enforce
any Receivable.
(c) DUE AUTHORIZATION. The execution and delivery of this
Agreement, any Supplement and the Receivables Purchase Agreement and the
execution and delivery to the Trustee of the Certificates by the Transferor and
the consummation of the transactions provided for in this Agreement, any
Supplement and the Receivables Purchase Agreement have been duly authorized by
the Transferor by all necessary corporate action on its part and this Agreement
will remain, from the time of its execution, an official record of the
Transferor.
(d) BINDING OBLIGATION. Each of this Agreement, any Supplement
and the Receivables Purchase Agreement, and the consummation of the transactions
provided for herein and therein, constitutes a legal, valid, and binding
obligation of the Transferor, enforceable in accordance with its terms, except
as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereinafter in effect,
affecting the enforcement of creditors'
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<PAGE> 40
rights in general and as such enforceability may be limited by general
principles of equity (whether considered in a proceeding at law or in equity).
(e) NO CONFLICTS. The execution, delivery and performance of
this Agreement, the Receivables Purchase Agreement, any Supplement and the
Certificates and the performance of the transactions contemplated by this
Agreement, the Receivables Purchase Agreement and any Supplement and the
fulfillment of the terms hereof by the Transferor, do not (i) contravene its
charter or By-Laws, (ii) violate any provision of, or require any filing (except
for the filings under the UCC required by this Agreement, each of which has been
duly made and is in full force and effect), registration, consent or approval
under, any law, rule, regulation, order, writ, judgment, injunction, decree,
determination or award presently in effect having applicability to the
Transferor, except for such filings, registrations, consents or approvals as
have already been obtained and are in full force and effect, (iii) result in a
breach of or constitute a default or require any consent under any indenture or
loan or credit agreement or any other agreement, lease or instrument to which
the Transferor is a party or by which it or its properties may be bound or
affected except those as to which a consent or waiver has been obtained and is
in full force and effect and an executed copy of which has been delivered to the
Trustee, or (iv) result in, or require, the creation or imposition of any lien
upon or with respect to any of the properties now owned or hereafter acquired by
the Transferor other than as specifically contemplated by this Agreement.
(f) TAXES. The Transferor has filed all tax returns (federal,
state and local) required to be filed and has paid or made adequate provision
for the payment of all taxes, assessments and other governmental charges due
from the Transferor or is contesting any such tax, assessment or other
governmental charge in good faith through appropriate proceedings. The
Transferor knows of no basis for any material additional tax assessment for any
fiscal year for which adequate reserves have not been established.
(g) NO VIOLATION. The execution and delivery of this
Agreement, any Supplement, the Receivables Purchase Agreement and the
Certificates, the performance of
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<PAGE> 41
the transactions contemplated by this Agreement and the fulfillment of the terms
hereof will not conflict with or violate any Requirements of Law applicable to
the Transferor.
(h) NO PROCEEDINGS. There are no proceedings or investigations
pending or, to the knowledge of the Transferor, threatened against the
Transferor before any court, regulatory body, administrative agency, or other
tribunal or governmental instrumentality (i) asserting the invalidity of this
Agreement, any Supplement, the Receivables Purchase Agreement or the
Certificates, (ii) seeking to prevent the issuance of the Certificates or the
consummation of any of the transactions contemplated by this Agreement, any
Supplement, the Receivables Purchase Agreement or the Certificates, (iii)
seeking any determination or ruling that, in the reasonable judgment of the
Transferor, would materially and adversely affect the performance by the
Transferor of its obligations under this Agreement, any Supplement or the
Receivables Purchase Agreement, (iv) seeking any determination or ruling that
would materially and adversely affect the validity or enforceability of this
Agreement, any Supplement, the Receivables Purchase Agreement or the
Certificates or (v) seeking to affect adversely the income tax attributes of the
Trust.
(i) ALL CONSENTS REQUIRED. All approvals, authorizations,
consents, orders or other actions of any Person or of any governmental body or
official required in connection with the execution and delivery of this
Agreement, any Supplement, the Receivables Purchase Agreement and the
Certificates, the performance of the transactions contemplated by this
Agreement, any Supplement, the Receivables Purchase Agreement and the
fulfillment of the terms hereof, have been obtained.
(j) BONA FIDE RECEIVABLES. Each Receivable is or will be an
account receivable arising out of an Originator's performance in accordance with
the terms of the Charge Account Agreement giving rise to such Receivable. The
Transferor has no knowledge of any fact which should have led it to expect at
the time of the initial creation of an interest in any Eligible Receivable
hereunder that such Eligible Receivable would not be paid in full when due. Each
Receivable classified as an "Eligible Receivable" by the Transferor in any
document or report deliv-
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ered hereunder satisfies the requirements of eligibility contained in the
definition of Eligible Receivable.
(k) PLACE OF BUSINESS. The principal place of business of the
Transferor is in Mason, Ohio, and the offices where the Transferor keeps its
records concerning the Receivables and related contracts are in Mason, Ohio.
(l) USE OF PROCEEDS. No proceeds of the issuance of any
Certificate will be used by the Transferor to purchase or carry any margin
security.
(m) PAY OUT EVENT. As of the Initial Closing Date, no Pay Out
Event and no condition that with the giving of notice and/or the passage of time
would constitute a Pay Out Event (a "Prospective Pay Out Event"), has occurred
and is continuing.
(n) NOT AN INVESTMENT COMPANY. The Transferor is not an
"investment company" within the meaning of the Investment Company Act, or is
exempt from all provisions of such Act.
(o) SOLVENCY. The Transferor is not insolvent and will not be
rendered insolvent upon the transfer of the Receivables to the Trust.
For the purposes of the representations and warranties
contained in this Section 2.3 and made by the Transferor on the Initial Closing
Date, "Certificates" shall mean the Certificates issued on the Initial Closing
Date. The representations and warranties set forth in this Section 2.3 shall
survive the transfer and assignment of the respective Receivables to the Trust,
and termination of the rights and obligations of the Servicer pursuant to
Section 10.1. The Transferor hereby represents and warrants to the Trust, with
respect to any Series of Certificates, as of its Closing Date, unless otherwise
stated in the related Supplement, that the representations and warranties of the
Transferor set forth in Section 2.3, are true and correct as of such date (for
the purposes of such representations and warranties, "Certificates" shall mean
the Certificates issued on the related Closing Date). Upon discovery by the
Transferor, the Servicer or a Responsible Officer of the Trustee of a breach of
any of the foregoing representa-
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<PAGE> 43
tions and warranties, the party discovering such breach shall give prompt
written notice to the others.
Section 2.4 REPRESENTATIONS AND WARRANTIES OF THE TRANSFEROR
RELATING TO THE AGREEMENT AND THE RECEIVABLES.
(a) BINDING OBLIGATION; VALID TRANSFER AND ASSIGNMENT. The
Transferor hereby represents and warrants to the Trustee, on behalf of the
Trust, that, as of the Initial Closing Date and with respect to any Series of
Certificates, as of the date of its related Supplement and Closing Date, and,
with respect to any Series and matters involving (X) Supplemental Accounts, as
of the applicable Addition Date and (Y) Automatic Additional Accounts, as of the
date the Receivables of such Accounts are designated for inclusion in the Trust:
(i) The Receivables Purchase Agreement, this
Agreement and any Supplement each constitutes the legal, valid and
binding obligation of the Transferor, enforceable against the
Transferor in accordance with its terms, except (A) as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in
effect affecting the enforcement of creditors' rights in general, and
(B) as such enforceability may be limited by general principles of
equity (whether considered in a suit at law or in equity).
(ii) This Agreement constitutes either (A) a valid
transfer, assignment, set-over and conveyance to the Trust of all
right, title and interest of the Transferor in and to the Trust
Property, and such Trust Property will be held by the Trust free and
clear of any Lien of any Person claiming through or under the
Transferor or any of its Affiliates except for (x) Permitted Liens, (y)
the interest of the Transferor as Holder of the Exchangeable Transferor
Certificate and any other Class of Certificates held by the Transferor
from time to time and (z) the Transferor's right, if any, to interest
accruing on, and investment earnings, if any, in respect of the
Interest Funding Account, the Principal Account, the Excess Funding
Account, or any Series Account, as provided in this Agreement or the
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related Supplement, or (B) a grant of a security interest (as defined
in the UCC as in effect in the Relevant UCC State) in, to and under the
Trust Property, which grant is enforceable with respect to the existing
Receivables and any Receivables in Automatic Additional Accounts
designated for inclusion in the Trust (other than Receivables in
Supplemental Accounts) and the proceeds thereof upon execution and
delivery of this Agreement, and which will be enforceable with respect
to such Receivables hereafter created and the proceeds thereof, upon
such creation. If this Agreement constitutes the grant of a security
interest to the Trust in such property, upon the filing of the
financing statement described in Section 2.1 and in the case of the
Receivables hereafter created and proceeds thereof, upon such creation,
the Trust shall have a first priority perfected security interest in
such property, except for Permitted Liens. Except as contemplated in
this Agreement or any Supplement, neither the Transferor nor any Person
claiming through or under the Transferor shall have any claim to or
interest in the Collection Account, the Principal Account, the Interest
Funding Account, the Distribution Account, the Excess Funding Account,
the principal funding account for any Series or any other Series
Account, except for the Transferor's rights to receive interest
accruing on, and investment earnings in respect of, any such account as
provided in this Agreement (or, if applicable, any Series Account as
provided in any Supplement) and, if this Agreement constitutes the
grant of a security interest in such property, except for the interest
of the Transferor in such property as a debtor for purposes of the UCC
as in effect in the Relevant UCC State. The Receivables Purchase
Agreement constitutes a transfer, assignment, set-over and conveyance
to the Transferor of all rights, titles and interests of the
Originators in and to the Receivables purported to be sold thereunder,
whether then existing or thereafter created in the applicable Accounts
and the proceeds thereof.
(iii) The Transferor is not insolvent.
(iv) The Transferor is the legal and beneficial owner
of all right, title and interest in
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and to each Receivable and each Receivable has been or will be
transferred to the Trust free and clear of any Lien other than
Permitted Liens.
(v) All consents, licenses, approvals or
authorizations of or registrations or declarations with any
Governmental Authority required to be obtained, effected or given by
the Transferor in connection with the transfer of Trust Property to the
Trust have been duly obtained, effected or given and are in full force
and effect.
(vi) The Transferor has clearly and unambiguously
marked all its computer records and all its microfiche storage files
regarding the Receivables as the property of the Trust and shall
maintain such records in a manner such that the Trust shall have a
perfected interest in such Receivables.
(vii) As of the Initial Closing Date, on the Business
Day following the date the Servicer receives a Termination Notice
pursuant to Section 10.1 and on the Business Day following any
Amortization Period Commencement Date, Schedule 1 to this Agreement is
and will be an accurate and complete listing of all Accounts in all
material respects as of such day and the information contained therein
with respect to the identity of each Account and the aggregate unpaid
balance of the Receivables existing thereunder is and will be true and
correct in all material respects as of such day.
(viii) Each Account classified as an "Eligible
Account" by the Transferor in any document or report delivered
hereunder will satisfy the requirements contained in the definition of
Eligible Account and each Receivable classified as an "Eligible
Receivable" by the Transferor in any document or report delivered
hereunder will satisfy the requirements contained in the definition of
Eligible Receivable.
(ix) All material information with respect to the
Accounts and the Receivables provided to the Trustee by the Transferor
was true and correct as of the Closing Date, or with respect to
Supplemental Accounts as of each Addition Date and
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with respect to Automatic Additional Accounts, as of the day
Receivables arising under each such Account are designated for
inclusion in the Trust, as the case may be.
(x) Each Receivable then existing has been conveyed
to the Trust free and clear of any Lien of any Person claiming through
or under the Transferor or any of its Affiliates (other than Permitted
Liens) and in compliance, in all material respects, with all
Requirements of Law applicable to the Transferor.
(xi) With respect to each Receivable then existing,
all consents, licenses, approvals or authorizations of or registrations
or declarations with any Governmental Authority required to be
obtained, effected or given by the Transferor in connection with the
conveyance of such Receivable to the Trust have been duly obtained,
effected or given and are in full force and effect.
(xii) On each day on which any new Receivable is
purchased by the Transferor, the Transferor shall be deemed to
represent and warrant to the Trust that (A) each Receivable purchased
by the Transferor on such day has been conveyed to the Trust in
compliance, in all material respects, with all Requirements of Law
applicable to the Transferor and free and clear of any Lien of any
Person claiming through or under the Transferor or any of its
Affiliates (other than Permitted Liens) and (B) with respect to each
such Receivable, all consents, licenses, approvals or authorizations of
or registrations or declarations with, any Governmental Authority
required to be obtained, effected or given by the Transferor in
connection with the conveyance of such Receivable to the Trust have
been duly obtained, effected or given and are in full force and effect.
(b) NOTICE OF BREACH. The representations and warranties set
forth in this Section 2.4 shall survive the transfer and assignment of the
respective Receivables to the Trust. Upon discovery by the Transferor, the
Servicer or a Responsible Officer of the Trustee of a breach of any of the
representations and warranties set
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forth in this Section 2.4, the party discovering such breach shall give prompt
written notice to the other parties mentioned above. The Transferor agrees to
cooperate with the Servicer and the Trustee in attempting to cure any such
breach.
(c) DESIGNATION OF INELIGIBLE RECEIVABLES. In the event of a
breach with respect to a Receivable of any representations and warranties set
forth in subsection 2.3(i) or subsections 2.4(a)(ii) through (xii), or in the
event that a Receivable is not an Eligible Receivable as a result of the failure
to satisfy the conditions set forth in the definition of Eligible Receivable,
such Receivable shall be designated an "Ineligible Receivable" and shall be
assigned a principal balance of zero for the purpose of determining the
aggregate amount of Principal Receivables on any day; PROVIDED, HOWEVER, that if
such representations and warranties with respect to such Receivable shall
subsequently be true and correct in all material respects as if such Receivable
had been created on such day or such Receivable shall subsequently satisfy the
conditions set forth in the definition of Eligible Receivable, such Receivable
shall be designated an Eligible Receivable, and the principal amount of such
Receivable (determined in accordance with the procedures set forth in the
definition of Principal Receivable) shall be included in determining the
aggregate amount of Principal Receivables on such day and the amount of such
Receivable remaining after subtracting the principal amount of such Receivable
shall be designated a Finance Charge Receivable, and shall be included in
determining the aggregate amount of Finance Charge Receivables for such day.
When the provisions of this subsection 2.4(c) require designation of a
Receivable as an Ineligible Receivable, the Servicer shall deduct the product of
the unpaid balance of such Ineligible Receivable and one MINUS the Finance
Charge Receivable Factor from the Principal Receivables in the Trust and
decrease the Transferor Amount by such amount. On and after the date of such
designation, each Ineligible Receivable shall not be given credit in determining
the aggregate amount of Principal Receivables used in the calculation of any
Investor Percentage, the Transferor Percentage or the Transferor Amount. In the
event that on any Business Day the exclusion of an Ineligible Receivable from
the calculation of the Transferor Amount would cause the Transferor Amount to be
reduced below the Minimum Transferor Amount, the Transferor shall make a
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deposit in the Excess Funding Account (for allocation as a Principal Receivable)
in immediately available funds prior to the next succeeding Business Day in an
amount equal to the amount by which the Transferor Amount would be reduced below
the Minimum Transferor Amount as a result of the exclusion of such Ineligible
Receivable. The portion of such deposit allocated to the Investor Certificates
of each Series shall be distributed to the Investor Certificateholders of each
Series in the manner specified in Article IV.
(d) REASSIGNMENT OF TRUST PORTFOLIO. In the event of a breach
of any of the representations and warranties set forth in subsections 2.3(a),
(b) or (c) or subsections 2.4(a)(i) or (ii) with respect to any Series, either
the Trustee or the Holders of Investor Certificates evidencing Undivided
Interests aggregating more than 50% of the Aggregate Invested Amount of such
Series, by notice then given in writing to the Transferor (and to the Trustee
and the Servicer, if given by the Investor Certificateholders), may direct the
Transferor to accept reassignment of an amount of Principal Receivables equal to
the face amount of the Invested Amount to be repurchased (as specified below)
within 60 days of such notice (or within such longer period as may be specified
in such notice), and the Transferor shall be obligated to accept reassignment of
such Principal Receivables on a Distribution Date specified by the Transferor
(such Distribution Date, the "Reassignment Date") occurring within such
applicable period on the terms and conditions set forth below; PROVIDED,
HOWEVER, that no such reassignment shall be required to be made if at any time
during such applicable period, the representations and warranties contained in
subsections 2.3(a), (b) or (c) or subsections 2.4(a)(i) or (ii) shall then be
true and correct in all material respects. The Transferor shall, on the Transfer
Date (in next day funds) preceding the Reassignment Date, deposit an amount
equal to the reassignment deposit amount for such Series in the Distribution
Account or Series Account, as provided in the related Supplement, for
distribution to the Investor Certificateholders pursuant to Article XII. The
reassignment deposit amount with respect to any Series, unless otherwise stated
in the related Supplement, shall be equal to (i) the Invested Amount of such
Series at the end of the day on the last day of the Monthly Period preceding the
Reassignment Date; PROVIDED, HOWEVER, that with respect to any Series
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issued pursuant to a Variable Funding Supplement such amount shall be the
Invested Amount of such Series as of the Reassignment Date, less the amount, if
any, previously allocated for payment of principal to such Certificateholders on
the related Reassignment Date in the Monthly Period in which the Reassignment
Date occurs, PLUS (ii) an amount equal to all interest accrued but unpaid on the
Investor Certificates of such Series at the applicable Certificate Rate through
such last day, less the amount, if any, previously allocated for payment of
interest to the Certificateholders of such Series on the related Distribution
Date in the Monthly Period in which the Reassignment Date occurs PLUS any other
amounts accrued and owing as specified in the applicable Supplement. Payment of
the reassignment deposit amount with respect to any Series, and all other
amounts in the Distribution Account or the applicable Series Account in respect
of the preceding Monthly Period, shall be considered a prepayment in full of the
Receivables represented by the Investor Certificates of such Series. On the
Distribution Date following the Transfer Date on which such amount has been
deposited in full into the Distribution Account or the applicable Series
Account, the Receivables and all monies due or to become due with respect
thereto and all proceeds of the Receivables shall be released to the Transferor
after payment of all amounts otherwise due hereunder on or prior to such dates
and the Trustee shall execute and deliver such instruments of transfer or
assignment, in each case without recourse, representation or warranty, as shall
be prepared by and as are reasonably requested by the Transferor to vest in the
Transferor, or its designee or assignee, all right, title and interest of the
Trust in and to such Receivables, all monies due or to become due with respect
thereto and all proceeds of such Receivables allocated to such Receivables
pursuant to the related Supplement. If the Trustee or the Investor
Certificateholders of any Series give notice directing the Transferor to accept
reassignment as provided above, the obligation of the Transferor to accept
reassignment of the applicable Receivables and pay the reassignment deposit
amount pursuant to this subsection 2.4(d) shall constitute the sole remedy
respecting a breach of the representations and warranties contained in
subsections 2.3(a), (b) and (c) and subsections 2.4(a)(i) and (ii) available to
the Investor Certificateholders of such Series or the Trustee on behalf of the
Investor Certificateholders of
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such Series. The Trustee shall have no duty to conduct any affirmative
investigation as to the occurrence of any condition requiring the repurchase of
any Receivable by the Transferor pursuant to this Agreement or any Supplement or
the eligibility of any Receivable for purposes of this Agreement or any
Supplement.
Section 2.5 COVENANTS OF THE TRANSFEROR. The Transferor
hereby covenants that:
(a) RECEIVABLES TO BE ACCOUNTS OR GENERAL INTANGIBLES. The
Transferor will take no action to cause any Receivable to be evidenced by any
instrument (as defined in the UCC as in effect in the Relevant UCC State). The
Transferor will take no action to cause any Receivable to be anything other than
an "account" or a "general intangible" (each as defined in the UCC as in effect
in the Relevant UCC State).
(b) SECURITY INTERESTS. Except for the conveyances hereunder,
the Transferor will not sell, pledge, assign or transfer to any other Person, or
grant, create, incur, assume or suffer to exist any Lien on any Receivable,
whether now existing or hereafter created, or any interest therein; the
Transferor will immediately notify the Trustee of the existence of any Lien on
any Receivable; and the Transferor shall defend the right, title and interest of
the Trust in, to and under the Receivables, whether now existing or hereafter
created, against all claims of third parties claiming through or under the
Transferor; PROVIDED, HOWEVER, that nothing in this subsection 2.5(b) shall
prevent or be deemed to prohibit the Transferor from suffering to exist upon any
of the Receivables any Permitted Lien.
(c) CHARGE ACCOUNT AGREEMENTS AND CREDIT AND COLLECTION
POLICIES. The Transferor shall comply with and perform its obligations and shall
cause the Originators to comply with and perform their obligations under the
Charge Account Agreements relating to the Accounts and the Credit and Collection
Policy except insofar as any failure to comply or perform would not materially
and adversely affect the rights of the Trust or the Certificateholders hereunder
or under the Certificates. The Transferor may change the terms and provisions of
the Charge Account Agreements or the Credit and Collection Policy in any respect
(including, without limitation, the
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reduction of the required minimum monthly payment, the calculation of the
amount, or the timing, of charge-offs and the periodic finance charges and other
fees to be assessed thereon) only if such change (i) would not, in the
reasonable belief of the Transferor, cause, immediately or with the passage of
time, a Pay Out Event to occur and (ii) (A) if it owns a comparable segment of
charge card accounts, such change is made applicable to the comparable segment
of the revolving credit card accounts owned by the Transferor, if any, which
have characteristics the same as, or substantially similar to, the Accounts that
are the subject of such change and (B) if it does not own such a comparable
segment, it will not make any such change with the intent to materially benefit
the Transferor over the Investor Certificateholders, except as otherwise
restricted by an endorsement, sponsorship, or other agreement between the
Transferor and an unrelated third party or by the terms of the Charge Account
Agreements.
(d) ACCOUNT ALLOCATIONS. In the event that the Transferor is
unable for any reason to transfer Receivables to the Trust in accordance with
the provisions of this Agreement (including, without limitation, by reason of
the application of the provisions of Section 9.2 or an order by any Governmental
Authority or any court of competent jurisdiction that the Transferor not
transfer any additional Receivables to the Trust) then, in any such event, (A)
the Transferor agrees to allocate and pay to the Trust, after the date of such
inability, all Collections with respect to Receivables, and all amounts which
would have constituted Collections with respect to Receivables but for the
Transferor's inability to transfer such Receivables; (B) the Transferor agrees
to have such amounts applied as Collections in accordance with Article IV; and
(C) for only so long as all Collections and all amounts which would have
constituted Collections are allocated and applied in accordance with clauses (A)
and (B) above, Receivables (and all amounts which would have constituted
Receivables but for the Transferor's inability to transfer Receivables to the
Trust) that are written off as uncollectible in accordance with the applicable
Credit and Collection Policy shall continue to be allocated in accordance with
Article IV, and all amounts that would have constituted Receivables but for the
Transferor's inability to transfer Receivables to the Trust shall be deemed to
be Receiv-
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ables for the purpose of calculating (i) the applicable Investor Percentage with
respect to any Series and (ii) the Aggregate Investor Percentage thereunder and
(iii) Principal Receivables and Finance Charge Receivables. If the Transferor is
unable pursuant to any Requirement of Law to allocate Collections as described
above, the Transferor agrees that it shall in any such event allocate, after the
occurrence of such event, payments on each Account with respect to the principal
balance of such Account first to the oldest principal balance of such Account
and to have such payments applied as Collections in accordance with Article IV.
(e) DELIVERY OF COLLECTIONS. In the event that the Transferor
receives Collections, the Transferor agrees to pay to the Servicer all payments
received by the Transferor in respect of the Receivables as soon as practicable
after receipt thereof by the Transferor.
(f) CONVEYANCE OF ACCOUNTS. The Transferor covenants and
agrees that it will not permit the Originators to convey, assign, exchange or
otherwise transfer any Account to any Person prior to the termination of this
Agreement pursuant to Article XII; PROVIDED, HOWEVER, that the Transferor shall
not be prohibited hereby from permitting an Originator to convey, assign,
exchange or otherwise transfer an Account of such Originator in connection with
a transaction in which such Originator and its successor agree to comply with
provisions substantially similar to those of either Section 2.7 or Section 7.2.
(g) NOTICE OF LIENS. The Transferor shall notify the Trustee
promptly after becoming aware of any Lien on any Receivable other than Permitted
Liens.
(h) ENFORCEMENT OF RECEIVABLES PURCHASE AGREEMENT. The
Transferor agrees to take all action necessary and appropriate to enforce its
rights and claims under the Receivables Purchase Agreement.
(i) SEPARATE BUSINESS. Other than with respect to In-Store
Payments, the Transferor will not permit its assets to be commingled with those
of FDSNB or FCHC, the Transferor shall maintain separate corporate records and
books of account from those of FDSNB and FCHC and the Transferor shall conduct
its business from an
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independent office. The Transferor will conduct its business solely in its own
name and will cause FDSNB and FCHC to conduct their business solely in their own
names so as not to mislead others as to the identity of the entity with which
those others are concerned. The Transferor will provide for its own operating
expenses and liabilities from its own funds, except that the organizational
expenses of the Transferor may be paid by FDSNB or FCHC. The Transferor will not
hold itself out, or permit itself to be held out, as having agreed to pay, or as
being liable for, the debts of FDSNB or FCHC. The Transferor shall cause FDSNB
and FCHC not to hold themselves out, or permit themselves to be held out, as
having agreed to pay, or as being liable for, the debts of the Transferor. The
Transferor will maintain an arm's length relationship with FDSNB and FCHC and
any of their respective Affiliates with respect to any transactions between the
Transferor, on the one hand, and FDSNB or FCHC or any of their respective
Affiliates on the other.
(j) ORIGINATORS. Transferor shall not acquire Receivables from
any Person other than an Originator which has agreed to comply with all
applicable terms of the Receivables Purchase Agreement or another agreement
containing terms identical in all material respects to the terms contained in
the Receivables Purchase Agreement.
(k) RECEIVABLES PURCHASE AGREEMENT NOTICES. The Transferor
shall promptly give the Trustee copies of any notices, reports or certificates
given or delivered to the Transferor under the Receivables Purchase Agreement.
(l) CAPITALIZATION. The Transferor shall maintain Equity in an
amount adequate to meet its obligations as such may arise from time to time. As
used herein, "Equity" means, at any date, without duplication, the sum of (i)
the Transferor's net worth (determined in accordance with generally accepted
accounting principles) and (ii) the outstanding principal amount of, and all
accrued and unpaid interest on, the Subordinated Promissory Note dated January
23, 1997 from the Transferor to FCHC, as such note may be amended, waived, or
otherwise modified from time to time in accordance with the terms thereof.
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(m) NOTICE OF CHANGE IN MONTHLY PERIOD. The Transferor shall
provide written notice to the Trustee at least 15 Business Days in advance of
any change in its fiscal month.
Section 2.6 ADDITION OF ACCOUNTS.
(a) Except as otherwise provided in this subsection 2.6(a),
all consumer revolving credit card accounts which meet the definition of
Automatic Additional Accounts shall be included as Accounts from and after the
date upon which such Automatic Additional Accounts come into existence and all
Receivables in such Automatic Additional Accounts, whether such Receivables are
then existing or thereafter created, shall be transferred automatically to the
Trust upon purchase by the Transferor. The Transferor, at its option, may at any
time, by providing written notice to the Trustee, the Servicer and each Rating
Agency, specify a date (the "Suspension Date") as of which the inclusion of
Automatic Additional Accounts as Accounts shall be terminated or suspended.
Within five Business Days following any Suspension Date, the Transferor shall
provide to the Trustee or the bailee of the Trustee a list of all Accounts as of
the Suspension Date (which list may be in the form of a microfiche or computer
file and which shall be incorporated by reference into this Agreement). In the
event that following any Suspension Date the Transferor desires to resume
including Automatic Additional Accounts as Accounts, it will provide at least
five Business Days' prior written notice to the Trustee, the Servicer and each
Rating Agency of the date (the "Resumption Date") upon which such resumption
will occur. Within five Business Days following the Resumption Date, the
Transferor will provide to the Trustee or the bailee of the Trustee a computer
file or microfiche list containing a true and complete list of all consumer
revolving credit card accounts which (i) came into existence on or after the
applicable Suspension Date, (ii) meet the definition of Automatic Additional
Accounts, (iii) have not been included as Accounts on or prior to such
Resumption Date pursuant to subsections 2.6(b) or 2.6(c) and (iv) the Transferor
does not wish to include as Accounts from and after such Resumption Date. All
Automatic Additional Accounts coming into existence on and after the Resumption
Date shall be included as Accounts and all Receivables in such Automatic
Additional Accounts, whether such Receiv-
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ables are then existing or thereafter created, shall be transferred
automatically to the Trust upon purchase by the Transferor. Within five Business
Days after the Resumption Date, the Transferor agrees to amend all financing
statements relating to the Receivables to reflect such resumption. For all
purposes of this Agreement, all receivables of such Automatic Additional
Accounts shall be treated as Receivables upon their creation and shall be
subject to the eligibility criteria specified in the definitions of "Eligible
Receivable" and "Eligible Account."
(b) On any day on which the Receivables in Automatic
Additional Accounts are to be transferred to the Trust, such Accounts shall be
included as Eligible Accounts if such Accounts satisfy the requirements of
clauses (a) through (e) of the definition of Eligible Accounts.
(c) If the Transferor has elected to terminate or suspend the
inclusion of Automatic Additional Accounts and (i) on any Record Date, the
Transferor Amount (excluding any portion thereof represented by a Supplemental
Certificate) for the related Monthly Period is less than the Minimum Transferor
Amount, the Transferor shall designate additional credit card accounts or any
successor credit card account designation accounts ("Supplemental Accounts") to
be included as Accounts in a sufficient amount such that the Transferor Amount
as a percentage of the Aggregate Principal Receivables for such Monthly Period
after giving effect to such addition is at least equal to the Minimum Transferor
Amount, or (ii) on any Record Date, the aggregate amount of Principal
Receivables is less than the Minimum Aggregate Principal Receivables, the
Transferor shall designate Supplemental Accounts to be included as Accounts in a
sufficient amount such that the aggregate amount of Principal Receivables will
be equal to or greater than the Minimum Aggregate Principal Receivables.
Receivables from such Supplemental Accounts shall be transferred to the Trust on
or before the tenth Business Day following such Record Date.
(d) In addition to its obligation under subsection 2.6(c), if
and for so long as the Transferor has elected to terminate or suspend the
inclusion of Automatic Additional Accounts, the Transferor may upon ten
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Business Days' notice to the Trustee and each Rating Agency, but shall not be
obligated to, designate from time to time Supplemental Accounts of the
Transferor to be included as Accounts.
(e) The Transferor agrees that any such transfer of
Receivables from Supplemental Accounts, under subsection 2.6(c) or (d), shall
satisfy the following conditions (to the extent provided below):
(i) on or before the fifth Business Day prior to the
Addition Date with respect to additions pursuant to subsection 2.6(c)
and on or before the tenth Business Day prior to the Addition Date with
respect to additions pursuant to subsection 2.6(d) (as applicable, the
"Notice Date"), the Transferor shall give the Trustee, each Rating
Agency and the Servicer written notice that such Supplemental Accounts
will be included, which notice shall specify the approximate aggregate
amount of the Receivables to be transferred;
(ii) on or before the applicable Addition Date, the
Transferor shall have delivered to the Trustee a written assignment
(including an acceptance by the Trustee on behalf of the Trust for the
benefit of the Investor Certificateholders) in substantially the form
of Exhibit B (the "Assignment") and the Transferor shall have indicated
in its computer files that the Receivables created in connection with
the Supplemental Accounts have been transferred to the Trust and,
within five Business Days thereafter, the Transferor shall have
delivered to the Trustee or the bailee of the Trustee a computer file
or microfiche list containing a true and complete list of all
Supplemental Accounts, identified by account number and the Outstanding
Balance of the Receivables in such Supplemental Accounts, as of the
Addition Cut-Off Date, which computer file or microfiche list shall be
as of the date of such Assignment incorporated into and made a part of
such Assignment and this Agreement;
(iii) the Transferor shall represent and warrant that
(x) each such Supplemental Account is an Eligible Account and each
Receivable in such Supplemental Account is an Eligible Receivable, (y)
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no selection procedures believed by the Transferor to be materially
adverse to the interests of the Investor Certificateholders were
utilized in selecting the Supplemental Accounts, provided, that, the
selection of newly originated Accounts is deemed not to be materially
adverse to the interests of the Investor Certificateholders, and (z) as
of the applicable Addition Date, the Transferor is not insolvent and
will not be rendered insolvent upon the transfer of Receivables to the
Trust;
(iv) the Transferor shall represent and
warrant that, as of the Addition Date, the Assignment
constitutes either (x) a valid transfer and assignment to the Trust
of all right, title and interest of the Transferor in and to (i) the
Receivables then existing and thereafter created and arising in
connection with the Supplemental Accounts, including, without
limitation, all accounts, general intangibles, contract rights, and
other obligations of any Obligor with respect to the Receivables,
then or thereafter existing, (ii) all monies and investments due or
to become due with respect thereto (including, without limitation,
the right to any payment of interest and Finance Charge Receivables,
including any Recoveries) and (iii) all proceeds (as defined in the
UCC as in effect in the Relevant UCC State) with respect to such
Receivables, and such Receivables and all proceeds thereof will be
held by the Trust free and clear of any Lien of any Person claiming
through or under the Transferor or any of its Affiliates except for
(I) Permitted Liens, (II) the interest of the Transferor as Holder of
the Exchangeable Transferor Certificate and any other Class or Series
of Certificates and (III) the Transferor's right, if any, to receive
interest accruing on, and investment earnings, if any, in respect of,
any Interest Funding Account, any Principal Account, the Excess
Funding Account or any Series Account as provided in the Pooling and
Servicing Agreement and any Supplement; or (y) a grant of a security
interest (as defined in the UCC as in effect in the Relevant
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UCC State) thereof upon such creation. In addition, the Transferor
shall represent and warrant that, if the Assignment constitutes the
grant of a security interest to the Trust in such property pursuant
to clause (y) above, upon filing of a financing statement described
in the Assignment with respect to the Supplemental Accounts designated
thereby and in the case of the Receivables of such Supplemental
Accounts thereafter created and the proceeds (as defined in the UCC as
in effect in the Relevant UCC State) thereof, upon such creation, the
Trust shall have a first priority perfected security interest in such
property, except for Permitted Liens.
(v) the Transferor shall deliver to the Trustee an
Officer's Certificate substantially in the form of Schedule 2 to
Exhibit B confirming the items set forth in paragraph (ii) above;
(vi) the Transferor shall deliver to the Trustee an
Opinion of Counsel with respect to the Receivables in the Supplemental
Accounts (with a copy to the Rating Agencies) substantially in the form
of Exhibit F; and
(vii) the Transferor shall have received written
notice from each Rating Agency that the inclusion of such accounts as
Supplemental Accounts pursuant to subsection 2.6(c) or (d), as the case
may be, will not result in the reduction or withdrawal of its then
existing rating of any Series of Investor Certificates then issued and
outstanding and shall have delivered such notice to the Trustee.
Section 2.7 REMOVAL OF ACCOUNTS.
(a) On each Determination Date that the Transferor Amount for
the related Monthly Period exceeds the Minimum Transferor Amount, the Trustee
shall be deemed to have offered to the Transferor automatically and without any
notice to or action by or on behalf of the Trustee, as of such Determination
Date, the right to remove from the Trust all of the Trust's right, title and
interest in, to and under the Receivables now existing and hereafter created,
all monies due or to become due and all amounts received with respect thereto
and all proceeds thereof in or with respect to those Accounts designated
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by the Transferor (the "Removed Accounts") in an aggregate amount not greater
than (i) at any time the excess of the Transferor Amount over the Minimum
Transferor Amount, and (ii) if any Amortization Period has commenced with
respect to any Series, the lesser of (x) the excess of the Transferor Amount
over the Minimum Transferor Amount and (y) the excess of Aggregate Principal
Receivables PLUS any amount on deposit in any Principal Account for the benefit
of the Holders of Investor Certificates of such Series over the Minimum
Aggregate Principal Receivables. To accept such offer, the Transferor is
required to furnish to the Trustee and each Rating Agency written notice by the
fifth Business Day after the Determination Date specifying the approximate
aggregate amount of Principal Receivables covered by the offer that the
Transferor intends to accept.
(b) In addition to the satisfaction of the conditions set
forth in subsection 2.7(a), the Transferor shall be permitted to accept
reassignment to it of the Receivables from Removed Accounts only upon
satisfaction of the following conditions:
(i) On each date specified by the Transferor for
removal of the Removed Accounts (a "Removal Date"), the Transferor
shall prepare and the Trustee shall execute and deliver to the
Transferor a written reassignment in substantially the form of Exhibit
H (the "Reassignment") and the Transferor shall deliver to the Trustee
or the bailee of the Trustee a computer file or microfiche list
containing a true and complete schedule identifying all Accounts the
Receivables of which remain in the Trust specifying for each such
Account, as of the Removal Notice Date, its account number and the
Outstanding Balance of such Account. Such computer file or microfiche
list shall be incorporated into and made part of this Agreement as of
the date of such Reassignment.
(ii) The Transferor shall represent and warrant as of
each Removal Notice Date that (a) the list of the Accounts not removed
from the Trust, as of the Removal Notice Date, complies in all material
respects with the requirements of paragraph (i) above and (b) either
(1) no selection procedure used by the Transferor which is materially
adverse to the
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interests of the Investor Certificateholders was utilized in selecting
the Removed Accounts or (2) a random selection procedure was used by
the Transferor in selecting the Removed Accounts.
(iii) The Transferor shall represent and warrant that
the removal of any Receivables in any Removed Accounts on any Removal
Date shall not, in the reasonable belief of the Transferor, cause a Pay
Out Event to occur.
(iv) The Transferor shall have delivered at least ten
days' (or such lesser number as any Rating Agency may agree) prior
written notice (which may be given prior to the Removal Date in
expectation that the Trustee will make the offer described in
subsection 2.7(a)) of such removal to each Rating Agency which has
rated any outstanding Series and the Trustee shall have received
written confirmation from each such Rating Agency that such Rating
Agency will not reduce or withdraw its rating on any outstanding Series
as a result of such removal.
(v) The Transferor shall have delivered to the
Trustee a certificate of a Vice President or more senior officer
confirming the Transferor's compliance with the items set forth in
paragraphs (i) through (iv) above. The Trustee may conclusively rely on
such certificate, shall have no duty to make inquiries with regard to
the matters set forth therein and shall incur no liability in so
relying.
(c) Upon satisfaction of the conditions set forth in
subsections 2.7(a) and (b), the Trustee shall execute and deliver the
Reassignment to the Transferor, and the Receivables from the Removed Accounts
shall no longer constitute a part of the Trust.
(d) Notwithstanding any other provisions of this Section 2.7,
the Transferor will be permitted to designate Removed Accounts and to remove
from the Trust all of the Trust's right, title and interest in, to and under the
Receivables then existing in such Removed Accounts together with all monies due
or to become due and all amounts received with respect thereto and all proceeds
thereof or with respect to such Removed Accounts in connection with the sale by
Federated or any Affiliate of
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Federated of all or substantially all of the capital stock or assets of any
Federated retail operating subsidiary if the conditions in clauses (i), (iii)
and (iv) of subsection 2.7(b) have been satisfied and the Transferor shall have
delivered to the Trustee an Officer's Certificate confirming the compliance with
such conditions; PROVIDED, HOWEVER, that the Transferor will have the option
under such circumstances, if it provides the Trustee with an Opinion of Counsel
to the effect that the Trust will continue to have a first priority perfected
security interest in all Receivables remaining in the Trust subsequent to such
Reassignment, to leave in the Trust all of the Trust's right, title and interest
in, to and under the Receivables then existing, together with all monies due or
to become due and all amounts received with respect thereto and all proceeds
thereof in or with respect to the Removed Accounts and cease, from and after the
applicable Removal Date, to transfer, assign, setover or otherwise convey to the
Trust the Receivables thereafter created and arising in connection with the
Removed Accounts, all monies due or to become due and all amounts received with
respect thereto and all proceeds thereof in or with respect to the Removed
Accounts, in which case the Reassignment shall be modified accordingly.
[End of Article II]
ARTICLE III
ADMINISTRATION AND SERVICING
OF RECEIVABLES
Section 3.1 ACCEPTANCE OF APPOINTMENT AND OTHER MATTERS
RELATING TO THE SERVICER.
(a) FDSNB agrees to act as the Servicer under this Agreement.
The Investor Certificateholders of each Series by their acceptance of the
related Certificates consent to FDSNB acting as Servicer. Notwithstanding the
foregoing or any other provisions of this Agreement or any Supplement, the
Investor Certificateholders consent to an Affiliate of FDSNB acting as Servicer
hereunder, in full substitution thereof; PROVIDED, HOWEVER, that such Affiliate
shall expressly assume, by an agreement supplemental hereto, executed and
delivered to the Trustee, the
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performance of every covenant and obligation of the Servicer, as applicable
hereunder, and shall in all respects be designated the Servicer under this
Agreement; PROVIDED, FURTHER, that FDSNB will remain jointly and severally
liable with such Affiliate.
(b) The Servicer shall service and administer the Receivables
and shall collect payments due under the Receivables in accordance with its
customary and usual servicing procedures and the Credit and Collection Policies
and shall have full power and authority, acting alone or through any party
properly designated by it hereunder, to do any and all things in connection with
such servicing and administration which it may deem necessary or desirable.
Without limiting the generality of the foregoing and subject to Section 10.1,
the Servicer is hereby authorized and empowered (i) to make withdrawals from the
Collection Account as set forth in this Agreement, (ii) unless such power and
authority is revoked by the Trustee on account of the occurrence of a Servicer
Default pursuant to Section 10.1, to instruct the Trustee to make withdrawals
and payments, from the Interest Funding Account, the Excess Funding Account, the
Principal Account and any Series Account, in accordance with such instructions
as set forth in this Agreement, (iii) unless such power and authority is revoked
by the Trustee on account of the occurrence of a Servicer Default pursuant to
Section 10.1, to instruct the Trustee in writing to take any action permitted or
required under any Enhancement at such time as set forth in this Agreement and
any Supplement, (iv) to execute and deliver, on behalf of the Trust for the
benefit of the Certificateholders, any and all instruments of satisfaction or
cancellation, or of partial or full release or discharge, and all other
comparable instruments, with respect to the Receivables and, after the
delinquency of any Receivable and to the extent permitted under and in
compliance with applicable law and regulations, to commence enforcement
proceedings with respect to such Receivables, (v) to make any filings, reports,
notices, applications, registrations with, and to seek any consents or
authorizations from, the Securities and Exchange Commission and any state
securities authority on behalf of the Trust as may be necessary or advisable to
comply with any federal or state securities or reporting requirements and (vi)
to delegate certain of its service, collection, enforcement and administrative
duties hereunder with respect to the
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Accounts and the Receivables to any Person who agrees to conduct such duties in
accordance with the Credit and Collection Policies; PROVIDED, HOWEVER, that the
Servicer shall notify the Trustee in writing of any material delegation. The
Trustee agrees that it shall promptly follow the instructions of the Servicer to
withdraw funds from the Principal Account, the Interest Funding Account, the
Excess Funding Account, or any Series Account and to take any action required
under any Enhancement at such time as required under this Agreement. The Trustee
shall execute at the Servicer's written request such documents prepared by the
Transferor and acceptable to the Trustee as the Servicer certifies are necessary
or appropriate to enable the Servicer to carry out its servicing and
administrative duties hereunder.
(c) In the event that the Transferor is unable for any reason
to transfer Receivables to the Trust in accordance with the provisions of this
Agreement (including, without limitation, by reason of the application of the
provisions of Section 9.2 or the order of any court of competent jurisdiction
that the Transferor not transfer any additional Principal Receivables to the
Trust) then, in any such event, (A) the Servicer agrees to allocate, after such
date, all Collections with respect to Principal Receivables, and all amounts
which would have constituted Collections with respect to Principal Receivables
but for the Transferor's inability to transfer such Receivables in accordance
with subsection 2.5(d); (B) the Servicer agrees to apply such amounts as
Collections in accordance with Article IV and (C) for only so long as all
Collections and all amounts which would have constituted Collections are
allocated and applied in accordance with clauses (A) and (B) above, Principal
Receivables and all amounts which would have constituted Principal Receivables
but for the Transferor's inability to transfer Receivables to the Trust that are
written off as uncollectible in accordance with this Agreement shall continue to
be allocated in accordance with Article IV and all amounts which would have
constituted Principal Receivables but for the Transferor's inability to transfer
Receivables to the Trust shall be deemed to be Principal Receivables for the
purpose of calculating the applicable Investor Percentage thereunder. If the
Servicer is unable pursuant to any Requirement of Law to allocate payments on
the Accounts as described above, the Servicer agrees that it shall in any such
event allocate,
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after the occurrence of such event, payments on each Account with respect to the
principal balance of such Account first to the oldest principal balance of such
Account and to have such payments applied as Collections in accordance with
Article IV.
(d) The Servicer shall not be obligated to use separate
servicing procedures, offices or employees for servicing the Receivables from
the procedures, offices and employees used by the Servicer in connection with
servicing other credit card receivables.
Section 3.2 SERVICING COMPENSATION. As compensation for
its servicing activities hereunder and reimbursement for its expenses as set
forth in the immediately following paragraph, the Servicer shall be entitled to
receive a servicing fee in respect of each day prior to the termination of the
Trust pursuant to Section 12.1 (the "SERVICING FEE"), payable in arrears on each
date and in the manner specified in the applicable Supplement, equal to the
product of (i) a fraction, the numerator of which is the actual number of days
in the measuring period specified in the applicable Supplement and the
denominator of which is the actual number of days in the year, (ii) the weighted
average Series Servicing Fee Percentage for all outstanding Series (based upon
the Series Servicing Fee Percentage for each Series and the Invested Amount of
such Series) and (iii) the daily average aggregate balance of all Principal
Receivables over the term of such measuring period. The share of the Servicing
Fee allocable to each Series with respect to any date of payment shall be equal
to the product of (i) a fraction, the numerator of which is the actual number of
days in the measuring period specified in the applicable Supplement and the
denominator of which is the actual number of days in the year, (ii) the
applicable Series Servicing Fee Percentage for such Series and (iii) the
Adjusted Invested Amount of such Series, as appropriate, as of the date of
determination for such payment as specified in the applicable Supplement. The
remainder of the Servicing Fee shall be paid by the Transferor, or retained by
the Servicer as provided in Article IV, and in no event shall the Trust, the
Trustee, any Enhancement Provider, or the Investor Certificateholders be liable
for the share of the Servicing Fee to be paid by the Transferor.
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The Servicer shall be responsible for its own expenses, which
shall include the amounts due to the Trustee pursuant to Section 11.4 and the
reasonable fees and disbursements of independent public accountants and all
other expenses incurred by the Servicer in connection with its activities
hereunder; PROVIDED, that the Servicer shall not be liable for any liabilities,
costs or expenses of the Trust, the Investor Certificateholders or the
Certificate Owners arising under any tax law, including without limitation any
federal, state or local income or franchise taxes or any other tax imposed on or
measured by income (or any interest, penalties or additions with respect thereto
or arising from a failure to comply therewith). In the event that the Servicer
fails to pay any amounts due to the Trustee pursuant to Section 11.4, the
Trustee shall be entitled to deduct and receive such amounts from the Servicing
Fee prior to the payment thereof to the Servicer and the obligations of the
Trust to pay any such amounts shall thereby be fully satisfied. The Servicer
shall be required to pay such expenses for its own account and shall not be
entitled to any payment therefor other than the Servicing Fee.
Section 3.3 REPRESENTATIONS AND WARRANTIES OF THE SERVICER.
FDSNB, as initial Servicer, hereby makes, and any Successor Servicer by its
appointment hereunder shall make, the following representations and warranties
on which the Trustee has relied in accepting the Receivables in trust and in
authenticating the Certificates issued on the Initial Closing Date:
(a) ORGANIZATION AND GOOD STANDING. The Servicer is either (i)
a national banking association duly organized, validly existing and in good
standing under the laws of the United States or (ii) a corporation duly
organized, validly existing and in good standing under the laws of its state of
incorporation and has the corporate power, authority and legal right to own its
properties and conduct its business as such properties are presently owned and
such business is presently conducted, and to execute, deliver and perform its
obligations under this Agreement and any Supplement.
(b) DUE QUALIFICATION. The Servicer is duly qualified to do
business and is in good standing (or is exempt from such requirements) as a
foreign corporation in any state where such qualification is necessary in
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order to service the Receivables as required by this Agreement and any
Supplement and has obtained all necessary licenses and approvals as required
under federal and state law in order to service the Receivables as required by
this Agreement, and if the Servicer shall be required by any Requirement of Law
to so qualify or register or obtain such license or approval, then it shall do
so except where the failure to obtain such license or approval does not
materially affect the Servicer's ability to perform its obligations hereunder or
the enforceability of the Receivables.
(c) DUE AUTHORIZATION. The execution, delivery, and
performance of this Agreement and any Supplement have been duly authorized by
the Servicer by all necessary corporate action on the part of the Servicer and
this Agreement and any Supplement will remain, from the time of its execution,
an official record of the Servicer.
(d) BINDING OBLIGATION. This Agreement and any Supplement
constitutes a legal, valid and binding obligation of the Servicer, enforceable
in accordance with its terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect, affecting the enforcement of creditors' rights
in general and as such enforceability may be limited by general principles of
equity (whether considered in a proceeding at law or in equity).
(e) NO VIOLATION. The execution and delivery of this Agreement
and any Supplement by the Servicer, and the performance of the transactions
contemplated by this Agreement and any Supplement and the fulfillment of the
terms hereof applicable to the Servicer, will not conflict with, violate, result
in any breach of any of the material terms and provisions of, or constitute
(with or without notice or lapse of time or both) a default under, any
Requirement of Law applicable to the Servicer or any indenture, contract,
agreement, mortgage, deed of trust or other instrument to which the Servicer is
a party or by which it is bound.
(f) NO PROCEEDINGS. There are no proceedings or investigations
pending or, to the knowledge of the Servicer, threatened against the Servicer
before any
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court, regulatory body, administrative agency or other tribunal or governmental
instrumentality seeking to prevent the issuance of the Certificates or the
consummation of any of the transactions contemplated by this Agreement, seeking
any determination or ruling that, in the reasonable judgment of the Servicer,
would materially and adversely affect the performance by the Servicer of its
obligations under this Agreement or any Supplement, or seeking any determination
or ruling that would materially and adversely affect the validity or
enforceability of this Agreement or any Supplement.
(g) COMPLIANCE WITH REQUIREMENTS OF LAW. The Servicer shall
duly satisfy all obligations on its part to be fulfilled under or in connection
with each Receivable and the related Account, will maintain in effect all
qualifications required under Requirements of Law in order to service properly
each Receivable and the related Account and will comply in all material respects
with all other Requirements of Law in connection with servicing each Receivable
and the related Account the failure to comply with which would have a material
adverse effect on the Certificateholders or any Enhancement Provider.
(h) PROTECTION OF CERTIFICATEHOLDERS' RIGHTS. The Servicer
shall take no action which, nor omit to take any action the omission of which,
would impair the rights of Certificateholders in any Receivable or the related
Account or the rights of any Enhancement Provider, nor shall it reschedule,
revise or defer payments due on any Receivable except in accordance with the
Credit and Collection Policies.
(i) ALL CONSENTS. All authorizations, consents, order or
approvals of or registrations or declarations with any Governmental Authority
required to be obtained, effected or given by the Servicer in connection with
the execution and delivery of this Agreement by the Servicer and the performance
of the transactions contemplated by this Agreement by the Servicer, have been
duly obtained, effected or given and are in full force and effect; PROVIDED,
HOWEVER, that the Servicer makes no representation or warranty regarding State
securities or "Blue Sky" laws in connection with the distribution of the
Certificates.
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(j) RESCISSION OR CANCELLATION. The Servicer shall not permit
any rescission or cancellation of any Receivable except as ordered by a court of
competent jurisdiction or other Governmental Authority or in accordance with the
normal operating procedures of the Servicer.
(k) RECEIVABLES NOT TO BE EVIDENCED BY PROMISSORY NOTES.
Except in connection with its enforcement or collection of an Account (in which
case any such promissory note would be made in the name of the Trust on behalf
of the Certificateholders), the Servicer will take no action to cause any
Receivable to be evidenced by an instrument (as defined in the UCC as in effect
in the Relevant UCC State).
(l) PRINCIPAL PLACE OF BUSINESS. The Servicer shall at all
times maintain its principal executive offices within the United States.
Section 3.4 REPORTS AND RECORDS FOR THE TRUSTEE.
(a) DAILY RECORDS. Upon reasonable prior notice by the
Trustee, the Servicer shall make available at an office of the Servicer (or
other location designated by the Servicer if such records are not accessible by
the Servicer at an office of the Servicer) selected by the Servicer for
inspection by the Trustee or its agent (reasonably acceptable to the Servicer)
on a Business Day during the Servicer's normal business hours a record setting
forth (i) the Collections on each Receivable and (ii) the amount of Receivables
for the Business Day preceding the date of the inspection. The Servicer shall,
at all times, maintain its computer files with respect to the Receivables in
such a manner so that the Receivables may be specifically identified and, upon
reasonable prior request of the Trustee, shall make available to the Trustee, at
an office of the Servicer (or other location designated by the Servicer if such
computer files are not located at an office of the Servicer) selected by the
Servicer, on any Business Day of the Servicer during the Servicer's normal
business hours any computer programs necessary to make such identification.
(b) DAILY REPORT.
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(i) On each Business Day the Servicer shall prepare a
completed Daily Report.
(ii) The Servicer shall deliver to the Trustee (with
copies to the Depositary and the Collateral Agent if either of such
Persons is not also the Trustee) the Daily Report by 2:30 p.m. (New
York City time) on each Business Day with respect to activity in the
Receivables for such Business Day (or, in the case of a Daily Report
delivered on the Business Day following a Saturday, Sunday or other
non-Business Day, the aggregate activity for such Business Day and such
preceding non-Business Days).
(iii) Upon discovery of any error or receipt of
notice of any error in any Daily Report, the Servicer, the Transferor
and the Trustee shall arrange to confer and shall agree upon any
adjustments necessary to correct any such errors. If any such error is
materially adverse to the interests of the Certificateholders or the
Certificate Owners, the Servicer or the Trustee, as the case may be,
shall retain all Collections which would otherwise be paid from the
Trust (or such lesser amount as the Trustee and the Servicer shall
agree to be necessary to cover any such error) in the Collection
Account until such material error is corrected. Unless the Trustee has
received written notice of any error or discrepancy, the Trustee may
rely on each Daily Report delivered to it for all purposes hereunder.
(c) SETTLEMENT STATEMENT. On each Determination Date, the
Servicer shall, prior to 3:00 p.m. (New York City time) on such day, deliver to
the Trustee the Settlement Statement for the related Monthly Period
substantially in the form of Exhibit D hereto, including the following
information (which, in the case of clauses (iii), (iv) and (v) below, will be
stated on the basis of an original principal amount of $1,000 per Certificate):
(i) the aggregate amount of Collections received in the Collection Account for
the Monthly Period preceding such Determination Date and the aggregate amount of
Finance Charge Collections and the aggregate amount of Principal Collections
processed during such Monthly Period; (ii) the aggregate amount of the
applicable Investor Percentage of Collections of Principal Receivables on the
last day of the preceding Monthly Period of each Series of
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Certificates and the aggregate amount of the applicable Investor Percentage of
Collections on the last day of the preceding Monthly Period of each Series of
Certificates with respect to Finance Charge Collections and Receivables in
Defaulted Accounts; (iii) for each Series and for each Class within any such
Series, the total amount to be distributed to Investor Certificateholders for
the Monthly Period immediately preceding such Determination Date; (iv) for each
Series and for each Class within any such Series, the amount of such
distribution allocable to principal; (v) for each Series and for each Class
within any such Series, the amount of such distribution allocable to interest;
(vi) for each Series and each Class within a Series, the Investor Default Amount
for the immediately preceding Monthly Period; (vii) for each Series and each
Class within a Series, the amount of the Investor Charge-Offs and the amount of
the reimbursements of Investor Charge-Offs for the Monthly Period immediately
preceding such Determination Date; (viii) for each Series, the Servicing Fee for
the Monthly Period immediately preceding such Determination Date; (ix) for each
Series, the existing deficit controlled amortization amount, if applicable; (x)
the aggregate amount of Receivables in the Trust at the close of business on the
last day of the Monthly Period preceding such Determination Date; (xi) for each
Series, the Invested Amount at the close of business on the last day of the
Monthly Period immediately preceding such Determination Date; (xii) the
available amount of any Enhancement for each Class of each Series, if any;
(xiii) for each Series and each Class within a Series, the Pool Factor as of the
end of the related Monthly Period; (xiv) the Yield Factor and Finance Charge
Receivable Factor applicable with respect to the related Monthly Period and (xv)
whether a Pay Out Event with respect to any Series shall have occurred during or
with respect to the related Monthly Period.
(d) The Trustee shall be under no duty to recalculate, verify
or recompute the information supplied to it under this Section 3.4 or such other
matters as are set forth in any Daily Report or Settlement Statement.
Section 3.5 ANNUAL SERVICER'S CERTIFICATE. The Servicer
will deliver, as provided in Section 13.5, to the Trustee, any Enhancement
Provider and each Rating Agency on or before sixty days following the end of the
Transferor Fiscal Year, beginning with March 31, 1998, an
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Officer's Certificate substantially in the form of Exhibit E stating that (a) a
review of the activities of the Servicer during the twelve-month period (which
shall be the period from the first day of the preceding Transferor Fiscal Year
to and including the last day of such Transferor Fiscal Year) and of its
performance under this Agreement was made under the supervision of the officer
signing such certificate and (b) to such officer's knowledge, based on such
review, the Servicer has fully performed all its obligations under this
Agreement throughout such period, or, if there has been a default in the
performance of any such obligation, specifying each such default known to such
officer and the nature and status thereof. A copy of such certificate may be
obtained by any Investor Certificateholder by a request in writing to the
Trustee addressed to the Corporate Trust Office.
Section 3.6 ANNUAL INDEPENDENT ACCOUNTANTS' SERVICING
REPORT.
(a) On or before the 120th day following the end of the second
quarter of the Transferor Fiscal Year, beginning with November 28, 1997, the
Servicer shall cause a firm of nationally recognized independent public
accountants (who may also render other services to the Servicer or the
Transferor) to furnish a report to the Trustee, any Enhancement Provider and
each Rating Agency, to the effect that such firm has made a study and evaluation
in accordance with generally accepted auditing standards of the Servicer's
assertion regarding the effectiveness of the internal control structure relative
to the servicing of Accounts under this Agreement, and that, on the basis of
such examination, such firm is of the opinion (assuming the accuracy of any
reports generated by the Servicer's third party agents) that the Servicer's
assertion regarding the effectiveness of the internal control structure in
effect on the last day of the second quarter of the Transferor Fiscal Year
relating to servicing procedures performed by the Servicer, is fairly stated. A
copy of such report will be sent to each Investor Certificateholder by the
Servicer.
(b) On or before the 90th day following the end of the
Transferor Fiscal Year of each calendar year, beginning with May 1, 1998, the
Servicer shall cause a firm of nationally recognized independent certified
public accountants (who may also render other services to
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the Servicer or the Transferor) to furnish a report to the Trustee, any
Enhancement Provider and each Rating Agency to the effect that they have
performed the procedures enumerated below, which were agreed to by the Servicer,
solely to assist the Servicer in evaluating the accuracy of the monthly
certificates forwarded by the Servicer pursuant to subsection 3.4(c) during the
period covered by such report (which shall be the prior Transferor Fiscal Year,
or for the initial period, from the Closing Date until January 31, 1998). These
procedures, the sufficiency of which is solely the responsibility of the
Servicer, shall include recalculating the mathematical calculations set forth in
four of the monthly certificates and agreeing the amounts used in the
mathematical calculations with the Transferor's computer reports which were the
source of such amounts. Any findings and exceptions noted, except for such
exceptions believed to be immaterial, as a result of the performance of these
procedures shall be set forth in such report. A copy of such report may be
obtained by any Investor Certificateholder by a request in writing to the
Trustee addressed to the Corporate Trust Office.
Section 3.7 TAX TREATMENT. The Transferor has structured this
Agreement and the Investor Certificates with the intention that the Investor
Certificates will qualify under applicable federal, state, local and foreign tax
law as indebtedness. Except to the extent expressly specified to the contrary in
any Supplement, the Transferor, the Servicer, the Holder of the Exchangeable
Transferor Certificate, each Investor Certificateholder, Holder of a Variable
Funding Certificate, and each Certificate Owner agree to treat and to take no
action inconsistent with the treatment of the Investor Certificates (or
beneficial interest therein) as indebtedness for purposes of federal, state,
local and foreign income or franchise taxes and any other tax imposed on or
measured by income. Each Investor Certificateholder, each Holder of a Variable
Funding Certificate and the Holder of the Exchangeable Transferor Certificate,
by acceptance of its Certificate and each Certificate Owner, by acquisition of a
beneficial interest in a Certificate, agree to be bound by the provisions of
this Section 3.7. Each Certificateholder agrees that it will cause any
Certificate Owner acquiring an interest in a Certificate through it to comply
with this Agreement as to treatment as indebtedness under applicable tax law, as
described in
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this Section 3.7. Furthermore, subject to Section 11.10, the Trustee shall treat
the Trust as a security device only, and shall not file tax returns or obtain an
employer identification number on behalf of the Trust.
Section 3.8 ADJUSTMENTS. (a) If the Servicer adjusts downward
the amount of any Receivable because of a rebate, refund, unauthorized charge or
billing error to an Obligor, because such Receivable was created in respect of
merchandise which was refused or returned by an Obligor, or if the Servicer
otherwise adjusts downward the amount of any Receivable without receiving
Collections therefor or without charging off such amount as uncollectible, then,
in any such case, the aggregate amount of the Principal Receivables will be
reduced by the product of one MINUS the Finance Charge Receivable Factor and the
amount of such adjustment. Similarly, the aggregate amount of the Principal
Receivables used to calculate the Transferor Amount and the applicable Investor
Percentages applicable to any Series will be reduced by the product of one MINUS
the Finance Charge Receivable Factor and the amount of any Receivable which was
discovered as having been created through a fraudulent or counterfeit charge or
with respect to which the covenant contained in subsection 2.5(b) was breached.
Any adjustment required pursuant to either of the two preceding sentences shall
be made as promptly as practicable but in no event later than the end of the
Monthly Period in which such adjustment obligation arises. In the event that,
following any such adjustment, the Transferor Amount (less the portion thereof
represented by any Supplemental Certificate) would be less than the Minimum
Transferor Amount, within two Business Days of the date on which such adjustment
obligation arises, the Transferor shall pay to the Servicer, for deposit into
the Excess Funding Account, in immediately available funds an amount equal to
the amount by which the Transferor Amount would be reduced below the Minimum
Transferor Amount as a result of such adjustment. Any amount deposited into the
Excess Funding Account in connection with the adjustment of a Receivable (an
"Adjustment Payment") shall be considered Principal Collections and shall be
applied in accordance with Article IV and the terms of each Supplement;
PROVIDED, HOWEVER, that any amounts paid by the Transferor pursuant to the
preceding sentence after the time period specified therein, to the extent of any
related Uncovered Dilution Amount, shall not be deposited
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into the Excess Funding Account, but shall be considered Finance Charge
Collections and shall be applied in accordance with Article IV and the terms of
each Supplement.
(b) If (i) the Servicer makes a deposit into the Collection
Account in respect of a Collection of a Receivable and such deposit was in the
form of a check which is not honored for any reason or (ii) the Servicer makes a
mistake with respect to the amount of any Collection and deposits an amount that
is less than or more than the actual amount of such Collection, the Servicer
shall appropriately adjust the amount subsequently deposited into the Collection
Account (or shall be entitled to receive a refund from the Collection Account in
the case of an excess deposit) to reflect such dishonored check or mistake. Any
Receivable in respect of which a dishonored check is received shall be deemed
not to have been paid. Notwithstanding the first two sentences of this
paragraph, any adjustments made pursuant to this paragraph will be reflected in
a current report but will not change any amount of Collections previously
reported pursuant to subsection 3.4(b).
Section 3.9 NOTICES TO FDSNB. In the event that FDSNB or any
Affiliate thereof is no longer acting as Servicer, any Successor Servicer
appointed pursuant to Section 10.2 shall deliver or make available to FDSNB each
certificate and report required to be prepared, forwarded or delivered
thereafter pursuant to Sections 3.4, 3.5 and 3.6.
[End of Article III]
ARTICLE IV
RIGHTS OF CERTIFICATEHOLDERS AND ALLOCATION
AND APPLICATION OF COLLECTIONS
Section 4.1 RIGHTS OF CERTIFICATEHOLDERS. Each Series of
Investor Certificates shall represent Undivided Interests in the Trust,
including the benefits of any Enhancement issued with respect to such Series and
the right to receive the Collections and other amounts at the times and in the
amounts specified in this Article IV and the related Supplement to be deposited
in the Investor Accounts or to be paid to the Investor Certificate-
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holders of such Series; PROVIDED, HOWEVER, that the aggregate interest
represented by such Certificates at any time in the Principal Receivables shall
not exceed an amount equal to the Invested Amount of such Certificates. The
Exchangeable Transferor Certificate shall represent the remaining undivided
interest in the Trust (the "Transferor Interest"), including the right to
receive the Collections and other amounts with respect to each series at the
times and in the amounts specified in this Article IV, as amended by each
Supplement, to be paid to the Holder of the Exchangeable Transferor Certificate;
PROVIDED, HOWEVER, that the aggregate interest represented by such Certificate
at any time in the Principal Receivables shall not exceed the Transferor Amount
at such time and such Certificate shall not represent any interest in the
Investor Accounts, except as provided in this Agreement and the Supplements, or
the benefits of any Enhancement issued with respect to any Series.
Section 4.2 ESTABLISHMENT OF ACCOUNTS.
(a) THE COLLECTION ACCOUNT. The Servicer, for the benefit of
the Certificateholders, shall establish in the name of the Trustee, on behalf of
the Trust, a non-interest-bearing segregated account (the "Collection Account")
bearing a designation clearly indicating that the funds deposited therein are
held in trust for the benefit of the Certificateholders, and shall cause such
Collection Account to be established and maintained with a Qualified
Institution; PROVIDED, HOWEVER, that such account need not be maintained as a
segregated trust account with a Qualified Institution if at all times the
certificates of deposit, short-term deposits or commercial paper or the
long-term unsecured debt obligations (other than such obligation whose rating is
based on collateral or on the credit of a Person other than such institution or
trust company) of the depositary institution or trust company maintaining such
account shall have a credit rating from Moody's and Standard & Poor's of at
least P-1 and A-1, respectively, in the case of the certificates of deposit,
short-term deposits or commercial paper, or a rating from Moody's and Standard &
Poor's of Aa3 and AA, respectively, in the case of the long-term unsecured debt
obligations. If, at any time, the institution holding the Collection Account
ceases to be a Qualified Institution, the Transferor shall direct the Servicer
to establish within ten Business Days a new Col-
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lection Account with a Qualified Institution, transfer any cash and/or any
investments to such new Collection Account and from the date such new Collection
Account is established, it shall be the "Collection Account." The Servicer shall
give written notice to the Trustee of the location and account number of the
Collection Account and shall notify the Trustee in writing prior to any
subsequent change thereof. Pursuant to authority granted to it pursuant to
subsection 3.1(b), the Servicer shall have the revocable power to withdraw funds
from the Collection Account for the purposes of carrying out its duties
hereunder.
The Collection Account shall be under the sole dominion and
control of the Trustee and the Trustee shall possess all right, title and
interest in all funds from time to time on deposit in such account.
(b) THE INTEREST FUNDING AND PRINCIPAL ACCOUNTS. The Trustee,
for the benefit of the Investor Certificateholders, shall establish and maintain
with a Qualified Institution in the name of the Trust two segregated trust
accounts for each Series (an "Interest Funding Account" and a "Principal
Account," respectively), each bearing a designation clearly indicating that the
funds therein are held for the benefit of the Investor Certificateholders of
such Series. Except as provided in subsection 4.2(e), each Interest Funding
Account and each Principal Account shall be under the sole dominion and control
of the Trustee for the benefit of the Investor Certificateholders. Pursuant to
authority granted to it hereunder, the Servicer shall have the revocable power
to instruct the Trustee to withdraw funds from the Interest Funding Account and
any Principal Account for any purpose of carrying out the Servicer's or the
Trustee's duties hereunder. The Trustee at all times shall maintain accurate
records reflecting each transaction in each Principal Account and each Interest
Funding Account and that funds held therein shall at all times be held in trust
for the benefit of the Investor Certificateholders of such Series. If, at any
time, the institution holding the Interest Funding Account ceases to be a
Qualified Institution, the Servicer shall direct the Trustee to establish within
ten Business Days a new Interest Funding Account meeting the conditions
specified above with a Qualified Institution, transfer any cash and/or any
investments to such new Interest Funding Account and from
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the date such new Interest Funding Account is established, it shall be the
"Interest Funding Account." Similarly, if, at any time, the institution holding
any Principal Account ceases to be a Qualified Institution, the Servicer shall
direct the Trustee to establish within ten Business Days a new Principal Account
meeting the conditions specified above with a Qualified Institution, transfer
any cash and/or any investments to such new Principal Account and from the date
such new Principal Account is established, it shall be a "Principal Account."
(c) DISTRIBUTION ACCOUNTS. The Trustee, for the benefit of the
Investor Certificateholders of each Series, shall cause to be established and
maintained in the name of the Trust, with an office or branch of a Qualified
Institution a non-interest-bearing segregated demand deposit account for each
Series (a "Distribution Account") bearing a designation clearly indicating that
the funds deposited therein are held in trust for the benefit of the Investor
Certificateholders of such Series. Each Distribution Account shall be under the
sole dominion and control of the Trustee for the benefit of the Investor
Certificateholders of the related Series. Pursuant to the authority granted to
the Paying Agent herein, the Paying Agent shall have the power, revocable by the
Trustee, to make withdrawals and payments from the Distribution Account for the
purpose of carrying out the Paying Agent's duties hereunder. If, at any time,
the institution holding a Distribution Account ceases to be a Qualified
Institution, the Servicer shall direct the Trustee to establish within ten
Business Days a new Distribution Account meeting the conditions specified above
with a Qualified Institution, transfer any cash and/or any investments to such
new Distribution Account and from the date such new Distribution Account is
established, it shall be a "Distribution Account."
(d) THE EXCESS FUNDING ACCOUNT. The Trustee, for the benefit
of the Certificateholders, shall cause to be established in the name of the
Trustee, on behalf of the Certificateholders, with a Qualified Institution, a
segregated trust account (the "Excess Funding Account") bearing a designation
clearly indicating that the funds deposited therein are held for the benefit of
the Certificateholders. Except as provided in subsection 4.3(f), the Excess
Funding Account shall, except as otherwise
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provided herein, be under the sole dominion and control of the Trustee for the
benefit of the Certificateholders. Pursuant to the authority granted to the
Servicer herein, the Servicer shall have the power, revocable by the Trustee, to
make withdrawals and payments from the Excess Funding Account for the purpose of
carrying out the Servicer's or Trustee's duties hereunder. If, at any time, the
institution holding the Excess Funding Account ceases to be a Qualified
Institution, the Servicer shall direct the Trustee to establish within ten
Business Days a new Excess Funding Account meeting the conditions specified
above with a Qualified Institution, transfer any cash and/or any investments to
such new Excess Funding Account and from the date such new Excess Funding
Account is established, it shall be the "Excess Funding Account."
(e) ADMINISTRATION OF THE PRINCIPAL ACCOUNTS AND THE INTEREST
FUNDING ACCOUNTS. Funds on deposit in each Principal Account and each Interest
Funding Account shall at all times be invested by the Servicer (or, at the
written direction of the Transferor, by the Trustee) on behalf of the Transferor
in Cash Equivalents. Any such investment shall mature and such funds shall be
available for withdrawal on or before the Transfer Date following the Monthly
Period in which such funds were processed for collection. The Trustee shall
maintain for the benefit of the Investor Certificateholders possession of the
negotiable instruments or securities evidencing the Cash Equivalents described
in clause (a) of the definition thereof from the time of purchase thereof until
the time of sale or maturity. No such investments shall be liquidated prior to
maturity. At the end of each month, all interest and earnings (net of losses and
investment expenses) on funds on deposit in each Principal Account and each
Interest Funding Account (unless otherwise specified in the applicable
Supplement) shall be deposited by the Trustee, at the written direction of the
Servicer, in a separate deposit account with a Qualified Institution in the name
of the Servicer, or a Person designated in writing by the Servicer, which shall
not constitute a part of the Trust, or shall otherwise be turned over by the
Trustee to the Servicer, in accordance with instructions from the Servicer to
the Trustee, not less frequently than monthly. Subject to the restrictions set
forth above, the Servicer, or a Person designated in writing by the Servicer, of
which the Trustee
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shall have received written notification, shall have the authority to instruct
the Trustee with respect to the investment of funds on deposit in any Principal
Account and any Interest Funding Account. Any investment instructions to the
Trustee shall be in writing and shall include a certification that the proposed
investment is a Cash Equivalent that matures at or prior to the time required by
this Agreement. For purposes of determining the availability of funds or the
balances in any Interest Funding Account and any Principal Account for any
reason under this Agreement, all investment earnings on such funds shall be
deemed not to be available or on deposit.
(f) ADDITIONAL PROCEDURES RELATING TO ESTABLISHMENT OF
ACCOUNTS. Each Series Account and the Excess Funding Account shall be
established at a Qualified Institution which agrees in writing as follows: (i)
all money, securities, instruments and other property credited to any such
account shall be treated as "financial assets" within the meaning of Section
8-102(a)(9) of the 1994 Official Text of the Uniform Commercial Code and (ii)
such Qualified Institution will comply with "entitlement orders" (within the
meaning of Section 8-102(a)(8) of the 1994 Official Text of the Uniform
Commercial Code) issued by the Trustee and relating to such account without
further consent by the Transferor or any other Person.
Section 4.3 COLLECTIONS AND ALLOCATIONS.
(a) COLLECTIONS. Obligors shall make payments on the
Receivables (i) to Lock-Box Accounts maintained by Lock-Box Banks pursuant to
Lock-Box Agreements or (ii) to the Servicer who shall deposit all such payments
in such Lock-Box Accounts no later than the second Business Day following
receipt or (iii) as In-Store Payments. All Collections on Receivables of amounts
due and owing to the Trustee represented by the Receivables deposited in the
Lock-Box Accounts will, pending remittance to the Collection Account, be held
for the benefit of the Trust and shall be deposited into the Collection Account
as promptly as possible after the Date of Processing of such Collections.
In-Store Payments shall be deposited in the Collection Account as promptly as
possible after the Date of Processing of such Collections, but in no event later
than the second Business Day following such Date of Processing.
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The Servicer shall allocate such amounts to each Series of
Investor Certificates and to the Holder of the Exchangeable Transferor
Certificate in accordance with this Article IV and the related Supplement and
shall cause the Trustee to withdraw the required amounts from the Collection
Account or pay such amounts to the Holder of the Exchangeable Transferor
Certificate in accordance with this Article IV and the related Supplement. The
Servicer shall make such deposits or payments on the date indicated herein by
wire transfer or as otherwise provided in the Supplement for any Series of
Certificates with respect to such Series.
Notwithstanding anything in this Agreement to the contrary,
but subject to the terms of any Supplement, for so long as, and only so long as,
FDSNB shall remain the Servicer hereunder, and (a) (i) FDSNB or an Affiliate of
FDSNB provides to the Trustee a letter of credit or other form of Enhancement
rated at least A-1 by Standard & Poor's and P-1 by Moody's (as certified to the
Trustee by the Servicer), and (ii) after notifying each Rating Agency of the
proposed use of such letter of credit or other form of Enhancement, the
Transferor shall have received a notice from each Rating Agency that making
payments monthly rather than daily would not result in a downgrading or
withdrawal of any of such Rating Agency's then-existing ratings of the Investor
Certificates, or (b) Federated shall have and maintain a short-term credit
rating of at least A-1 by Standard & Poor's and P-1 by Moody's (as certified to
the Trustee by the Servicer), the Servicer need not deposit Collections from the
Collection Account into the Principal Account or the Interest Funding Account or
any Series Account, or make payments to the Holder of the Exchangeable
Transferor Certificate, prior to the close of business on the day any
Collections are deposited in the Collection Account as otherwise provided in
this Article IV and the related Supplement, but may instead make such deposits,
payments and withdrawals on each Transfer Date in an amount equal to the net
amount of such deposits, payments and withdrawals which would have been made but
for the provisions of this paragraph.
(b) ALLOCATIONS FOR THE EXCHANGEABLE TRANSFEROR CERTIFICATE.
Throughout the existence of the Trust, unless otherwise stated in any
Supplement, on each Business Day the Servicer shall allocate to the Holder of
the
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Exchangeable Transferor Certificate an amount equal to the product of (A) the
Transferor Percentage and (B) the aggregate amount of Principal Collections and
Finance Charge Collections in the Collection Account. Except as otherwise
provided in any Supplement, the Servicer shall pay such amount to the Holder of
the Exchangeable Transferor Certificate on each Business Day; PROVIDED,
HOWEVER, that amounts payable to the Holder of the Exchangeable Transferor
Certificate pursuant to this clause (b) shall instead be deposited in the
Excess Funding Account to the extent necessary to prevent the Transferor Amount
from being less than the Minimum Transferor Amount.
(c) ALLOCATIONS OF COLLECTIONS BETWEEN FINANCE CHARGE
COLLECTIONS AND PRINCIPAL COLLECTIONS. On each Business Day for all purposes of
this Agreement and each Supplement, the Servicer shall allocate all Collections
received for any period between Finance Charge Collections and Principal
Collections. Such Collections shall be allocated such that the sum of (i) the
product of (x) such Collections received with respect to such Business Day MINUS
the sum of Recoveries and Interchange on such Business Day and (y) the Yield
Factor in effect with respect to such Business Day and (ii) any investment
earnings with respect to amounts on deposit in the Excess Funding Account on
such Business Day and (iii) the sum of Recoveries and Interchange on such
Business Day shall be considered Finance Charge Collections and the remainder of
such Collections shall be considered Principal Collections.
(d) ALLOCATION FOR SERIES. On each Business Day, (i) the
amount of Finance Charge Collections available in the Collection Account
allocable to each Series shall be determined by multiplying the aggregate amount
of such Finance Charge Collections by the applicable Investor Percentage for
Finance Charge Collections for such Series, (ii) the amount of Principal
Collections available in the Collection Account allocable to each Series shall
be determined by multiplying the aggregate amount of such Principal Collections
by the applicable Investor Percentage for Principal Collections for such Series
and (iii) the Receivables in Defaulted Accounts allocable to each Series shall
be determined by multiplying the aggregate amount of such Receivables in
Defaulted Accounts by the applicable Investor Percentage for Receivables in
Defaulted Accounts for such Series. The
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Servicer shall, prior to the close of business on the day any Collections are
deposited in the Collection Account, withdraw the required amounts from the
Collection Account and deposit such amounts into the applicable Principal
Account, the applicable Interest Funding Account, the Excess Funding Account, or
any Series Account or pay such amounts to the Holder of the Exchangeable
Transferor Certificate in accordance with the provisions of this Article IV and
the Supplements.
(e) UNALLOCATED PRINCIPAL COLLECTIONS; EXCESS FUNDING ACCOUNT.
On each Business Day, Shared Principal Collections shall be allocated to each
outstanding Series PRO RATA based on the Principal Shortfall, if any, for each
such Series, and then, at the option of the Transferor, any remainder may be
applied as principal with respect to the Variable Funding Certificates. The
Servicer shall pay any remaining Shared Principal Collections on such Business
Day to the Transferor; PROVIDED, that if the Transferor Amount as determined on
such Business Day does not exceed the Minimum Transferor Amount, then such
remaining Shared Principal Collections shall be deposited in the Excess Funding
Account to the extent necessary to cause the Transferor Amount to be at least
equal to the Minimum Transferor Amount; PROVIDED, FURTHER, that if an
Amortization Period has commenced and is continuing with respect to more than
one outstanding Series, such remaining Shared Principal Collections shall be
allocated to such Series pro rata based on the Investor Percentage for Principal
Receivables applicable for such Series.
(f) EXCESS FUNDING ACCOUNT. Amounts on deposit in the Excess
Funding Account on any Business Day will be invested by the Servicer (or, at the
direction of the Transferor, by the Trustee) on behalf of the Transferor in Cash
Equivalents which shall mature and be available on or before the next Business
Day on which amounts may be released from the Excess Funding Account. Earnings
from such investments received shall be deposited in the Collection Account and
treated as Finance Charge Collections. Any investment instructions to the
Trustee shall be in writing and shall include a certification that the proposed
investment is a Cash Equivalent that matures on or prior to the date required by
this Agreement. If on any Business Day the Transferor Amount is greater than the
Minimum Transferor Amount, amounts on deposit in the Excess Funding Account may,
at the option of the Trans-
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feror, be released to the Holder of the Exchangeable Transferor Certificate.
On the first Business Day of the Amortization Period for any
Series, funds on deposit in the Excess Funding Account will be deposited by the
Servicer, or by the Trustee at the written direction of the Servicer, in the
Principal Account for the benefit of such Series to the extent of the lesser of
(x) the Invested Amount of such Series and (y) the product of (i) the product of
(A) 100% minus the Transferor Percentage and (B) the amount on deposit in the
Excess Funding Account at the beginning of such Amortization Period and (ii) the
Excess Funding Account Percentage for such Series. Any funds in the Excess
Funding Account on any subsequent day will be allocated to Investor Certificates
of each Series in an Amortization Period to the extent that Default Amounts
allocated to the Transferor Interest or adjustments as described in Section 3.8
would cause the Transferor Amount to be less than the Minimum Transferor Amount
and, with respect to any credit adjustment, the Transferor has not made an
Adjustment Payment to the Excess Funding Account, in an amount equal to the
least of (i) the product of (A) such reduction below the Minimum Transferor
Amount and (B) the Excess Funding Account Percentage for such Series, (ii) the
product of (A) the amount of funds available in the Excess Funding Account and
(B) the Excess Funding Account Percentage and (iii) the Adjusted Invested Amount
of such Series.
(g) EXCESS FINANCE CHARGE COLLECTIONS. On each Business Day,
(i) for each Group, the Servicer shall apply the aggregate amount for all
outstanding Series in such Group of the amounts which the related Supplements
specify are to be treated as "Excess Finance Charge Collections" for such
Business Day to each Series in such Group, pro rata, in proportion to the
aggregate amount for all outstanding Series which the related Supplements
specify are "Finance Charge Shortfalls," if any, with respect to each such
Series, and (ii) the Servicer shall withdraw (or shall instruct the Trustee to
withdraw) from the Collection Account and pay to the Holder of the Exchangeable
Transferor Certificate an amount equal to the excess, if any, of (x) the
aggregate amount for all outstanding Series in a Group of the amounts which the
related Supplements specify are to be treated as "Excess Finance Charge
Collections" for such Distribution Date
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over (y) the aggregate amount for all outstanding Series in such Group which the
related Supplements specify are "Finance Charge Shortfalls" for such
Distribution Date; PROVIDED, HOWEVER, that the sharing of Excess Finance Charge
Collections among Series in a Group will continue only until such time, if any,
at which the Transferor shall deliver to the Trustee an Officer's Certificate to
the effect that, in the reasonable belief of the Transferor, the continued
sharing of Excess Finance Charge Collections among Series in any Group would
have adverse regulatory implications with respect to the Transferor. Following
the delivery by the Transferor of such an Officer's Certificate to the Trustee,
there will not be any further sharing of Excess Finance Charge Collections among
Series in any Group.
[THE REMAINDER OF ARTICLE IV IS RE-
SERVED AND SHALL BE SPECIFIED IN ANY
SUPPLEMENT WITH RESPECT TO ANY SERIES]
[End of Article IV]
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ARTICLE V
[ARTICLE V IS RESERVED AND SHALL BE
SPECIFIED IN ANY SUPPLEMENT WITH
RESPECT TO ANY SERIES]
[End of Article V]
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ARTICLE VI
THE CERTIFICATES
Section 6.1 THE CERTIFICATES . Subject to Sections 6.10 and
6.13, the Investor Certificates of each Series and any Class thereof may be
issued in bearer form (the "Bearer Certificates") with attached interest coupons
and a special coupon (collectively, the "Coupons") or in fully registered form
(the "Registered Certificates"), and shall be substantially in the form of the
exhibits with respect thereto attached to the related Supplement. The
Exchangeable Transferor Certificate shall be substantially in the form of
Exhibit A. The Investor Certificates and the Exchangeable Transferor Certificate
shall, upon issue pursuant hereto or to Section 6.9 or Section 6.10, be executed
and delivered by the Transferor to the Trustee for authentication and redelivery
as provided in Sections 2.1 and 6.2. Unless otherwise specified in any
Supplement, any Investor Certificate shall be issuable in a minimum denomination
of $1,000 Undivided Interest and integral multiples thereof and shall be issued
upon original issuance in an original aggregate principal amount equal to the
Initial Invested Amount. The Exchangeable Transferor Certificate shall be issued
as a single certificate. Each Certificate shall be executed by manual or
facsimile signature on behalf of the Transferor by its President or any Vice
President. Certificates bearing the manual or facsimile signature of the
individual who was, at the time when such signature was affixed, authorized to
sign on behalf of the Transferor or the Trustee shall not be rendered invalid,
notwithstanding that such individual has ceased to be so authorized prior to the
authentication and delivery of such Certificates or does not hold such office at
the date of such Certificates. No Certificate shall be entitled to any benefit
under this Agreement, or be valid for any purpose, unless there appears on such
Certificate a certificate of authentication substantially in the form provided
for herein, executed by or on behalf of the Trustee by the manual signature of a
duly authorized signatory, and such certificate upon any Certificate shall be
conclusive evidence, and the only evidence, that such Certificate has been
validly issued and duly authenticated and delivered hereunder. All Certificates
shall be dated the date of their authentication except Bearer
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Certificates which shall be dated the applicable Issuance Date as provided in
the related Supplement.
Section 6.2 AUTHENTICATION OF CERTIFICATES. Contemporaneously
with the initial assignment and transfer of the Receivables, whether now
existing or hereafter created (other than Receivables in Additional Accounts)
and the other components to the Trust, the Trustee shall authenticate and
deliver the initial Series of Investor Certificates (or applicable Classes
thereof), upon the written order of the Transferor. Upon the issuance of such
Investor Certificates, such Investor Certificates shall be validly issued, fully
paid and non-assessable. The Trustee shall authenticate and deliver the
Exchangeable Transferor Certificate to the Transferor simultaneously with its
delivery of the initial Series of Investor Certificates. Upon an Exchange as
provided in Section 6.9 and the satisfaction of certain other conditions
specified therein, the Trustee shall authenticate and deliver the Investor
Certificates of additional Series (with the designation provided in the related
Supplement), upon the written order of the Transferor. Upon the written order of
the Transferor, the Certificates of any Series shall be duly authenticated by or
on behalf of the Trustee, in authorized denominations equal to (in the
aggregate) the Initial Invested Amount of such Series of Investor Certificates.
If specified in the related Supplement for any Series, the Trustee shall
authenticate and deliver outside the United States the Global Certificate that
is issued upon original issuance thereof, upon the written order of the
Transferor, to the Depositary. If specified in the related Supplement for any
Series, the Trustee shall authenticate Book-Entry Certificates that are issued
upon original issuance thereof, upon the written order of the Transferor, to a
Clearing Agency or its nominee as provided in Section 6.10.
Section 6.3 REGISTRATION OF TRANSFER AND EXCHANGE OF
CERTIFICATES.
(a) The Trustee shall cause to be kept at the office or agency
to be maintained by a transfer agent and registrar (the "Transfer Agent and
Registrar") in accordance with the provisions of Section 11.15, a register (the
"Certificate Register") in which, subject to such reasonable regulations as it
may prescribe, the Transfer Agent and Registrar shall provide for the
registration of
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the Investor Certificates of each Series (unless otherwise provided in the
related Supplement) and of transfers and exchanges of the Investor Certificates
as herein provided. Whenever reference is made in this Agreement to the transfer
or exchange of the Certificates by the Trustee, such reference shall be deemed
to include the transfer or exchange on behalf of the Trustee by a Transfer Agent
and Registrar. The Trustee is hereby initially appointed Transfer Agent and
Registrar for the purposes of registering the Investor Certificates and
transfers and exchanges of the Investor Certificates as herein provided. If any
form of Investor Certificate is issued as a Global Certificate, the Trustee may,
or if and so long as any Series of Investor Certificates are listed on a stock
exchange and such exchange shall so require, the Trustee shall appoint a
co-transfer agent and registrar, which will also be a co-paying agent, in such
city as the Transferor may specify. Any reference in this Agreement to the
Transfer Agent and Registrar shall include any co-transfer agent and registrar
unless the context otherwise requires. The Trustee shall be permitted to resign
as Transfer Agent and Registrar upon 30 days' written notice to the Servicer. In
the event that the Trustee shall no longer be the Transfer Agent and Registrar,
the Transferor shall appoint a successor Transfer Agent and Registrar.
Upon surrender for registration of transfer of any Certificate
at any office or agency of the Transfer Agent and Registrar maintained for such
purposes, the Transferor shall execute, subject to the provisions of subsection
6.3(c), and the Trustee shall authenticate and, unless the Transfer Agent and
Registrar is different than the Trustee, in which case the Transfer Agent and
Registrar shall, deliver, in the name of the designated transferee or
transferees, one or more new Certificates in authorized denominations of like
aggregate Undivided Interests; PROVIDED, HOWEVER, that the provisions of this
paragraph shall not apply to Bearer Certificates.
At the option of any Holder of Registered Certificates,
Registered Certificates may be exchanged for other Registered Certificates of
the same Series in authorized denominations of like aggregate Undivided
Interests in the Trust, upon surrender of the Registered Certificates to be
exchanged at any office or agency of the Transfer Agent and Registrar maintained
for such
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purpose. At the option of a Bearer Certificateholder, subject to applicable laws
and regulations (including, without limitation, the Bearer Rules), Bearer
Certificates may be exchanged for other Bearer Certificates or Registered
Certificates of the same Series in authorized denominations of like aggregate
Undivided Interests in the Trust, in the manner specified in the Supplement for
such Series, upon surrender of the Bearer Certificates to be exchanged at an
office or agency of the Transfer Agent and Registrar located outside the United
States. Each Bearer Certificate surrendered pursuant to this Section 6.3 shall
have attached thereto (or be accompanied by) all unmatured Coupons, provided
that any Bearer Certificate so surrendered after the close of business on the
Record Date preceding the relevant Distribution Date after the related Series
Termination Date need not have attached the Coupons relating to such
Distribution Date.
Whenever any Investor Certificates of any Series are so
surrendered for exchange, the Transferor shall execute, and the Trustee shall
authenticate and (unless the Transfer Agent and Registrar is different than the
Trustee, in which case the Transfer Agent and Registrar shall) deliver, the
Investor Certificates of such Series which the Certificateholder making the
exchange is entitled to receive. Every Investor Certificate presented or
surrendered for registration of transfer or exchange shall be accompanied by a
written instrument of transfer in a form satisfactory to the Trustee and the
Transfer Agent and Registrar duly executed by the Certificateholder thereof or
his attorney-in-fact duly authorized in writing.
The preceding provisions of this Section 6.3 notwithstanding,
the Trustee or the Transfer Agent and Registrar, as the case may be, shall not
be required to register the transfer of or exchange any Investor Certificate of
any Series for a period of 15 days preceding the due date for any payment with
respect to the Investor Certificates of such Series.
Unless otherwise provided in the related Supplement, no
service charge shall be made for any registration of transfer or exchange of
Certificates, but the Transfer Agent and Registrar may require payment of a sum
sufficient to cover any tax or governmental charge that
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may be imposed in connection with any transfer or exchange of Certificates.
All Investor Certificates (together with any Coupons attached
to Bearer Certificates) surrendered for registration of transfer or exchange
shall be canceled by the Transfer Agent and Registrar and disposed of in a
manner satisfactory to the Trustee. The Trustee shall cancel and dispose of any
Global Certificates upon their exchange in full for Definitive Certificates.
Such certificate shall also state that a certificate or certificates of each
Foreign Clearing Agency to the effect referred to in Section 6.13 was received
with respect to each portion of the Global Certificate exchanged for Definitive
Certificates.
The Transferor shall execute and deliver to the Trustee or the
Transfer Agent and Registrar, as applicable, Bearer Certificates and Registered
Certificates in such amounts and at such times as are necessary to enable the
Trustee to fulfill its responsibilities under this Agreement and the
Certificates.
(b) Except as provided in Section 6.9 or 7.2 or in any
Supplement, in no event shall the Exchangeable Transferor Certificate or any
interest therein be transferred, sold, exchanged, pledged, participated or
otherwise assigned hereunder, in whole or in part, unless the Transferor shall
have consented in writing to such transfer and unless the Trustee shall have
received (1) confirmation in writing from each Rating Agency that such transfer
will not result in a lowering or withdrawal of its then-existing rating of any
Series of Investor Certificates, and (2) an Opinion of Counsel that such
transfer does not (i) adversely affect the conclusions reached in any of the
federal income tax opinions issued in connection with the original issuance of
any Series of Investor Certificates or (ii) result in a taxable event to the
holders of any such Series.
(c) Unless otherwise provided in the related Supplement,
registration of transfer of Registered Certificates containing a legend relating
to the restrictions on transfer of such Registered Certificates (which legend
shall be set forth in the Supplement relating to such Investor Certificates)
shall be effected only if the
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conditions set forth in such related Supplement are satisfied.
Whenever a Registered Certificate containing the legend set
forth in the related Supplement is presented to the Transfer Agent and Registrar
for registration of transfer, the Transfer Agent and Registrar shall promptly
seek instructions from the Servicer regarding such transfer. The Transfer Agent
and Registrar and the Trustee shall be entitled to receive written instructions
signed by an officer of the Servicer prior to registering any such transfer or
authenticating new Registered Certificates, as the case may be. The Servicer
hereby agrees to indemnify the Transfer Agent and Registrar and the Trustee and
to hold each of them harmless against any loss, liability or expense incurred
without gross negligence or bad faith on their part arising out of or in
connection with actions taken or omitted by them in reliance on any such written
instructions furnished pursuant to this subsection 6.3(c).
(d) The Transfer Agent and Registrar will maintain at its
expense in the Borough of Manhattan, the City of New York, an office or offices
or an agency or agencies where Investor Certificates of such Series may be
surrendered for registration of transfer or exchange.
(e) Prior to the registration of transfer of any portion of a
Transferor Retained Class, the Trustee shall have received an Opinion of Counsel
to the effect that such proposed Transfer will not adversely affect the federal
or Applicable Tax State income tax characterization of any outstanding Series of
Investor Certificates or the taxability (or tax characterization) of the Trust
under federal or Applicable Tax State income tax laws.
Section 6.4 MUTILATED, DESTROYED, LOST OR STOLEN
CERTIFICATES. If (a) any mutilated Certificate (together, in the case of
Bearer Certificates, with all unmatured Coupons, if any, appertaining thereto)
is surrendered to the Transfer Agent and Registrar, or the Transfer Agent and
Registrar receives evidence to its satisfaction of the destruction, loss or
theft of any Certificate and (b) there is delivered to the Transfer Agent and
Registrar and the Trustee such security or indemnity as may be required by them
to hold each of them harmless, then, in the absence of notice to the Trustee
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that such Certificate has been acquired by a bona fide purchaser, the Transferor
shall execute and the Trustee shall authenticate and (unless the Transfer Agent
and Registrar is different from the Trustee, in which case the Transfer Agent
and Registrar shall) deliver (in compliance with applicable law), in exchange
for or in lieu of any such mutilated, destroyed, lost or stolen Certificate, a
new Certificate of like tenor and aggregate Undivided Interest. In connection
with the issuance of any new Certificate under this Section 6.4, the Trustee or
the Transfer Agent and Registrar may require the payment of a sum sufficient to
cover any tax or other governmental charge that may be imposed in relation
thereto and any other expenses (including the fees and expenses of the Trustee
and the Transfer Agent and Registrar) connected therewith. Any duplicate
Certificate issued pursuant to this Section 6.4 shall constitute complete and
indefeasible evidence of ownership in the Trust, as if originally issued,
whether or not the lost, stolen or destroyed Certificate shall be found at any
time.
Section 6.5 PERSONS DEEMED OWNERS. Prior to due presentation
of a Certificate for registration of transfer, the Trustee, the Paying Agent,
the Transfer Agent and Registrar and any agent of any of them may treat the
Person in whose name any Certificate is registered as the owner of such
Certificate for the purpose of receiving distributions pursuant to Article V (as
described in any Supplement) and Article XII and for all other purposes
whatsoever, and neither the Trustee, the Paying Agent, the Transfer Agent and
Registrar nor any agent of any of them shall be affected by any notice to the
contrary; PROVIDED, HOWEVER, that in determining whether the holders of Investor
Certificates evidencing the requisite Undivided Interests have given any
request, demand, authorization, direction, notice, consent or waiver hereunder,
Investor Certificates owned by the Transferor, the Servicer or any Affiliate
thereof shall be disregarded and deemed not to be outstanding, except that, in
determining whether the Trustee shall be protected in relying upon any such
request, demand, authorization, direction, notice, consent or waiver, only
Investor Certificates which a Responsible Officer in the Corporate Trust Office
of the Trustee knows to be so owned shall be so disregarded. Investor
Certificates so owned that have been pledged in good faith shall not be
disregarded as outstanding if the pledgee establishes to the
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satisfaction of the Trustee the pledgee's right so to act with respect to such
Investor, Certificates and that the pledgee is not the Transferor, the Servicer
or an Affiliate thereof. In addition, for purposes of determining whether the
requisite percentage of Investor Certificateholders shall have given any
request, demand, authorization, direction, notice, consent or waiver hereunder,
the outstanding amount of any Series of Variable Funding Certificates (unless
otherwise provided in the Supplement relating to such Series) shall be based on
the related commitments of the holders of the Variable Funding Certificates (in
such amounts as the Servicer shall advise the Trustee in writing) rather than
the amount then outstanding.
In the case of a Bearer Certificate, the Trustee, the Paying
Agent, the Transfer Agent and Registrar and any agent of any of them may treat
the holder of a Bearer Certificate or Coupon as the owner of such Bearer
Certificate or Coupon for the purpose of receiving distributions pursuant to
Article V (as described in any Supplement) and Article XII and for all other
purposes whatsoever, and neither the Trustee, the Paying Agent, the Transfer
Agent and Registrar nor any agent of any of them shall be affected by any notice
to the contrary. Certificates so owned which have been pledged in good faith
shall not be disregarded and may be regarded as outstanding, if the pledgee
establishes to the satisfaction of the Trustee the pledgee's right so to act
with respect to such Investor Certificates and that the pledgee is not the
Transferor, the Servicer or an Affiliate thereof.
Section 6.6 APPOINTMENT OF PAYING AGENT.
(a) The Paying Agent shall make distributions to Investor
Certificateholders from the appropriate account or accounts maintained for the
benefit of Certificateholders as specified in this Agreement or the related
Supplement for any Series pursuant to Articles IV and V hereof. Any Paying Agent
shall have the revocable power to withdraw funds from such appropriate account
or accounts for the purpose of making distributions referred to above. The
Trustee (or the Servicer if the Trustee is the Paying Agent) may revoke such
power and remove the Paying Agent if the Trustee (or the Servicer if the Trustee
is the Paying Agent) determines in its sole dis-
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cretion that the Paying Agent shall have failed to perform its obligations under
this Agreement in any material respect or for other good cause. The Paying
Agent, unless the Supplement with respect to any Series states otherwise, shall
initially be the Trustee. The Trustee shall be permitted to resign as Paying
Agent upon 30 days' written notice to the Servicer. Upon the resignation of the
Paying Agent, if the Paying Agent was not the Trustee, the Trustee shall be the
successor Paying Agent unless and until another successor has been appointed as
Paying Agent. In the event that the Trustee shall no longer be the Paying Agent,
the Transferor shall appoint a successor to act as Paying Agent (which shall be
a bank or trust company). The provisions of Sections 11.1, 11.2 and 11.3 shall
apply to the Trustee also in its role as Paying Agent, for so long as the
Trustee shall act as Paying Agent. Any reference in this Agreement to the Paying
Agent shall include any co-paying agent unless the context requires otherwise.
If specified in the related Supplement for any Series, so long
as the Investor Certificates of such Series are outstanding and the Paying Agent
is not located in New York City, the Transferor shall maintain a co-paying agent
in New York City (for Registered Certificates only) or any other city designated
in such Supplement.
(b) The Transferor shall cause each Paying Agent (other than
the Trustee) to execute and deliver to the Trustee an instrument in which such
Paying Agent shall agree with the Trustee that such Paying Agent will hold all
sums, if any, held by it for payment to the Certificateholders in trust for the
benefit of the Certificateholders entitled thereto and waive all rights of
set-off the Paying Agent may have against any sums held by it until such sums
shall be paid to such Certificateholders and shall agree, and if the Trustee is
the Paying Agent it hereby agrees, that it shall comply with all requirements of
the Internal Revenue Code regarding the withholding by the Trustee of payments
in respect of federal income taxes due from Certificate Owners.
Section 6.7 ACCESS TO LIST OF CERTIFICATEHOLDERS' NAMES AND
ADDRESSES. The Trustee will furnish or cause to be furnished by the Transfer
Agent and Registrar to the Servicer or the Paying Agent, within five
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Business Days after receipt by the Trustee of a request therefor from the
Servicer or the Paying Agent, respectively, in writing, a list in such form as
the Servicer or the Paying Agent may reasonably require, of the names and
addresses of the Investor Certificateholders as of the most recent Record Date
for payment of distributions to Investor Certificateholders. Unless otherwise
provided in the related Supplement, holders of Investor Certificates evidencing
Undivided Interests aggregating not less than 10% of the Invested Amount of the
Investor Certificates of any Series (the "Applicants") may apply in writing to
the Trustee, and if such application states that the Applicants desire to
communicate with other Investor Certificateholders of any Series with respect to
their rights under this Agreement or under the Investor Certificates and is
accompanied by a copy of the communication which such Applicants propose to
transmit, then the Trustee, after having been adequately indemnified by such
Applicants for its costs and expenses, shall afford or shall cause the Transfer
Agent and Registrar to afford such Applicants access during normal business
hours to the most recent list of Certificateholders held by the Trustee and
shall give the Servicer notice that such request has been made, within five
Business Days after the receipt of such application. Such list shall be as of a
date no more than 45 days prior to the date of receipt of such Applicants'
request. Every Certificateholder, by receiving and holding a Certificate, agrees
with the Trustee that neither the Trustee, the Transfer Agent and Registrar, nor
any of their respective agents shall be held accountable by reason of the
disclosure of any such information as to the names and addresses of the
Certificateholders hereunder, regardless of the source from which such
information was obtained.
Section 6.8 AUTHENTICATING AGENT.
(a) The Trustee may appoint one or more authenticating agents
(each, an "Authenticating Agent") with respect to the Certificates which shall
be authorized to act on behalf of the Trustee in authenticating the Certificates
in connection with the issuance, delivery, registration of transfer, exchange or
repayment of the Certificates. The Trustee may appoint any Transfer Agent and
Registrar to be an Authentication Agent. Whenever reference is made in this
Agreement to the authentication of Certificates by the Trustee or the Trustee's
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certificate of authentication, such reference shall be deemed to include
authentication on behalf of the Trustee by an Authenticating Agent and a
certificate of authentication executed on behalf of the Trustee by an
Authenticating Agent. Each Authenticating Agent must be acceptable to the
Transferor.
(b) Any institution succeeding to the corporate agency
business of an Authenticating Agent shall continue to be an Authenticating Agent
without the execution or filing of any paper or any further act on the part of
the Trustee or such Authenticating Agent.
(c) An Authenticating Agent may at any time resign by giving
written notice of resignation to the Trustee and to the Transferor. The Trustee
may at any time terminate the agency of an Authenticating Agent by giving notice
of termination to such Authenticating Agent and to the Transferor. Upon
receiving such a notice of resignation or upon such a termination, or in case at
any time an Authenticating Agent shall cease to be acceptable to the Trustee or
the Transferor, the Trustee promptly may appoint a successor Authenticating
Agent. Any successor Authenticating Agent upon acceptance of its appointment
hereunder shall become vested with all the rights, powers and duties of its
predecessor hereunder, with like effect as if originally named as an
Authenticating Agent. No successor Authenticating Agent shall be appointed
unless acceptable to the Trustee and the Transferor.
(d) The Servicer agrees to pay each Authenticating Agent from
time to time reasonable compensation for its services under this Section 6.8.
(e) The provisions of Sections 11.1, 11.2 and 11.3 shall be
applicable to any Authenticating Agent.
(f) Pursuant to an appointment made under this Section 6.8,
the Certificates may have endorsed thereon, in lieu of the Trustee's certificate
of authentication, an alternate certificate of authentication in substantially
the following form:
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Trustee's Certificate of Authentication
This is one of the certificates described in the Pooling and
Servicing Agreement.
------------------------
as Authenticating Agent
for the Trustee,
By:
---------------------
Authorized Signatory
Section 6.9 TENDER OF EXCHANGEABLE TRANSFEROR CERTIFICATE.
(a) Upon any Exchange, the Transferor shall deliver to the
Trustee for authentication under Section 6.2, one or more new Series of Investor
Certificates. Any such Series of Investor Certificates shall be substantially in
the form specified in the related Supplement and shall bear, upon its face, the
designation for such Series to which it belongs, as selected by the Transferor.
Except as specified in any Supplement for a related Series, all Investor
Certificates of any Series shall rank PARI PASSU and be equally and ratably
entitled as provided herein to the benefits hereof (except that the Enhancement
provided for any Series shall not be available for any other Series) without
preference, priority or distinction on account of the actual time or times of
authentication and delivery, all in accordance with the terms and provisions of
this Agreement.
(b) The Holder of the Exchangeable Transferor Certificate may
(i) tender the Exchangeable Transferor Certificate to the Trustee in exchange
for (A) one or more newly issued Series of Investor Certificates or, with
respect to any pre-funded Series, interests therein and (B) a reissued
Exchangeable Transferor Certificate, (ii) request the Trustee to issue to it one
or more Classes of any newly issued Series of Investor Certificates which upon
payment by the purchaser thereof of the Initial Invested Amount of such
Certificates to a Defeasance Account, will represent an interest in the Trust
equal to such Initial Invested Amount (an "Unfunded Certificate") or (iii) take
a combination of the actions
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specified in clauses (i) and (ii); provided that the sum of the amount of
Transferor Amount which is tendered under clause (i) and the amount to be paid
to the Defeasance Account under clause (ii) equals the Initial Invested Amount
of the Investor Certificates delivered to the Holder of the Exchangeable
Transferor Certificate (any such event under clauses (i), (ii) or (iii), a
"Transferor Exchange"). In addition, to the extent permitted for any Series of
Investor Certificates as specified in the related Supplement, the Investor
Certificateholders of such Series may tender their Investor Certificates and the
Holder of the Exchangeable Transferor Certificate may tender the Exchangeable
Transferor Certificate to the Trustee pursuant to the terms and conditions set
forth in such Supplement in exchange for (i) one or more newly issued Series of
Investor Certificates and (ii) a reissued Exchangeable Transferor Certificate
(an "Investor Exchange"). Unless otherwise specified in any Supplement, the
Transferor shall not be permitted to deposit money into any Defeasance Account.
The Transferor Exchange and Investor Exchange are referred to collectively
herein as an "Exchange." The Holder of the Exchangeable Transferor Certificate
may perform an Exchange by notifying the Trustee, in writing, at least five
Business Days in advance (an "Exchange Notice") of the date upon which the
Exchange is to occur (an "Exchange Date"). Any Exchange Notice shall state the
designation of any Series to be issued on the Exchange Date and, with respect to
each such Class or Series: (a) its Initial Invested Amount (or the method for
calculating such Initial Invested Amount), which at any time may not be greater
than the current principal amount of the Exchangeable Transferor Certificate at
such time (or in the case of an Investor Exchange, the sum of the Invested
Amount of any Class or Series of Investor Certificates to be exchanged PLUS the
current principal amount of the Exchangeable Transferor Certificate) taking into
account any Receivables transferred to the Trust simultaneous with such
Exchange, (b) its Certificate Rate (or the method for allocating interest
payments or other cash flows to such Series), if any, and (c) the Enhancement
Provider, if any, with respect to such Series. On the Exchange Date, the Trustee
shall authenticate and deliver any such Class or Classes of such Series of
Investor Certificates only upon delivery to it of the following: (a) a
Supplement satisfying the criteria set forth in subsection 6.9(c) and in form
reasonably satis-
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factory to the Trustee executed by the Transferor and the Servicer and
specifying the Principal Terms of such Series, (b) the applicable Enhancement,
if any, (c) the agreement, if any, pursuant to which the Enhancement Provider
agrees to provide the Enhancement, if any, (d) an Opinion of Counsel to the
effect that (i) any Class of the newly issued Series of Investor Certificates
sold to third parties will be characterized as either indebtedness or
partnership interests for Federal and Applicable Tax State income tax purposes
or (ii) that the issuance of the newly issued Series of Investor Certificates
will not adversely affect the Federal or Applicable Tax State income tax
characterization of any outstanding Series of Investor Certificates or the
taxability of the Trust under Federal or Applicable Tax State income tax laws,
(e) written confirmation from each Rating Agency that the Exchange will not
result in such Rating Agency's reducing or withdrawing its rating on any then
outstanding Class of any Series as to which it is a Rating Agency, (f) an
Officer's Certificate of the Transferor, that on the Exchange Date after giving
effect to such exchange (i) the Transferor Amount would be at least equal to the
Minimum Transferor Amount and (ii) the Retained Interest would be at least equal
to the Minimum Retained Interest, (g) the existing Exchangeable Transferor
Certificate or applicable Investor Certificates, as the case may be and (h) such
other documents, certificates and Opinions of Counsel as may be required by the
applicable Supplement. Upon satisfaction of such conditions, the Trustee shall
cancel the existing Exchangeable Transferor Certificate or applicable Investor
Certificates, as the case may be, and issue, as provided above, such Series of
Investor Certificates and a new Exchangeable Transferor Certificate, dated the
Exchange Date. There is no limit to the number of Exchanges that may be
performed under this Agreement.
(c) In conjunction with an Exchange, the parties hereto shall
execute a Supplement, which shall specify the relevant terms with respect to any
newly issued Series of Investor Certificates, which may include without
limitation: (i) its name or designation, (ii) the Initial Invested Amount or the
method of calculating the Initial Invested Amount, (iii) the Certificate Rate
(or formula for the determination thereof), (iv) the Closing Date, (v) the
rating agency or agencies rating such Series, (vi) the name of the Clearing
Agency, if any, (vii)
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the rights of the Holder of the Exchangeable Transferor Certificate that have
been transferred to the Holders of such Series pursuant to such Exchange
(including any rights to allocations of Collections of Finance Charge
Receivables and Principal Receivables), (viii) the interest payment date or
dates and the date or dates from which interest shall accrue, (ix) the method of
allocating Collections with respect to Principal Receivables for such Series
and, if applicable, with respect to other Series and the method by which the
principal amount of Investor Certificates of such Series shall amortize or
accrete and the method for allocating Collections with respect to Finance Charge
Receivables and Receivables in Defaulted Accounts, (x) the names of any accounts
to be used by such Series and the terms governing the operation of any such
account, (xi) the Series Servicing Fee Percentage, (xii) the Minimum Transferor
Amount, (xiii) the Series Termination Date, (xiv) the terms of any Enhancement
with respect to such Series, (xv) the Enhancement Provider, if applicable, (xvi)
the base rate applicable to such Series, (xvii) the terms on which the
Certificates of such Series may be repurchased or remarketed to other investors,
(xviii) any deposit into any account provided for such Series, (xix) the number
of Classes of such Series, and if more than one Class, the rights and priorities
of each such Class, (xx) whether any fees will be included in the funds
available to be paid for such Series, (xxi) the priority of any Series with
respect to any other Series, (xxii) the rights, if any, of the holders of the
Exchangeable Transferor Certificates that have been transferred to the holders
of such Series, (xxiii) the Pool Factor, (xxiv) the Minimum Aggregate Principal
Receivables, (xxv) whether such Series will be a part of a group or subject to
being paired with any other Series, (xxvi) whether such Series will be prefunded
or paired with any other Series, and (xxvii) any other relevant terms of such
Series (including whether or not such Series will be pledged as collateral for
an issuance of any other securities, including commercial paper) (all such
terms, the "Principal Terms" of such Series). The terms of such Supplement may
modify or amend the terms of this Agreement solely as applied to such new
Series. If on the date of the issuance of such Series there is issued and
outstanding one or more Series of Investor Certificates and no Series of
Investor Certificates is currently rated by a Rating Agency, then as a condition
to such Exchange a nationally recognized investment banking firm
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or commercial bank shall also deliver to the Trustee an officer's certificate
stating, in substance, that the Exchange will not have an adverse effect on the
timing or distribution of payments to such other Series of Investor Certificates
then issued and outstanding.
(d) The Transferor may surrender the Exchangeable Transferor
Certificate to the Trustee in exchange for a newly issued Exchangeable
Transferor Certificate and one or more additional certificates (each a
"Supplemental Certificate"), the terms of which shall be defined in a Supplement
(which Supplement shall be subject to Section 13.1(a) to the extent that it
amends any of the terms of this Agreement), to be delivered to or upon the order
of the Transferor (or the Holder of a Supplemental Certificate, in the case of
the transfer or exchange thereof, as provided below), upon satisfaction of the
following conditions:
(i) the Transferor Amount (excluding the interest
represented by any Supplemental Certificate) shall not be less than the
Minimum Transferor Amount, as of the date of, and after giving effect
to, such exchange;
(ii) each Rating Agency shall have confirmed in
writing such exchange (or transfer or exchange as provided below) will
not cause a reduction or withdrawal of the ratings, if any, on the
Certificates; and
(iii) the Transferor shall have delivered to the
Trustee and each Rating Agency an Opinion of Counsel that such exchange
shall not cause the Trust to be characterized for U.S. federal income
tax purposes as an association taxable as a corporation or otherwise
have any material adverse impact on the U.S. federal income taxation of
any outstanding Class or Series of Investor Certificates or any
Certificateholder or Certificate Owner, which Opinion of Counsel shall
be dated the date of such exchange (or transfer or exchange as provided
below).
Any Supplemental Certificate may be transferred or exchanged only upon
satisfaction of the conditions set forth in clauses (ii) and (iii) above.
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Section 6.10 BOOK-ENTRY CERTIFICATES. Unless otherwise
provided in any related Supplement, the Investor Certificates, upon original
issuance, shall be issued in the form of typewritten Certificates representing
the Book-Entry Certificates, to be delivered to the depositary specified in such
Supplement (the "Depositary") which shall be the Clearing Agency or Foreign
Clearing Agency, by or on behalf of such Series. The Investor Certificates of
each Series shall, unless otherwise provided in the related Supplement,
initially be registered on the Certificate Register in the name of the nominee
of the Clearing Agency or Foreign Clearing Agency. No Certificate Owner will
receive a definitive certificate representing such Certificate Owner's interest
in the related Series of Investor Certificates, except as provided in Section
6.12. Unless and until definitive, fully registered Investor Certificates of any
Series ("Definitive Certificates") have been issued to Certificate Owners
pursuant to Section 6.12:
(i) the provisions of this Section 6.10 shall be in
full force and effect with respect to each such Series;
(ii) the Transferor, the Servicer, the Paying Agent,
the Transfer Agent and Registrar and the Trustee may deal with the
Clearing Agency and the Clearing Agency Participants for all purposes
(including the making of distributions on the Investor Certificates of
each such Series) as the authorized representatives of the Certificate
Owners;
(iii) to the extent that the provisions of this
Section 6.10 conflict with any other provisions of this Agreement, the
provisions of this Section 6.10 shall control with respect to each such
Series; and
(iv) the rights of Certificate Owners of Investor
Certificates of each such Series shall be exercised only through the
Clearing Agency or Foreign Clearing Agency and the applicable Clearing
Agency Participants and shall be limited to those established by law
and agreements between such Certificate Owners and the Clearing Agency
or Foreign Clearing Agency and/or the Clearing Agency Participants.
Pursuant to the Depositary Agreement appli-
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cable to a Series, unless and until Definitive Certificates of such
Series are issued pursuant to Section 6.12, the initial Clearing Agency
will make book-entry transfers among the Clearing Agency Participants
and receive and transmit distributions of principal and interest on the
Investor Certificates to such Clearing Agency Participants.
Section 6.11 NOTICES TO CLEARING AGENCY. Whenever notice or
other communication to the Certificateholders is required under this Agreement,
unless and until Definitive Certificates shall have been issued to Certificate
Owners pursuant to Section 6.12, the Trustee shall give all such notices and
communications specified herein to be given to Holders of the Investor
Certificates to the Clearing Agency or Foreign Clearing Agency.
Section 6.12 DEFINITIVE CERTIFICATES. If (i) (A) the
Transferor advises the Trustee in writing that the Clearing Agency or Foreign
Clearing Agency is no longer willing or able to discharge properly its
responsibilities under the applicable Depositary Agreement, and (B) the
Transferor is unable to locate a qualified successor, (ii) the Transferor, at
its option, advises the Trustee in writing that it elects to terminate the
book-entry system through the Clearing Agency or Foreign Clearing Agency with
respect to any Series of Certificates or (iii) after the occurrence of a
Servicer Default, Certificate Owners of a Series representing beneficial
interests aggregating not less than 50% of the Invested Amount of such Series
advise the Trustee and the applicable Clearing Agency or Foreign Clearing Agency
through the applicable Clearing Agency Participants in writing that the
continuation of a book-entry system through the applicable Clearing Agency or
Foreign Clearing Agency is no longer in the best interests of the Certificate
Owners, the Trustee shall notify all Certificate Owners of such Series, through
the applicable Clearing Agency Participants, of the occurrence of any such event
and of the availability of Definitive Certificates to Certificate Owners of such
Series requesting the same. Upon surrender to the Trustee of the Investor
Certificates of such Series by the applicable Clearing Agency or Foreign
Clearing Agency for registration of transfer, accompanied by registration
instructions from the applicable Clearing Agency or Foreign Clearing Agency, the
Trustee shall issue the Definitive Certificates of such
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Series. Neither the Transferor nor the Trustee shall be liable for any delay in
delivery of such instructions and may conclusively rely on, and shall be
protected in relying on, such instructions. Upon the issuance of Definitive
Certificates of such Series, all references herein to obligations imposed upon
or to be performed by the applicable Clearing Agency or Foreign Clearing Agency
shall be deemed to be imposed upon and performed by the Trustee, to the extent
applicable with respect to such Definitive Certificates, and the Trustee shall
recognize the Holders of the Definitive Certificates of such Series as
Certificateholders of such Series hereunder.
Section 6.13 GLOBAL CERTIFICATE; EURO-CERTIFICATE EXCHANGE
DATE. If specified in the related Supplement for any Series, the Investor
Certificates may be initially issued in the form of a single temporary Global
Certificate (the "Global Certificate") in bearer form, without interest coupons,
in the denomination of the Initial Invested Amount of such Series and
substantially in the form attached to the related Supplement. Unless otherwise
specified in the related Supplement, the provisions of this Section 6.13 shall
apply to such Global Certificate. The Global Certificate will be authenticated
by the Trustee upon the same conditions, in substantially the same manner and
with the same effect as the Definitive Certificates. The Global Certificate may
be exchanged in the manner described in the related Supplement for Registered or
Bearer Certificates in definitive form.
Section 6.14 MEETINGS OF CERTIFICATEHOLDERS.
To the extent provided by the Supplement for any Series issued
in whole or in part in Bearer Certificates, the Servicer or the Trustee may at
any time call a meeting of the Certificateholders of such Series, to be held at
such time and at such place as the Servicer or the Trustee, as the case may be,
shall determine, for the purpose of approving a modification of or amendment to,
or obtaining a waiver of, any covenant or condition set forth in this Agreement
with respect to such Series or in the Certificates of such Series, subject to
Section 13.1 of this Agreement.
Section 6.15 UNCERTIFICATED CLASSES. Notwithstanding anything
to the contrary contained in this
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Article VI or in Article XII, unless otherwise specified in any Supplement, any
provisions contained in this Article VI and in Article XII relating to the
registration, form, execution, authentication, delivery, presentation,
cancellation and surrender of Certificates shall not be applicable to any
uncertificated Certificates.
[End of Article VI]
ARTICLE VII
OTHER MATTERS RELATING TO THE TRANSFEROR
Section 7.1 LIABILITY OF THE TRANSFEROR. The Transferor
shall be liable in accordance herewith solely to the extent of the obligations
specifically undertaken by the Transferor.
Section 7.2 MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF
THE OBLIGATIONS OF, THE TRANSFEROR.
(a) The Transferor shall not consolidate with or merge into
any other Person or convey or transfer its properties and assets substantially
as an entirety to any Person, unless:
(i) the Person formed by such consolidation or into
which the Transferor is merged or the Person which acquires by
conveyance or transfer the properties and assets of the Transferor
substantially as an entirety shall be, if the Transferor is not the
surviving Person (x) a corporation organized and existing under the
laws of the United States of America or any State or the District of
Columbia or (y) a state or national banking association that is not
subject to the United States Bankruptcy Code of 1978, as amended from
time to time, or to any successor statute, and shall expressly assume,
by an agreement supplemental hereto, executed and delivered to the
Trustee, in form satisfactory to the Trustee, the performance of every
covenant and obligation of the Transferor, as applicable hereunder and
shall benefit from all the rights granted to the Transferor, as
applicable hereunder. To the extent that any right, covenant or
obligation of the Transferor, as applicable hereunder, is inapplicable
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to the successor Person, such successor Person shall be subject to such
covenant or obligation, or benefit from such right, as would apply, to
the extent practicable, to such successor Person. In furtherance
hereof, in applying this Section 7.2 to a successor Person, Section 9.2
hereof shall be applied by reference to events of involuntary
liquidation, receivership or conservatorship applicable to such
successor Person as shall be set forth in the officer's certificate
described in subsection 7.2(a)(ii);
(ii) the Transferor shall have delivered to the
Trustee an Officer's Certificate signed by a Vice President (or any
more senior officer) of the Transferor stating that such consolidation,
merger, conveyance or transfer and such supplemental agreement comply
with this Section 7.2 and that all conditions precedent herein provided
for relating to such transaction have been complied with and an Opinion
of Counsel that such supplemental agreement is legal, valid and binding
and that the Person surviving such consolidation, conveyance or
transfer is organized and existing under the laws of the United States
of America or any State or the District of Columbia and, subject to
customary limitations and qualifications, such Person should not be
substantively consolidated with any Originator or the Servicer;
(iii) the Transferor shall have delivered notice to
each Rating Agency of such consolidation, merger, conveyance or
transfer and each Rating Agency shall have provided written
confirmation that such consolidation, merger, conveyance or transfer
will not result in such Rating Agency reducing or withdrawing its
rating on any then outstanding Class or Series as to which it is a
Rating Agency; and
(iv) if the Transferor is not the surviving Person,
the surviving Person shall file new UCC-1 financing statements with
respect to the interest of the Trust in the Receivables.
(b) The obligations of the Transferor hereunder shall not be
assignable nor shall any Person succeed to the obligations of the Transferor
hereunder ex-
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cept for mergers, consolidations, assumptions or transfers in accordance with
the provisions of the foregoing paragraph.
Section 7.3 LIMITATION ON LIABILITY. The directors, officers,
employees or agents of the Transferor shall not be under any liability to the
Trust, the Trustee, the Certificateholders, any Enhancement Provider or any
other Person hereunder or pursuant to any document delivered hereunder, it being
expressly understood that all such liability is expressly waived and released as
a condition of, and as consideration for, the execution of this Agreement and
any Supplement and the issuance of the Certificates; PROVIDED, HOWEVER, that
this provision shall not protect the officers, directors, employees, or agents
of the Transferor against any liability which would otherwise be imposed upon
them by reason of willful misfeasance, bad faith or gross negligence in the
performance of duties or by reason of reckless disregard of obligations and
duties hereunder. Except as provided in Sections 7.1 and 7.4 with respect to the
Trust and the Trustee and its officers, directors, employees and agents, the
Transferor shall not be under any liability to the Trust, the Trustee, its
officers, directors, employees and agents, the Certificateholders, any
Enhancement Provider or any other Person for any action taken or for refraining
from the taking of any action in its capacity as Transferor pursuant to this
Agreement or any Supplement whether arising from express or implied duties under
this Agreement or any Supplement or otherwise; PROVIDED, HOWEVER, that this
provision shall not protect the Transferor against any liability which would
otherwise be imposed upon it by reason of willful misfeasance, bad faith or
gross negligence in the performance of duties or by reason of reckless disregard
of obligations and duties hereunder. The Transferor and any director, officer,
employee or agent may rely in good faith on any document of any kind PRIMA FACIE
properly executed and submitted by any Person respecting any matters arising
hereunder.
Section 7.4 LIABILITIES. (a) Notwithstanding Section 7.3
(and notwithstanding Sections 8.3 and 8.4), the Transferor by entering into this
Agreement, and any Holder of any interest in the Exchangeable Transferor
Certificate (excluding, unless otherwise provided in any Supplement, any
Supplemental Certificate) by its accep-
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tance thereof, agree to be liable, directly to the injured party, for the entire
amount of any losses, claims, damages or liabilities (other than those taken at
the direction of Investor Certificateholders or that would be incurred by an
Investor Certificateholder if the Investor Certificates were notes secured by
the Receivables, including for example, as a result of the performance of the
Receivables, market fluctuations, a shortfall or failure to make payment under
any Enhancement or other similar market or investment risks associated with
ownership of the Investor Certificates) arising out of or based on the
arrangement created by this Agreement or the actions of the Servicer taken
pursuant hereto (to the extent that, if the Trust Property at the time the claim
is made were used to pay in full all outstanding Certificates of all Series, the
Trust Property that would remain after the Investor Certificateholders and
Enhancement Providers, if any, were paid in full would be insufficient to pay
any such losses, claims, damages or liabilities) as though this Agreement
created a partnership under the New York Revised Limited Partnership Act in
which the Transferor and such Holder of the Exchangeable Transferor Certificate
were general partners. To the extent provided in Section 8.4, the Servicer will
(from its own assets and not from the assets of the Trust) indemnify and hold
harmless the Trustee, the Transferor and each Holder of the Exchangeable
Transferor Certificate against and from certain losses, claims, damages and
liabilities of the Transferor or such Holder as described in this Section
arising from the actions or omissions of the Servicer.
(b) The Transferor shall indemnify and hold harmless the
Trustee and its officers, directors, employees and agents, from and against any
loss, liability, expense, damage or injury (collectively, a "Loss") suffered or
sustained by reason of the acceptance by the Trustee of the trust pursuant to
this Agreement, including any judgment, award, settlement, reasonable attorneys'
fees and other costs or expenses incurred in connection with the defense of any
action, proceeding or claim; PROVIDED, HOWEVER, that the Transferor's duty to
indemnify under this subsection 7.4(b) shall not extend to any Losses that are
caused by or result from the fraud, negligence, or willful misconduct of, the
Trustee, its employees or its agents; PROVIDED, FURTHER, that in no event will
the Transferor be liable, directly or indi-
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rectly, for or in respect of any indebtedness evidenced or created by any
Certificate, recourse as to which shall be limited solely to the assets of the
Trust allocated for the payment thereof as provided in this Agreement and any
applicable Supplement. This indemnification shall survive the termination of the
Agreement or the resignation or removal of the Trustee.
Section 7.5 TRANSFEROR'S RECORDS. The Transferor shall
clearly and unambiguously mark its accounting records evidencing the Receivables
being purchased pursuant to the Receivables Purchase Agreement with a legend
stating that such Receivables have been conveyed to the Trust pursuant to this
Agreement.
[End of Article VII]
ARTICLE VIII
OTHER MATTERS RELATING
TO THE SERVICER
Section 8.1 LIABILITY OF THE SERVICER. The Servicer shall be
liable in accordance herewith only to the extent of the obligations specifically
undertaken by the Servicer in such capacity herein.
Section 8.2 MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE
OBLIGATIONS OF, THE SERVICER. Subject to subsection 3.1(a), the Servicer shall
not consolidate with or merge into any other Person or convey or transfer its
properties and assets substantially as an entirety to any Person, unless:
(i) the Person formed by such consolidation or into
which the Servicer is merged or the Person which acquires by conveyance
or transfer the properties and assets of the Servicer substantially as
an entirety shall be (x) a corporation organized and existing under the
laws of the United States of America or any State or the District of
Columbia or (y) a state or national banking association that is not
subject to the United States Bankruptcy Code of 1978, as amended from
time to time, or to any successor statute and, if the Servicer is not
the surviving Person, shall expressly assume, by an
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agreement supplemental hereto, executed and delivered to the Trustee in
form satisfactory to the Trustee, the performance of every covenant and
obligation of the Servicer hereunder (to the extent that any right,
covenant or obligation of the Servicer, as applicable hereunder, is
inapplicable to the successor Person, such successor Person shall be
subject to such covenant or obligation, or benefit from such right, as
would apply, to the extent practicable, to such successor Person);
(ii) the Servicer shall have delivered to the Trustee
an Officer's Certificate that such consolidation, merger, conveyance or
transfer and such supplemental agreement comply with this Section 8.2
and that all conditions precedent herein provided for relating to such
transaction have been complied with and an Opinion of Counsel that such
supplemental agreement is legal, valid and binding with respect to the
Servicer and that the Person surviving such consolidation, conveyance
or transfer is organized and existing under the laws of the United
States of America or any State or the District of Columbia; and
(iii) the Servicer shall have delivered notice to
each Rating Agency of such consolidation, merger, conveyance or
transfer.
Section 8.3 LIMITATION ON LIABILITY OF THE SERVICER AND
OTHERS. The directors, officers, employees or agents of the Servicer shall not
be under any liability to the Trust, the Trustee, the Certificateholders, any
Enhancement Provider or any other Person hereunder or pursuant to any document
delivered hereunder, it being expressly understood that all such liability is
expressly waived and released as a condition of, and as consideration for, the
execution of this Agreement and any Supplement and the issuance of the
Certificates; PROVIDED, HOWEVER, that this provision shall not protect the
directors, officers, employees and agents of the Servicer against any liability
which would otherwise be imposed upon them by reason of willful misfeasance, bad
faith or gross negligence in the performance of duties or by reason of reckless
disregard of obligations and duties hereunder. Except as provided in Sections
8.1 and 8.4 with respect to the Trustee, its officers, directors, employ-
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ees and agents, the Servicer shall not be under any liability to the Trust, the
Trustee, its officers, directors, employees and agents, the Certificateholders,
any Enhancement Provider or any other Person for any action taken or for
refraining from the taking of any action in its capacity as Servicer pursuant to
this Agreement or any Supplement; PROVIDED, HOWEVER, that this provision shall
not protect the Servicer against any liability which would otherwise be imposed
upon it by reason of willful misfeasance, bad faith or gross negligence in the
performance of duties or by reason of its reckless disregard of its obligations
and duties hereunder or under any Supplement. The Servicer may rely in good
faith on any document of any kind PRIMA FACIE properly executed and submitted by
any Person respecting any matters arising hereunder. The Servicer shall not be
under any obligation to appear in, prosecute or defend any legal action which is
not incidental to its duties to service the Receivables in accordance with this
Agreement which in its reasonable opinion may involve it in any expense or
liability.
Section 8.4 SERVICER INDEMNIFICATION OF THE TRANSFEROR,
THE TRUST AND THE TRUSTEE. Subject to the limitations on liability set forth in
Section 8.3, the Servicer shall indemnify and hold harmless the Transferor, the
Trustee and the Trust (each, an "Indemnified Party") from and against any loss,
liability, reasonable expense, damage or injury, including, but not limited to,
any judgment, award, settlement, reasonable attorneys' fees and other costs or
expenses incurred in connection with the defense of any actual or threatened
action, proceeding or claim, suffered or sustained by reason of any acts or
omissions or alleged acts or omissions of the Servicer with respect to
activities of the Trust or the Trustee for which the Servicer is responsible
pursuant to this Agreement; PROVIDED, HOWEVER, that the Servicer shall not
indemnify or hold harmless an Indemnified Party if such acts, omissions or
alleged acts or omissions constitute or are caused by fraud, negligence or
willful misconduct by such Indemnified Party (or any of such Indemnified Party's
officers, directors, employees or agents) or the Investor Certificateholders;
PROVIDED, FURTHER, that the Servicer shall not indemnify or hold harmless the
Trust, the Investor Certificateholders or the Certificate Owners for any losses,
liabilities,
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expenses, damages or injuries suffered or sustained by any of them with respect
to any action taken by the Trustee at the request of the Investor
Certificateholders; PROVIDED, FURTHER, that the Servicer shall not indemnify or
hold harmless the Trust, the Investor Certificateholders or the Certificate
Owners as to any losses, liabilities, expenses, damages or injuries suffered or
sustained by any of them in their capacities as investors, including without
limitation losses incurred as a result of Defaulted Accounts or Receivables
which are written off as uncollectible; PROVIDED, FURTHER, that the Servicer
shall not indemnify or hold harmless the Transferor, the Trust, the Investor
Certificateholders or the Certificate Owners for any losses, liabilities,
expenses, damages or injuries suffered or sustained by the Trust, the Investor
Certificateholders or the Certificate Owners arising under any tax law,
including without limitation, any federal, state, local or foreign income or
franchise taxes or any other tax imposed on or measured by income (or any
interest or penalties with respect thereto or arising from a failure to comply
therewith) required to be paid by the Trust, the Investor Certificateholders or
the Certificate Owners in connection herewith to any taxing authority; and,
PROVIDED, FURTHER, that in no event will the Servicer be liable, directly or
indirectly, for or in respect of any indebtedness evidenced or created by any
Certificate, recourse as to which shall be limited solely to the assets of the
Trust allocated for the payment thereof as provided in this Agreement and any
applicable Supplement. Any such indemnification shall not be payable from the
assets of the Trust, but the Servicer shall be subrogated to the rights of the
Trust with respect to the foregoing matters if and to the extent that the
Servicer shall have indemnified the Trust with respect thereto. The Servicer
shall indemnify and hold harmless the Trustee and its officers, directors,
employees or agents from and against any loss, liability, reasonable expense,
damage or injury suffered or sustained by reason of the acceptance of this Trust
by the Trustee, the issuance by the Trust of the Certificates or any of the
other matters contemplated herein or in any Supplement; PROVIDED, HOWEVER, that
the Servicer shall not indemnify the Trustee or its officers, directors,
employees or agents for any loss, liability, expense, damage or injury caused by
the fraud, negligence or willful misconduct of any of them. The provisions of
this indemnity shall run directly to and be enforceable by an
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injured party subject to the limitations hereof and shall survive the
resignation or removal of the Servicer, the resignation or removal of the
Trustee and/or the termination of the Trust and shall survive the termination of
this Agreement.
Section 8.5 THE SERVICER NOT TO RESIGN. Subject to
subsection 3.1(a), the Servicer shall not resign from the obligations and duties
hereby imposed on it except upon determination that (i) the performance of its
duties hereunder is no longer permissible under applicable law and (ii) there is
no reasonable action which the Servicer could take to make the performance of
its duties hereunder permissible under applicable law. Any such determination
permitting the resignation of the Servicer shall be evidenced as to clause (i)
above by an Opinion of Counsel to such effect delivered to the Trustee. No such
resignation shall become effective until the Trustee or a Successor Servicer
shall have assumed the responsibilities and obligations of the Servicer in
accordance with Section 10.2 hereof. If the Trustee is unable within 120 days of
the date of delivery to it of such Opinion of Counsel to appoint a Successor
Servicer, the Trustee shall serve as Successor Servicer hereunder (but shall
have continued authority to appoint another Person as Successor Servicer).
Section 8.6 ACCESS TO CERTAIN DOCUMENTATION AND
INFORMATION REGARDING THE RECEIVABLES. The Servicer shall provide to the
Trustee and its agents (who shall be reasonably acceptable to the Servicer)
access to the documentation regarding the Accounts and the Receivables in such
cases where the Trustee is required in connection with the enforcement of the
rights of the Investor Certificateholders, or by applicable statutes or
regulations, to review such documentation, such access being afforded without
charge but only (i) upon reasonable request, (ii) during normal business hours,
(iii) subject to the Servicer's normal security and confidentiality procedures
and (iv) at offices designated by the Servicer. Nothing in this Section 8.6
shall derogate from the obligation of the Transferor, the Trustee or the
Servicer to observe any applicable law prohibiting disclosure of information
regarding the Obligors and the failure of the Servicer to provide access as
provided in this Section 8.6 as a result of such obligations shall not
constitute a breach of this Section 8.6.
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Section 8.7 DELEGATION OF DUTIES. It is understood and
agreed by the parties hereto that the Servicer may delegate certain of its
duties hereunder to FACS Group, Inc., a subsidiary of Federated, located in
Mason, Ohio, Tampa, Florida and Phoenix, Arizona and to First Data Resources,
Inc., a Delaware corporation. In the ordinary course of business, the Servicer
may at any time delegate any duties hereunder to any Person who agrees to
conduct such duties in accordance with the Credit and Collection Policies. Any
such delegations shall not relieve the Servicer of its liability and
responsibility with respect to such duties, and shall not constitute a
resignation within the meaning of Section 8.5 hereof and the Servicer will
remain jointly and severally liable with such Person for any amounts which would
otherwise be payable pursuant to this Article VIII as if the Servicer had
performed such duty; PROVIDED, HOWEVER, that in the case of any significant
delegation to a Person other than an Affiliate of FDSNB (i) written notice shall
be given to the Trustee and to each Rating Agency of such delegation and (ii) no
Rating Agency shall have notified the Transferor or the Trustee in writing that
such delegation will result in the lowering or withdrawal of its then existing
rating of any Series or Class of Investor Certificates.
[End of Article VIII]
ARTICLE IX
PAY OUT EVENTS
Section 9.1 PAY OUT EVENTS. If any one of the following
events (each, a "Trust Pay Out Event") shall occur:
(a) the Transferor, any Holder of the Exchangeable Transferor
Certificate (other than a Holder of a Supplemental Certificate) or FCHC 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 bank-
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ruptcy proceeding or any other insolvency, readjustment of debt, marshalling of
assets and liabilities or similar proceedings, or for the winding-up or
liquidation of its affairs, shall have been entered against the Transferor, any
Holder of the Exchangeable Transferor Certificate (other than a Holder of a
Supplemental Certificate) or FCHC; or the Transferor, any Holder of the
Exchangeable Transferor Certificate (other than a Holder of a Supplemental
Certificate) or FCHC shall admit in writing its inability to pay its debts
generally as they become due, file a petition to take advantage of any
applicable insolvency or reorganization statute including the U.S. bankruptcy
code, make an assignment for the benefit of its creditors or voluntarily suspend
payment of its obligations; or the Transferor shall become unable for any reason
to transfer Receivables to the Trust in accordance with the provisions of this
Agreement;
(b) the Trust shall become subject to regulation by the
Securities and Exchange Commission as an "investment company" within the meaning
of the Investment Company Act; or
(c) the Transferor shall become unable for any reason to
transfer Receivables to the Trust pursuant to this Agreement;
then a Pay Out Event with respect to all Series of Certificates shall occur
without any notice or other action on the part of the Trustee or the Investor
Certificateholders immediately upon the occurrence of such event.
Section 9.2 ADDITIONAL RIGHTS UPON THE OCCURRENCE OF CERTAIN
EVENTS.
(a) If (x) the Transferor shall consent to the appointment of
a bankruptcy trustee or receiver or liquidator for the winding-up or liquidation
of its affairs, or a decree or order of a court or agency or supervisory
authority having jurisdiction in the premises for the appointment of a
bankruptcy trustee or receiver or liquidator for the winding-up or liquidation
of its affairs shall have been entered against the Transferor (an "Insolvency
Event"), the Transferor shall on the day of such Insolvency Event (the
"Appointment Day") or (y) the Retained Percentage shall at any time be equal to
or
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less than 2% (a "Trigger Event"), the following actions shall be taken and
processes begun:
(i) If an Insolvency Event shall have occurred, the Transferor
shall immediately cease to transfer Principal Receivables to the Trust and shall
promptly give written notice to the Trustee of such Insolvency Event.
Notwithstanding any cessation of the transfer to the Trust of additional
Principal Receivables, receivables accrued in respect of periodic finance
charges, late fees and similar fees and charges, whenever created, accrued in
respect of Receivables which have been transferred to the Trust, shall continue
to be a part of the Trust, and Collections with respect thereto shall continue
to be allocated and paid in accordance with Article IV.
(ii) If an Insolvency Event or a Trigger Event shall have
occurred, this Agreement and the Trust shall be deemed to have terminated,
subject to the liquidation, winding-up and dissolution procedures described
below; PROVIDED, HOWEVER, that within 15 days of the date of written notice to
the Trustee, the Trustee shall (A) publish a notice in an Authorized Newspaper
that an Insolvency Event or a Trigger Event has occurred, that the Trust has
terminated, and that the Trustee intends to sell, dispose of or otherwise
liquidate the Receivables pursuant to this Agreement in a commercially
reasonable manner and on commercially reasonable terms, which shall include the
solicitation of competitive bids (a "Disposition") and (B) send written notice
to the Investor Certificateholders describing the provisions of this Section 9.2
and requesting each Investor Certificateholder to advise the Trustee in writing
that it elects one of the following options: (1) the Investor Certificateholder
wishes the Trustee to instruct the Servicer not to effectuate a Disposition, (2)
the Investor Certificateholder refuses to advise the Trustee as to the specific
action the Trustee shall instruct the Servicer to take or (3) the Investor
Certificateholder wishes the Servicer to effect a Disposition. If after 75 days
from the day notice pursuant to clause (A) above is first published (the
"Publication Date"), the Trustee shall not have received the written instruction
described in clause (B) above from Holders of Investor Certificates representing
Undivided Interests aggregating in excess of 50% of the related Invested Amount
of each Series (or, in the case
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of a Series having more than one Class, each Class of such Series) and the
holders of any Supplemental Certificates or any other interest in the
Exchangeable Transferor Certificate other than the Transferor as provided in
Section 6.3(b) (for each Series, a "Holders' Majority"), the Trustee shall
instruct the Servicer to effectuate a Disposition, and the Servicer shall
proceed to consummate a Disposition. If, however, with respect to the portion of
the Receivables allocable to any outstanding Series, a Holders' Majority
instruct the Trustee not to effectuate a Disposition of the portion of the
Receivables allocable to such Series, the Trust shall be reconstituted and
continue with respect to such Series pursuant to the terms of this Agreement and
the applicable Supplement (as amended in connection with such reconstitution);
PROVIDED, HOWEVER, that in the event of an Insolvency Event, the Trust shall not
be reconstituted unless the Trustee shall have first received an Opinion of
Counsel to the effect that the Trust, as reconstituted, shall not be subject to
Federal or any Applicable Tax State income tax on its income. The portion of the
Receivables allocable to any Series shall be equal to the sum of (1) the product
of (A) the Transferor Percentage, (B) the aggregate outstanding Principal
Receivables and (C) a fraction the numerator of which is the related Investor
Percentage of Collections of Finance Charge Receivables and the denominator of
which is the sum of all Investor Percentages with respect to Collections of
Finance Charge Receivables for all Series outstanding and (2) the Invested
Amount of such Series. The Transferor or any of its Affiliates shall be
permitted to bid for the Receivables. In addition, the Transferor or any of its
Affiliates shall have the right to match any bid by a third person and be
granted the right to purchase the Receivables at such matched bid price. The
Trustee may obtain a prior determination from any such bankruptcy trustee,
receiver or liquidator that the terms and manner of any proposed Disposition are
commercially reasonable. The provisions of Sections 9.1 and 9.2 shall not be
deemed to be mutually exclusive.
(b) The proceeds from the Disposition pursuant to subsection
(a) above shall be treated as Collections on the Receivables and shall be
allocated and deposited in accordance with the provisions of Article IV;
PROVIDED, HOWEVER that the proceeds from a Disposition with respect to a Series
shall be applied solely to make pay-
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ments to such Series; PROVIDED, FURTHER, that the Trustee shall determine
conclusively in its sole discretion the amount of such proceeds which are
allocable to Finance Charge Collections and the amount of such proceeds which
are allocable to Collections of Principal Receivables. Unless the Trustee
receives written instructions from Investor Certificateholders of one or more
Series to continue the Trust with respect to such Series as provided in
subsection 9.2(a) above, on the day following the last Distribution Date in the
Monthly Period during which such proceeds are distributed to the Investor
Certificateholders of each Series, the Trust shall terminate.
(c) The Trustee may appoint an agent or agents to assist with
its responsibilities pursuant to this Article IX with respect to competitive
bids.
[End of Article IX]
ARTICLE X
SERVICER DEFAULTS
Section 10.1 SERVICER DEFAULTS. If any one of the following
events (a "Servicer Default") shall occur and be continuing:
(a) any failure by the Servicer to make any payment, transfer
or deposit or to give instructions or notice to the Trustee pursuant to Article
IV or to instruct the Trustee to make any required drawing, withdrawal, or
payment under any Enhancement on or before the date occurring five Business Days
after the date such payment, transfer, deposit, withdrawal or drawing or such
instruction or notice is required to be made or given, as the case may be, under
the terms of this Agreement; PROVIDED, HOWEVER, that any such failure caused by
a non- willful act of the Servicer shall not constitute a Servicer Default if
the Servicer promptly remedies such failure within five Business Days after
receiving notice of such failure or otherwise becoming aware of such failure;
(b) failure on the part of the Servicer duly to observe or
perform in any respect any other covenants or agreements of the Servicer set
forth in this Agree-
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ment, which has a material adverse effect on the Investor Certificateholders of
any Series and which continues unremedied for a period of 60 days after the date
on which written notice of such failure, requiring the same to be remedied,
shall have been given to the Servicer by the Trustee, or to the Servicer and the
Trustee by the Holders of Investor Certificates evidencing Undivided Interests
aggregating not less than 50% of the Invested Amount of any Series materially
adversely affected thereby and continues to materially adversely affect such
Investor Certificateholders for such period; or the Servicer shall delegate its
duties under this Agreement, except as permitted by Section 8.7;
(c) any representation, warranty or certification made by the
Servicer in this Agreement or in any certificate delivered pursuant to this
Agreement shall prove to have been incorrect when made, which has a material
adverse effect on the Investor Certificateholders of any Series and which
continues to be incorrect in any material respect for a period of 60 days after
the date on which written notice of such failure, requiring the same to be
remedied, shall have been given to the Servicer by the Trustee, or to the
Servicer and the Trustee by the Holders of Investor Certificates evidencing
Undivided Interests aggregating not less than 50% of the Invested Amount of any
Series materially adversely affected thereby and continues to materially
adversely affect such Investor Certificateholders for such period; or
(d) the Servicer shall consent to the appointment of a
bankruptcy trustee or receiver or liquidator in any bankruptcy proceeding or any
other insolvency, readjustment of debt, marshalling of assets and liabilities or
similar proceedings of or relating to the Servicer or of or relating to all or
substantially all of its property, or a decree or order of a court or agency or
supervisory authority having jurisdiction in the premises for the appointment of
a bankruptcy trustee or receiver or liquidator in any bankruptcy proceeding or
any other insolvency, readjustment of debt, marshalling of assets and
liabilities or similar proceedings, or for the winding-up or liquidation of its
affairs, shall have been entered against the Servicer, and such decree or order
shall have remained in force undischarged or unstayed for a period of 60 days;
or the Servicer shall admit in writing its inability to pay its debts generally
as they
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become due, file a petition to take advantage of any applicable insolvency or
reorganization statute, make any assignment for the benefit of its creditors or
voluntarily suspend payment of its obligations;
then, so long as such Servicer Default shall not have been remedied, either the
Trustee, or the Holders of Investor Certificates evidencing Undivided Interests
aggregating more than 50% of the Aggregate Invested Amount, by notice then given
in writing to the Servicer (and to the Trustee if given by the Investor
Certificateholders) (a "Termination Notice"), may terminate all of the rights
and obligations of the Servicer as Servicer under this Agreement. The Servicer
agrees that promptly after it receives such Termination Notice, the Servicer
will at its own expense deliver to the Trustee or to the bailee of the Trustee a
computer file or microfiche list containing a true and complete list of all
Accounts, identified by account number and setting forth the Outstanding Balance
of each Receivable as of the date of receipt of such Termination Notice. After
receipt by the Servicer of such Termination Notice, and on the date that a
Successor Servicer shall have been appointed by the Trustee pursuant to Section
10.2, all authority and power of the Servicer under this Agreement shall pass to
and be vested in a Successor Servicer; and, without limitation, the Trustee is
hereby authorized and empowered (upon the failure of the Servicer to cooperate)
to execute and deliver, on behalf of the Servicer, as attorney-in-fact or
otherwise, all documents and other instruments upon the failure of the Servicer
to execute or deliver such documents or instruments, and to do and accomplish
all other acts or things necessary or appropriate to effect the purposes of such
transfer of servicing rights and obligations. The Servicer agrees to cooperate
with the Trustee and such Successor Servicer in effecting the termination of the
responsibilities and rights of the Servicer to conduct servicing hereunder
including, without limitation, the transfer to such Successor Servicer of all
authority of the Servicer to service the Receivables provided for under this
Agreement, including, without limitation, all authority over all Collections
which shall on the date of transfer be held by the Servicer for deposit, or
which have been deposited by the Servicer, in the Collection Account, the Excess
Funding Account, the Interest Funding Account or the Principal Account, and any
Series Account, or which shall thereafter be
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received with respect to the Receivables. The Servicer shall promptly transfer
its electronic records or electronic copies thereof relating to the Receivables
to the Successor Servicer in such electronic form as the Successor Servicer may
reasonably request and shall promptly transfer to the Successor Servicer all
other records, correspondence and documents necessary for the continued
servicing of the Receivables in the manner and at such times as the Successor
Servicer shall reasonably request. To the extent that compliance with this
Section 10.1 shall require the Servicer to disclose to the Successor Servicer
information of any kind which the Servicer reasonably deems to be confidential,
the Successor Servicer shall be required to enter into such customary licensing
and confidentiality agreements as the Servicer shall deem necessary to protect
its interests. The Servicer shall, on the date of any servicing transfer,
transfer all of its rights and obligations under the Enhancement with respect to
any Series to the Successor Servicer. In connection with any service transfer,
all reasonable costs and expenses (including attorneys' fees) incurred in
connection with transferring the records, correspondence and other documents
with respect to the Receivables and the other Trust Property to the Successor
Servicer and amending this Agreement to reflect such succession as Successor
Servicer pursuant to this Section 10.1 and Section 10.2 shall be paid by the
Servicer (unless the Trustee is acting as the Servicer on a temporary basis, in
which case the original Servicer shall be responsible therefor) upon
presentation of reasonable documentation of such costs and expenses.
Notwithstanding the foregoing, a delay in or failure of
performance referred to in subsection 10.1(a) for a period of five Business Days
or under subsection 10.1(b) or (c) for a period of 60 Business Days, shall not
constitute a Servicer Default if such delay or failure could not be prevented by
the exercise of reasonable diligence by the Servicer and such delay or failure
was caused by an act of God or the public enemy, acts of declared or undeclared
war, public disorder, rebellion, riot or sabotage, epidemics, landslides,
lightning, fire, hurricanes, tornadoes, earthquakes, nuclear disasters or
meltdowns, floods, power outages, bank closings, communications outages,
computer failure or similar causes. The preceding sentence shall not relieve the
Servicer from using its best efforts to perform its obligations in a
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timely manner in accordance with the terms of this Agreement and the Servicer
shall provide the Trustee, any Enhancement Provider, the Transferor and the
Holders of Investor Certificates with an Officer's Certificate giving prompt
notice of such failure or delay by it, together with a description of the cause
of such failure or delay and its efforts so to perform its obligations.
Section 10.2 TRUSTEE TO ACT; APPOINTMENT OF SUCCESSOR.
(a) On and after the receipt by the Servicer of a Termination
Notice pursuant to Section 10.1, the Servicer shall continue to perform all
servicing functions under this Agreement until the date specified in the
Termination Notice or as otherwise specified by the Trustee in writing or, if no
such date is specified in such Termination Notice, or otherwise specified by the
Trustee, until a date mutually agreed upon by the Servicer and Trustee. The
Trustee shall notify each Rating Agency of such removal of the Servicer. The
Trustee shall, as promptly as possible after the giving of a Termination Notice,
appoint a successor servicer (the "Successor Servicer"), and such Successor
Servicer shall accept its appointment by a written assumption in a form
acceptable to the Trustee. If such Successor Servicer is unable to accept such
appointment, the Trustee may obtain bids from any potential successor servicer
(which may be in excess of the Servicing Fee specified in any Supplement). If
the Trustee is unable to obtain any bids from any potential successor servicer
and the Servicer delivers an Officer's Certificate to the effect that it cannot
in good faith cure the Servicer Default which gave rise to a transfer of
servicing, and if the Trustee is legally unable to act as Successor Servicer,
then the Trustee shall notify each Enhancement Provider of the proposed sale of
the Receivables and shall provide each such Enhancement Provider an opportunity
to bid on the Receivables and shall offer the Transferor the right of first
refusal to purchase the Receivables on terms equivalent to the best purchase
offer as determined by the Trustee, but in no event less than an amount equal to
the Aggregate Invested Amount on the date of such purchase PLUS all interest
accrued but unpaid on all of the outstanding Investor Certificates at the
applicable Certificate Rate through the date of such purchase; PROVIDED,
HOWEVER, that no such purchase by the Transferor shall occur un-
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less the Transferor shall deliver an Opinion of Counsel reasonably acceptable to
the Trustee that such purchase would not constitute a fraudulent conveyance of
the Transferor. The proceeds of such sale shall be deposited in the Distribution
Account or any Series Account, as provided in the related Supplement, for
distribution to the Investor Certificateholders of each outstanding Series
pursuant to Section 12.3 of the Agreement. In the event that a Successor
Servicer has not been appointed and has not accepted its appointment at the time
when the Servicer ceases to act as Servicer, the Trustee without further action
shall automatically be appointed the Successor Servicer (but shall have
continued authority, to appoint another Person as Successor Servicer). The
Trustee may delegate any of its servicing obligations to an affiliate or agent
of the Trustee in accordance with Article III hereof. Any such delegations shall
not relieve the Trustee of its liability and responsibility with respect to such
duties. Notwithstanding the above, the Trustee shall, if it is legally unable to
act, petition a court of competent jurisdiction to appoint any established
financial institution having, in the case of a Person that is subject to
risk-based capital adequacy requirements, risk-based capital of at least
$50,000,000 or, in the case of a Person that is not subject to risk-based
capital requirements, having a net worth of not less than $50,000,000 and whose
regular business includes the servicing of credit card receivables as the
Successor Servicer hereunder.
(b) Upon its appointment, the Successor Servicer shall be the
successor in all respects to the Servicer with respect to servicing functions
under this Agreement and shall be subject to all the responsibilities, duties
and liabilities relating thereto placed on the Servicer by the terms and
provisions hereof, and all references in this Agreement to the Servicer shall be
deemed to refer to the Successor Servicer. Any Successor Servicer, by its
acceptance of its appointment, will automatically agree to be bound by the terms
and provisions of each Enhancement.
(c) In connection with such appointment and assumption, the
Trustee shall be entitled to such compensation, or may make such arrangements
for the compensation of the Successor Servicer out of Collections, as it and
such Successor Servicer shall agree; PROVIDED, HOWEV-
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ER, that no such compensation shall be in excess of the Servicing Fee permitted
to the Servicer pursuant to Section 3.2. The Transferor agrees that if the
Servicer is terminated hereunder, it will agree to deposit a portion of the
Collections in respect of Finance Charge Receivables that it is entitled to
receive pursuant to Article IV to pay its ratable share of the compensation of
the Successor Servicer.
(d) All authority and power granted to the Successor Servicer
under this Agreement shall automatically cease and terminate upon termination of
the Trust pursuant to Section 12.1 and shall pass to and be vested in the
Transferor and, without limitation, the Transferor is hereby authorized and
empowered to execute and deliver, on behalf of the Successor Servicer, as
attorney-in-fact or otherwise, all documents and other instruments, and to do
and accomplish all other acts or things necessary or appropriate to effect the
purposes of such transfer of servicing rights. The Successor Servicer agrees to
cooperate with the Transferor in effecting the termination of the
responsibilities and rights of the Successor Servicer to conduct servicing on
the Receivables. The Successor Servicer shall transfer its electronic records
relating to the Receivables to the Transferor in such electronic form as the
Transferor may reasonably request and shall transfer all other records,
correspondence and documents to the Transferor in the manner and at such times
as the Transferor shall reasonably request. To the extent that compliance with
this Section 10.2 shall require the Successor Servicer to disclose to the
Transferor information of any kind which the Successor Servicer deems to be
confidential, the Transferor shall be required to enter into such customary
licensing and confidentiality agreements as the Successor Servicer shall deem
necessary to protect its interests.
Section 10.3 NOTIFICATION TO CERTIFICATEHOLDERS. Within two
Business Days after the Servicer becomes aware of any Servicer Default, the
Servicer shall give prompt written notice thereof to the Trustee and any
Enhancement Provider and, upon receipt of such written notice, the Trustee shall
give notice to the Investor Certificateholders at their respective addresses
appearing in the Certificate Register. Upon any termination or appointment of a
Successor Servicer pursuant to this Article X, the Trustee shall give prompt
written notice
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thereof to Investor Certificateholders at their respective addresses appearing
in the Certificate Register.
Section 10.4 WAIVER OF PAST DEFAULTS. The Holders of Investor
Certificates evidencing Undivided Interests aggregating not less than 66-2/3% of
the Invested Amount of each Series materially adversely affected by any default
by the Servicer or Transferor may, on behalf of all Certificateholders of such
Series, waive any default by the Servicer or Transferor in the performance of
their respective obligations hereunder and its consequences, except a default in
the failure to make any required deposits or payments of interest or principal
relating to such Series pursuant to Article IV, which default does not result
from the failure of the Paying Agent to perform its obligations to make any
required deposits or payments of interest and principal in accordance with
Article IV. Upon any such waiver of a past default, such default shall cease to
exist, and any default arising therefrom shall be deemed to have been remedied
for every purpose of this Agreement. No such waiver shall extend to any
subsequent or other default or impair any right consequent thereon except to the
extent expressly so waived.
[End of Article X]
ARTICLE XI
THE TRUSTEE
Section 11.1 DUTIES OF TRUSTEE.
(a) The Trustee, prior to the occurrence of any Servicer
Default of which a Responsible Officer of the Trustee has knowledge and after
the curing of all Servicer Defaults which may have occurred, undertakes to
perform such duties and only such duties as are specifically set forth in this
Agreement, and no implied covenants or duties shall be read into this Agreement
against the Trustee. If a Responsible Officer has received written notice that a
Servicer Default has occurred (and such Servicer Default has not been cured or
waived), the Trustee shall exercise such of the rights and powers vested in it
by this Agreement, and use the same degree of care and skill in its exercise, as
a prudent person
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would exercise or use under the circumstances in the conduct of such person's
own affairs; PROVIDED, HOWEVER, that if the Trustee shall assume the duties of
the Servicer pursuant to Section 8.5 or 10.2, the Trustee in performing such
duties shall use the degree of skill and attention customarily exercised by a
servicer with respect to comparable receivables that it services for itself or
others.
(b) The Trustee, upon receipt of all resolutions,
certificates, statements, opinions, reports, documents, orders or other
instruments furnished to the Trustee which are specifically required to be
furnished pursuant to any provision of this Agreement, shall examine them to
determine whether they substantially conform to the requirements of this
Agreement. The Trustee shall retain all such items for at least one year after
receipt and shall make such items available for inspection by any Investor
Certificateholder at the Corporate Trust Office, such inspection to be made
during regular business hours and upon reasonable prior notice to the Trustee.
(c) Subject to subsection 11.1(a), no provision of this
Agreement shall be construed to relieve the Trustee from liability for its own
negligent action, its own negligent failure to act or its own misconduct;
PROVIDED, HOWEVER, that:
(i) the Trustee shall not be personally liable for an
error of judgment made in good faith by a Responsible Officer or
Responsible Officers of the Trustee, unless it shall be proved that the
Trustee was negligent in ascertaining the pertinent facts;
(ii) the Trustee shall not be personally liable with
respect to any action taken, suffered or omitted to be taken by it in
good faith in accordance with the direction of the Holders of Investor
Certificates evidencing Undivided Interests aggregating more than 50%
of the Invested Amount of any Series relating to the time, method and
place of conducting any proceeding for any remedy available to the
Trustee with respect to such Series, or exercising any trust or power
conferred upon the Trustee with respect to such Series, under this
Agreement; and
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(iii) the Trustee shall not be charged with knowledge
of any failure by the Servicer referred to in clauses (a) and (b) of
Section 10.1 or of any breach by the Servicer contemplated by clause
(c) of Section 10.1 or any Pay Out Event unless a Responsible Officer
of the Trustee obtains actual knowledge of such failure, breach or Pay
Out Event or the Trustee receives written notice of such failure,
breach or Pay Out Event from the Servicer or any Holders of Investor
Certificates evidencing Undivided Interests aggregating not less than
10% of the Invested Amount of any Series adversely affected thereby.
(d) The Trustee shall not be required to expend or risk its
own funds or otherwise incur financial liability in the performance of any of
its duties hereunder, or in the exercise of any of its rights or powers, if
there is reasonable ground for believing that the repayment of such funds or
adequate indemnity against such risk or liability is not reasonably assured to
it, and none of the provisions contained in this Agreement shall in any event
require the Trustee to perform, or be responsible for the manner of performance
of, any of the obligations of the Servicer under this Agreement except during
such time, if any, as the Trustee shall be the successor to, and be vested with
the rights, duties, powers and privileges of, the Servicer in accordance with
the terms of this Agreement.
(e) Except for actions expressly authorized by this Agreement,
the Trustee shall take no action reasonably likely to impair the interests of
the Trust in any Receivable now existing or hereafter created or to impair the
value of any Receivable now existing or hereafter created.
(f) Except as provided in this Agreement, the Trustee shall
have no power to vary the corpus of the Trust.
(g) If to the knowledge of a Responsible Officer of the
Trustee, the Paying Agent or the Transfer Agent and Registrar shall fail to
perform any obligation, duty or agreement in the manner or on the day required
to be performed by the Paying Agent or the Transfer Agent and Registrar, as the
case may be, under this Agreement,
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the Trustee shall be obligated promptly upon its obtaining knowledge thereof by
a Responsible Officer of the Trustee to perform such obligation, duty or
agreement in the manner so required.
(h) If the Transferor has agreed to transfer any of its credit
card receivables (other than the Receivables) to another Person, upon the
written request of the Transferor, the Trustee on behalf of the Trust will enter
into such intercreditor agreements with the transferee of such receivables as
are customary and necessary to identify separately the rights, if any, of the
Trust and such other Person in the Transferor's credit card receivables;
PROVIDED, HOWEVER, that the Trust shall not be required to enter into any
intercreditor agreement which could adversely affect the interests of the
Certificateholders or the Trustee and, upon the request of the Trustee, the
Transferor will deliver an Opinion of Counsel on any matters relating to such
intercreditor agreement, reasonably requested by the Trustee.
Section 11.2 CERTAIN MATTERS AFFECTING THE TRUSTEE. Except as
otherwise provided in Section 11.1:
(a) the Trustee may rely on and shall be protected in acting
on, or in refraining from acting in accordance with, any assignment of
Receivables in Supplemental Accounts, the initial report, the Daily Report, the
Settlement Statement, the annual Servicer's certificate, the monthly payment
instructions and notification to the Trustee, the monthly Certificateholder's
statement, any resolution, Officer's Certificate, certificate of auditors or any
other certificate, statement, instrument, opinion, report, notice, request,
consent, order, appraisal, bond or other paper or document believed by it to be
genuine and to have been signed or presented to it pursuant to this Agreement by
the proper party or parties;
(b) the Trustee may consult with counsel, and any Opinion of
Counsel shall be full and complete authorization and protection in respect of
any action taken or suffered or omitted by it hereunder in good faith and in
accordance with such Opinion of Counsel;
(c) the Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by
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this Agreement or any Enhancement, or to institute, conduct or defend any
litigation hereunder or in relation hereto, at the request, order or direction
of any of the Certificateholders or any Enhancement Provider, pursuant to the
provisions of this Agreement, unless such Certificateholders or Enhancement
Provider shall have offered to the Trustee reasonable security or indemnity
against the costs, expenses and liabilities which may be incurred therein or
thereby; nothing contained herein shall, however, relieve the Trustee of the
obligations, upon the occurrence of any Servicer Default (which has not been
cured or waived) of which a Responsible Officer of the Trustee has knowledge, to
exercise such of the rights and powers vested in it by this Agreement and any
Enhancement, and to use the same degree of care and skill in its exercise as a
prudent person would exercise or use under the circumstances in the conduct of
his own affairs;
(d) the Trustee shall not be personally liable for any action
taken, suffered or omitted by it in good faith and believed by it to be
authorized or within the discretion or rights or powers conferred upon it by
this Agreement;
(e) the Trustee shall not be bound to make any investigation
into the facts of matters stated in, or to verify the accuracy of, any
assignment of Receivables in Supplemental Accounts, the initial report, the
Daily Report, the Settlement Statement, the annual Servicer's certificate, the
monthly payment instructions and notification to the Trustee, the monthly
Certificateholders statement, any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, approval, bond or
other paper or document, unless requested in writing so to do by Holders of
Investor Certificates evidencing Undivided Interests aggregating more than 50%
of the Invested Amount of any Series which could be adversely affected if the
Trustee does not perform such acts;
(f) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through
agents or attorneys or a custodian, and the Trustee shall not be responsible for
any misconduct or negligence on the part of any such agent, attorney or
custodian appointed with due care by it hereunder;
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(g) except as may be required by subsection 11.1(a), the
Trustee shall not be required to make any initial or periodic examination of any
documents or records related to the Receivables or the Accounts for the purpose
of establishing the presence or absence of defects, the compliance by the
Transferor with its representations and warranties or for any other purpose;
(h) whenever in the administration of this Agreement the
Trustee shall deem it desirable that a matter be proved or established prior to
taking, suffering or omitting any action hereunder, the Trustee (unless other
evidence be herein specifically prescribed) may, in the absence of bad faith on
its part, rely upon an Officer's Certificate; and
(i) the right of the Trustee to perform any discretionary act
enumerated in this Agreement or any Supplement shall not be construed as a duty,
and the Trustee shall not be answerable for performance of any such act.
Section 11.3 TRUSTEE NOT LIABLE FOR RECITALS IN CERTIFICATES.
The Trustee assumes no responsibility for the correctness of the recitals
contained herein and in the Certificates (other than the certificate of
authentication on the Certificates). Except as set forth in Section 11.14, the
Trustee makes no representations as to the validity or sufficiency of this
Agreement or of the Certificates (other than the certificate of authentication
on the Certificates) or of any Receivable or related document. The Trustee shall
not be accountable for the use or application by the Transferor of any of the
Certificates or of the proceeds of such Certificates, or for the use or
application of any funds paid to the Transferor in respect of the Receivables or
deposited in or withdrawn from the Collection Account, the Excess Funding
Account, the Principal Account or the Interest Funding Account, or any Series
Account or other accounts now or hereafter established to effectuate the
transactions contemplated herein and in accordance with the terms hereof. The
Trustee shall have no responsibility for filing any financing or continuation
statement in any public office at any time or to otherwise perfect or maintain
the perfection of any security interest or Lien granted to it hereunder (unless
the Trustee shall have become the Successor Servicer) or to prepare or file any
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Securities and Exchange Commission filing for the Trust or to record this
Agreement or any Supplement.
Section 11.4 THE SERVICER TO PAY TRUSTEE'S FEES AND EXPENSES.
The Servicer covenants and agrees to pay to the Trustee from time to time, and
the Trustee shall be entitled to receive, reasonable compensation (which shall
not be limited by any provision of law in regard to the compensation of a
trustee of an express trust) for all services rendered by the Trustee in the
execution of the trust hereby created and in the exercise and performance of any
of the powers and duties hereunder of the Trustee, and, subject to Section 8.4,
the Servicer will pay or reimburse the Trustee (without reimbursement from any
Investor Account, any Series Account or otherwise) upon its request for all
reasonable expenses, disbursements and advances incurred or made by the Trustee
in accordance with any of the provisions of this Agreement (including the
reasonable fees and expenses of its agents and counsel) except any such expense,
disbursement or advance as may arise from its own negligence or bad faith and
except as provided in the following sentence. If the Trustee is appointed
Successor Servicer pursuant to Section 10.2, the provisions of this Section 11.4
shall not apply to expenses, disbursements and advances made or incurred by the
Trustee in its capacity as Successor Servicer (which shall be covered out of the
Servicing Fee).
The obligations of the Servicer under this Section 11.4 shall
survive the termination of the Trust and the resignation or removal of the
Trustee.
Section 11.5 ELIGIBILITY REQUIREMENTS FOR TRUSTEE. The
Trustee hereunder shall at all times be (a) a corporation organized and doing
business under the laws of the United States of America or any state thereof
authorized under such laws to exercise corporate trust powers, having a
long-term unsecured debt rating of at least Baa3 by Moody's and BBB- by Standard
& Poor's having, in the case of a Person that is subject to risk-based capital
adequacy requirements, risk-based capital of at least $50,000,000 or, in the
case of a Person that is not subject to risk-based capital adequacy
requirements, having a combined capital and surplus of at least $50,000,000 and
subject to supervision or examination by federal or state authority and (b) not
be a Related
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Person. If such corporation publishes reports of condition at least annually,
pursuant to law or to the requirements of the aforesaid supervising or examining
authority, then for the purpose of this Section 11.5, the combined capital and
surplus of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published. In
case at any time the Trustee shall cease to be eligible in accordance with the
provisions of this Section 11.5, the Trustee shall resign immediately in the
manner and with the effect specified in Section 11.6.
Section 11.6 RESIGNATION OR REMOVAL OF TRUSTEE.
(a) The Trustee may at any time resign and be discharged from
the Trust hereby created by giving written notice thereof to the Servicer. Upon
receiving such notice of resignation, the Servicer shall promptly appoint a
successor trustee by written instrument, in duplicate, one copy of which
instrument shall be delivered to the resigning Trustee and one copy to the
successor trustee. If no successor trustee shall have been so appointed and have
accepted such appointment within 30 days after the giving of such notice of
resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor trustee.
(b) If at any time the Trustee shall cease to be eligible in
accordance with the provisions of Section 11.5 hereof and shall fail to resign
after written request therefor by the Transferor, or if at any time the Trustee
shall be legally unable to act, or shall be adjudged a bankrupt or insolvent, or
a receiver of the Trustee or of its property shall be appointed, or any public
officer shall take charge or control of the Trustee or of its property or
affairs for the purpose of rehabilitation, conservation or liquidation, then the
Transferor may, but shall not be required to, remove the Trustee and promptly
appoint a successor trustee by written instrument, in duplicate, one copy of
which instrument shall be delivered to the Trustee so removed and one copy to
the successor trustee.
(c) If (i) the Trustee shall fail to perform any of its
obligations hereunder, (ii) a Certificateholder shall have delivered written
notice of such failure to
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the Trustee, and (iii) the Trustee shall not have corrected such failure for 60
days thereafter, then the Holders of Investor Certificates representing more
than 50% of the Invested Amount shall have the right to remove the Trustee and
(with the consent of the Transferor, which shall not be unreasonably withheld)
promptly appoint a successor trustee by written instrument, in duplicate, one
copy of which instrument shall be delivered to the Trustee so removed and one
copy to the successor trustee.
(d) Any resignation or removal of the Trustee and appointment
of a successor trustee pursuant to any of the provisions of this Section 11.6
shall not become effective until acceptance of appointment by the successor
trustee as provided in Section 11.7 hereof and any liability of the Trustee
arising hereunder shall survive such appointment of a successor trustee. Notice
of any resignation or removal of the Trustee and appointment of a successor
trustee shall be provided promptly to each Rating Agency by the Servicer.
Section 11.7 SUCCESSOR TRUSTEE.
(a) Any successor trustee appointed as provided in Section
11.6 hereof shall execute, acknowledge and deliver to the Transferor and to its
predecessor Trustee an instrument accepting such appointment hereunder, and
thereupon the resignation or removal of the predecessor Trustee shall become
effective and such successor trustee, without any further act, deed or
conveyance, shall become fully vested with all the rights, powers, duties and
obligations of its predecessor hereunder, with the like effect as if originally
named as Trustee herein. The predecessor Trustee shall deliver to the successor
trustee all documents and statements held by it hereunder, and the Transferor
and the predecessor Trustee shall execute and deliver such instruments and do
such other things as may reasonably be required for fully and certainly vesting
and confirming in the successor trustee all such rights, powers, duties and
obligations.
(b) No successor trustee shall accept appointment as provided
in this Section 11.7 unless at the time of such acceptance such successor
trustee shall be eligible under the provisions of Section 11.5 hereof.
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(c) Upon acceptance of appointment by a successor trustee as
provided in this Section 11.7, such successor trustee shall mail notice of such
succession hereunder to all Certificateholders at their addresses as shown in
the Certificate Register.
Section 11.8 MERGER OR CONSOLIDATION OF TRUSTEE. Any Person
into which the Trustee may be merged or converted or with which it may be
consolidated, or any Person resulting from any merger, conversion or
consolidation to which the Trustee shall be a party, or any Person succeeding to
all or substantially all of the corporate trust business of the Trustee, shall
be the successor of the Trustee hereunder, provided such corporation shall be
eligible under the provisions of Section 11.5 hereof, without the execution or
filing of any paper or any further act on the part of any of the parties hereto,
anything herein to the contrary notwithstanding.
Section 11.9 APPOINTMENT OF CO-TRUSTEE OR SEPARATE TRUSTEE.
(a) Notwithstanding any other provisions of this Agreement, at
any time, for the purpose of meeting any legal requirements of any jurisdiction
in which any part of the Trust may at the time be located, the Trustee shall
have the power and may execute and deliver all instruments to appoint one or
more Persons to act as a co-trustee or co-trustees, or separate trustee or
separate trustees, of all or any part of the Trust, and to vest in such Person
or Persons, in such capacity and for the benefit of the Certificateholders, such
title to the Trust, or any part thereof, and, subject to the other provisions of
this Section 11.9, such powers, duties, obligations, rights and trusts as the
Trustee may consider necessary or desirable. No co-trustee or separate trustee
hereunder shall be required to meet the terms of eligibility as a successor
trustee under Section 11.5 and no notice to Certificateholders of the
appointment of any co-trustee or separate trustee shall be required under
Section 11.7 hereof.
(b) Every separate trustee and co-trustee shall, to the extent
permitted by law, be appointed and act subject to the following provisions and
conditions:
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(i) all rights, powers, duties and obligations
conferred or imposed upon the Trustee shall be conferred or imposed
upon and exercised or performed by the Trustee and such separate
trustee or co-trustee jointly (it being understood that such separate
trustee or co-trustee is not authorized to act separately without the
Trustee joining in such act), except to the extent that under any laws
of any jurisdiction in which any particular act or acts are to be
performed (whether as Trustee hereunder or as successor to the Servicer
hereunder), the Trustee shall be incompetent or unqualified to perform
such act or acts, in which event such rights, powers, duties and
obligations (including the holding of title to the Trust or any portion
thereof in any such jurisdiction) shall be exercised and performed
singly by such separate trustee or co-trustee, but solely at the
direction of the Trustee;
(ii) no trustee hereunder shall be personally liable
by reason of any act or omission of any other trustee hereunder; and
(iii) the Trustee may at any time accept the
resignation of or remove any separate trustee or co-trustee.
(c) Any notice, request or other writing given to the Trustee
shall be deemed to have been given to each of the then separate trustees and
co-trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Agreement and
the conditions of this Article XI. Each separate trustee and co-trustee, upon
its acceptance of the trusts conferred, shall be vested with the estates or
property specified in its instrument of appointment, either jointly with the
Trustee or separately, as may be provided therein, subject to all the provisions
of this Agreement, specifically including every provision of this Agreement
relating to the conduct of, affecting the liability of, or affording protection
to, the Trustee. Every such instrument shall be filed with the Trustee and a
copy thereof given to the Servicer.
(d) Any separate trustee or co-trustee may at any time
constitute the Trustee as its agent or attorney-in-fact with full power and
authority, to the extent not
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prohibited by law, to do any lawful act under or in respect to this Agreement on
its behalf and in its name. If any separate trustee or co-trustee shall die,
become incapable of acting, resign or be removed, all of its estates,
properties, rights, remedies and trusts shall vest in and be exercised by the
Trustee, to the extent permitted by law, without the appointment of a new or
successor trustee.
Section 11.10 TAX RETURNS. Consistent with Section 3.7, the
Trustee shall not file any Federal tax returns on behalf of the Trust; PROVIDED,
HOWEVER, that if a Class of Certificates is issued that would be characterized
as an equity interest in a partnership for U.S. federal income tax purposes,
partnership information returns shall be prepared and signed by the Transferor,
as general partner. In the event the Trust shall be required to file tax
returns, the Servicer shall at its expense prepare or cause to be prepared any
tax returns required to be filed by the Trust and, to the extent possible, shall
remit such returns to the Trustee for signature at least five days before such
returns are due to be filed. The Trustee is hereby authorized to sign any such
return on behalf of the Trust. The Servicer shall prepare or shall cause to be
prepared all tax information required by law to be distributed to
Certificateholders and shall deliver such information to the Trustee at least
five days prior to the date it is required by law to be distributed to
Certificateholders. The Trustee, upon request, will furnish the Servicer with
all such information known to the Trustee as may be reasonably required in
connection with the preparation of all tax returns of the Trust and shall, upon
request, execute such return. In no event shall the Trustee or the Servicer be
liable for any liabilities, costs or expenses of the Trust, the Investor
Certificateholders or the Certificate Owners arising under any tax law,
including without limitation federal, state, local or foreign income or excise
taxes or any other tax imposed on or measured by income (or any interest or
penalty with respect thereto or arising from a failure to comply therewith).
Section 11.11 TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION
OF CERTIFICATES. All rights of action end claims under this Agreement or any
Series of Certificates may be prosecuted and enforced by the Trustee without the
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possession of any of the Certificates or the production thereof in any
proceeding relating thereto, and any such proceeding instituted by the Trustee
shall be brought in its own name as trustee. Any recovery of judgment shall,
after provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, be for the
ratable benefit of any Series of Certificateholders in respect of which such
judgment has been obtained.
Section 11.12 SUITS FOR ENFORCEMENT. If a Servicer Default of
which a Responsible Officer of the Trustee has knowledge shall occur and be
continuing, the Trustee, in its discretion may, subject to the provisions of
Section 10.1, proceed to protect and enforce its rights and the rights of any
Series of Certificateholders under this Agreement by a suit, action or
proceeding in equity or at law or otherwise, whether for the specific
performance of any covenant or agreement contained in this Agreement or in aid
of the execution of any power granted in this Agreement or for the enforcement
of any other legal, equitable or other remedy as the Trustee, being advised by
counsel, shall deem most effectual to protect and enforce any of the rights of
the Trustee or any Series of Certificateholders.
Section 11.13 RIGHTS OF CERTIFICATEHOLDERS TO DIRECT TRUSTEE.
Holders of Investor Certificates evidencing Undivided Interests aggregating more
than 50% of the Aggregate Invested Amount (or, with respect to any remedy, trust
or power that does not relate to all Series, 50% of the aggregate Invested
Amount of the Investor Certificates of all Series to which such remedy, trust or
power relates) shall have the right to direct the time, method, and place of
conducting any proceeding for any remedy available to the Trustee, or exercising
any trust or power conferred on the Trustee; PROVIDED, HOWEVER, that Holders of
Investor Certificates aggregating more than 50% of the aggregate Invested Amount
of any Class may direct the Trustee to exercise its rights under Section 8.6;
PROVIDED, FURTHER, that, subject to Section 11.1, the Trustee shall have the
right to decline to follow any such direction if the Trustee being advised by
counsel determines that the action so directed may not lawfully be taken, or if
the Trustee in good faith shall, by a Responsible Officer or Responsible
Officers of the Trustee, determine that the proceedings so directed would
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be illegal or involve it in personal liability or be unduly prejudicial to the
rights of Certificateholders not parties to such direction; and PROVIDED,
FURTHER that nothing in this Agreement shall impair the right of the Trustee to
take any action deemed proper by the Trustee and which is not inconsistent with
such direction of such Holders of Investor Certificates.
Section 11.14 REPRESENTATIONS AND WARRANTIES OF TRUSTEE. The
Trustee represents and warrants that:
(i) the Trustee is a New York banking corporation
organized, existing and authorized to engage in the business of banking
under the laws of the State of New York;
(ii) the Trustee is a Person that satisfies the
eligibility requirements of Section 11.5;
(iii) the Trustee has full power, authority and right
to execute, deliver and perform this Agreement, and has taken all
necessary action to authorize the execution, delivery and performance
by it of this Agreement; and
(iv) this Agreement has been duly executed and
delivered by the Trustee and constitutes a legal, valid and binding
obligation of the Trustee, enforceable against the Trustee in
accordance with its terms, except as such enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws now or hereafter in effect affecting the enforcement
of creditors' rights in general and except as such enforceability may
be limited by general principles of equity (whether considered in a
suit at law or in equity).
Section 11.15 MAINTENANCE OF OFFICE OR AGENCY. The Trustee
will maintain at its expense an office or offices, or agency or agencies, where
notices and demands to or upon the Trustee in respect of the Certificates and
this Agreement may be served. The Trustee initially appoints its Corporate Trust
Office as its office for such purposes. The Trustee will give prompt written
notice to the Servicer and to Certificateholders (or in the case of Holders of
Bearer Certificates, in the manner
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provided for in the related Supplement) of any change in the location of the
Certificate Register or any such office or agency.
Section 11.16 TRUSTEE MAY OWN CERTIFICATES. The Trustee in
its individual or any other capacity may become the owner or pledgee of Investor
Certificates and may deal with the Transferor, the Servicer or any Enhancement
Provider with the same rights as it would have if it were not the Trustee. The
Trustee in its capacity as Trustee shall exercise its duties and
responsibilities hereunder independent of and without reference to its
investment, if any, in Investor Certificates.
[End of Article XI]
ARTICLE XII
TERMINATION
Section 12.1 TERMINATION OF TRUST.
(a) The respective obligations and responsibilities of the
Transferor, the Servicer and the Trustee created hereby (other than the
obligation of the Trustee to make payments to Certificate holders as hereafter
set forth) shall terminate, except with respect to the duties described in
Section 8.4 and 11.5 and subsection 2.4(c) and 12.3(b), on the Trust Termination
Date; PROVIDED, HOWEVER, that the Trust shall not terminate on the date
specified in clause (i) of the definition of "Trust Termination Date" if each of
the Servicer and the Holder of the Exchangeable Transferor Certificate notify
the Trustee in writing, not later than five Business Days preceding such date,
that they desire that the Trust not terminate on such date, which notice (such
notice, a "Trust Extension") shall specify the date on which the Trust shall
terminate (such date, the "Extended Trust Termination Date"); PROVIDED, HOWEVER,
that the Extended Trust Termination Date shall be not later than the expiration
of 21 years from the death of the last survivor of the descendants of Ronald W.
Tysoe, living on the date of this Agreement. The Servicer and the Holder of the
Exchangeable Transferor Certificate may, on any date following the Trust
Extension, so long as no Series of Cert-
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ificates is outstanding, deliver a notice in writing to the Trustee changing the
Extended Trust Termination Date.
(b) In the event that (i) the Trust has not terminated by the
last Distribution Date occurring in the second month preceding the Trust
Termination Date, and (ii) the Invested Amount of any Series, exclusive of any
Transferor Retained Class (after giving effect to all transfers, withdrawals,
deposits and drawings to occur on such date and the payment of principal on any
Series of Certificates to be made on the related Distribution Date during such
month pursuant to Article IV) would be greater than zero, the Servicer shall
sell within 30 days after such Transfer Date an amount of Receivables up to the
remaining Invested Amount if it can do so in a commercially reasonable manner.
The Servicer shall notify each Enhancement Provider of the proposed sale of the
Receivables and shall provide each Enhancement Provider an opportunity to bid on
the Receivables. The Transferor shall have the right of first refusal to
purchase the Receivables on terms equivalent to the best purchase offer. The
proceeds of any such sale shall be treated as Collections on the Receivables and
shall be allocated and deposited in accordance with Article IV; PROVIDED,
HOWEVER, that the Servicer shall determine conclusively in its sole discretion
the amount of such proceeds which are allocable to Finance Charge Collections
and the amount of such proceeds which are allocable to Collections of Principal
Receivables. During such thirty-day period, the Servicer shall continue to
collect payments on the Receivables and allocate and deposit such payments in
accordance with the provisions of Article IV.
(c) In the event that the Invested Amount with respect to any
Series is greater than zero on its Series Termination Date or such earlier date
as is specified in the related Supplement (after giving effect to deposits and
distributions otherwise to be made on such date), the Trustee will request the
Servicer to sell, and the Servicer will sell or cause to be sold on such Series
Termination Date, in accordance with the procedures and subject to the
conditions described in such Supplement, Principal Receivables and the related
Finance Charge Receivables (or, if an Opinion of Counsel that such sale will not
have a material adverse effect on the characterization of the Certificates for
U.S. federal income tax purposes is obtained, interests therein) in an amount up
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to 110% of the Invested Amount with respect to such Series on such date (after
giving effect to such deposits and distributions; PROVIDED, HOWEVER, that in no
event shall such amount exceed an amount of Principal Receivables (and all
associated Finance Charge Receivables) equal to the sum of (i) the product of
(A) the Transferor's Percentage, (B) the aggregate outstanding Principal
Receivables, and (C) a fraction the numerator of which is the related Investor
Percentage of Collections of Finance Charge Receivables and the denominator of
which is the sum of all Investor Percentages with respect to Collections of
Finance Charge Receivables of all Series outstanding and (ii) the Invested
Amount of such Series). The proceeds from any such sale shall be allocated and
distributed in accordance with the terms of the applicable Supplement.
Section 12.2 OPTIONAL TERMINATION. (a) If so provided in any
Supplement, the Transferor may, but shall not be obligated to, cause a final
distribution to be made in respect of the related Series of Certificates on a
Distribution Date specified in such Supplement by depositing into the
Distribution Account or the applicable Series Account, not later than the
Transfer Date preceding such Distribution Date, for application in accordance
with Section 12.3, the amount specified in such Supplement.
(b) The amount deposited pursuant to subsection 12.2(a) shall
be paid to the Investor Certificateholders of the related Series pursuant to
Section 12.3 on the related Distribution Date following the date of such
deposit. All Certificates of a Series with respect to which a final distribution
has been made pursuant to subsection 12.2(a) shall be delivered by the Holder
to, and be canceled by, the Transfer Agent and Registrar and be disposed of in a
manner satisfactory to the Trustee and the Transferor. The Invested Amount of
each Series with respect to which a final distribution has been made pursuant to
subsection 12.2(a) shall, for the purposes of the definition of "Transferor
Amount," be deemed to be equal to zero on the Distribution Date following the
making of the deposit, and the Transferor Amount shall thereupon be deemed to
have been increased by the Invested Amount of such Series.
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Section 12.3 FINAL PAYMENT WITH RESPECT TO ANY SERIES.
(a) Written notice of any termination, specifying the
Distribution Date upon which the Investor Certificateholders of any Series may
surrender their Certificates for payment of the final distribution with respect
to such Series and cancellation, shall be given (subject to at least four
Business Days' prior notice from the Servicer to the Trustee) by the Trustee to
Investor Certificateholders of such Series mailed not later than the fifth day
of the month of such final distribution (or in the manner provided by the
Supplement relating to such Series) specifying (i) the Distribution Date (which
shall be the Distribution Date in the month (x) in which the deposit is made
pursuant to subsection 2.4(d), 9.2(a), 10.2(a), or 12.2(a) of the Agreement or
such other section as may be specified in the related Supplement, or (y) in
which the related Series Termination Date occurs) upon which final payment of
such Investor Certificates will be made upon presentation and surrender of such
Investor Certificates at the office or offices therein designated (which, in the
case of Bearer Certificates, shall be outside the United States), (ii) the
amount of any such final payment and (iii) that the Record Date otherwise
applicable to such Distribution Date is not applicable, payments being made only
upon presentation and surrender of the Investor Certificates at the office or
offices therein specified. The Servicer's notice to the Trustee in accordance
with the preceding sentence shall be accompanied by an Officers' Certificate
setting forth the information specified in Article V of this Agreement covering
the period during the then current calendar year through the date of such notice
and setting forth the date of such final distribution. The Trustee shall give
such notice to the Transfer Agent and Registrar and the Paying Agent at the time
such notice is given to such Investor Certificateholders.
(b) Notwithstanding the termination of the Trust pursuant to
subsection 12.1(a) or the occurrence of the Series Termination Date with respect
to any Series, all funds then on deposit in the Excess Funding Account, the
Interest Funding Account, the Principal Account, the Distribution Account or any
Series Account applicable to the related Series shall continue to be held in
trust for the benefit of the Certificateholders of the related
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Series and the Paying Agent or the Trustee shall pay such funds to the
Certificateholders of the related Series upon surrender of their Certificates
(which surrenders and payments, in the case of Bearer Certificates, shall be
made only outside the United States). In the event that all of the Investor
Certificateholders of any Series shall not surrender their Certificates for
cancellation within six months after the date specified in the above-mentioned
written notice, the Trustee shall give a second written notice (or, in the case
of Bearer Certificates, publication notice) to the remaining Investor
Certificateholders of such Series upon receipt of the appropriate records from
the Transfer Agent and Registrar to surrender their Certificates for
cancellation and receive the final distribution with respect thereto. If within
one and one half years after the second notice with respect to a Series, all the
Investor Certificates of such Series shall not have been surrendered for
cancellation, the Trustee may take appropriate steps or may appoint an agent to
take appropriate steps, to contact the remaining Investor Certificateholders of
such Series concerning surrender of their Certificates, and the cost thereof
shall be paid out of the funds in the Distribution Account or any Series Account
held for the benefit of such Investor Certificateholders. The Trustee and the
Paying Agent shall pay to the Transferor upon request any monies held by them
for the payment of principal or interest which remains unclaimed for two years.
After payment to the Transferor, Investor Certificateholders entitled to the
money must look to the Transferor for payment as general creditors unless an
applicable abandoned property law designates another Person.
(c) All Certificates surrendered for payment of the final
distribution with respect to such Certificates and cancellation shall be
canceled by the Transfer Agent and Registrar and be disposed of in a manner
satisfactory to the Trustee and the Transferor.
Section 12.4 TERMINATION RIGHTS OF HOLDER OF EXCHANGEABLE
TRANSFEROR CERTIFICATE. Upon the termination of the Trust pursuant to Section
12.1, and after payment of all amounts due hereunder on or prior to such
termination and the surrender of the Exchangeable Transferor Certificate, the
Trustee shall execute a written reconveyance substantially in the form of
Exhibit H pursuant to which it shall reconvey to the Holder of the
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Exchangeable Transferor Certificate (without recourse, representation or
warranty) all right, title and interest of the Trust in the Receivables, whether
then existing or thereafter created, all moneys due or to become due with
respect thereto (including all accrued interest theretofore posted as Finance
Charge Receivables) allocable to the Trust pursuant to any Supplement, except
for amounts held by the Trustee pursuant to subsection 12.3(b). The Trustee
shall execute and deliver such instruments of transfer and assignment, in each
case prepared by the Transferor and without recourse, representation or warranty
(other than a warranty that such property is conveyed free and clear of any Lien
of any Person claiming by or through the Trustee), as shall be reasonably
requested by the Holder of the Exchangeable Transferor Certificate to vest in
such Holder all right, title and interest which the Trust had in the Receivables
and other Trust Property.
[End of Article XII]
ARTICLE XIII
MISCELLANEOUS PROVISIONS
Section 13.1 AMENDMENT.
(a) This Agreement (including any Supplement) may be amended
from time to time by the Servicer, the Transferor and the Trustee, without the
consent of any of the Certificateholders, (i) to cure any ambiguity, to revise
any exhibits or Schedules (other than Schedule 1), to correct or supplement any
provisions herein or thereon which may be inconsistent with any other provisions
herein or thereon or (ii) to add any other provisions with respect to matters or
questions raised under this Agreement which shall not be inconsistent with the
provisions of this Agreement; PROVIDED, HOWEVER, that such action shall not, as
evidenced by an Opinion of Counsel, adversely affect in any material respect the
interests of any of the Investor Certificateholders. Additionally, this
Agreement may be amended from time to time by the Servicer, the Transferor and
the Trustee, without the consent of any of the Certificateholders, to add to or
change any of the provisions of this Agreement (i) to provide that Bearer
Certificates may be registrable as to
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principal, to change or eliminate any restrictions on the payment of principal
of (or premium, if any) or any interest on Bearer Certificates to comply with
the Bearer Rules, to permit Bearer Certificates to be issued in exchange for
Registered Certificates (if then permitted by the Bearer Rules), to permit
Bearer Certificates to be issued in exchange for Bearer Certificates of other
authorized denominations or to permit the issuance of Certificates in
uncertificated form or (ii) to restrict or eliminate in any way the Transferor's
right to designate Removed Accounts and to remove from the Trust all of the
Trust's right, title and interest in, to and under the Receivables in such
Removed Accounts pursuant to Section 2.7.
This Agreement (including any Supplement), and any schedule or
exhibit thereto may also be amended from time to time by the Servicer, the
Transferor and the Trustee, without the consent of any of the
Certificateholders, for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Agreement, or of
modifying in any manner the rights of the Holders of Certificates; provided that
(i) the Servicer shall have provided an Officer's Certificate to the Trustee to
the effect that such amendment will not materially and adversely affect the
interests of the Certificateholders, (ii) such amendment shall not, as evidenced
by an Opinion of Counsel, cause the Trust to be characterized for U.S. federal
income tax purposes as an association taxable as a corporation or otherwise have
any material adverse impact on the U.S. federal income taxation of any
outstanding Series of Investor Certificates or any Certificate Owner and (iii)
the Servicer shall have provided at least ten Business Days prior written notice
to each Rating Agency of such amendment and shall have received written
confirmation from each Rating Agency to the effect that the then current rating
of any Series or any class of any Series will not be reduced or withdrawn as a
result of such amendment; PROVIDED, FURTHER, that such amendment shall not
reduce in any manner the amount of, or delay the timing of, distributions which
are required to be made on any Investor Certificate of such Series without the
consent of the related Investor Certificateholder, change the definition of or
the manner of calculating the interest of any Investor Certificateholder of such
Series without the consent of the related Investor Certificateholder or
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reduce the percentage pursuant to clause (b) required to consent to any such
amendment, in each case without the consent of all such Investor
Certificateholders; PROVIDED, FURTHER, that for the purposes of the Officer's
Certificate referred to in subclause (i) above, any action taken in order to
enable the Trust or a portion thereof to elect to qualify as a FASIT (or
comparable tax entity for the securitization of financial assets) in accordance
with the Code shall be deemed not to materially and adversely affect the
interests of the Certificateholders.
(b) This Agreement and any Supplement may also be amended from
time to time by the Servicer, the Transferor and the Trustee with the consent of
the Holders of Investor Certificates evidencing Undivided Interests aggregating
not less than 66-2/3% of the Invested Amount of each and every Series adversely
affected, for the purpose of adding any provisions to or changing in any manner
or eliminating any of the provisions of this Agreement or of modifying in any
manner the rights of the Investor Certificateholders of any Series then issued
and outstanding; PROVIDED, HOWEVER, that no such amendment under this subsection
shall (i) reduce in any manner the amount of, or delay the timing of,
distributions which are required to be made on any Investor Certificate of such
Series without the consent of all of the related Investor Certificateholders;
(ii) change the definition of or the manner of calculating the interest of any
Investor Certificateholder of such Series without the consent of the related
Investor Certificateholder or (iii) reduce the aforesaid percentage required to
consent to any such amendment, in each case without the consent of all such
Investor Certificateholders.
(c) Notwithstanding anything in this Section 13.1 to the
contrary, the Supplement with respect to any Series may be amended on the items
and in accordance with the procedures provided in such Supplement.
(d) Promptly after the execution of any such amendment (other
than an amendment pursuant to paragraph (a)), the Trustee shall furnish
notification of the substance of such amendment to each Investor
Certificateholder of each Series adversely affected and ten Business Days prior
to the proposed effective date for such amendment the Servicer shall furnish
notification of the sub-
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stance of such amendment to each Rating Agency providing a rating for such
Series.
(e) It shall not be necessary to obtain the consent of
Investor Certificateholders under this Section 13.1 to approve the particular
form of any proposed amendment, but it shall be sufficient if such consent shall
approve the substance thereof. The manner of obtaining such consents and of
evidencing the authorization of the execution thereof by Investor
Certificateholders shall be subject to such reasonable requirements as the
Trustee may prescribe.
(f) Any Supplement executed and delivered pursuant to Section
6.9 and any amendments regarding the addition or removal of Receivables to or
from the Trust as provided in Sections 2.6 or 2.7, executed in accordance with
the provisions hereof, shall not be considered amendments to this Agreement for
the purpose of subsections 13.1(a) and (b).
(g) In connection with any amendment, the Trustee may request
an Opinion of Counsel from the Transferor or Servicer to the effect that the
amendment complies with all requirements of this Agreement. The Trustee may, but
shall not be obligated to, enter into any amendment which affects the Trustee's
rights, duties or immunities under this Agreement or otherwise.
Section 13.2 PROTECTION OF RIGHT, TITLE AND INTEREST TO TRUST.
(a) The Servicer shall cause this Agreement, all amendments
hereto and/or all financing statements and continuation statements and any other
necessary documents covering the Certificateholders and the Trustee's right,
title and interest to the Trust to be promptly recorded, registered and filed,
and at all times to be kept recorded, registered and filed, all in such manner
and in such places as may be required by law fully to preserve and protect the
right, title and interest of the Certificateholders or the Trustee, as the case
may be, hereunder to all property comprising the Trust. The Servicer shall
deliver to the Trustee file-stamped copies of, or filing receipts for, any
document recorded, registered or filed as provided above, as soon as available
following such recording, registration or filing. The Transferor shall
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cooperate fully with the Servicer in connection with the obligations set forth
above and will execute any and all documents reasonably required to fulfill the
intent of this subsection 13.2(a).
(b) Within 30 days after the Transferor makes any change in
its name, identity or corporate structure which would make any financing
statement or continuation statement filed in accordance with paragraph (a) above
materially misleading within the meaning of Section 9-402(7) of the UCC as in
effect in the Relevant UCC State, the Transferor shall give the Trustee written
notice of any such change and shall file such financing statements or amendments
as may be necessary to continue the perfection of the Trust's security interest
in the Receivables and the proceeds thereof.
(c) Each of the Transferor and the Servicer will give the
Trustee prompt written notice of any relocation of any office from which it
services Receivables or keeps records concerning the Receivables or of its
principal executive office and whether, as a result of such relocation, the
applicable provisions of the UCC would require the filing of any amendment of
any previously filed financing or continuation statement or of any new financing
statement and shall file such financing statements or amendments as may be
necessary to continue the perfection of the Trust's security interest in the
Receivables and the proceeds thereof. Each of the Transferor and the Servicer
will at all times maintain each office from which it services Receivables and
its principal executive office within the United States of America.
(d) The Servicer will deliver to the Trustee: (i) upon each
date that any Supplemental Accounts are to be included in the Accounts pursuant
to subsection 2.6(c), an Opinion of Counsel substantially in the form of Exhibit
F; and (ii) on or before March 31 of each year, beginning with March 31, 1998,
an Opinion of Counsel, substantially in the form of Exhibit G.
Section 13.3 LIMITATION ON RIGHTS OF CERTIFICATEHOLDERS.
(a) The death or incapacity of any Investor Certificateholder
shall not operate to terminate this Agreement or the Trust, nor shall such death
or incapac-
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ity entitle such Certificateholder's legal representatives or heirs to claim an
accounting or to take any action or commence any proceeding in any court for a
partition or winding up of the Trust, nor otherwise affect the rights,
obligations and liabilities of the parties hereto or any of them.
(b) No Investor Certificateholder shall have any right to vote
(except with respect to the Investor Certificateholders as provided in Section
13.1 hereof) or in any manner otherwise control the operation and management of
the Trust, or the obligations of the parties hereto, nor shall anything herein
set forth, or contained in the terms of the Certificates, be construed so as to
constitute the Certificateholders from time to time as members of an
association; nor shall any Investor Certificateholder be under any liability to
any third person by reason of any action taken by the parties to this Agreement
pursuant to any provision hereof.
(c) No Certificateholder shall have any right by virtue of any
provisions of this Agreement to institute any suit, action or proceeding in
equity or at law upon or under or with respect to this Agreement, unless such
Certificateholder previously shall have given written notice to the Trustee, and
unless the Holders of Certificates evidencing Undivided Interests aggregating
more than 50% of the Invested Amount of any Series which may be adversely
affected but for the institution of such suit, action or proceeding, shall have
made written request upon the Trustee to institute such action, suit or
proceeding in its own name as Trustee hereunder and shall have offered to the
Trustee such reasonable indemnity as it may require against the costs, expenses
and liabilities to be incurred therein or thereby, and the Trustee, for 60 days
after its receipt of such notice, request and offer of indemnity, shall have
neglected or refused to institute any such action, suit or proceeding; it being
understood and intended, and being expressly covenanted by each
Certificateholder with every other Certificateholder and the Trustee, that no
one or more Certificateholders shall have the right in any manner whatever by
virtue or by availing itself or themselves of any provisions of this Agreement
to affect, disturb or prejudice the rights of the Certificateholders of any
other of the Certificates, or to obtain or seek to obtain priority over or
preference to any other such Certificateholder,
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or to enforce any right under this Agreement, except in the manner herein
provided and for the equal, ratable and common benefit of all
Certificateholders. For the protection and enforcement of the provisions of this
Section 13.3, each and every Certificateholder and the Trustee shall be entitled
to such relief as can be given either at law or in equity.
Section 13.4 GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
Section 13.5 NOTICES. All demands, notices, instructions,
directions and communications hereunder shall be in writing and shall be deemed
to have been duly given if personally delivered or if sent by facsimile, courier
or registered mail, return receipt requested, at the following addresses: (a) in
the case of the Transferor, 9111 Duke Boulevard, Mason, Ohio 45040, Attention:
President, with a copy to Federated at 7 West Seventh Street, Cincinnati, Ohio
45202, Attention: General Counsel and a copy to the Servicer at the address
provided below, (b) in the case of the Servicer, 9111 Duke Boulevard, Mason,
Ohio 45040, Attention: Chief Financial Officer with a copy to Federated at 7
West Seventh Street, Cincinnati, Ohio 45202, Attention: General Counsel, (c) in
the case of the Trustee, the Corporate Trust Office, (d) in the case of the
Enhancement Provider for a particular Series, the address, if any, specified in
the Supplement relating to such Series and (e) in the case of the Rating Agency
for a particular Series, the address, if any, specified in the Supplement
relating to such Series; or, as to each party, such other address as shall be
designated by such party in a written notice to each other party. Unless
otherwise provided with respect to any Series in the related Supplement any
notice required or permitted to be mailed to a Certificateholder shall be given
by first class mail, postage prepaid, at the address of such Certificateholder
as shown in the Certificate Register, or with respect to any notice required or
permitted to be made to the Holders of Bearer Certificates, by publication in
the manner provided in the related Supplement. If and so long as any Series or
Class is listed on the Luxembourg Stock Exchange and such
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Exchange shall so require, any Notice to Investor Certificateholders shall be
published in an authorized newspaper of general circulation in Luxembourg within
the time period prescribed in this Agreement. Any notice so mailed within the
time prescribed in this Agreement shall be conclusively presumed to have been
duly given, whether or not the Certificateholder receives such notice.
Section 13.6 SEVERABILITY OF PROVISIONS. If any one or more
of the covenants, agreements, provisions or terms of this Agreement shall for
any reason whatsoever be held invalid, then such covenants, agreements,
provisions or terms shall be deemed severable from the remaining covenants,
agreements, provisions or terms of this Agreement and shall in no way affect the
validity or enforceability of the other provisions of this Agreement or of the
Certificates or rights of the Certificateholders thereof.
Section 13.7 ASSIGNMENT. Notwithstanding anything to the
contrary contained herein, except as provided in Section 8.2, this Agreement may
not be assigned by the Servicer without the prior consent of Holders of Investor
Certificates evidencing Undivided Interests aggregating not less than 66 2/3% of
the Invested Amount of each Series on a Series by Series basis.
Section 13.8 CERTIFICATES NON-ASSESSABLE AND FULLY PAID.
Except to the extent otherwise expressly provided in Section 7.4 with respect to
the Transferor, it is the intention of the parties to this Agreement that the
Certificateholders shall not be personally liable for obligations of the Trust,
that the Undivided Interests represented by the Certificates shall be
non-assessable for any losses or expenses of the Trust or for any reason
whatsoever, and that Certificates upon authentication thereof by the Trustee
pursuant to Sections 2.1 and 6.2 are and shall be deemed fully paid.
Section 13.9 FURTHER ASSURANCES. The Transferor and the
Servicer agree to do and perform, from time to time, any and all acts and to
execute any and all further instruments required or reasonably requested by the
Trustee more fully to effect the purposes of this Agreement, including, without
limitation, the execution of any financing statements or continuation statements
relating to the Receivables and the other Trust Property
146
<PAGE> 152
for filing under the provisions of the UCC of any applicable jurisdiction.
Section 13.10 NO WAIVER; CUMULATIVE REMEDIES. No failure to
exercise and no delay in exercising, on the part of the Trustee, any Enhancement
Provider or the Investor Certificateholders, any right, remedy, power or
privilege hereunder, shall operate as a waiver thereof; nor shall any single or
partial exercise of any right, remedy, power or privilege hereunder preclude any
other or further exercise thereof or the exercise of any other right, remedy,
power or privilege. The rights, remedies, powers and privileges herein provided
are cumulative and not exhaustive of any rights, remedies, powers and privileges
provided by law.
Section 13.11 COUNTERPARTS. This Agreement may be executed in
two or more counterparts (and by different parties on separate counterparts),
each of which shall be an original, but all of which together shall constitute
one and the same instrument.
Section 13.12 THIRD-PARTY BENEFICIARIES. This Agreement will
inure to the benefit of and be binding upon the parties hereto, the
Certificateholders and, to the extent provided in the related Supplement, to the
Enhancement Provider named therein, and their respective successors and
permitted assigns. Except as otherwise provided in this Article XIII, no other
Person will have any right or obligation hereunder.
Section 13.13 ACTIONS BY CERTIFICATEHOLDERS.
(a) Wherever in this Agreement a provision is made that an
action may be taken or a notice, demand or instruction given by Investor
Certificateholders, such action, notice or instruction may be taken or given by
any Investor Certificateholder, unless such provision requires a specific
percentage of Investor Certificateholders.
(b) Any request, demand, authorization, direction, notice,
consent, waiver or other act by a Certificateholder shall bind such
Certificateholder and every subsequent holder of such Certificate issued upon
the registration of transfer thereof or in exchange therefor or in lieu thereof
in respect of anything done or omitted
147
<PAGE> 153
to be done by the Trustee or the Servicer in reliance thereon, whether or not
notation of such action is made upon such Certificate.
(c) Any request, demand, authorization, direction, notice,
consent, waiver or other action provided by this Agreement or any Supplement to
be given or taken by Certificateholders may be embodied in and evidenced by one
or more instruments of substantially similar tenor signed by such
Certificateholders in person or by agent duly appointed in writing; and except
as herein otherwise expressly provided, such action shall become effective when
such instrument or instruments are delivered to the Trustee and, when required,
to the Transferor or the Servicer. Proof of execution of any such instrument or
of a writing appointing any such agent shall be sufficient for any purpose of
this Agreement or any Supplement and conclusive in favor of the Trustee, the
Transferor and the Servicer, if made in the manner provided in this Section.
(d) The fact and date of the execution by any
Certificateholder of any such instrument or writing may be proved in any
reasonable manner which the Trustee deems sufficient.
Section 13.14 RULE 144A INFORMATION. For so long as any of
the Investor Certificates of any Series or any Class are "restricted securities"
within the meaning of Rule 144A(a)(3) under the Securities Act, each of the
Transferor, the Servicer, the Trustee and the Enhancement Provider for such
Series agree to cooperate with each other to provide to any Investor
Certificateholders of such Series or Class and to any prospective purchaser of
Certificates designated by such an Investor Certificateholder upon the request
of such Investor Certificateholder or prospective purchaser, any information
required to be provided to such holder or prospective purchaser to satisfy the
condition set forth in Rule 144A(d)(4) under the Securities Act.
Section 13.15 MERGER AND INTEGRATION. Except as
specifically stated otherwise herein, this Agreement sets forth the entire
understanding of the parties relating to the subject matter hereof, and all
prior understandings, written or oral, are superseded by this Agree-
148
<PAGE> 154
ment. This Agreement may not be modified, amended, waived or supplemented except
as provided herein.
Section 13.16 HEADINGS. The headings herein are for purposes
of reference only and shall not otherwise affect the meaning or interpretation
of any provision hereof.
[End of Article XIII]
149
<PAGE> 155
IN WITNESS WHEREOF, the Transferor, the Servicer and the
Trustee have caused this Pooling and Servicing Agreement to be duly executed by
their respective officers as of the day and year first above written.
PRIME II RECEIVABLES CORPORATION,
Transferor
By: /S/ Karen M. Hoguet
-----------------------------------
Name: Karen M. Hoguet
Title: Chairman of the Board
FDS NATIONAL BANK,
Servicer
By: /S/ Susan R. Robinson
-----------------------------------
Name: Susan R. Robinson
Title: Treasurer
THE CHASE MANHATTAN BANK,
Trustee
By: /S/ Dennis Kildea
-----------------------------------
Name: Dennis Kildea
Title: Trust Officer
<PAGE> 156
EXHIBIT A
---------
FORM OF EXCHANGEABLE TRANSFEROR CERTIFICATE
-------------------------------------------
No. 1 One Unit
PRIME CREDIT CARD MASTER TRUST II
ASSET BACKED CERTIFICATE
THIS CERTIFICATE WAS ISSUED PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY BE SOLD ONLY PURSUANT TO
A REGISTRATION STATEMENT EFFECTIVE UNDER THE ACT OR AN EXEMPTION FROM THE
PROVISIONS OF SECTION 5 OF THE ACT. IN ADDITION, THE TRANSFER OF THIS
CERTIFICATE IS SUBJECT TO RESTRICTIONS SET FORTH IN THE POOLING AND SERVICING
AGREEMENT REFERRED TO HEREIN. A COPY OF THE POOLING AND SERVICING AGREEMENT WILL
BE FURNISHED TO THE HOLDER OF THIS CERTIFICATE BY THE TRUSTEE UPON WRITTEN
REQUEST.
THIS CERTIFICATE REPRESENTS AN
------------------------------
UNDIVIDED INTEREST IN THE
-------------------------
PRIME CREDIT CARD MASTER TRUST II
---------------------------------
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 consumer revolving credit card accounts generated or to be
generated by FDS National Bank ("FDSNB" or the "Servicer") and other assets and
interests constituting the Trust under the Pooling and Servicing Agreement
described below.
(Not an interest in or a recourse obligation of Prime II Receivables
Corporation, Federated Department Stores, Inc., FDS National Bank or any
Affiliate of either of them.)
This certifies that Prime II Receivables Corporation (the
"Holder" or the "Transferor," as the context requires) is the registered owner
of a fractional undivided interest in the Prime Credit Card Master Trust II (the
"Trust") issued pursuant to the Pooling and Servicing Agreement, dated as of
January 22, 1997 (the "Pooling and Servicing Agreement"; such term to include
any amendment or Supplement thereto) by and among Prime II Receiv-
A-1
<PAGE> 157
ables Corporation, as Transferor, FDS National Bank, as the Servicer, and The
Chase Manhattan Bank as Trustee (the "Trustee"), as supplemented by each
supplement thereto existing from time to time. The corpus of the Trust consists
of all of the Transferor's right, title and interest in, to and under the Trust
Property.
To the extent not defined herein, the capitalized terms used
herein have the meanings assigned in the Pooling and Servicing Agreement. This
Certificate is issued under and is subject to the terms, provisions and
conditions of the Pooling and Servicing Agreement, to which Pooling and
Servicing Agreement, as amended from time to time, the Holder by virtue of the
acceptance hereof assents and by which the Holder is bound.
This Certificate has not been registered or qualified under
the Act or any state securities law. No sale, transfer or other disposition of
this Certificate shall be permitted other than in accordance with the provisions
of Section 6.3, 6.9 or 7.2 of the Pooling and Servicing Agreement.
This Certificate is the Exchangeable Transferor Certificate
(the "Certificate"), which represents an undivided interest in the Trust,
including the right to receive the Collections and other amounts at the times
and in the amounts specified in the Pooling and Servicing Agreement to be paid
to the Holder of the Exchangeable Transferor Certificate. The aggregate interest
represented by this Certificate at any time in the Principal Receivables in the
Trust shall not exceed the Transferor Amount at such time. In addition to this
Certificate, Series of Investor Certificates will be issued to investors
pursuant to the Pooling and Servicing Agreement, each of which will represent an
Undivided Interest in the Trust. This Certificate shall not represent any
interest in the Investor Accounts or any Enhancement, except to the extent
provided in the Pooling and Servicing Agreement. The Transferor Amount on any
date of determination will be an amount equal to the aggregate amount of
Principal Receivables at the end of the day immediately prior to such date of
determination PLUS amounts on deposit in the Excess Funding Account (but not
including any investment earnings thereon) MINUS the Aggregate Invested Amount
at the end of such day.
A-2
<PAGE> 158
The Servicer shall deposit all Collections in the Collection
Account as promptly as possible after the Date of Processing of such
Collections. Unless otherwise stated in any Supplement, throughout the existence
of the Trust, the Servicer shall allocate to the Holder of the Certificate an
amount equal to the product of (A) the Transferor Percentage and (B) the
aggregate amount of such Collections allocated to Principal Receivables and
Finance Charge Receivables, respectively, in respect of each Monthly Period.
Notwithstanding the first sentence of this paragraph, the Servicer need not
deposit this amount or any other amounts so allocated to the Certificate
pursuant to the Pooling and Servicing Agreement into the Collection Account and
shall pay, or be deemed to pay, such amounts as collected to the Holder of the
Certificate.
FDS National Bank, or any permitted successor or assignee, as
Servicer, is entitled to receive as servicing compensation a monthly servicing
fee. The portion of the servicing fee which will be allocable to the Holder of
the Certificate pursuant to the Pooling and Servicing Agreement will be payable
by the Holder of the Certificate and neither the Trust nor the Trustee or the
Investor Certificateholders will have any obligation to pay such portion of the
servicing fee.
This Certificate does not represent a recourse obligation of,
or any interest in, the Transferor or the Servicer. This Certificate is limited
in right of payment to certain Collections respecting the Receivables, all as
more specifically set forth hereinabove and in the Pooling and Servicing
Agreement.
Upon the termination of the Trust pursuant to Section 12.1 of
the Pooling and Servicing Agreement, the Trustee shall assign and convey to the
Holder of the Certificate (without recourse, representation or warranty) all
right, title and interest of the Trust in the Receivables, whether then existing
or thereafter created, and all proceeds relating thereto. The Trustee shall
execute and deliver such instruments of transfer and assignment, in each case
without recourse, as shall be reasonably requested by the Holder of the
Certificate to vest in such Holder all right, title and interest which the
Trustee had in the Receivables.
A-3
<PAGE> 159
Unless the certificate of authentication hereon has been
executed by or on behalf of the Trustee, by manual signature, this Certificate
shall not be entitled to any benefit under the Pooling and Servicing Agreement,
or be valid for any purpose.
A-4
<PAGE> 160
IN WITNESS WHEREOF, the Transferor has caused this Certificate
to be duly executed.
PRIME II RECEIVABLES CORPORATION
By:__________________________
Name:
Title:
Date:
CERTIFICATE OF AUTHENTICATION
This is the Exchangeable Transferor Certificate referred to in
the within-mentioned Pooling and Servicing Agreement.
THE CHASE MANHATTAN BANK,
as Trustee
By:_____________________________
Authorized Officer
A-5
<PAGE> 161
EXHIBIT B
---------
FORM OF ASSIGNMENT OF RECEIVABLES IN SUPPLEMENTAL ACCOUNTS
----------------------------------------------------------
(As required by Subsection 2.6(e)(ii) of the Pooling
and Servicing Agreement)
ASSIGNMENT NO. ___ OF RECEIVABLES IN SUPPLEMENTAL ACCOUNTS,
dated as of __________ __, ____, by and between PRIME II RECEIVABLES
CORPORATION, a corporation organized under the laws of the State of Delaware
(the "Transferor"), to THE CHASE MANHATTAN BANK, a banking corporation organized
and existing under the laws of the State of New York as Trustee (in such
capacity, the "Trustee") pursuant to the Pooling and Servicing Agreement
referred to below.
W I T N E S S E T H:
--------------------
WHEREAS, the Transferor and the Trustee are parties to the
Pooling and Servicing Agreement, dated as of January 22, 1997 (hereinafter as
such agreement may have been, or may from time to time be, amended, supplemented
or otherwise modified, the "Pooling and Servicing Agreement") among the
Transferor, FDS National Bank, as Servicer and the Trustee;
WHEREAS, pursuant to the Pooling and Servicing Agreement, the
Transferor wishes to designate Supplemental Accounts to be included as Accounts
and to convey the Receivables of such Supplemental Accounts, whether now
existing or hereafter created, to the Trust as part of the corpus of the Trust
(as each such term is defined in the Pooling and Servicing Agreement); and
WHEREAS, the Trustee is willing to accept such designation and
conveyance subject to the terms and conditions hereof;
NOW, THEREFORE, the Transferor and the Trustee hereby agree as
follows:
B-1
<PAGE> 162
(1) DEFINED TERMS. All terms defined in the Pooling and
Servicing Agreement and used herein shall have such defined meanings when used
herein, unless otherwise defined herein.
"ADDITION DATE" shall mean, with respect to the Supplemental
Accounts designated hereby, ____________, ____.
"NOTICE DATE" shall mean, with respect to the Supplemental
Accounts designated hereby, ____________, ____ (which shall be a date on or
prior to the fifth Business Day prior to the Addition Date with respect to
additions pursuant to subsection 2.6(c) of the Pooling and Servicing Agreement
and the tenth Business Day prior to the Addition Date with respect to additions
pursuant to subsection 2.6(d) of the Pooling and Servicing Agreement).
(2) DESIGNATION OF ADDITIONAL ACCOUNTS. The Transferor shall
deliver to the Trustee not later than five Business Days after the Addition
Date, a computer file or microfiche list containing a true and complete list of
each consumer revolving credit card account which as of the Addition Date shall
be deemed to be a Supplemental Account, such accounts being identified by
account number and by the Outstanding Balance of the Receivables in such
Supplemental Accounts as of the Addition Cut-Off Date. Such file or list shall
be marked as Schedule 1 to this Assignment and, as of the Addition Date, shall
be incorporated into and made a part of this Assignment.
(3) CONVEYANCE OF RECEIVABLES.
(a) The Transferor does hereby transfer, assign,
set-over and otherwise convey to the Trust for the benefit of the
Certificateholders, without recourse on and after the Addition Date,
all right, title and interest of the Transferor in and to the
Receivables now existing and hereafter created in the Supplemental
Accounts designated hereby, all monies due or to become due with
respect thereto (including all Finance Charge Receivables) and all
proceeds of such Receivables.
(b) In connection with such transfer, the Transferor
agrees to record and file, at its own ex-
B-2
<PAGE> 163
ense, a financing statement with respect to the Receivables now
existing and hereafter created in the Supplemental Accounts designated
hereby (which may be a single financing statement with respect to all
such Receivables) for the transfer of such Receivables meeting the
requirements of applicable state law in such manner and such
jurisdictions as are necessary to perfect the assignment of such
Receivables to the Trust, and to deliver a file-stamped copy of such
financing statement or other evidence of such filing (which may, for
purposes of this Section 3, consist of telephone confirmation of such
filing) to the Trustee on or prior to the date of this Assignment.
(c) In connection with such transfer, the Transferor
further agrees, at its own expense, on or prior to the date of this
Assignment to indicate in its computer files that Receivables created
in connection with the Supplemental Accounts designated hereby have
been transferred to the Trust pursuant to this Assignment for the
benefit of the Certificateholders.
(d) The Transferor hereby grants and transfers to the
Trustee, for the benefit of the Certificateholders, a first priority
perfected security interest in all of the Transferor's right, title and
interest in, to and under the Receivables now existing and hereafter
created and arising in connection with the Supplemental Accounts
designated hereby, all monies due or to become due with respect thereto
(including all Finance Charge Receivables) and all proceeds of such
Receivables, to secure the Secured Obligations and agrees that this
Assignment shall constitute a security agreement under applicable law.
(4) ACCEPTANCE BY TRUSTEE. The Trustee hereby acknowledges its
acceptance on behalf of the Trust for the benefit of the Certificateholders of
all right, title and interest previously held by the Transferor in and to the
Receivables now existing and hereafter created, in the Supplemental Accounts
designated hereby and declares that it shall maintain such right, title and
interest, upon the trust herein set forth, for the benefit of all
Certificateholders.
B-3
<PAGE> 164
(5) REPRESENTATIONS AND WARRANTIES OF THE TRANSFEROR. The
Transferor hereby represents and warrants to the Trust as of the Addition Date:
(a) LEGAL VALID AND BINDING OBLIGATION. This
Assignment constitutes a legal, valid and binding obligation of the
Transferor enforceable against the Transferor in accordance with its
terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect affecting the enforcement of creditors'
rights in general and except as such enforceability may be limited by
general principles of equity (whether considered in a suit at law or in
equity).
(b) ELIGIBILITY OF ACCOUNTS AND RECEIVABLES. Each
Supplemental Account designated hereby is an Eligible Account and each
Receivable in such Supplemental Account is an Eligible Receivable. No
selection procedures believed by the Transferor to be materially
adverse to the interests of the Investor Certificateholders were
utilized in selecting the Supplemental Accounts from the available
Eligible Accounts, provided, that, the selection of newly originated
Accounts is deemed not to be materially adverse to the interests of the
Investor Certificateholders.
(c) INSOLVENCY. The Transferor is not insolvent and,
after giving effect to the conveyance set forth in Section 3 of this
Assignment, will not be insolvent.
(d) SECURITY INTEREST. This Assignment constitutes
either (i) a valid transfer and assignment to the Trust of all right,
title and interest of the Transferor in and to (a) the Receivables now
existing and hereafter created in and arising in connection with the
Supplemental Accounts, including, without limitation, all accounts,
general intangibles, contract rights, and other obligations of any
Obligor with respect to the Receivables, now or hereafter existing, (b)
all monies and investments due or to become due with respect thereto
(including, without limitation, the right to any payment of interest
and Finance Charge Receivables), including
B-4
<PAGE> 165
any and all proceeds (as defined in the UCC as in effect in the
Relevant UCC State) with respect to such Receivables, and such
Receivables and all proceeds thereof will be held by the Trust free and
clear of any Lien of any Person claiming through or under the
Transferor or any of its Affiliates, except for (x) Permitted Liens,
(y) the interest of the Transferor as Holder of the Exchangeable
Transferor Certificate and any other Class or Series of Certificates
and (z) the Transferor's right, if any, to receive interest accruing
on, and investment earnings, if any, in respect of, any Interest
Funding Account, any Principal Account, the Excess Funding Account or
any Series Account as provided in the Pooling and Servicing Agreement
and any Supplement; or (ii) a grant of a security interest (as defined
in the UCC as in effect in the Relevant UCC State) in such property to
the Trust, which is enforceable with respect to the existing
Receivables of the Supplemental Accounts designated hereby and the
proceeds (as defined in the UCC as in effect in the Relevant UCC State)
thereof upon the conveyance of such Receivables to the Trust, and which
will be enforceable with respect to the Receivables thereafter created
in respect of Supplemental Accounts designated hereby and the proceeds
(as defined in the UCC as in effect in the Relevant UCC State) thereof
upon such creation. If this Assignment constitutes the grant of a
security interest to the Trust in such property pursuant to clause (ii)
above, upon the filing of a financing statement described in Paragraph
3 of this Assignment with respect to the Supplemental Accounts
designated hereby and in the case of the Receivables of such
Supplemental Accounts thereafter created and the proceeds (as defined
in the UCC as in effect in the Relevant UCC State) thereof, upon such
creation, the Trust shall have a first priority perfected security
interest in such property, except for Permitted Liens.
(a) CONDITIONS PRECEDENT. The acceptance by the
Trustee set forth in Section 4 and the amendment of the Pooling and
Servicing Agreement set forth in Section 7 are subject to the
satisfaction, on or prior to the Addition Date, of the following
conditions precedent:
B-5
<PAGE> 166
(a) OFFICER'S CERTIFICATE. The Transferor
shall have delivered to the Trustee a certificate of a Vice
President or more senior officer substantially in the form of
Schedule 2 hereto, certifying that (i) all requirements set
forth in Section 2.6 of the Pooling and Servicing Agreement
for designating Supplemental Accounts and conveying the
Receivables arising in such Accounts, whether now existing or
hereafter created, have been satisfied and (ii) each of the
representations and warranties made by the Transferor in
Section 5 is true and correct as of the Addition Date.
(b) OPINION OF COUNSEL. The Transferor shall
have delivered to the Trustee an Opinion of Counsel with
respect to the Supplemental Accounts designated hereby
substantially in the form of Exhibit F to the Pooling and
Servicing Agreement.
(c) ADDITIONAL INFORMATION. The Transferor
shall have delivered to the Trustee such information as was
reasonably requested by the Trustee to satisfy itself as to
the accuracy of the representation and warranty regarding the
insolvency of the Transferor set forth in subsection 5(c) to
this Agreement.
(f) AMENDMENT OF THE POOLING AND SERVICING AGREEMENT.
The Pooling and Servicing Agreement is hereby amended to provide that
all references therein to the "Pooling and Servicing Agreement," to
"this Agreement" and "herein" shall be deemed from and after the
Addition Date to be a dual reference to the Pooling and Servicing
Agreement as supplemented by this Assignment. Except as expressly
amended hereby, all of the representations, warranties, terms,
covenants and conditions of the Pooling and Servicing Agreement shall
remain unamended and shall continue to be, and shall remain, in full
force and effect in accordance with its terms and except as expressly
provided herein shall not constitute or be deemed to constitute a
waiver of compliance with or a consent to noncompliance with any term
or provision of the Pooling and Servicing Agreement.
B-6
<PAGE> 167
(c) COUNTERPARTS. This Assignment may be executed in
two or more counterparts (and by different parties on separate
counterparts), each of which shall be an original, but all of which
together shall constitute one and the same instrument.
(d) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK,
WITHOUT REGARD TO ITS CONFLICT OF LAW PROVISIONS.
B-7
<PAGE> 168
IN WITNESS WHEREOF, the undersigned have caused this
Assignment of Receivables in Supplemental Accounts to be duly executed and
delivered by their respective duly authorized officers on the day and year first
above written.
PRIME II RECEIVABLES CORPORATION
By:____________________________
Name:
Title:
THE CHASE MANHATTAN BANK,
Trustee
By:____________________________
Name:
Title:
B-8
<PAGE> 169
Schedule 1
to Assignment of
Receivables in
Supplemental Accounts
---------------------
SUPPLEMENTAL ACCOUNTS
---------------------
B-9
<PAGE> 170
Schedule 2
to Assignment of
Receivables in
Supplemental Accounts
---------------------
Prime II Receivables Corporation
Prime Credit Card Master Trust II
Officer's Certificate
_____________________, a duly authorized officer of Prime II
Receivables Corporation, a corporation organized and existing under the laws of
the State of Delaware (the "Transferor"), hereby certifies and acknowledges on
behalf of the Transferor that to the best of his knowledge the following
statements are true on ____________, ____, (the "Addition Date"), and further
acknowledges on behalf of the Transferor that this Officer's Certificate will be
relied upon by The Chase Manhattan Bank as Trustee (the "Trustee") of the Prime
Credit Card Master Trust II in connection with the Trustee entering into
Assignment No. __ of Receivables in Supplemental Accounts, dated as of the
Addition Date (the "Assignment"), by and between the Transferor and the Trustee,
in connection with the Pooling and Servicing Agreement, dated as of January 22,
1997, as heretofore supplemented and amended (the "Pooling and Servicing
Agreement") among the Transferor, FDS National Bank, as Servicer, and the
Trustee. The undersigned hereby certifies and acknowledges on behalf of the
Transferor that:
(a) On or prior to the Addition Date, the Transferor has
delivered to the Trustee the Assignment (including an acceptance by the Trustee
on behalf of the Trust for the benefit of the Investor Certificateholders) and
the Transferor has indicated in its computer files that the Receivables created
in connection with the Supplemental Accounts have been transferred to the Trust
and within five Business Days after the Addition Date the Transferor shall
deliver to the Trustee or the bailee of the Trustee a computer file or
microfiche list containing a true and complete list of all Supplemental Accounts
identified by account number and the Outstanding Balance of the Receivables in
such Supplemental Accounts as of the Addition Date, which computer file or
microfiche list shall be, as of the date of such Assignment, incorporated
B-10
<PAGE> 171
into and made a part of such Assignment and the Pooling and Servicing Agreement.
(b) Each of the representations and warranties made by the
Seller in the Assignment with respect to the Receivables is true and correct in
all material respects as of the Addition Date with respect to the Receivables of
the Supplemental Accounts designated thereby.
Initially capitalized terms used herein and not otherwise
defined are used as defined in the Pooling and Servicing Agreement.
IN WITNESS WHEREOF, I have hereunto set my hand this
____________ day of
PRIME II RECEIVABLES CORPORATION
By:___________________________
Name:
Title:
B-11
<PAGE> 172
<TABLE>
<CAPTION>
EXHIBIT "C"
Daily Cash Allocation - Revolving Period
----------------------------------------
<S> <C> <C> <C> <C> <C>
Receivables in Interest Income Interest Income -
Collections Defaulted AC's Recoveries Excess Fund. AC Excess Purch. AC
----------- -------------- ---------- --------------- -----------------
Data : 0 0.00 0.00
Master Trust Allocations MONTH 1
------------------------
Yield Factor December 13, 1996 0.00%
Finance Charge Collections 0.00
Principal Collections 0.00
<CAPTION>
Excess Excess Principal Rec
Floating Allocation %: Total AR FC Receivables Funding Purchase + Exc Funding Principal
(based on prior day) Factor A/C Balance A/C Balance Receivables
<S> <C> <C> <C> <C> <C> <C>
0 0.46% 0 0 0 0
1997-1 1997-2 1998-1 1999-1 2000-1
------ ------ ------ ------ -------
Invested Amount A 0 0 0 0 0.00
Invested Amount B 0 0 0 0 0.00
Invested Amount C 0 0 0 0
Total 0 0 0 0 0
Floating Alloc. Percentage 0.0% 0.0% 0.0% 0.0% 0.0%
Daily Allocation: FC Collections 0 0 0 0 0.00
Daily Allocation: Write offs 0 0 0 0 0
Daily Allocation: Principal Collections 0 0 0 0 0
Minimum Transferor's Interest
Required Amount
Payment to Series
Discount Amount
Payment to Series
Paydown VFC
Net Principal payment to Transferor
PreFunding Account - Amount Available for Release
</TABLE>
<TABLE>
<S> <C> <C>
Collection Detail
----------------- 22-Jan-97
Interchange 0.00
Data : STAR 0
Master Trust Allocations
------------------------
Yield Factor
Finance Charge Collections
Principal Collections
Total 0.00
Floating Allocation %: Finance Charge
(based on prior day) Receivables
0
Transferor Total
---------- -----
Invested Amount A
Invested Amount B
Invested Amount C
Total 0 0
Floating Alloc. Percentage 0.0% 0.0%
Daily Allocation: FC Collections 0 0
Daily Allocation: Write offs 0 0
Daily Allocation: Principal Collections 0 0
Minimum Transferor's Interest 0.00%
Required Amount 0
Payment to Series 0
Discount Amount 0
Payment to Series 0
Paydown VFC 0
Net Principal payment to Transferor 0
PreFunding Account - Amount Available for 0
</TABLE>
<PAGE> 173
<TABLE>
<CAPTION>
Series Allocations
-------------------
SERIES 1997-1
-------------
27-Jan-97 Allocation of Finance Charge Collections
12:12 PM ----------------------------------------------------------
Class Class FDSNB Investor
Date FC Coll. Write-offs A Yield B Yield Servicing Default Amount
---------- -------------- --------------- ------------ ---------- ------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
01-Jan-97 0.00 0.00 0.00 0.00 0.00 0.00
02-Jan-97
03-Jan-97
04-Jan-97
05-Jan-97
06-Jan-97
07-Jan-97
08-Jan-97
09-Jan-97
10-Jan-97
11-Jan-97
12-Jan-97
13-Jan-97
14-Jan-97
15-Jan-97
16-Jan-97
17-Jan-97
18-Jan-97
19-Jan-97
20-Jan-97
21-Jan-97
22-Jan-97
23-Jan-97
24-Jan-97
25-Jan-97
26-Jan-97
27-Jan-97
28-Jan-97
29-Jan-97
30-Jan-97
31-Jan-97
01-Feb-97
02-Feb-97
03-Feb-97
04-Feb-97
-------------- --------------- ------------- ---------- ------------- -----------------
Total Allocated 0.00 0.00 0.00 0.00 0.00 0.00
Monthly Target 0.00 - - 0.00 0.00
BOM Invested Amount daily amount - -
Servicing % days since last capture 1 1
0.00%
</TABLE>
<TABLE>
<CAPTION>
27-Jan-97
06:07 PM -------------------------------------
Reimbursement Reimbursement
Date of Class A ICO of Class B ICO
---------- -------------------------------------
<S> <C> <C>
01-Jan-97 0.00 0.00
02-Jan-97
03-Jan-97
04-Jan-97
05-Jan-97
06-Jan-97
07-Jan-97
08-Jan-97
09-Jan-97
10-Jan-97
11-Jan-97
12-Jan-97
13-Jan-97
14-Jan-97
15-Jan-97
16-Jan-97
17-Jan-97
18-Jan-97
19-Jan-97
20-Jan-97
21-Jan-97
22-Jan-97
23-Jan-97
24-Jan-97
25-Jan-97
26-Jan-97
27-Jan-97
28-Jan-97
29-Jan-97
30-Jan-97
31-Jan-97
01-Feb-97
02-Feb-97
03-Feb-97
04-Feb-97
-------------------------------------------
Total Allocated 0 0.00 0.00
Monthly Target 0 0.00 0
BOM Invested Amount daily amount
Servicing % days since last capture
</TABLE>
<PAGE> 174
<TABLE>
<CAPTION>
---------
---------------- ---------------- Reimb. Class A Class B ---------- ------------
Class A Class B of Class Class Required Supp'l. Supp'l. To Allocated
Addit'l. Paymnts Addit'l. Paymnts C ICO C Yield Reserve Paymnts Paymnts Servicing Transferor To Group 1
---------------- ---------------- -------- ------- --------- -------- -------- --------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
---------------- ---------------- -------- ------- --------- -------- -------- --------- ---------- -----------
0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
0 0 0 0.00 0.00 0 0 0.00
-
0
0.00%
</TABLE>
<PAGE> 175
<TABLE>
<CAPTION>
Total Allocations - Finance Charge Collections + Principal Collections
======================================================================
|------------------------ Series 1997-1 ---------------------------
Date Class A Int. Class B Int. Class C Int. Servicer Funding Transferor proof
- ---- ------------ ------------ ------------ -------- ------- ---------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
01-Jan-97 0.00 0.00 0.00 0.00 0.00 0.00 0.00
02-Jan-97
03-Jan-97
04-Jan-97
05-Jan-97
06-Jan-97
07-Jan-97
08-Jan-97
09-Jan-97
10-Jan-97
11-Jan-97
12-Jan-97
13-Jan-97
14-Jan-97
15-Jan-97
16-Jan-97
17-Jan-97
18-Jan-97
19-Jan-97
20-Jan-97
21-Jan-97
22-Jan-97
23-Jan-97
24-Jan-97
25-Jan-97
26-Jan-97
27-Jan-97
28-Jan-97
29-Jan-97
30-Jan-97
31-Jan-97
01-Feb-97
02-Feb-97
03-Feb-97
04-Feb-97
----------- --------- -------- ----- ------ ------- -----
AC Balance 0.00 0.00 0.00 0.00 0.00 0.00 0.00
MEMO TOTALS 0.00
</TABLE>
<PAGE> 176
27-Jan-97
<TABLE>
<CAPTION>
Transferor's Instructions
==========================
<S> <C>
Total Allocation 0.00
To Buy AR/Pay servicing:
From Collection AC To Operating AC 0.00
To Paydown :
From Collection AC to Principal AC (Current Day) 0.00
From Collection AC to Principal AC (Subsequent Day) 0.00
Paydown CP (Current Day):
From Interest AC to Principal AC 0.00
From Collection Account To Principal AC 0.00
From Operating AC To Principal AC 0.00
Issue CP:
From Principal AC to Collection AC 0.00
From Collection AC to Operating AC 0.00
To Increase Transferor's Interest:
From Collection AC to Excess Purchase AC 0.00
From Collection AC to Excess Funding AC 0.00
From Incoming Wire Acct SF/ABS to Principal AC
To Decrease Transferor's Interest:
From Excess Purchase AC to Operating AC 0.00
From Excess Funding AC To Operating AC 0.00
From Operating AC To First Data Resources 0.00
From Collection AC To Operating AC 0.00
--------------------------------
Prime II Receivables Corporation
27-Jan-97
Servicer's Instructions
=======================
<S> <C>
To Pay Servicing Fee:
From Collection AC to PRIME II Operating AC 0.00
To Fund Interest Funding Accounts:
From Collection AC to Interest Fund AC 0.00
Change in Amount Invested:
From Interest Funding AC - Series 1997-1 0.00
From Reserve AC 0.00
From Excess Funding AC 0.00
From Excess Purchase AC 0.00
To Pay Fees:
From Collection AC to Trustee 0.00
From Interest Funding AC To Principal AC 0.00
To transfer interest income to OPERATING ACCOUNT
From Interest Funding AC - Series 1997-1 To operating AC 0.00
From Reserve AC To Operating AC 0.00
From Excess Funding AC To Operating AC 0.00
From Excess Purchase AC To Operating AC 0.00
To Pay Class C Coupon:
From Collection AC to Operating AC 0.00
-----------------------------------
FDS National Bank, Inc. as Servicer
</TABLE>
<PAGE> 177
Exhibit D
PRIME CREDIT CARD
MASTER TRUST II
SETTLEMENT STATEMENT
Distribution Date: 15-Jan-97
Monthly Period: December 1996
1-Dec-96
4-Jan-97
(i) Collections 0.00
Finance Charge 0.00
Interchange 0.00
Principal 0.00
(ii) Investor Percentage - Principal Collections
Series 1997-1 0.00%
A 0.00%
B 0.00%
C 0.00%
Investor Percentage - Finance Charge Collections
and Receivables in Defaulted Accounts
Series 1997-1 0.00%
A 0.00%
B 0.00%
C 0.00%
(iii) Distribution Amount per $1,000
Series 1997-1
A 0.00
B 0.00
C 0.00
Total $'s Distributed
Series 1997-1 0.00
(Iv) Allocation to Principal per $1,000
Series 1997-1
A 0.00
B 0.00
C 0.00
Total $'s Distributed
Series 1997-1 0.00
(v) Allocation to Interest per $1,000
Series 1997-1
A 0.00
B 0.00
C 0.00
<PAGE> 178
PRIME CREDIT CARD
MASTER TRUST II
SETTLEMENT STATEMENT
Total $'s Distributed
Series 1997-1 0.00
(vi) Investor Default Amount
Series 1997-1 0.00
A 0.00
B 0.00
C 0.00
(vii) Investor Charge Offs and Reinbursements
Series 1997-1 Charge Offs 0.00
A 0.00
B 0.00
C 0.00
Series 1997-1 Reimbusements 0.00
A 0.00
B 0.00
C 0.00
(viii) Servicing Fees
Series 1997-1 0.00
A 0.00
B 0.00
C 0.00
(ix) Deficit Controlled Amortization Amount
Series 1997-1 0.00
A 0.00
B 0.00
C 0.00
(x) Receivables in Trust 0.00
(xi) Invested Amount
Series 1997-1 0.00
A 0.00
B 0.00
C 0.00
(xii) Enhancement 0.00
(xiii) Pool Factor 0.00
(xiv) Yield Factor 0.00
Finance Charge Receivables Factor 0.00
(xv) Payout Event NO
Page 2
<PAGE> 1
Exhibit 10.23
_____________________________________________________
PRIME II RECEIVABLES CORPORATION
Transferor
FDS NATIONAL BANK
Servicer
and
THE CHASE MANHATTAN BANK
Trustee
on behalf of the Series 1997-1 Certificateholders
----------------------------
SERIES 1997-1 VARIABLE FUNDING SUPPLEMENT
Dated as of January 22, 1997
to
POOLING AND SERVICING AGREEMENT
Dated as of January 22, 1997
----------------------------
Class A Variable Funding Certificates, Series 1997-1
Class B Variable Funding Certificates, Series 1997-1
PRIME CREDIT CARD MASTER TRUST II
_____________________________________________________
<PAGE> 2
TABLE OF CONTENTS
-----------------
SECTION 1. Designation........................................................1
SECTION 2. Definitions........................................................1
SECTION 3. Reassignment and Transfer Terms...................................17
SECTION 4. Delivery and Payment for the Series 1997-1 Certificates...........17
SECTION 5. Depositary; Form of Delivery of Series 1997-1 Certificates........17
SECTION 6. Addition and Removal of Accounts..................................17
SECTION 7. Article IV of Agreement...........................................18
Section 4.4 Rights of Certificateholders.........................19
Section 4.5 Collections and Allocation...........................19
Section 4.6 Application of Funds on Deposit......................19
Section 4.7 Coverage of Required Amounts for the Series 1997-1
Certificates.........................................30
Section 4.8 Investor Charge-Offs.................................32
Section 4.9 Reserve Account.......................................33
Section 4.10 Excess Purchase Account..............................34
Section 4.11 Principal and Interest Funding Accounts..............35
SECTION 8. Article V of the Agreement........................................36
Section 5.1 Distributions........................................36
Section 5.2 Monthly Certificateholders' Statement................37
Section 5.3 Annual Certificateholders' Tax Statement.............38
SECTION 9. Article VI of Agreement...........................................38
Section 6.15 VFC Additional Invested Amounts.....................39
Section 6.16 Extension...........................................40
Section 6.17 Transfers of Class C Certificates; Legends..........41
SECTION 10. Series 1997-1 Pay Out Events.....................................43
SECTION 11. Successor Servicer and Delegation................................46
SECTION 12. Successor Trustee................................................46
SECTION 13. Notices to Administrative Agent..................................46
<PAGE> 3
SECTION 14. Charge Account Agreements and Credit and Collection Policies.....47
SECTION 15. Minimum Denominations............................................47
SECTION 16. Cash Equivalents.................................................48
SECTION 17. Automatic Additional Accounts....................................48
SECTION 18. Series 1997-1 Termination........................................48
SECTION 19. Actions by Administrative Agent..................................48
SECTION 20. Periodic Finance Charges and Other Fees..........................48
SECTION 21. Distribution Account.............................................48
SECTION 22. Rating Agency Condition..........................................48
SECTION 23. Ratification of Agreement........................................48
SECTION 24. Counterparts.....................................................49
SECTION 25. GOVERNING LAW....................................................49
SECTION 26. The Trustee......................................................49
SECTION 27. Instructions in Writing..........................................49
LIST OF EXHIBITS
----------------
EXHIBIT A-1 Form of Class A Certificate
EXHIBIT A-2 Form of Class B Certificate
EXHIBIT A-3 Form of Class C Certificate
EXHIBIT B Form of Extension Notice
EXHIBIT C Form of Investor Certificate Election Notice
EXHIBIT D Form of Investment Letter for Series C
EXHIBIT E Form of Servicer Report
ii
<PAGE> 4
SERIES 1997-1 VARIABLE FUNDING SUPPLEMENT, dated as of January
22, 1997 (this "VARIABLE FUNDING SUPPLEMENT") by and among PRIME II RECEIVABLES
CORPORATION, a corporation organized and existing under the laws of the State of
Delaware, as Transferor (the "Transferor"), FDS NATIONAL BANK, a national
banking association organized and existing under the federal laws of the United
States, as Servicer (the "Servicer"), and THE CHASE MANHATTAN BANK, a banking
corporation organized and existing under the laws of State of New York, as
trustee (together with its successors in trust thereunder as provided in the
Agreement referred to below, the "TRUSTEE") under the Pooling and Servicing
Agreement dated as of January 22, 1997 (the "AGREEMENT") among the Transferor,
the Servicer and the Trustee.
Section 6.9 of the Agreement provides, among other things,
that the Transferor and the Trustee may at any time and from time to time enter
into a supplement to the Agreement for the purpose of authorizing the issuance
by the Trustee to the Transferor, for execution and redelivery to the Trustee
for authentication, one or more Series of Certificates.
Pursuant to this Variable Funding 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 Variable
Funding Supplement to be known generally as the "SERIES 1997-1 VARIABLE FUNDING
CERTIFICATES." The Series 1997-1 Variable Funding Certificates shall be issued
in two Classes, which shall be designated generally as the Class A Variable
Funding Certificates, Series 1997-1 (the "CLASS A VARIABLE FUNDING
CERTIFICATES"), and the Class B Variable Funding Certificates, Series 1997-1
(the "CLASS B VARIABLE FUNDING CERTIFICATES"). In addition, there is also hereby
created a third Class of interest in the Trust which shall be deemed to be an
"Investor Certificate" for all purposes under the Agreement and this Variable
Funding Supplement, except as expressly provided herein, and which shall be
known as the Class C Certificates, Series 1997-1 (the "CLASS C CERTIFICATES").
The Series 1997-1 Variable Funding Certificates and the Class C Certificates are
collectively referred to sometimes in this Variable Funding Supplement as the
"SERIES 1997-1 CERTIFICATES". There is hereby established a Group to be known as
"Group I", in which the Series 1997-1 shall be included as the initial member.
The Class C Certificates shall be Transferor Retained Certificates so long as
and to the extent held of record by the Transferor.
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 Variable
Funding Supplement shall govern. All Article, Section or subsection references
herein shall mean Article, Section or subsections of the Agreement, as amended
or supplemented by this Variable Funding 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.
"ADMINISTRATIVE AGENT" shall mean Credit Suisse First Boston,
New York Branch, or any successor designated as the Administrative Agent in the
Class A Certificate Purchase Agreement and the Class B Certificate Purchase
Agreement.
<PAGE> 5
"AMORTIZATION PERIOD" shall mean the period commencing on the
Amortization Period Commencement Date and ending on the earlier to occur of (i)
the date of termination of the Trust pursuant to Section 12.1 of the Agreement
or (ii) the Series 1997-1 Termination Date.
"AMORTIZATION PERIOD COMMENCEMENT DATE" shall mean, initially,
with respect to the Investor Certificates, the earlier of the first day of the
February 2000 Monthly Period and the Pay Out Commencement Date, and, with
respect to an Extension, the earlier of the date specified as such in the
Extension Notice and the Pay Out Commencement Date.
"ASSIGNEE" shall have the meaning specified in subsection
6.17(a) of the Agreement.
"ANNUAL PORTFOLIO TURNOVER RATE" shall mean with respect to
any Business Day during a Monthly Period, the aggregate of Receivables arising
under Accounts from sales of goods and services or cash advances, excluding any
portion thereof representing Periodic Finance Charges, Late Fees, annual
membership fees or other fees and similar charges during each of the twelve
Monthly Periods ending on the last day of the second preceding Monthly Period
DIVIDED by the average of the aggregate Outstanding Balances of Receivables as
of the last day of each such Monthly Period.
"AVAILABLE RESERVE AMOUNT" shall mean, for any Business Day,
the lesser of (i) the amount on deposit in the Reserve Account on such Business
Day (after giving effect to any deposit to, or withdrawal from, the Reserve
Account to be made with respect to such Business Day), and (ii) the Required
Reserve Amount as of such Business Day.
"BASE RATE" shall mean, with respect to the Investor
Certificates, the sum of (i) the weighted average of the annualized Class A
Certificate Rate, the annualized Class B Certificate Rate and the annualized
Class C Certificate Rate and (ii) the Series Servicing Fee Percentage per annum.
"CARRYOVER DISCOUNT AMOUNT" shall mean, for Series 1997-1 for
any Business Day, the excess, if any, of (i) the sum of (A) the product of the
Discount Allocation Percentage and the Discount Amount and (B) the Carryover
Discount Amount for Series 1997-1 for the preceding Business Day over (ii) the
amount of Principal Collections added to Total Finance Charge Collections for
such Series on such preceding Business Day.
"CLASS A ADDITIONAL PAYMENTS" shall mean amounts payable
pursuant to Section 2.4 or 2.5 of the Class A Certificate Purchase Agreement in
an aggregate amount not exceeding, for any Business Day, the product of (i) a
fraction, the numerator of which is the actual number of days from and including
the preceding Business Day to but excluding such Business Day and the
denominator of which is 360, (ii) 0.25% and (iii) the Class A Invested Amount
for such Business Day. .
"CLASS A AGENT" shall mean Credit Suisse First Boston, New
York Branch, or any successor at the time designated as the Agent for the Class
A Certificateholders under the Class A Certificate Purchase Agreement.
2
<PAGE> 6
"CLASS A CARRYING COST DAILY FACTOR" shall mean, on any
Business Day, the Class A Carrying Costs for such Business Day DIVIDED by the
Class A Invested Amount for such Business Day.
"CLASS A CARRYING COSTS" shall mean, for any Business Day, the
sum of the accrued Yield (as defined in the Class A Certificate Purchase
Agreement) since the preceding Business Day on the outstanding principal amount
of the Class A Certificates.
"CLASS A CERTIFICATE PURCHASE AGREEMENT" shall mean the Class
A Certificate Purchase Agreement, dated as of January 22, 1997, among the
Transferor, the Servicer, the purchasers of Class A Certificates named therein
and Credit Suisse First Boston, New York Branch, as the Class A Agent and the
Administrative Agent, as amended from time to time.
"CLASS A CERTIFICATE RATE" shall mean, with respect to the
Class A Certificates, the Class A Carrying Cost Daily Factor.
"CLASS A CERTIFICATEHOLDER" shall mean any Person in whose
name a Class A Certificate is registered in the Certificate Register.
"CLASS A CERTIFICATEHOLDERS' INTEREST" shall mean the portion
of the Series 1997-1 Certificateholders' Interest evidenced by the Class A
Certificates.
"CLASS A CERTIFICATES" shall mean any of the Certificates
executed by the Transferor and authenticated by or on behalf of the Trustee,
substantially in the form of Exhibit A-l hereto.
"CLASS A DAILY PRINCIPAL AMOUNT" shall have the meaning
specified in subsection 4.6(e)(i) of the Agreement.
"CLASS A FLOATING ALLOCATION PERCENTAGE" shall mean, with
respect to any Business Day, the percentage equivalent of a fraction, the
numerator of which is the Class A Invested Amount for such Business Day and the
denominator of which is the sum of the amount of Principal Receivables in the
Trust and the amount on deposit in the Excess Funding Account as of the end of
the preceding Business Day.
"CLASS A INITIAL INVESTED AMOUNT" shall mean the aggregate
initial principal amount of the Class A Certificates on the Issuance Date.
"CLASS A INTEREST" shall mean with respect to any Business Day
an amount equal to the product of the Class A Certificate Rate and the
outstanding principal balance of the Class A Certificates as of the close of
business on such Business Day.
"CLASS A INVESTED AMOUNT" shall mean, when used with respect
to any Business Day, an amount equal to (a) the Class A Initial Invested Amount,
PLUS (b) the aggregate principal amount of any VFC Additional Class A Invested
Amounts purchased by the Class A Certificateholders through the end of the
preceding Business Day pursuant to Section 6.15 of the Agreement, MINUS (c) the
aggregate amount of principal payments made to the Class A Certificateholders
prior to such Business Day and MINUS (d) the excess, if any, of the aggregate
3
<PAGE> 7
amount of unreimbursed Class A Investor Charge-Offs for all Distribution Dates
preceding such date over Class A Investor Charge-Offs reimbursed pursuant to
subsection 4.8(c) of the Agreement prior to such Business Day.
"CLASS A INVESTOR CHARGE-OFF" shall have the meaning specified
in subsection 4.8(c) of the Agreement.
"CLASS A INVESTOR PERCENTAGE" shall mean, for any Business
Day, the Class A Invested Amount as a percentage of the Invested Amount on such
Business Day.
"CLASS A PROGRAM FEE" shall mean the fees or other amounts
payable pursuant to subsection 2.3(a) of the Class A Certificate Purchase
Agreement, to the extent not included in Class A Carrying Costs.
"CLASS A REQUIRED AMOUNT" shall mean the amount, if any, by
which (x) the sum of the amounts described in subsections 4.6(a)(i), (v), (vi)
or (viii) of the Agreement during the Revolving Period or subsections 4.6(b)(i),
(v), (vi) or (viii) or 4.6(c)(i), (v), (vi) or (viii) of the Agreement during
the Amortization Period, as applicable, plus the Class A Investor Percentage of
the amount described in subsection 4.6(a)(iv) of the Agreement during the
Revolving Period, or subsection 4.6(b)(iv) or 4.6(c)(iv) of the Agreement during
the Amortization Period, as applicable, exceeds (y) the Total Finance Charge
Collections available for application thereto pursuant to subsections 4.6(a),
(b) or (c) of the Agreement, as applicable, on any Business Day.
"CLASS A SUPPLEMENTAL PAYMENTS" shall mean, on any Business
Day, the sum of all unpaid amounts owed to the Administrative Agent, the Class A
Agent or any Class A Purchaser (as defined in the Class A Purchase Agreement)
pursuant to the Class A Certificate Purchase Agreement which have arisen prior
to such Business Day (including, without limitation, amounts payable pursuant to
Section 2.4 or 2.5 of the Class A Purchase Agreement on any Business Day in
excess of the maximum amount of Class A Additional Payments for such Business
Day), other than Class A Interest, Class A Additional Payments and the unpaid
principal amount of the Class A Certificates.
"CLASS B ADDITIONAL PAYMENTS" shall mean amounts payable
pursuant to Section 2.4 or 2.5 of the Class B Certificate Purchase Agreement in
an aggregate amount not exceeding, for any Business Day, the product of (i) a
fraction, the numerator of which is the actual number of days from and including
the preceding Business Day to but excluding such Business Day and the
denominator of which is 360, (ii) 0.25% and (iii) the Class B Invested Amount
for such Business Day.
"CLASS B AGENT" shall mean Credit Suisse First Boston, New
York Branch, or any successor at the time designated as the Agent for the Class
B Certificateholders under the Class B Certificate Purchase Agreement.
"CLASS B CARRYING COST DAILY FACTOR" shall mean, on any
Business Day, the Class B Carrying Costs for such Business Day DIVIDED by the
Class B Invested Amount for such Business Day.
4
<PAGE> 8
"CLASS B CARRYING COSTS" shall mean, for any Business Day, the
sum of the accrued Yield (as defined in the Class B Certificate Purchase
Agreement) since the preceding Business Day on the outstanding principal amount
of the Class B Certificates.
"CLASS B CERTIFICATE PURCHASE AGREEMENT" shall mean the Class
B Certificate Purchase Agreement, dated as of January 22, 1997, among the
Transferor, the Servicer, the purchasers of Class B Certificates named therein
and Credit Suisse First Boston, New York Branch, as the Class B Agent and the
Administrative Agent, as amended from time to time.
"CLASS B CERTIFICATE RATE" shall mean the Class B Carrying
Cost Daily Factor.
"CLASS B CERTIFICATEHOLDER" shall mean any Person in whose
name a Class B Certificate is registered in the Certificate Register.
"CLASS B CERTIFICATEHOLDERS' INTEREST" shall mean the portion
of the Series 1997-1 Certificateholders' Interest evidenced by the Class B
Certificates.
"CLASS B CERTIFICATES" shall mean any of the Certificates
executed by the transferor and authenticated by or on behalf of the Trustee,
substantially in the form of Exhibit A-2 hereto
"CLASS B DAILY PRINCIPAL AMOUNT" shall have the meaning
specified in subsection 4.6(e)(ii) of the Agreement.
"CLASS B FIXED/FLOATING ALLOCATION PERCENTAGE" shall mean,
with respect to any Business Day, the percentage equivalent of a fraction the
numerator of which is equal to the Class B Invested Amount for the day
immediately following the last day of the Revolving Period and the denominator
of which is equal to the greater of (x) the sum of the aggregate 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 (y) the sum of
the numerators used to calculate the allocation percentages with respect to
Principal Receivables of all Series outstanding on such Business Day.
"CLASS B FLOATING ALLOCATION PERCENTAGE" shall mean, with
respect to any Business Day, the percentage equivalent of a fraction, the
numerator of which is the Class B Invested Amount for such Business Day and the
denominator of which is the sum of 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.
"CLASS B INITIAL INVESTED AMOUNT" shall mean the aggregate
initial principal amount of the Class B Certificates on the Issuance Date.
"CLASS B INTEREST" shall mean, with respect to any Business
Day, an amount equal to the product of the Class B Certificate Rate and the
outstanding principal balance of the Class B Certificates as of the close of
business on such Business Day.
"CLASS B INVESTED AMOUNT" shall mean, when used with respect
to any Business Day, an amount equal to (a) the Class B Initial Invested Amount,
PLUS (b) the aggregate principal
5
<PAGE> 9
amount of any VFC Additional Class B Invested Amounts purchased by the Class B
Certificateholders through the end of the preceding Business Day pursuant to
Section 6.15 of the Agreement, MINUS (c) the aggregate amount of principal
payments made to Class B Certificateholders prior to such Business Day, MINUS
(d) the aggregate amount of Class B Investor Charge-Offs and the amount of
Reallocated Class B Principal Collections for all prior Business Days and PLUS
(e) the aggregate amount allocated to the Class B Certificates and available on
all prior Business Days in accordance with subsection 4.8(b) of the Agreement,
for the purpose of reimbursing amounts deducted pursuant to the foregoing clause
(d).
"CLASS B INVESTOR CHARGE-OFF" shall have the meaning specified
in subsection 4.8(b) of the Agreement.
"CLASS B INVESTOR PERCENTAGE" shall mean, for any Business
Day, the Class B Invested Amount as a percentage of the Invested Amount on such
Business Day.
"CLASS B PRINCIPAL PAYMENT COMMENCEMENT DATE" shall mean,
following an Amortization Period Commencement Date, the earlier of (a) the
Business Day on which the Class A Invested Amount is paid in full 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 on such
Business Day, the Business Day following the Business Day 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(d), 9.2, 10.2, 12.1
or 12.2 of the Agreement or Section 3 of this Variable Funding Supplement.
"CLASS B PROGRAM FEE" shall mean the fees payable pursuant to
subsection 2.3(a) of the Class B Certificate Purchase Agreement, to the extent
not included in Class B Carrying Costs.
"CLASS B REQUIRED AMOUNT" shall mean the amount, if any, by
which (x) the sum of the amounts described in subsections 4.6(a)(ii), (v), (vii)
or (ix) of the Agreement during the Revolving Period or subsections 4.6(b)(ii),
(v), (vii) or (ix) or 4.6(c)(ii), (v), (vii) or (ix) of the Agreement during the
Amortization Period, as applicable, plus the Class B Investor Percentage of the
amount described in subsection 4.6(a)(iv) of the Agreement during the Revolving
Period, or subsection 4.6(b)(iv) or 4.6(c)(iv) of the Agreement during the
Amortization Period, as applicable, exceeds (y) the Total Finance Charge
Collections available for application thereto pursuant to subsections 4.6(a),
(b) or (c) of the Agreement, as applicable, on any Business Day.
"CLASS B SUPPLEMENTAL PAYMENTS" shall mean, on any Business
Day, the sum of all unpaid amounts owed to the Administrative Agent, the Class B
Agent or any Class B Purchaser (as defined in the Class B Purchase Agreement)
pursuant to the Class B Certificate Purchase Agreement which have arisen prior
to such Business Day (including, without limitation, amounts payable pursuant to
Section 2.4 or 2.5 of the Class B Purchase Agreement on any Business Day in
excess of the maximum amount of Class B Additional Payments for such Business
Day), other than Class B Interest, Class B Additional Payments and the unpaid
principal amount of the Class B Certificates.
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<PAGE> 10
"CLASS C ADDITIONAL INTEREST" shall have the meaning specified
in subsection 6.17(c) of the Agreement.
"CLASS C CERTIFICATE RATE" shall mean 0% per annum; PROVIDED,
HOWEVER, that such rate may be increased pursuant to the terms of a supplemental
agreement entered into in accordance with subsection 6.17(c) of the Agreement.
"CLASS C CERTIFICATEHOLDER" shall mean any Person in whose
name a Class C Certificate is registered in the Certificate Register.
"CLASS C CERTIFICATEHOLDERS' INTEREST" shall mean the portion
of the Series 1997-1 Certificateholders' Interest evidenced by the Class C
Certificates.
"CLASS C CERTIFICATES" shall mean any of the Certificates
executed by the transferor and authenticated by or on behalf of the Trustee,
substantially in the form of Exhibit A-3 hereto.
"CLASS C DAILY PRINCIPAL AMOUNT" shall have the meaning
specified in subsection 4.6(e)(iii) of the Agreement.
"CLASS C FIXED/FLOATING ALLOCATION PERCENTAGE" shall mean,
with respect to any Business Day, the percentage equivalent of a fraction the
numerator of which is equal to the Class C Invested Amount for the day
immediately following the last day of the Revolving Period and the denominator
of which is equal to the greater of (x) the sum of the aggregate 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 (y) the sum of
the numerators used to calculate the allocation percentages with respect to
Principal Receivables of all Series outstanding on such Business Day.
"CLASS C FLOATING ALLOCATION PERCENTAGE" shall mean, with
respect to any Business Day, the percentage equivalent of a fraction, the
numerator of which is the Class C Invested Amount for such Business Day and the
denominator of which is the sum of 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.
"CLASS C INITIAL INVESTED AMOUNT" shall mean the aggregate
initial principal amount of the Class C Certificates on the Issuance Date.
"CLASS C INTEREST" shall have the meaning specified in
subsection 6.17(c) of the Agreement.
"CLASS C INTEREST SHORTFALL" shall have the meaning specified
in subsection 6.17(c) of the Agreement.
"CLASS C INVESTED AMOUNT" shall mean, when used with respect
to any Business Day, an amount equal to (a) the Class C Initial Invested Amount,
PLUS (b) the aggregate principal amount of any VFC Additional Class C Invested
Amounts purchased by the Class C Certificateholders through the end of the
preceding Business Day pursuant to Section 6.15 of the
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<PAGE> 11
Agreement, MINUS (c) the aggregate amount of principal payments made to Class C
Certificateholders prior to such Business Day, MINUS (d) the aggregate amount of
Class C Investor Charge-Offs and the amount of Reallocated Class C Principal
Collections for all prior Business Days and PLUS (e) the aggregate amount
allocated to the Class C Certificates and available on all prior Business Days
in accordance with subsection 4.9(b) of the Agreement, for the purpose of
reimbursing amounts deducted pursuant to the foregoing clause (d).
"CLASS C INVESTOR CHARGE-OFF" shall have the meaning specified
in subsection 4.8(a) of the Agreement.
"CLASS C INVESTOR PERCENTAGE" shall mean, for any Business
Day, the Class C Invested Amount as a percentage of the Invested Amount on such
Business Day.
"CLASS C PRINCIPAL PAYMENT COMMENCEMENT DATE" shall mean,
following an Amortization Period Commencement Date, the earlier of (a) the
Business Day on which the Class A Invested Amount and the Class B Invested
Amount are paid in full or, if there are no Principal Collections allocable to
the Series 1997-1 Variable Funding Certificates remaining after payments have
been made to the Class A Certificates and the Class B Certificates on such
Business Day, the Business Day following the Business Day 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(d), 9.2, 10.2, 12.1 or 12.2 of the Agreement or Section 3 of this
Variable Funding Supplement.
"CLOSING DATE" shall mean January 23, 1997.
"DISCOUNT ALLOCATION PERCENTAGE" shall mean with respect to
Series 1997-1 and any Business Day the percentage equivalent of a fraction the
numerator of which is the Series 1997-1 Discount Factor and the denominator of
which is the Discount Factor on such Business Day.
"DISCOUNT AMOUNT" shall mean for any Business Day the Discount
Factor multiplied by the Outstanding Balance of Receivables transferred to the
Trust on such Business Day.
"DISCOUNT FACTOR" shall mean for any Business Day an amount
equal to the sum of each Series Discount Factor for all Series then outstanding
on such Business Day.
"DISCOUNT TRIGGER EVENT" shall mean for any Business Day (i)
the Discount Factor for the second preceding Monthly Period being in excess of
zero, (ii) the Transferor having elected, by not less than 30 days' prior
written notice to the Servicer, the Trustee, the Rating Agencies and the
Administrative Agent, to commence discounting of purchases of Receivables, and
(iii) the Rating Agencies and the Administrative Agent on behalf of the Class A
Certificateholders and Class B Certificateholders having consented in writing (a
copy of which is delivered to the Trustee) to such discounting of purchases of
Receivables on or prior to such Business Day and having not revoked such consent
in writing (a copy of which is to be delivered to the Trustee).
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<PAGE> 12
"DISTRIBUTION DATE" shall mean the 15th day of each month or,
if such 15th day is not a Business Day, the next succeeding Business Day, and
the Scheduled Series 1997-1 Termination Date.
"ELECTION DATE" shall have the meaning specified in subsection
6.16(a) of the Agreement.
"ELECTION NOTICE" shall have the meaning specified in
subsection 6.16(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 the Reserve Account and, with respect to the Class B
Certificates, the subordination of the Class C Invested Amount and the Reserve
Account; PROVIDED, HOWEVER that neither the Holders of the Class B Certificates
nor the Holders of the Class C Certificates nor any provider of amounts on
deposit in the Reserve Account shall be an "Enhancement Provider" for the
purposes of the Agreement or this Supplement.
"ENHANCEMENT PERCENTAGE" shall mean, 0.0% for each Business
Day from the Closing Date to and excluding the Determination Date which occurs
during the March 1997 Monthly Period, and thereafter for each Business Day
during the period commencing on a Determination Date to but excluding the next
following Determination Date (an "ENHANCEMENT PERCENTAGE DETERMINATION PERIOD"),
the greater of (i) the sum of the Excess Spread Enhancement Cap Percentage for
the Monthly Period immediately preceding such Enhancement Percentage
Determination Period and the Payment Rate Enhancement Cap Percentage for such
Monthly Period and (ii) the Enhancement Percentage for the preceding Enhancement
Percentage Determination Period minus 1.0%; PROVIDED that so long as no Reserve
Account Increase Notice shall have been delivered, the Enhancement Percentage
shall not exceed 4.0%, and PROVIDED FURTHER that if a Reserve Account Increase
Notice shall have been delivered, the Enhancement Percentage shall at all times
thereafter equal 100%.
"EXCESS FINANCE CHARGE COLLECTIONS" shall mean, with respect
to any Business Day, as the context requires, either (x) the amount described in
subsection 4.6(a)(xvi) of the Agreement during the Revolving Period or
subsection 4.6(b)(xii) or 4.6(c)(xvi) of the Agreement, as applicable, during
the Amortization Period allocated to the Series 1997-1 Certificates but
available to cover shortfalls in amounts paid from Finance Charge Collections
for other Series, if any, or (y) the aggregate amount of Total Finance Charge
Collections allocable to other Series in excess of the amounts necessary to make
required payments with respect to such Series, if any, and available to cover
shortfalls with respect to the Series 1997-1 Certificates.
"EXCESS PURCHASE ACCOUNT" shall have the meaning specified in
subsection 4.10(a) of the Agreement.
"EXCESS SPREAD PERCENTAGE" shall mean, for a Monthly Period,
(a) the lesser of (i) the aggregate Total Finance Charge Collections deposited
in the Collection Account on each Business Day during such Monthly Period and
(ii) the sum for each Business Day during such Monthly Period of the product of
the Floating Allocation Percentage for Series 1997-1 and the
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<PAGE> 13
amount of Finance Charge Collections for such Business Day, MINUS (b) the sum
for each Business Day during such Monthly Period of the product of the Floating
Allocation Percentage for Series 1997-1 and the amount of Finance Charge
Collections for such Business Day described in clause (e) of the definition of
the term "Finance Charge Collections" in Section 1.1 of the Agreement, MINUS (c)
the aggregate amounts withdrawn from the Collection Account during such Monthly
Period pursuant to subsections 4.6(a)(i) through (vii), (x), (xi) or (xv),
4.6(b)(i) through (vii) or (x) or 4.6(c)(i) through (vii), (x), (xi) or (xv) of
the Agreement, as applicable, during such Monthly Period, expressed as an
annualized percentage of the average daily Invested Amount during such Monthly
Period.
"EXCESS SPREAD ENHANCEMENT CAP PERCENTAGE" shall mean, for any
Monthly Period, if the average of the Excess Spread Percentages for such Monthly
Period and the two preceding Monthly Periods (or (i) in the case of the February
1997 Monthly Period, for such Monthly Period, and (ii) in the case of the March
1997 Monthly Period, for such Monthly Period and the February 1997 Monthly
Period) is greater than the percentage (if any) set forth in the left-hand
column below and less than or equal to the percentage (if any) set forth in the
middle column below, the percentage set forth opposite such percentages in the
right-hand column below:
Three-Month Average Excess Spread
Excess Spread Percentage Enhancement Cap
> =< ---------------
Percentage
- ------------------- ------------------- ---------------
5.00% -- 0.00%
4.00% 5.00% 1.00%
3.00% 4.00% 2.00%
2.00% 3.00% 3.00%
-- 2.00% 4.00%
PROVIDED, that following any date on which the Excess Spread Enhancement Cap
Percentage for a Monthly Period shall have increased from the percentage
applicable to the prior Monthly Period, such increased Excess Spread Enhancement
Cap Percentage shall not thereafter be reduced until the Monthly Period for
which both (i) the average of the Excess Spread Percentages for such Monthly
Period and the two preceding Monthly Periods (or, if less, the number of Monthly
Periods which have been completed following the February 1997 Monthly Period)
and (ii) the average of the Excess Spread Percentages for such Monthly Period
and the five preceding Monthly Periods (or, if less, the number of Monthly
Periods which have been completed following the February 1997 Monthly Period)
would, based on the percentages (if any) set forth in the left-hand and middle
columns above, have resulted in a lower Excess Spread Enhancement Cap Percentage
in the right-hand column above, and the amount of any reduction for a Monthly
Period shall not exceed 1.00%.
"EXTENSION" shall mean the procedure by which all or a portion
of the Investor Certificateholders consent to the extension of the Revolving
Period to the new Amortization Period Commencement Date set forth in the
Extension Notice, pursuant to Section 6.16 of the Agreement.
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<PAGE> 14
"EXTENSION DATE" shall mean the last day of the January 2000
Monthly Period or if an Extension has already occurred, the date of the next
Extension Date set forth in the Extension Notice relating to the Extension then
in effect (or, if any such date is not a Business Day, the next preceding
Business Day).
"EXTENSION NOTICE" shall have the meaning specified in
subsection 6.16(a) of the Agreement.
"EXTENSION OPINION" shall have the meaning specified in
subsection 6.16(a) of the Agreement.
"EXTENSION TAX OPINION" shall have the meaning specified in
subsection 6.16(a) of the Agreement.
"FIXED/FLOATING ALLOCATION PERCENTAGE" shall mean for any
Business Day the percentage equivalent of a fraction, the numerator of which is
the Invested Amount for the day immediately following the last day of the
Revolving Period and the denominator of which is the greater of (a) the sum of
the aggregate amount of Principal Receivables in the Trust and the amount on
deposit in the Excess Funding Account as of the end of the preceding Business
Day and (b) the sum of the numerators used to calculate the allocation
percentages with respect to Principal Receivables of all Series outstanding on
such Business Day.
"FLOATING ALLOCATION PERCENTAGE" shall mean for any Business
Day the sum of the applicable Class A Floating Allocation Percentage, Class B
Floating Allocation Percentage and the Class C Floating Allocation Percentage
for such Business Day.
"INITIAL INVESTED AMOUNT" shall mean the aggregate initial
principal amount of the Series 1997-1 Certificates on the Issuance Date.
"INTERCHANGE COLLECTIONS" shall mean, with respect to Series
1997-1 on any Business Day, the product of the Floating Allocation Percentage
for Series 1997-1 and the amount of Interchange for such Business Day.
"INTEREST FUNDING ACCOUNT" shall have the meaning specified in
subsection 4.11(a) of the Agreement.
"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 date, (b) the Class B Invested Amount as of such date and (c) the Class
C Invested Amount as of such date.
"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 the Class C Investor Charge-Offs.
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<PAGE> 15
"INVESTOR DEFAULT AMOUNT" shall mean, with respect to each
Business Day, an amount equal to the product of the aggregate Default Amount for
all Defaulted Accounts on such Business Day and the Floating Allocation
Percentage applicable for such Business Day.
"INVESTOR PERCENTAGE" shall mean for any Business Day, (a)
with respect to (i) Receivables in Defaulted Accounts or any Uncovered Dilution
Amount at any time, (ii) Finance Charge Collections so long as no Pay Out Event
has occurred with respect to the Series 1997-1 or any other Series, and (iii)
Principal Collections during the Revolving Period, the Floating Allocation
Percentage and (b) with respect to (i) Finance Charge Collections if a Pay Out
Event has occurred with respect to the Series 1997-1 or any other Series and
(ii) Principal Collections during the Amortization Period, the Fixed/Floating
Allocation Percentage.
"INVESTOR 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 and including the preceding Business Day to but
excluding such Business Day and the denominator of which is the actual number of
days in the year, (ii) the Series Servicing Fee Percentage and (iii) the
Invested Amount for such Business Day.
"INVESTOR UNCOVERED DILUTION AMOUNT" shall mean, with respect
to each Business Day, an amount equal to the product of the Uncovered Dilution
Amount for such Business Day and the Floating Allocation Percentage applicable
for such Business Day.
"ISSUANCE DATE" shall mean the initial date on which the
Investor Certificates are issued.
"MAXIMUM FACILITY AMOUNT" shall mean for any Business Day, the
sum of (i) the aggregate Commitments, as defined in the Class A Certificate
Purchase Agreement, plus (ii) the aggregate Commitments, as defined in the Class
B Certificate Purchase Agreement on such Business Day.
"MINIMUM TRANSFEROR PERCENTAGE" shall mean 2.0%.
"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 February 28, 1997.
"NET FINANCE CHARGE PORTFOLIO YIELD" shall mean, for Series
1997-1 with respect to any Monthly Period, the annualized percentage equivalent
of a fraction, the numerator of which is the amount of Finance Charge
Collections allocable to Series 1997-1 for such Monthly Period, calculated on a
cash basis after subtracting the Investor Default Amount applicable to Series
1997-1 for such Monthly Period, and the denominator of which is the average
daily Invested Amount of Series 1997-1 during such Monthly Period.
"NET PRINCIPAL COLLECTIONS" shall mean, for Series 1997-1 on
any Business Day, the sum of (i) the product, during the Revolving Period, of
the Floating Allocation Percentage for Series 1997-1 and, during the
Amortization Period, of the Fixed/Floating Allocation Percentage for Series
1997-1 and the amount of Principal Collections on such Business Day MINUS on and
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<PAGE> 16
after the occurrence of and during the continuance of a Discount Trigger Event
(ii) the lesser of (a) the sum of (x) the product of the Discount Allocation
Percentage for Series 1997-1 and the Discount Amount for such Business Day and
(y) the Carryover Discount Amount for Series 1997-1 for such Business Day and
(b) the amount determined in clause (i).
"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 10 of
this Variable Funding Supplement.
"PAYMENT RATE ENHANCEMENT CAP PERCENTAGE" shall mean, for any
Monthly Period, if the average of the Payment Rate Percentages for such Monthly
Period and the two preceding Monthly Periods (or (i) in the case of the February
1997 Monthly Period, for such Monthly Period, and (ii) in the case of the March
1997 Monthly Period, for such Monthly Period and the February 1997 Monthly
Period) is greater than the percentage (if any) set forth in the left-hand
column below and less than or equal to the percentage (if any) set forth in the
middle column below, the percentage set forth opposite such percentages in the
right-hand column below:
Three-Month Average Payment Rate
Payment Rate Percentage Enhancement Cap
=> < ---------------
Percentage
- ------------------- ------------------- ---------------
30.00% -- 0.00%
25.00% 30.00% 1.00%
-- 25.00% 2.00%
PROVIDED, that following any date on which the Payment Rate Enhancement Cap
Percentage for a Monthly Period shall have increased from the percentage
applicable to the prior Monthly Period, such increased Payment Rate Enhancement
Cap Percentage shall not thereafter be reduced until the Monthly Period for
which both (i) the average of the Payment Rate Percentages for such Monthly
Period and the two preceding Monthly Periods (or, if less, the number of Monthly
Periods which have been completed following the February 1997 Monthly Period)
and (ii) the average of the Payment Rate Percentages for such Monthly Period and
the five preceding Monthly Periods (or, if less, the number of Monthly Periods
which have been completed following the February 1997 Monthly Period) would,
based on the percentages (if any) set forth in the left-hand and middle columns
above, have resulted in a lower Payment Rate Enhancement Cap Percentage in the
right-hand column above, and the amount of any reduction for a Monthly Period
shall not exceed 1.00%.
"PAYMENT RATE PERCENTAGE" shall mean, for a Monthly Period,
the aggregate Net Principal Collections deposited into the Collection Account
during such Monthly Period, expressed as a percentage of (i) during the
Revolving Period, Floating Allocation Percentage for Series 1997-1 times the
Principal Receivables on the first day of such Monthly Period, and (ii) during
the Amortization Period, the Fixed/Floating Allocation Percentage for Series
1997-1 times the Principal Receivables on the first day of such Monthly Period.
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<PAGE> 17
"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 Total Finance Charge Collections allocated to the Series 1997-1
Certificates for such Monthly Period, calculated on a cash basis, minus the
aggregate Investor Default Amounts for each Business Day during such Monthly
Period, and the denominator of which is the average daily Invested Amount during
such Monthly Period.
"PRINCIPAL ACCOUNT" shall have the meaning specified in
subsection 4.11(a) of the Agreement.
"PRINCIPAL SHORTFALLS" shall mean, as the context requires,
either (a) the amounts specified as such in the Supplement for any other Series
or (b) with respect to the Series 1997-1 Certificates, the amount specified as
such in subsection 4.6(f) of the Agreement.
"PROCEEDS ACCOUNT" shall have the meaning specified in Section
4.12 of the Agreement.
"RATING AGENCY" shall mean each of Moody's and Standard &
Poor's.
"RATING AGENCY CONDITION" shall mean, with respect to any
action or series of related actions or proposed transaction or series or related
proposed transactions, that each Rating Agency shall have notified the
Administrative Agent in writing that such action or series of related actions or
proposed transaction or series or related proposed transactions will not result
in a reduction or withdrawal of the rating of any commercial paper notes or
other short-term or intermediate term obligation issued by any Structured
Purchaser (as defined in either the Class A Purchase Agreement or the Class B
Purchase Agreement) or in a reduction in any informal long-term rating assigned
by such Rating Agency to the Class A Certificates or the Class B Certificates.
"REALLOCATED CLASS B PRINCIPAL COLLECTIONS" shall have the
meaning specified in subsection 4.7(d) of the Agreement.
"REALLOCATED CLASS C PRINCIPAL COLLECTIONS" shall have the
meaning specified in subsection 4.7(c) of the Agreement.
"REQUIRED CLASS B INVESTED AMOUNT" shall mean, (a) for any
Business Day during the Revolving Period, an amount equal to 12.5% of the Class
A Invested Amount on such Business Day or (b) for any Business Day if, on or
prior to such Business Day, there have been any reductions in the Class B
Invested Amount pursuant to clause (d) of the definition of such term or if the
Amortization Period shall have commenced, an amount equal to the Required Class
B Invested Amount on the Business Day immediately preceding such reduction or
commencement; PROVIDED that from and after the Class B Principal Payment
Commencement Date, the Required Class B Invested Amount shall equal $0.
"REQUIRED CLASS C INVESTED AMOUNT" shall mean, (a) for any
Business Day during the Revolving Period, an amount equal to the greater of (i)
10% of the Invested Amount on such Business Day or (ii) 5% of the Maximum
Facility Amount on such Business Day, or (b) for any Business Day if, on or
prior to such Business Day, there have been any reductions in the Class
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<PAGE> 18
C Invested Amount pursuant to clause (d) of the definition of such term or if
the Amortization Period shall have commenced, an amount equal to the Required
Class C Invested Amount on the Business Day immediately preceding such reduction
or commencement; PROVIDED that from and after the Class C Principal Payment
Commencement Date, the Required Class C Invested Amount shall equal $0.
"REQUIRED RESERVE AMOUNT" shall mean, with respect to any
Business Day, the product of (i) the Enhancement Percentage for such Business
Day, times (ii) during the Revolving Period, the Invested Amount on such
Business Day or, during the Amortization Period, the Invested Amount on the last
day of the Revolving Period, PROVIDED that during the Amortization Period, the
Required Reserve Amount on any Business Day shall not exceed the Invested Amount
on such Business Day.
"RESERVE ACCOUNT" shall have the meaning specified in
subsection 4.9(a) of the Agreement.
"RESERVE ACCOUNT INCREASE NOTICE" shall mean a written notice
delivered by the Administrative Agent to the Servicer pursuant to the Class A
Certificate Purchase Agreement at the instruction of the Class A
Certificateholders or pursuant to the Class B Certificate Purchase Agreement at
the instruction of the Class B Certificateholders stating that a Termination
Event shall have occurred thereunder and directing that the Enhancement
Percentage be increased to 100%.
"REVOLVING PERIOD" shall mean (a) the period from and
including the Closing Date to, but not including, the Amortization Period
Commencement Date, or (b) with respect to an Extension, the period beginning on
the Extension Date and ending on the date specified in the Extension Notice.
"SCHEDULED SERIES 1997-1 TERMINATION DATE" shall mean January
31, 2002 unless a different date shall be set forth in the Extension Notice.
"SERIES 1997-1" shall mean the Series of the Prime Credit Card
Master Trust II represented by the Series 1997-1 Certificates.
"SERIES 1997-1 CERTIFICATEHOLDER" shall mean the Holder 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 CERTIFICATES" shall have the meaning specified
in Section 1 of this Variable Funding Supplement.
"SERIES 1997-1 DISCOUNT FACTOR" shall mean with respect to
Series 1997-1 for any Business Day, the amount for Series 1997-1, if any,
calculated as of the second preceding Monthly Period, by which either (x) (a)
the product of (i) the Base Rate plus one-half of one percent MINUS the Net
Finance Charge Portfolio Yield divided by the Annual Portfolio Turnover Rate and
(ii)
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<PAGE> 19
the Floating Allocation Percentage exceeds (b) zero or, (y) solely at the option
of the Transferor, the amount by which (a) the product of (i) the Base Rate plus
one percent MINUS the Net Finance Charge Portfolio Yield divided by the Annual
Portfolio Turnover Rate and (ii) the Floating Allocation Percentage exceeds (b)
zero; provided, however that the Series Discount Factor shall not exceed 4.00%.
"SERIES 1997-1 PAY OUT EVENT" shall have the meaning specified
in Section 10 of this Variable Funding Supplement.
"SERIES 1997-1 SHORTFALL" shall mean the amount, if any, by
which (x) the sum of the amounts described in subsections 4.6(a)(i) through (xv)
of the Agreement during the Revolving Period or subsections 4.6(b)(i) through
(xi) or 4.6(c)(i) through (xv) of the Agreement during the Amortization Period,
as applicable, exceeds (y) the Total Finance Charge Collections available for
application thereto pursuant to subsections 4.6(a), (b) or (c) of the Agreement,
as applicable, on any Business Day.
"SERIES 1997-1 TERMINATION DATE" shall mean the earlier to
occur of (i) the day after the Distribution Date on which the Series 1997-1
Certificates are paid in full including any Supplemental Payments, or (ii) the
Scheduled Series 1997-1 Termination Date.
"SERIES 1997-1 VARIABLE FUNDING CERTIFICATES" shall have the
meaning specified in Section 1 of this Variable Funding Supplement.
"SERIES SERVICING FEE PERCENTAGE" shall mean 2.00%.
"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 4.6(e)(iii) and 4.6(f) of the Agreement,
may be applied to Principal Shortfalls with respect to other outstanding Series
or (b) the amounts allocated to the investor certificates of other Series which
the applicable Supplements for such Series specify are to be treated as "Shared
Principal Collections" and which may be applied to cover Principal Shortfalls
with respect to the Series 1997-1 Certificates.
"TARGETED HOLDER" shall mean (i) each holder of a right to
receive interest, principal or any other amount with respect to any Class C
Certificate or any other certificates or other interest in the Trust, excluding
any certificates or other interest in the Trust (including, if applicable, the
Class A Variable Funding Certificates and the Class B Variable Funding
Certificates) 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 (iii) 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.
"TERMINATION EVENT" shall mean the occurrence of any event or
condition constituting a "Termination Event" in the Class A Certificate Purchase
Agreement or the Class B Certificate Purchase Agreement.
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<PAGE> 20
"TERMINATION PAYMENT DATE" shall mean the earlier of the first
Distribution Date following the liquidation or sale of the Receivables as a
result of an insolvency or bankruptcy event and the occurrence of the Scheduled
Series 1997-1 Termination Date.
"TOTAL FINANCE CHARGE COLLECTIONS" shall mean, with respect to
Series 1997-1 on any Business Day, the sum of (i) the product of applicable
Investor Percentage for the Series 1997-1 and the amount of Finance Charge
Collections for such Business Day, PLUS (ii) on and after the occurrence of and
during the continuance of a Discount Trigger Event the lesser of (a) the sum of
(x) the product of the Discount Allocation Percentage for Series 1997-1 and the
Discount Amount for such Business Day and (y) the Carryover Discount Amount for
Series 1997-1 for such Business Day and (b) the product of the applicable
Investor Percentage for the Series 1997-1 and the amount of Principal
Collections for such Business Day, PLUS (iii) available cash investment earnings
for such Business Day on amounts on deposit in the Reserve Account to the extent
such earnings are to be treated as Total Finance Charge Collections in
accordance with subsection 4.9(b), PLUS (iv) available cash investment earnings
for such Business Day on amounts on deposit in the Interest Funding Account, the
Principal Account, the Proceeds Account or the Excess Purchase Account.
"TRANSFER" shall have the meaning specified in subsection
6.17(a) of the Agreement.
"VFC ADDITIONAL CLASS A INVESTED AMOUNT" shall have the
meaning specified in subsection 6.15(a) of the Agreement.
"VFC ADDITIONAL CLASS B INVESTED AMOUNT" shall have the
meaning specified in subsection 6.15(a) of the Agreement.
"VFC ADDITIONAL CLASS C INVESTED AMOUNT" shall have the
meaning specified in subsection 6.15(a) of the Agreement.
"VFC ADDITIONAL INVESTED AMOUNT" shall have the meaning
specified in subsection 6.15(a) of the Agreement.
"VFC PRINCIPAL COLLECTIONS" shall mean amounts specified as
such in subsections 4.6(a)(v), 4.6(a)(vi), 4.6(a)(vii), 4.6(a)(x) and 4.6(d) of
the Agreement.
SECTION 3. REASSIGNMENT AND CERTAIN TRANSFER TERMS.
(a) 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
which the Invested Amount shall be less than 10% of the highest Invested Amount
since the Closing Date. The deposit required in connection with any such
termination and final distribution shall be equal to the Invested Amount plus
(i) all accrued and unpaid interest on the Series 1997-1 Certificates, (ii) all
accrued and unpaid Class A Program Fees, (iii) all unpaid Class A Additional
Payments and Class A Supplemental Payments, (iv) all accrued and unpaid Class B
Program Fees, and (v) all unpaid Class B Additional Payments and Class B
Supplemental Payments, through the day prior to the Distribution Date on which
the repurchase occurs.
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(b) In no event shall the Class C Certificates or any interest
therein be transferred, sold, exchanged, pledged, participated or otherwise
assigned, in whole or in part, unless the Transferor shall have consented in
writing to such transfer and unless (l) the Rating Agency Condition shall have
been satisfied, and (2) the Trustee shall have received an Opinion of Counsel
that such transfer does not (i) adversely affect the conclusions reached in any
of the federal income tax opinions dated the applicable Closing Date issued in
connection with the original issuance of any Series of Investor Certificates or
(ii) result in a taxable event to the holders of any such Series.
(c) Each Series 1997-1 Certificateholder, by accepting and
holding a Series 1997-1 Certificate or interest therein, will be deemed to have
represented and warranted that it is not (i) an employee benefit plan (as
defined in Section 3(3) of ERISA) that is subject to the provisions of Title I
of ERISA, (ii) a plan described in Section 4975(e)(1) of the Code, or (iii) an
entity whose underlying assets include plan assets by reason of a plan's
investment in the entity.
SECTION 4. DELIVERY AND PAYMENT FOR THE SERIES 1997-1
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
when authenticated in accordance with Section 6.2 of the Agreement.
SECTION 5. DEPOSITARY; 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 Definitive Certificates as provided in
Section 6.12 of the Agreement.
SECTION 6. ADDITION AND REMOVAL OF ACCOUNTS. (a) Paragraph
(b) of the definition of "AUTOMATIC ADDITIONAL ACCOUNT" in Section 1.1 of the
Agreement shall read in its entirety as follows and shall be applicable only
to the Series 1997-1 Certificates:
"(b) any other consumer revolving credit card
account, Receivables from which each Rating Agency permits to be added
automatically to the Trust; PROVIDED:
(i) the Rating Agency Condition shall have been
satisfied with respect to the inclusion of such
accounts as Automatic Additional Accounts pursuant
to this paragraph (b); and
(ii) the Administrative Agent on behalf of the Class A
Certificateholders and Class B Certificateholders
shall have consented in writing to including as
Automatic Additional Accounts any Accounts the
receivables of which have been purchased (but the
accounts of which have not been originated) by the
Originator or any VISA(R)or MasterCard(R)revolving
credit card accounts which have not been originated
by the Originator in accordance with the Credit and
Collection Policy substantially as in effect on the
Closing Date (subject to changes therein which would
not materially and adversely affect the interests of
the Series 1997-1 Certificateholders) with respect to
the retail operating subsidiaries of Federated as at
the Closing Date."
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(b) Subsection (viii) of Section 2.6(e) of the Agreement shall
read in its entirety as follows and shall be applicable only to the Series
1997-1 Certificates:
"(viii) the Administrative Agent on behalf of the Class A
Certificateholders and Class B Certificateholders
shall have consented in writing to including as
Automatic Additional Accounts any Accounts the
receivables of which have been purchased (but the
accounts of which have not been originated) by the
Originator or any VISA(R)or MasterCard(R)revolving
credit card accounts which have not been
originated by the Originator in accordance with
the Credit and Collection Policy substantially as
in effect on the Closing Date (subject to changes
therein which would not materially and adversely
affect the interests of the Series 1997-1
Certificateholders) with respect to the retail
operating subsidiaries of Federated as at the
Closing Date."
(c) Section 2.7(d) shall read in its entirety as follows and
shall be applicable only to the Series 1997-1 Certificates:
"Notwithstanding the foregoing, the Transferor will be
permitted to designate Removed Accounts in connection with the
sale by Federated or any Affiliate of Federated of all or
substantially all of the capital stock or assets of any retail
subsidiary of Federated if (A) the conditions in clauses (i),
(iii) and (iv) of subsection 2.7(b) have been met and the
Transferor shall have delivered to the Trustee and the
Administrative Agent an Officer's Certificate confirming the
compliance with such conditions and (B) the Administrative
Agent on behalf of the Class A Certificateholders and the
Class B Certificateholders has consented in writing to such
sale."
SECTION 7. ARTICLE IV OF AGREEMENT. Sections 4.1, 4.2 and 4.3
of the Agreement shall be 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, consisting of 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
Fixed/Floating Allocation Percentage (as applicable from time to time) of
Collections received with respect to the Receivables and (b) funds on deposit in
the Collection Account and the Excess Funding Account (for such Series, the
"SERIES 1997-1 CERTIFICATEHOLDERS' INTEREST"). The Class B Invested Amount and
the Class C Invested Amount shall be subordinate to the Class A Certificates,
and the Class C Invested Amount shall be subordinated to the Class B
Certificates.
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From and after the Amortization Period Commencement Date, the Class B
Certificates will not have the right to receive payments of principal until the
Class A Invested Amount has been paid in full, and the Class C Certificates will
not have the right to receive payments of principal until the Class A Invested
Amount and the Class B Invested Amount have been paid in full. The Exchangeable
Transferor Certificate shall not represent any interest in the Collection
Account or the Excess Funding Account, except as specifically provided in this
Article IV.
Section 4.5 COLLECTIONS AND ALLOCATION. The Servicer will
apply or will instruct the Trustee to apply all funds on deposit in the
Collection Account or the Excess Funding Account that are allocable to the
Series 1997-1 Certificates as described in this Article IV. 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 Collections in accordance with the Daily Report with respect to such
Business Day in accordance with the terms of Section 4.6 of the Agreement.
Section 4.6 APPLICATION OF FUNDS ON DEPOSIT IN THE COLLECTION
ACCOUNT FOR THE SERIES 1997-1 CERTIFICATES. (a) On each Business Day with
respect to the Revolving Period, the Servicer shall instruct the Trustee in
writing to withdraw and the Trustee, acting in accordance with such
instructions, shall withdraw, to the extent of Total Finance Charge Collections,
the amounts required to be withdrawn from the Collection Account pursuant to
subsections 4.6(a)(i) through 4.6(a)(xvi) of the Agreement.
(i) CLASS A INTEREST AND PROGRAM FEES. On each
Business Day, the Trustee, acting in accordance with instructions from the
Servicer, shall withdraw from the Collection Account and deposit into the
Interest Funding Account, to the extent of Total Finance Charge Collections for
such Business Day, an amount equal to sum of the Class A Interest and the Class
A Program Fees accrued since the preceding Business Day PLUS any Class A
Interest or Class A Program Fees due with respect to any prior Business Day but
not previously paid to the Class A Certificateholders.
(ii) CLASS B INTEREST AND PROGRAM FEES. On each
Business Day, the Trustee, acting in accordance with instructions from the
Servicer, shall withdraw from the Collection Account and deposit into the
Interest Funding Account, to the extent of Total Finance Charge Collections for
such Business Day (after giving effect to the withdrawals pursuant to subsection
4.6(a)(i) of the Agreement), an amount equal to the sum of the Class B Interest
and the Class B Program Fees accrued since the preceding Business Day PLUS any
Class B Interest or Class B Program Fees due with respect to any prior Business
Day but not previously paid to the Class B Certificateholders.
(iii) INVESTOR SERVICING FEE PAYABLE FROM
INTERCHANGE. On each Business Day, the Trustee, acting in accordance with
instructions from the Servicer, shall withdraw from the Collection Account and
distribute to the Servicer, to the extent of the lesser of (A) Total Finance
Charge Collections for such Business Day (after giving effect to the withdrawals
pursuant to subsection 4.6(a)(i) and (ii) of the Agreement) and (B) Interchange
Collections for such Business Day, the Investor Servicing Fee accrued since the
preceding Business Day PLUS any Investor Servicing Fee due with respect to any
prior Business Day but not distributed to the Servicer.
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(iv) INVESTOR SERVICING FEE. On each Business Day,
if FDSNB or any Affiliate of FDSNB is not the Servicer, the Trustee, acting in
accordance with instructions from the Servicer, shall withdraw from the
Collection Account and distribute to the Servicer, to the extent of Total
Finance Charge Collections for such Business Day (after giving effect to the
withdrawals pursuant to subsection 4.6(a)(i) through (iii) of the Agreement),
the Investor Servicing Fee accrued since the preceding Business Day PLUS any
Investor Servicing Fee due with respect to any prior Business Day but not
distributed to the Servicer, to the extent not withdrawn on such Business Day
pursuant to subsection 4.6(a)(iii) of the Agreement.
(v) INVESTOR DEFAULT AMOUNT AND UNCOVERED
DILUTION AMOUNT. On each Business Day, the Trustee, acting in accordance with
instructions from the Servicer, shall withdraw from the Collection Account, to
the extent of Total Finance Charge Collections for such Business Day (after
giving effect to the withdrawals pursuant to subsections 4.6(a)(i) through (iv)
of the Agreement), an amount equal to the sum of (A) the aggregate Investor
Default Amount for such Business Day, PLUS (B) the unpaid Investor Default
Amount for any previous Business Day, PLUS (C) the Investor Uncovered Dilution
Amount for such Business Day, PLUS (D) the unpaid Investor Uncovered Dilution
Amount for any previous Business Day, such amount to be treated as VFC Principal
Collections during the Revolving Period.
(vi) REIMBURSEMENT OF CLASS A INVESTOR
CHARGE-OFFS. On each Business Day, the Trustee, acting in accordance with
instructions from the Servicer, shall withdraw from the Collection Account,
to the extent of Total Finance Charge Collections for such Business Day (after
giving effect to the withdrawals pursuant to subsections 4.6(a)(i) through (v)
of the Agreement), an amount equal to the unreimbursed Class A Investor
Charge-Offs, such amount to be treated as VFC Principal Collections during the
Revolving Period.
(vii) REIMBURSEMENT OF CLASS B INVESTOR
CHARGE-OFFS. On each Business Day, the Trustee, acting in accordance with
instructions from the Servicer, shall withdraw from the Collection Account, to
the extent of Total Finance Charge Collections for such Business Day (after
giving effect to the withdrawals pursuant to subsections 4.6(a)(i) through (vi)
of the Agreement), an amount equal to the unreimbursed Class B Investor
Charge-Offs, such amount to be treated as VFC Principal Collections during the
Revolving Period.
(viii) CLASS A ADDITIONAL PAYMENTS. On each
Business Day, the Trustee, acting in accordance with instructions from the
Servicer, shall withdraw from the Collection Account and pay to the Class A
Certificateholders, to the extent of Total Finance Charge Collections for such
Business Day (after giving effect to the withdrawals pursuant to subsection
4.6(a)(i) through (vii) of the Agreement), the portion of the Class A Additional
Payments accrued since the preceding Business Day PLUS any Class A Additional
Payments due with respect to any prior Business Day but not distributed to the
Class A Certificateholders, with interest thereon as provided in the Class A
Certificate Purchase Agreement.
(ix) CLASS B ADDITIONAL PAYMENTS. On each
Business Day, the Trustee, acting in accordance with instructions from the
Servicer, shall withdraw from the Collection Account and pay to the Class B
Certificateholders, to the extent of Total Finance Charge Collections for such
Business Day (after giving effect to the withdrawals pursuant to subsection
4.6(a)(i) through (viii) of the Agreement), the portion of the Class B
Additional Payments accrued
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since the preceding Business Day PLUS any Class B Additional Payments with
respect to any prior Business Day but not distributed to the Class B
Certificateholders, with interest thereon as provided in the Class B Certificate
Purchase Agreement.
(x) REIMBURSEMENT OF CLASS C INVESTOR CHARGE-OFFS.
On each Business Day, the Trustee, acting in accordance with instructions from
the Servicer, shall withdraw from the Collection Account, to the extent of Total
Finance Charge Collections for such Business Day after giving effect to the
withdrawals pursuant to subsections 4.6(a)(i) through (ix) of the Agreement), an
amount equal to the unreimbursed Class C Investor Charge-Offs, such amount to be
treated as VFC Principal Collections during the Revolving Period.
(xi) CLASS C INTEREST. On each Business Day, the
Trustee, acting in accordance with instructions from the Servicer, shall
withdraw from the Collection Account and pay to the Class C Certificateholders
to the extent of Total Finance Charge Collections for such Business Day (after
giving effect to the withdrawals pursuant to subsections 4.6(a)(i) through (x)
of the Agreement), an amount equal to (x) the amount of interest which has
accrued with respect to the outstanding aggregate principal amount of the Class
C Certificates at the Class C Certificate Rate but which has not been paid to
the Class C Certificateholders PLUS (y) additional interest at the Class C
Certificate Rate for interest that has accrued on interest that was due pursuant
to this subsection but was not previously paid to the Class C
Certificateholders.
(xii) REQUIRED RESERVE AMOUNT. On each Business
Day, the Trustee, acting in accordance with instructions from the Servicer,
shall withdraw from the Collection Account and deposit into the Reserve Account,
to the extent of Total Finance Charge Collections for such Business Day (after
giving effect to the withdrawals pursuant to subsections 4.6(a)(i) through (xi)
of the Agreement), an amount equal to the excess, if any, of the Required
Reserve Amount (determined after all deposits, withdrawals, reductions, payments
and adjustments to be made with respect to such date) over the Available Reserve
Amount (without giving effect to any deposit made on such Business Day under
Section 4.6).
(xiii) CLASS A SUPPLEMENTAL PAYMENTS. On each
Business Day, the Trustee, acting in accordance with instructions from the
Servicer, shall withdraw from the Collection Account and pay to the Class A
Agent, to the extent of Total Finance Charge Collections for such Business Day
(after giving effect to the withdrawals pursuant to subsections 4.6(a)(i)
through (xii) of the Agreement), an amount equal to the sum of all unpaid Class
A Supplemental Payments.
(xiv) CLASS B SUPPLEMENTAL PAYMENTS. On each
Business Day, the Trustee, acting in accordance with instructions from the
Servicer, shall withdraw from the Collection Account and pay to the Class B
Agent, to the extent of Total Finance Charge Collections for such Business Day
(after giving effect to the withdrawals pursuant to subsections 4.6(a)(i)
through (xiii) of the Agreement), an amount equal to the sum of all unpaid Class
B Supplemental Payments.
(xv) FDSNB SERVICING FEE. On each Business Day,
if FDSNB or any Affiliate of FDSNB is the Servicer, the Trustee, acting in
accordance with instructions from the Servicer, shall withdraw from the
Collection Account and distribute to the Servicer, to the extent of Total
Finance Charge Collections for such Business Day (after giving effect to the
withdrawals
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pursuant to subsections 4.6(a)(i) through (xiv) of the Agreement) the Investor
Servicing Fee accrued since the preceding Business Day PLUS any Investor
Servicing Fee due with respect to any prior Business Day but not distributed to
the Servicer, to the extent not withdrawn on such Business Day pursuant to
subsection 4.6(a)(iii) of the Agreement.
(xvi) EXCESS FINANCE CHARGE COLLECTIONS. Any
amounts remaining in the Collection Account to the extent of the Total Finance
Charge Collections for such Business Day (after giving effect to the withdrawals
pursuant to subsections 4.6(a)(i) through (xv) of the Agreement) shall be
treated as Excess Finance Charge Collections allocable to other Series in Group
I, and the Servicer shall direct the Trustee in writing on each Business Day to
withdraw and the Trustee, acting in accordance with such instructions, shall
withdraw such amounts from the Collection Account and first make such amounts
available as Excess Finance Charge Collections to pay to Certificateholders of
other Series in Group I to the extent of shortfalls, if any, in amounts payable
to such certificateholders from Finance Charge Collections allocated to such
other Series, then pay any unpaid commercially reasonable costs and expenses of
a Successor Servicer, if any, and then pay any remaining Excess Finance Charge
Collections to the Transferor.
(b) On each Business Day prior to the last Business Day of any
Monthly Period with respect to the Amortization Period, the Servicer shall
instruct the Trustee in writing to withdraw and the Trustee, acting in
accordance with such instructions, shall withdraw, to the extent of Total
Finance Charge Collections, the amounts required to be withdrawn from the
Collection Account pursuant to subsections 4.6(b)(i) through 4.6(b)(xii) of the
Agreement.
(i) CLASS A INTEREST AND PROGRAM FEES. On each
Business Day, the Trustee, acting in accordance with instructions from the
Servicer, shall withdraw from the Collection Account and deposit into the
Interest Funding Account, to the extent of Total Finance Charge Collections for
such Business Day, an amount equal to the sum of the Class A Interest and the
Class A Program Fees accrued since the preceding Business Day PLUS any Class A
Interest or Class A Program Fees due with respect to any prior Business Day but
not previously paid to the Class A Certificateholders.
(ii) CLASS B INTEREST AND PROGRAM FEES. On each
Business Day, the Trustee, acting in accordance with instructions from the
Servicer, shall withdraw from the Collection Account and deposit into the
Interest Funding Account, to the extent of Total Finance Charge Collections for
such Business Day (after giving effect to the withdrawals pursuant to subsection
4.6(b)(i) of the Agreement), an amount equal to the sum of the Class B Interest
and the Class B Program Fees accrued since the preceding Business Day PLUS any
Class B Interest or Class B Program Fees due with respect to any prior Business
Day but not previously paid to the Class B Certificateholders.
(iii) INVESTOR SERVICING FEE PAYABLE FROM
INTERCHANGE. On each Business Day, the Trustee, acting in accordance with
instructions from the Servicer, shall withdraw from the Collection Account and
distribute to the Servicer, to the extent of the lesser of (A) Total Finance
Charge Collections for such Business Day (after giving effect to the withdrawals
pursuant to subsection 4.6(b)(i) and (ii) of the Agreement) and (B) Interchange
Collections for such Business Day, the Investor Servicing Fee accrued since the
preceding Business Day PLUS any
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Investor Servicing Fee due with respect to any prior Business Day but not
distributed to the Servicer.
(iv) INVESTOR SERVICING FEE. On each Business
Day, if FDSNB or any Affiliate of FDSNB is not the Servicer, the Trustee, acting
in accordance with instructions from the Servicer, shall withdraw from the
Collection Account and distribute to the Servicer, to the extent of Total
Finance Charge Collections for such Business Day (after giving effect to the
withdrawals pursuant to subsection 4.6(b)(i) through (iii) of the Agreement),
the Investor Servicing Fee accrued since the preceding Business Day PLUS any
Investor Servicing Fee due with respect to any prior Business Day but not
distributed to the Servicer, to the extent not withdrawn on such Business Day
pursuant to subsection 4.6(a)(iii) of the Agreement.
(v) INVESTOR DEFAULT AMOUNT AND UNCOVERED
DILUTION AMOUNT. On each Business Day, the Trustee, acting in accordance with
instructions from the Servicer, shall withdraw from the Collection Account, to
the extent of Total Finance Charge Collections for such Business Day (after
giving effect to the withdrawals pursuant to subsections 4.6(b)(i) through (iv)
of the Agreement), an amount equal to the sum of (A) the aggregate Investor
Default Amount for such Business Day, PLUS (B) the unpaid Investor Default
Amount for any previous Business Day, PLUS (C) the Investor Uncovered Dilution
Amount for such Business Day, PLUS (D) the unpaid Investor Uncovered Dilution
Amount for any previous Business Day, such amount to be deposited into the
Principal Account or paid pursuant to subsection 4.6(e) to the applicable Class
or Classes of Certificateholders on such Business Day.
(vi) REIMBURSEMENT OF CLASS A INVESTOR
CHARGE-OFFS. On each Business Day, the Trustee, acting in accordance with
instructions from the Servicer, shall withdraw from the Collection Account, to
the extent of Total Finance Charge Collections for such Business Day (after
giving effect to the withdrawals pursuant to subsections 4.6(b)(i) through (v)
of the Agreement), an amount equal to the unreimbursed Class A Investor
Charge-Offs, such amount to be deposited into the Principal Account or paid
pursuant to subsection 4.6(e) to the applicable Class or Classes of
Certificateholders on such Business Day.
(vii) REIMBURSEMENT OF CLASS B INVESTOR
CHARGE-OFFS. On each Business Day, the Trustee, acting in accordance with
instructions from the Servicer, shall withdraw from the Collection Account, to
the extent of Total Finance Charge Collections for such Business Day (after
giving effect to the withdrawals pursuant to subsections 4.6(b)(i) through (vi)
of the Agreement), an amount equal to the unreimbursed Class B Investor
Charge-Offs, such amount to be deposited into the Principal Account or paid
pursuant to subsection 4.6(e) to the applicable Class or Classes of
Certificateholders on such Business Day.
(viii) CLASS A ADDITIONAL PAYMENTS. On each
Business Day, the Trustee, acting in accordance with instructions from the
Servicer, shall withdraw from the Collection Account and pay to the Class A
Certificateholders, to the extent of Total Finance Charge Collections for such
Business Day (after giving effect to the withdrawals pursuant to subsection
4.6(b)(i) through (vii) of the Agreement), the portion of the Class A Additional
Payments accrued since the preceding Business Day PLUS any Class A Additional
Payments due with respect to any prior Business Day but not distributed to the
Class A Certificateholders, with interest thereon as provided in the Class A
Certificate Purchase Agreement.
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(ix) CLASS B ADDITIONAL PAYMENTS. On each
Business Day, the Trustee, acting in accordance with instructions from the
Servicer, shall withdraw from the Collection Account and pay to the Class B
Certificateholders, to the extent of Total Finance Charge Collections for such
Business Day (after giving effect to the withdrawals pursuant to subsection
4.6(b)(i) through (viii) of the Agreement), the portion of the Class B
Additional Payments accrued since the preceding Business Day PLUS any Class B
Additional Payments due with respect to any prior Business Day but not
distributed to the Class B Certificateholders, with interest thereon as provided
in the Class B Certificate Purchase Agreement.
(x) REIMBURSEMENT OF CLASS C INVESTOR
CHARGE-OFFS. On each Business Day, the Trustee, acting in accordance with
instructions from the Servicer, shall withdraw from the Collection Account, to
the extent of Total Finance Charge Collections for such Business Day after
giving effect to the withdrawals pursuant to subsections 4.6(b)(i) through
(ix) of the Agreement), an amount equal to the unreimbursed Class C Investor
Charge-Offs, such amount to be deposited into the Principal Account or paid
pursuant to subsection 4.6(e) to the applicable Class or Classes of
Certificateholders on such Business Day.
(xi) REQUIRED RESERVE AMOUNT. On each Business
Day, the Trustee, acting in accordance with instructions from the Servicer,
shall withdraw from the Collection Account and deposit into the Reserve Account,
to the extent of Total Finance Charge Collections for such Business Day (after
giving effect to the withdrawals pursuant to subsections 4.6(b)(i) through (x)
of the Agreement), an amount equal to the excess, if any, of the Required
Reserve Amount (determined after all deposits, withdrawals, reductions, payments
and adjustments to be made with respect to such date) over the Available Reserve
Amount (without giving effect to any deposit made on such Business Day under
Section 4.6).
(xii) EXCESS FINANCE CHARGE COLLECTIONS. Any
amounts remaining in the Collection Account to the extent of the Total Finance
Charge Collections for such Business Day (after giving effect to the withdrawals
pursuant to subsections 4.6(b)(i) through (xi) of the Agreement), shall be
treated as Excess Finance Charge Collections, and the Trustee shall deposit any
such remaining Total Finance Charge Collections into the Collection Account and
shall add such funds to the Total Finance Charge Collections on each subsequent
Business Day in such Monthly Period until the last Business Day of the related
Monthly Period.
(c) On the last Business Day of each Monthly Period with
respect to the Amortization Period, the Servicer shall instruct the Trustee in
writing to withdraw and the Trustee, acting in accordance with such
instructions, shall withdraw, to the extent of Total Finance Charge Collections,
the amounts required to be withdrawn from the Collection Account pursuant to
subsections 4.6(c)(i) through 4.6(c)(xvi) of the Agreement.
(i) CLASS A INTEREST AND PROGRAM FEES. On each
Business Day, the Trustee, acting in accordance with instructions from the
Servicer, shall withdraw from the Collection Account and deposit into the
Interest Funding Account, to the extent of Total Finance Charge Collections for
such Business Day, an amount equal to the sum of the Class A Interest and Class
A Program Fees accrued since the preceding Business Day PLUS any Class A
Interest or Class A Program Fees due with respect to any prior Business Day but
not previously paid to the Class A Certificateholders.
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(ii) CLASS B INTEREST AND PROGRAM FEES. On each
Business Day, the Trustee, acting in accordance with instructions from the
Servicer, shall withdraw from the Collection Account and deposit into the
Interest Funding Account, to the extent of Total Finance Charge Collections for
such Business Day (after giving effect to the withdrawals pursuant to subsection
4.6(c)(i) of the Agreement), an amount equal to the sum of the Class B Interest
and the Class B Program Fees accrued since the preceding Business Day PLUS any
Class B Interest or the Class B Program Fees due with respect to any prior
Business Day but not previously paid to the Class B Certificateholders.
(iii) INVESTOR SERVICING FEE PAYABLE FROM
INTERCHANGE. On each Business Day, the Trustee, acting in accordance with
instructions from the Servicer, shall withdraw from the Collection Account and
distribute to the Servicer, to the extent of the lesser of (A) Total Finance
Charge Collections for such Business Day (after giving effect to the withdrawals
pursuant to subsection 4.6(c)(i) and (ii) of the Agreement) and (B) Interchange
Collections for such Business Day, the Investor Servicing Fee accrued since the
preceding Business Day PLUS any Investor Servicing Fee due with respect to any
prior Business Day but not distributed to the Servicer.
(iv) INVESTOR SERVICING FEE. On each Business Day,
if FDSNB or any Affiliate of FDSNB is not the Servicer, the Trustee, acting in
accordance with instructions from the Servicer, shall withdraw from the
Collection Account and distribute to the Servicer, to the extent of Total
Finance Charge Collections for such Business Day (after giving effect to the
withdrawals pursuant to subsection 4.6(c)(i) through (iii) of the Agreement),
the Investor Servicing Fee accrued since the preceding Business Day PLUS any
Investor Servicing Fee due with respect to any prior Business Day but not
distributed to the Servicer, to the extent not withdrawn on such Business Day
pursuant to subsection 4.6(c)(iii) of the Agreement.
(v) INVESTOR DEFAULT AMOUNT AND UNCOVERED
DILUTION AMOUNT. On each Business Day, the Trustee, acting in accordance with
instructions from the Servicer, shall withdraw from the Collection Account, to
the extent of Total Finance Charge Collections for such Business Day (after
giving effect to the withdrawals pursuant to subsections 4.6(c)(i) through (iv)
of the Agreement), an amount equal to the sum of (A) the aggregate Investor
Default Amount for such Business Day, PLUS (B) the unpaid Investor Default
Amount for any previous Business Day, PLUS (C) the Investor Uncovered Dilution
Amount for such Business Day, PLUS (D) the unpaid Investor Uncovered Dilution
Amount for any previous Business Day, such amount to be deposited into the
Principal Account or paid pursuant to subsection 4.6(e) to the applicable Class
or Classes of Certificateholders on such Business Day.
(vi) REIMBURSEMENT OF CLASS A INVESTOR
CHARGE-OFFS. On each Business Day, the Trustee, acting in accordance with
instructions from the Servicer, shall withdraw from the Collection Account, to
the extent of Total Finance Charge Collections for such Business Day (after
giving effect to the withdrawals pursuant to subsections 4.6(c)(i) through (v)
of the Agreement), an amount equal to the unreimbursed Class A Investor
Charge-Offs, such amount to be deposited into the Principal Account or paid
pursuant to subsection 4.6(e) to the applicable Class or Classes of
Certificateholders on such Business Day.
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(vii) REIMBURSEMENT OF CLASS B INVESTOR
CHARGE-OFFS. On each Business Day, the Trustee, acting in accordance with
instructions from the Servicer, shall withdraw from the Collection Account, to
the extent of Total Finance Charge Collections for such Business Day (after
giving effect to the withdrawals pursuant to subsections 4.6(c)(i) through (vi)
of the Agreement), an amount equal to the unreimbursed Class B Investor
Charge-Offs, such amount to be deposited into the Principal Account or paid
pursuant to subsection 4.6(e) to the applicable Class or Classes of
Certificateholders on such Business Day.
(viii) CLASS A ADDITIONAL PAYMENTS. On each
Business Day, the Trustee, acting in accordance with instructions from the
Servicer, shall withdraw from the Collection Account and pay to the Class A
Certificateholders, to the extent of Total Finance Charge Collections for such
Business Day (after giving effect to the withdrawals pursuant to subsection
4.6(c)(i) through (vii) of the Agreement), the portion of the Class A Additional
Payments accrued since the preceding Business Day PLUS any Class A Additional
Payments due with respect to any prior Business Day but not distributed to the
Class A Certificateholders, with interest thereon as provided in the Class A
Certificate Purchase Agreement.
(ix) CLASS B ADDITIONAL PAYMENTS. On each Business
Day, the Trustee, acting in accordance with instructions from the Servicer,
shall withdraw from the Collection Account and pay to the Class B
Certificateholders, to the extent of Total Finance Charge Collections for such
Business Day (after giving effect to the withdrawals pursuant to subsection
4.6(c)(i) through (viii) of the Agreement), the portion of the Class B
Additional Payments accrued since the preceding Business Day PLUS any Class B
Additional Payments due with respect to any prior Business Day but not
distributed to the Class B Certificateholders, with interest thereon as provided
in the Class B Certificate Purchase Agreement.
(x) REIMBURSEMENT OF CLASS C INVESTOR
CHARGE-OFFS. On each Business Day, the Trustee, acting in accordance with
instructions from the Servicer, shall withdraw from the Collection Account, to
the extent of Total Finance Charge Collections for such Business Day after
giving effect to the withdrawals pursuant to subsections 4.6(c)(i) through
(ix) of the Agreement), an amount equal to the unreimbursed Class C Investor
Charge-Offs, such amount to be deposited into the Principal Account or paid
pursuant to subsection 4.6(e) to the applicable Class or Classes of
Certificateholders on such Business Day.
(xi) CLASS C INTEREST. On each Business Day, the
Trustee, acting in accordance with instructions from the Servicer, shall
withdraw from the Collection Account and pay to the Class C Certificateholders
to the extent of Total Finance Charge Collections for such Business Day (after
giving effect to the withdrawals pursuant to subsections 4.6(c)(i) through (x)
of the Agreement), an amount equal to (x) the amount of interest which has
accrued with respect to the outstanding aggregate principal amount of the Class
C Certificates at the Class C Certificate Rate but which has not been paid to
the Class C Certificateholders PLUS (y) additional interest at the Class C
Certificate Rate for interest that has accrued on interest that was due pursuant
to this subsection but was not previously paid to the Class C
Certificateholders.
(xii) REQUIRED RESERVE AMOUNT. On each Business
Day, the Trustee, acting in accordance with instructions from the Servicer,
shall withdraw from the Collection Account and deposit into the Reserve Account,
to the extent of Total Finance Charge Collections
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for such Business Day (after giving effect to the withdrawals pursuant to
subsections 4.6(c)(i) through (xi) of the Agreement), an amount equal to excess,
if any, of the Required Reserve Amount (determined after all deposits,
withdrawals, reductions, payments and adjustments to be made with respect to
such date) over the Available Reserve Amount (without giving effect to any
deposit made on such Business Day under Section 4.6).
(xiii) CLASS A SUPPLEMENTAL PAYMENTS. On each
Business Day, the Trustee, acting in accordance with instructions from the
Servicer, shall withdraw from the Collection Account and pay to the Class A
Agent, to the extent of Total Finance Charge Collections for such Business Day
(after giving effect to the withdrawals pursuant to subsections 4.6(c)(i)
through (xii) of the Agreement), an amount equal to the sum of all unpaid Class
A Supplemental Payments.
(xiv) CLASS B SUPPLEMENTAL PAYMENTS. On each
Business Day, the Trustee, acting in accordance with instructions from the
Servicer, shall withdraw from the Collection Account and pay to the Class B
Agent, to the extent of Total Finance Charge Collections for such Business Day
(after giving effect to the withdrawals pursuant to subsections 4.6(c)(i)
through (xiii) of the Agreement), an amount equal to the sum of all unpaid Class
B Supplemental Payments.
(xv) FDSNB SERVICING FEE. On each Business Day, if
FDSNB or any Affiliate of FDSNB is the Servicer, the Trustee, acting in
accordance with instructions from the Servicer, shall withdraw from the
Collection Account and distribute to the Servicer, to the extent of Total
Finance Charge Collections for such Business Day (after giving effect to the
withdrawals pursuant to subsections 4.6(c)(i) through (xiv) of the Agreement)
the Investor Servicing Fee accrued since the preceding Business Day PLUS any
Investor Servicing Fee due with respect to any prior Business Day but not
distributed to the Servicer, to the extent not withdrawn on such Business Day
pursuant to subsection 4.6(c)(iii) of the Agreement.
(xvi) EXCESS FINANCE CHARGE COLLECTIONS. Any
amounts remaining in the Collection Account to the extent of Total Finance
Charge Collections for such Business Day (after giving effect to the withdrawals
pursuant to subsections 4.6(c)(i) through (xv) of the Agreement), shall be
treated as Excess Finance Charge Collections allocable to other Series in Group
I, and the Servicer shall direct the Trustee on such Business Day to withdraw
such amounts from the Collection Account and to first make such amounts
available as Excess Finance Charge Collections to pay to Certificateholders of
other Series in Group I to the extent of shortfalls, if any, in amounts payable
to such certificateholders from Finance Charge 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 Finance
Charge Collections to the Transferor.
(d) For each Business Day (i) the funds on deposit in the
Collection Account in an amount not to exceed, during the Revolving Period, the
Class C Floating Allocation Percentage or, during the Amortization Period, the
Class C Fixed/Floating Allocation Percentage of Net Principal Collections with
respect to such Business Day shall be applied by the Servicer or by the Trustee
acting in accordance with the instructions of the Servicer as Reallocated Class
C Principal Collections to the extent necessary to pay first the Class A
Required Amount and then the Class B Required Amount on such Business Day as
described in subsection 4.7(c) of the Agreement, (ii) if any Class A Required
Amount remains after giving effect to such application, the funds on
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deposit in the Collection Account in an amount not to exceed, during the
Revolving Period, the Class B Floating Allocation Percentage or, during the
Amortization Period, the Class B Fixed/Floating Allocation Percentage of Net
Principal Collections with respect to such Business Day shall be applied by the
Servicer or by the Trustee acting in accordance with the instructions of the
Servicer as Reallocated Class B Principal Collections to the extent necessary to
pay the remaining Class A Required Amount on such Business Day as described in
subsection 4.7(d) of the Agreement, and (iii) the remainder of the Net Principal
Collections shall be treated as VFC Principal Collections and applied as
provided in subsection 4.6(f) of the Agreement.
(e) For each Business Day on and after the Amortization Period
Commencement Date, the funds on deposit in the Collection Account will be
distributed by the Trustee acting in accordance with the instructions of the
Servicer in the following priority:
(i) an amount equal to the sum of (A) Net Principal
Collections for such Business Day (MINUS the amount of Reallocated
Class B Principal Collections and Reallocated Class C Principal
Collections with respect to such Business Day which is required to fund
a deficiency pursuant to subsection 4.7(c) or 4.7(d) of the Agreement
for such Business Day, if any), (B) any amount on deposit in the Excess
Funding Account allocated to the Investor Certificates on such Business
Day, and (C) the aggregate amounts, if any, allocated on such Business
Day pursuant to subsections 4.6(b)(v), (vi), (vii) or (x) or 4.6(c)(v),
(vi), (vii) or (x) (such sum, the "CLASS A DAILY PRINCIPAL AMOUNT"),
plus the amount of Shared Principal Collections allocated to the Series
1997-1 Certificates in accordance with Sections 4.3(e) and 4.6(f) of
the Agreement, will be deposited into the Principal Account until the
amount on deposit therein equals the Class A Invested Amount;
(ii) on and after the Class B Principal Payment
Commencement Date, an amount equal to the sum of (A) Net Principal
Collections for such Business Day (MINUS the amount of Reallocated
Class C Principal Collections with respect to such Business Day which
is required to fund a deficiency with respect to the Class B
Certificates pursuant to subsection 4.7(c) of the Agreement for such
Business Day), (B) any amount on deposit in the Excess Funding Account
allocated to the Investor Certificates on such Business Day, and (C)
the amount, if any, allocated to pursuant to subsections 4.6(b)(v),
(vii) or (x) or 4.6(c)(v), (vii) or (x) of the Agreement with respect
to such Business Day, MINUS, in the case of each of clauses (A), (B)
and (C) above, the amount thereof paid to the Class A
Certificateholders pursuant to subsection 4.6(e)(i) of the Agreement
(such sum, after such reduction, the "CLASS B DAILY PRINCIPAL Amount"),
will be deposited into the Principal Account until the amount on
deposit therein equals the Class B Invested Amount;
(iii) on and after the Class C Principal Payment
Commencement Date, an amount equal to (A) Net Principal Collections for
such Business Day, (B) any amount on deposit in the Excess Funding
Account allocated to the Class C Certificates on such Business Day, and
(C) the amount, if any, allocated to pursuant to subsections 4.6(b)(v)
or (x) or 4.6(c)(v) or (x) of the Agreement with respect to such
Business Day, MINUS, in the case of each of clauses (A), (B) and (C)
above, the amount thereof paid to the Class A Certificateholders
pursuant to subsection 4.6(e)(i) of the Agreement or to the Class B
Certificateholders pursuant to subsection 4.6(e)(ii) of the Agreement
(such sum, after such
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reduction, the "CLASS C DAILY PRINCIPAL AMOUNT") will be paid to the
Holders of the Class C Certificates; and
(iv) an amount equal to the balance of any such
remaining funds on deposit in the Collection Account on such Business
Day allocated to the Series 1997-1 Certificates shall be treated as
Shared Principal Collections and applied as provided in subsection
4.3(e) of the Agreement.
(f) VFC Principal Collections shall be applied by the Servicer
or by the Trustee acting in accordance with the instructions of the Servicer on
each Business Day with respect to the Revolving Period first, at the option of
the Transferor and in an amount to be determined by the Transferor, to make
payments of principal to (i) the Class A Certificateholders, (ii) if after
giving effect to such payment, both (A) no Series 1997-1 Pay Out Event shall
have occurred and be continuing and (B) the Class B Invested Amount shall not be
less than the Required Class B Invested Amount, to the Class A
Certificateholders and the Class B Certificateholders pro rata based on the
Invested Amount of each such Class on such Business Day, or (iii) if after
giving effect to such payment, both (A) no Series 1997-1 Pay Out Event shall
have occurred and be continuing, (B) the Class B Invested Amount shall not be
less than the Required Class B Invested Amount, and (C) the Class C Invested
Amount shall not be less than the Required Class C Invested Amount, to the Class
A Certificateholders, the Class B Certificateholders and the Class C
Certificateholders pro rata based on the Invested Amount of each such Class on
such Business Day and, then the remaining VFC Principal Collections shall be
treated as Shared Principal Collections available to make payments with respect
to other Series pursuant to subsection 4.3(e) of the Agreement. On any Business
Day Shared Principal Collections allocated to the Series 1997-1 Certificates for
such Business Day may be applied by the Servicer or by the Trustee acting in
accordance with the instructions of the Servicer, at the option of the
Transferor and in an amount (such amount to be deemed the "PRINCIPAL SHORTFALL"
with respect to the Series 1997-1 Certificates) to be determined by the
Transferor, to make payments of principal to (i) the Class A Certificateholders,
(ii) if after giving effect to such payment, both (A) no Series 1997-1 Pay Out
Event shall have occurred and be continuing and (B) the Class B Invested Amount
shall not be less than the Required Class B Invested Amount, to the Class A
Certificateholders and the Class B Certificateholders pro rata based on the
Invested Amount of each such Class on such Business Day, or (iii) if after
giving effect to such payment, both (A) no Series 1997-1 Pay Out Event shall
have occurred and be continuing, (B) the Class B Invested Amount shall not be
less than the Required Class B Invested Amount, and (C) the Class C Invested
Amount shall not be less than the Required Class C Invested Amount, to the Class
A Certificateholders, the Class B Certificateholders and the Class C
Certificateholders pro rata based on the Invested Amount of each such Class on
such Business Day. Amounts of principal to be paid to the Class A
Certificateholders or the Class B Certificateholders pursuant to this subsection
4.6(f) shall be deposited into the Principal Account.
(g) At the option of the Transferor on any Business Day, all
or any portion of Principal Collections otherwise to be paid to the Transferor
as Holder of the Exchangeable Transferor Certificate pursuant to subsection
4.3(b) of the Agreement on such Business Day or of Shared Principal Collections
otherwise to be paid to the Transferor pursuant to subsection 4.3(e) of the
Agreement on such Business Day may be deposited into the Reserve Account.
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Section 4.7 COVERAGE OF REQUIRED AMOUNTS 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 Transferor Finance
Charge Collections in an amount equal to the excess of (x) the product of (a)
the Base Rate and (b) the product of (i) the amount on deposit in the Excess
Funding Account and (ii) 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, such amount to be applied during the Revolving Period in the manner
specified in subsections 4.6(a)(i) through (ix) and (xii) through (xv) of the
Agreement or during the Amortization Period in the manner specified in
subsections 4.6(b)(i) through (ix) and (xi) of the Agreement or subsections
4.6(c)(i) through (ix) and (vii) through (xv), as applicable, of the Agreement.
After giving effect to such application, on each Business Day, the Servicer
shall determine the Class A Required Amount, the Class B Required Amount and the
Series 1997-1 Shortfall, if any. In the event that the Class A Required Amount,
the Class B Required Amount or the Series 1997-1 Shortfall for a Business Day is
greater than zero, the Servicer shall reflect such positive amount on the Daily
Report for such Business Day.
(b) To the extent of any Series 1997-1 Shortfall, the Servicer
shall apply any Excess Finance Charge Collections allocable to the Series 1997-1
Certificates in an amount equal to such Series 1997-1 Shortfall in the manner
specified in subsections 4.6(a)(i) through (xv) of the Agreement during the
Revolving Period or in the manner specified in subsections 4.6(b)(i) through
(xi) or 4.6(c)(i) through (xv) of the Agreement, as applicable, during the
Amortization Period. Excess Finance Charge Collections allocated to the Series
1997-1 Certificates for any Business Day shall mean an amount equal to the
product of (x) Excess Finance Charge Collections available from all other Series
in Group I for such Business Day and (y) a fraction, the numerator of which is
the Series 1997-1 Shortfall 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 Finance Charge Collections for all Series in Group I for such Business
Day. If there is any Class A Required Amount for a Business Day after such
application of Excess Finance Charge Collections, the amount thereof, up to the
Available Reserve Amount, shall be withdrawn by the Trustee acting in accordance
with the instructions of the Servicer on such Business Day from the Reserve
Account and shall be applied during the Revolving Period in the manner specified
in subsections 4.6(a)(i), (v), (vi) or (viii) of the Agreement, or during the
Amortization Period in the manner described in subsections 4.6(b)(i), (v), (vi)
or (viii) of the Agreement or subsections 4.6(c)(i), (v), (vi) or (viii) of the
Agreement, as applicable. If there is any Class B Required Amount for a Business
Day after such application of Excess Finance Charge Collections, the amount
thereof, up to the Available Reserve Amount (after giving effect to any
withdrawals in respect of the Class A Required Amount), shall be withdrawn by
the Trustee acting in accordance with the instructions of the Servicer on such
Business Day from the Reserve Account and shall be applied during the Revolving
Period in the manner specified in subsections 4.6(a)(ii), (v), (vii) or (ix) of
the Agreement, or during the Amortization Period in the manner described in
subsections 4.6(b)(ii), (v), (vi) or (ix) or 4.6(c)(ii), (v), (vii) or (ix) of
the Agreement, as applicable.
(c) In the event that the sum of the Class A Required Amount
and the Class B Required Amount for a Business Day exceeds the sum of the
Available Reserve Amount and the amount of the Excess Finance Charge Collections
allocated thereto on such Business Day, a portion of the Net Principal
Collections allocable to the Class C Certificates in an amount equal
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to the lesser of such excess and product of (i) (x) during the Revolving Period,
the Class C Floating Allocation Percentage or (y) during the Amortization
Period, the Class C Fixed/Floating Allocation Percentage and (ii) the amount of
Net Principal Collections in the Collection Account with respect to such
Business Day shall be allocated by the Servicer first to the Class A
Certificates and then to the Class B Certificates and applied on such Business
Day in accordance with the provisions during the Revolving Period of subsections
4.6(a)(i), (ii) or (iv) through (ix) of the Agreement and during the
Amortization Period, in accordance with the provisions of subsections 4.6(b)(i),
(ii) or (iv) through (ix) of the Agreement or 4.6(c)(i), (ii) or (iv) through
(ix) of the Agreement, as applicable; PROVIDED, HOWEVER, that with respect to
amounts applied pursuant to subsections 4.6(a)(iv), (b)(iv) and (c)(iv), such
amounts shall be applied only to the extent of the sum of the Class A Floating
Allocation Percentage and the Class B Floating Allocation Percentage of the
shortfall arising pursuant to such subsections (any such amount so applied,
"REALLOCATED CLASS C PRINCIPAL COLLECTIONS"). In the event that the sum of the
Class A Required Amount and the Class B Required Amount (determined in
accordance with the first sentence of this subsection (c)) exceeds such
Available Reserve Amount and the amount of such Excess Finance Charge
Collections and of such Net Principal Collections allocable to the Class C
Certificates, the Class C Invested Amount shall be reduced but only to the
extent that the Class C Invested Amount shall be reduced to zero and then the
Class B Invested Amount and, if applicable, the Class A Invested Amount shall be
reduced as provided in subsections 4.8(b) or 4.8(c) of the Agreement.
(d) In the event that the Class A Required Amount for a
Business Day exceeds the sum of the Available Reserve Amount, the amount of the
Excess Finance Charge Collections and the amount of Reallocated Class C
Principal Collections allocated thereto on such Business Day, a portion of the
Net Principal Collections allocable to the Class B Certificates in an amount
equal to the lesser of such excess and the product of (i) (x) during the
Revolving Period, the Class B Floating Allocation Percentage or (y) during the
Amortization Period, the Class B Fixed/Floating Allocation Percentage and (ii)
the amount of Net Principal Collections in the Collection Account with respect
to such Business Day, shall be allocated by the Servicer first to the Class A
Certificates and applied on such Business Day in accordance with the provisions
during the Revolving Period of subsections 4.6(a)(i), (iv), (v), (vi) and (viii)
of the Agreement and during the Amortization Period, in accordance with the
provisions of subsection 4.6(b)(i), (iv), (v), (vi) and (viii) of the Agreement
or subsection 4.6(c)(i), (iv), (v), (vi) and (viii) of the Agreement, as
applicable; PROVIDED, HOWEVER, that with respect to amounts applied pursuant to
subsections 4.6(a)(iv), (b) (iv) and (c) (iv), such amounts shall be applied
only to the extent of the Class A Floating Allocation Percentage of the
shortfall arising pursuant to such subsections (any such amount so applied,
"REALLOCATED CLASS B PRINCIPAL COLLECTIONS"). In the event that the Class A
Required Amount (determined in accordance with the first sentence of this
subsection (d)) exceeds such Available Reserve Amount and the amount of such
Excess Finance Charge Collections and of such Net Principal Collections
allocable to the Class B Certificates, the Class B Invested Amount shall be
reduced but only to the extent that the Class B Invested Amount shall be reduced
to zero and then the Class A Invested Amount shall be reduced as provided in
subsection 4.8(c) of the Agreement.
Section 4.8 INVESTOR CHARGE-OFFS. (a) If, on any Determination
Date with respect to a Distribution Date on or prior to the Class C Principal
Payment Commencement Date, the sum of (i) aggregate Investor Default Amount, if
any, for each Business Day in the preceding Monthly
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Period plus (ii) the aggregate Investor Uncovered Dilution Amount, if any, for
each Business Day in the preceding Monthly Period exceeded the aggregate amount
of Finance Charge Collections applied to the payment thereof pursuant to
subsection 4.6(a)(v) of the Agreement during the Revolving Period or subsection
4.6(b)(v) or 4.6(c)(v) of the Agreement, as applicable, during the Amortization
Period and the Available Reserve Amount and the amount of Excess Finance Charge
Collections and Reallocated Class C Principal Collections allocated thereto
pursuant to subsections 4.7(b) and (c) of the Agreement, the Class C Invested
Amount will be reduced (without duplication of any reduction pursuant to the
last sentence of subsection 4.7(c)) by the amount by which such aggregate
Investor Default Amount and Investor Uncovered Dilution Amount exceeds the
amount applied with respect thereto during such preceding Monthly Period (a
"CLASS C INVESTOR CHARGE-OFF"). To the extent that on any subsequent Business
Day VFC Additional Amounts are purchased pursuant to Section 6.15, the Holder of
the Class C Certificates shall first deposit into the Excess Funding Account an
amount equal to any Class C Investor Charge-Offs on such Business Day and then
shall purchase any other Class C Invested Amount pursuant to Section 6.15. To
the extent that on any subsequent Business Day there is a remaining positive
balance of Total Finance Charge Collections on deposit in the Collection Account
after giving effect during the Revolving Period to subsections 4.6(a)(i) through
(ix) of the Agreement or during the Amortization Period to subsections 4.6(b)(i)
through (ix) or subsections 4.6(c)(i) through (ix) of the Agreement, as
applicable, the Servicer will apply such excess Finance Charge Collections as
provided in subsection 4.6(a)(x) of the Agreement during the Revolving Period or
subsection 4.6(b)(x) or 4.6(c)(x) of the Agreement, as applicable, during the
Amortization Period to reimburse the aggregate amount of Class C Investor
Charge-Offs not previously reimbursed, up to the amount so available.
(b) In the event that any reduction of the Class C Invested
Amount pursuant to subsection 4.8(a) of the Agreement 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 lesser
of (i) the amount by which the Class C Invested Amount would have been reduced
below zero and (ii) the sum of (A) aggregate Investor Default Amount, if any,
for each Business Day in the preceding Monthly Period plus (B) the aggregate
Investor Uncovered Dilution Amount, if any, for each Business Day in the
preceding Monthly Period (a "CLASS B INVESTOR CHARGE-OFF"). To the extent that
on any subsequent Business Day there is a positive balance of Total Finance
Charge Collections on deposit in the Collection Account after giving effect to
subsections 4.6(a)(i) through (vi) of the Agreement during the Revolving Period
or subsections 4.6(b)(i) through (vi) or 4.6(c)(i) through (vi) of the
Agreement, as applicable, during the Amortization Period, the Servicer will
apply such excess Finance Charge Collections as provided in subsection
4.6(a)(vii) of the Agreement during the Revolving Period or subsection
4.6(b)(vii) or 4.6(c)(vii) of the Agreement, as applicable, during the
Amortization Period to reimburse the aggregate amount of Class B Investor
Charge-Offs not previously reimbursed, up to the amount so available.
(c) In the event that any such reduction of the Class B
Invested Amount pursuant to Subsection 4.8(b) of the Agreement 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
lesser of (i) the amount by which the Class B Invested Amount would have been
reduced below zero and (ii) the sum of (A) aggregate Investor Default Amount, if
any, for each Business Day in the preceding Monthly Period plus (B) the
aggregate Investor Uncovered
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Dilution Amount, if any, for each Business Day in the preceding Monthly Period
(a "CLASS A INVESTOR CHARGE-OFF"). To the extent that on any subsequent Business
Day there is a positive balance of Total Finance Charge Collections on deposit
in the Collection Account after giving effect to subsections 4.6(a)(i) through
(v) of the Agreement during the Revolving Period or subsections 4.6(b)(i)
through (v) or 4.6(c)(i) through (v) of the Agreement, as applicable, during the
Amortization Period, the Servicer will apply such excess Finance Charge
Collections as provided in subsection 4.6(a)(vi) of the Agreement during the
Revolving Period or subsection 4.6(b)(vi) or 4.6(c)(vi) of the Agreement, as
applicable, during the Amortization Period to reimburse the aggregate amount of
Class A Investor Charge-Offs not previously reimbursed, up to the amount so
available.
Section 4.9 RESERVE ACCOUNT. (a) The Servicer shall establish
and maintain with an Eligible Institution, which may be the Trustee, in the name
of the Trustee, on behalf of the Trust, a segregated trust account (the "RESERVE
ACCOUNT") bearing a designation clearly indicating that the funds deposited
therein are held for the benefit of the Holders of Series 1997-1 Variable
Funding Certificates. The Trustee shall possess all right, title and interest in
all funds on deposit from time to time in the Reserve Account and in all
proceeds thereof. The Reserve Account shall be under the sole dominion and
control of the Trustee for the benefit of the Holders of Series 1997-1 Variable
Funding Certificates. If at any time an Eligible Institution holding the Reserve
Account ceases to be an Eligible Institution, the Transferor shall notify the
Trustee, and the Trustee upon being notified (or the Servicer on its behalf)
shall within 10 Business Days establish a new Reserve Account meeting the
conditions specified above, and shall transfer any cash or any investments to
such new Reserve Account. The Trustee, at the direction of the Servicer, shall
make deposits to and withdrawals from the Reserve Account in the amounts and at
the times set forth in Sections 4.6, 4.7 and 4.9 of the Agreement. All
withdrawals from the Reserve Account shall be made in the priority set forth
below.
(b) No deposit into the Reserve Account shall be required on
the Closing Date. Funds on deposit in the Reserve Account from time to time
shall be invested and/or reinvested at the direction of the Servicer by the
Trustee in Cash Equivalents that will mature so that such funds will be
available for withdrawal on the following Transfer Date. No Cash Equivalent
shall be disposed of prior to its maturity unless the Servicer so directs and
either (i) such disposal will not result in a loss of all or part of the
principal portion of such Cash Equivalent or (ii) prior to the maturity of such
Cash Equivalent, a default occurs in the payment of principal, interest or any
other amount with respect to such Cash Equivalent. The Trustee shall maintain
for the benefit of the Holders of Series 1997-1 Variable Funding Certificates
possession of the negotiable instruments or securities, if any, evidencing such
Cash Equivalents. All cash interest and earnings (net of losses and investment
expenses) received on each Business Day on funds on deposit in the Reserve
Account shall be retained therein to the extent that the Available Reserve
Amount is less than the Required Reserve Amount on such Business Day, and such
retained amounts shall be considered to be available and on deposit in the
Reserve Account until withdrawn therefrom. All cash interest and earnings (net
of losses and investment expenses) received on each Business Day on funds on
deposit in the Reserve Account in excess of the amount, if any, required to be
retained in the Reserve Account on such Business Day shall be treated as a
component of Total Finance Charge Collections and, for purposes of determining
the availability of funds or the balances in the Reserve Account for any other
reason under this Variable Funding Supplement, all such investment earnings on
such funds shall be deemed not to be available or on deposit in the Reserve
Account. If on any Business Day the amount on deposit in
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the Reserve Account exceeds the Required Reserve Amount, the amount of such
excess shall be treated as a component of Total Finance Charge Collections.
Section 4.10 EXCESS PURCHASE ACCOUNT. (a) The Servicer shall
establish and maintain with an Eligible Institution, which may be the Trustee,
in the name of the Trustee, on behalf of the Trust, a segregated trust account
(the "EXCESS PURCHASE ACCOUNT") bearing a designation clearly indicating that
the funds deposited therein are held for the benefit of the Holders of Series
1997-1 Variable Funding Certificates. The Trustee shall possess all right, title
and interest in all funds on deposit from time to time in the Excess Purchase
Account and in all proceeds thereof. The Excess Purchase Account shall be under
the sole dominion and control of the Trustee for the benefit of the Holders of
Series 1997-1 Variable Funding Certificates. If at any time an Eligible
Institution holding the Excess Purchase Account ceases to be an Eligible
Institution, the Transferor shall notify the Trustee, and the Trustee upon being
notified (or the Servicer on its behalf) shall within 10 Business Days establish
a new Excess Purchase Account meeting the conditions specified above, and shall
transfer any cash or any investments to such new Excess Purchase Account. The
Trustee, at the direction of the Servicer, shall make deposits to the Excess
Purchase Account in the amounts and at the times set forth in Section 6.15 of
the Agreement.
(b) Funds on deposit in the Excess Purchase Account from time
to time shall be invested and/or reinvested at the direction of the Servicer by
the Trustee in Cash Equivalents that will mature so that such funds will be
available for withdrawal not later than the following Transfer Date. No Cash
Equivalent shall be disposed of prior to its maturity unless the Servicer so
directs and either (i) such disposal will not result in a loss of all or part of
the principal portion of such Cash Equivalent or (ii) prior to the maturity of
such Cash Equivalent, a default occurs in the payment of principal, interest or
any other amount with respect to such Cash Equivalent. The Trustee shall
maintain for the benefit of the Holders of Series 1997-1 Variable Funding
Certificates possession of the negotiable instruments or securities, if any,
evidencing such Cash Equivalents. All cash interest and earnings (net of losses
and investment expenses) received on each Business Day on funds on deposit in
the Excess Purchase Account shall be treated as a component of Total Finance
Charge Collections. For purposes of determining the availability of funds or the
balances in the Excess Purchase Account for any other reason under this Variable
Funding Supplement, all investment earnings on such funds shall be deemed not to
be available or on deposit.
(c) If on any Business Day prior to the Amortization Period
Commencement Date the greater of (i) the sum of (A) the aggregate Invested
Amount of each Series then outstanding as of such day including the Series
1997-1 Variable Funding Certificates minus amounts on deposit in the principal
funding account for any Series and (B) the Minimum Transferor Amount as of such
day or (ii) the Minimum Aggregate Principal Receivables exceeds an amount equal
to (a) the aggregate amount of Principal Receivables and amounts on deposit in
the Excess Funding Account (other than investment earnings thereon), PLUS (b)
the amount on deposit in the Excess Purchase Account, the amount of such excess
shall be withdrawn by the Trustee in accordance with the instructions of the
Servicer from the Excess Purchase Account and paid to the Transferor in respect
of VFC Additional Invested Amounts theretofore purchased hereunder. On the
Amortization Period Commencement Date, the amount on deposit in the Excess
Purchase Account
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or, if less, the sum of the Class A Invested Amount and the Class B Invested
Amount shall be withdrawn by the Trustee at the direction of the Servicer and
deposited into the Principal Account.
Section 4.11 PRINCIPAL AND INTEREST FUNDING ACCOUNTS. (a) The
Servicer shall establish and maintain with an Eligible Institution approved by
the Class A Agent and the Class B Agent, which may be the Trustee, in the name
of the Trustee, on behalf of the Trust, segregated trust accounts (the
"PRINCIPAL ACCOUNT" and the "INTEREST FUNDING ACCOUNT", respectively), each
bearing a designation clearly indicating that the funds deposited therein are
held for the benefit of the Holders of Series 1997-1 Variable Funding
Certificates. The Trustee shall possess all right, title and interest in all
funds on deposit from time to time in the Principal Account and the Interest
Funding Account and in all proceeds thereof. The Principal Account and the
Interest Funding Account shall each be under the sole dominion and control of
the Trustee for the benefit of the Holders of Series 1997-1 Variable Funding
Certificates. If at any time an Eligible Institution holding the Principal
Account or the Interest Funding Account ceases to be an Eligible Institution,
the Transferor shall notify the Trustee and the Administrative Agent, and the
Trustee upon being notified (or the Servicer on its behalf ) shall within ten
Business Days establish a new Principal Account or Interest Funding Account, as
the case may be, meeting the conditions specified above, and shall transfer any
cash or any investments to such new Principal Account or Interest Funding
Account. The Trustee, at the direction of the Servicer, shall make deposits to
the Principal Account in the amounts and at the times set forth in Section 4.6
or 4.10 of the Agreement and shall make deposits to the Interest Funding Account
in the amounts and at the times set forth in Section 4.6 of the Agreement.
Amounts deposited into the Principal Account or Interest Funding Account shall
not reduce the Invested Amount.
(b) Funds on deposit in the Principal Account and the Interest
Funding Account in respect of the Class A Variable Funding Certificates from
time to time shall be invested and/or reinvested at the direction of the Class A
Agent by the Trustee in Cash Equivalents that will mature so that such funds
will be available for withdrawal on the Business Day preceding the respective
dates on which the related payments are required to be made under the Class A
Certificate Purchase Agreement. No Cash Equivalent shall be disposed of prior to
its maturity unless the Class A Agent so directs and either (i) such disposal
will not result in a loss of all or part of the principal portion of such Cash
Equivalent or (ii) prior to the maturity of such Cash Equivalent, a default
occurs in the payment of principal, interest or any other amount with respect to
such Cash Equivalent. The Trustee shall maintain for the benefit of the Holders
of Class A Certificates possession of the negotiable instruments or securities,
if any, evidencing such Cash Equivalents. Funds on deposit in the Principal
Account and the Interest Funding Account in respect of the Class B Variable
Funding Certificates from time to time shall be invested and/or reinvested at
the direction of the Class B Agent by the Trustee in Cash Equivalents that will
mature so that such funds will be available for withdrawal on the Business Day
preceding the respective dates on which the related payments are required to be
made under the Class B Certificate Purchase Agreement. No Cash Equivalent shall
be disposed of prior to its maturity unless the Class B Agent so directs and
either (i) such disposal will not result in a loss of all or part of the
principal portion of such Cash Equivalent or (ii) prior to the maturity of such
Cash Equivalent, a default occurs in the payment of principal, interest or any
other amount with respect to such Cash Equivalent. The Trustee shall maintain
for the benefit of the Holders of Class B Certificates possession of the
negotiable instruments or securities, if any, evidencing such Cash Equivalents.
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(c) All cash interest and earnings (net of losses and
investment expenses) received on each Business Day on funds on deposit in the
Principal Account or the Interest Funding Account shall be treated as a
component of Total Finance Charge Collections. For purposes of determining the
availability of funds or the balances in the Principal Account or the Interest
Funding Account for any other reason under this Variable Funding Supplement, all
investment earnings on such funds shall be deemed not to be available or on
deposit.
(d) Amounts on deposit in the Principal Account shall be
withdrawn by the Trustee acting at the direction of the Class A Agent at the end
of each Fixed Period (as defined in the Class A Certificate Purchase Agreement)
for any portion of the Class A Investor Principal Balance (as so defined) or on
any other date on which a payment in respect of principal of the Class A
Certificates is due as contemplated by the Class A Certificate Purchase
Agreement, to pay to Class A Certificateholders such portion of the Class A
Investor Principal Balance. Amounts on deposit in the Interest Funding Account
shall be withdrawn by the Trustee acting at the direction of the Class A Agent
at the end of each Fixed Period (as defined in the Class A Certificate Purchase
Agreement) for any portion of the Class A Investor Principal Balance (as so
defined) or on any other date on which a payment in respect of interest on the
Class A Certificates is due as contemplated by the Class A Certificate Purchase
Agreement, to pay to Class A Certificateholders accrued and unpaid interest on
such portion of the Class A Investor Principal Balance and, on each Distribution
Date, to pay accrued and unpaid Class A Program Fees. Amounts on deposit in the
Principal Account shall be withdrawn by the Trustee acting at the direction of
the Class B Agent at the end of each Fixed Period (as defined in the Class B
Certificate Purchase Agreement) for any portion of the Class B Investor
Principal Balance (as so defined) or on any other date on which a payment in
respect of principal of the Class B Certificates is due as contemplated by the
Class B Certificate Purchase Agreement, to pay to Class B Certificateholders
such portion of the Class B Investor Principal Balance. Amounts on deposit in
the Interest Funding Account shall be withdrawn by the Trustee acting at the
direction of the Class B Agent at the end of each Fixed Period (as defined in
the Class B Certificate Purchase Agreement) for any portion of the Class B
Investor Principal Balance (as so defined) or on any other date on which a
payment in respect of interest on the Class B Certificates is due as
contemplated by the Class B Certificate Purchase Agreement, to pay to Class B
Certificateholders accrued and unpaid interest on such portion of the Class B
Investor Principal Balance and, on each Distribution Date, to pay accrued and
unpaid Class B Program Fees.
Section 4.12 PROCEEDS ACCOUNT. The Servicer shall establish
and maintain with an Eligible Institution, which may be the Trustee, in the name
of the Trustee, on behalf of the Trust, a segregated trust account (the
"PROCEEDS ACCOUNT") bearing a designation clearly indicating that the funds
deposited therein are held for the benefit of the Holders of Series 1997-1
Variable Funding Certificates. The Trustee shall possess all right, title and
interest in all funds on deposit from time to time in the Proceeds Account and
in all proceeds thereof. The Proceeds Account shall be under the sole dominion
and control of the Trustee for the benefit of the Holders of Series 1997-1
Variable Funding Certificates. If at any time an Eligible Institution holding
the Proceeds Account ceases to be an Eligible Institution, the Transferor shall
notify the Trustee, and the Trustee upon being notified (or the Servicer on its
behalf) shall within 10 Business Days establish a new Proceeds Account meeting
the conditions specified above, and shall transfer any cash or any investments
to such new Proceeds Account. The Trustee, at the direction of the Servicer,
shall make deposits to and withdrawals from the Proceeds Account in the amounts
and at the times
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set forth in Section 6.15 of the Agreement. Funds on deposit in the Proceeds
Account from time to time shall be held uninvested.
SECTION 8. 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 Business Day, the
Paying Agent shall distribute to the Class A Certificateholders the amount, if
any, specified in subsection 4.11(d) of the Agreement to be paid to the Class A
Certificateholders on such Business Day; PROVIDED, HOWEVER, that the final
payment in retirement of the Class A Certificates will be made only upon
presentation and surrender of the Class A Certificates at the office or offices
specified in the notice of such final distribution delivered by the Trustee
pursuant to Section 12.3 of the Agreement.
(b) On each Business Day, the Paying Agent shall distribute to
the Class B Certificateholders the amount, if any, specified in subsection
4.11(d) of the Agreement to be paid to the Class B Certificateholders on such
Business Day; PROVIDED, HOWEVER, that the final payment in retirement of the
Class B Certificate 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 of the
Agreement.
(c) On each Business Day, the Paying Agent shall distribute
(in accordance with the Daily Report delivered by the Servicer to the Trustee
pursuant to subsection 3.4(b) of the Agreement) to each Class C
Certificateholder of record (other than as provided in subsection 2.4(d) or in
Section 12.3 of the Agreement respecting a final distribution) such
Certificateholder's PRO RATA share (based on the aggregate Undivided Interests
represented by Class C Certificates held by such Certificateholder) of such
amounts on deposit in the Collection Account as are payable to the Class C
Certificateholders pursuant to Section 4.6 of the Agreement; PROVIDED, HOWEVER,
that the final payment in retirement of the Class C Certificate 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 of the Agreement.
Section 5.2 MONTHLY CERTIFICATEHOLDERS' STATEMENT. As soon as
practicable, but no later than each Determination Date following the end of each
Monthly Period with respect to items (i) through (vii) below, and no later than
30 days following the end of each Monthly Period with respect to the remaining
items listed below, the Servicer shall forward to the Trustee, the
Administrative Agent and the Rating Agencies a statement, substantially in the
form of Exhibit E to this Variable Funding Supplement, including the following
information:
(i) the amount of Net Principal Collections
received in the Collection Account during the related Monthly Period
and allocated in respect of each Class of Series 1997-1 Certificates;
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(ii) the amount of Total Finance Charge Collections
processed during the related Monthly Period and allocated in respect of
each Class of Series 1997-1 Certificates;
(iii) 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 Transferor
Amount, the Floating Allocation Percentage and, during the Amortization
Period, the Fixed/Floating Allocation Percentage with respect to the
Principal Receivables in the Trust as of the end of the day on the last
day of the Monthly Period preceding such Distribution Date;
(iv) the aggregate outstanding balance of Accounts
which are 30, 60, 90, 120, 150 and 180 days or more delinquent as of
the end of each billing cycle during the preceding Monthly Period for
such account;
(v) the aggregate Investor Default Amount for the
related Monthly Period;
(vi) the aggregate Investor Uncovered Dilution
Amount for the related Monthly Period;
(vii) the aggregate amount of Class A Investor
Charge-Offs, Class B Investor Charge-Offs and Class C Investor
Charge-Offs for the related Monthly Period and reimbursements thereof;
(viii) the aggregate amount of the Monthly
Servicing Fee for the related Monthly Period;
(ix) the Excess Spread Percentage, the Excess
Spread Enhancement Cap Percentage, the Payment Rate Percentage, the
Payment Rate Enhancement Cap Percentage and the Enhancement Percentage
for the related Monthly Period;
(x) the Available Reserve Account Amount on the
last day of Monthly Period immediately preceding the related Monthly
Period, the aggregate deposits in the Reserve Account during the
related Monthly Period, the aggregate disbursements from the Reserve
Account during such Monthly Period, and the Available Reserve Account
Amount and the Required Reserve Account Amount on the last day of such
Monthly Period; and
(xi) the Portfolio Yield and the average of the
daily Base Rates for the related Monthly Period.
Section 5.3 ANNUAL CERTIFICATEHOLDERS' TAX STATEMENT. On or
before January 31 of each calendar year, beginning with calendar year 1998, the
Trustee shall distribute to each Person who at any time during the preceding
calendar year was a Series 1997-1 Certificateholder, a statement prepared by the
Servicer containing information regarding the amounts distributed to such Person
and the principal and interest portion thereof, aggregated for such calendar
year or the applicable portion thereof during which such Person was a Series
1997-1 Certificateholder, together with such other customary information
(consistent with the treatment of the Certificates as debt) as the Trustee or
the Servicer deems necessary or desirable to enable the Series 1997-1
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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 9. ARTICLE VI OF AGREEMENT. The Opinion of Counsel
referred to in part (b) of the seventh sentence of Section 6.9 of the Agreement
shall mean, with respect to the Series 1997-1 Certificates, an Opinion of
Counsel to the effect that the Class A Certificates and the Class B Certificates
will not represent interests in an association taxable as a corporation or a
publicly traded partnership for federal income tax purposes. Except as provided
in the preceding sentence, sections 6.1 through 6.14 of the Agreement shall be
read in their entirety as provided in 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 Certificates:
SECTION 6.15 VFC ADDITIONAL INVESTED AMOUNTS. (a) The Holders
of the Class A Certificates, the Holders of the Class B Certificates and the
Holders of the Class C Certificates agree, by acceptance of the Class A
Certificates, the Class B Certificates or the Class C Certificates,
respectively, that the Transferor may from time to time prior to the
Amortization Period Commencement Date for the Variable Funding Certificates
require that such Certificateholders acquire as of any Business Day additional
undivided interests in the Trust in specified amounts (such amounts,
respectively, the "VFC ADDITIONAL CLASS A INVESTED AMOUNT," the "VFC ADDITIONAL
CLASS B INVESTED AMOUNT," and the "VFC ADDITIONAL CLASS C INVESTED AMOUNT" and,
collectively, the "VFC ADDITIONAL INVESTED AMOUNTS") not to exceed, after giving
effect thereto, an amount equal to (i) the aggregate amount of Principal
Receivables and amounts on deposit in the Excess Funding Account (other than
investment earnings thereon), (ii) PLUS the amount on deposit in the Excess
Purchase Account, MINUS (iii) the greater of (A) the sum of (x) the aggregate
Invested Amount of each Series then outstanding as of such day including the
Variable Funding Certificates minus amounts on deposit in the principal funding
account for any Series and (y) the Minimum Transferor Amount as of such day or
(B) the Minimum Aggregate Principal Receivables.
(b) The obligation of any Holder of Class A Certificates to
acquire any VFC Additional Class A Invested Amount shall be subject to the
satisfaction of any applicable conditions provided in the Class A Certificate
Purchase Agreement and subject to the further conditions that, after giving
effect to such acquisition and to any concurrent acquisitions of VFC Additional
Invested Amounts, (i) the Class B Invested Amount shall be equal to or greater
than the Required Class B Invested Amount and the Class C Invested Amount shall
be equal to or greater than the Required Class C Invested Amount and (ii) the
sum of the Available Reserve Amount plus the excess, if any, of the Class C
Invested Amount over 10% of the Invested Amount shall be equal to or greater
than the Required Reserve Amount. The obligation of any Holder of Class B
Certificates to acquire any VFC Additional Class B Invested Amount shall be
subject to the satisfaction of any applicable conditions provided in the Class B
Certificate Purchase Agreement and subject to the further conditions that, after
giving effect to such acquisition and to any concurrent acquisitions of VFC
Additional Invested Amounts, (i) the Class C Invested Amount shall be equal to
or greater than the Required Class C Invested Amount and (ii) the sum of the
Available Reserve Amount plus the excess, if any, of the Class C Invested Amount
over 10% of the Invested Amount shall be equal to or greater than the Required
Reserve Amount.
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(c) If the Holders of the Class A Certificates acquire such
additional interest, then in consideration of such Holder's payments of the VFC
Additional Class A Invested Amount, the Servicer shall note such VFC Additional
Class A Invested Amount on the related Daily Report and direct the Trustee to
pay to the Transferor such VFC Additional Invested Amounts, and the Invested
Amount of the Class A Variable Funding Certificates will be equal to the
Invested Amount of the Class A Certificates stated in such Daily Report. If the
Holders of the Class B Certificates acquire such additional interest, then in
consideration of such Holder's payments of the VFC Additional Class B Invested
Amount, the Servicer shall note such VFC Additional Class B Invested Amount on
the related Daily Report and direct the Trustee to pay to the Transferor such
VFC Additional Invested Amounts, and the Invested Amount of the Class B
Certificates will be equal to the Invested Amount of the Class B Certificates
stated in such Daily Report. If the Holders of the Class C Certificates acquire
such additional interest, then in consideration of such Holder's payments of the
VFC Additional Class C Invested Amount, the Servicer shall appropriately note
such VFC Additional Class C Invested Amount on the related Daily Report and
direct the Trustee to pay to the Transferor such VFC Additional Invested
Amounts, and the Invested Amount of the Class C Certificates will be equal to
the Invested Amount of the Class C Certificates stated in such Daily Report.
(d) The proceeds of the purchase on any Business Day of VFC
Additional Invested Amounts received by the Trustee shall be deposited upon
receipt into the Proceeds Account. To the extent that on any purchase date and
after giving effect to the purchase of VFC Additional Invested Amounts pursuant
to this Section 6.15, (a) the greater of (i) the sum of (A) the aggregate
Invested Amount of each Series then outstanding as of such day including the
Variable Funding Certificates minus amounts on deposit in the principal funding
account for any Series and (B) the Minimum Transferor Amount as of such day or
(ii) the Minimum Aggregate Principal Receivables exceeds (b) an amount equal to
the aggregate amount of Principal Receivables and amounts on deposit in the
Excess Funding Account (other than investment earnings thereon), the Servicer
shall instruct the Trustee, and the Trustee, upon such instruction from the
Servicer, shall withdraw a portion of the purchase price for such VFC Additional
Invested Amounts equal to such excess from the Proceeds Account and deposit such
portion into the Excess Purchase Account. The Trustee shall withdraw any
remaining Proceeds of such purchase price from the Proceeds Account and transfer
such amounts to the Transferor in accordance with the instructions of the
Servicer.
(e) In the event that the proceeds of a purchase of any VFC
Additional Class A Invested Amounts required to be made on a Business Day
pursuant to the Class A Certificate Purchase Agreement shall not have been
received in the Proceeds Account by 1:00 p.m., New York City time, on such
Business Day, the Servicer shall notify the Class A Agent and the Transferor by
not later than 1:30 p.m., New York City time, on such Business Day. In the event
that the proceeds of a purchase of any VFC Additional Class B Invested Amounts
required to be made on a Business Day pursuant to the Class B Certificate
Purchase Agreement shall not have been received in the Proceeds Account by 1:00
p.m., New York City time, on such Business Day, the Servicer shall notify the
Class B Agent and the Transferor by not later than 1:30 p.m., New York City
time, on such Business Day.
Section 6.16 EXTENSION. (a) If a Pay Out Event has not
occurred or has occurred but has been remedied on or before the 30th Business
Day preceding the Extension Date, the Transferor, in its sole discretion, may
deliver to the Trustee on or before such date a notice
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substantially in the form of Exhibit B (the "EXTENSION NOTICE") to this Variable
Funding Supplement. The Trustee shall mail 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
Transferor 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 6.16 have been fulfilled;
and (iii) a form of Investor Certificateholder Election Notice substantially in
the form of Exhibit C (the "ELECTION NOTICE") to this Variable Funding
Supplement. In addition, the Extension Notice shall state that any Investor
Certificateholder electing to approve the Extension must do so on or before the
Election Date (as defined below) by returning the annexed Election Notice
properly executed to the Trustee in the manner described below. The Extension
Notice shall also state that an Investor Certificateholder may withdraw any such
election in whole or in part on or before the Election Date, and the Transferor,
in its sole discretion, may, prior to the Election Date, withdraw its election
to extend the Revolving Period. Any Holder that elects to approve an Extension
hereunder shall deliver a duly executed Election Notice to the Trustee at the
address designated in the Extension Notice on or before 3:00 p.m., New York City
time, on or before the fifth Business Day preceding the Extension Date (such
Business Day constituting the "ELECTION DATE").
(b) No Extension shall occur until prior satisfaction of the
following conditions at the close of business on the Election Date: (i) no Pay
Out Event shall have occurred and be continuing, (ii) there shall have been
delivered to the Trustee (A) the Extension Tax Opinion and the Extension
Opinion, each addressed to the Transferor and the Trustee and (B) written
confirmation from each Rating Agency rating the Class A Certificates or the
Class B Certificates or providing informal ratings on such Series 1997-1
Variable Funding Certificates for the benefit of a Class A Certificateholder or
Class B Certificateholder that the Extension will not cause such Rating Agency
to lower its then current rating or informal rating or withdraw its ratings or
informal ratings of such Investor Certificates, (iii) the holders of more than
50% of the principal amount of Class A Certificates and of more than 50% of the
principal amount of Class B Certificates shall have elected to approve the
Extension by returning to the Trustee on or before the Election Date the
executed Election Notice annexed to the Extension Notice delivered to such Class
A Certificateholders and Class B Certificateholders pursuant to subsection
6.16(a) of the Agreement, (iv) if provided for by the Transferor, in its sole
discretion, in the Extension Notice, the holders of a specified minimum amount
of outstanding Class C Certificates shall have elected to approve of the
Extension by returning to the Trustee on or before the Election Date the
executed form of Election Notice annexed to the Extension Notice delivered to
such Class C Certificateholders pursuant to subsection 6.16(a) of the Agreement
and (v) the Transferor shall have delivered to the Trustee an Officer's
Certificate and an Opinion of Counsel, each to the effect that all conditions
precedent in this subparagraph (b) have been satisfied. If, by the close of
business on the Election Date, all of the conditions stated in this subsection
6.16(b) of the Agreement have not been satisfied and all such documents
delivered to the Trustee pursuant to this
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subsection 6.16(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 6.16, shall evidence an extension or renewal
of the obligations represented by the Investor Certificates delivered in
exchange therefor, and not a novation or extinguishment of such obligations or a
substitution with respect thereto.
(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 6.16 shall or may be modified to comply
with all applicable laws and regulations in effect at the time of a prepared
Extension.
Section 6.17 TRANSFERS OF CLASS C CERTIFICATES; LEGENDS. (a)
No Class C Certificate or any interest therein may be sold (including in the
initial offering), conveyed, assigned, hypothecated, pledged, participated or
otherwise transferred (each such act or event, a "TRANSFER"), except in
accordance with this Section 6.17. Any Transfer of a Class C Certificate
otherwise permitted by this Section 6.17 will be permitted only if it consists
of a PRO RATA percentage interest in all payments made with respect to such
Holder's beneficial interest in the Class C Certificates. No Transfer of a Class
C Certificate or any interest therein to any Person (each, an "ASSIGNEE") may
occur, unless the Assignee shall have executed and delivered to the Trustee an
investment letter substantially in the form of Exhibit D hereto and the
Transferor shall have granted its prior written consent thereto. Such consent
shall not be granted if the Transferor determines in its sole and absolute
discretion that such Transfer would create a 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; PROVIDED, that any
attempted Transfer that would cause the number of Targeted Holders to exceed
ninety-nine shall be void; and PROVIDED, FURTHER, that the number of Targeted
Holders for the Trust as a result of Transfers of Class C Certificates shall not
be more than ten or such other number as may be consented to by the Transferor,
which consent may be withheld in its sole and absolute discretion. The
Transferor agrees to monitor the number of Targeted Holders and to deny its
consent to any transfer of any interest in the Trust with respect to which no
opinion has been rendered that such certificate (or other interest in the Trust)
will be treated as debt for federal income tax purposes if such transfer could
cause the number of Targeted Holders to exceed ninety-nine.
(b) Each initial purchaser of a Class C Certificate or any
interest therein and any Assignee thereof shall further certify to the
Transferor, the Servicer and the Trustee that it has neither acquired nor will
it sell, trade or transfer any interest in a Class C Certificate or cause an
interest in a Class C Certificate to be marketed on or through 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. In addition, each initial
purchaser of a Class C Certificate or any interest therein and any Assignee
shall certify, prior to any delivery or Transfer to it of a Class C Certificate,
that it is not and, for so
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long as it holds any interest in a Class C Certificate, will not become a
partnership, Subchapter S corporation or grantor trust for U.S. federal income
tax purposes. If an initial purchaser of an interest in a Class C Certificate or
an Assignee cannot make the certification described in the preceding sentence,
the Transferor may, in its sole discretion, prohibit a Transfer to such entity;
PROVIDED, HOWEVER, that if the Transferor agrees to permit such a Transfer, the
Transferor or the Servicer may require additional certifications in order to
prevent the Trust from being treated as a publicly traded partnership. Each
initial purchaser of an interest in a Class C Certificate and each Assignee
acknowledges that any Opinion of Counsel furnished to the Transferor or the
Trustee to the effect that the Trust will not be treated as a publicly traded
partnership taxable as a corporation will be dependent in part on the accuracy
of the certifications described in this subsection 6.17(b).
(c) Subject to the provisions of subsections 6.17(a) and
6.17(b) above, the Transferor may at any time, without the consent of the
Investor Certificateholders, (i) sell or transfer all or a portion of the Class
C Certificates and (ii) in connection with any such sale or transfer, enter into
a supplemental agreement with the Trustee pursuant to which the Transferor may
amend the Class C Certificate Rate, set forth the amount of monthly interest due
Class C Certificateholders (the "CLASS C INTEREST"), provide for the payment of
additional amounts (the "CLASS C ADDITIONAL INTEREST") with respect to any
shortfall (the "CLASS C INTEREST SHORTFALL") in payments of such Class C
Interest and provide for such other provisions with respect to the Class C
Certificates as may be specified in such supplemental agreement, PROVIDED that
in each such case (A) the Transferor shall have given notice to the Trustee, the
Servicer, the Administrative Agent and the Rating Agencies of such proposed sale
or transfer of the Class C Certificates and such supplemental agreement at least
five Business Days prior to the consummation of such sale or transfer and the
execution of such proposed supplemental agreement; (B) the Rating Agency
Condition shall have been satisfied; (C) no Trust Pay Out Event or Series 1997-1
Pay Out Event shall have occurred prior to the consummation of such proposed
sale or transfer of Class C Certificates or the execution of such supplemental
agreement; (D) 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 supplemental 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, (E) the Transferor will have delivered an
Opinion of Counsel, dated the date of such certificate with respect to such
action to the effect that such action will not adversely affect the Federal or
Applicable Tax State income tax characterization of any outstanding Series of
Investor Certificates or the taxability of the Trust under Federal or Applicable
Tax State income tax laws, and (F) either (x) the Available Reserve Amount on
the most recent Determination Date (after giving effect to all payments and
allocations on such Determination Date) shall have been equal to or greater than
the Required Reserve Amount on such Determination Date, each recalculated on a
pro forma basis as though the Class C Certificates had borne interest at the
amended Class C Interest Rate throughout each of the three Monthly Periods
preceding such Determination Date or (y) the Administrative Agent shall have
consented to such supplemental agreement and the terms and conditions set forth
therein; 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, or
join any other Person instituting against, the Trust or the Transferor any
bankruptcy, reorganization, arrangement, insolvency or liquidation proceeding,
or other proceeding under any
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federal or state bankruptcy or similar law, for one year and one day after all
Investor Certificates are paid in full.
(d) Transfers of Class C Certificates shall also be subject to
the provisions of subsection 3(c) of this Variable Funding Supplement.
Section 6.18 TRANSFERS OF VARIABLE FUNDING CERTIFICATES;
LEGENDS. (a) The provisions of this Section 6.18 shall apply to the Class A
Certificates and the Class B Certificates unless, with respect to such Class,
the Transferor and the Trustee shall have received an Opinion of Counsel to the
effect that such Class will be treated as indebtedness for federal income tax
purposes.
(b) Subject to subsection 6.18(a), no Transfer of a Class A
Certificate or Class B Certificate or any interest therein (including in the
initial offering) may occur, except in accordance with this Section 6.18. Any
Transfer of a Class A Certificate or Class B Certificate otherwise permitted by
this Section 6.18 will be permitted only if it consists of a PRO RATA percentage
interest in all payments made with respect to such Holder's beneficial interest
in the Class A Certificates or Class B Certificates, as the case may be. No
Transfer of a Class A Certificate or a Class B Certificate or any interest
therein to any Assignee shall be permitted, unless such Assignee shall have
executed and delivered to the Trustee an investment letter substantially in the
form of Exhibit A to the Class A Certificate Purchase Agreement or to the Class
B Certificate Purchase Agreement, as applicable, and, except in the case of a
Transfer to a Support Bank (as defined in such respective agreements), unless
the Transferor shall have granted its prior written consent thereto. Such
consent shall not be granted if the Transferor reasonably determines that such
Transfer would create a 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; PROVIDED, that any attempted Transfer that
would cause the number of Targeted Holders to exceed ninety-nine shall be void;
and PROVIDED, FURTHER, that the number of Targeted Holders for the Trust as a
result of Transfers of Class A Certificates and Class B Certificates shall not
in the aggregate be more than 20 or such other number as may be consented to by
the Transferor, which consent may be withheld in its sole and absolute
discretion. The Transferor shall not withhold its consent to a Transfer unless
(i) the determination referred to in the preceding sentence has been made with
respect to such Transfer, (ii) one of the two provisos to the preceding sentence
is applicable to such Transfer, (iii) the Transferor has the right to withhold
its consent to such Transfer pursuant to the Class A Certificate Purchase
Agreement or the Class B Certificate Purchase Agreement, as applicable, or (iv)
the Transferor has the right to prohibit such Transfer pursuant to subsection
6.18(c).
(c) Each initial purchaser of a Class A Certificate or a Class
B Certificate, as applicable, or any interest therein and any Assignee thereof
shall further certify to the Transferor, the Servicer and the Trustee that it
has neither acquired nor will it sell, trade or transfer any interest in a Class
A Certificate or Class B Certificate, as applicable, or cause an interest in a
Class A Certificate or Class B Certificate, as applicable, to be marketed on or
through 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. In addition, each initial purchaser of a Class A Certificate or a
Class B Certificate,
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as applicable, or any interest therein and any Assignee shall certify, prior to
any delivery or Transfer to it of a Class A Certificate or Class B Certificate,
as applicable, that it is not and, for so long as it holds any interest in a
Class A Certificate or Class B Certificate, as applicable, will not become a
partnership, Subchapter S corporation or grantor trust for U.S. federal income
tax purposes. If an initial purchaser of an interest in a Class A Certificate or
Class B Certificate or an Assignee cannot make the certification described in
the preceding sentence, the Transferor may, in its sole discretion, by written
notice to the Trustee permit a Transfer to such entity; PROVIDED, HOWEVER, that
if the Transferor agrees to permit such a Transfer, the Transferor, the Servicer
or the Trustee may require additional certifications in order to prevent the
Trust from being treated as a publicly traded partnership. Each initial
purchaser of an interest in a Class A Certificate or a Class B Certificate and
each Assignee acknowledges that the Opinion of Counsel to the effect that the
Trust will not be treated as a publicly traded partnership taxable as a
corporation is dependent in part on the accuracy of the certifications described
in this subsection 6.18(c).
(d) Transfers of Class A Certificates or Class B Certificates
shall also be subject to the provisions of subsection 3(c) of this Variable
Funding Supplement.
SECTION 10. SERIES 1997-1 PAY OUT EVENTS. The Pay Out Events
which can cause the commencement of the Amortization Period with respect to the
Series 1997-1 Variable Funding Certificates include the Trust Pay Out Events
described in Section 9.1 of the Agreement and the Series 1997-1 Pay Out Events
described in the following sentence. If any one of the following events shall
occur with respect to the Series 1997-1 Certificates:
(a) failure on the part of the Transferor (i) to make any
payment or deposit required by the terms of (A) the Agreement or (B) this
Variable Funding Supplement, on or before the date occurring five days after the
date such payment or deposit is required to be made herein or (ii) duly to
observe or perform in any material respect any covenants or agreements of the
Transferor set forth in the Agreement or this Variable Funding Supplement, which
failure has a material adverse effect on the Series 1997-1 Variable Funding
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 Class A Certificates evidencing
Undivided Interests aggregating more than 50% of the Class A Invested Amount or
of Class B Certificates evidencing Undivided Interests aggregating more than 50%
of the Class B Invested Amount, and continues to affect materially and adversely
the interests of the Series 1997-1 Variable Funding Certificateholders for such
period;
(b) any representation or warranty made by the Transferor in
the Agreement or this Series 1997-1 Variable Funding Supplement, or any
information contained in a computer file or microfiche list required to be
delivered by the Transferor pursuant to Section 2.1 or 2.6 of the Agreement, (i)
shall prove to have been incorrect in any material respect when made or when
delivered, which continues to be incorrect in any material respect for a period
of 60 days after the date on which written notice of such failure, requiring the
same to be remedied, shall have been given to the Transferor by the Trustee, or
to the Transferor and the Trustee by the Holders of Class A Certificates
evidencing Undivided Interests aggregating more than 50% of the Class A Invested
Amount or of Class B Certificates evidencing Undivided Interests aggregating
more than 50% of the Class B Invested Amount, and (ii) as a result of which the
interests of the Series
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1997-1 Variable Funding 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 10(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 Portfolio Yield for any three consecutive
Monthly Periods is reduced to a rate which is less than the average of the daily
Base Rates for such period;
(d) (i) the Transferor Amount shall be less than the Minimum
Transferor Amount or (ii) the sum of the amount of Principal Receivables in the
Trust and the amount on deposit in the Excess Funding Account shall be less than
the Minimum Aggregate Principal Receivables, in each case for 15 consecutive
days;
(e) any Servicer Default shall occur which would have a
material adverse effect on the Series 1997-1 Variable Funding
Certificateholders;
(f) failure on the part of the Servicer to deliver the Daily
Report or Settlement Statement to the Trustee when due, which failure continues
for a period of five Business Days after the date on which written notice of
such failure, requiring the same to be remedied, shall have been given by the
Trustee to the Servicer;
(g) the Trustee shall have received notice from the
Administrative Agent that a Termination Event has occurred under the Class A
Certificate Purchase Agreement or the Class B Certificate Purchase Agreement and
stating that such occurrence constitutes a Series 1997-1 Pay Out Event;
(h) failure on the part of the Servicer duly to observe or
perform in any respect any covenants or agreements of the Servicer set forth in
the Agreement (other than those set forth in subsection 10.1(a) or 10.1(f)
thereof), which has a material adverse effect on the Series 1997-1 Variable
Funding Certificateholders and which continues unremedied for a period of 30
days after the date on which written notice of such failure, requiring the same
to be remedied, has been given to the Servicer by the Trustee, or to the
Servicer and the Trustee by the Holders of Class A Certificates evidencing
Undivided Interests aggregating more than 50% of the Class A Invested Amount or
of Class B Certificates evidencing Undivided Interests aggregating more than 50%
of the Class B Invested Amount, materially adversely affected thereby and
continues to materially adversely affect such Series 1997-1 Variable Funding
Certificateholders for such period; or the Servicer shall delegate its duties
under the Agreement, except as permitted by Section 8.7 thereof; or any
representation, warranty or certification made by the Servicer in the Agreement
or in any certificate delivered pursuant to the Agreement shall prove to have
been incorrect when made, which has a material adverse effect on the Series
1997-1 Variable Funding Certificateholders and which continues to be incorrect
in any material respect for a period of 45 days after the date on which written
notice of such failure, requiring the same to be remedied, shall have been given
to the Servicer by the Trustee, or to the Servicer and the Trustee by the
Holders of Class A Certificates evidencing Undivided Interests aggregating more
than 50% of the Class A Invested Amount or of Class B Certificates evidencing
Undivided Interests aggregating more than 50% of
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<PAGE> 51
the Class B Invested Amount, materially adversely affected thereby and continues
to materially adversely affect such Series 1997-1 Variable Funding
Certificateholders for such period;
(i) failure on the part of the Originator (i) to make any
payment or deposit required by the terms of the Receivables Purchase Agreement
on or before the date occurring five days after the date such payment or deposit
is required to be made therein or (ii) duly to observe or perform in any
material respect any covenants or agreements of the Originator set forth in the
Receivables Purchase Agreement, which failure has a material adverse effect on
the Series 1997-1 Variable Funding 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
Originator by the Trustee, or to the Originator and the Trustee by the Holders
of Class A Certificates evidencing Undivided Interests aggregating more than 50%
of the Class A Invested Amount or of Class B Certificates evidencing Undivided
Interests aggregating more than 50% of the Class B Invested Amount, and
continues to affect materially and adversely the interests of the Series 1997-1
Variable Funding Certificateholders for such period;
(j) any representation or warranty made by the Originator in
the Receivables Purchase Agreement, or any information contained in a
transmittal list required to be delivered by the Originator pursuant to Section
2.02 thereof, (i) shall prove to have been incorrect in any material respect
when made or when delivered, which continues to be incorrect in any material
respect for a period of 60 days after the date on which written notice of such
failure, requiring the same to be remedied, shall have been given to the
Originator by the Trustee, or to the Originator and the Trustee by the Holders
of Class A Certificates evidencing Undivided Interests aggregating more than 50%
of the Class A Invested Amount or of Class B Certificates evidencing Undivided
Interests aggregating more than 50% of the Class B Invested Amount, and (ii) as
a result of which the interests of the Series 1997-1 Variable Funding
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 10(k) shall not be
deemed to have occurred hereunder if the Originator has accepted reassignment of
the related Receivable, or all of such Receivables, if applicable, during such
period in accordance with the provisions of the Receivables Purchase Agreement;
(k) Federated shall cease to own directly or indirectly 100%
of the issued and outstanding capital stock of each of the Transferor and the
Originator;
(l) the Originator shall not be in compliance with all minimum
ratios of total capital (and core capital) to risk-weighted-assets required by
the governmental authorities regulating the Originator in accordance with the
implementation by such authorities of the Basle Accord and such noncompliance
shall have continued for a period of 30 days; or
(m) the sum of (i) Transferor's tangible net worth (determined
in accordance with generally accepted accounting principles) plus (ii) to the
extent excluded in determining such tangible net worth, the outstanding
principal amount of, and all accrued and unpaid interest on, the subordinated
promissory note from the Transferor to FCHC referred to in subsection 2.5(l) of
the Agreement, at any time shall be less than $20,000,000, and such condition
shall continue for a period of 30 days;
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then, in the case of any event described in subparagraph (a), (b), (e), (f),
(h), (i), (j), (k), (l) or (m) after the applicable grace period, if any, set
forth in such subparagraphs, either the Trustee or the Holders of Class A
Certificates evidencing Undivided Interests aggregating more than 50% of the
Class A Invested Amount or of Class B Certificates evidencing Undivided
Interests aggregating more than 50% of the Class B Invested Amount, by notice
then given in writing to the Transferor and the Servicer (and to the Trustee if
given by the Certificateholders) 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 subparagraph (c), (d), (g) or (h), 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 Variable Funding Certificateholders
immediately upon the occurrence of such event. The Servicer shall provide prompt
written notice to the Rating Agencies of the occurrence of any Pay Out Event
following the Servicer's obtaining actual knowledge of such event.
SECTION 11. SUCCESSOR SERVICER AND DELEGATION. (a) Section
10.2 of the Agreement shall read in its entirety as provided in the Agreement
and, in addition, the following sentence should be inserted in the fifteenth
line of Section 10.2(a) between the phrase "acceptable to the Trustee." and "If
such Successor Servicer is" and shall be applicable only with respect to the
Series 1997-1 Certificates: "Any Successor Servicer must either (A) be approved
by the Class A Agent and the Class B Agent, which approvals shall not be
unreasonably withheld, or (B) be a Person which (i) has a net worth of at least
$50,000,000, (ii) has serviced at least $2,000,000,000 of credit or charge card
receivables at any one time outstanding during the previous 12 months and (iii)
has a senior long-term debt rating, as determined by at least one nationally
recognized statistical rating organization, of at least `BBB' or its equivalent,
PROVIDED, that if such Successor Servicer has no long term debt or such debt is
not rated by a nationally recognized statistical rating organization, the long
term debt rating of its parent must be at least `BBB' or its equivalent."
(b) The Servicer shall not delegate any significant duties as
servicer under the Agreement pursuant to Section 8.7 thereof to any Person other
than an Affiliate of FDSNB except in accordance with such Section and with the
prior consent of the Administrative Agent acting at the direction of Holders of
Class A Certificates evidencing Undivided Interests aggregating more than 50% of
the Class A Invested Amount or of Class B Certificates evidencing Undivided
Interests aggregating more than 50% of the Class B Invested Amount, which
direction shall not be unreasonably withheld.
(c) The Trustee covenants and agrees that, so long as any
portion of the Class A Investor Principal Balance (as defined in the Class A
Certificate Purchase Agreement) or the Class B Investor Principal Balance (as
defined in the Class B Certificate Purchase Agreement) shall remain outstanding
or any monetary obligation arising hereunder or under the Class A Certificate
Purchase Agreement or the Class B Certificate Purchase Agreement to the Class A
Agent, the Class B Agent or any purchaser thereunder shall remain unpaid, unless
Holders of Class A Certificates evidencing Undivided Interests aggregating more
than 50% of the Class A Invested Amount and of Class B Certificates evidencing
Undivided Interests aggregating more than 50% of the Class B Invested Amount,
shall otherwise consent in writing, it shall, for the benefit of the Class A
Certificateholders, the Class A Agent, the Class B Certificateholders and the
Class B Agent, and so long as the Class B Certificate Purchase Agreement or the
Class B Certificate Purchase Agreement, as the case may be, shall be in effect,
use reasonable efforts to consult with
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the Class A Agent and the Class B Agent prior to any appointment of any
Successor Servicer pursuant to Section 10.2 of the Agreement; PROVIDED that the
consent of the Class A Certificateholders or the Class B Certificateholders to
the appointment of a Successor Servicer shall only be required if otherwise
required under the terms of the Agreement.
SECTION 12. SUCCESSOR TRUSTEE. Section 11.6 of the Agreement
shall read in its entirety as provided in the Agreement and, in addition, the
following sentence shall be added to the end of subsection 11.6(c) of the
Agreement and shall be applicable only to the Series 1997-1 Certificates: "Any
successor trustee appointed pursuant to this Section 11.6 shall be subject to
the written consent of the Administrative Agent (which consent shall not be
unreasonably withheld)."
SECTION 13. NOTICES TO ADMINISTRATIVE AGENT. A copy of each
notice, demand, direction, report, Officer's Certificate or other certificate,
election and opinion required to be sent or delivered pursuant to Section or
subsection 1.2(d), 2.3, 2.4(b), 2.4(d), 2.5(f), 2.6(d), 2.6(e), 2.7, 3.5, 3.6,
6.3(b), 6.9, 6.14, 7.2, 8.2, 8.7, 9.2, 10.1, 10.2, 10.3, 10.4, 11.6, 11.9,
11.15, 12.1, 12.2 or 13.2 of the Agreement shall also be sent or delivered and,
in the case of opinions, shall be addressed to the Administrative Agent. The
Trustee shall also promptly furnish to the Administrative Agent a copy of any
notice delivered to it by any Holder of Investor Certificates (other than
notices which relate solely to a Series of Investor Certificates other than the
Series 1997-1 Certificates or in connection with transfers of Certificates).
The Transferor shall give prompt notice to the Administrative
Agent (if not otherwise provided for in the Agreement or this Variable Funding
Supplement) of any deposit made pursuant to subsection 2.4(c) or 3.8(a) of the
Agreement, any change in Charge Account Agreements or the Credit and Collection
Policy pursuant to subsection Section 2.5(c) of the Agreement or Section 14 of
this Variable Funding Supplement that constitutes a change to the Charge Account
Agreements, any transfer pursuant to subsection 2.5(f) of the Agreement and any
circumstance contemplated by subsection 3.1(c) of the Agreement. The Servicer
shall give prompt notice to the Administrative Agent of any change in the
depositary holding the Collection Account pursuant to subsection 4.2(a) of the
Agreement, and the Trustee shall give prompt notice to the Administrative Agent
of the appointment or change of any Paying Agent pursuant to Section 6.6 of the
Agreement and any merger, conversion or consolidation of the Trustee as
contemplated by Section 11.9 of the Agreement.
SECTION 14. CHARGE ACCOUNT AGREEMENTS AND CREDIT AND
COLLECTION POLICIES. Section 2.5(c) of the Agreement shall read in its entirety
as set forth below and as so amended and restated shall be applicable only with
respect to the Series 1997-1 Certificates: "The Transferor shall comply with and
perform its obligations and shall cause the Originator to comply with and
perform their obligations under the Charge Account Agreements relating to the
Accounts and the Credit and Collection Policy except insofar as any failure to
comply or perform would not materially and adversely affect the rights of the
Trust or the Certificateholders hereunder or under the Certificates. The
Transferor may change the terms and provisions of the Charge Account Agreements
or the Credit and Collection Policy in any respect (including, without
limitation, the reduction of the required minimum monthly payment, the
calculation of the amount, or the timing, of charge offs and the periodic
finance charges and other fees to be assessed thereon) only if such change (i)
would not, in the reasonable belief of the Transferor, cause, immediately or
with the
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passage of time, a Series 1997-1 Pay Out Event to occur, (ii) (A) if it owns a
comparable segment of charge card accounts, such change is made applicable to
the comparable segment of the revolving credit card accounts owned by the
Transferor, if any, which have characteristics the same as, or substantially
similar to, the Accounts that are the subject of such change and (B) if it does
not own such a comparable segment, it will not make any such change with the
intent to materially benefit the Transferor or the Originator over the Investor
Certificateholders, except as otherwise restricted by an endorsement,
sponsorship, or other agreement between the Transferor and an unrelated third
party or by the terms of the Charge Account Agreements, and (iii) if the
Servicer is servicing charge card accounts owned by an unrelated third party,
such change would not result in the Servicer's applying a materially higher
standard of care to the servicing of such accounts than it applies under this
Agreement. Notwithstanding the Credit and Collection Policy, in the event that
(i) a Servicer Default shall have occurred, or (ii) any event or circumstance
described in subsection 9.1(a) of the Agreement shall have occurred with respect
to Federated, the Servicer shall promptly take all steps necessary to cause the
availability of In-Store Payments to cease and shall indemnify and hold the
Trust harmless from any loss resulting from any further In-Store Payments which
for any reason are not available for application as Collections as provided in
the Agreement."
SECTION 15. MINIMUM DENOMINATIONS. The Series 1997-1
Certificates shall initially be issued in the principal amounts of $92,800,000
Class A Variable Funding Certificates, $11,600,000 Class B Variable Funding
Certificates and $11,600,000 Class C Certificates. There shall be no minimum
denomination for the Series 1997-1 Certificates and the principal amount thereof
shall equal on any day the principal amount thereof reflected on the then most
recently issued Daily Report.
SECTION 16. CASH EQUIVALENTS. No investment of any amounts on
deposit in any account established pursuant to this Series 1997-1 Variable
Funding Supplement which is not otherwise a Cash Equivalent (i) issued by an
investment company described in subclause (x) of clause (c) of the definition of
Cash Equivalents or (ii) described in clause (d) or (e) of the definition of
Cash Equivalent shall constitute a Cash Equivalent without the written approval
of the Administrative Agent.
SECTION 17. AUTOMATIC ADDITIONAL ACCOUNTS. The Transferor
shall not elect to terminate or suspend the inclusion of Automatic Additional
Accounts without the prior written consent of the Administrative Agent acting on
behalf of the Holders of Series 1997-1 Variable Funding Certificates as provided
in Section 19 of this Variable Funding Supplement.
SECTION 18. 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.
SECTION 19. ACTIONS BY ADMINISTRATIVE AGENT. The
Administrative Agent shall have no obligation hereunder to grant any consent or
approval, to give any direction or to take any discretionary action unless and
until it has been directed to do so by the Class A Certificateholders as
provided in the Class A Certificate Purchase Agreement or by the Class B
Certificateholders as provided in the Class B Certificate Purchase Agreement.
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SECTION 20. PERIODIC FINANCE CHARGES AND OTHER FEES. The
Transferor hereby agrees that, except as otherwise required by any Requirement
of Law, or as is deemed by the Transferor to be necessary in order for the
Transferor to maintain its credit card business, based upon a good faith
assessment by the Transferor, in its sole discretion, of the nature of the
competition in the credit card business, it shall not at any time reduce the
Periodic Finance Charges assessed on any Receivable or other fees on any Account
if, as a result of such reduction, the Transferor's reasonable expectation of
the Portfolio Yield as of such date would be less than the Base Rate.
SECTION 21. RATING AGENCY CONDITION. Any requirement set forth
in the Agreement that, with respect to any action or series of related actions
or proposed transaction or series or related proposed transactions, each Rating
Agency shall have determined or notified the Trustee, the Transferor or the
Servicer that such action or series of related actions or proposed transaction
or series or related proposed transactions will not result in a reduction or
withdrawal of the rating of any Series of Investor Certificates (or any similar
requirement), shall mean with respect to the Series 1997-1, that the Rating
Agency Condition has been satisfied with respect to such action or series of
related actions or proposed transaction or series or related proposed
transactions.
SECTION 22. DISTRIBUTION ACCOUNT. There shall be no
Distribution Account for Series 1997-1.
SECTION 23. CERTIFICATE PURCHASE AGREEMENTS. The Trustee
hereby acknowledges receipt of copies of the Class A Certificate Purchase
Agreement and the Class B Certificate Purchase Agreement and agrees to be bound
by the provisions of subsection 9.12 (b) and Sections 9.14 and 9.15 of each such
agreement applicable to it. The Servicer hereby agrees to provide the Trustee
with a copy of any amendment or other modification to either such agreement.
SECTION 24. RATIFICATION OF AGREEMENT. As supplemented by this
Variable Funding Supplement, the Agreement is in all respects ratified and
confirmed and the Agreement as so supplemented by this Variable Funding
Supplement shall be read, taken, and construed as one and the same instrument.
SECTION 25. COUNTERPARTS. This Variable Funding Supplement may
be executed in any number of counterparts, each of which so executed shall be
deemed to be an original, but all of such counterparts shall together constitute
but one and the same instrument.
SECTION 26. GOVERNING LAW. THIS VARIABLE FUNDING SUPPLEMENT
SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT
REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND
REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH
LAWS.
SECTION 27. THE TRUSTEE. The Trustee shall not be responsible
in any manner whatsoever for or in respect of the sufficiency of this Variable
Funding Supplement or for in respect of the Preliminary Statement contained
herein, all of which recitals are made solely by the Transferor.
52
<PAGE> 56
SECTION 28. INSTRUCTIONS IN WRITING. All instructions given by
the Servicer to the Trustee pursuant to this Variable Funding Supplement shall
be in writing, and may be included in a Daily Report or Settlement Statement.
53
<PAGE> 57
IN WITNESS WHEREOF, the Transferor, the Servicer and the Trustee have
caused this Series 1997-1 Variable Funding Supplement to be duly executed by
their respective officers as of the day and year first above written.
PRIME II RECEIVABLES CORPORATION
Transferor
By: /S/ KAREN M. HOGUET
-----------------------------------
Name: Karen M. Hoguet
Title: Chairman of the Board
FDS NATIONAL BANK
Servicer
By: /S/ SUSAN R. ROBINSON
-----------------------------------
Name: Susan R. Robinson
Title: Treasurer
THE CHASE MANHATTAN BANK
Trustee
By: /S/ DENNIS KILDEA
-----------------------------------
Name: Dennis Kildea
Title: Trust Officer
61
<PAGE> 58
Exhibit A-1
[FORM OF CLASS A VARIABLE FUNDING CERTIFICATE]
THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), IN RELIANCE UPON EXEMPTIONS PROVIDED BY
THE SECURITIES ACT. NO RESALE OR OTHER TRANSFER OF THIS CERTIFICATE MAY BE MADE
EXCEPT (A) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT, (B) IN A TRANSACTION EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND APPLICABLE STATE SECURITIES OR "BLUE SKY" LAWS. NEITHER THE
TRANSFEROR NOR THE TRUSTEE IS OBLIGATED TO REGISTER THE CERTIFICATES UNDER THE
SECURITIES ACT OR ANY OTHER SECURITIES OR "BLUE SKY" LAW.
EACH HOLDER OF THIS CERTIFICATE OR AN INTEREST THEREIN, BY ACCEPTING
AND HOLDING THIS CERTIFICATE, IS DEEMED TO HAVE REPRESENTED AND WARRANTED THAT
IT IS NOT (I) AN EMPLOYEE BENEFIT PLAN AS DEFINED IN SECTION 3(3) OF ERISA) THAT
IS SUBJECT TO THE PROVISIONS OF TITLE I OF ERISA, (II) A PLAN DESCRIBED IN
SECTION 4975(E)(l) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED, OR (III)
ANY ENTITY WHOSE UNDERLYING ASSETS INCLUDE PLAN ASSETS BY REASON OF A PLAN'S
INVESTMENT IN THE ENTITY.
No.___ ____% Percentage Interest
PRIME CREDIT CARD MASTER TRUST II
CLASS A VARIABLE FUNDING CERTIFICATE,
SERIES 1997-1
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 consumer revolving credit card accounts generated
or to be generated by FDS National Bank ("FDSNB") and other assets and interests
constituting the Trust under the Pooling and Servicing Agreement described
below.
(Not an interest in or a recourse obligation of Prime II Receivables
Corporation, FDSNB or any affiliate of either of them.)
This certifies that ____________________________ (the
"Certificateholder") is the registered owner of a fractional undivided interest
in the Prime Credit Card Master Trust II (the "Trust") issued pursuant to the
Pooling and Servicing Agreement, dated as of January 22, 1997 (the
<PAGE> 59
"Pooling and Servicing Agreement," such term to include any amendment or
Supplement thereto) by and among Prime II Receivables Corporation, as Transferor
(the "Transferor"), FDSNB, as Servicer (the "Servicer"), and The Chase Manhattan
Bank, as Trustee (the "Trustee"), and the Series 1997-1 Variable Funding
Supplement, dated as of January 22, 1997 (the "Supplement"), among the
Transferor, the Servicer and the Trustee. The corpus of the Trust consists of
all of the Transferor's right, title and interest in, to and under the Trust
Property. The Certificateholder is entitled to payments from time to time as
provided in the Pooling and Servicing Agreement.
The holder of this Certificate on any Business Day is entitled to
payment in an amount equal to its pro rata share (as provided in the Pooling and
Servicing Agreement) of (a) the Class A Initial Invested Amount PLUS (b) an
amount equal to the aggregate principal amount of any VFC Additional Class A
Invested Amount purchased by the Class A Certificateholders through the end of
the preceding Business Day pursuant to Section 6.15 of the Pooling and Servicing
Agreement MINUS (c) the aggregate amount of principal payments made to the Class
A Certificateholders prior to such Business Day.
This Certificate does not purport to summarize the Pooling and
Servicing Agreement and reference is made to the Pooling and Servicing 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. A copy of the Pooling and Servicing Agreement may be requested from
the Trustee by writing to the Trustee at 450 West 33rd Street, New York, New
York 10001, Attention: Corporate Trustee Administration Department. To the
extent not defined herein, the capitalized terms used herein have the meanings
ascribed to them in the Pooling and Servicing Agreement. This Certificate is one
of a series of Certificates entitled "Prime Credit Card Master Trust II Class A
Variable Funding Certificates, Series 1997-1" (the "Class A Variable Funding
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 Pooling and Servicing Agreement, to which Pooling and
Servicing Agreement, as amended from time to time, the Certificateholder by
virtue of the acceptance hereof assents and by which the Certificateholder is
bound.
The Series 1997-1 Certificates are issued in three classes, the Class A
Variable Funding Certificates (of which this certificate is one), the Class B
Variable Funding Certificates, which are subordinated to the Class A Variable
Funding Certificates in certain rights of payment as described in the Agreement
and the Class C Certificates, which are subordinated to the Class A Variable
Funding Certificates and Class B Variable Funding Certificates in certain rights
of payment as described in the Agreement.
A portion of the aggregate Receivables in the Trust as determined
pursuant to the Pooling and Servicing Agreement will be treated as Finance
Charge Receivables. Such amount may be adjusted from time to time pursuant to
the Supplement. The remainder of such Receivables will be treated as Principal
Receivables.
Each holder of a Class A Variable Funding Certificate (a "Class A
Certificateholder") or any interest therein by acceptance of its Certificate or
any interest therein, agrees to treat the Class A
A-1-2
<PAGE> 60
Variable Funding Certificates for purposes of federal, state and local income or
franchise taxes and any other tax imposed on or measured by income, as
indebtedness of the Transferor to the extent permitted by law.
The Trust's assets are allocated in part to the holders of the Investor
Certificates (the "Investor Certificateholders") with the remainder allocated to
holders of other Series of Certificates issued by the Trust, if any, and to the
Transferor. In addition to the Investor Certificates, an Exchangeable Transferor
Certificate will be issued pursuant to the Pooling and Servicing Agreement and
will represent the Transferor's Interest in the Trust. The Exchangeable
Transferor Certificate will represent the interest in the Receivables not
represented by the Investor Certificates or any other Series of Certificates.
The Exchangeable Transferor Certificate may be exchanged by the Transferor
pursuant to the Pooling and Servicing Agreement for one or more Series of
Certificates and a reissued Exchangeable Transferor Certificate upon the
conditions set forth in the Pooling and Servicing Agreement. In addition, to the
extent permitted for any Series of Certificates by the related Supplement, the
Certificateholders of such Series may tender their Certificates and the
Transferor may tender the Exchangeable Transferor Certificate in exchange for
one or more Series of Certificates and a reissued Exchangeable Transferor
Certificate.
The aggregate interest in the Trust represented by the Investor
Certificates at any time shall not exceed an amount equal to the Invested Amount
at such time. The Initial Invested Amount is $116,000,000. The aggregate
interest in the Trust represented by the Class A Variable Funding Certificates
at any time shall not exceed an amount equal to the Class A Invested Amount at
such time. The Class A Initial Invested Amount is $92,800,000.
Interest will accrue on the unpaid principal amount of the Class A
Variable Funding Certificates at a per annum rate equal to the Class A
Certificate Rate and will be calculated on each Business Day based on the
product of the Class A Certificate Rate and the outstanding principal balance of
the Class A Variable Funding Certificates on such Business Day.
If on any Determination Date the sum of (i) aggregate Investor Default
Amount and (ii) the aggregate Investor Uncovered Dilution Amount, if any, for
each Business Day in the preceding Monthly Period exceeded the aggregate amount
of Finance Charge Collections applied to the payment thereof and the Available
Reserve Amount, and the amount of Excess Finance Charge Collections and
Reallocated Class C Principal Collections allocated pursuant thereto, then a
portion of the Class C Invested Amount will be reduced by an amount equal to
such insufficiency (but not in excess of the sum of (i) aggregate Investor
Default Amount and (ii) the aggregate Investor Uncovered Dilution Amount for
such Monthly Period) to avoid a charge-off with respect to the Class A Variable
Funding Certificates or Class B Variable Funding Certificates. If the Class C
Invested Amount is reduced to zero, then a portion of the Class B Invested
Amount will be reduced by an amount by which the Class C Invested Amount would
have been reduced below zero (but not in excess of aggregate Investor Default
Amount for such Monthly Period). If the Class B Invested Amount is reduced to
zero, then a portion of the Class A Invested Amount will be reduced by an amount
by which the Class B Invested Amount would have been reduced below zero (but not
in excess of aggregate Investor Default Amount for such Monthly Period).
A-1-3
<PAGE> 61
The Servicer, is entitled to receive as servicing compensation a
servicing fee in an amount equal to, with respect to each Series, the product of
(i) a fraction, the numerator of which is the actual number of days in the
measuring period specified in the applicable Series Supplement and the
denominator of which is the actual number of days in the year, (ii) the
applicable Series Servicing Fee Percentage and (iii) the Adjusted Invested
Amount as of the end of the date of determination for such payment as specified
in the applicable Series Supplement. The share of the Servicing Fee allocable to
the Investor Certificates for any Business Day is equal to the product of (i) a
fraction, the numerator of which is the actual number of days from and including
the preceding Business Day to but excluding such Business Day and the
denominator of which is the actual number of days in the year, (ii) 2.0% per
annum and (iii) the Invested Amount as of the end of the preceding Business Day
(the "Servicing Fee"). The Servicing Fee will be paid in the manner set forth in
the Pooling and Servicing Agreement. The remainder of the servicing compensation
will be allocable to the Transferor Amount and the Certificateholders of all
other Series, and the Trustee and the Investor Certificateholders will not have
any obligation to pay such portion of the servicing compensation.
As described in the Pooling and Servicing Agreement, Principal
Collections with respect to any Business Day will be allocated on the basis of
the aggregate Investor Percentage of all Series and the Transferor Percentage
with respect to the Principal Collections.
Subject to the Pooling and Servicing Agreement and the Supplement,
payments of principal are limited to the unpaid Class A Invested Amount of the
Class A Variable Funding Certificates, which may be less than the unpaid balance
of the Class A Variable Funding Certificates pursuant to the terms of the
Pooling and Servicing Agreement and the Supplement. All principal of and
interest on the Class A Variable Funding Certificates is due and payable no
later than January 31, 2002, unless a different date shall be set forth in an
Extension Notice (the "Series Termination Date"). After the Series Termination
Date, neither the Trust nor the Transferor will have any further obligation to
distribute principal or interest on the Class A Variable Funding Certificates.
In the event that the Class A Invested Amount is greater than zero on the Series
Termination Date, the Trustee will sell or cause to be sold, to the extent
necessary, an amount of Principal Receivables and the related Finance Charge
Receivables (or, in some cases, interests therein) 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 determined pursuant to the
Pooling and Servicing Agreement), and shall pay the proceeds to the Class A
Certificateholders pro rata in final payment of the Class A Variable Funding
Certificates, then to the Class B Variable Funding Certificateholders pro rata
in final payment of the Class B Variable Funding Certificates and then to the
Class C Certificateholders pro rata in final payment of the Class C
Certificates.
The transfer of this Certificate shall be registered in the Certificate
Register upon surrender of this Certificate for registration of transfer at any
office or agency maintained by the Transfer Agent and Registrar accompanied by a
written instrument of transfer in a form satisfactory to the Trustee and the
Transfer Agent and Registrar duly executed by the Certificateholder or such
Certificateholder's attorney-in-fact duly authorized in writing, and thereupon
one or more new Class
A-1-4
<PAGE> 62
A Variable Funding Certificates of authorized denominations and for the same
aggregate fractional Undivided Interests will be issued to the designated
transferee or transferees.
As provided in the Pooling and Servicing Agreement and certain
limitations therein and herein set forth, Class A Variable Funding Certificates
are exchangeable for new Class A Variable Funding Certificates evidencing like
aggregate fractional undivided interests, as requested by the Class A
Certificateholder surrendering such Class A Variable Funding Certificates. No
service charge may be imposed for any such exchange but the Transfer Agent and
Registrar may require payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection therewith.
The Trustee, the Paying Agent and the Transfer Agent and Registrar, and
any agent of any of them, may treat the person in whose name this Certificate is
registered as the owner hereof for all purposes, and neither the Trustee, the
Paying Agent and the Transfer Agent and Registrar, nor any agent of any of them
or of any such agent shall be affected by notice to the contrary except in
certain circumstances described in the Pooling and Servicing Agreement.
The Pooling and Servicing Agreement and the Supplement may be amended
from time to time by the Servicer, the Transferor and the Trustee, without the
consent of any of the Class A Certificateholders, to cure any ambiguity, to
revise any exhibits or schedules (other than Schedule 1) of the Pooling and
Servicing Agreement, to correct or supplement any provisions therein which may
be inconsistent with any other provisions therein or to add any other provisions
with respect to matters or questions raised under the Pooling and Servicing
Agreement or the Supplement which shall not be inconsistent with the provisions
of the Pooling and Servicing Agreement or the Supplement; PROVIDED, HOWEVER,
that such action shall not, as evidenced by an Opinion of Counsel, adversely
affect in any material respect the interests of any of the Investor
Certificateholders. Additionally, the Pooling and Servicing Agreement and the
Supplement may be amended from time to time by the Servicer, the Transferor and
the Trustee, without the consent of any of the Class A Certificateholders, to
add to or change any of the provisions of the Pooling and Servicing Agreement
(i) to provide that Bearer Certificates may be registrable as to principal, to
change or eliminate any restrictions on the payment of principal of (or premium,
if any) or any interest on Bearer Certificates to comply with the Bearer Rules,
to permit Bearer Certificates to be issued in exchange for Registered
Certificates (if then permitted by the Bearer Rules), to permit Bearer
Certificates to be issued in exchange for Bearer Certificates of other
authorized denominations or to permit the issuance of Certificates in
uncertificated form or (ii) to restrict or eliminate in any way the Transferor's
right to designate Removed Accounts and to remove from the Trust all of the
Trust's right, title and interest in, to and under the Receivables in such
Removed Accounts pursuant to Section 2 of the Pooling and Servicing Agreement.
The Trustee may, but shall not be obligated to, enter into any such amendment
which affects the Trustee's rights, duties or immunities under the Pooling and
Servicing Agreement or otherwise.
The Pooling and Servicing Agreement (and any schedule or exhibit
thereto) and the Supplement (and any schedule or exhibit thereto) may also be
amended from time to time by the Servicer, the Transferor and the Trustee,
without the consent of any of the Class A
A-1-5
<PAGE> 63
Certificateholders, for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of the Pooling and Servicing
Agreement or the Supplement, or of modifying in any manner the rights of the
Holders of the Class A Variable Funding Certificates; provided that (i) the
Servicer shall have provided an Officer's Certificate to the Trustee to the
effect that such amendment will not materially and adversely affect the
interests of the Certificateholders, (ii) such amendment shall not, as evidenced
by an Opinion of Counsel, cause the Trust to be characterized for U.S. federal
income tax purposes as an association taxable as a corporation or otherwise have
any material adverse impact on the U.S. federal income taxation of the Class A
Variable Funding Certificates or the Class A Certificateholders and (iii) the
Servicer shall have provided at least ten Business Days prior written notice to
each Rating Agency of such amendment and shall have received written
confirmation from each Rating Agency to the effect that the then current rating
of any Series or any Class of any Series will not be reduced or withdrawn as a
result of such amendment; PROVIDED, FURTHER, that such amendment shall not
reduce in any manner the amount of, or delay the timing of, distributions which
are required to be made on any Class A Variable Funding Certificate without the
consent of the related Class A Certificateholder, change the definition of or
the manner of calculating the interest of any Investor Certificateholder of such
Series without the consent of the related Investor Certificateholder or reduce
the percentage pursuant to the next succeeding paragraph required to consent to
any such amendment, in each case without the consent of all such Class A
Certificateholders.
The Pooling and Servicing Agreement and the Supplement may also be
amended from time to time by the Servicer, the Transferor and the Trustee with
the consent of the Holders of Investor Certificates evidencing Undivided
Interests aggregating not less than 66-2/3% of the Invested Amount of each and
every Series adversely affected, for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of the Pooling and
Servicing Agreement or of modifying in any manner the rights of the Investor
Certificateholders of any Series then issued and outstanding; PROVIDED, HOWEVER,
that no such amendment 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 any Series without the consent of the related Investor
Certificateholders; (ii) change the definition of or the manner of calculating
the interest of any Investor Certificateholder of any Series without the consent
of the related Investor Certificateholder or (iii) reduce the aforesaid
percentage required to consent to any such amendment, in each case without the
consent of all such Investor Certificateholders; PROVIDED, FURTHER, that for the
purposes of the Officer's Certificate referred to in clause (i) above, any
action taken in order to enable the Trust or a portion thereof to elect to
qualify as a FASIT (or comparable tax entity for the securitization of financial
assets) in accordance with the Internal Revenue Code of 1986, as amended, shall
be deemed not to materially and adversely affect the interest of the
Certificateholders.
THIS CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY
THE LAWS OF THE STATE OF NEW YORK.
Unless the certificate of authentication hereon has been executed by or
on behalf of the Trustee, by manual signature, this Certificate shall not be
entitled to any benefit under the Pooling and Servicing Agreement, or be valid
for any purpose.
A-1-6
<PAGE> 64
IN WITNESS WHEREOF, the Transferor has caused this Certificate to be
duly executed under its official seal.
PRIME II RECEIVABLES CORPORATION
By:_________________________________
Name:
Title:
CERTIFICATE OF AUTHENTICATION
This is one of the Class A Variable Funding Certificates referred to in
the within-mentioned Pooling and Servicing Agreement.
THE CHASE MANHATTAN BANK,
as Trustee
By:_____________________________
Authorized Signatory
<PAGE> 65
Exhibit A-2
[FORM OF CLASS B VARIABLE FUNDING CERTIFICATE]
THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), IN RELIANCE UPON EXEMPTIONS PROVIDED BY
THE SECURITIES ACT. NO RESALE OR OTHER TRANSFER OF THIS CERTIFICATE MAY BE MADE
EXCEPT (A) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT, (B) IN A TRANSACTION EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND APPLICABLE STATE SECURITIES OR "BLUE SKY" LAWS. NEITHER THE
TRANSFEROR NOR THE TRUSTEE IS OBLIGATED TO REGISTER THE CERTIFICATES UNDER THE
SECURITIES ACT OR ANY OTHER SECURITIES OR "BLUE SKY" LAW.
EACH HOLDER OF THIS CERTIFICATE OR AN INTEREST THEREIN, BY ACCEPTING
AND HOLDING THIS CERTIFICATE, IS DEEMED TO HAVE REPRESENTED AND WARRANTED THAT
IT IS NOT (I) AN EMPLOYEE BENEFIT PLAN AS DEFINED IN SECTION 3(3) OF ERISA) THAT
IS SUBJECT TO THE PROVISIONS OF TITLE I OF ERISA, (II) A PLAN DESCRIBED IN
SECTION 4975(E)(l) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED, OR (III)
ANY ENTITY WHOSE UNDERLYING ASSETS INCLUDE PLAN ASSETS BY REASON OF A PLAN'S
INVESTMENT IN THE ENTITY.
No.___ ____% Percentage Interest
PRIME CREDIT CARD MASTER TRUST II
CLASS B VARIABLE FUNDING CERTIFICATE,
SERIES 1997-1
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 consumer revolving credit card accounts generated
or to be generated by FDS National Bank ("FDSNB") and other assets and interests
constituting the Trust under the Pooling and Servicing Agreement described
below.
(Not an interest in or a recourse obligation of Prime II Receivables
Corporation, FDSNB or any affiliate of either of them.)
This certifies that ____________________________ (the
"Certificateholder") is the registered owner of a fractional undivided interest
in the Prime Credit Card Master Trust II (the "Trust") issued pursuant to the
Pooling and Servicing Agreement, dated as of January 22, 1997 (the
<PAGE> 66
"Pooling and Servicing Agreement," such term to include any amendment or
Supplement thereto) by and among Prime II Receivables Corporation, as Transferor
(the "Transferor"), FDSNB, as Servicer (the "Servicer"), and The Chase Manhattan
Bank, as Trustee (the "Trustee"), and the Series 1997-1 Variable Funding
Supplement, dated as of January 22, 1997 (the "Supplement"), among the
Transferor, the Servicer and the Trustee. The corpus of the Trust consists of
all of the Transferor's right, title and interest in, to and under the Trust
Property. The Certificateholder is entitled to payments from time to time as
provided in the Pooling and Servicing Agreement.
The holder of this Certificate on any Business Day is entitled to
payment in an amount equal to its pro rata share (as provided in the Pooling and
Servicing Agreement) of (a) the Class B Initial Invested Amount PLUS (b) an
amount equal to the aggregate principal amount of any VFC Additional Class B
Invested Amount purchased by the Class B Certificateholders through the end of
the preceding Business Day pursuant to Section 6.15 of the Pooling and Servicing
Agreement MINUS (c) the aggregate amount of principal payments made to the Class
B Certificateholders prior to such Business Day.
This Certificate does not purport to summarize the Pooling and
Servicing Agreement and reference is made to the Pooling and Servicing 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. A copy of the Pooling and Servicing Agreement may be requested from
the Trustee by writing to the Trustee at 450 West 33rd Street, New York, New
York 10001, Attention: Corporate Trustee Administration Department. To the
extent not defined herein, the capitalized terms used herein have the meanings
ascribed to them in the Pooling and Servicing Agreement. This Certificate is one
of a series of Certificates entitled "Prime Credit Card Master Trust II Class B
Variable Funding Certificates, Series 1997-1" (the "Class B Variable Funding
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 Pooling and Servicing Agreement, to which Pooling and
Servicing Agreement, as amended from time to time, the Certificateholder by
virtue of the acceptance hereof assents and by which the Certificateholder is
bound.
The Series 1997-1 Certificates are issued in three classes, the Class A
Variable Funding Certificates, the Class B Variable Funding Certificates (of
which this certificate is one), which are subordinated to the Class A Variable
Funding Certificates in certain rights of payment as described in the Agreement
and the Class C Certificates, which are subordinated to the Class A Variable
Funding Certificates and Class B Variable Funding Certificates in certain rights
of payment as described in the Agreement.
A portion of the aggregate Receivables in the Trust as determined
pursuant to the Pooling and Servicing Agreement will be treated as Finance
Charge Receivables. Such amount may be adjusted from time to time pursuant to
the Supplement. The remainder of such Receivables will be treated as Principal
Receivables.
Each holder of a Class B Variable Funding Certificate (a "Class B
Certificateholder") or any interest therein by acceptance of its Certificate or
any interest therein, agrees to treat the Class B
A-2-2
<PAGE> 67
Variable Funding Certificates for purposes of federal, state and local income or
franchise taxes and any other tax imposed on or measured by income, as
indebtedness of the Transferor to the extent permitted by law.
The Trust's assets are allocated in part to the holders of the Investor
Certificates (the "Investor Certificateholders") with the remainder allocated to
holders of other Series of Certificates issued by the Trust, if any, and to the
Transferor. In addition to the Investor Certificates, an Exchangeable Transferor
Certificate will be issued pursuant to the Pooling and Servicing Agreement and
will represent the Transferor's Interest in the Trust. The Exchangeable
Transferor Certificate will represent the interest in the Receivables not
represented by the Investor Certificates or any other Series of Certificates.
The Exchangeable Transferor Certificate may be exchanged by the Transferor
pursuant to the Pooling and Servicing Agreement for one or more Series of
Certificates and a reissued Exchangeable Transferor Certificate upon the
conditions set forth in the Pooling and Servicing Agreement. In addition, to the
extent permitted for any Series of Certificates by the related Supplement, the
Certificateholders of such Series may tender their Certificates and the
Transferor may tender the Exchangeable Transferor Certificate in exchange for
one or more Series of Certificates and a reissued Exchangeable Transferor
Certificate.
The aggregate interest in the Trust represented by the Investor
Certificates at any time shall not exceed an amount equal to the Invested Amount
at such time. The Initial Invested Amount is $116,000,000. The aggregate
interest in the Trust represented by the Class B Variable Funding Certificates
at any time shall not exceed an amount equal to the Class B Invested Amount at
such time. The Class B Initial Invested Amount is $11,600,000.
Interest will accrue on the unpaid principal amount of the Class B
Variable Funding Certificates at a per annum rate equal to the Class B
Certificate Rate and will be calculated on each Business Day based on the
product of the Class B Certificate Rate and the outstanding principal balance of
the Class B Variable Funding Certificates on such Business Day.
If on any Determination Date the sum of (i) aggregate Investor Default
Amount and (ii) the aggregate Investor Uncovered Dilution Amount, if any, for
each Business Day in the preceding Monthly Period exceeded the aggregate amount
of Finance Charge Collections applied to the payment thereof and the Available
Reserve Amount, and the amount of Excess Finance Charge Collections and
Reallocated Class C Principal Collections allocated pursuant thereto, then a
portion of the Class C Invested Amount will be reduced by an amount equal to
such insufficiency (but not in excess of the sum of (i) aggregate Investor
Default Amount and (ii) the aggregate Investor Uncovered Dilution Amount for
such Monthly Period) to avoid a charge-off with respect to the Class A Variable
Funding Certificates or Class B Variable Funding Certificates. If the Class C
Invested Amount is reduced to zero, then a portion of the Class B Invested
Amount will be reduced by an amount by which the Class C Invested Amount would
have been reduced below zero (but not in excess of aggregate Investor Default
Amount for such Monthly Period). If the Class B Invested Amount is reduced to
zero, then a portion of the Class A Invested Amount will be reduced by an amount
by which the Class B Invested Amount would have been reduced below zero (but not
in excess of aggregate Investor Default Amount for such Monthly Period).
A-2-3
<PAGE> 68
The Servicer, is entitled to receive as servicing compensation a
servicing fee in an amount equal to, with respect to each Series, the product of
(i) a fraction, the numerator of which is the actual number of days in the
measuring period specified in the applicable Series Supplement and the
denominator of which is the actual number of days in the year, (ii) the
applicable Series Servicing Fee Percentage and (iii) the Adjusted Invested
Amount as of the end of the date of determination for such payment as specified
in the applicable Series Supplement. The share of the Servicing Fee allocable to
the Investor Certificates for any Business Day is equal to the product of (i) a
fraction, the numerator of which is the actual number of days from and including
the preceding Business Day to but excluding such Business Day and the
denominator of which is the actual number of days in a year, (ii) 2.0% per annum
and (iii) the Invested Amount as of the end of the preceding Business Day (the
"Servicing Fee"). The Servicing Fee will be paid in the manner set forth in the
Pooling and Servicing Agreement. The remainder of the servicing compensation
will be allocable to the Transferor Amount and the Certificateholders of all
other Series, and the Trustee and the Investor Certificateholders will not have
any obligation to pay such portion of the servicing compensation.
As described in the Pooling and Servicing Agreement, Principal
Collections with respect to any Business Day will be allocated on the basis of
the aggregate Investor Percentage of all Series and the Transferor Percentage
with respect to the Principal Collections.
Subject to the Pooling and Servicing Agreement and the Supplement,
payments of principal are limited to the unpaid Class B Invested Amount of the
Class B Variable Funding Certificates, which may be less than the unpaid balance
of the Class B Variable Funding Certificates pursuant to the terms of the
Pooling and Servicing Agreement and the Supplement. All principal of and
interest on the Class B Variable Funding Certificates is due and payable no
later than January 31, 2002, unless a different date shall be set forth in an
Extension Notice (the "Series Termination Date"). After the Series Termination
Date, neither the Trust nor the Transferor will have any further obligation to
distribute principal or interest on the Class B Variable Funding Certificates.
In the event that the Class B Invested Amount is greater than zero on the Series
Termination Date, the Trustee will sell or cause to be sold, to the extent
necessary, an amount of Principal Receivables and the related Finance Charge
Receivables (or, in some cases, interests therein) 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 determined pursuant to the
Pooling and Servicing Agreement), and shall pay the proceeds to the Class A
Certificateholders pro rata in final payment of the Class A Variable Funding
Certificates, then to the Class B Variable Funding Certificateholders pro rata
in final payment of the Class B Variable Funding Certificates and then to the
Class C Certificateholders pro rata in final payment of the Class C
Certificates.
The transfer of this Certificate shall be registered in the Certificate
Register upon surrender of this Certificate for registration of transfer at any
office or agency maintained by the Transfer Agent and Registrar accompanied by a
written instrument of transfer in a form satisfactory to the Trustee and the
Transfer Agent and Registrar duly executed by the Certificateholder or such
Certificateholder's attorney-in-fact duly authorized in writing, and thereupon
one or more new Class
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<PAGE> 69
B Variable Funding Certificates of authorized denominations and for the same
aggregate fractional Undivided Interests will be issued to the designated
transferee or transferees.
As provided in the Pooling and Servicing Agreement and certain
limitations therein and herein set forth, Class B Variable Funding Certificates
are exchangeable for new Class B Variable Funding Certificates evidencing like
aggregate fractional undivided interests, as requested by the Class B
Certificateholder surrendering such Class B Variable Funding Certificates. No
service charge may be imposed for any such exchange but the Transfer Agent and
Registrar may require payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection therewith.
The Trustee, the Paying Agent and the Transfer Agent and Registrar, and
any agent of any of them, may treat the person in whose name this Certificate is
registered as the owner hereof for all purposes, and neither the Trustee, the
Paying Agent and the Transfer Agent and Registrar, nor any agent of any of them
or of any such agent shall be affected by notice to the contrary except in
certain circumstances described in the Pooling and Servicing Agreement.
The Pooling and Servicing Agreement and the Supplement may be amended
from time to time by the Servicer, the Transferor and the Trustee, without the
consent of any of the Class B Certificateholders, to cure any ambiguity, to
revise any exhibits or schedules (other than Schedule 1) of the Pooling and
Servicing Agreement, to correct or supplement any provisions therein which may
be inconsistent with any other provisions therein or to add any other provisions
with respect to matters or questions raised under the Pooling and Servicing
Agreement or the Supplement which shall not be inconsistent with the provisions
of the Pooling and Servicing Agreement or the Supplement; PROVIDED, HOWEVER,
that such action shall not, as evidenced by an Opinion of Counsel, adversely
affect in any material respect the interests of any of the Investor
Certificateholders. Additionally, the Pooling and Servicing Agreement and the
Supplement may be amended from time to time by the Servicer, the Transferor and
the Trustee, without the consent of any of the Class B Certificateholders, to
add to or change any of the provisions of the Pooling and Servicing Agreement
(i) to provide that Bearer Certificates may be registrable as to principal, to
change or eliminate any restrictions on the payment of principal of (or premium,
if any) or any interest on Bearer Certificates to comply with the Bearer Rules,
to permit Bearer Certificates to be issued in exchange for Registered
Certificates (if then permitted by the Bearer Rules), to permit Bearer
Certificates to be issued in exchange for Bearer Certificates of other
authorized denominations or to permit the issuance of Certificates in
uncertificated form or (ii) to restrict or eliminate in any way the Transferor's
right to designate Removed Accounts and to remove from the Trust all of the
Trust's right, title and interest in, to and under the Receivables in such
Removed Accounts pursuant to Section 2 of the Pooling and Servicing Agreement.
The Trustee may, but shall not be obligated to, enter into any such amendment
which affects the Trustee's rights, duties or immunities under the Pooling and
Servicing Agreement or otherwise.
The Pooling and Servicing Agreement (and any schedule or exhibit
thereto) and the Supplement (and any schedule or exhibit thereto) may also be
amended from time to time by the Servicer, the Transferor and the Trustee,
without the consent of any of the Class B
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<PAGE> 70
Certificateholders, for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of the Pooling and Servicing
Agreement or the Supplement, or of modifying in any manner the rights of the
Holders of the Class B Variable Funding Certificates; provided that (i) the
Servicer shall have provided an Officer's Certificate to the Trustee to the
effect that such amendment will not materially and adversely affect the
interests of the Certificateholders, (ii) such amendment shall not, as evidenced
by an Opinion of Counsel, cause the Trust to be characterized for U.S. federal
income tax purposes as an association taxable as a corporation or otherwise have
any material adverse impact on the U.S. federal income taxation of the Class B
Variable Funding Certificates or the Class B Certificateholders and (iii) the
Servicer shall have provided at least ten Business Days prior written notice to
each Rating Agency of such amendment and shall have received written
confirmation from each Rating Agency to the effect that the then current rating
of any Series or any Class of any Series will not be reduced or withdrawn as a
result of such amendment; PROVIDED, FURTHER, that such amendment shall not
reduce in any manner the amount of, or delay the timing of, distributions which
are required to be made on any Class B Variable Funding Certificate without the
consent of the related Class B Certificateholder, change the definition of or
the manner of calculating the interest of any Investor Certificateholder of such
Series without the consent of the related Investor Certificateholder or reduce
the percentage pursuant to the next succeeding paragraph required to consent to
any such amendment, in each case without the consent of all such Class B
Certificateholders.
The Pooling and Servicing Agreement and the Supplement may also be
amended from time to time by the Servicer, the Transferor and the Trustee with
the consent of the Holders of Investor Certificates evidencing Undivided
Interests aggregating not less than 66-2/3% of the Invested Amount of each and
every Series adversely affected, for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of the Pooling and
Servicing Agreement or of modifying in any manner the rights of the Investor
Certificateholders of any Series then issued and outstanding; PROVIDED, HOWEVER,
that no such amendment 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 any Series without the consent of the related Investor
Certificateholders; (ii) change the definition of or the manner of calculating
the interest of any Investor Certificateholder of any Series without the consent
of the related Investor Certificateholder or (iii) reduce the aforesaid
percentage required to consent to any such amendment, in each case without the
consent of all such Investor Certificateholders; PROVIDED, FURTHER, that for the
purposes of the Officer's Certificate referred to in clause (i) above, any
action taken in order to enable the Trust or a portion thereof to elect to
qualify as a FASIT (or comparable tax entity for the securitization of financial
assets) in accordance with the Internal Revenue Code of 1986, as amended, shall
be deemed not to materially and adversely affect the interest of the
Certificateholders.
THIS CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY
THE LAWS OF THE STATE OF NEW YORK.
Unless the certificate of authentication hereon has been executed by or
on behalf of the Trustee, by manual signature, this Certificate shall not be
entitled to any benefit under the Pooling and Servicing Agreement, or be valid
for any purpose.
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<PAGE> 71
IN WITNESS WHEREOF, the Transferor has caused this Certificate to be
duly executed under its official seal.
PRIME II RECEIVABLES CORPORATION
By:_________________________________
Name:
Title:
CERTIFICATE OF AUTHENTICATION
This is one of the Class B Variable Funding Certificates referred to in
the within-mentioned Pooling and Servicing Agreement.
THE CHASE MANHATTAN BANK,
as Trustee
By:_____________________________
Authorized Signatory
<PAGE> 72
Exhibit A-3
[FORM OF CLASS C CERTIFICATE]
THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), IN RELIANCE UPON EXEMPTIONS PROVIDED BY
THE SECURITIES ACT. NO RESALE OR OTHER TRANSFER OF THIS CERTIFICATE MAY BE MADE
EXCEPT (A) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT, (B) IN A TRANSACTION EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND APPLICABLE STATE SECURITIES OR "BLUE SKY" LAWS. NEITHER THE
TRANSFEROR NOR THE TRUSTEE IS OBLIGATED TO REGISTER THE CERTIFICATES UNDER THE
SECURITIES ACT OR ANY OTHER SECURITIES OR "BLUE SKY" LAW.
EACH HOLDER OF THIS CERTIFICATE OR AN INTEREST THEREIN, BY ACCEPTING
AND HOLDING THIS CERTIFICATE, IS DEEMED TO HAVE REPRESENTED AND WARRANTED THAT
IT IS NOT (I) AN EMPLOYEE BENEFIT PLAN AS DEFINED IN SECTION 3(3) OF ERISA) THAT
IS SUBJECT TO THE PROVISIONS OF TITLE I OF ERISA, (II) A PLAN DESCRIBED IN
SECTION 4975(E)(l) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED, OR (III)
ANY ENTITY WHOSE UNDERLYING ASSETS INCLUDE PLAN ASSETS BY REASON OF A PLAN'S
INVESTMENT IN THE ENTITY.
No.___ ___% Percentage Interest
PRIME CREDIT CARD MASTER TRUST II
CLASS C CERTIFICATE,
SERIES 1997-1
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 consumer revolving credit card accounts generated
or to be generated by FDS National Bank ("FDSNB") and other assets and interests
constituting the Trust under the Pooling and Servicing Agreement described
below.
(Not an interest in or a recourse obligation of Prime II Receivables
Corporation, FDSNB or any affiliate of either of them.)
This certifies that ____________________________ (the
"Certificateholder") is the registered owner of a fractional undivided interest
in the Prime Credit Card Master Trust II (the "Trust") issued pursuant to the
Pooling and Servicing Agreement, dated as of January 22, 1997 (the
<PAGE> 73
"Pooling and Servicing Agreement," such term to include any amendment or
Supplement thereto) by and among Prime II Receivables Corporation, as Transferor
(the "Transferor"), FDSNB, as Servicer (the "Servicer"), and The Chase Manhattan
Bank, as Trustee (the "Trustee"), and the Series 1997-1 Variable Funding
Supplement, dated as of January 22, 1997 (the "Supplement"), among the
Transferor, the Servicer and the Trustee. The corpus of the Trust consists of
all of the Transferor's right, title and interest in, to and under the Trust
Property. The Certificateholder is entitled to payments from time to time as
provided in the Pooling and Servicing Agreement.
The holder of this Certificate on any Business Day is entitled to
payment in an amount equal to its pro rata share (as provided in the Pooling and
Servicing Agreement) of (a) the Class C Initial Invested Amount PLUS (b) an
amount equal to the aggregate principal amount of any VFC Additional Class C
Invested Amount purchased by the Class C Certificateholders through the end of
the preceding Business Day pursuant to Section 6.15 of the Pooling and Servicing
Agreement MINUS (c) the aggregate amount of principal payments to the Class C
Certificateholders prior to such Business Day.
This Certificate does not purport to summarize the Pooling and
Servicing Agreement and reference is made to the Pooling and Servicing 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. A copy of the Pooling and Servicing Agreement may be requested from
the Trustee by writing to the Trustee at 450 West 33rd Street, New York, New
York 10001, Attention: Corporate Trustee Administration Department. To the
extent not defined herein, the capitalized terms used herein have the meanings
ascribed to them in the Pooling and Servicing Agreement. This Certificate is one
of a series of Certificates entitled "Prime Credit Card Master Trust II Class C
Certificates, Series 1997-1" (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 Pooling and Servicing
Agreement, to which Pooling and Servicing Agreement, as amended from time to
time, the Certificateholder by virtue of the acceptance hereof assents and by
which the Certificateholder is bound.
The Series 1997-1 Certificates are issued in three classes, the Class A
Variable Funding Certificates, the Class B Variable Funding Certificates, which
are subordinated to the Class A Variable Funding Certificates in certain rights
of payment as described in the Agreement and the Class C Certificates (of which
this certificate is one), which are subordinated to the Class A Variable Funding
Certificates and Class B Variable Funding Certificates in certain rights of
payment as described in the Agreement.
A portion of the aggregate Receivables in the Trust as determined
pursuant to the Pooling and Servicing Agreement will be treated as Finance
Charge Receivables. Such amount may be adjusted from time to time pursuant to
the Supplement. The remainder of such Receivables will be treated as Principal
Receivables.
Each holder of a Class C Certificate (a "Class C Certificateholder") or
any interest therein by acceptance of its Certificate or any interest therein,
agrees to treat the Class C Certificates for
A-3-2
<PAGE> 74
purposes of federal, state and local income or franchise taxes and any other tax
imposed on or measured by income, as indebtedness of the Transferor to the
extent permitted by law.
The Trust's assets are allocated in part to the holders of the Investor
Certificates (the "Investor Certificateholders") with the remainder allocated to
holders of other Series of Certificates issued by the Trust, if any, and to the
Transferor. In addition to the Investor Certificates, an Exchangeable Transferor
Certificate will be issued pursuant to the Pooling and Servicing Agreement and
will represent the Transferor's Interest in the Trust. The Exchangeable
Transferor Certificate will represent the interest in the Receivables not
represented by the Investor Certificates or any other Series of Certificates.
The Exchangeable Transferor Certificate may be exchanged by the Transferor
pursuant to the Pooling and Servicing Agreement for one or more Series of
Certificates and a reissued Exchangeable Transferor Certificate upon the
conditions set forth in the Pooling and Servicing Agreement. In addition, to the
extent permitted for any Series of Certificates by the related Supplement, the
Certificateholders of such Series may tender their Certificates and the
Transferor may tender the Exchangeable Transferor Certificate in exchange for
one or more Series of Certificates and a reissued Exchangeable Transferor
Certificate.
The aggregate interest in the Trust represented by the Investor
Certificates at any time shall not exceed an amount equal to the Invested Amount
at such time. The Initial Invested Amount is $116,000,000. The aggregate
interest in the Trust represented by the Class C Certificates at any time shall
not exceed an amount equal to the Class C Invested Amount at such time. The
Class C Initial Invested Amount is $11,600,000.
Interest will accrue on the unpaid principal amount of the Class C
Certificates at a per annum rate equal to the Class C Certificate Rate and will
be calculated on each Business Day based on the product of the Class C
Certificate Rate and the outstanding principal balance of the Class C
Certificates on such Business Day.
If on any Determination Date the sum of (i) aggregate Investor Default
Amount and (ii) the aggregate Investor Uncovered Dilution Amount, if any, for
each Business Day in the preceding Monthly Period exceeded the aggregate amount
of Finance Charge Collections applied to the payment thereof and the Available
Reserve Amount, and the amount of Excess Finance Charge Collections and
Reallocated Class C Principal Collections allocated pursuant thereto, then a
portion of the Class C Invested Amount will be reduced by an amount equal to
such insufficiency (but not in excess of the sum of (i) aggregate Investor
Default Amount and (ii) the aggregate Investor Uncovered Dilution Amount for
such Monthly Period) to avoid a charge-off with respect to the Class A Variable
Funding Certificates or Class B Variable Funding Certificates. If the Class C
Invested Amount is reduced to zero, then a portion of the Class B Invested
Amount will be reduced by an amount by which the Class C Invested Amount would
have been reduced below zero (but not in excess of aggregate Investor Default
Amount for such Monthly Period). If the Class B Invested Amount is reduced to
zero, then a portion of the Class A Invested Amount will be reduced by an amount
by which the Class B Invested Amount would have been reduced below zero (but not
in excess of aggregate Investor Default Amount for such Monthly Period).
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<PAGE> 75
The Servicer, is entitled to receive as servicing compensation a
servicing fee in an amount equal to, with respect to each Series, the product of
(i) a fraction, the numerator of which is the actual number of days in the
measuring period specified in the applicable Series Supplement and the
denominator of which is the actual number of days in the year, (ii) the
applicable Series Servicing Fee Percentage and (iii) the Adjusted Invested
Amount as of the end of the date of determination for such payment as specified
in the applicable Series Supplement. The share of the Servicing Fee allocable to
the Investor Certificates for any Business Day is equal to the product of (i) a
fraction, the numerator of which is the actual number of days from and including
the preceding Business Day to but excluding such Business Day and the
denominator of which is the actual number of days in a year, (ii) 2.0% per annum
and (iii) the Invested Amount as of the end of the preceding Business Day (the
"Servicing Fee"). The Servicing Fee will be paid in the manner set forth in the
Pooling and Servicing Agreement. The remainder of the servicing compensation
will be allocable to the Transferor Amount and the Certificateholders of all
other Series, and the Trustee and the Investor Certificateholders will not have
any obligation to pay such portion of the servicing compensation.
As described in the Pooling and Servicing Agreement, Principal
Collections with respect to any Business Day will be allocated on the basis of
the aggregate Investor Percentage of all Series and the Transferor Percentage
with respect to the Principal Collections.
Subject to the Pooling and Servicing Agreement and the Supplement,
payments of principal are limited to the unpaid Class C Invested Amount of the
Class C Certificates, which may be less than the unpaid balance of the Class C
Certificates pursuant to the terms of the Pooling and Servicing Agreement and
the Supplement. All principal of and interest on the Class C Certificates is due
and payable no later than January 31, 2002, unless a different date shall be set
forth in an Extension Notice (the "Series Termination Date"). After the Series
Termination Date, neither the Trust nor the Transferor will have any further
obligation to distribute principal or interest on the Class C Certificates. In
the event that the Class C Invested Amount is greater than zero on the Series
Termination Date, the Trustee will sell or cause to be sold, to the extent
necessary, an amount of Principal Receivables and the related Finance Charge
Receivables (or, in some cases, interests therein) 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 determined pursuant to the
Pooling and Servicing Agreement), and shall pay the proceeds to the Class A
Certificateholders pro rata in final payment of the Class A Variable Funding
Certificates, then to the Class B Variable Funding Certificateholders pro rata
in final payment of the Class B Variable Funding Certificates and then to the
Class C Certificateholders pro rata in final payment of the Class C
Certificates.
The transfer of this Certificate shall be registered in the Certificate
Register upon surrender of this Certificate for registration of transfer at any
office or agency maintained by the Transfer Agent and Registrar accompanied by a
written instrument of transfer in a form satisfactory to the Trustee and the
Transfer Agent and Registrar duly executed by the Certificateholder or such
Certificateholder's attorney-in-fact duly authorized in writing, and thereupon
one or more new Class C Certificates of authorized denominations and for the
same aggregate fractional Undivided Interests will be issued to the designated
transferee or transferees.
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<PAGE> 76
As provided in the Pooling and Servicing Agreement and certain
limitations therein and herein set forth, Class C Certificates are exchangeable
for new Class C Certificates evidencing like aggregate fractional undivided
interests, as requested by the Class C Certificateholder surrendering such Class
C Certificates. No service charge may be imposed for any such exchange but the
Transfer Agent and Registrar may require payment of a sum sufficient to cover
any tax or other governmental charge that may be imposed in connection
therewith.
The Trustee, the Paying Agent and the Transfer Agent and Registrar, and
any agent of any of them, may treat the person in whose name this Certificate is
registered as the owner hereof for all purposes, and neither the Trustee, the
Paying Agent and the Transfer Agent and Registrar, nor any agent of any of them
or of any such agent shall be affected by notice to the contrary except in
certain circumstances described in the Pooling and Servicing Agreement.
The Pooling and Servicing Agreement and the Supplement may be amended
from time to time by the Servicer, the Transferor and the Trustee, without the
consent of any of the Class C Certificateholders, to cure any ambiguity, to
revise any exhibits or schedules (other than Schedule 1) of the Pooling and
Servicing Agreement, to correct or supplement any provisions therein which may
be inconsistent with any other provisions therein or to add any other provisions
with respect to matters or questions raised under the Pooling and Servicing
Agreement or the Supplement which shall not be inconsistent with the provisions
of the Pooling and Servicing Agreement or the Supplement; PROVIDED, HOWEVER,
that such action shall not, as evidenced by an Opinion of Counsel, adversely
affect in any material respect the interests of any of the Investor
Certificateholders. Additionally, the Pooling and Servicing Agreement and the
Supplement may be amended from time to time by the Servicer, the Transferor and
the Trustee, without the consent of any of the Class C Certificateholders, to
add to or change any of the provisions of the Pooling and Servicing Agreement
(i) to provide that Bearer Certificates may be registrable as to principal, to
change or eliminate any restrictions on the payment of principal of (or premium,
if any) or any interest on Bearer Certificates to comply with the Bearer Rules,
to permit Bearer Certificates to be issued in exchange for Registered
Certificates (if then permitted by the Bearer Rules), to permit Bearer
Certificates to be issued in exchange for Bearer Certificates of other
authorized denominations or to permit the issuance of Certificates in
uncertificated form or (ii) to restrict or eliminate in any way the Transferor's
right to designate Removed Accounts and to remove from the Trust all of the
Trust's right, title and interest in, to and under the Receivables in such
Removed Accounts pursuant to Section 2 of the Pooling and Servicing Agreement.
The Trustee may, but shall not be obligated to, enter into any such amendment
which affects the Trustee's rights, duties or immunities under the Pooling and
Servicing Agreement or otherwise.
The Pooling and Servicing Agreement (and any schedule or exhibit
thereto) and the Supplement (and any schedule or exhibit thereto) may also be
amended from time to time by the Servicer, the Transferor and the Trustee,
without the consent of any of the Class C Certificateholders, for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions of the Pooling and Servicing Agreement or the Supplement, or of
modifying in any manner the rights of the Holders of the Class C Certificates;
provided that (i) the Servicer shall have provided an Officer's Certificate to
the Trustee to the effect that such amendment
A-3-5
<PAGE> 77
will not materially and adversely affect the interests of the
Certificateholders, (ii) such amendment shall not, as evidenced by an Opinion of
Counsel, cause the Trust to be characterized for U.S. federal income tax
purposes as an association taxable as a corporation or otherwise have any
material adverse impact on the U.S. federal income taxation of the Class C
Certificates or the Class C Certificateholders and (iii) the Servicer shall have
provided at least ten Business Days prior written notice to each Rating Agency
of such amendment and shall have received written confirmation from each Rating
Agency to the effect that the then current rating of any Series or any Class of
any Series will not be reduced or withdrawn as a result of such amendment;
PROVIDED, FURTHER, that such amendment shall not reduce in any manner the amount
of, or delay the timing of, distributions which are required to be made on any
Class C Certificate without the consent of the related Class C
Certificateholder, change the definition of or the manner of calculating the
interest of any Investor Certificateholder of such Series without the consent of
the related Investor Certificateholder or reduce the percentage pursuant to the
next succeeding paragraph required to consent to any such amendment, in each
case without the consent of all such Class C Certificateholders.
The Pooling and Servicing Agreement and the Supplement may also be
amended from time to time by the Servicer, the Transferor and the Trustee with
the consent of the Holders of Investor Certificates evidencing Undivided
Interests aggregating not less than 66-2/3% of the Invested Amount of each and
every Series adversely affected, for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of the Pooling and
Servicing Agreement or of modifying in any manner the rights of the Investor
Certificateholders of any Series then issued and outstanding; PROVIDED, HOWEVER,
that no such amendment 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 any Series without the consent of the related Investor
Certificateholders; (ii) change the definition of or the manner of calculating
the interest of any Investor Certificateholder of any Series without the consent
of the related Investor Certificateholder or (iii) reduce the aforesaid
percentage required to consent to any such amendment, in each case without the
consent of all such Investor Certificateholders; PROVIDED, FURTHER, that for the
purposes of the Officer's Certificate referred to in clause (i) above, any
action taken in order to enable the Trust or a portion thereof to elect to
qualify as a FASIT (or comparable tax entity for the securitization of financial
assets) in accordance with the Internal Revenue Code of 1986, as amended, shall
be deemed not to materially and adversely affect the interest of the
Certificateholders.
THIS CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY
THE LAWS OF THE STATE OF NEW YORK.
Unless the certificate of authentication hereon has been executed by or
on behalf of the Trustee, by manual signature, this Certificate shall not be
entitled to any benefit under the Pooling and Servicing Agreement, or be valid
for any purpose.
A-3-6
<PAGE> 78
IN WITNESS WHEREOF, the Transferor has caused this Certificate to be
duly executed under its official seal.
PRIME II RECEIVABLES CORPORATION
By:_________________________________
Name:
Title:
CERTIFICATE OF AUTHENTICATION
This is one of the Class C Certificates referred to in the
within-mentioned Pooling and Servicing Agreement.
THE CHASE MANHATTAN BANK,
as Trustee
By:_____________________________
Authorized Signatory
<PAGE> 79
EXHIBIT B
FORM OF EXTENSION NOTICE
PRIME CREDIT CARD MASTER TRUST II, SERIES 1997-1
The undersigned, a duly authorized representative of Prime II
Receivables Corporation, a Delaware corporation the "Transferor"), as Transferor
pursuant to the Pooling and Servicing Agreement dated as of January 22, 1997
(the "Pooling and Servicing Agreement"), by and between the Transferor, as
transferor, FDS National Bank, as Servicer (the "Servicer"), and The Chase
Manhattan Bank, as trustee (the "Trustee"), as supplemented by the Series 1997-1
Supplement, dated January 22, 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, or as the Pooling
and Servicing Agreement may from time to time be amended, supplemented, or
modified, the "Agreement"), does hereby notify the Trustee (or any successor
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 Treasurer, 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 6.16(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 6.16(a) for such delivery.
G. NOTIFICATION OF EXTENSION.
Pursuant to subsection 6.16(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 6.16, 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 at least the aggregate principal amount of Class A Certificates
<PAGE> 80
and Class B Certificates set forth below, 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,
___________________________ [address] on or before 3:00 p.m., [New York City]
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 minimum principal amount of Class A Certificates that
must approve of the Extension before such Extension may occur shall equal $ .
(3) The minimum principal amount of Class B Certificates that
must approve of the Extension before such Extension may occur shall equal $ .
4) 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 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 6.16(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) [ (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.
B-2
<PAGE> 81
(2) the form of Extension Opinion.
(3) the Election Notice.
IN WITNESS WHEREOF, the undersigned has duly-executed this
certificate this [ ] day of [ , ].
PRIME II RECEIVABLES CORPORATION
By:_______________________________
Name:
Title:
B-3
<PAGE> 82
EXHIBIT C
FORM OF INVESTOR CERTIFICATEHOLDER ELECTION NOTICE
The Chase Manhattan Bank
450 West 33rd Street
New York, New York 10001
Attention: Corporate Trustee Administration Department
Re: Prime Credit Card Master Trust II:
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 6.16(a) of the Pooling and
Servicing Agreement, dated as of January 22, 1997 including the Series 1997-1
Supplement thereto, each by and among Prime II Receivables Corporation, as
transferor, FDS National Bank, as Servicer, and The Chase Manhattan Bank, as
trustee (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): _____________________
<PAGE> 83
EXHIBIT D
FORM OF INVESTMENT LETTER
(Class C Certificates, Series 1997-1)
[Date]
Re: Prime Credit Card Master Trust II
Class C Certificates, Series 1997-1
-----------------------------------
Ladies and Gentlemen:
This letter (the "Investment Letter") is delivered by the
undersigned (the "Purchaser") pursuant to Section 6.17 of the Series 1997-1
Variable Funding Supplement, dated as of January __, 1997 (the "Supplement"),
among Prime II Receivables Corporation, as Transferor (the "Transferor"), FDS
National Bank, as Servicer (the "Servicer"), and The Chase Manhattan Bank, as
Trustee (the "Trustee"), which supplements the Pooling and Servicing Agreement,
dated as of January __, 1997, among the Transferor, the Servicer and the
Trustee, in connection with the Purchaser's acquisition of Class C Certificates
or an interest therein. Capitalized terms used herein without definition shall
have the meanings set forth in the Supplement. The Purchaser represents to and
agrees with the Transferor and the Trustee as follows:
(a) The Purchaser has such knowledge and experience in
financial and business matters as to be capable of evaluating the
merits and risks of its investment in the Series C Certificates and is
able to bear the economic risk of such investment. The Purchaser has
independently and based on such documents and information as it has
deemed appropriate, made is own appraisal of and investigation into
the business, operations, property, financial and other condition and
creditworthiness of the Trust, the Transferor and the Servicer and
made its own decision to purchase its interest in the Series C
Certificates, and will, independently and based on such documents and
information as it shall deem appropriate at the time, continue to make
its own analysis, appraisals and decisions in taking or not taking
action under the Supplement, and to make such investigation as it
deems necessary to inform itself as to the business, operations,
property, financial and other condition and creditworthiness of the
Trust, the Transferor and the Servicer.
(b) The Purchaser is an "accredited investor", as defined in
Rule 501, promulgated by the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the
"Securities Act"), or is a sophisticated institutional investor. The
Purchaser understands that the offering and sale of the Series C
Certificates has not been and will not be registered under the
Securities Act and has not and will not be registered or qualified
under any applicable "Blue Sky" law, and that the offering and sale of
the Series C Certificates has not been reviewed by, passed on or
submitted to any federal or state agency or commission, securities
exchange or other regulatory body.
<PAGE> 84
(c) The Purchaser is acquiring an interest in Series C
Certificates without a view to any distribution, resale or other
transfer thereof except, with respect to any Series C Certificates or
any interest or participation therein, as contemplated in the
following sentence. The Purchaser will not resell or otherwise
transfer any interest or participation in the Series C Certificates,
except in accordance with Section 6.17 of the Supplement and (i) in a
transaction exempt from the registration requirements of the
Securities Act of 1933, as amended, and applicable state securities or
"blue sky" laws; (ii) to the Transferor or any affiliate of the
Transferor; or (iii) to a person who the Purchaser reasonably believes
is a qualified institutional buyer (within the meaning thereof in Rule
144A under the Securities Act) that is aware that the resale or other
transfer is being made in reliance upon Rule 144A. In connection
therewith, the Purchaser hereby agrees that it will not resell or
otherwise transfer the Series C Certificates or any interest therein
unless the purchaser thereof provides to the addressee hereof a letter
substantially in the form hereof.
(d) The Purchaser hereby certifies to the Transferor, the
Servicer and the Trustee that it has neither acquired nor will it
sell, trade or transfer any interest in a Class C Certificate or cause
an interest in a Class C Certificate to be marketed on or through 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. The Purchaser
hereby further certifies that it is not and, for so long as it holds
any interest in a Class C Certificate, will not become a partnership,
Subchapter S corporation or grantor trust for U.S. federal income tax
purposes. The Purchaser acknowledges that the Opinion of Counsel to
the effect that the Trust will not be treated as a publicly traded
partnership taxable as a corporation is dependent in part on the
accuracy of the certifications described in this paragraph.
(e) Pursuant to subsection 6.17(c) of the Supplement, the
Purchaser hereby agrees not to institute against, or join any other
Person in instituting 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.
D-2
<PAGE> 85
(f) This Investment Letter has been duly executed and
delivered and constitutes the legal, valid and binding obligation of
the Purchaser, enforceable against the Purchaser in accordance with
its terms, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws or equitable
principles affecting the enforcement of creditors' rights generally
and general principles of equity.
Very truly yours,
[NAME OF PURCHASER]
By:___________________________
Name:
Title:
ACKNOWLEDGED AS OF THE DATE FIRST ABOVE WRITTEN:
PRIME II RECEIVABLES
CORPORATION
By:_______________________
Name:
Title:
D-3
<PAGE> 86
EXHIBIT E
PRIME CREDIT CARD MASTER TRUST II
FORM OF MONTHLY CERTIFICATEHOLDERS' STATEMENT
[Attached hereto]
<PAGE> 87
<TABLE>
<CAPTION>
Exhibit E
PRIME CREDIT CARD
MASTER TRUST II
SERIES 1997-1 MONTHLY CERTIFICATEHOLDERS STATEMENT
Distribution Date: 01-Jan-97
Monthly Period: January
01-Jan-97
01-Jan-97
<S> <C>
(i) Net Principal Collections/Allocation 0.00
Class A Allocation 0.00
Class B Allocation 0.00
Class C Allocation 0.00
(ii) Total Finance Charge Collections/Allocation 0.00
Of which Interchange 0.00
Class A Allocation 0.00
Class B Allocation 0.00
Class C Allocation 0.00
(iii)Principal Receivables 01-Jan-97 00.0
Invested Amount 0.00
Class A 0.00
Class B 0.00
Class C 0.00
Transferor Amount 0.00
Percentage 0.00%
Fixed/Floating Allocation Percentage 0.00
Class A 0.00%
Class B 0.00%
Class C 0.00%
(iv) Delinquency
Current 0.00 0.00%
30 Days 0.00 0.00%
60 Days 0.00 0.00%
90 Days 0.00 0.00%
120 Days 0.00 0.00%
150 Days 0.00 0.00%
180 Days + 0.00 0.00%
Total 0.00 0.00%
(v) Aggregate Investor Default Amount 0.00
Percentage of Average Invested Amount 0.00%
(vi) Aggregate Investor Uncovered Dilution 0.00
(vii)Investor Charge Offs/Recoveries 0.00
Class A Charge Offs 0.00
Class A Charge Off Recoveries 0.00
Class B Charge Offs 0.00
Class B Charge Off Recoveries 0.00
Class C Charge Offs 0.00
Class C Charge Off Recoveries 0.00
(viii)Monthly Servicing Fee 0.00
Average of 6 Months Average of 3 Months Current Month
(ix) Payment Rate Percentage 0.00% 0.00% 0.00%
Excess Spread Percentage 0.00% 0.00% 0.00%
(x) Reserve Account:
Required Reserve Account Percentage 0.00%
Opening Balance 0.00
Deposits 0.00
Disbursement 0.00
Closing Balance 0.00
(xi) Portfolio Yield 0.00%
Average Base Rate 0.00%
</TABLE>
Page 1
<PAGE> 1
Exhibit 10.24
COMMERCIAL PAPER DEALER AGREEMENT
between
Federated Department Stores, Inc., as Issuer
and
Citicorp Securities, Inc., as Dealer
Concerning Notes to be issued pursuant to an Issuing and Paying Agency
Agreement dated as of January 30, 1997 between the Issuer and Citibank,
N.A., as Issuing and Paying Agent
Dated As Of
January 30, 1997
<PAGE> 2
COMMERCIAL PAPER DEALER AGREEMENT
This agreement ("Agreement") sets forth the understandings between the
Issuer and the Dealer in connection with the issuance and sale by the Issuer of
its short-term promissory notes through the Dealer (the "Notes").
Certain terms used in this Agreement are defined in Section 6 hereof.
The Addendum to this Agreement, and any Annexes or Exhibits described
in this Agreement or such Addendum, are hereby incorporated into this Agreement
and made fully a part hereof.
Section 1. OFFERS, SALES AND RESALES OF NOTES
1.1 While (i) the Issuer has and shall have no obligation to sell the
Notes to the Dealer or to permit the Dealer to arrange any sale of the Notes for
the account of the Issuer, and (ii) the Dealer has and shall have no obligation
to purchase the Notes from the Issuer or to arrange any sale of the Notes for
the account of the Issuer, the parties hereto agree that in any case where the
Dealer purchases Notes from the Issuer, or arranges for the sale of Notes by the
Issuer, such Notes will be purchased or sold by the Dealer in reliance on the
representations, warranties, covenants and agreements of the Issuer contained
herein or made pursuant hereto and on the terms and conditions and in the manner
provided herein. Subject to the foregoing, the Dealer will use all reasonable
efforts to arrange sales of the Notes at the times and in the amounts requested
by the Issuer.
1.2 So long as this Agreement shall remain in effect, and in addition to
the limitations contained in Section 1.7 hereof, the Issuer shall not, without
the consent of the Dealer, offer, solicit or accept offers to purchase, or sell,
any Notes except (a) in transactions with one or more dealers which may from
time to time after the date hereof become dealers with respect to the Notes by
executing with the Issuer one or more agreements which contain provisions
substantially identical to Section 1 of this Agreement, of which the Issuer
hereby undertakes to provide the Dealer prompt notice or (b) in transactions
with the other dealers listed on the Addendum hereto, which are executing
agreements with the Issuer which contain provisions substantially identical to
Section 1 of this Agreement contemporaneously herewith. In no event shall the
Issuer offer, solicit or accept offers to purchase, or sell, any Notes directly
on its own behalf in transactions with persons other than broker-dealers as
specifically permitted in this Section 1.2.
1.3 The Notes shall be in a minimum denomination or minimum amount,
whichever is applicable, of $250,000 or integral multiples of $1,000 in excess
thereof, will bear such interest rates, if interest bearing, or will be sold at
such discount from their face amounts, as shall be agreed upon by the Dealer and
the Issuer, shall have a maturing not exceeding 270 days from the date of
issuance (exclusive of days of grace) and shall not contain any provision for
extension, renewal or automatic "rollover."
1.4 The authentication, delivery and payment of the Notes shall be
effected in accordance with the Issuing and Paying Agency Agreement and the
Notes shall be either individual bearer physical certificates or represented by
book-entry Notes registered in the name of DTC or its nominee in the form or
forms annexed to the Issuing and Paying Agency Agreement. The Dealer agrees to
keep
2
<PAGE> 3
confidential the user number identification and password given to it pursuant to
the Issuing and Paying Agency Agreement.
1.5 If the Issuer and the Dealer shall agree on the terms of the
purchase of any Note by the Dealer or the sale of any Note arranged by the
Dealer (including, but not limited to, agreement with respect to the date of
issue, purchase price, principal amount, maturity and interest rate (in the case
of interest-bearing Notes) or discount thereof (in the case of Notes issued on a
discount basis), and appropriate compensation for the Dealer's services
hereunder) pursuant to this Agreement, the Issuer shall cause such Note to be
issued and delivered in accordance with the terms of the Issuing and Paying
Agency Agreement and payment for such Note shall be made by the purchaser
thereof, either directly or through the Dealer, to the Issuer. Except as
otherwise agreed, in the event that the Dealer is acting as an agent and a
purchaser shall either fail to accept delivery of or make payment for a Note on
the date fixed for settlement, the Dealer shall promptly notify the Issuer, and
if the Dealer has theretofore paid the Issuer for the Note, the Issuer will
promptly return such funds to the Dealer against its return of the Note to the
Issuer, in the case of a certificated Note, and upon notice of such failure and
an appropriate book-entry credit in the case of a book-entry Note. If such
failure occurred for any reason other than default by the Dealer, the Issuer
shall reimburse the Dealer on an equitable basis for the Dealer's loss of the
use of such funds for the period such funds were credited to the Issuer's
account.
1.6 All offers and sales of the Notes by the Issuer shall be effected
pursuant to the exemption from the registration requirements of the Securities
Act provided by Section 4(2) thereof, which exempts transactions by an issuer
not involving any public offering. The Dealer and the Issuer hereby establish
and agree to observe the following procedures in connection with offers, sales
and subsequent resales or other transfers of the Notes:
(a) Offers and sales of the Notes shall be made only to the
following types of investors: (i) investors reasonably believed by the Dealer to
be Institutional Accredited Investors or Sophisticated Individual Accredited
Investors, (ii) non-bank fiduciaries or agents that will be purchasing Notes for
one or more accounts, each of which is an Institutional Accredited Investor or
Sophisticated Individual Accredited Investor, and (iii) Qualified Institutional
Buyers.
(b) Resales and other transfers of the Notes by the holders thereof
shall be made only in accordance with the restrictions in the legends described
in clause (e) below.
(c) No general solicitation or general advertising shall be used in
connection with the offering of the Notes. Without limiting the generality of
the foregoing; without the prior written approval of Dealer, the Issuer shall
not issue any press release or place or publish any "tombstone" or other
advertisement relating to the Notes. The Dealer shall not use any materials
other than the Private Placement Memorandum as then approved by the Issuer in
connection with the offer and sale of the Notes.
(d) No sale of Notes to any one purchaser shall be for less than
$250,000 principal or face amount, and no Note shall be issued in a smaller
principal or face amount. If the purchaser is a non-bank fiduciary acting on
behalf of others, each person for whom such purchaser is acting must purchase at
least $250,000 principal or face amount of Notes.
(e) Offers and sales of the Notes by the Issuer through the Dealer
acting as agent for the Issuer shall be made in accordance with Rule 506 under
the Securities Act, and shall be subject to the restrictions described in the
legend appearing on Exhibit A hereto. A legend substantially to the effect of
such Exhibit A shall appear as part of the Private Placement Memorandum used in
connection
3
<PAGE> 4
with offers and sales of Notes hereunder, as well as on each Note offered and
sold pursuant to this Agreement.
(f) Dealer shall furnish or shall have furnished to each purchaser
of Notes being sold to an ultimate purchaser for the first time a copy of the
then-current Private Placement Memorandum unless such purchaser has previously
received a copy of the Private Placement Memorandum as then in effect. The
Private Placement Memorandum shall expressly state that any person to whom Notes
are offered shall have an opportunity to ask questions of, and receive
information from, the Issuer and the Dealer and shall provide the names,
addresses and telephone numbers of the persons from whom information regarding
the Issuer may be obtained.
(g) The Issuer agrees, for the benefit of the Dealer and each of the
holders and prospective purchasers from time to time of the Notes that, if at
any time the Issuer shall not be subject to Section 13 or 15(d) of the Exchange
Act, the Issuer will furnish, upon request and at its expense, to the Dealer and
to holders and prospective purchasers of Notes information required by Rule
144A(d)(4)(i) in compliance with Rule 144A(d).
(h) In the event that any Note offered or to be offered by Dealer
would be ineligible for resale under Rule 144A, the Issuer shall immediately
notify Dealer (by telephone, confirmed in writing) of such fact and shall
promptly prepare and deliver to Dealer an amendment or supplement to the Private
Placement Memorandum describing the Notes that are ineligible, the reason for
such ineligibility and any other relevant information relating thereto.
1.7 The Issuer hereby represents and warrants to the Dealer, in
connection with offers, sales and resales of Notes as follows:
The Issuer represents and agrees that the proceeds of the sale
of the Notes are not currently contemplated to be used for the purpose of
buying, carrying or trading securities within the meaning of Regulation T and
the interpretations thereunder by the Board of Governors of the Federal Reserve
System. In the event that the Issuer determines to use such proceeds for the
purpose of buying, carrying or trading securities, whether in connection with an
acquisition of another company or otherwise, the Issuer shall give the Dealer at
least five business days' prior written notice to that effect. The Issuer shall
also give the Dealer prompt notice of the actual date that it commences to
purchase securities with the proceeds of the Notes. Thereafter, in the event
that the Dealer purchases Notes as principal and does not resell such Notes on
the day of such purchase, to the extent necessary to comply with Regulation T
and the interpretations thereunder, the Dealer will sell such Notes only to
offerees it reasonably believes to be QIBs or to QIBs it reasonably believes are
acting for other QIBs, in each case in accordance with Rule 144A.
Section 2. Representations and Warranties of Issuer.
-----------------------------------------
The Issuer represents and warrants that:
2.1 The Issuer is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation and has
all the requisite corporate power and authority to execute, deliver and perform
its obligations under the Notes, this Agreement and the Issuing and Paying
Agency Agreement.
2.2 This Agreement and the Issuing and Paying Agency Agreement have been
duly authorized, executed and delivered by the Issuer and constitute legal,
valid and binding obligations of
4
<PAGE> 5
the Issuer enforceable against the Issuer in accordance with their terms subject
to applicable bankruptcy, insolvency and similar laws affecting creditors'
rights generally, and subject, as to enforceability, to general principles of
equity (regardless of whether enforcement is sought in a proceeding in equity or
at law).
2.3 The Notes have been duly authorized, and when issued and delivered
as provided in the Issuing and Paying Agency Agreement, will be duly and validly
issued and delivered and will constitute legal, valid and binding obligations of
the Issuer enforceable against the Issuer in accordance with their terms subject
to applicable bankruptcy, insolvency and similar laws affecting creditors'
rights generally, and subject, as to enforceability, to general principles of
equity (regardless of whether enforcement is sought in a proceeding in equity or
at law).
2.4 The offer and sale of Notes in the manner contemplated hereby do not
require registration of the Notes under the Securities Act, pursuant to the
exemption from registration contained in Section 4(2) thereof, and no indenture
in respect of the Notes is required to be qualified under the Trust Indenture
Act of 1939, as amended. Neither the Issuer nor any affiliate (as defined in
Regulation 501(b) of Regulation D), will sell, offer for sale or solicit offers
to buy or otherwise negotiate in respect of any security (as defined in the
Securities Act) which will be integrated with the sale of the Notes in a manner
which would require the registration of the Notes under the Securities Act.
2.5 The Notes are unsecured and unsubordinated indebtedness of the
Issuer.
2.6 No consent or action of, or filing or registration with, any
governmental or public regulatory body or authority, including the SEC (except
for the filing of a Form D with the SEC), is required to authorize, or is
otherwise required in connection with the execution, delivery or performance of,
this Agreement, the Notes or the Issuing and Paying Agency Agreement, except as
may be required by the securities or Blue Sky laws of the various states in
connection with the offer and sale of the Notes.
2.7 Neither the execution and delivery of this Agreement and the Issuing
and Paying Agency Agreement, nor the issuance and delivery of the Notes in
accordance with the Issuing and Paying Agency Agreement, nor the fulfillment of
or compliance with the terms and provisions hereof or thereof by the Issuer,
will (i) result in the creation or imposition of any mortgage, lien, charge or
encumbrance of any nature whatsoever upon any of the properties or assets of the
Issuer, or (ii) violate or result in a breach or an event of default under any
of the terms of the Issuer's charter documents or by-laws, any contract or
instrument to which the Issuer is a party or by which it or its property is
bound, or any law or regulation, or any order, writ, injunction or decree of any
court or government instrumentality, to which the Issuer is subject or by which
it or its property is bound, which breach or event of default might have a
material adverse effect on the condition (financial or otherwise), operations or
reasonably foreseeable business prospects of the Issuer and its subsidiaries
taken as a whole or the ability of the Issuer to perform its obligations under
this Agreement, the Notes or the Issuing and Paying Agency Agreement (a
"Material Adverse Effect").
2.8 There is no litigation or governmental proceeding pending, or to the
knowledge of the Issuer threatened, against or affecting the Issuer or any of
its subsidiaries which might result in a Material Adverse Effect.
2.9 The Issuer is not an "investment company" or an entity "controlled"
by an "investment company" within the meaning of the Investment Company Act of
1940, as amended.
5
<PAGE> 6
2.10 Neither the Private Placement Memorandum nor the Company
Information contains any untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, provided that this representation and warranty shall not apply to
any statements or omissions made in reliance upon and in conformity with the
Dealer Information.
2.11 Each (a) issuance of Notes by the Issuer hereunder and (b)
amendment or supplement of the Private Placement Memorandum shall be deemed a
representation and warranty by the Issuer to the Dealer, as of the date thereof,
that, both before and after giving effect to such issuance and after giving
effect to such amendment or supplement, (i) the representations and warranties
given by the Issuer set forth above in this Section 2 remain true and correct on
and as of such date as if made on and as of such date, (ii) in the case of an
issuance of Notes, the Notes being issued on such date have been duly and
validly issued and constitute legal, valid and binding obligations of the
Issuer, enforceable against the Issuer in accordance with their terms, subject
to applicable bankruptcy, insolvency and similar laws affecting creditors'
rights generally and subject, as to enforceability, to general principles of
equity (regardless of whether enforcement is sought in a proceeding in equity or
at law) and (iii) in the case of an issuance of Notes, since the date of the
most recent Private Placement Memorandum, there has been no material adverse
change in the condition (financial or otherwise), operations or reasonably
foreseeable business prospects of the Issuer and its subsidiaries, taken as a
whole which has not been disclosed to the Dealer in writing.
Section 3. Covenants and Agreements of Issuer
----------------------------------
The Issuer covenants and agrees that:
3.1 The Issuer will give the Dealer prompt notice (but in any event
prior to any subsequent issuance of Notes hereunder) of any amendment to,
modification of, or waiver with respect to, the Notes or the Issuing and Paying
Agency Agreement, including a complete copy of any such amendment, modification
or waiver.
3.2 The Issuer shall, whenever there shall occur any downgrading or
receipt of any notice of intended or potential downgrading or any review for
potential change in the rating accorded any of the Issuer's securities by any
national recognized statistical rating organization which has published a rating
of the Notes, promptly, and in any event prior to any subsequent issuance of
Notes hereunder, notify the Dealer (by telephone, confirmed in writing) of such
changes, development, or occurrence.
3.3 The Issuer shall from time to time furnish to the Dealer such
information as the Dealer may reasonably request (other than material non-public
information), including, without limitation, any press releases or material
provided by the Issuer to any national securities exchange or rating agency,
regarding (i) the Issuer's operations and financial condition, (ii) the due
authorization and execution of the Notes, and (iii) the Issuer's ability to pay
the Notes as they mature.
3.4 The Issuer will take all such action as the Dealer may reasonably
request to ensure that each offer and each sale of the Notes will comply with
any applicable state Blue Sky laws; provided, that the Issuer shall not be
obligated to file any general consent to service of process or to qualify as a
foreign corporation in any jurisdiction in which it is not so qualified or
subject itself to taxation in respect of doing business in any jurisdiction in
which it is not otherwise so subject.
3.5 The Issuer will not be in default of any of its obligations
hereunder, under the Notes or under the Issuing and Paying Agency Agreement, at
any time that any of the Notes are outstanding.
6
<PAGE> 7
3.6 The Issuer shall not issue Notes hereunder until the Dealer shall
have received (a) an opinion of counsel to the Issuer, addressed to the Dealer,
substantially in the form attached hereto, (b) a copy of the executed Issuing
and Paying Agency Agreement, (c) a copy of resolutions adopted by the Board of
Directors of the Issuer, in the form attached hereto and certified by the
Secretary or similar officer of the Issuer, authorizing execution and delivery
by the Issuer of this Agreement the Issuing and Paying Agency Agreement and the
Notes and consummation by the Issuer of the transactions contemplated hereby and
thereby, (d) prior to the issuance of any Notes represented by a book-entry note
registered in the name of DTC or its nominee, a copy of the executed Letter of
Representations among the Issuer, the Issuing and Paying Agent and DTC and (e)
such other certificates, opinions, letters and documents as the Dealer shall
have reasonably requested.
3.7 The Issuer shall reimburse the Dealer for all of the Dealer's
out-of-pocket expenses related to this Agreement, including reasonable expenses
incurred in connection with its preparation and negotiation, and the
transactions contemplated hereby (including, but not limited to, the printing
and distribution of the Private Placement Memorandum), and, if applicable, for
the reasonable fees and out-of-pocket expenses of the Dealer's counsel.
Section 4. DISCLOSURE
----------
4.1 The Private Placement Memorandum and its contents (other than the
Dealer Information) shall be the sole responsibility of the Issuer. The Private
Placement Memorandum shall contain a statement expressly offering an opportunity
for each prospective purchaser to ask questions of, and receive answers from,
the Issuer concerning the offering of Notes and to obtain relevant additional
information which the Issuer possesses or can acquire without unreasonable
effort or expense.
4.2 The Issuer agrees promptly to furnish the Dealer the Company
Information as it becomes available.
4.3 (a) The Issuer further agrees to notify the Dealer promptly upon the
occurrence of any event relating to or affecting the Issuer that would cause the
Private Placement Memorandum or the Company Information then in existence to
include an untrue statement of material fact or to omit to state a material fact
necessary in order to make the statements contained therein, in light of the
circumstances under which they are made, not misleading.
(b) In the event that the Issuer gives the Dealer notice pursuant to
Section 4.3(a) and the Dealer notifies the Issuer that it then has Notes it is
holding in inventory, the Issuer agrees promptly to supplement or amend the
Private Placement Memorandum so that such Private Placement Memorandum, as
amended or supplemented, shall not contain an untrue statement of a material
fact or omit to state a material fact necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading, and the Issuer shall make such supplement or amendment available to
the Dealer and prospective holders of the Notes.
(c) In the event that (i) the Issuer gives the Dealer notice
pursuant to Section 4.3(a) and (ii) the Dealer does not notify the Issuer that
it is then holding Notes in inventory and (iii) the Issuer chooses not to
promptly amend or supplement the Private Placement Memorandum in the manner
described in clause (b) above, then all solicitations and sales of Notes shall
be suspended until such time as the Issuer has so amended or supplemented the
Private Placement Memorandum, and made such amendment or supplement available to
the Dealer and prospective holders of the Notes.
7
<PAGE> 8
Section 5. INDEMNIFICATION AND CONTRIBUTION
--------------------------------
5.1 The Issuer, as the Indemnifying Party, will indemnify and hold
harmless the Dealer, each individual, corporation, partnership, trust,
association or other entity controlling the Dealer, any affiliate of the Dealer
or any such controlling entity and their respective directors, officers,
employees, partners, incorporators, shareholders, servants, trustees and agents
(hereinafter the "Dealer Indemnitees") against any and all liabilities, suits,
causes of action, losses, damages, claims, costs and expenses (including,
without limitation, reasonable fees and disbursements of counsel) or judgments
of whatever kind or nature (each a "Claim"), imposed upon, incurred by or
asserted against the Dealer Indemnitees arising out of or based upon (i) any
allegation that the Private Placement Memorandum, the Company Information or any
information provided by the Issuer to the Dealer in writing expressly for
inclusion in the Private Placement Memorandum included (as of any relevant time)
or includes an untrue statement of a material fact or omitted (as of any
relevant time) or omits to state any material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading or (ii) arising out of or based upon the breach by the Issuer of
any agreement, covenant or representation made in or pursuant to this Agreement.
This indemnification shall not apply to the extent that the Claim arises out of
or is based upon Dealer Information.
5.2 The Dealer, as the Indemnifying Party, will indemnify and hold
harmless the Issuer, each individual, corporation, partnership, trust,
association or other entity controlling the Issuer, any affiliate of the Issuer
or any such controlling entity and their respective directors, officers,
employees, partners, incorporators, shareholders, servants, trustees and agents
(hereinafter the "Issuer Indemnitees") against any and all Claims imposed upon,
incurred by or asserted against the Issuer Indemnitees arising out of or based
upon any allegation that the Dealer Information included (as of any relevant
time) or includes an untrue statement of a material fact or omitted (as of any
relevant time) or omits to state any material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
5.3 Provisions relating to claims made for indemnification under this
Section 5 are set forth on Exhibit B to this Agreement.
5.4 If the indemnification provided for in this Section 5 is held to be
unavailable or insufficient to hold harmless an Indemnitee under Sections 5.1 or
5.2 in respect of a Claim, although applicable in accordance with the terms of
this Section 5, each Indemnifying Party shall contribute to the amount paid or
payable by such Indemnitee as a result of such Claim in such proportion as is
appropriate to reflect the relative benefits received by the Issuer on the one
hand and the Dealer on the other from the offering of the Notes, provided,
however, that any such contribution by the Dealer shall not be in excess of the
benefits received by it from the offering of the Notes. The respective benefits
received by the Issuer and the Dealer shall be deemed to be the aggregate net
proceeds received by the Issuer of the Notes issued hereunder and the aggregate
commissions and fees earned by the Dealer hereunder.
8
<PAGE> 9
Section 6. DEFINITIONS
-----------
6.1 "Claim" shall have the meaning set forth in Section 5.1.
6.2 "Company Information" at any given time shall mean, to the extent
applicable, (i) the Issuer's most recent report on Form 10-K filed with the SEC
and each report on Form 10-Q or 8-K filed by the Issuer with the SEC since the
most recent Form 10-K, (ii) the Issuer's most recent annual audited financial
statements and each interim financial statement or report prepared subsequent
thereto, if not included in item (i) above, (iii) the Issuer's and its
affiliates' other publicly available recent reports, including, but not limited
to, any publicly available filings or reports provided to their respective
shareholders, (iv) any other information or disclosure prepared pursuant to
Section 4.3 hereof and (v) any information prepared or approved by the Issuer
for dissemination to investors or potential investors in the Notes.
6.3 "Dealer Information" shall mean statements concerning the Dealer or
other matters and provided by the Dealer in writing expressly for inclusion in
the Private Placement Memorandum.
6.4 "DTC" shall mean The Depository Trust Company.
6.5 "Exchange Act" shall mean the U.S. Securities Exchange Act of 1934,
as amended.
6.6 "Indemnifying Party" shall have the meaning set forth in Section 5.
6.7 "Indemnitees" shall mean the Dealer Indemnitees or the Company
Indemnitees (as such terms are defined in Sections 5.1 and 5.2) as the context
shall require.
6.8 "Institutional Accredited Investor" shall mean an institutional
investor that is an accredited investor within the meaning of Rule 501 under the
Securities Act and that has such knowledge and experience in financial and
business matters that it is capable of evaluating and bearing the economic risk
of an investment in the Notes, including, but not limited to, a bank, as defined
in Section 3(a)(2) of the Securities Act, or a savings and loan association or
other institution, as defined in Section 3(a)(5)(A) of the Securities Act,
whether acting in its individual or fiduciary capacity.
6.9 "Issuing and Paying Agency Agreement" shall mean the issuing and
paying agency agreement described on the cover page of this Agreement, as such
agreement may be amended or supplemented from time to time.
6.10 "Issuing and Paying Agent" shall mean the party designated as such
on the cover page of this Agreement, as issuing and paying agent under the
Issuing and Paying Agency Agreement.
6.11 "Non-bank fiduciary or agent" shall mean a fiduciary or agent other
than (a) a bank, as defined in Section 3(a)(2) of the Securities Act, or (b) a
savings and loan association, as defined in Section 3(a)(5)(A) of the Securities
Act.
6.12 "Private Placement Memorandum" shall mean offering materials
prepared in accordance with Section 4 (including materials referred to therein
or incorporated by reference therein) provided to purchasers and prospective
purchasers of the Notes, and shall include amendments and supplements thereto
which may be prepared from time to time in accordance with this Agreement (other
than any amendment or supplement that has been completely superseded by a later
amendment or supplement).
6.13 "Qualified Institutional Buyer" shall have the meaning assigned to
that term in Rule 144A under the Securities Act.
6.14 "Rule 144A" shall mean Rule 144A under the Securities Act.
9
<PAGE> 10
6.15 "SEC" shall mean the U.S. Securities and Exchange Commission.
6.16 "Securities Act" shall mean the U.S. Securities Act of 1933, as
amended.
6.17 "Sophisticated Individual Accredited Investor" shall mean an
individual who (a) is an accredited investor within the meaning of Regulation D
under the Securities Act and (b) based on his or her pre-existing relationship
with the Dealer, is reasonably believed by the Dealer to be a sophisticated
investor (i) possessing such knowledge and experience (or represented by a
fiduciary or agent possessing such knowledge and experience) in financial and
business matters that he or she is capable of evaluating and bearing the
economic risk of an investment in the Notes and (ii) having a net worth of at
least $5 million.
Section 7. GENERAL
-------
7.1 Unless otherwise expressly provided herein, all notices under this
Agreement to parties hereto shall be in writing and shall be effective when
received at the address of the respective party set forth in the Addendum to
this Agreement.
7.2 This Agreement shall be governed by and construed in accordance with
the laws of the State of New York, without regard to its conflict of laws
provisions.
7.3 The Issuer agrees that any suit, action or proceeding brought by the
Issuer against the Dealer in connection with or arising out of this Agreement or
the Notes or the offer and sale of the Notes shall be brought solely in the
United States federal courts located in the borough of Manhattan or the courts
of the State of New York located in the Borough of Manhattan. EACH OF THE DEALER
AND THE ISSUER WAIVES ITS RIGHT TO TRIAL BY JURY IN ANY SUIT, ACTION OR
PROCEEDING WITH RESPECT TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
7.4 This Agreement may be terminated, at any time, by the Issuer, upon
one business day's prior notice to such effect to the Dealer, or by the Dealer
upon one business day's prior notice to such effect to the Issuer. Any such
termination, however, shall not affect the obligations of the parties under
Sections 3.7, 5 and 7.3 hereof or the respective representations, warranties,
agreements, covenants, rights or responsibilities of the parties made or arising
prior to the termination of this Agreement.
7.5 This Agreement is not assignable by either party hereto without the
written consent of the other party, which consent shall not be unreasonably
withheld.
7.6 This Agreement is for the exclusive benefit of the parties hereto,
and their respective successors and permitted assigns hereunder, and (to the
extent provided in Section 5) the Indemnitees, and shall not be deemed to give
any legal or equitable right, remedy or claim to any other person whatsoever. No
purchaser of any of the Notes from the Dealer shall be deemed a successor or
assign by reason merely of such purchase.
10
<PAGE> 11
7.7 This Agreement may be signed in any number of counterparts, each of
which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date and year first above written:
Federated Department Stores, Inc. as Issuer
By: /s/ Karen M. Hoguet
--------------------------------------
Name: Karen M. Hoguet
Title: Senior Vice President
Citicorp Securities, Inc. as Dealer
By: /s/ Christopher P. Daifotis
--------------------------------------
Name: Christopher P. Daifotis
Title: Vice President
11
<PAGE> 12
ADDENDUM
1. The other dealers referred to in clause (b) of Section 1.2 of the Agreement
are Lehman Brothers Inc.
2. The following section 3.8 is hereby added to the Agreement:
3.8 Without limiting any obligation of the Issuer pursuant to this
Agreement to provide the Dealer with credit and financial information, the
Issuer hereby acknowledges and agrees that the Dealer may share the Company
Information and any other information or matters relating to the Issuer or
the transactions contemplated hereby with affiliates of the Dealer,
including, but not limited to Citibank, N.A., and that such affiliates may
likewise share information relating to the Issuer or such transactions with
the Dealer, provided, however, that the Dealer for itself and on behalf of
its affiliates acknowledges that it is aware, and that it has advised or
will advise any person or entity to whom or which it divulges or discloses
Company Information or such other information or matters that, in general,
the United States securities laws prohibit any person or entity who or
which possesses material, non-public information regarding a company from
purchasing or selling securities of such company or from communicating such
information to any person or entity.
3. The addresses of the respective parties for purposes of notices under
Section 7.1 are as follows:
For the Issuer: Federated Department Stores, Inc.
Address: 7 West Seventh Street
Cincinnati, Ohio 45202
Attention: Susan P. Storer
Telephone number: 513/579-7775
Fax number: 513/579-7393
For the Dealer: Citicorp Securities, Inc.
Address: 399 Park Avenue, 7th Fl.
New York, New York 10043
Attention: Domestic Money Market Department
Telephone number: 212/291-3986
Fax number: 212/291-3454
12
<PAGE> 13
EXHIBIT A
FORM OF LEGEND FOR
PRIVATE PLACEMENT MEMORANDUM AND NOTES
THE NOTES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), OR ANY OTHER APPLICABLE SECURITIES LAW, AND OFFERS AND SALES
THEREOF MAY BE MADE ONLY IN COMPLIANCE WITH AN APPLICABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
BY ITS ACCEPTANCE OF A NOTE, THE PURCHASER WILL BE DEEMED TO REPRESENT THAT IT
HAS BEEN AFFORDED AN OPPORTUNITY TO INVESTIGATE MATTERS RELATING TO THE ISSUER
AND THE NOTES, THAT IT IS NOT ACQUIRING SUCH NOTE WITH A VIEW TO ANY
DISTRIBUTION THEREOF AND THAT IT IS EITHER (A) AN INSTITUTIONAL INVESTOR OR
HIGHLY SOPHISTICATED INDIVIDUAL INVESTOR THAT IS AN ACCREDITED INVESTOR WITHIN
THE MEANING OF RULE 501(a) UNDER THE ACT (AN "INSTITUTIONAL ACCREDITED INVESTOR"
OR "SOPHISTICATED INDIVIDUAL ACCREDITED INVESTOR", RESPECTIVELY) WITH SUCH
KNOWLEDGE AND EXPERIENCE IN FINANCIAL AND BUSINESS MATTERS THAT IT IS CAPABLE OF
EVALUATING AND BEARING THE RISKS OF AN INVESTMENT IN THE NOTES AND THAT EITHER
IT IS PURCHASING NOTES FOR ITS OWN ACCOUNT, IS A U.S. BANK (AS DEFINED IN
SECTION 3(a)(2) OF THE ACT) OR A SAVINGS AND LOAN ASSOCIATION OR OTHER
INSTITUTION (AS DEFINED IN SECTION 3(a)(5)(a) OF THE ACT) ACTING IN ITS
INDIVIDUAL OR FIDUCIARY CAPACITY OR IS A FIDUCIARY OR AGENT (OTHER THAN A U.S.
BANK OR SAVINGS AND LOAN ASSOCIATION) PURCHASING NOTES FOR ONE OR MORE ACCOUNTS
EACH OF WHICH IS SUCH AN INSTITUTIONAL ACCREDITED INVESTOR OR SOPHISTICATED
INDIVIDUAL ACCREDITED INVESTOR (i) WHICH ITSELF POSSESSES SUCH KNOWLEDGE AND
EXPERIENCE IN FINANCIAL AND BUSINESS MATTERS THAT SUCH PURCHASER IS CAPABLE OF
EVALUATING THE MERITS AND RISKS OF AN INVESTMENT IN THE NOTES, OR (ii) WITH
RESPECT TO WHICH SUCH PURCHASER HAS SOLE INVESTMENT DISCRETION; OR (B) A
QUALIFIED INSTITUTIONAL BUYER ("QIB") WITHIN THE MEANING OF RULE 144A UNDER THE
ACT WHICH IS ACQUIRING NOTES FOR ITS OWN ACCOUNT OR FOR ONE OR MORE ACCOUNTS,
EACH OF WHICH IS A QIB AND WITH RESPECT TO EACH OF WHICH THE PURCHASER HAS SOLE
INVESTMENT DISCRETION; AND THE PURCHASER ACKNOWLEDGES THAT IT IS AWARE THAT THE
SELLER MAY RELY UPON THE EXEMPTION FROM THE REGISTRATION PROVISIONS OF SECTION 5
OF THE ACT PROVIDED BY RULE 144A. BY ITS ACCEPTANCE OF A NOTE, THE PURCHASER
THEREOF SHALL ALSO BE DEEMED TO AGREE THAT ANY RESALE OR OTHER TRANSFER THEREOF
WILL BE MADE ONLY (A) IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE ACT,
EITHER (1) TO THE ISSUER OR TO CITICORP SECURITIES, INC. OR LEHMAN BROTHERS
INC., OR ANOTHER PERSON DESIGNATED BY THE ISSUER AS A PLACEMENT AGENT FOR THE
NOTES (COLLECTIVELY, THE
<PAGE> 14
"PLACEMENT AGENTS"), NONE OF WHICH SHALL HAVE ANY OBLIGATION TO ACQUIRE SUCH
NOTE, (2) THROUGH A PLACEMENT AGENT TO AN INSTITUTIONAL ACCREDITED INVESTOR OR
HIGHLY SOPHISTICATED INDIVIDUAL INVESTOR OR A QIB BY A PLACEMENT AGENT, OR (3)
TO A QIB IN A TRANSACTION THAT MEETS THE REQUIREMENTS OF RULE 144A AND (B) IN
MINIMUM AMOUNTS OF $250,000.
<PAGE> 15
EXHIBIT B
FURTHER PROVISIONS RELATING TO INDEMNIFICATION
(a) The Indemnifying Party agrees to reimburse each Indemnitee for all
expenses (including reasonable fees and disbursements of internal and external
counsel) as they are incurred by it in connection with investigating or
defending any loss, claim, damage, liability or action in respect of which
indemnification may be sought under Section 5 of the Agreement (whether or not
it is a party to any such proceedings).
(b) Promptly after receipt by an Indemnitee of notice of the existence
of a Claim, such Indemnitee will, if a claim in respect thereof is to be made
against the Indemnifying Party, notify the Indemnifying Party in writing of the
existence thereof, provided that (i) the omission so to notify the Indemnifying
Party will not relieve it from any liability which it may have hereunder unless
and except to the extent it did not otherwise learn of such Claim and such
failure results in the forfeiture by the Indemnifying Party of substantial
rights and defenses, and (ii) the omission so to notify the Indemnifying Party
will not relieve it from liability which it may have to an Indemnitee otherwise
than on account of this indemnity agreement. In case any such Claim is made
against any Indemnitee and it notifies the Indemnifying Party of the existence
thereof, the Indemnifying Party will be entitled to participate therein, and to
the extent that it may elect by written notice delivered to the Indemnitee, to
assume the defense thereof, with counsel reasonably satisfactory to such
Indemnitee; provided that if the defendants in any such Claim include both the
Indemnitee and the Indemnifying Party and the Indemnitee shall have concluded
that there may be legal defenses available to it which are different from or
additional to those available to the Indemnifying Party, the Indemnifying Party
shall not have the right to direct the defense of such Claim on behalf of such
Indemnitee, and the Indemnitee shall have the right to select separate counsel
to assert such legal defenses on behalf of such Indemnitee. Upon receipt of
notice from the Indemnifying Party to such Indemnitee of the Indemnifying
Party's election so to assume the defense of such Claim and approval by the
Indemnitee of counsel, the Indemnifying Party will not be liable to such
Indemnitee for expenses incurred thereafter by the Indemnitee in connection with
the defense thereof (other than reasonable costs of investigation) unless (i)
the Indemnitee shall have employed separate counsel in connection with the
assertion of legal defenses in accordance with the proviso to the next preceding
sentence (it being understood, however, that the Indemnifying Party shall not be
liable for the expenses of more than one separate counsel (in addition to any
local counsel in the jurisdiction in which any Claim is brought), (ii) the
Indemnifying Party shall not have employed counsel reasonably satisfactory to
the Indemnitee to represent the Indemnitee within a reasonable time after notice
of existence of the Claim or (iii) the Indemnifying Party has authorized in
writing the employment of counsel for the Indemnitee. The indemnity,
reimbursement and contribution obligations of the Indemnifying Party hereunder
shall be in addition to any other liability the Indemnifying Party may otherwise
have to an Indemnitee and shall be binding upon and inure to the benefit of any
successors, assigns, heirs and personal representatives of the Indemnifying
Party and any Indemnitee. The Indemnifying Party agrees that without the
Indemnitee's prior written consent, it will not settle, compromise or consent to
the entry of any judgment in any Claim in respect of which indemnification may
be sought under the indemnification provision of the Agreement, unless such
settlement, compromise or consent includes an unconditional release of each
Indemnitee from all liability arising out of such Claim.
<PAGE> 1
Exhibit 10.25
FEDERATED DEPARTMENT STORES, INC.
$400,000,000
COMMERCIAL PAPER
PRIVATE PLACEMENT MEMORANDUM
THE NOTES DESCRIBED HEREIN (THE "NOTES") HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY OTHER APPLICABLE
SECURITIES LAWS, AND OFFERS AND SALES THEREOF MAY BE MADE ONLY IN COMPLIANCE
WITH AN APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE ACT AND
ANY APPLICABLE STATE SECURITIES LAWS. BY ITS ACCEPTANCE OF A NOTE, THE PURCHASER
THEREOF WILL BE DEEMED TO REPRESENT THAT IT HAS BEEN AFFORDED AN OPPORTUNITY TO
INVESTIGATE MATTERS RELATING TO THE ISSUER AND THE NOTES, THAT IT IS NOT
ACQUIRING SUCH NOTE WITH A VIEW TO ANY DISTRIBUTION THEREOF AND THAT IT IS
EITHER (A) AN INSTITUTIONAL INVESTOR OR HIGHLY SOPHISTICATED INDIVIDUAL INVESTOR
THAT IS AN ACCREDITED INVESTOR WITHIN THE MEANING OF RULE 501(a) UNDER THE ACT
(AN "INSTITUTIONAL ACCREDITED INVESTOR" OR "SOPHISTICATED INDIVIDUAL ACCREDITED
INVESTOR" RESPECTIVELY) WITH SUCH KNOWLEDGE AND EXPERIENCE IN FINANCIAL AND
BUSINESS MATTERS THAT IT IS CAPABLE OF EVALUATING THE RISKS OF AN INVESTMENT IN
THE NOTES AND THAT EITHER IT IS PURCHASING NOTES FOR ITS OWN ACCOUNT, IS A U.S.
BANK (AS DEFINED IN SECTION 3(a)(2) OF THE ACT) OR A SAVINGS AND LOAN
ASSOCIATION OR OTHER INSTITUTION (AS DEFINED IN SECTION 3(a)(5)(A) OF THE ACT)
ACTING IN ITS INDIVIDUAL OR FIDUCIARY CAPACITY, OR IS A FIDUCIARY OR AGENT
(OTHER THAN A U.S. BANK OR SAVINGS AND LOAN ASSOCIATION) PURCHASING NOTES FOR
ONE OR MORE ACCOUNTS EACH OF WHICH IS SUCH AN INSTITUTIONAL ACCREDITED INVESTOR
OR SOPHISTICATED INDIVIDUAL ACCREDITED INVESTOR (a) WHICH ITSELF POSSESSES SUCH
KNOWLEDGE AND EXPERIENCE IN FINANCIAL AND BUSINESS MATTERS THAT SUCH PURCHASER
IS CAPABLE OF EVALUATING THE MERITS AND RISKS OF AN INVESTMENT IN THE NOTES, OR
(b) WITH RESPECT TO WHICH SUCH PURCHASER HAS SOLE INVESTMENT DISCRETION; OR (B)
A QUALIFIED INSTITUTIONAL BUYER ("QIB") WITHIN THE MEANING OF RULE 144A UNDER
THE ACT WHICH IS ACQUIRING NOTES FOR ITS OWN ACCOUNT OR FOR ONE OR MORE
ACCOUNTS, EACH OF WHICH IS A QIB AND WITH RESPECT TO EACH OF WHICH THE PURCHASER
HAS SOLE INVESTMENT DISCRETION; AND THE PURCHASER ACKNOWLEDGES THAT IT IS AWARE
THAT THE SELLER MAY RELY UPON THE EXEMPTION FROM THE REGISTRATION PROVISIONS OF
SECTION 5 OF THE ACT PROVIDED BY RULE 144A. BY ITS ACCEPTANCE OF A NOTE, THE
PURCHASER THEREOF SHALL ALSO BE DEEMED TO AGREE THAT ANY RESALE OR OTHER
TRANSFER THEREOF WILL BE MADE ONLY (A) IN A TRANSACTION EXEMPT FROM REGISTRATION
UNDER THE ACT EITHER (1) TO THE ISSUER OR TO CITICORP SECURITIES, INC. OR LEHMAN
BROTHERS INC. OR ANOTHER PERSON DESIGNATED BY THE ISSUER AS A PLACEMENT AGENT
FOR THE NOTES (COLLECTIVELY THE "PLACEMENT AGENTS"), NONE OF WHICH SHALL HAVE
ANY OBLIGATION TO ACQUIRE SUCH NOTE, (2) THROUGH A PLACEMENT AGENT TO AN
INSTITUTIONAL ACCREDITED INVESTOR OR HIGHLY SOPHISTICATED INDIVIDUAL INVESTOR OR
A QIB BY A PLACEMENT AGENT, OR (3) TO A QIB IN A TRANSACTION THAT MEETS THE
REQUIREMENTS OF RULE 144A AND (B) IN MINIMUM AMOUNTS OF $250,000.
-------------------------
PLACEMENT AGENTS
CITICORP SECURITIES, INC.
LEHMAN BROTHERS INC.
<PAGE> 2
THIS PRIVATE PLACEMENT MEMORANDUM IS CONFIDENTIAL AND HAS BEEN PREPARED BY
FEDERATED DEPARTMENT STORES, INC. (THE "COMPANY") SOLELY FOR USE IN CONNECTION
WITH THE OFFERING OF NOTES DESCRIBED HEREIN. THIS PRIVATE PLACEMENT MEMORANDUM
IS PERSONAL TO THE RECIPIENT HEREOF AND DOES NOT CONSTITUTE AN OFFER TO ANY
OTHER PERSON OR TO THE PUBLIC GENERALLY TO SUBSCRIBE FOR OR OTHERWISE ACQUIRE
THE NOTES. DISTRIBUTION OF THIS PRIVATE PLACEMENT MEMORANDUM TO ANY OTHER PERSON
OR TO THE PUBLIC GENERALLY TO SUBSCRIBE FOR OR OTHERWISE ACQUIRE THE NOTES IS
UNAUTHORIZED, AND ANY DISCLOSURE OF ANY OF ITS CONTENTS, WITHOUT THE PRIOR
WRITTEN CONSENT OF THE COMPANY, IS PROHIBITED. EACH RECIPIENT, BY ACCEPTING
DELIVERY OF THIS PRIVATE PLACEMENT MEMORANDUM, AGREES TO THE FOREGOING AND TO
MAKE NO PHOTOCOPIES OF THIS PRIVATE PLACEMENT MEMORANDUM OR ANY DOCUMENTS
REFERRED TO HEREIN.
THE NOTES HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL, STATE OR FOREIGN SECURITIES
COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING AUTHORITIES HAVE
NOT REVIEWED OR PASSED ON THE ACCURACY OR ADEQUACY OF THIS DOCUMENT. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE> 3
FEDERATED DEPARTMENT STORES, INC.
SUMMARY OF TERMS
----------------
ISSUER: Federated Department Stores, Inc.
("Federated" or the "Company"), a corporation
incorporated under the laws of Delaware.
PROGRAM SIZE: Authorized to a maximum outstanding of
$400,000,000.
PLACEMENT AGENTS: Citicorp Securities, Inc. and Lehman Brothers Inc.
SECURITIES: Unsecured notes (the "Notes"), ranking pari
passu with all other unsecured and unsubordinated
indebtedness of the Company.
RATINGS: S&P Moody's
--- -------
Commercial Paper Not Rated Not Rated
Senior Secured BB+ n/a
Senior Unsecured BB- Bal
Subordinated Unsecured BB- Ba3
EXEMPTION: The Notes are exempt from registration under the
Securities Act of 1933, as amended, pursuant to
Section 4(2), and cannot be resold unless
registered or an exemption from registration is
available.
OFFERING PRICE: Par less a discount representing an interest
factor, or if interest bearing, at par.
DENOMINATIONS: Minimum of $250,000.
MATURITIES: Up to 270 days from date of issue.
REDEMPTION: The Notes will not be redeemed prior to maturity
or be subject to voluntary prepayment.
FORM: Each Note will be evidenced by (i) a note
certificate issued in bearer form or (ii) a
master note registered in the name of the
nominee of The Depository Trust Company
("DTC"). The master note (the "Book-Entry
Note") will be deposited with the Issuing and
Paying Agent as subcustodian for DTC or its
successor. DTC will record, by appropriate
entries on its book-entry registration and
transfer system, the respective amounts payable
in respect of the Book-Entry Note. Payments by
DTC participants to purchasers for whom a DTC
participant is acting as agent in respect of the
Book-Entry Note will be governed by the standing
instructions and customary practices under which
securities are held at DTC through DTC
participants.
SETTLEMENT: Unless otherwise agreed to, same day basis, in
immediately available funds.
ISSUING AND PAYING AGENT: Citibank, N.A.
399 Park Avenue
New York, NY 10043
2
<PAGE> 4
BUSINESS
--------
The Company is one of the leading operators of full-line department stores in
the United States, with 409 department stores in 33 states as of November 2,
1996. The Company's department stores sell a wide range of merchandise,
including men's, women's and children's apparel and accessories, cosmetics, home
furnishings and other consumer goods, and are diversified by size of store,
merchandising character and character of community served. The Company's
department stores are located at urban or suburban sites, principally in densely
populated areas across the United States. The Company also operates more than
150 specialty stores under the names "Aeropostale" and "Charter Club," and a
mail order catalog business under the name "Bloomingdale's By Mail."
The following table sets forth certain information with respect to each of the
Company's retail operating divisions:
<TABLE>
<CAPTION>
February 3, 1996
--------------------------------
Number of Gross
Stores Square Feet(a)
------------ -------------
(thousands)
<S> <C> <C>
Bloomingdale's . . . . . . . . 17 4,689
The Bon Marche . . . . . . . . . 41 4,960
Burdines . . . . . . . . . . . . . 47 7,884
Macy's East . . . . . . . . . . . 89 23,355
Macy's West . . . . . . . . . . . 116 22,518
Rich's/Lazarus/Goldsmith's. . 75 14,672
Stern's . . . . . . . . . . . . . 27 5,425
Macy's Specialty . . . . . . . . . 153 555
--------- -----------
Total . . . . . . . . . . . . . 565 84,058
========= ============
<FN>
(a) Reflects total square footage of store locations, including
office, storage, service and other support space that is not
dedicated to direct merchandise sales, but excluding warehouses
and distribution terminals not located at store sites.
</TABLE>
In general, each of the Company's retail operating divisions is a separate
subsidiary of the Company. However, the Macy's West division and the
Rich's/Lazarus/Goldsmith's division each comprises three separate subsidiaries
of the Company.
The Company and its predecessors have been operating department stores since
1830. Federated was organized as a Delaware corporation in 1929. On February 4,
1992, Allied Stores Corporation ("Allied") was merged into Federated. On May 26,
1994, Federated acquired Joseph Horne Co., Inc. pursuant to a subsidiary merger.
On December 19, 1994, Federated acquired R. H. Macy & Co., Inc. ("Macy's")
pursuant to a merger. On October 11, 1995, the Company acquired Broadway Stores,
Inc. ("Broadway")
3
<PAGE> 5
pursuant to a subsidiary merger, with the results of operations of Broadway
being included in the Company's results of operations since July 29, 1995.
Federated, Allied and substantially all of their respective subsidiaries
(collectively, the "Federated/Allied Companies") were reorganized under chapter
11 of the United States Bankruptcy Code pursuant to a plan of reorganization
which became effective on February 4, 1992. Macy's and substantially all of its
subsidiaries (the "Macy's Debtors") were reorganized under chapter 11 of the
United States Bankruptcy Code pursuant to a plan of reorganization which became
effective on December 19, 1994. Broadway was reorganized under chapter 11 of the
United States Bankruptcy Code pursuant to a plan of reorganization which became
effective on October 8, 1992. For additional information regarding the
respective reorganization proceedings of the Federated/Allied Companies, the
Macy's Debtors and Broadway, see Item 3 "Legal Proceedings," the Company's
Annual Report Form 10-K for the period ended February 3,1996.
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------------------
39 Weeks Ended 39 Weeks Ended 52 Weeks Ended 52 Weeks Ended
November 2, 1996 October 28, 1995 February 3, 1996 January 28, 1995
--------------------- ------------------- --------------------- -------------------
(millions, except share data)
<S> <C> <C> <C> <C>
Net Sales $ 10,194 $ 9,784 $ 15,049 $ 8,316
Operating Income
Excluding unusual items(1) 539 355 982 635
% of Sales 5.3% 3.6% 6.5% 7.6%
EBITDA (2) 941 720 1,479 921
% of Sales 9.2% 7.4% 9.8% 11.1%
Net Income (1)
Excluding Unusual Items 111 (26) 269 239
Including Unusual Items (23) (170) 75 188
Earnings Per Share(1)
Excluding Unusual Items $ .53 $ (.14) $ 1.40 $ 1.80
Including Unusual Items $ (.11) $ (.91) $ .39 $ 1.41
The foregoing information is qualified in its entirety by reference to the reports and information described below under the
"Available Information."
<FN>
- ------------------------------
(1) Unusual items represent business and consolidation expenses for all periods and the charitable contribution to the
Federated Department Stores Foundation in 1995.
(2) EBITDA represents earnings before interest, taxes, depreciation, amortization, and unusual items.
</TABLE>
4
<PAGE> 6
BANK FACILITIES
- ---------------
The Company maintains bank borrowing facilities sufficient to support the
commercial paper outstanding.
AVAILABLE INFORMATION
- ---------------------
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports and other information with the Securities and Exchange
Commission (the "Commission"). Such reports and other information may be
inspected without charge at the public reference facilities maintained by the
Commission at 450 Fifth Street, NW, Washington, D.C. 20549, and at the Regional
Offices of the Commission. Copies thereof may be obtained from the Commission
upon payment of the prescribed fees. If available, such reports and other
information may also be accessed through the Commission's electronic data
gathering, analysis and retrieval system ("EDGAR") via electronic means,
including the Commission's web site on the Internet (http://www.sec.gov). The
Company will provide without charge to each purchaser of the Notes, upon oral or
written request, a copy of any and all documents filed by the Company with the
Commission and any and all publicly available financial information. The
Company, Citicorp Securities, Inc. and Lehman Brothers Inc. are offering the
opportunity to each prospective purchaser prior to purchasing any Notes, to ask
questions of, and receive answers from, the Company, Citicorp Securities, Inc.
and Lehman Brothers Inc. concerning the offering of the Notes and to obtain any
relevant information to the extent the information is not confidential or
non-public information and to the extent the Company, Citicorp Securities, Inc.
or Lehman Brothers Inc. possesses such information or can acquire it without
unreasonable effort or expense.
Requests should be directed to: Susan Robinson, Investor Relations, Federated
Department Stores, Inc., 7 West Seventh Street, Cincinnati, Ohio 45202,
telephone (513) 579-7028. Any other questions can be directed to Christopher J.
Kulusic at Citicorp Commercial Paper Investor Marketing, 399 Park Avenue, 11th
Floor/ Zone 13, New York, New York 10043, telephone (212) 559-8617 or Michele
Mahoney at Lehman Brothers Inc., 3 World Financial Center, New York, New York
10285-1200, telephone (212)526-6092.
As consideration for the Placement Agents' services in connection with the sales
of the Notes, the Company has agreed to pay compensation to the Placement Agents
which may be in the form of discounts. Compensation of the Placement Agents may
be deducted from the sale proceeds of the Notes prior to remittance to the
Company or the Depositary. The Company has agreed to indemnify the Placement
Agents and their affiliates for certain liabilities, including certain
liabilities under the Act, and to contribute to payments the Placement Agents
may be required to make in respect thereof.
CITICORP SECURITIES, INC. AND LEHMAN BROTHERS INC. MAY FROM TIME TO TIME ACT AS
UNDERWRITERS FOR PUBLIC OFFERINGS OF, OR MAKE A MARKET FOR, SECURITIES OF THE
COMPANY OR ITS AFFILIATES AND MAY HAVE A LONG OR SHORT POSITION IN SUCH
SECURITIES. ALTHOUGH CITICORP SECURITIES, INC. AND LEHMAN BROTHERS INC. MAY
PURCHASE AND SELL, AS PRINCIPAL OR AGENT, OUTSTANDING COMMERCIAL PAPER OF THE
COMPANY, CITICORP SECURITIES, INC. AND LEHMAN BROTHERS INC. ASSUME NO OBLIGATION
TO PURCHASE OR MAKE A MARKET IN ANY SUCH OUTSTANDING COMMERCIAL PAPER.
Citicorp Securities, Inc. and certain of its affiliates have provided from time
to time, and expect to provide in the future, investment and commercial banking
services to the Company and certain of its affiliates in the ordinary course of
business.
5
<PAGE> 7
Citicorp Securities, Inc. is a wholly owned subsidiary of Citicorp and is a
broker-dealer registered with the Securities and Exchange Commission and a
member of the National Association of Securities Dealers, Inc.
Citicorp Securities, Inc. is not a bank and is a separate corporate entity from
Citibank, N.A. and other banks and thrifts which are subsidiaries of Citicorp.
Unless otherwise stated as the case, the securities sold, offered, or
recommended by Citicorp Securities, Inc. are not deposits, are not insured by
the Federal Deposit Insurance Corporation or the Federal Savings and Loan
Insurance Corporation, are not guaranteed by a bank or thrift affiliated with
Citicorp Securities, Inc. and are not otherwise an obligation or responsibility
of such an affiliated bank or thrift.
6
<PAGE> 1
Exhibit 10.26
COMMERCIAL PAPER DEALER AGREEMENT
between
Federated Department Stores, Inc., as Issuer
and
Lehman Brothers Inc., as Dealer
Concerning Notes to be issued pursuant to an Issuing and Paying Agency
Agreement dated as of January 30, 1997 between the Issuer and Citibank,
N.A., as Issuing and Paying Agent
Dated As Of
January 30, 1997
<PAGE> 2
COMMERCIAL PAPER DEALER AGREEMENT
This agreement ("Agreement") sets forth the understandings between the
Issuer and the Dealer in connection with the issuance and sale by the Issuer of
its short-term promissory notes through the Dealer (the "Notes").
Certain terms used in this Agreement are defined in Section 6 hereof.
The Addendum to this Agreement, and any Annexes or Exhibits described
in this Agreement or such Addendum, are hereby incorporated into this Agreement
and made fully a part hereof.
Section 1. OFFERS, SALES AND RESALES OF NOTES
----------------------------------
1.1 While (i) the Issuer has and shall have no obligation to sell the
Notes to the Dealer or to permit the Dealer to arrange any sale of the Notes for
the account of the Issuer, and (ii) the Dealer has and shall have no obligation
to purchase the Notes from the Issuer or to arrange any sale of the Notes for
the account of the Issuer, the parties hereto agree that in any case where the
Dealer purchases Notes from the Issuer, or arranges for the sale of Notes by the
Issuer, such Notes will be purchased or sold by the Dealer in reliance on the
representations, warranties, covenants and agreements of the Issuer contained
herein or made pursuant hereto and on the terms and conditions and in the manner
provided herein. Subject to the foregoing, the Dealer will use all reasonable
efforts to arrange sales of the Notes at the times and in the amounts requested
by the Issuer.
1.2 So long as this Agreement shall remain in effect, and in addition to
the limitations contained in Section 1.7 hereof, the Issuer shall not, without
the consent of the Dealer, offer, solicit or accept offers to purchase, or sell,
any Notes except (a) in transactions with one or more dealers which may from
time to time after the date hereof become dealers with respect to the Notes by
executing with the Issuer one or more agreements which contain provisions
substantially identical to Section 1 of this Agreement, of which the Issuer
hereby undertakes to provide the Dealer prompt notice or (b) in transactions
with the other dealers listed on the Addendum hereto, which are executing
agreements with the Issuer which contain provisions substantially identical to
Section 1 of this Agreement contemporaneously herewith. In no event shall the
Issuer offer, solicit or accept offers to purchase, or sell, any Notes directly
on its own behalf in transactions with persons other than broker-dealers as
specifically permitted in this Section 1.2.
1.3 The Notes shall be in a minimum denomination or minimum amount,
whichever is applicable, of $250,000 or integral multiples of $1,000 in excess
thereof, will bear such interest rates, if interest bearing, or will be sold at
such discount from their face amounts, as shall be agreed upon by the Dealer and
the Issuer, shall have a maturing not exceeding 270 days from the date of
issuance (exclusive of days of grace) and shall not contain any provision for
extension, renewal or automatic "rollover."
1.4 The authentication, delivery and payment of the Notes shall be
effected in accordance with the Issuing and Paying Agency Agreement and the
Notes shall be either individual bearer physical certificates or represented by
book-entry Notes registered in the name of DTC or its nominee in the form or
forms annexed to the Issuing and Paying Agency Agreement. The Dealer agrees to
keep
2
<PAGE> 3
confidential the user number identification and password given to it pursuant to
the Issuing and Paying Agency Agreement.
1.5 If the Issuer and the Dealer shall agree on the terms of the
purchase of any Note by the Dealer or the sale of any Note arranged by the
Dealer (including, but not limited to, agreement with respect to the date of
issue, purchase price, principal amount, maturity and interest rate (in the case
of interest-bearing Notes) or discount thereof (in the case of Notes issued on a
discount basis), and appropriate compensation for the Dealer's services
hereunder) pursuant to this Agreement, the Issuer shall cause such Note to be
issued and delivered in accordance with the terms of the Issuing and Paying
Agency Agreement and payment for such Note shall be made by the purchaser
thereof, either directly or through the Dealer, to the Issuer. Except as
otherwise agreed, in the event that the Dealer is acting as an agent and a
purchaser shall either fail to accept delivery of or make payment for a Note on
the date fixed for settlement, the Dealer shall promptly notify the Issuer, and
if the Dealer has theretofore paid the Issuer for the Note, the Issuer will
promptly return such funds to the Dealer against its return of the Note to the
Issuer, in the case of a certificated Note, and upon notice of such failure and
an appropriate book-entry credit in the case of a book-entry Note. If such
failure occurred for any reason other than default by the Dealer, the Issuer
shall reimburse the Dealer on an equitable basis for the Dealer's loss of the
use of such funds for the period such funds were credited to the Issuer's
account.
1.6 All offers and sales of the Notes by the Issuer shall be effected
pursuant to the exemption from the registration requirements of the Securities
Act provided by Section 4(2) thereof, which exempts transactions by an issuer
not involving any public offering. The Dealer and the Issuer hereby establish
and agree to observe the following procedures in connection with offers, sales
and subsequent resales or other transfers of the Notes:
(a) Offers and sales of the Notes shall be made only to the
following types of investors: (i) investors reasonably believed by the Dealer to
be Institutional Accredited Investors or Sophisticated Individual Accredited
Investors, (ii) non-bank fiduciaries or agents that will be purchasing Notes for
one or more accounts, each of which is an Institutional Accredited Investor or
Sophisticated Individual Accredited Investor, and (iii) Qualified Institutional
Buyers.
(b) Resales and other transfers of the Notes by the holders thereof
shall be made only in accordance with the restrictions in the legends described
in clause (e) below.
(c) No general solicitation or general advertising shall be used in
connection with the offering of the Notes. Without limiting the generality of
the foregoing; without the prior written approval of Dealer, the Issuer shall
not issue any press release or place or publish any "tombstone" or other
advertisement relating to the Notes. The Dealer shall not use any materials
other than the Private Placement Memorandum as then approved by the Issuer in
connection with the offer and sale of the Notes.
(d) No sale of Notes to any one purchaser shall be for less than
$250,000 principal or face amount, and no Note shall be issued in a smaller
principal or face amount. If the purchaser is a non-bank fiduciary acting on
behalf of others, each person for whom such purchaser is acting must purchase at
least $250,000 principal or face amount of Notes.
(e) Offers and sales of the Notes by the Issuer through the Dealer
acting as agent for the Issuer shall be made in accordance with Rule 506 under
the Securities Act, and shall be subject to the restrictions described in the
legend appearing on Exhibit A hereto. A legend substantially to the effect of
such Exhibit A shall appear as part of the Private Placement Memorandum used in
connection with
3
<PAGE> 4
offers and sales of Notes hereunder, as well as on each Note offered and sold
pursuant to this Agreement.
(f) Dealer shall furnish or shall have furnished to each purchaser
of Notes being sold to an ultimate purchaser for the first time a copy of the
then-current Private Placement Memorandum unless such purchaser has previously
received a copy of the Private Placement Memorandum as then in effect. The
Private Placement Memorandum shall expressly state that any person to whom Notes
are offered shall have an opportunity to ask questions of, and receive
information from, the Issuer and the Dealer and shall provide the names,
addresses and telephone numbers of the persons from whom information regarding
the Issuer may be obtained.
(g) The Issuer agrees, for the benefit of the Dealer and each of the
holders and prospective purchasers from time to time of the Notes that, if at
any time the Issuer shall not be subject to Section 13 or 15(d) of the Exchange
Act, the Issuer will furnish, upon request and at its expense, to the Dealer and
to holders and prospective purchasers of Notes information required by Rule
144A(d)(4)(i) in compliance with Rule 144A(d).
(h) In the event that any Note offered or to be offered by Dealer
would be ineligible for resale under Rule 144A, the Issuer shall immediately
notify Dealer (by telephone, confirmed in writing) of such fact and shall
promptly prepare and deliver to Dealer an amendment or supplement to the Private
Placement Memorandum describing the Notes that are ineligible, the reason for
such ineligibility and any other relevant information relating thereto.
1.7 The Issuer hereby represents and warrants to the Dealer, in
connection with offers, sales and resales of Notes as follows:
The Issuer represents and agrees that the proceeds of the sale of
the Notes are not currently contemplated to be used for the purpose of buying,
carrying or trading securities within the meaning of Regulation T and the
interpretations thereunder by the Board of Governors of the Federal Reserve
System. In the event that the Issuer determines to use such proceeds for the
purpose of buying, carrying or trading securities, whether in connection with an
acquisition of another company or otherwise, the Issuer shall give the Dealer at
least five business days' prior written notice to that effect. The Issuer shall
also give the Dealer prompt notice of the actual date that it commences to
purchase securities with the proceeds of the Notes. Thereafter, in the event
that the Dealer purchases Notes as principal and does not resell such Notes on
the day of such purchase, to the extent necessary to comply with Regulation T
and the interpretations thereunder, the Dealer will sell such Notes only to
offerees it reasonably believes to be QIBs or to QIBs it reasonably believes are
acting for other QIBs, in each case in accordance with Rule 144A.
Section 2. Representations and Warranties of Issuer.
-----------------------------------------
The Issuer represents and warrants that:
2.1 The Issuer is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation and has
all the requisite corporate power and authority to execute, deliver and perform
its obligations under the Notes, this Agreement and the Issuing and Paying
Agency Agreement.
2.2 This Agreement and the Issuing and Paying Agency Agreement have been
duly authorized, executed and delivered by the Issuer and constitute legal,
valid and binding obligations of
4
<PAGE> 5
the Issuer enforceable against the Issuer in accordance with their terms subject
to applicable bankruptcy, insolvency and similar laws affecting creditors'
rights generally, and subject, as to enforceability, to general principles of
equity (regardless of whether enforcement is sought in a proceeding in equity or
at law).
2.3 The Notes have been duly authorized, and when issued and delivered
as provided in the Issuing and Paying Agency Agreement, will be duly and validly
issued and delivered and will constitute legal, valid and binding obligations of
the Issuer enforceable against the Issuer in accordance with their terms subject
to applicable bankruptcy, insolvency and similar laws affecting creditors'
rights generally, and subject, as to enforceability, to general principles of
equity (regardless of whether enforcement is sought in a proceeding in equity or
at law).
2.4 The offer and sale of Notes in the manner contemplated hereby do not
require registration of the Notes under the Securities Act, pursuant to the
exemption from registration contained in Section 4(2) thereof, and no indenture
in respect of the Notes is required to be qualified under the Trust Indenture
Act of 1939, as amended. Neither the Issuer nor any affiliate (as defined in
Regulation 501(b) of Regulation D), will sell, offer for sale or solicit offers
to buy or otherwise negotiate in respect of any security (as defined in the
Securities Act) which will be integrated with the sale of the Notes in a manner
which would require the registration of the Notes under the Securities Act.
2.5 The Notes are unsecured and unsubordinated indebtedness of the
Issuer.
2.6 No consent or action of, or filing or registration with, any
governmental or public regulatory body or authority, including the SEC (except
for the filing of a Form D with the SEC), is required to authorize, or is
otherwise required in connection with the execution, delivery or performance of,
this Agreement, the Notes or the Issuing and Paying Agency Agreement, except as
may be required by the securities or Blue Sky laws of the various states in
connection with the offer and sale of the Notes.
2.7 Neither the execution and delivery of this Agreement and the Issuing
and Paying Agency Agreement, nor the issuance and delivery of the Notes in
accordance with the Issuing and Paying Agency Agreement, nor the fulfillment of
or compliance with the terms and provisions hereof or thereof by the Issuer,
will (i) result in the creation or imposition of any mortgage, lien, charge or
encumbrance of any nature whatsoever upon any of the properties or assets of the
Issuer, or (ii) violate or result in a breach or an event of default under any
of the terms of the Issuer's charter documents or by-laws, any contract or
instrument to which the Issuer is a party or by which it or its property is
bound, or any law or regulation, or any order, writ, injunction or decree of any
court or government instrumentality, to which the Issuer is subject or by which
it or its property is bound, which breach or event of default might have a
material adverse effect on the condition (financial or otherwise), operations or
reasonably foreseeable business prospects of the Issuer and its subsidiaries
taken as a whole or the ability of the Issuer to perform its obligations under
this Agreement, the Notes or the Issuing and Paying Agency Agreement (a
"Material Adverse Effect").
2.8 There is no litigation or governmental proceeding pending, or to the
knowledge of the Issuer threatened, against or affecting the Issuer or any of
its subsidiaries which might result in a Material Adverse Effect.
2.9 The Issuer is not an "investment company" or an entity "controlled"
by an "investment company" within the meaning of the Investment Company Act of
1940, as amended.
5
<PAGE> 6
2.10 Neither the Private Placement Memorandum nor the Company
Information contains any untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, provided that this representation and warranty shall not apply to
any statements or omissions made in reliance upon and in conformity with the
Dealer Information.
2.11 Each (a) issuance of Notes by the Issuer hereunder and (b)
amendment or supplement of the Private Placement Memorandum shall be deemed a
representation and warranty by the Issuer to the Dealer, as of the date thereof,
that, both before and after giving effect to such issuance and after giving
effect to such amendment or supplement, (i) the representations and warranties
given by the Issuer set forth above in this Section 2 remain true and correct on
and as of such date as if made on and as of such date, (ii) in the case of an
issuance of Notes, the Notes being issued on such date have been duly and
validly issued and constitute legal, valid and binding obligations of the
Issuer, enforceable against the Issuer in accordance with their terms, subject
to applicable bankruptcy, insolvency and similar laws affecting creditors'
rights generally and subject, as to enforceability, to general principles of
equity (regardless of whether enforcement is sought in a proceeding in equity or
at law) and (iii) in the case of an issuance of Notes, since the date of the
most recent Private Placement Memorandum, there has been no material adverse
change in the condition (financial or otherwise), operations or reasonably
foreseeable business prospects of the Issuer and its subsidiaries, taken as a
whole which has not been disclosed to the Dealer in writing.
Section 3. Covenants and Agreements of Issuer
----------------------------------
The Issuer covenants and agrees that:
3.1 The Issuer will give the Dealer prompt notice (but in any event
prior to any subsequent issuance of Notes hereunder) of any amendment to,
modification of, or waiver with respect to, the Notes or the Issuing and Paying
Agency Agreement, including a complete copy of any such amendment, modification
or waiver.
3.2 The Issuer shall, whenever there shall occur any downgrading or
receipt of any notice of intended or potential downgrading or any review for
potential change in the rating accorded any of the Issuer's securities by any
national recognized statistical rating organization which has published a rating
of the Notes, promptly, and in any event prior to any subsequent issuance of
Notes hereunder, notify the Dealer (by telephone, confirmed in writing) of such
changes, development, or occurrence.
3.3 The Issuer shall from time to time furnish to the Dealer such
information as the Dealer may reasonably request (other than material non-public
information), including, without limitation, any press releases or material
provided by the Issuer to any national securities exchange or rating agency,
regarding (i) the Issuer's operations and financial condition, (ii) the due
authorization and execution of the Notes, and (iii) the Issuer's ability to pay
the Notes as they mature.
3.4 The Issuer will take all such action as the Dealer may reasonably
request to ensure that each offer and each sale of the Notes will comply with
any applicable state Blue Sky laws; provided, that the Issuer shall not be
obligated to file any general consent to service of process or to qualify as a
foreign corporation in any jurisdiction in which it is not so qualified or
subject itself to taxation in respect of doing business in any jurisdiction in
which it is not otherwise so subject.
3.5 The Issuer will not be in default of any of its obligations
hereunder, under the Notes or under the Issuing and Paying Agency Agreement, at
any time that any of the Notes are outstanding.
6
<PAGE> 7
3.6 The Issuer shall not issue Notes hereunder until the Dealer shall
have received (a) an opinion of counsel to the Issuer, addressed to the Dealer,
substantially in the form attached hereto, (b) a copy of the executed Issuing
and Paying Agency Agreement, (c) a copy of resolutions adopted by the Board of
Directors of the Issuer, in the form attached hereto and certified by the
Secretary or similar officer of the Issuer, authorizing execution and delivery
by the Issuer of this Agreement the Issuing and Paying Agency Agreement and the
Notes and consummation by the Issuer of the transactions contemplated hereby and
thereby, (d) prior to the issuance of any Notes represented by a book-entry note
registered in the name of DTC or its nominee, a copy of the executed Letter of
Representations among the Issuer, the Issuing and Paying Agent and DTC and (e)
such other certificates, opinions, letters and documents as the Dealer shall
have reasonably requested.
3.7 The Issuer shall reimburse the Dealer for all of the Dealer's
out-of-pocket expenses related to this Agreement, including reasonable expenses
incurred in connection with its preparation and negotiation, and the
transactions contemplated hereby (including, but not limited to, the printing
and distribution of the Private Placement Memorandum), and, if applicable, for
the reasonable fees and out-of-pocket expenses of the Dealer's counsel.
Section 4. DISCLOSURE
-----------
4.1 The Private Placement Memorandum and its contents (other than the
Dealer Information) shall be the sole responsibility of the Issuer. The Private
Placement Memorandum shall contain a statement expressly offering an opportunity
for each prospective purchaser to ask questions of, and receive answers from,
the Issuer concerning the offering of Notes and to obtain relevant additional
information which the Issuer possesses or can acquire without unreasonable
effort or expense.
4.2 The Issuer agrees promptly to furnish the Dealer the Company
Information as it becomes available.
4.3 (a) The Issuer further agrees to notify the Dealer promptly upon the
occurrence of any event relating to or affecting the Issuer that would cause the
Private Placement Memorandum or the Company Information then in existence to
include an untrue statement of material fact or to omit to state a material fact
necessary in order to make the statements contained therein, in light of the
circumstances under which they are made, not misleading.
(b) In the event that the Issuer gives the Dealer notice pursuant to
Section 4.3(a) and the Dealer notifies the Issuer that it then has Notes it is
holding in inventory, the Issuer agrees promptly to supplement or amend the
Private Placement Memorandum so that such Private Placement Memorandum, as
amended or supplemented, shall not contain an untrue statement of a material
fact or omit to state a material fact necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading, and the Issuer shall make such supplement or amendment available to
the Dealer and prospective holders of the Notes.
(c) In the event that (i) the Issuer gives the Dealer notice
pursuant to Section 4.3(a) and (ii) the Dealer does not notify the Issuer that
it is then holding Notes in inventory and (iii) the Issuer chooses not to
promptly amend or supplement the Private Placement Memorandum in the manner
described in clause (b) above, then all solicitations and sales of Notes shall
be suspended until such time as the Issuer has so amended or supplemented the
Private Placement Memorandum, and made such amendment or supplement available to
the Dealer and prospective holders of the Notes.
7
<PAGE> 8
Section 5. INDEMNIFICATION AND CONTRIBUTION
--------------------------------
5.1 The Issuer, as the Indemnifying Party, will indemnify and hold
harmless the Dealer, each individual, corporation, partnership, trust,
association or other entity controlling the Dealer, any affiliate of the Dealer
or any such controlling entity and their respective directors, officers,
employees, partners, incorporators, shareholders, servants, trustees and agents
(hereinafter the "Dealer Indemnitees") against any and all liabilities, suits,
causes of action, losses, damages, claims, costs and expenses (including,
without limitation, reasonable fees and disbursements of counsel) or judgments
of whatever kind or nature (each a "Claim"), imposed upon, incurred by or
asserted against the Dealer Indemnitees arising out of or based upon (i) any
allegation that the Private Placement Memorandum, the Company Information or any
information provided by the Issuer to the Dealer in writing expressly for
inclusion in the Private Placement Memorandum included (as of any relevant time)
or includes an untrue statement of a material fact or omitted (as of any
relevant time) or omits to state any material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading or (ii) arising out of or based upon the breach by the Issuer of
any agreement, covenant or representation made in or pursuant to this Agreement.
This indemnification shall not apply to the extent that the Claim arises out of
or is based upon Dealer Information.
5.2 The Dealer, as the Indemnifying Party, will indemnify and hold
harmless the Issuer, each individual, corporation, partnership, trust,
association or other entity controlling the Issuer, any affiliate of the Issuer
or any such controlling entity and their respective directors, officers,
employees, partners, incorporators, shareholders, servants, trustees and agents
(hereinafter the "Issuer Indemnitees") against any and all Claims imposed upon,
incurred by or asserted against the Issuer Indemnitees arising out of or based
upon any allegation that the Dealer Information included (as of any relevant
time) or includes an untrue statement of a material fact or omitted (as of any
relevant time) or omits to state any material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
5.3 Provisions relating to claims made for indemnification under this
Section 5 are set forth on Exhibit B to this Agreement.
5.4 If the indemnification provided for in this Section 5 is held to be
unavailable or insufficient to hold harmless an Indemnitee under Sections 5.1 or
5.2 in respect of a Claim, although applicable in accordance with the terms of
this Section 5, each Indemnifying Party shall contribute to the amount paid or
payable by such Indemnitee as a result of such Claim in such proportion as is
appropriate to reflect the relative benefits received by the Issuer on the one
hand and the Dealer on the other from the offering of the Notes, provided,
however, that any such contribution by the Dealer shall not be in excess of the
benefits received by it from the offering of the Notes. The respective benefits
received by the Issuer and the Dealer shall be deemed to be the aggregate net
proceeds received by the Issuer of the Notes issued hereunder and the aggregate
commissions and fees earned by the Dealer hereunder.
8
<PAGE> 9
Section 6. DEFINITIONS
-----------
6.1 "Claim" shall have the meaning set forth in Section 5.1.
6.2 "Company Information" at any given time shall mean, to the extent
applicable, (i) the Issuer's most recent report on Form 10-K filed with the SEC
and each report on Form 10-Q or 8-K filed by the Issuer with the SEC since the
most recent Form 10-K, (ii) the Issuer's most recent annual audited financial
statements and each interim financial statement or report prepared subsequent
thereto, if not included in item (i) above, (iii) the Issuer's and its
affiliates' other publicly available recent reports, including, but not limited
to, any publicly available filings or reports provided to their respective
shareholders, (iv) any other information or disclosure prepared pursuant to
Section 4.3 hereof and (v) any information prepared or approved by the Issuer
for dissemination to investors or potential investors in the Notes.
6.3 "Dealer Information" shall mean statements concerning the Dealer or
other matters and provided by the Dealer in writing expressly for inclusion in
the Private Placement Memorandum.
6.4 "DTC" shall mean The Depository Trust Company.
6.5 "Exchange Act" shall mean the U.S. Securities Exchange Act of 1934,
as amended.
6.6 "Indemnifying Party" shall have the meaning set forth in Section 5.
6.7 "Indemnitees" shall mean the Dealer Indemnitees or the Company
Indemnitees (as such terms are defined in Sections 5.1 and 5.2) as the context
shall require.
6.8 "Institutional Accredited Investor" shall mean an institutional
investor that is an accredited investor within the meaning of Rule 501 under the
Securities Act and that has such knowledge and experience in financial and
business matters that it is capable of evaluating and bearing the economic risk
of an investment in the Notes, including, but not limited to, a bank, as defined
in Section 3(a)(2) of the Securities Act, or a savings and loan association or
other institution, as defined in Section 3(a)(5)(A) of the Securities Act,
whether acting in its individual or fiduciary capacity.
6.9 "Issuing and Paying Agency Agreement" shall mean the issuing and
paying agency agreement described on the cover page of this Agreement, as such
agreement may be amended or supplemented from time to time.
6.10 "Issuing and Paying Agent" shall mean the party designated as such
on the cover page of this Agreement, as issuing and paying agent under the
Issuing and Paying Agency Agreement.
6.11 "Non-bank fiduciary or agent" shall mean a fiduciary or agent other
than (a) a bank, as defined in Section 3(a)(2) of the Securities Act, or (b) a
savings and loan association, as defined in Section 3(a)(5)(A) of the Securities
Act.
6.12 "Private Placement Memorandum" shall mean offering materials
prepared in accordance with Section 4 (including materials referred to therein
or incorporated by reference therein) provided to purchasers and prospective
purchasers of the Notes, and shall include amendments and supplements thereto
which may be prepared from time to time in accordance with this Agreement (other
than any amendment or supplement that has been completely superseded by a later
amendment or supplement).
6.13 "Qualified Institutional Buyer" shall have the meaning assigned to
that term in Rule 144A under the Securities Act.
6.14 "Rule 144A" shall mean Rule 144A under the Securities Act.
9
<PAGE> 10
6.15 "SEC" shall mean the U.S. Securities and Exchange Commission.
6.16 "Securities Act" shall mean the U.S. Securities Act of 1933, as
amended.
6.17 "Sophisticated Individual Accredited Investor" shall mean an
individual who (a) is an accredited investor within the meaning of Regulation D
under the Securities Act and (b) based on his or her pre-existing relationship
with the Dealer, is reasonably believed by the Dealer to be a sophisticated
investor (i) possessing such knowledge and experience (or represented by a
fiduciary or agent possessing such knowledge and experience) in financial and
business matters that he or she is capable of evaluating and bearing the
economic risk of an investment in the Notes and (ii) having a net worth of at
least $5 million.
Section 7. GENERAL
-------
7.1 Unless otherwise expressly provided herein, all notices under this
Agreement to parties hereto shall be in writing and shall be effective when
received at the address of the respective party set forth in the Addendum to
this Agreement.
7.2 This Agreement shall be governed by and construed in accordance with
the laws of the State of New York, without regard to its conflict of laws
provisions.
7.3 The Issuer agrees that any suit, action or proceeding brought by the
Issuer against the Dealer in connection with or arising out of this Agreement or
the Notes or the offer and sale of the Notes shall be brought solely in the
United States federal courts located in the borough of Manhattan or the courts
of the State of New York located in the Borough of Manhattan. EACH OF THE DEALER
AND THE ISSUER WAIVES ITS RIGHT TO TRIAL BY JURY IN ANY SUIT, ACTION OR
PROCEEDING WITH RESPECT TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
7.4 This Agreement may be terminated, at any time, by the Issuer, upon
one business day's prior notice to such effect to the Dealer, or by the Dealer
upon one business day's prior notice to such effect to the Issuer. Any such
termination, however, shall not affect the obligations of the parties under
Sections 3.7, 5 and 7.3 hereof or the respective representations, warranties,
agreements, covenants, rights or responsibilities of the parties made or arising
prior to the termination of this Agreement.
7.5 This Agreement is not assignable by either party hereto without the
written consent of the other party, which consent shall not be unreasonably
withheld.
7.6 This Agreement is for the exclusive benefit of the parties hereto,
and their respective successors and permitted assigns hereunder, and (to the
extent provided in Section 5) the Indemnitees, and shall not be deemed to give
any legal or equitable right, remedy or claim to any other person whatsoever. No
purchaser of any of the Notes from the Dealer shall be deemed a successor or
assign by reason merely of such purchase.
10
<PAGE> 11
7.7 This Agreement may be signed in any number of counterparts, each of
which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date and year first above written:
Federated Department Stores, Inc. as Issuer
By: /s/ Karen M. Hoguet
------------------------------------
Name: Karen M. Hoguet
Title: Senior Vice President
Lehman Brothers Inc. as Dealer
By: /s/ Herbert McDade
------------------------------------
Name: Herbert McDade
Title: Managing Director
11
<PAGE> 12
ADDENDUM
1. The other dealers referred to in clause (b) of Section 1.2 of the Agreement
are Citicorp Securities, Inc.
2. Intentionally Omitted.
3. The addresses of the respective parties for purposes of notices under
Section 7.1 are as follows:
For the Issuer: Federated Department Stores, Inc.
Address: 7 West Seventh Street
Cincinnati, Ohio 45202
Attention: Susan P. Storer
Telephone number: 513/579-7775
Fax number: 513/579-7393
For the Dealer: Lehman Brothers Inc.
Address: 3 World Financial Center
New York, New York 10285
Attention: Commercial Paper Product Management
Telephone number: 212/526-7000
Fax number: 212/528-6925
12
<PAGE> 13
EXHIBIT A
FORM OF LEGEND FOR
PRIVATE PLACEMENT MEMORANDUM AND NOTES
THE NOTES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), OR ANY OTHER APPLICABLE SECURITIES LAW, AND OFFERS AND SALES
THEREOF MAY BE MADE ONLY IN COMPLIANCE WITH AN APPLICABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
BY ITS ACCEPTANCE OF A NOTE, THE PURCHASER WILL BE DEEMED TO REPRESENT THAT IT
HAS BEEN AFFORDED AN OPPORTUNITY TO INVESTIGATE MATTERS RELATING TO THE ISSUER
AND THE NOTES, THAT IT IS NOT ACQUIRING SUCH NOTE WITH A VIEW TO ANY
DISTRIBUTION THEREOF AND THAT IT IS EITHER (A) AN INSTITUTIONAL INVESTOR OR
HIGHLY SOPHISTICATED INDIVIDUAL INVESTOR THAT IS AN ACCREDITED INVESTOR WITHIN
THE MEANING OF RULE 501(a) UNDER THE ACT (AN "INSTITUTIONAL ACCREDITED INVESTOR"
OR "SOPHISTICATED INDIVIDUAL ACCREDITED INVESTOR", RESPECTIVELY) WITH SUCH
KNOWLEDGE AND EXPERIENCE IN FINANCIAL AND BUSINESS MATTERS THAT IT IS CAPABLE OF
EVALUATING AND BEARING THE RISKS OF AN INVESTMENT IN THE NOTES AND THAT EITHER
IT IS PURCHASING NOTES FOR ITS OWN ACCOUNT, IS A U.S. BANK (AS DEFINED IN
SECTION 3(a)(2) OF THE ACT) OR A SAVINGS AND LOAN ASSOCIATION OR OTHER
INSTITUTION (AS DEFINED IN SECTION 3(a)(5)(a) OF THE ACT) ACTING IN ITS
INDIVIDUAL OR FIDUCIARY CAPACITY OR IS A FIDUCIARY OR AGENT (OTHER THAN A U.S.
BANK OR SAVINGS AND LOAN ASSOCIATION) PURCHASING NOTES FOR ONE OR MORE ACCOUNTS
EACH OF WHICH IS SUCH AN INSTITUTIONAL ACCREDITED INVESTOR OR SOPHISTICATED
INDIVIDUAL ACCREDITED INVESTOR (i) WHICH ITSELF POSSESSES SUCH KNOWLEDGE AND
EXPERIENCE IN FINANCIAL AND BUSINESS MATTERS THAT SUCH PURCHASER IS CAPABLE OF
EVALUATING THE MERITS AND RISKS OF AN INVESTMENT IN THE NOTES, OR (ii) WITH
RESPECT TO WHICH SUCH PURCHASER HAS SOLE INVESTMENT DISCRETION; OR (B) A
QUALIFIED INSTITUTIONAL BUYER ("QIB") WITHIN THE MEANING OF RULE 144A UNDER THE
ACT WHICH IS ACQUIRING NOTES FOR ITS OWN ACCOUNT OR FOR ONE OR MORE ACCOUNTS,
EACH OF WHICH IS A QIB AND WITH RESPECT TO EACH OF WHICH THE PURCHASER HAS SOLE
INVESTMENT DISCRETION; AND THE PURCHASER ACKNOWLEDGES THAT IT IS AWARE THAT THE
SELLER MAY RELY UPON THE EXEMPTION FROM THE REGISTRATION PROVISIONS OF SECTION 5
OF THE ACT PROVIDED BY RULE 144A. BY ITS ACCEPTANCE OF A NOTE, THE PURCHASER
THEREOF SHALL ALSO BE DEEMED TO AGREE THAT ANY RESALE OR OTHER TRANSFER THEREOF
WILL BE MADE ONLY (A) IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE ACT,
EITHER (1) TO THE ISSUER OR TO CITICORP SECURITIES, INC. OR LEHMAN BROTHERS
INC., OR ANOTHER PERSON DESIGNATED BY THE ISSUER AS A PLACEMENT AGENT FOR THE
NOTES (COLLECTIVELY, THE
<PAGE> 14
"PLACEMENT AGENTS"), NONE OF WHICH SHALL HAVE ANY OBLIGATION TO ACQUIRE SUCH
NOTE, (2) THROUGH A PLACEMENT AGENT TO AN INSTITUTIONAL ACCREDITED INVESTOR OR
HIGHLY SOPHISTICATED INDIVIDUAL INVESTOR OR A QIB BY A PLACEMENT AGENT, OR (3)
TO A QIB IN A TRANSACTION THAT MEETS THE REQUIREMENTS OF RULE 144A AND (B) IN
MINIMUM AMOUNTS OF $250,000.
<PAGE> 15
EXHIBIT B
FURTHER PROVISIONS RELATING TO INDEMNIFICATION
(a) The Indemnifying Party agrees to reimburse each Indemnitee for all
expenses (including reasonable fees and disbursements of internal and external
counsel) as they are incurred by it in connection with investigating or
defending any loss, claim, damage, liability or action in respect of which
indemnification may be sought under Section 5 of the Agreement (whether or not
it is a party to any such proceedings).
(b) Promptly after receipt by an Indemnitee of notice of the existence
of a Claim, such Indemnitee will, if a claim in respect thereof is to be made
against the Indemnifying Party, notify the Indemnifying Party in writing of the
existence thereof, provided that (i) the omission so to notify the Indemnifying
Party will not relieve it from any liability which it may have hereunder unless
and except to the extent it did not otherwise learn of such Claim and such
failure results in the forfeiture by the Indemnifying Party of substantial
rights and defenses, and (ii) the omission so to notify the Indemnifying Party
will not relieve it from liability which it may have to an Indemnitee otherwise
than on account of this indemnity agreement. In case any such Claim is made
against any Indemnitee and it notifies the Indemnifying Party of the existence
thereof, the Indemnifying Party will be entitled to participate therein, and to
the extent that it may elect by written notice delivered to the Indemnitee, to
assume the defense thereof, with counsel reasonably satisfactory to such
Indemnitee; provided that if the defendants in any such Claim include both the
Indemnitee and the Indemnifying Party and the Indemnitee shall have concluded
that there may be legal defenses available to it which are different from or
additional to those available to the Indemnifying Party, the Indemnifying Party
shall not have the right to direct the defense of such Claim on behalf of such
Indemnitee, and the Indemnitee shall have the right to select separate counsel
to assert such legal defenses on behalf of such Indemnitee. Upon receipt of
notice from the Indemnifying Party to such Indemnitee of the Indemnifying
Party's election so to assume the defense of such Claim and approval by the
Indemnitee of counsel, the Indemnifying Party will not be liable to such
Indemnitee for expenses incurred thereafter by the Indemnitee in connection with
the defense thereof (other than reasonable costs of investigation) unless (i)
the Indemnitee shall have employed separate counsel in connection with the
assertion of legal defenses in accordance with the proviso to the next preceding
sentence (it being understood, however, that the Indemnifying Party shall not be
liable for the expenses of more than one separate counsel (in addition to any
local counsel in the jurisdiction in which any Claim is brought), (ii) the
Indemnifying Party shall not have employed counsel reasonably satisfactory to
the Indemnitee to represent the Indemnitee within a reasonable time after notice
of existence of the Claim or (iii) the Indemnifying Party has authorized in
writing the employment of counsel for the Indemnitee. The indemnity,
reimbursement and contribution obligations of the Indemnifying Party hereunder
shall be in addition to any other liability the Indemnifying Party may otherwise
have to an Indemnitee and shall be binding upon and inure to the benefit of any
successors, assigns, heirs and personal representatives of the Indemnifying
Party and any Indemnitee. The Indemnifying Party agrees that without the
Indemnitee's prior written consent, it will not settle, compromise or consent to
the entry of any judgment in any Claim in respect of which indemnification may
be sought under the indemnification provision of the Agreement, unless such
settlement, compromise or consent includes an unconditional release of each
Indemnitee from all liability arising out of such Claim.
<PAGE> 1
Exhibit 10.38
FEDERATED DEPARTMENT STORES, INC.
1995 EXECUTIVE EQUITY INCENTIVE PLAN
(AS AMENDED AND RESTATED AS OF FEBRUARY 28, 1997)
Federated Department Stores, Inc., a Delaware corporation (the "Company"),
hereby amends and restates this 1995 Executive Equity Incentive Plan (this
"Plan") effective as of February 28, 1997 (the "Effective Date").
1. PURPOSE. The purpose of this Plan is to attract and retain directors,
officers, and other key executives and employees of the Company and its
subsidiaries and to provide to such persons incentives and rewards relating to
the Company's business plans.
2. DEFINITIONS. In addition to the terms defined elsewhere herein, the
following terms have the following meanings when used herein with initial
capital letters:
(a) "Appreciation Right" means a right granted pursuant to Section 5.
(b) "Board" means the Board of Directors of the Company or, pursuant
to any delegation by the Board to the Compensation Committee pursuant to
Section 11, the Compensation Committee.
(c) "Change in Control" means the occurrence of any of the following
events:
(i) The Company is merged, consolidated, or reorganized into or
with another corporation or other legal entity, and as a result of
such merger, consolidation, or reorganization less than a majority of
the combined voting power of the then-outstanding securities of such
corporation or entity immediately after such transaction are held in
the aggregate by the holders of the then-outstanding securities
entitled to vote generally in the election of directors of the Company
(the "Voting Stock") immediately prior to such transaction;
(ii) The Company sells or otherwise transfers all or
substantially all of its assets to another corporation or other legal
entity and, as a result of such sale or transfer, less than a majority
of the combined voting power of the then-outstanding securities of
such other corporation or entity immediately after such sale or
transfer is held in the aggregate by the holders of Voting Stock of
the Company immediately prior to such sale or transfer.
(iii) There is a report filed on Schedule 13D or Schedule 14D-1
(or any successor schedule, form, or report or item therein), each as
promulgated pursuant to the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), disclosing that any person (as the term
"person" is used in Section 13(d)(3) or Section 14(d)(2) of the
Exchange Act) has become the beneficial owner (as the term "beneficial
owner" is defined under Rule 13d-3 or any successor rule or regulation
promulgated under the Exchange Act) of securities representing 30% or
more of the combined voting power of the Voting Stock of the Company;
(iv) The Company files a report or proxy statement with the
Securities and Exchange Commission pursuant to the Exchange Act
disclosing in response to Form 8-K or Schedule 14A (or any successor
schedule, form, or report or item therein) that a change in control of
the Company has occurred or will occur in the future pursuant to any
then-existing contract or transaction; or
(v) If, during any period of two consecutive years, individuals
who at the beginning of any such period constitute the directors of
the Company cease for any reason to constitute at least a majority
thereof; provided, however, that for purposes of this clause (v) each
director who is first elected, or first nominated for election by the
Company's stockholders, by a vote of at least two-thirds of the
directors of the Company (or a committee thereof) then still in office
who were directors of the Company at the beginning of any such period
will be deemed to
<PAGE> 2
have been a director of the Company at the beginning of such
period.
Notwithstanding the foregoing provisions of Section 2(d)(iii) or 2(d)(iv),
unless otherwise determined in a specific case by majority vote of the
Board, a "Change in Control" will not be deemed to have occurred for
purposes of Section 2(d)(iii) or 2(d)(iv) solely because (1) the Company,
(2) a Subsidiary, or (3) any employee stock ownership plan or any other
employee benefit plan of the Company or any Subsidiary either files or
becomes obligated to file a report or a proxy statement under or in
response to Schedule 13D, Schedule 14D-1, Form 8-K, or Schedule 14A (or any
successor schedule, form, or report or item therein) under the Exchange Act
disclosing beneficial ownership by it of shares of Voting Stock, whether in
excess of 30% or otherwise, or because the Company reports that a change in
control of the Company has occurred or will occur in the future by reason
of such beneficial ownership.
(d) "Code" means the Internal Revenue Code of 1986, as amended from
time to time.
(e) "Common Shares" means shares of Common Stock of the Company or any
security into which such Common Shares may be changed by reason of any
transaction or event of the type referred to in Section 8.
(f) "Compensation Committee" means a committee appointed by the Board
in accordance with the By-Laws of the Company consisting of at least three
Non-Employee Directors.
(g) "Date of Grant" means the date determined in accordance with the
Board's authorization on which a grant of Option Rights or Appreciation
Rights, or a grant of Restricted Shares, becomes effective.
(h) "Immediate Family" has the meaning ascribed thereto in Rule
16a-1(e) under the Exchange Act.
(i) "Incentive Stock Options" means Option Rights that are intended to
qualify as "incentive stock options" under Section 422 of the Code or any
successor provision.
(j) "Market Value per Share" means any of the following, as determined
in accordance with the Board's authorization: (i) the closing sale price
per share of the Common Shares as reported in the New York Stock Exchange
Composite Transactions Report (or any other consolidated transactions
reporting system which subsequently may replace such Composite Transactions
Report) for the New York Stock Exchange (the "NYSE") trading day
immediately preceding the date determined in accordance with the Board's
authorization, or if there are no sales on such date, on the next preceding
day on which there were sales, (ii) the average (whether weighted or not)
or mean price, determined by reference to the closing sales prices, average
between the high and low sales prices, or any other standard for
determining price adopted by the Board, per share of the Common Shares as
reported in the NYSE Composite Transactions Report as of the date or for
the period determined in accordance with the Board's authorization, or
(iii) in the event that the Common Shares are not listed for trading on the
NYSE as of a relevant Date of Grant, an amount determined in accordance
with standards adopted by the Board.
(k) "Non-Employee Director" means a Director of the Company who is not
a full-time employee of the Company or any Subsidiary.
(l) "Nonqualified Stock Option" means Option Rights other than
Incentive Stock Options.
(m) "Optionee" means the optionee named in an agreement with the
Company evidencing an outstanding Option Right.
(n) "Option Price" means the purchase price payable on exercise of an
Option Right.
(o) "Option Right" means the right to purchase Common Shares upon
exercise
<PAGE> 3
of an option granted pursuant to Section 4.
(p) "Participant" means a person who is approved by the Board to
receive benefits under this Plan and who is at the time an officer,
executive, or other employee of the Company or any one or more of its
Subsidiaries, or who has agreed to commence serving in any of such
capacities, and also includes each Non-Employee Director.
(q) "Restricted Shares" means Common Shares issued pursuant to Section
6 as to which neither the substantial risk of forfeiture nor the
prohibition on transfers referred to in Section 6 has expired.
(r) "Rule 16b-3" means Rule 16b-3 promulgated under the Exchange Act
(or any successor rule substantially to the same effect), as in effect from
time to time.
(s) "Spread" means the excess of the Market Value per Share of the
Common Shares on the date when an Appreciation Right is exercised, or on
the date when Option Rights are surrendered in payment of the Option Price
of other Option Rights, over the Option Price provided for in the related
Option Right.
(t) "Subsidiary" has the meaning specified in Rule 405 promulgated
under the Securities Act of 1933, as amended (or in any successor rule
substantially to the same effect).
3. SHARES AVAILABLE UNDER THE PLAN. Subject to adjustment as provided in
Section 8, the number of Common Shares that may be issued or transferred under
this Plan upon the exercise of Option Rights or Appreciation Rights or as
Restricted Shares and released from substantial risks of forfeiture thereof, may
not exceed the sum of (i) 10.0 million and (ii) the number of shares which would
otherwise have been available for issuance under the 1992 Equity Plan upon the
effectiveness of this Plan. The aggregate number of Common Shares issued under
this Plan upon the grant of Restricted Shares may not exceed the number of
shares which would otherwise have been available for issuance as restricted
shares under the 1992 Equity Plan as of the Effective Date. Shares issued under
this Plan may be shares of original issuance or treasury shares or a combination
of the foregoing. No Participant will be granted Option Rights or Appreciation
Rights, in the aggregate, for more than 500,000 Common Shares in any period of
three fiscal years of the Company, subject to adjustment as provided in Section
8.
4. OPTION RIGHTS. The Board may from time to time authorize the grant to
Participants of options to purchase Common Shares upon such terms and conditions
as it may determine in accordance with the following provisions:
(a) Each grant will specify the number of Common Shares to which it
pertains and the term during which the rights granted thereunder will
exist. The aggregate number of Common Shares to which the grants to any
Non-Employee Director in any fiscal year of the Company pertain shall not
exceed 3500 (subject to adjustment as provided in Section 8).
(b) Each grant will specify an Option Price per share, which may not
be less than the Market Value per Share as of the Date of Grant.
(c) Each grant will specify whether the Option Price is payable (i) in
cash, (ii) by the actual or constructive transfer to the Company of
nonforfeitable, unrestricted Common Shares already owned by the Optionees
(or other consideration authorized pursuant to Section 4(d)) having an
actual or constructive value as of the time of exercise as determined by
the Board or in accordance with the applicable agreement referred to in
Section 4(i), equal to the total Option Price, or (iii) by a combination of
such methods of payment.
(d) The Board may determine, at or after the Date of Grant, that
payment of the Option Price of any option (other than an Incentive Stock
Option) may also be made in whole or in part in the form of Restricted
Shares or other Common Shares that are forfeitable or subject to
restrictions on transfer, or other Option Rights (based on the Spread on
the date of exercise). Unless otherwise determined by the Board at or after
the Date of Grant, whenever any Option Price is paid in whole or in part by
means of any of the forms
<PAGE> 4
of consideration specified in this paragraph, the Common Shares received
upon the exercise of the Option Rights will be subject to such risks of
forfeiture or restrictions on transfer as may correspond to any that apply
to the consideration surrendered, but only to the extent of (i) the number
of shares surrendered in payment of the Option Price or (ii) the Spread of
any unexercisable portion of Option Rights surrendered in payment of the
Option Price.
(e) Any grant may provide for deferred payment of the Option Price
from the proceeds of sale through a bank or broker on the exercise date of
some or all of the shares to which such exercise relates.
(f) Successive grants may be made to the same Participant whether or
not any Option Rights previously granted to such Participant remain
unexercised.
(g) Each grant will specify the period or periods of continuous
service by the Optionee with the Company or any Subsidiary which is
necessary before the Option Rights or installments thereof will become
exercisable and may provide for the earlier exercise of such Option Rights
in the event of a Change in Control or other event.
(h) Option Rights granted under this Plan may be (i) Incentive Stock
Options, (ii) Nonqualified Stock Options, or (iii) combinations of the
foregoing.
(i) Each grant of Option Rights will be evidenced by an agreement
executed on behalf of the Company by any officer, director, or, if
authorized by the Board, employee of the Company and delivered to the
Optionee and containing such terms and provisions as the Board may approve,
except that in no event will any such agreement include any provision
prohibited by the express terms of this Plan.
5. APPRECIATION RIGHTS. The Board may also authorize the grant to any
Optionee (other than a Non-Employee Director) of Appreciation Rights in respect
of Option Rights granted hereunder. An Appreciation Right will be a right of the
Optionee, exercisable by surrender of the related Option Right or in accordance
with the applicable agreement referred to in Section 5(f), to receive from the
Company an amount, as determined by the Board, which will be expressed as a
percentage of the Spread at the time of exercise. Each such grant will be in
accordance with the following provisions:
(a) Any grant may provide that the amount payable on exercise of an
Appreciation Right may be paid by the Company in cash, in Common Shares, or
in any combination thereof and may either grant to the Optionee or retain
in the Board the right to elect among those alternatives.
(b) Any grant may specify that the amount payable on exercise of an
Appreciation Right may not exceed a maximum specified by the Board as of
the Date of Grant.
(c) Any grant may specify waiting periods before exercise and
permissible exercise dates or periods and will provide that no Appreciation
Right may be exercised except at a time when the related Option Right is
also exercisable and at a time when the Spread is positive.
(d) Any grant may specify that such Appreciation Right may be
exercised only in the event of a Change in Control or other event.
(e) Any grant may provide that, in the event of a Change in Control,
then any such Appreciation Right will automatically be deemed to have been
exercised by the Optionee, the related Option Right will be deemed to have
been surrendered by the Optionee and will be cancelled, and the Company
forthwith upon the consummation thereof will pay to the Optionee in cash an
amount equal to the Spread at the time of such consummation.
(f) Each grant of Appreciation Rights will be evidenced by an
agreement executed on behalf of the Company by any officer, director, or,
if authorized by the Board, employee of the Company and delivered to and
accepted by the Optionee, which agreement will describe such Appreciation
Rights, identify the related Option Rights, state that such
<PAGE> 5
Appreciation Rights are subject to all the terms and conditions of this
Plan, and contain such other terms and provisions as the Board may approve,
except that in no event will any such agreement include any provision
prohibited by the express terms of this Plan.
6. RESTRICTED SHARES. The Board may also authorize the issuance or transfer
of Restricted Shares to Participants (other than Non-Employee Directors) in
accordance with the following provisions:
(a) Each such issuance or transfer will constitute an immediate
transfer of the ownership of Common Shares to the Participant in
consideration of the performance of services, entitling such Participant to
voting, dividend, and other ownership rights, but subject to the
substantial risk of forfeiture provided below.
(b) Each such issuance or transfer may be made without additional
consideration.
(c) Each such issuance or transfer will provide that the Restricted
Shares covered thereby will be subject, except (if the Board so determines)
in the event of a Change in Control or other event specified in the
agreement referred to in Section 6(e), for a period to be determined by the
Board at the Date of Grant, to a "substantial risk of forfeiture" within
the meaning of Section 83 of the Code.
(d) Each such issuance or transfer will provide that during the period
for which such substantial risk of forfeiture is to continue, the
transferability of the Restricted Shares will be prohibited or restricted
in the manner and to the extent prescribed in or pursuant to the agreement
referred to in Section 6(e) (which restrictions may include, without
limitation, rights of repurchase or first refusal or provisions subjecting
the Restricted Shares to a continuing substantial risk of forfeiture in the
hands of any transferee).
(e) Each issuance or transfer of Restricted Shares will be evidenced
by an agreement executed on behalf of the Company by any officer, director,
or, if authorized by the Board, employee of the Company and delivered to
and accepted by the Participant and containing such terms and provisions as
the Board may approve except that in no event will any such agreement
include any provision prohibited by the express terms of the Plan. All
certificates representing Restricted Shares will be held in custody by the
Company until all restrictions thereon have lapsed, together with a stock
power executed by the Participant in whose name such certificates are
registered, endorsed in blank and covering such Restricted Shares, which
may be executed by any officer of the Company upon a determination by the
Board that an event causing the forfeiture of the Restricted Shares has
occurred.
7. TRANSFERABILITY. (a) Except as provided in Section 7(b), no Option
Right, Appreciation Right, or Restricted Share granted, issued, or transferred
under this Plan will be transferable otherwise than (i) upon death, by will or
the laws of descent and distribution, (ii) pursuant to a qualified domestic
relations order, as that term is defined in the Code or the rules thereunder
Title I of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), or the rules thereunder, or (iii) to a fully revocable trust of which
the Optionee is treated as the owner for federal income tax purposes.
(b) Notwithstanding the provisions of Section 7(a), Option Rights,
Appreciation Rights, and Restricted Shares (including Option Rights,
Appreciation Rights, and Restricted Shares granted, issued, or transferred
under this Plan prior to the Effective Date) will be transferable by a
Participant who at the time of such transfer is eligible to earn "Long-Term
Incentive Awards" under the Company's 1992 Incentive Bonus Plan, as amended
(or any successor plan thereto), without payment of consideration therefor
by the transferee, to any one or more members of the Participant's
Immediate Family (or to one or more trusts established solely for the
benefit of one or more members of the Participant's Immediate Family or to
one or more partnerships in which the only partners are members of the
Participant's Immediate Family); provided, however, that (i) no such
transfer will be effective unless reasonable prior notice thereof is
delivered to the Company and such transfer is thereafter effected in
accordance with any terms and conditions that shall have been made
applicable thereto by the Company or the Board and (ii) any such transferee
will be subject to the same terms and conditions hereunder as the
Participant.
<PAGE> 6
(c) The Board may specify at the Date of Grant that part or all of the
Common Shares that are (i) to be issued or transferred by the Company upon
the exercise of Option Rights or Appreciation Rights or (ii) no longer
subject to the substantial risk of forfeiture and restrictions on transfer
referred to in Section 6, will be subject to further restrictions on
transfer.
8. ADJUSTMENTS. The Board may make or provide for such adjustments in the
numbers of Common Shares covered by outstanding Option Rights or Appreciation
Rights granted hereunder, in the prices per share applicable to such Option
Rights and Appreciation Rights, and in the kind of shares covered thereby, as
the Board may determine is equitably required to prevent dilution or enlargement
of the rights of Participants that otherwise would result from (a) any stock
dividend, stock split, combination of shares, recapitalization, or other change
in the capital structure of the Company, (b) any merger, consolidation,
spin-off, split-off, spin-out, split-up, reorganization, partial or complete
liquidation, or other distribution of assets or issuance of rights or warrants
to purchase securities, or (c) any other corporate transaction or event having
an effect similar to any of the foregoing; provided, however, that no such
adjustment in the numbers of Common Shares covered by outstanding Option Rights
or Appreciation Rights will be made unless such adjustment would change by more
than 5% the number of Common Shares issuable upon exercise of Option Rights or
Appreciation Rights; provided, further, however, that any adjustment which by
reason of this Section 8 is not required to be made currently will be carried
forward and taken into account in any subsequent adjustment. In the event of any
such transaction or event, the Board may provide in substitution for any or all
outstanding awards under this Plan such alternative consideration as it may
determine to be equitable in the circumstances and may require in connection
therewith the surrender of all awards so replaced. The Board may also make or
provide for such adjustments in the numbers of shares specified in Section 3 as
the Board may determine is appropriate to reflect any transaction or event
described in this Section 8.
9. FRACTIONAL SHARES. The Company will not be required to issue any
fractional Common Shares pursuant to this Plan. The Board may provide for the
elimination of fractions and for the settlement of fractions in cash.
10. WITHHOLDING TAXES. To the extent that the Company is required to
withhold federal, state, local, or foreign taxes in connection with any payment
made or benefit realized by a Participant or other person under this Plan, and
the amounts available to the Company for such withholding are insufficient, it
will be a condition to the receipt of such payment or the realization of such
benefit that the Participant or such other person make arrangements satisfactory
to the Company for payment of the balance of such taxes required to be withheld,
which arrangements may include relinquishment of a portion of such benefit.
11. ADMINISTRATION OF THE PLAN. (a) This Plan will be administered by the
Board, which may from time to time delegate all or any part of its authority
under this Plan to the Compensation Committee or any subcommittee thereof.
(b) The Board will take such actions as are required to be taken by it
hereunder, may take the actions permitted to be taken by it hereunder, and
will have the authority from time to time to interpret this Plan and to
adopt, amend, and rescind rules and regulations for implementing and
administering this Plan. All such actions will be in the sole discretion of
the Board, and when taken, will be final, conclusive, and binding. Without
limiting the generality or effect of the foregoing, the interpretation and
construction by the Board of any provision of this Plan or of any
agreement, notification, or document evidencing the grant of Option Rights,
Appreciation Rights, or Restricted Shares, and any determination by the
Board in its sole discretion pursuant to any provision of this Plan or of
any such agreement, notification, or document will be final and conclusive.
Without limiting the generality or effect of any provision of the
Certificate of Incorporation of the Company, no member of the Board will be
liable for any such action or determination made in good faith.
(c) The provisions of Sections 4, 5, and 6 will be interpreted as
authorizing the Board, in taking any action under or pursuant to this Plan,
to take any action it determines in its sole discretion to be appropriate
subject only to the express limitations therein contained and no
authorization in any such Section or other provision of this Plan is
intended or may be deemed to constitute a limitation on the authority of
the Board.
<PAGE> 7
(d) The existence of this Plan or any right granted or other action
taken pursuant hereto will not affect the authority of the Board or the
Company to take any other action, including in respect of the grant or
award of any option, security, or other right or benefit, whether or not
authorized by this Plan, subject only to limitations imposed by applicable
law as from time to time applicable thereto.
12. AMENDMENTS, ETC. (a) This Plan may be amended from time to time by the
Board, but without further approval by the holders of a majority of the Common
Shares present in person or by proxy at a meeting of the Company's stockholders
and entitled to vote generally in the election of directors, or such other
approval as may be required by Rule 16b-3, no such amendment will (i) increase
the maximum numbers of Common Shares or Restricted Shares issuable pursuant to
Section 3 or the maximum number of Common Shares that may be subject to Option
Rights or Appreciation Rights granted to any Participant in any period of three
fiscal years of the Company (except that adjustments and additions authorized by
this Plan will not be limited by this provision) or (ii) cause Rule 16b-3 to
become inapplicable to this Plan or Option Rights, Appreciation Rights, or
Restricted Shares granted, issued, or transferred hereunder during any period in
which the Company has any class of equity securities registered pursuant to
Section 13 or 15 of the Exchange Act.
(b) The Board may, with the concurrence of the affected Optionee,
cancel any agreement evidencing Option Rights or any other award granted
under this Plan. In the event of such cancellation, the Board may authorize
the granting of new Option Rights or other awards hereunder (which may or
may not cover the same number of Common Shares which had been the subject
of the prior award) in such manner, at such option price, and subject to
such other terms, conditions, and discretions as would have been applicable
under this Plan had the canceled Option Rights or other award not been
granted.
(c) In case of termination of employment by reason of death,
disability, or normal or early retirement, or in the case of hardship or
other special circumstances, of a Participant who holds an Option Right or
Appreciation Right not immediately exercisable in full, or any Restricted
Shares as to which the substantial risk of forfeiture or the prohibition or
restriction on transfer has not lapsed, or who holds Common Shares subject
to any transfer restriction imposed pursuant to Section 7(b), the Board may
take such action as it deems equitable in the circumstances or in the best
interests of the Company, including without limitation waiving or modifying
any other limitation or requirement under any such award.
(d) This Plan will not confer upon any Participant any right with
respect to continuance of employment or other service with the Company or
any Subsidiary, nor will it interfere in any way with any right the Company
or any Subsidiary would otherwise have to terminate or modify the terms of
such Participant's employment or other service at any time.
(e) To the extent that any provision of this Plan would prevent any
Option Right that was intended to qualify as an Incentive Stock Option from
qualifying as such, that provision will be null and void with respect to
such Option Right, but will remain in effect for other Option Rights and
there will be no further effect on any provision of this Plan.
(f) This Plan will be governed by and construed in accordance with the
laws of the State of Delaware, without giving effect to the principles of
conflict of laws thereof. If any provision of this Plan is held to be
invalid or unenforceable, no other provision of this Plan will be affected
thereby.
<PAGE> 1
Exhibit 10.44
EMPLOYMENT AGREEMENT
Entered into on March 10, 1997
between
FEDERATED CORPORATE SERVICES, INC.
and
JAMES M. ZIMMERMAN
<PAGE> 2
EMPLOYMENT AGREEMENT
--------------------
THIS AGREEMENT, made in the City of Cincinnati and State of
Ohio, on the 10th day of March, 1997 (the "Agreement Effective Date"), between
Federated Corporate Services, Inc., a Delaware corporation (hereinafter called
the "Employer"), and James M. Zimmerman of Cincinnati, Ohio (hereinafter called
the "Employee").
RECITALS
--------
Employer and Employee are parties to an Employment Agreement
dated as of December 9, 1994.
Employer and Employee are desirous of entering into a new
employment agreement with a term commencing on May 16, 1997.
IT IS AGREED by and between the parties hereto as follows:
ARTICLE I
EMPLOYMENT
----------
1.1 TERM AND DUTIES. The Employer agrees to and does employ
the Employee to perform the duties of Chairman of the Board ("Chairman") and
Chief Executive Officer of Federated Department Stores, Inc. ("Federated") in
accordance with the terms of this Agreement. The period (the "Term") of such
employment shall begin on May 16, 1997 and shall end on the later of May 16,
2001 or such later date as agreed by the Employer and Employee. The duties of
the Employee shall be those commensurate with the office of Chairman of the
Board and Chief Executive Officer of Federated. In such capacity he shall have
general charge of the business and affairs of Federated, with particular
responsibility for the overall merchandising activities of Federated, in
addition to his duties of general supervision. Neither the Employee's title nor
any of his functions shall be changed without his consent. While it is
understood that the right to elect directors and officers of Federated is by law
vested in the stock-
1
<PAGE> 3
holders and directors of Federated, it is nevertheless mutually contemplated,
subject to such rights, that the Employee shall, at all times during his
employment, be Chairman of the Board and Chief Executive Officer of Federated
and shall be a member of the Board of Directors of Federated.
1.2 COMPENSATION. In consideration of Employee's services
during the Term, the Employer agrees to (a) pay the Employee an annual salary in
the amount of One Million Two Hundred Fifty Thousand Dollars ($1,250,000) ("Base
Salary"), (b) permit the Employee to participate in Federated's annual and
long-term bonus programs as set forth on Exhibit A and (c) grant the Employee
stock options as set forth on Exhibit A. Nothing in this Agreement shall
preclude or in any way affect the grant by the Employer or the receipt by the
Employee of increases in such salary or any such bonuses or other forms of
additional compensation, including additional equity or equity-based awards, any
such salary and/or bonus increases and additional compensation, contingent or
otherwise, to be determined solely in the discretion of the Board of Directors
of the Employer or persons to whom such authority is delegated by such Board of
Directors. The Employee's salary shall never be reduced during the Term without
the Employee's consent.
1.3 PAYMENT SCHEDULE. The Base Salary specified in Section
1.2(a) hereof shall be payable as current salary, in installments not less
frequently than monthly, and at the same rate for any fraction of a month
unexpired at the end of the Term.
1.4 EXPENSES. During the Term the Employee shall be allowed
reasonable traveling expenses and shall be furnished office space, assistance
and accommodations suitable to the character of his position with Federated and
adequate for the performance of his duties hereunder.
1.5 BENEFITS. The Employee and/or the Employee's family, as
the case may be, shall be eligible for participation in and shall receive all
benefits under savings and retirement programs, welfare benefit plans, fringe
benefit programs and perquisites provided by the Employer and its affiliates
(including, for example, without limitation, medical, prescription,
2
<PAGE> 4
dental, disability, salary continuance, executive life, group life, accidental
death and travel accident insurance plans and programs, use of an automobile,
financial counseling, and suitable business and country club memberships), at
least as favorable as the most favorable of such plans and programs provided to
key executives of Federated in effect from time to time.
1.6 TERMINATION IN CASE OF DISABILITY. The Employee shall not
be in breach of this Agreement if he shall fail to perform his duties hereunder
because of physical or mental disability. If for a continuous period of 12
months during the Term the Employee fails to render services to the Employer
because of the Employee's physical or mental disability, the Board or its
delegate may end the Term prior to its stated termination date. If there should
be any dispute between the parties as to the Employee's physical or mental
disability at any time, such question shall be settled by the opinion of an
impartial reputable physician agreed upon for the purpose by the parties or
their representatives, or failing agreement within 10 days of a written request
therefor by either party to the other, then one designated by the then president
of the local Academy of Medicine. The written opinion of such physician as to
the matter in dispute shall be final and binding on the parties.
1.7 TERMINATION OF SERVICES. If, prior to the end of the Term,
(a) the Employer shall terminate the Employee's employment other than for Cause,
or (b) the Executive shall terminate his employment for Good Reason, then the
Employer shall immediately thereupon pay the Employee in a lump sum in cash (a)
the full amount of salary that would be payable to the Employee under Section
1.2 and (b) the aggregate of the target level annual bonus for which the
Employee is eligible under the Employer's 1992 Incentive Bonus Plan as set forth
in Exhibit A for each year remaining in the Term following such termination.
Employee shall be credited with vesting and benefit service through the
remainder of the Term.
1.8 TERMINATION FOR CAUSE. The Employer may terminate the
employment of the Employee and this Agreement and all of its obligations
hereunder, except for obligations accrued but unpaid to the effective date of
termination, for Cause upon notice given pursuant to this Section. As used in
this Agreement, the term "Cause" shall mean (a) the willful breach of
3
<PAGE> 5
duty by the Employee in the course of his employment, (b) the Employee's
habitual neglect of his duties, (c) a material willful breach by the Employee of
his duties under this Agreement which breach is not cured by the Employee within
ten (10) days of receipt of written notice thereof from the Employer to the
Employee, or (d) the Employee's final conviction of a felony, which conviction
is nonappealable or for which the period of filing an appeal has expired.
"Cause" shall not include (a) bad judgment or negligence of the Employee (other
than his habitual neglect of duty), or (b) any act or omission believed by the
Employee in good faith to have been in or not opposed to the interests of the
Employer (without intent of gaining therefrom directly or indirectly a profit to
which he was not legally entitled) and reasonably believed by the Employee not
to have been improper or unlawful, or (c) any act or omission in respect of
which a determination could properly have been made by the Board of Directors of
Federated that the Employee met the applicable standard of conduct prescribed
for indemnification or reimbursement under the bylaws of Federated or the laws
of Delaware, in each case in effect at the time of such act or omission, or (d)
an act or omission with respect to which notice of termination is given more
than twelve months after the earliest date on which any non-employee director of
Federated who was not a party to such act or omission knew or should have known
of such act or omission.
1.9 The term "Good Reason" means:
A. The assignment to the Employee of any duties materially
inconsistent with the Employee's position (including status, offices, titles and
reporting requirements), authority, duties or responsibilities as contemplated
in Article I of this Agreement, or any other action by the Employer which
results in a material diminution in such position, authority, duties or
responsibilities, excluding for this purpose an action not taken in bad faith
and which is remedied by the Employer within ten (10) days after receipt of
written notice thereof given by the Employee, provided that repeated instances
of such action shall be evidence of the bad faith of the Employer;
B. any material failure by the Employer to comply with any
of the provisions of this Agreement, other than a failure not occurring in bad
faith and which is reme-
4
<PAGE> 6
died by the Employer within ten (10) days after receipt of written notice
thereof given by the Employee, provided that repeated failures shall be evidence
of the bad faith of the Employer;
C. failure of the Employee to be elected or reelected
Chairman and Chief Executive Officer of the Federated or to be elected or
reelected to membership on the Federated's Board of Directors; or
D. any purported termination by the Employer of the
Employee's employment otherwise than as expressly permitted by this Agreement.
1.10 LOCATION OF EMPLOYMENT. Employer shall not require
Employee to be based in any office or location other than within the Cincinnati,
Ohio Standard Metropolitan Statistical Area without his agreement, except for
travel reasonably required in the performance of the Employee's
responsibilities.
ARTICLE II
OTHER PROVISIONS
----------------
2.1 PERFORMANCE OF DUTIES. The Employee agrees that during the
Term (a) he will faithfully and in conformity with the directions of the Board
of Directors of Federated, perform the duties of his employment hereunder, and
that he will devote to the performance of said duties all such time and
attention as they shall reasonably require, taking, however, from time to time
(as the Employer agrees that he may) reasonable vacations; and (b) he will not,
without the express consent of the Board of Directors of Federated, or persons
to whom such authority is delegated by such Board of Directors become actively
associated with or engaged in any competing business (as hereinafter defined)
while he is employed by Employer or within one (1) year of the first to occur of
(i) the expiration of the Term or (ii) the termination of his employment by the
Employer for Cause or by the Employee other than for Good Reason prior to or at
the end of the Term, and he will do nothing inconsistent with his duties to the
Employer.
Notwithstanding the foregoing, the aforesaid one (1) year
period shall be shortened to whatever shorter period, if any, is adopted at any
time subsequent to the date hereof by
5
<PAGE> 7
the Compensation Committee of the Board of Directors of Federated as the
standard period during which such non-compete provisions in the Employer's
standard employment agreements shall apply.
In the event that (i) the Employee is advised at any time by
the Employer in writing that his services will no longer be required during the
Term or (ii) the employment of the Employee is terminated by the Employee for
Good Reason, Employee shall be free to become actively engaged with another
business regardless of whether it is a competing business.
Employee agrees that he will not disclose to anyone outside of
the Employer, or use in other than the Employer's business, confidential
information relating to the Employer's business, in any way obtained by him
while employed by the Employer, unless authorized by the Employer in writing. It
is understood that violation of this provision would cause irreparable harm to
the Employer and that Employer may seek to enjoin any such violation or to take
any other applicable action. The Employee also agrees that he will not engage in
any activity which would violate the Conflict of Interest or Business Ethics
Statement signed from time to time by the Employee.
As used in this Section 2.1 a "competing business" shall be
any business which:
A. at the time of determination, is substantially similar to
the whole or a substantial part of the business at the end of the period of
active employment, conducted by Employer, or any of its subsidiaries, or
subsidiaries of subsidiaries, or affiliates, or divisions, or substantially
similar to some substantial part of said business; and
B. at the time of determination, is operating a store or
stores which, during its or their fiscal year preceding the determination, in
the aggregate had aggregate net sales, including sales in leased and licensed
departments, in excess of $10,000,000, which store or stores is or are located
in a city or within a radius of twenty-five (25) miles from the outer limits of
a city where Employer, or any of its subsidiaries, or subsidiaries of
subsidiaries, or affiliates, or divisions is operating a store or stores which,
during its or their fiscal year preceding the determina-
6
<PAGE> 8
tion, in the aggregate had aggregate nets sales, including sales in leased and
licensed departments, in excess of $10,000,000; and
C. had aggregate net sales at all its locations, including
sales in leased and licensed departments and sales by its divisions,
subsidiaries and affiliates, during its fiscal year preceding that in which the
Employee made such an investment therein, or first rendered personal services
thereto, following his termination of service, in excess of $25,000,000.
ARTICLE III
MISCELLANEOUS
-------------
3.1 ASSIGNMENT. This Agreement shall not be assignable by the
Employer without the written consent of the Employee. The Employee may not
assign, pledge, or encumber his interest in this Agreement, or any part thereof,
without the written consent of the Employer.
3.2 GOVERNING LAW. This Agreement has been executed on behalf
of the Employer by an officer of the Employer located in the City of Cincinnati,
Ohio. This Agreement and all questions arising in connection herewith shall be
governed by the internal substantive laws of the State of Ohio. The Employer and
the Employee each consent to the jurisdiction of, and agree that any controversy
between them arising out of this Agreement shall be brought in, the United
States District Court for the Southern District of Ohio, Western Division; the
Court of Common Pleas for Hamilton County, Ohio; or such other court venued
within Hamilton County, Ohio as may have subject matter jurisdiction over the
controversy.
3.3 SEVERABILITY. If any portion of this Agreement is held to
be invalid or unenforceable, such holding shall not affect any other portion of
this Agreement.
3.4 ENTIRE AGREEMENT. This Agreement comprises the entire
agreement between the parties hereto and as of the date hereof, supersedes,
cancels and annuls any and all prior agreements between the parties hereto. This
Agreement may not be modified, renewed or
7
<PAGE> 9
extended orally, but only by a written instrument referring to this Agreement
and executed by the parties hereto.
3.5 GENDER AND NUMBER. Words in the masculine herein may be
interpreted as feminine or neuter, and words in the singular as plural, and vice
versa, where the sense requires.
3.6 NOTICES. Any notice or consent required or permitted to be
given under this Agreement shall be in writing and shall be effective when given
by personal delivery or five business days after being sent by certified US
mail, return receipt requested, to the Secretary of Federated Department Stores,
Inc. at its principal place of business in the City of Cincinnati or to the
Employee at his last known address as shown on the records of the Employer.
3.7 WITHHOLDING TAXES. The Employer may withhold from any
amounts payable under this Agreement all federal, state, city or other taxes as
shall be required pursuant to any law or governmental regulation or ruling.
3.8 WAIVER AND RELEASE. In consideration of the Employer's
entering into this Agreement, and the receipt of other good and valuable
consideration, the sufficiency of which is expressly acknowledged, the Employee,
for himself and his successors, assigns, heirs, executors and administrators,
hereby waives and releases and forever discharges the Employer and its
affiliates and their officers, directors, agents, employees, shareholders,
successors and assigns from all claims, demands, damages, actions and causes of
action whatsoever which he now has on account of any matter, whether known or
unknown to him and whether or not previously disclosed to the Employee or the
Employer, that relates to or arises out of (a) any existing or former employment
agreement (written or oral) entered into between the Employee and the Employer
or any of its affiliates (or any amendment or supplement to any such agreement),
(b) any agreement providing for a payment or payments or extension of the
employment relationship triggered by a merger or sale or other disposition of
the stock or assets or restructuring of the Employer or any affiliate of the
Employer, or (c) any applicable severance plan.
8
<PAGE> 10
3.9 ENFORCEMENT OF AGREEMENT. If the Employee incurs legal or
other fees and expenses in an effort to establish entitlement to benefits under
this Agreement, regardless of whether the Employee ultimately prevails, the
Employer shall reimburse him for such fees and expenses, unless a court of
competent jurisdiction determines that the Employee made such effort in bad
faith.
Reimbursement of fees and expenses described in the preceding
paragraph shall be made monthly during the course of any action upon the written
submission of a request for reimbursement together with proof that the fees and
expenses were incurred
3.10 MISCELLANEOUS. Except as specifically provided herein,
all accounts payable pursuant to this Agreement shall be paid without reduction
regardless of any amounts of salary, compensation or other amounts which may be
paid or payable to Employee from any source or which Employee could have
obtained upon seeking other employment; provided that the Company shall be
permitted to make all payments pursuant to this Agreement net of any legally
required tax withholdings. Employee shall not be required to seek other
employment, and there shall be no offset to amounts due hereunder as a result of
any salary, compensation or other amounts Employee may be paid from other
sources.
IN WITNESS WHEREOF, the parties hereto have hereunto and to a
duplicate hereof set their signatures on March 10, 1997.
FEDERATED CORPORATE SERVICES, INC.
By: /s/ Dennis J. Broderick
--------------------------------
Dennis J. Broderick
Title: President
JAMES M. ZIMMERMAN
/s/ James M. Zimmerman
-------------------------------------
9
<PAGE> 11
EXHIBIT A
---------
to
EMPLOYMENT AGREEMENT
Entered into on March 10th, 1997 between
FEDERATED CORPORATE SERVICES, INC.
and
JAMES M. ZIMMERMAN
(All capitalized terms used in this Exhibit are defined as set
forth in the Agreement)
ANNUAL BONUS: For each year during the Term (including fiscal 1997),
the annual bonus payable (if any) under the terms of the
1992 Incentive Bonus Plan (as such may be amended from
time to time) of Federated Department Stores, Inc.
(Federated) will be based on performance goals
established for the senior executives of the Employer on
an annual basis by the Board of Directors of Federated or
a Committee thereof, with the amount of bonus equal to a
sliding percent of Employee's annual base salary in
effect as of the last day of the performance period based
on performance against the targeted annual goal, as
follows:
<TABLE>
<CAPTION>
PERFORMANCE AGAINST TARGET PAYOUT AS PERCENT
-------------------------- -----------------
OF ANNUAL SALARY
----------------
<S> <C>
Below 95% of Target 0.0%
95% of Target 24.0%
Target 50.0%
110% of Target 70.0%
120% of Target 90.0%
</TABLE>
Any annual bonus payable hereunder shall be paid in the
fiscal year following the annual performance period in
respect of which the bonus is payable in accordance with
Federated's 1992 Incentive Bonus Plan.
By operation of Federated's Supplementary Executive
Retirement Plan, annual bonuses paid to Employee under
Federated's 1992
<PAGE> 12
Incentive Bonus Plan are included as eligible compensation
under Federated's Pension Plan.
LONG TERM PLAN:
For each three-year performance period commencing with the
1995-1997 performance period, the bonus payable (if any)
under the terms of Federated's 1992 Incentive Bonus Plan
(as such may be amended from time to time) will be based
on performance goals established for the senior executives
of Federated in respect of each such three-year
performance period by the Board of Directors of Federated
or a Committee thereof, with the amount of bonus equal to
a sliding percent of Employee's annual base salary
(prorated on an annual basis for any change in Employee's
base salary occurring at any time during any such
three-year period and determined for any such year in the
three-year period based on the annual base salary in
effect as of the last day of the fiscal year) based on
performance against the targeted three-year goal, as
follows:
<TABLE>
<CAPTION>
PERFORMANCE AGAINST TARGET PAYMENT AS PERCENT
-------------------------- ------------------
OF ANNUAL SALARY
----------------
<S> <C>
Below 95% of Target 0.0%
95% of Target 24.0%
Target 50.0%
110% of Target 70.0%
120% of Target 90.0%
</TABLE>
Illustratively, in respect of the fiscal 1995-1997
performance period, assuming achievement of the 1995-1997
goal at the 50% target level, the long-term incentive
payout in 1998 in respect of such three-year period would
be $541,250 (the sum of (i) 50% (target level) x
$1,000,000 (the base salary in effect at the end of each
of the 1995 and 1996 fiscal years) x 67% (the percent of
time during the three-year period that the $1,000,000 is
deemed applicable for purposes of calculating the
long-term payout, i.e., two years out of the three-year
period because the Employee's base salary at the end of
each of the 1995 and 1996 fiscal years was $1,000,000) +
(ii) 50% (target level) x $1.25 million (the base salary
in effect at the end of the 1997 fiscal year) x 33% (the
percent of time during the three-year period that the
$1.25 million base salary is deemed applicable for
purposes of calculating the long-term payout, i.e., one
year out of the three-year period because Employee's base
salary at the end of the 1997 fiscal year will be $1.25
million).
<PAGE> 13
Employee shall be entitled to a pro rata portion of a
long-term bonus, if any is payable under the terms of
Federated's 1992 Incentive Bonus Plan (as such may be
amended from time to time), for any three-year performance
period commencing on or after fiscal 1995 but which
performance period has not ended as of the end of the
Term. The pro rata payment is based on the length of
Employee's service of employment within such three-year
performance period. Illustratively, if the performance
period covers the 1996-1998 fiscal years and the
employment terminates on the last day of the 1997 fiscal
year, Employee would have been employed for sixty-seven
percent (67%) of the performance period and would be
eligible for sixty-seven percent (67%) of any long-term
bonus payable as provided above if and when any bonus is
paid in respect of that period under the terms of
Federated's 1992 Incentive Plan (as may be amended) based
upon the performance goals established for the senior
executives of the Employer for that period by the Board of
Directors of Federated or a Committee thereof.
Any long-term bonus payable hereunder shall be paid in the
fiscal year following the three-year performance period in
respect of which the bonus is payable in accordance with
Federated's 1992 Incentive Bonus Plan.
STOCK OPTIONS: Federated shall grant, to Employee, effective
March 28, 1997 (the "Grant Date"), options for 450,000
shares, with vesting of 100,000 shares on the first
anniversary of the Grant Date, 100,000 shares on the
second anniversary of the Grant Date and 250,000 shares on
the third anniversary of the Grant Date, except that 100%
vesting shall occur immediately upon the effective date of
the termination of the employment of Employee (a) by
Employer other than for Cause, (b) by Employee for Good
Reason or (c) by Employer and Employee by mutual consent;
the options will be issued at one hundred percent of the
closing market price of Federated's common stock on the
New York Stock Exchange as listed in THE WALL STREET
JOURNAL on the trading day immediately preceding the Grant
Date; the grant is subject to the terms of the attached
form of Nonqualified Stock Option Agreement with
Federated.
<PAGE> 1
Exhibit 10.46
SUPPLEMENTARY EXECUTIVE RETIREMENT PLAN
OF
FEDERATED DEPARTMENT STORES, INC.
(As amended and restated effective as of January 1, 1997)
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
-----------------
Page
----
<S> <C> <C>
ARTICLE I NAME AND PURPOSE OF PLAN....................................................................I-1
1.1 Name of Plan................................................................................I-1
1.2 Purpose of Plan.............................................................................I-1
1.3 Effective Date of Plan Document.............................................................I-1
ARTICLE II DEFINITIONS................................................................................II-1
2.1 Annuity....................................................................................II-1
2.2 Basic Pension Plan.........................................................................II-1
2.3 Board of Directors.........................................................................II-1
2.4 Code.......................................................................................II-1
2.5 Committee..................................................................................II-1
2.6 Effective Amendment Date...................................................................II-1
2.7 Employee...................................................................................II-1
2.8 Employer...................................................................................II-1
2.9 ERISA......................................................................................II-1
2.10 Executive..................................................................................II-1
2.11 Executive Deferred Compensation Plan.......................................................II-2
2.12 Federated..................................................................................II-2
2.13 Participant................................................................................II-2
2.14 Plan.......................................................................................II-2
ARTICLE III ELIGIBILITY AND PARTICIPATION.............................................................III-1
3.1 Eligibility...............................................................................III-1
3.2 Entry as Participants.....................................................................III-2
3.3 Duration of Participation.................................................................III-2
3.4 Reinstatement of Participation............................................................III-2
ARTICLE IV SUPPLEMENTAL RETIREMENT BENEFITS...........................................................IV-1
4.1 Supplemental Retirement Benefit............................................................IV-1
4.2 Benefit Formula for Supplemental Retirement Benefit........................................IV-1
4.3 Form and Amount of Supplemental Retirement Benefit.........................................IV-2
4.4 Effect on Supplemental Retirement Benefit of Reemployment or Continued Employment
After Commencement of Such Benefit.........................................................IV-3
4.5 Definitions for Determination of Supplemental Retirement Benefit...........................IV-3
4.6 Other Cessation of Employment..............................................................IV-4
ARTICLE V PRE-PENSION DEATH BENEFITS..................................................................V-1
5.1 Eligibility for Pre-Pension Death Benefit...................................................V-1
5.2 Beneficiary.................................................................................V-1
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C> <C> <C>
5.3 Form and Amount of Pre-Pension Death Benefit if Beneficiary is Participant's Spouse.........V-1
5.4 Form and Amount of Pre-Pension Death Benefit if Beneficiary is Not Participant's
Spouse......................................................................................V-2
ARTICLE VI ADDITIONAL BENEFIT PROVISIONS..............................................................VI-1
6.1 Benefits Not Assignable....................................................................VI-1
6.2 Benefits Payable to Minors, Incompetents, and Others.......................................VI-1
6.3 Administrative Adjustment for Small Benefits...............................................VI-1
6.4 Timing of Benefit Distributions............................................................VI-1
6.5 References to Form of Payment..............................................................VI-2
6.6 Actuarial Assumptions......................................................................VI-2
6.7 Applicable Benefit Provisions..............................................................VI-2
6.8 Merger of Prior Plans and Coverage of Pre-Effective Amendment Date Participants............VI-3
ARTICLE VII SOURCE OF BENEFITS........................................................................VII-1
ARTICLE VIII ADMINISTRATION...........................................................................VIII-1
8.1 Committee................................................................................VIII-1
8.2 Powers of Committee......................................................................VIII-1
8.3 Actions of Committee.....................................................................VIII-1
8.4 Compensation of Committee and Payment of Administrative Expenses.........................VIII-1
8.5 Limits on Liability......................................................................VIII-1
8.6 Claims Procedure.........................................................................VIII-2
ARTICLE IX TERMINATION OR AMENDMENT...................................................................IX-1
9.1 Right and Procedure to Terminate...........................................................IX-1
9.2 Amendment of Plan..........................................................................IX-1
ARTICLE X MISCELLANEOUS...............................................................................X-1
10.1 Plan Not a Contract of Employment...........................................................X-1
10.2 Construction................................................................................X-1
SIGNATURE PAGE.....................................................................................Signature Page-1
</TABLE>
ii
<PAGE> 4
SUPPLEMENTARY EXECUTIVE RETIREMENT PLAN
OF
FEDERATED DEPARTMENT STORES, INC.
(As amended and restated effective as of January 1, 1997)
ARTICLE I
---------
NAME AND PURPOSE OF PLAN
------------------------
1.1 NAME OF PLAN. The name of this Plan shall be the Supplementary
Executive Retirement Plan of Federated Department Stores, Inc.
1.2 PURPOSE OF PLAN. The purpose of the Plan is to provide certain
executives of the Employer with additional amounts of retirement pay.
1.3 EFFECTIVE DATE OF PLAN DOCUMENT. The Plan was originally adopted as
of January 1, 1984. This Plan document amends and restates the Plan effective as
of the Effective Amendment Date.
I-1
<PAGE> 5
ARTICLE II
----------
DEFINITIONS
-----------
As used in the Plan, the following terms shall have the meanings
indicated below unless it is clear from the context that another meaning is
intended:
2.1 ANNUITY - means a form of benefit, without any life insurance,
which provides for equal payments in monthly installments (or, to the extent
provided under Section 6.3 below, quarterly installments) over more than a
one-year period.
2.2 BASIC PENSION PLAN - means the plan which is known as the Federated
Department Stores, Inc. Cash Account Pension Plan, as such plan exists as of the
Effective Amendment Date or as it may thereafter be amended. The Basic Pension
Plan, as herein defined, is a defined benefit plan (as such term is defined in
Section 414(j) of the Code and Section 3(35) of ERISA), is intended to be
qualified as a tax-favored plan under Section 401(a) of the Code, and is
sponsored by Federated.
2.3 BOARD OF DIRECTORS - means the Board of Directors of Federated.
2.4 CODE - means the Internal Revenue Code of 1986, as such code exists
as of the Effective Amendment Date or as it may thereafter be amended.
2.5 COMMITTEE - means all of the committees appointed under Section 8.1
below to administer the Plan.
2.6 EFFECTIVE AMENDMENT DATE - refers to the effective date of this
amendment and restatement of the Plan and means January 1, 1997.
2.7 EMPLOYEE - means, at any point in time, any individual who is a
common law employee of the Employer and who is classified as an employee by the
Employer for payroll payment and withholding purposes at such time.
2.8 EMPLOYER - means Federated and each other corporation which is a
member of the controlled group of corporations (within the meaning of Section
414(b) of the Code) which includes Federated.
2.9 ERISA - means the Employee Retirement Income Security Act of 1974,
as such act exists as of the Effective Amendment Date or as it may thereafter be
amended.
2.10 EXECUTIVE - means, at any point in time, any Employee who at such
time, pursuant to the provisions of Section 3.1 below, meets the criteria
necessary to become a Participant in the Plan and to accrue benefits under the
Plan.
II-1
<PAGE> 6
2.11 EXECUTIVE DEFERRED COMPENSATION PLAN - means the plan which is
known as the Executive Deferred Compensation Plan of Federated Department
Stores, Inc., as such plan exists as of the Effective Amendment Date or as it
may thereafter be amended. The Executive Deferred Compensation Plan, as herein
defined, allows certain executives of the Employer to defer a portion of their
compensation and is sponsored by Federated.
2.12 FEDERATED - means Federated Department Stores, Inc., or any
corporate successor thereto. Federated, as herein defined, is the sponsor of the
Plan.
2.13 PARTICIPANT - means, at any point in time, any person who at such
time either is accruing benefits under the Plan or still has accrued benefits
under the Plan. The provisions of Article III below determine when a person is a
Participant on or after the Effective Amendment Date.
2.14 PLAN - means the plan contained in this document, which is named
the Supplementary Executive Retirement Plan of Federated Department Stores, Inc.
II-2
<PAGE> 7
ARTICLE III
-----------
ELIGIBILITY AND PARTICIPATION
-----------------------------
3.1 ELIGIBILITY.
3.1.1 Only Executives are eligible to become Participants in
the Plan and thereby accrue benefits under the Plan. A person is considered to
be an Executive at any point in time if, and only if, he or she is an Employee,
and meets the criteria established and in effect under Section 3.1.2 below, at
such time.
3.1.2 In order for an Employee to be considered an Executive
under the Plan, he or she must meet the criteria established in accordance with
the following provisions of this Section 3.1.2 (such criteria being called in
the following provisions of this Section 3.1.2 as the "eligibility criteria"):
(a) As of the Effective Amendment Date and at any later point in
time until changed under paragraph (b) below, the eligibility criteria which
must be met by an Employee in order for him or her to be considered an Executive
shall be an annualized rate of base compensation (not including, among other
things, bonuses, commissions, overtime pay, stock options, severance pay,
retention bonuses, fringe benefits, or welfare benefits) of $100,000 or more.
(b) Subject to the provisions of paragraph (c) below but
notwithstanding the provisions of paragraph (a) above, the Committee may, at any
time and from time to time, increase the dollar amount set forth in paragraph
(a) above, or otherwise change the eligibility criteria, pursuant to a written
resolution adopted either at any meeting of the Committee or in a writing signed
by all members of the Committee.
(c) Notwithstanding any other provision of the Plan, all
Employees who meet the eligibility criteria must be part of a select group of
management or other highly compensated employees (within the meaning of Sections
201, 301, and 401 of ERISA) of the Employer. As a result, the Committee shall,
pursuant to its power to amend the eligibility criteria under the provisions of
paragraph (b) above, amend the eligibility criteria at any time if necessary to
ensure that all of the Employees who meet the eligibility criteria in effect at
such time are part of such a select group of management or other highly
compensated employees of the Employer.
(d) Any eligibility criteria which is established under the
foregoing provisions of this Section 3.1.2 shall remain in effect until changed
by the Committee pursuant to the foregoing provisions of this Section 3.1.2. In
addition, any written resolution of the Committee which amends the eligibility
criteria shall hereby be incorporated by reference into, and hereby made a part
of, the Plan.
III-1
<PAGE> 8
3.2 ENTRY AS PARTICIPANTS. Executives shall become Participants in the
Plan on or after the Effective Amendment Date only in accordance with the
following provisions:
3.2.1 Each person who, as of any Entry Date which occurs on
or after the Effective Amendment Date, is an Executive on such date shall become
a Participant on such Entry Date.
3.2.2 For purposes of Section 3.2.1 above, an "Entry Date"
means the first day of any calendar year.
3.3 DURATION OF PARTICIPATION. Each Participant in the Plan shall
continue to be a Participant until he or she ceases to be an Executive and the
entire amount of his or her benefit, if any, under the Plan has been paid by the
Employer.
3.4 REINSTATEMENT OF PARTICIPATION. Any person who ceases to be a
Participant, but who is thereafter reemployed as an Executive by the Employer,
shall be reinstated as a Participant only when, and if, he or she becomes a
Participant under the provisions of Section 3.2 above (determined as if he or
she had not previously been a Participant in the Plan).
III-2
<PAGE> 9
ARTICLE IV
----------
SUPPLEMENTAL RETIREMENT BENEFITS
--------------------------------
4.1 SUPPLEMENTAL RETIREMENT BENEFIT. Subject to the other provisions of
the Plan, a Participant in the Plan shall be entitled to a retirement benefit
under the Plan, called in the other provisions of the Plan as the "supplemental
retirement benefit," if, and only if, he or she ceases to be an Employee and is
eligible to receive a retirement benefit under the Basic Pension Plan.
4.2 BENEFIT FORMULA FOR SUPPLEMENTAL RETIREMENT BENEFIT. Subject to the
other provisions of the Plan, if a Participant is entitled to a supplemental
retirement benefit under the Plan, the monthly amount of such benefit, if it is
payable in the form of a single life annuity which commences as of the later of
the Participant's normal retirement date or the first day of the first month
which begins on or after he or she ceases to be an Employee, shall be equal to
the result produced by first multiplying the amount determined under Section
4.2.1 below by Section 4.2.2 below and second subtracting from such product the
amount determined under Section 4.2.3 below ((4.2.1 x 4.2.2) - 4.2.3), where
Sections 4.2.1, 4.2.2, and 4.2.3 are as follows:
4.2.1 The amount determined under this Section 4.2.1 is
equal to the difference between (1) 1.5% of the Participant's highest average
monthly compensation for any five calendar years (regardless of whether they are
consecutive) falling within the latest ten calendar years which end prior to the
date the Participant ceases to be an Executive and (2) 2.5% of the Participant's
estimated monthly social security benefit.
4.2.2 The amount determined under this Section 4.2.2 is
equal to the number, up to but not in excess of 30, of the Participant's years
of vesting service as of the date he or she ceases to be an Executive
(disregarding any fractional part of a year of vesting service).
4.2.3 The amount determined under this Section 4.2.3 is
equal to the monthly amount of a benefit which, if paid to the Participant in
the form of a single life annuity which commences as of the later of the
Participant's normal retirement date or the first day of the first month which
begins on or after he or she ceases to be an Employee, would be actuarially
equivalent to the aggregate of: (1) the benefits which the Participant accrues
under the Basic Pension Plan; and, if and to the extent applicable, (2) the sum
of (x) the account balance of the Participant under the Retirement Income (the
"RI") portion of the prior Federated Department Stores, Inc. Retirement Income
and Thrift Incentive Plan determined as of December 31, 1995, (y) the account
balance of the Participant under the Profit Sharing Retirement Plan (the "PSRP")
portion of Part B of the prior Allied Stores Corporation Retirement Benefit and
Profit Sharing Investment Program determined as of December 31, 1979, and (z)
the account balance of the Participant under the R.H. Macy & Co., Inc. Profit
Sharing Plan determined as of December 31, 1996.
IV-1
<PAGE> 10
4.3 FORM AND AMOUNT OF SUPPLEMENTAL RETIREMENT BENEFIT. If a
Participant becomes entitled to a supplemental retirement benefit under this
Article IV, then the form and amount of such supplemental retirement benefit
shall be determined in accordance with the following provisions:
4.3.1 Subject to the provisions of Sections 4.3.2 and 4.3.3
below, the supplemental retirement benefit which is payable to the Participant
under the Plan shall be paid in the form of a single life annuity which
commences as of the later of the Participant's normal retirement date or the
first day of the first month which begins on or after the date he or she ceases
to be an Employee. The monthly amount of such benefit shall be equal to the
amount determined under the provisions of Section 4.2 above.
4.3.2 (a) Subject to the provisions of Section 4.3.3 below
but notwithstanding the provisions of Section 4.3.1 above, the Participant may,
at any time prior to the commencement of his or her supplemental retirement
benefit under the Plan and in lieu of any other possible form of payment for
such benefit, elect that payment of his or her supplemental retirement benefit
under the Plan be made in any Annuity form different from the benefit form
described in Section 4.3.1 above, provided that the Annuity form being requested
is permitted as a form of payment for the Participant's benefit under the Basic
Pension Plan.
(b) Further, and also subject to the provisions of
Section 4.3.3 below but notwithstanding the provisions of Section 4.3.1 above,
if the Participant requests, prior to the date he or she ceases to be an
Employee, that the payment of his or her supplemental retirement benefit under
the Plan be made in the form of a lump sum cash payment which is paid as of the
first day of the first month both which begins after the date he or she ceases
to be an Employee and during which the Committee can administratively determine
and process the payment of such benefit, the Committee may, in its sole
discretion and after taking into account the interests of the Employer, agree to
such request and cause such benefit to be paid in accordance with the lump sum
form of payment so requested and in lieu of any other possible form of payment
for such benefit. The Committee is not in any manner obligated to agree to such
request, however.
(c) If, under the provisions of paragraph (a) or
(b) above, the Participant's supplemental retirement benefit under the Plan is
paid in a form different from the benefit form described in Section 4.3.1 above,
then the monthly amount or lump sum amount, as the case may be, of the
Participant's supplemental retirement benefit when it is to be paid in
accordance with the different form shall be that amount which makes such
supplemental retirement benefit actuarially equivalent to the Participant's
supplemental retirement benefit if it were to be paid in the form of payment
described in Section 4.3.1 above.
4.3.3 Further, notwithstanding the provisions of Sections
4.3.1 and 4.3.2 above, if the supplemental retirement benefit payable under the
Plan to the Participant has a present value of $15,000 or less as of the first
day of the first month both which begins on or after the date that the
Participant ceases to be an Employee and during which the Committee can
IV-2
<PAGE> 11
administratively determine and process the payment of the benefit, then such
supplemental retirement benefit shall be converted to and paid as a lump sum
cash payment as of such date (with the amount of such payment equal to such
present value amount). For purposes hereof, the present value of the
Participant's supplemental retirement benefit as of any date shall be equal to
the amount that a lump sum cash payment made as of such date would be if such
lump sum payment were to be actuarially equivalent to the Participant's
supplemental retirement benefit if it were to be paid in the form of payment
described in Section 4.3.1 above.
4.4 EFFECT ON SUPPLEMENTAL RETIREMENT BENEFIT OF REEMPLOYMENT OR
CONTINUED EMPLOYMENT AFTER COMMENCEMENT OF SUCH BENEFIT. If a Participant who
becomes entitled to the distribution of a supplemental retirement benefit under
the Plan is reemployed by or continues in employment with the Employer as an
Executive, then the provisions of the Basic Pension Plan which apply to the
effect on a participant's retirement benefit of the reemployment or continued
employment of the participant by or with the Employer shall apply in similar
fashion to the Participant's supplemental retirement benefit under the Plan as
if such supplemental retirement benefit were payable under the Basic Pension
Plan.
4.5 DEFINITIONS FOR DETERMINATION OF SUPPLEMENTAL RETIREMENT BENEFIT.
For purposes of the other provisions of the Plan, the following terms, all of
which relate to the determination of any Participant's supplemental retirement
benefit under the Plan, shall have the meanings hereinafter set forth unless the
context otherwise requires:
4.5.1 A Participant's "compensation" for any period (for
purposes of this Section 4.5.1, the "subject period") means, except as is
otherwise noted below, his or her Compensation for the subject period under, and
as such term is defined in, the Basic Pension Plan. However, notwithstanding the
foregoing, any amounts which would be part of the Participant's Compensation for
the subject period under the Basic Pension Plan but for the fact such amount is
deferred (for purposes of receipt by the Participant) to a later period by
reason of an election of the Participant under the Executive Deferred
Compensation Plan shall still be considered as part of the Participant's
compensation for the subject period under the Plan. Also, notwithstanding the
foregoing, the limitations of Section 401(a)(17) of the Code shall not apply to
the determination of the Participant's compensation for purposes of the Plan. In
addition, and also notwithstanding the foregoing, any remuneration that the
Participant receives for services performed after the latest date on which he or
she qualifies as an Executive, regardless of the form in which it is paid, shall
not be considered as part of the Participant's compensation for purposes of the
Plan.
4.5.2 A Participant's "estimated monthly social security
benefit" means the monthly primary insurance benefit which would be payable to
the Participant under Title II of the Federal Social Security Act, as amended,
as of the later of the date the Participant first attains his or her normal
retirement date or the date on which the Participant ceases to be an Employee,
if such benefit was computed on the basis of the benefit and wage base levels in
effect under the Federal Social Security Act, as amended, as of the date on
which the Participant
IV-3
<PAGE> 12
ceases to be an Employee and on the basis of a compensation record determined in
accordance with the following rules:
(a) For each of the first calendar year in which
the Participant performs services as an Employee and all prior calendar years,
the Participant shall be deemed to have wages for Federal Social Security Act
purposes equal to the result produced by discounting his or her compensation for
the calendar year immediately following the first calendar year in which the
Participant performs services as an Employee backwards to the applicable
calendar year, using for this purpose the actual change in the average wages as
determined by the Federal Social Security Administration;
(b) For each of the calendar years beginning
with the calendar year immediately following the first calendar year in which
the Participant first performs services as an Employee and ending with the last
full calendar year ending on or before the date on which the Participant ceases
to be an Employee, the Participant shall be deemed to have wages for Federal
Social Security Act purposes equal to his or her compensation for the applicable
calendar year; and
(c) For the period which begins on the first
day of the first calendar year ending after the date on which the Participant
ceases to be an Employee and ends on the date the Participant first attains his
or her normal retirement date, the Participant shall be deemed to have an annual
rate of wages for Federal Social Security Act purposes equal to the
Participant's compensation for the latest calendar year which ends prior to the
date the Participant ceases to be an Employee.
4.5.3 A Participant's "normal retirement date" means his or
her Normal Retirement Date as such term is defined in the Basic Pension Plan.
4.5.4 A "single life annuity" means an Annuity which is
payable monthly for the life of the applicable Participant, ending with the last
monthly payment due for the month in which the Participant dies.
4.5.5 A Participant's "years of vesting service" means,
except as noted below, the number of years of Vesting Service with which he or
she is credited with under, and in accordance with, the provisions of the Basic
Pension Plan; except that any such years of Vesting Service which are
disregarded under the Basic Pension Plan solely by reason of a break-in-service
of the Participant shall still be included as years of vesting service for
purposes of the Plan if the Participant is reemployed by the Employer for at
least five years after such break-in-service. In addition, and notwithstanding
the foregoing, any services completed by the Participant after the latest date
on which he or she qualifies as an Executive shall be disregarded in determining
the Participant's years of vesting service for purposes of the Plan.
4.6 OTHER CESSATION OF EMPLOYMENT. Except as may otherwise be provided
in Article V below, if a Participant dies prior to the date as of which any
supplemental retirement
IV-4
<PAGE> 13
benefit to which he or she is entitled under the Plan begins to be paid, or if
the Participant ceases to be an Employee for any reason at a time when he or she
is not entitled to a retirement benefit under the Basic Pension Plan (and hence
is not entitled to a supplemental retirement benefit under the Plan), neither he
or she nor any person claiming by or through him or her shall be entitled to
receive any benefit under the Plan. In such case, his or her interest under the
Plan shall be forfeited.
IV-5
<PAGE> 14
ARTICLE V
---------
PRE-PENSION DEATH BENEFITS
--------------------------
5.1 ELIGIBILITY FOR PRE-PENSION DEATH BENEFIT.
------------------------------------------
5.1.1 A death benefit, called in the other provisions of the
Plan as a "pre-pension death benefit," shall be paid to the beneficiary of a
Participant who both (1) dies while still an Employee (and prior to any
supplemental retirement benefit beginning to be paid to him or her under the
Plan) and (2) would have been entitled to a supplemental retirement benefit
under Article IV above if he or she had not died but had ceased to be an
Employee on the date of his or her death.
5.1.2 In addition, a pre-pension death benefit shall also be
paid to the beneficiary of a Participant who dies after terminating employment
as an Employee at a time when he or she was entitled to a supplemental
retirement benefit under Article IV above but prior to the date as of which such
supplemental retirement benefit begins to be paid to him or her.
5.1.3 Except as may be provided in Sections 5.1.1 and 5.1.2
above, no pre-pension death benefit (or any other death benefit) is payable
under the Plan with respect to a Participant who dies prior to the date he or
she is eligible for or begins to receive a supplemental retirement benefit under
Article IV above.
5.2 BENEFICIARY. For purposes of this Article V, the "beneficiary" of
any Participant shall mean the person who is the Participant's lawful spouse at
the time of the Participant's death; except that, if it is established to the
satisfaction of the Committee that the Participant is not survived by a lawful
spouse or such spouse cannot reasonably be located, the Participant's
"beneficiary" shall be the person or trust named by the Participant as his or
her beneficiary for purposes of the Plan's pre-pension death benefit in a
writing or form which is filed with the Committee prior to the Participant's
death; and except that, if the Committee determines that the Participant is not
survived by a lawful spouse or other properly designated beneficiary who can
reasonably be located, the Participant's "beneficiary" shall be deemed to be the
Participant's estate.
5.3 FORM AND AMOUNT OF PRE-PENSION DEATH BENEFIT IF BENEFICIARY IS
PARTICIPANT'S SPOUSE. If a Participant's beneficiary becomes entitled to a
pre-pension death benefit under this Article V and such beneficiary is the
Participant's surviving spouse, then the form and amount of such death benefit
shall be determined in accordance with the following provisions:
5.3.1 Subject to the provisions of Sections 5.3.2 below, the
pre-pension death benefit which is payable to the Participant's surviving spouse
under the Plan shall be paid in the form of a lump sum cash payment which is
paid as of the first day of the first month both which begins on or after the
date of the Participant's death and during which the Committee can
V-1
<PAGE> 15
administratively determine and process the payment of the death benefit to the
surviving spouse. The amount of such lump sum payment shall be the amount which
makes such lump sum payment actuarially equivalent to the supplemental
retirement benefit that would have been payable to the Participant under the
Plan if (1) the Participant, if he or she had not yet terminated employment with
the Employer prior to his or her death, had terminated such employment on the
date of his or her death and (2) the Participant had survived to the date which
would have been the Participant's normal retirement date had he or she survived
(or, if such Participant dies after his or her normal retirement date, the first
day of the first calendar month which begins on or after the date of the
Participant's death) and began receiving as of such date his or her supplemental
retirement benefit in the form of a single life annuity.
5.3.2 Notwithstanding the provisions of Section 5.3.1 above,
the Participant may, in a writing or form which is filed with the Committee at
any time prior to his or her death and in lieu of any other possible form of
payment for such pre-pension death benefit, elect that payment of such
pre-pension death benefit be made in any Annuity form which is permitted as a
benefit form for a surviving spouse's pre-pension death benefit under the Basic
Pension Plan, provided that such election shall not be effective if the lump sum
payment of such pre-pension death benefit which would otherwise be made under
Section 5.3.1 above would be $15,000 or less. If such pre-pension death benefit
is paid in an Annuity form pursuant to the Participant's election under this
Section 5.3.2, then the periodic amount of such pre-pension death benefit shall
be that amount which makes such pre-pension death benefit actuarially equivalent
to the supplemental retirement benefit that would have been payable to the
Participant under the Plan if (1) the Participant, if he or she had not yet
terminated employment with the Employer prior to his or her death, had
terminated such employment on the date of his or her death and (2) the
Participant had survived to the date which would have been the Participant's
normal retirement date had he or she survived (or, if such Participant dies
after his or her normal retirement date, the first day of the first calendar
month which begins on or after the date of the Participant's death) and began
receiving as of such date his or her supplemental retirement benefit in a single
life annuity.
5.4 FORM AND AMOUNT OF PRE-PENSION DEATH BENEFIT IF BENEFICIARY IS NOT
PARTICIPANT'S SPOUSE. If a Participant's beneficiary becomes entitled to a
pre-pension death benefit under this Article V and such beneficiary is not the
Participant's surviving spouse, then such death benefit shall be paid in the
form of a lump sum cash payment which is paid as of the first day of the first
month both which begins on or after the date of the Participant's death and
during which the Committee can administratively determine and process the
payment of the death benefit to the beneficiary. The amount of such lump sum
payment shall be the amount which makes such lump sum payment actuarially
equivalent to the supplemental retirement benefit that would have been payable
to the Participant under the Plan if (1) the Participant, if he or she had not
yet terminated employment with the Employer prior to his or her death, had
terminated such employment on the date of his or her death and (2) the
Participant had survived to the date which would have been the Participant's
normal retirement date had he or she survived (or, if such Participant dies
after his or her normal retirement date, the first day of the
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<PAGE> 16
first calendar month which begins on or after the date of the Participant's
death) and began receiving as of such date his or her supplemental retirement
benefit in a single life annuity.
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<PAGE> 17
ARTICLE VI
----------
ADDITIONAL BENEFIT PROVISIONS
-----------------------------
6.1 BENEFITS NOT ASSIGNABLE. Except to the extent required by
applicable law, benefits provided under the Plan may not in any manner be
anticipated, assigned (either at law or in equity), or alienated or be subject
to attachment, garnishment, levy, execution, or any other legal or equitable
process.
6.2 BENEFITS PAYABLE TO MINORS, INCOMPETENTS, AND OTHERS. In the event
any benefit is payable under the Plan to a person who, in the sole discretion of
the Committee, is a minor, an incompetent, or otherwise under a legal
disability, is, by reason of advanced age, illness, or other physical or mental
incapacity, incapable of handling and disposing of his or her property, or
otherwise is in such position or condition that the Committee believes that such
person could not utilize the benefit for his or her support or welfare, the
Committee shall have discretion to apply the whole or any part of such benefit
directly to the care, comfort, maintenance, support, education, or use of such
person or pay the whole or any part of such benefit to the parent of such
person, the guardian, committee, conservator, or other legal representative,
wherever appointed, of such person, the person with whom such person is
residing, or any other person having the care and control of such person. The
receipt of any such person to whom any such payment on behalf of any Participant
(or his or her beneficiary) is made shall be a sufficient discharge therefor.
6.3 ADMINISTRATIVE ADJUSTMENT FOR SMALL BENEFITS. Notwithstanding any
other provision of the Plan to the contrary, as an administrative convenience,
if the monthly amount of any supplemental retirement benefit or pre-pension
death benefit which is payable under the Plan in the form of an Annuity would
otherwise be less than $50, the Committee may direct that such benefit begin to
be paid in quarterly installments instead of monthly installments at any time.
6.4 TIMING OF BENEFIT DISTRIBUTIONS. For purposes of the Plan, each
benefit payment under the Plan shall always be made "as of" a certain date
specified in an appropriate section of the Plan, which means that the amount of
the payment shall be determined as of such date and the actual payment shall be
made on or as soon as practical after such date (to allow the Committee time to
ascertain the applicable person's entitlement to a benefit and the amount of
such benefit and to process and payout such benefit). If a person entitled to a
benefit hereunder dies subsequent to the date as of which such payment was to
have been made but, because of administrative reasons, prior to the actual
payment thereof, such benefit shall be paid to his or her estate. If,
notwithstanding the foregoing, a Participant (or a beneficiary of the
Participant) who is entitled to a benefit hereunder cannot reasonably be
located, then such benefit shall thereupon be deemed forfeited. If, however, the
lost Participant (or the beneficiary) thereafter makes a claim for the amount
previously forfeited hereunder, such benefit shall be paid or commence, with any
unpaid installments thereof which otherwise would have previously been
VI-1
<PAGE> 18
paid also being paid (but without any interest credited on such unpaid
installments), as soon as administratively possible.
6.5 REFERENCES TO FORM OF PAYMENT. Any references to the "form" of
payment of any benefit under the Plan shall be deemed to be referring to the
combination of the method by which such benefit shall be paid (E.G., an Annuity
form or a lump sum cash payment) and the date as of which such benefit is to
commence (if the method of payment is an Annuity) or the date as of which such
benefit is to be paid (if the method of payment is a lump sum cash payment).
6.6 ACTUARIAL ASSUMPTIONS. Under the Plan, any reference to actuarial
equivalent, actuarially equivalent, or actuarial equivalence means or refers to
equality in value of the aggregate amounts of a benefit when compared to the
aggregate amounts of such benefit if paid or determined in a different form. If
the Plan requires a determination that a benefit when paid in accordance with
any certain form of benefit (for purposes of this Section 6.6, the "actual
form") would be actuarially equivalent to such benefit if it were payable in a
different form (for purposes of this Section 6.6, the "other form"), then,
except as noted below, the following steps shall be taken: (1) the present value
of the other form as of the date as of which the actual form is to commence
shall first be determined; (2) if the actual form involves a single life
annuity, the monthly amount of such single life annuity shall then be determined
so as to be actuarially equivalent to the present value amount determined under
clause (1); (3) if the actual form involves an Annuity other than a single life
annuity, the monthly amount of such Annuity shall then be determined so as to be
actuarially equivalent to the single life annuity determined under clause (2)
above; and (4) if the actual form involves a lump sum cash payment, the lump sum
amount of such payment shall be equal to the present value amount determined
under clause (1) above. The actuarial assumptions to be used in making any such
determinations shall be the same assumptions as would be used pursuant to the
provisions of Sections 9.5.3 and 9.5.4 of the Basic Pension Plan (as in effect
on the Effective Amendment Date) to make such determinations if such
determinations were being made under the Basic Pension Plan. Notwithstanding the
foregoing, when any Annuity form of benefit under the Plan commences prior to
the applicable Participant's normal retirement date and within the ten year
period ending on the date which immediately precedes such normal retirement
date, the monthly amount of such Annuity shall not be less than the periodic
amount that would apply to such Annuity if it commenced as of the Participant's
normal retirement date, reduced by 0.4% for each full month by which the date as
of which the Annuity benefit actually commences.
6.7 APPLICABLE BENEFIT PROVISIONS. Subject to Section 4.4 above, any
supplemental retirement benefit to which a Participant becomes entitled (or any
pre-pension death benefit to which the Participant's beneficiary becomes
entitled) shall be determined on the basis of the provisions of the Plan in
effect as of the date the Participant last ceases to be an Employee
notwithstanding any amendment to the Plan adopted subsequent to such date,
except for subsequent amendments which are by their specific terms or by
applicable law made applicable to such Participant (or his or her beneficiary).
VI-2
<PAGE> 19
6.8 MERGER OF PRIOR PLANS AND COVERAGE OF PRE-EFFECTIVE
AMENDMENT DATE PARTICIPANTS.
6.8.1 (a) The Plan amends and restates, effective as of the
Effective Amendment Date, the Supplementary Executive Retirement Plan of
Federated Department Stores, Inc. as it was in effect on December 31, 1996 (the
"Prior Federated Supplemental Plan"). In addition, two other supplemental
executive retirement plans, the R.H. Macy & Co., Inc. Benefit Equalization Plan
(the "Prior Macy's Supplemental Plan") and the Supplemental Executive Retirement
Plan of Broadway Stores Inc. (the "Broadway Supplemental Plan"), were merged
into the Prior Federated Supplemental Plan effective as of December 31, 1996. As
a result, the Plan also amends and restates, effective as of the Effective
Amendment Date, the Prior Macy's Supplemental Plan and the Prior Broadway
Supplemental Plan.
(b) However, notwithstanding any other provision
of the Plan to the contrary, the amendment and restatement of the Prior
Federated Supplemental Plan, the Prior Macy's Supplemental Plan, and the Prior
Broadway Supplemental Plan by the Plan shall not reduce the benefits accrued
under such prior plans by any Participant as of December 31, 1996. In
determining the benefits accrued under such prior plans as of December 31, 1996
by any Participant, however, any amounts by which such prior plans offset their
otherwise determined benefits for the Participant by reason of any amounts
described in Section 4.2.3 above, by reason of the benefits of any defined
benefit pension plans which were amended and restated as of the Effective
Amendment Date by the Basic Pension Plan, and/or by reason of the benefits of
any defined benefit pension plans which were merged immediately prior to the
Effective Amendment Date into the predecessor plan which was continued by the
Basic Pension Plan shall still be determined as of the date as of which the
benefit applicable to the Participant under this Plan commences to be paid.
6.8.2 In addition, except as is otherwise provided in this
Section 6.8.2, the provisions of the Plan only apply to persons who become
Participants in the Plan under Article III above. However, any person who never
becomes a Participant in the Plan under Article III above but both was a
participant in one or more of the Prior Federated Supplemental Plan, the Prior
Macy's Supplemental Plan, and the Prior Broadway Supplemental Plan and still is
entitled to a benefit under one or more of such prior plans as of December 31,
1996 (determined as if such person had not been employed by the Employer after
such date) shall be considered a participant in the Plan to the extent of his or
her right to such benefit. The amount of such benefit, the form in which such
benefit is to be paid, and the conditions (if any) which may cause such benefit
not to be paid shall be determined under the versions of such prior plans in
effect at the time he or she ceased to be an Employee.
VI-3
<PAGE> 20
ARTICLE VII
-----------
SOURCE OF BENEFITS
------------------
All benefits payable under this Plan shall be paid exclusively from the
Employer's general assets, with the costs of such benefits to be appropriately
charged to each corporation included in the Employer being determined by the
Committee. No Participant (or any beneficiary of or other person claiming
through the Participant) shall have any right or claim to the payment of any
benefit under this Plan which in any manner whatsoever is superior to or
different from the right or claim of a general and unsecured creditor of the
corporation or corporations included in the Employer to which the costs of such
benefit are charged.
VII-1
<PAGE> 21
ARTICLE VIII
------------
ADMINISTRATION
--------------
8.1 COMMITTEE. The Plan shall be administered by one or more committees
which are appointed from time to time by, and which shall serve at the pleasure
of, the Board of Directors. If the Board of Directors appoints more than one
committee to administer the Plan, it shall assign to each such committee
different aspects of the administrative duties applicable to the Plan. Except
where the context otherwise requires, each such committee may be referred to in
this Article VIII as "a Committee," "any Committee," or "such Committee," but
all such committees shall be collectively referred to in the other Articles of
the Plan as "the Committee." Thus, any reference in any other Article of the
Plan to "the Committee" shall be deemed to refer to the committee appointed
under this Section 8.1 which has responsibility for the aspect of the Plan with
respect to which such provision applies.
8.2 POWERS OF COMMITTEE. Any Committee, in connection with
administering the Plan, is authorized to make such rules and regulations as it
may deem necessary to carry out the provisions of the Plan and, subject to the
scope of its powers as assigned by the Board of Directors, is given complete
discretionary authority to determine any person's eligibility for benefits under
the Plan, to construe the terms of the Plan, and to decide any other matters
pertaining to the Plan's administration. Any Committee shall, subject to the
scope of its powers as assigned by the Board of Directors, determine any
question arising in the administration, interpretation, and application of the
Plan, which determination shall be binding and conclusive on all persons. In the
administration of the Plan, any Committee may employ or permit any agents to
carry out any of its responsibilities hereunder.
8.3 ACTIONS OF COMMITTEE. Any Committee shall act by a majority of its
members at the time in office, and any such action may be taken either by a vote
at a meeting or in writing without a meeting. Any Committee may by such majority
action appoint subcommittees and may authorize any one or more of its members or
any agent of it to execute any document or documents or to take any other
action, including the exercise of discretion, on behalf of such Committee. Any
Committee may provide for the allocation of responsibilities for the operation
of the Plan.
8.4 COMPENSATION OF COMMITTEE AND PAYMENT OF ADMINISTRATIVE EXPENSES.
The members of any Committee shall serve without compensation for services as
such. All expenses of the administration of the Plan shall be paid by the
Employer, with the portion of such expenses to be appropriately charged to each
corporation included in the Employer being determined by the Committee which is
assigned this duty by the Board of Directors.
8.5 LIMITS ON LIABILITY. Federated and each other corporation included
in the Employer shall hold each member of a Committee harmless from any and all
claims, losses, damages, expenses, and liabilities arising from any act or
omission of the member.
VIII-1
<PAGE> 22
8.6 CLAIMS PROCEDURE.
8.6.1 If a Participant, a Participant's beneficiary, or any
other person claiming through a Participant has a dispute as to the failure of
the Plan to pay or provide a benefit, as to the amount of Plan benefit paid, or
as to any other matter involving the Plan, the person may file a claim for the
benefit or relief believed by the person to be due. Such claim must be provided
by written notice to the Committee which is assigned by the Board of Directors
the duty to review initial claims or disputes (or its agent designated by it for
this purpose). Such Committee (or its agent) will decide any claims made
pursuant to this Section 8.6.
8.6.2 If a claim made pursuant to Section 8.6.1 above is
denied, in whole or in part, notice of the denial in writing will be furnished
by the Committee which is assigned by the Board of Directors the duty to review
initial claims or disputes (or its agent designated by it for this purpose) to
the claimant within 90 days after receipt of the claim by such Committee (or
such agent); except that if special circumstances require an extension of time
for processing the claim, the period in which such Committee (or such agent) is
to furnish the claimant written notice of the denial will be extended for up to
an additional 90 days (and such Committee or its agent will provide the claimant
within the initial 90-day period a written notice indicating the reasons for the
extension and the date by which such Committee or its agent expects to render
the final decision). The final notice of denial will be written in a manner
designed to be understood by the claimant and set forth: (1) the specific
reasons for the denial, (2) specific reference to pertinent Plan provisions on
which the denial is based, (3) a description of any additional material or
information necessary for the claimant to perfect the claim and an explanation
of why such material or information is necessary, and (4) information as to the
steps to be taken if the claimant wishes to appeal such denial of his or her
claim. If no written notice is provided the claimant within the applicable
90-day period or 180-day period, as the case may be, the claimant may assume his
or her claim has been denied and go immediately to the appeal process set forth
in Section 8.6.3 below.
8.6.3 Any claimant who has a claim denied under Sections
8.6.1 and 8.6.2 above may appeal the denied claim to the Committee which is
assigned by the Board of Directors the duty to review appeals of denied claims
(or its agent designated by it for this purpose). Such an appeal must, in order
to be considered, be filed by written notice to such Committee (or such agent)
within 60 days of the receipt by the claimant of a written notice of the denial
of his or her initial claim (unless it was not reasonably possible for the
claimant to make such appeal within such 60-day period, in which case the
claimant must file his or her appeal within 60 days after the time it becomes
reasonable for him or her so to file an appeal). If any appeal is filed in
accordance with such rules, the claimant, and any duly authorized representative
of the claimant, will be given the opportunity to review pertinent documents and
submit issues and comments in writing. A formal hearing may be allowed in its
discretion by such Committee (or its agent designated by it for this purpose)
but is not required.
VIII-2
<PAGE> 23
8.6.4 Upon any appeal of a denied claim made pursuant to
Section 8.6.3 above, the Committee which is assigned by the Board of Directors
the duty to review appeals of denied claims (or its agent designated by it for
this purpose) will provide a full and fair review of the subject claim and
decide the appeal within 60 days after the filing of the appeal; except that if
special circumstances require an extension of time for processing the appeal,
the period in which the appeal is to be decided will be extended for up to an
additional 60 days (and the party deciding the appeal will provide the claimant
written notice of the extension prior to the end of the initial 60-day period).
The decision on appeal will be set forth in a writing designed to be understood
by the claimant, specify the reasons for the decision and references to
pertinent Plan provisions on which the decision is based, and be furnished to
the claimant by such Committee (or its agent) within the 60-day period or
120-day period, as is applicable, described above.
8.6.5 Any Committee referred to in the foregoing provisions
of this Section 8.6 may prescribe additional rules which are consistent with the
other provisions of this Section 8.6, and the scope of the duties assigned to it
by the Board of Directors, in order to carry out the Plan's claims procedures.
VIII-3
<PAGE> 24
ARTICLE IX
----------
TERMINATION OR AMENDMENT
------------------------
9.1 RIGHT AND PROCEDURE TO TERMINATE.
9.1.1 Federated reserves the right to terminate the Plan in
its entirety. The procedure for Federated to terminate this Plan in its entirety
is as follows. In order to completely terminate the Plan, the Board of Directors
shall adopt resolutions, pursuant and subject to the regulations or by-laws of
Federated and any applicable law, and either at a duly called meeting of the
Board of Directors or by a written consent in lieu of a meeting, to terminate
this Plan. Such resolutions shall set forth therein the effective date of the
Plan's termination.
9.1.2 In the event the Board of Directors adopts resolutions
completely terminating the Plan, no further benefits shall be paid after the
effective date of the Plan's termination, except for the benefits accrued by
Participants under the Plan as of the later of the effective date of the Plan's
termination or the date such resolutions terminating the Plan are adopted (and
such benefits will be paid in accordance with the provisions of the Plan as in
effect immediately prior to the later of such dates). In determining the benefit
accrued under the Plan as of the later of such dates by any Participant,
however, any amount by which the Plan offsets its otherwise determined benefit
for the Participant by reason of any amounts described in Section 4.2.3 above
shall still be determined as of the date as of which the benefit applicable to
the Participant under the Plan commences to be paid.
9.2 AMENDMENT OF PLAN. Subject to the other provisions of this Section
9.2, Federated may amend this Plan at any time and from time to time in any
respect, provided that no such amendment shall decrease the benefits accrued
under the Plan by Participants as of the later of the effective date of such
amendment or the date such amendment is adopted. In determining the benefit
accrued under the Plan as of the later of such dates by any Participant,
however, any amount by which the Plan offsets its otherwise determined benefit
for the Participant by reason of any amounts described in Section 4.2.3 above
shall still be determined as of the date as of which the benefit applicable to
the Participant under the Plan commences to be paid. The procedure for Federated
to amend this Plan is as follows:
9.2.1 Subject to Section 9.2.2 below, in order to amend the
Plan, the Board of Directors shall adopt resolutions, pursuant and subject to
the regulations or by-laws of Federated and any applicable law, and either at a
duly called meeting of the Board of Directors or by a written consent in lieu of
a meeting, to amend this Plan. Such resolutions shall either (1) set forth the
express terms of the Plan amendment or (2) simply set forth the nature of the
amendment and direct an officer of Federated or any other Federated employee to
have prepared and to sign on behalf of Federated the formal amendment to the
Plan. In the latter case, such officer or employee shall have prepared and shall
sign on behalf of Federated an amendment to the Plan which is in accordance with
such resolutions.
IX-1
<PAGE> 25
9.2.2 In addition to the procedure for amending the Plan set
forth in Section 9.2.1 above, the Board of Directors may also adopt resolutions,
pursuant and subject to the regulations or by-laws of Federated and any
applicable law, and either at a duly called meeting of the Board of Directors or
by a written consent in lieu of a meeting, to delegate to any officer of
Federated the authority to amend the Plan. Such resolutions may either grant the
officer broad authority to amend the Plan in any manner the officer deems
necessary or advisable or may limit the scope of amendments he or she may adopt,
such as by limiting such amendments to matters related to the administration of
the Plan. In the event of any such delegation to amend the Plan, the officer to
whom authority is delegated shall amend the Plan by having prepared and signing
on behalf of Federated an amendment to the Plan which is within the scope of
amendments which he or she has authority to adopt. Also, any such delegation to
amend the Plan may be terminated at any time by later resolutions adopted by the
Board of Directors. Finally, in the event of any such delegation to amend the
Plan, and even while such delegation remains in effect, the Board of Directors
shall continue to retain its own right to amend the Plan pursuant to the
procedure set forth in Section 9.2.1 above.
IX-2
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ARTICLE X
---------
MISCELLANEOUS
-------------
10.1 PLAN NOT A CONTRACT OF EMPLOYMENT. The Plan is not a
contract of employment, and the terms of employment of any Participant shall not
be affected in any way by the Plan except as specifically provided in the Plan.
The establishment of the Plan shall not be construed as conferring any legal
rights upon any Participant for a continuation of employment, nor shall it
interfere with the right of the Employer to discharge any Employee and to treat
him or her without regard to the effect which such treatment might have upon him
or her as a Participant in this Plan. Each Participant (and any beneficiary of
or other person claiming through the Participant) who may have or claim or right
under the Plan shall be bound by the terms of the Plan.
10.2 CONSTRUCTION.
10.2.1 The Plan is intended to be a plan which is unfunded
and maintained primarily for the purpose of providing deferred compensation for
a select group of management or highly compensated employees (within the meaning
of Sections 201, 301, and 401 of ERISA), and its terms shall be interpreted
accordingly.
10.2.2 Further, the provisions of the Plan shall be
administered and enforced according to applicable Federal law and, only to the
extent not preempted by ERISA, the laws of the State of Ohio.
10.2.3 If any provision of the Plan, or the application of
any such provision to any person or circumstances, shall be invalid under any
applicable law, neither the application of such provision to persons or
circumstances other than those as to which such provision is invalid nor any
other provisions of the Plan shall be affected thereby.
10.2.4 The headings and subheadings in the Plan have been
inserted for convenience of reference only and are to be ignored in any
construction of the provisions hereof.
10.2.5 In the construction of the Plan, the singular shall
include the plural, and the plural shall include the singular, in all cases
where such meanings would be appropriate.
X-1
<PAGE> 27
IN WITNESS WHEREOF, the sponsor of the Plan hereby signs this amendment
and restatement of the Plan this 12th day of December, 1996, effective for
all purposes as of January 1, 1997.
FEDERATED DEPARTMENT STORES, INC.
By /s/ John R. Sims
--------------------------------
Title Vice President
------------------------------
Signature Page-1
<PAGE> 1
Exhibit 10.47
EXECUTIVE DEFERRED COMPENSATION PLAN
OF
FEDERATED DEPARTMENT STORES, INC.
ARTICLE I
1.1 "PLAN" means the Executive Deferred Compensation Plan of Federated
Department Stores, Inc., as described in this instrument.
1.2 "COMPANY" means Federated Department Stores, Inc. or any successor
company thereafter.
1.3 "COMMITTEE" means one or more Committees appointed to administer
the Plan as and to the extent provided in Article VIII.
1.4 "EFFECTIVE DATE" means November 1, 1993.
1.5 "EXECUTIVE" means an employee of the Company or of any division,
subsidiary or affiliate of the Company whose annualized rate of base
compensation as of the first day of a Plan Year or the first day of his Initial
Eligibility is not less than $96,368. Such amount may be adjusted from time to
time as the Committee may determine.
1.6 "INITIAL ELIGIBILITY" means (a) for each Plan Year beginning
January 1, 1994 or later, the first day of the calendar quarter following the
date an employee of the Company becomes an Executive; and (b) as to an Executive
who was hired on or before May 1, 1993, (i) November 1, 1993 if his base salary
on that date was at least $150,000, and (ii) December 1, 1993 if his base salary
on that date was at least $96,368 and less than $150,000.
1.7 "FISCAL YEAR" means the fiscal year of the Company as established
from time to time.
1.8 "PARTICIPANT" means a person a portion of whose compensation for
any Plan Year has been deferred pursuant to the Plan and whose Cash or Stock
Credits have not been wholly distributed.
1.9 "DEFERRED COMPENSATION" means the portion of a Participant's
compensation for any Plan Year, or part thereof, that has been deferred pursuant
to the Plan.
1.10 "CASH CREDITS" of a Participant at any time means the sum of all
amounts, including interest equivalents, theretofore credited to him pursuant to
Section 3.1 less the amounts theretofore distributed.
<PAGE> 2
1.11 "STOCK CREDITS" of a Participant at any time mean the aggregate
of all stock equivalents and dividend equivalents theretofore credited to him
pursuant to Section 4.1, less the amounts thereof theretofore distributed.
1.12 "TERMINATION OF SERVICE" or similar expression means the
termination of the Participant's employment as a regular employee of the Company
and any division, subsidiary or affiliate thereof, and shall include retirement.
A Participant who is on temporary leave of absence, whether with or without pay,
shall not be deemed to have terminated his service.
1.13 "PLAN YEAR" means the calendar year.
ARTICLE II
2.1 Each Executive of the Company or of any division, subsidiary or
affiliate of the Company may elect to have a percentage of his base
compensation, to be received by him during each Plan Year from and after January
1, 1994 deferred in accordance with the terms and conditions of the Plan. The
percentage of such base compensation that may be so deferred for any Plan Year
shall not exceed 50%, which percentage in each case shall be a multiple of 5%.
An Executive desiring to exercise such election shall, prior to the
beginning of each such Plan Year (or prior to the beginning of the calendar
quarter immediately following the Executive's Initial Eligibility, if other than
at the beginning of a Plan Year, but in no event later than thirty days after
his Initial Eligibility), notify the Company, in writing, of the percentage of
such base compensation for such Plan Year that he elects to be so deferred.
Prior to each Plan Year beginning on or after January 1, 1994 and each
Plan Year thereafter, each Executive may make a separate election to defer all
or a portion of any annual incentive bonus or any long-term incentive bonus, the
measurement period for which commences with or within the Plan Year for which an
election is being made. Such percentage shall not exceed 100% as to any cash
bonuses to be paid under the Company's 1992 Incentive Bonus Plan (or any
successor plan) during any such Plan Year. Each such percentage shall be in each
case a multiple of 5%.
Each Executive eligible for 1993 deferrals may make a separate election
(i) prior to November 1, 1993 to have a percentage of his base compensation
during the period from November 1, 1993 to December 31, 1993, or (ii) prior to
December 1, 1993 to have a percentage of his base compensation during the period
from December 1, 1993 to December 31, 1993, depending on the Initial Eligibility
date applicable to such Executive, deferred in accordance with the terms and
conditions of the Plan. The percentage of such base compensation that may be
deferred for such period shall not exceed 90%, which percentage shall be a
multiple of 5%.
2
<PAGE> 3
2.2 The amount of a Participant's Deferred Compensation shall be
credited to him either as a Cash Credit or as a Stock Credit as provided in
Article III or Article IV, as the case may be, pursuant to the Participant's
election for any Plan Year. Such election shall be made in writing at the same
time that the Participant elects said percentage as provided in Section 2.1. If
a Participant shall fail to make such election at such time, he shall be deemed
to have elected the Deferred Compensation credited to him as a Stock Credit.
2.3 A Participant's Cash Credits and Stock Credits shall be
distributable in the manner and subject to the conditions set forth in Article
VI.
ARTICLE III
3.1 (a) If a Cash Credit is elected, the Participant shall be credited,
as of the end of each calendar quarter of each Plan Year for which the election
was made, with the dollar amount of the Deferred Compensation.
(b) The Cash Credits of each Participant shall be credited, as
of the end of each calendar quarter, with an interest equivalent determined by
applying to 100% of such Participant's Cash Credits at the beginning of each
calendar quarter, less the amounts distributable or withdrawn pursuant to
Article VI during such quarter, an interest rate equal to one quarter of the
percent per annum on United States Five-Year Treasury Bills as of the last day
of such calendar quarter.
ARTICLE IV
4.1 (a) If a Stock Credit is elected, the Participant shall be
credited, as of the end of each calendar quarter, with a stock equivalent which
shall be the number of full shares of common stock of the Company that is
transferred to or purchased by the Trust provided for in Section 7.4 with the
amount of his Deferred Compensation for such calendar quarter and with the
dollar amount of any part of such credit that is not convertible into a full
share.
(b) The Stock Credits of each Participant shall be credited,
as of the end of each calendar quarter, with a dividend equivalent which shall
be an amount determined by multiplying the dividends payable, either in cash or
property (other than common stock of the Company), upon a share of common stock
of the Company to a stockholder of record during such calendar quarter, by the
number of shares in the Participant's Stock Credits at the beginning of such
calendar quarter, less the number of shares distributable or withdrawn pursuant
to Article VI during such quarter for which credit is being made. In case of
dividends payable in property, the dividend equivalent shall be based on the
fair market value of the property at the time of distribution of the dividend,
as determined by the Committee. If the dollar amount credited to the Stock
Credits of a Participant at the end of any calendar quarter equals or exceeds
the average
3
<PAGE> 4
closing price of one share of common stock of the Company determined as provided
in subsection (a) of this Section 4.1, such amount shall be treated as if it
were a Stock Credit made on such date and such dollar amount shall be reduced
accordingly.
(c) If at any time the number of outstanding shares of
common stock of the Company shall be increased as the result of any stock
dividend or split-up, the number of shares credited to each Participant's Stock
Credits shall be increased in the same proportion as the outstanding number of
shares of common stock is increased, or if the number of outstanding shares of
common stock of the Company shall at any time be decreased as the result of any
combination of outstanding shares, the number of shares credited to each
Participant's Stock Credits shall be decreased in the same proportion as the
outstanding number of shares of common stock is decreased. In the event the
Company shall at any time be consolidated with or merged into any other
corporation, there shall be credited to each Participant's Stock Credits, in
lieu of the common stock of the Company then credited thereto, the stock of
securities given in exchange for a share of common stock of the Company upon
such consolidation or merger, multiplied by the number of shares of common stock
then credited to the Stock Credits of the Participant.
ARTICLE V
5.1 If the Company shall be adjudicated or determined to be insolvent
by a court of competent jurisdiction, either in bankruptcy or otherwise, all
Stock Credits of all Participants shall be deemed as of the date of commencement
of such proceeding, to be Cash Credits in the same dollar amount as would have
been credited to them at the time such Stock Credits were credited had they at
that time elected to have them credited as Cash Credits, together with interest
equivalents thereon from that time computed as provided in Section 3.1(b); and
together with all other credits of all Participants shall constitute debts of
the Company in any such proceeding.
ARTICLE VI
6.1 (a) The following rules shall apply to distributions
under the Plan.
(i) Except in the case of a Participant who has
exercised the election provided in the following paragraph of
this Section 6.1(a), such distribution shall be made in
fifteen approximately equal annual installments.
(ii) A Participant may request in writing to the
Committee at any time prior to the termination of his service
that the distribution of his Cash or Stock Credits to him
following such termination shall be made in one to fifteen
approximately equal installments as the Participant shall
request. The Committee in its sole discretion shall determine
whether to grant such request. Such request by a Participant
may be exercised only once and shall, if approved by the
Committee, be irrevocable.
4
<PAGE> 5
(iii) Notwithstanding the foregoing provisions of
this section, if a Participant's Cash and Stock Credits shall
have a value of less than $15,000 at the date of termination
of his service, payment of such Cash and Stock Credits shall
be made in one installment. Such value of Stock Credits shall
be based on the closing market price on the New York Stock
Exchange on the nearest day of sale preceding the date of
termination of his service.
(b) Distribution of the Cash and Stock Credits pursuant to subsection
(a) of this Section 6.1 shall be made as soon as practicable following the end
of the Fiscal Year in which such termination of service occurred.
(c) A Participant may request in writing to the Committee prior to the
termination of his service, that the distribution of his Cash or Stock Credits,
in the event that his service shall terminate by reason of his death, to the
person or persons designated as provided in Section 6.2 or to his estate, as the
case may be, shall be made in approximately equal installments as the
Participant shall request not to exceed fifteen. The Committee in its sole
discretion shall determine whether to grant such request. If no request is made,
such distribution shall be made in fifteen installments. In any event, if the
beneficiary is an estate or if the value of the Participant's Cash and Stock
Credits shall be less than $15,000 at the date of the Participant's death (such
value determined in accordance with Section 6.1(a)(iii), payment shall be made
in one installment.
(d) Notwithstanding the foregoing provisions of this section, in the
event of a "designated change of control" (as defined herein) of the Company,
distribution of the Cash and Stock Credits of a Participant (or the person or
persons designated as provided in Section 6.2) shall be made to such person in a
single payment as soon as practicable following such "designated change of
control", in accordance with the provisions of Section 6.4 but not sooner than
30 days after such "designated change of control" occurs. For purposes of this
paragraph, a "designated change of control" of the Company shall be deemed to
have occurred if any of the following transactions shall have transpired: (i)
any person or group (within the meaning of Section 13(d) and 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Act"), other than an employee
benefit plan sponsored by the Company) makes a tender or exchange offer for
shares of common stock of the Company (other than pursuant to a merger or
consolidation agreement) pursuant to which purchases are made which result
(together with any other holding) in such person or group becoming the
beneficial owner within the meaning of Rule 13d-3 under the Act of more than 20%
of the Company's then outstanding common stock; (ii) the Company becomes aware
that any person or group (as defined above) has become the beneficial owner (as
defined above) of more than 20% of the Company's then outstanding common stock
and such information has been presented to and considered by the Board of
Directors; (iii) the stockholders of the Company approve a definitive agreement
to merge or consolidate the Company with or into another corporation or to sell
or otherwise dispose of all or substantially all its assets, or adopt a plan of
dissolution
5
<PAGE> 6
or liquidation; or (iv) individuals who were members of the Board of Directors
cease to constitute at least a majority thereof as a result of a contested
election. The foregoing notwithstanding, a merger of Federated Department
Stores, Inc. with R.H. Macy & Co., Inc. pursuant to the Joint Plan of
Reorganization of R.H. Macy & Co., Inc. and certain of its subsidiaries for
which Federated Department Stores, Inc. and R.H. Macy & Co., Inc. are joint plan
proponents, filed with the United States Bankruptcy Court for the Southern
District of New York on July 29, 1994, as the same may be amended or modified,
shall not be deemed a "designated change of control" of the Company for the
purposes of this Plan.
6.2 Any Cash or Stock Credits or remaining undistributed installments
thereof, which become distributable after the death of a Participant, shall be
distributed in installments, as provided in this Article VI, to such person or
persons, or the survivors thereof, including corporations, unincorporated
associations or trusts as the Participant may designate. The Participant may
also designate to his widow the absolute power to appoint by will one or more
persons including her estate, to receive payments distributable to her if she
should die before all distributions have been received. All such designations
shall be made in writing delivered to the Committee. The Participant may from
time to time revoke or change any such designation on file with the Committee.
At the time of the Participant's death, if the person or persons designated
therein shall have all predeceased the Participant or otherwise ceased to exist
or if no beneficiary designation is on file, such distributions shall be made to
the Participant's estate. If the person or persons designated therein shall
survive the Participant but shall die before receiving all of such distribution,
the balance thereof payable to such deceased distributee shall, unless the
Participant's designation provides otherwise, be distributed to such deceased
distributee's estate.
6.3 The distribution of the Cash or Stock Credits of a Participant
whose service is terminated by reason of his death shall be made as provided in
Section 6.1(c). If the death of the Participant occurs after the termination of
his service, the number of installments remaining to be paid shall be the number
which otherwise would be distributable to the Participant, provided that the
beneficiary may request, within six months of the death of the Participant, in
writing to the Committee a shorter number of installments as to all installments
which have not yet become payable. The Committee in its sole discretion shall
determine whether to grant such request. In any event, if the beneficiary is an
estate, payment shall be made in one installment.
6.4 Distribution of the Cash Credits of a Participant shall be made in
cash. Distribution of the Stock Credits of a Participant shall be made by
delivery of the number of shares of common stock of the Company credited from
the shares held in the Trust provided for in Section 7.4 hereof and by payment
of the balance, if any, in cash, except to the extent provided for in Section
6.5. The Committee may, with the consent of the person or persons then entitled
to receive distribution of the next payable Cash or Stock Credits (including
Stock Credits as to which the elections provided in the following
6
<PAGE> 7
paragraphs have been exercised), make other changes in the time of distribution
of all or part of the undistributed Cash or Stock Credits.
6.5 To the extent that the Company or the trustee provided for in
Section 7.4 hereof is required to withhold federal, state, local or foreign
taxes in connection with any payment made to a Participant or other person
hereunder, it shall be a condition to the receipt of such payment that the
Participant or such other person make arrangements satisfactory to the Company
or the trustee, as the case may be, for the payment of all such taxes required
to be withheld. In the case of any distribution to be made in shares of common
stock of the Company, the Participant shall have the right to have the Company
or the trustee, as the case may be, retain shares having a then fair market
value equal to the amount of tax required to be withheld in respect of such
distribution.
6.6 Notwithstanding any other provision of this Article VI, in the
event of a "designated change of control" of the Company, all Stock Credits of
Participants (or the person or persons designated as provided in Section 6.2)
shall be changed following the date of such "designated change of control" to,
and each Participant (or the person or persons designated as provided in Section
6.2) shall instead be credited as of such date with, their cash equivalent
determined as follows: the number of shares of common stock of the Company
represented by the Stock Credits of a Participant shall be multiplied by the
greater of (i) the average price of such stock computed on a daily basis for the
ninety (90) day calendar period immediately preceding said date of "designated
change of control", or (ii) the highest price offered for shares of common stock
of the Company by the corporation, person or group making a tender or exchange
offer for shares of common stock of the Company that is comprised within a
transaction constituting a "designated change of control" of the Company. Such
Participant shall not be credited with any dividend equivalents with respect to
such Stock Credits for the quarter of the Plan Year in which said Stock Credits
shall be so changed, but the dollar amount distributable to him as aforesaid in
lieu thereof shall instead be credited, in that Plan Year and subsequent Plan
Years, with an interest equivalent to the same extent that Cash Credits would be
so credited. For purposes of this Section 6.6 a "designated change of control"
shall have the same meaning as set forth in Section 6.1(d) hereof.
6.7 Notwithstanding any other provision of the Plan, a Participant or a
beneficiary of a Participant may withdraw all or a portion of his account in the
event of unforseeable emergency. For this purpose, unforseeable emergency means
that funds are necessary in light of the immediate and heavy unexpected
financial needs of the Participant or beneficiary. Any such distribution shall
be limited to the amount required to meet any immediate financial need that is
not reasonably available from other sources, all as determined by the Committee.
Distribution shall be made in cash as soon as practicable following approval of
the withdrawal request by the Committee. The Participant's deferrals shall be
suspended and the Participant shall not be permitted to again defer until the
beginning of the second Plan Year following the withdrawal. The Stock Credits
shall be converted to cash based on the closing market price on the New
7
<PAGE> 8
York Stock Exchange on the nearest day of sale preceding the day such withdrawal
request is approved by the Committee.
ARTICLE VII
7.1 No Participant or any other person shall have any interest in any
fund or in any specific asset or assets of the Company by reason of any Cash or
Stock Credits or interest or dividend equivalent credited to him hereunder, nor
the right to exercise any of the rights or privileges of a stockholder with
respect to any common stock credited to his Stock Credits, nor any right to
receive any distribution under the Plan except as to the extent expressly
provided in the Plan. Nothing in the Plan shall be deemed to give any officer or
any employee of the Company or any division, subsidiary or affiliate of the
Company any right to participate in the Plan, except in accordance with the
provisions of the Plan.
7.2 Neither the adoption nor the amendment of the Plan, nor any action
of the Board of Directors of the Company or the Committee, nor any election to
defer compensation hereunder, shall be held or construed to confer on any person
any legal right to continue as an employee of the Company or any division,
subsidiary or affiliate of the Company.
7.3 No Participant shall have the right to assign, pledge or otherwise
dispose of (except (i) by the exercise of a power of appointment designated as
in Article VI provided or (ii) as provided in Article VI) any Cash or Stock
Credits nor shall the Participant's interest therein be subject to garnishment,
attachment, transfer by operations of law, or any legal process; nor shall any
person entitled to receive Cash or Stock Credits or remaining undistributed
installments thereof, which become distributable after the death of a
Participant in accordance with Article VI, have the right to assign or pledge
any such credits or remaining undistributed installments.
7.4 The Company shall establish and keep in effect as long as benefits
are payable under the Plan, a Grantor (Rabbi) Trust, intended to meet the safe
harbor provisions of RevProc 92-64, for the benefit of Participant's Stock
Credits under the Plan (the "Trust"). The Company shall transfer to the Trust or
cause the Trust to purchase shares of common stock of the Company from time to
time which shall be held for the benefit of all Participants who have Stock
Credits in such amounts so that the number of shares at the end of each calendar
quarter shall equal the number of Stock Credits of all Participants outstanding
under the Plan. Distribution of shares pursuant to Section 6.4 of the Plan shall
be made directly from the Trust.
The Trust (i) shall be governed by and subject to the terms of
a trust agreement entered into between the Company, as grantor, and the trustee
and (ii) shall provide that the trustee shall promptly distribute to a
Participant such shares of common stock as the Participant shall be entitled to
pursuant to the Plan as directed by the
8
<PAGE> 9
Company. For purposes of making such distributions the trustee shall be entitled
to rely upon the written directions of the Company.
ARTICLE VIII
8.1 The administration of various aspects of the Plan by the Company
shall be monitored by one or more Committees appointed from time to time by the
Board of Directors of the Company to serve at the pleasure of the Board of
Directors.
8.2 As to each such Committee, three members of the Committee shall
constitute a quorum for the transaction of business by such Committee. All
action taken by the Committee at a meeting shall be by the vote of a majority of
those present at such meeting, but any action may be taken by the Committee
without a meeting upon written consent signed by all of the members of the
Committee.
8.3 All determinations of the Committee with respect to such
Committee's responsibilities as designated by the Board of Directors, including
but without limitation the determination of the Committee as to any disputed
question arising under the Plan, including all questions of construction and
interpretation, shall be final, binding and conclusive upon all persons. Without
limiting the generality of the foregoing, the determination of the Committee as
to whether a Participant has terminated his service and the date thereof shall
be final, binding and conclusive upon all persons.
8.4 The acknowledgment by the Company or the Committee of an assignment
or pledge made in accordance with provisions of Section 7.3 and any distribution
by the Company to the assignee or pledgee shall be final, binding and conclusive
upon all persons and shall relieve the Company and Committee of any liability or
obligation to any other person or persons with respect to such distribution. As
a condition to such acknowledgment or distribution the Company or the Committee
may require the submission of such statements, opinions, orders, certificates,
resolutions, or other instruments, or documents, consents or evidence, as the
case may be, and may impose such requirements of conditions, as either of them,
in its sole discretion, shall determine to be necessary or appropriate. Such
acknowledgment or distribution shall in no event constitute an amendment,
modification or waiver of any of the provisions of the Plan, or impose any
obligation on the Company or Committee except as expressly provided by the Plan.
8.5 The Company or the committee may consult with legal counsel, who
may be counsel for the Company or other counsel, with respect to its obligation
or duties hereunder, or with respect to any action or proceeding or any question
of law, and shall not be liable with respect to any action taken or omitted by
it in good faith pursuant to the advise of such counsel.
8.6 Whenever the context so requires, words in the masculine include
the feminine and in the feminine include the masculine.
9
<PAGE> 10
ARTICLE IX
9.1 The Board of Directors of the Company may, in its absolute
discretion, without notice, any time and from time to time, modify or amend, in
whole or in part, any or all of the provisions of the Plan, or suspend or
terminate it entirely, provided, that no such modification, amendment,
suspension or termination may, without his consent, apply to or affect the
payment or distribution to any Participant of any Cash or Stock Credits,
credited to him for any Plan Year ended prior to the effective date of such
modification, amendment, suspension or termination.
10
<PAGE> 1
Exhibit 10.48
FEDERATED DEPARTMENT STORES, INC.
PROFIT SHARING 401(k) INVESTMENT PLAN
(Amending and restating the Federated Department Stores, Inc.
Retirement Income and Thrift Incentive Plan effective as of April 1, 1997)
<PAGE> 2
FEDERATED DEPARTMENT STORES, INC.
PROFIT SHARING 401(k) INVESTMENT PLAN
(Amending and restating the Federated Department Stores, Inc. Retirement Income
and Thrift Incentive Plan effective as of April 1, 1997)
This plan shall be known as the Federated Department Stores, Inc.
Profit Sharing 401(k) Investment Plan (the "Plan").
The Plan provides additional retirement income to persons who
participate in the Plan. In this regard, it is intended that the Plan (together
with the Trust used in conjunction with the Plan) qualify as a tax-favored plan
and trust under Sections 401(a) and 501(a) of the Code. The Plan shall be
interpreted in a manner consistent with Sections 401(a) and 501(a) of the Code
wherever possible.
The Plan was adopted by Federated effective as of January 25, 1953 and
has been amended many times since then. Its name immediately prior to its
amendment and restatement under this document was the Federated Department
Stores, Inc. Retirement Income and Thrift Incentive Plan. This document, except
as otherwise provided herein, amends and restates the Plan effective as of April
1, 1997.
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SECTION 1 DEFINITIONS...............................................................................1-1
1.1 Accounts..................................................................................1-1
1.2 Affiliated Employer.......................................................................1-1
1.3 Annuity...................................................................................1-1
1.4 Board.....................................................................................1-1
1.5 Code......................................................................................1-1
1.6 Committee.................................................................................1-1
1.7 Compensation..............................................................................1-1
1.8 Effective Amendment Date..................................................................1-3
1.9 Employee..................................................................................1-3
1.10 Employer..................................................................................1-4
1.11 ERISA.....................................................................................1-4
1.12 Federated.................................................................................1-4
1.13 Highly Compensated Employee...............................................................1-4
1.14 Investment Fund...........................................................................1-5
1.15 Leased Employee...........................................................................1-5
1.16 Leave of Absence..........................................................................1-5
1.17 Non-Highly Compensated Employee...........................................................1-5
1.18 Normal Retirement Age.....................................................................1-6
1.19 Participant...............................................................................1-6
1.20 Plan......................................................................................1-6
1.21 Plan Administrator........................................................................1-6
1.22 Plan Year.................................................................................1-6
1.23 Savings Agreement.........................................................................1-6
1.24 Spouse....................................................................................1-7
1.25 Total Disability or Totally Disabled......................................................1-7
1.26 Trust.....................................................................................1-8
1.27 Trustee...................................................................................1-8
1.28 Trust Fund................................................................................1-8
SECTION 2 SERVICE DEFINITIONS AND RULES.............................................................2-1
2.1 Service Definitions.......................................................................2-1
2.2 Special Credited Employment...............................................................2-3
2.3 Affiliated Employment.....................................................................2-4
</TABLE>
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SECTION 3 ELIGIBILITY AND PARTICIPATION.............................................................3-1
3.1 Eligibility for Participation.............................................................3-1
3.2 Entry Date................................................................................3-1
3.3 Duration of Participation.................................................................3-1
3.4 Reinstatement of Participation............................................................3-1
SECTION 4 SAVINGS AND ROLLOVER CONTRIBUTIONS........................................................4-1
4.1 Effective Date of Savings Agreement.......................................................4-1
4.2 Amendment and Suspension of Savings Agreement.............................................4-1
4.3 Savings Contributions.....................................................................4-2
4.4 Pre- and After-Tax Nature of Savings Contributions........................................4-2
4.5 Savings Contributions Eligible for Match..................................................4-3
4.6 Rollover Contributions....................................................................4-3
4.7 Mistake of Fact...........................................................................4-4
SECTION 4A AVERAGE ACTUAL DEFERRAL PERCENTAGE
RESTRICTIONS............................................................................4A-1
4A.1 Average Actual Deferral Percentage Limits................................................4A-1
4A.2 Special Rules for Average Actual Deferral Percentage Limits..............................4A-1
4A.3 Distribution or Recharacterization of Excess Contributions...............................4A-2
4A.4 Definitions for Average Actual Deferral Percentage Limits................................4A-5
4A.5 Disaggregating Portions of Plan..........................................................4A-6
SECTION 5 MATCHING CONTRIBUTIONS....................................................................5-1
5.1 Annual Amount of Matching Contributions...................................................5-1
5.2 Time and Form of Matching Contributions...................................................5-2
5.3 Mistake of Fact...........................................................................5-2
SECTION 5A AVERAGE ACTUAL CONTRIBUTION PERCENTAGE
RESTRICTIONS............................................................................5A-1
5A.1 Average Actual Contribution Percentage Limits............................................5A-1
5A.2 Special Rules for Average Actual Contribution Percentage Limits..........................5A-2
5A.3 Distribution or Forfeiture of Excess Aggregate Contributions.............................5A-3
5A.4 Definitions for Average Actual Contribution Percentage Limits............................5A-7
5A.5 Disaggregating Portions of Plan..........................................................5A-8
</TABLE>
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SECTION 6 ACCOUNTS AND THEIR ALLOCATIONS AND VESTING................................................6-1
6.1 Savings Accounts and Allocation of Savings Contributions Thereto..........................6-1
6.2 Matching Accounts and Allocation of Matching Contributions
Thereto..................................................................................6-2
6.3 Rollover Accounts and Allocation of Rollover Contribution Thereto.........................6-3
6.4 Retirement Income Accounts................................................................6-3
6.5 Allocation of Forfeitures.................................................................6-4
6.6 Maximum Annual Addition to Accounts.......................................................6-4
6.7 Investment of Accounts....................................................................6-4
6.8 Allocation of Income and Losses of Investment Funds to Accounts...........................6-4
6.9 Loans to Participants.....................................................................6-5
6.10 Deduction of Benefit Payments, Forfeitures, and Withdrawals...............................6-8
6.11 Account Balances..........................................................................6-8
6.12 Vested Rights.............................................................................6-8
6.13 Voting of Federated Common Shares Held in Investment Fund.................................6-9
SECTION 6A MAXIMUM ANNUAL ADDITION LIMITS...........................................................6A-1
6A.1 Maximum Annual Addition Limit--Separate Limitation as to This
Plan....................................................................................6A-1
6A.2 Maximum Annual Addition Limit--Combined Limitation for This Plan
and Other Defined Benefit Plans.........................................................6A-4
SECTION 6B INVESTMENT OF ACCOUNTS...................................................................6B-1
6B.1 General Rules for Investment of Accounts.................................................6B-1
6B.2 Investment Funds.........................................................................6B-2
SECTION 7 WITHDRAWALS DURING EMPLOYMENT.............................................................7-1
7.1 Withdrawals of After-Tax Savings and Rollover Contributions...............................7-1
7.2 Withdrawals of Pre-Tax Savings Contributions..............................................7-1
7.3 Requirements for Hardship Withdrawals.....................................................7-2
7.4 Suspension of Savings Contributions.......................................................7-3
7.5 Reduction of Post-Withdrawal Pre-Tax Savings Contributions................................7-4
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SECTION 8 DISTRIBUTIONS ON ACCOUNT OF TERMINATION
OF EMPLOYMENT FOR REASONS OTHER THAN DEATH...............................................8-1
8.1 Distribution of Retirement Benefit........................................................8-1
8.2 Required Commencement Date................................................................8-1
8.3 Forfeiture of Nonvested Accounts on Termination of Employment.............................8-2
8.4 Special Rules as to Effect of Rehirings on Accounts.......................................8-3
8.5 Source of Restorals.......................................................................8-3
8.6 Application of Forfeitures................................................................8-3
SECTION 8A FORM OF DISTRIBUTION OF SAVINGS, ROLLOVER,
AND MATCHING ACCOUNTS...................................................................8A-1
8A.1 Section Applies Only to Savings, Rollover, and Matching Accounts.........................8A-1
8A.2 Normal Form of Savings Benefit -- Lump Sum Payment.......................................8A-1
8A.3 Optional Annuity Form of Benefit Rules...................................................8A-1
8A.4 Normal Form of Annuity Benefit...........................................................8A-3
8A.5 Election Out of Normal Annuity Form......................................................8A-3
8A.6 Optional Annuity Forms...................................................................8A-4
8A.7 Annuity Definitions......................................................................8A-4
SECTION 8B FORM OF DISTRIBUTION OF RETIREMENT INCOME
ACCOUNTS................................................................................8B-1
8B.1 Section Applies Only to Retirement Income Accounts.......................................8B-1
8B.2 Normal Form of Profit Sharing Benefit -- Qualified Annuity Forms.........................8B-1
8B.3 Election Out of Normal Form..............................................................8B-1
8B.4 Regular Optional Forms...................................................................8B-2
8B.5 Annuity Form of Benefit Rules............................................................8B-3
8B.6 Annuity Definitions......................................................................8B-3
8B.7 Required Lump Sum Form for Small Profit Sharing Benefit..................................8B-3
SECTION 9 DISTRIBUTIONS ON ACCOUNT OF DEATH.........................................................9-1
9.1 Distribution of Death Benefit.............................................................9-1
9.2 Time of Death Benefit.....................................................................9-1
9.3 Normal Form of Death Benefit -- Lump Sum Payment..........................................9-1
9.4 Optional Annuity Form of Death Benefit Rules..............................................9-2
9.5 Annuity Definitions.......................................................................9-2
9.6 Designation of Beneficiary................................................................9-3
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SECTION 9A SPECIAL SPOUSAL DEATH BENEFIT DISTRIBUTION RULES
FOR RETIREMENT INCOME ACCOUNTS..........................................................9A-1
9A.1 Section Applies Only to Retirement Income Accounts.......................................9A-1
9A.2 Time of Profit Sharing Death Benefit.....................................................9A-1
9A.3 Normal Form of Profit Sharing Death Benefit..............................................9A-1
9A.4 Election Out of Normal Form..............................................................9A-1
9A.5 Optional Forms...........................................................................9A-2
9A.6 Annuity Form of Benefit Rules............................................................9A-2
9A.7 Required Lump Sum Form for Small Profit Sharing Death Benefit............................9A-3
9A.8 Annuity Definitions......................................................................9A-4
9A.9 Designation of Beneficiary...............................................................9A-4
SECTION 10 ADDITIONAL DISTRIBUTION PROVISIONS.......................................................10-1
10.1 Allocation of Contributions After Distribution...........................................10-1
10.2 Determination of Proper Party For Distribution and Forfeiture When
Proper Party Cannot Be Located..........................................................10-1
10.3 Reemployed Participant...................................................................10-2
10.4 Nonalienation of Benefits................................................................10-2
10.5 Incompetency.............................................................................10-2
10.6 Legal Distribution Limits................................................................10-2
10.7 Distribution Form Notices................................................................10-3
10.8 Direct Rollover Distributions............................................................10-3
10.9 Distribution Restrictions................................................................10-4
10.10 Coverage of Pre-Effective Amendment Date Participants....................................10-5
SECTION 11 NAMED FIDUCIARIES........................................................................11-1
SECTION 12 ADMINISTRATIVE AND INVESTMENT COMMITTEE..................................................12-1
12.1 Appointment of Committee.................................................................12-1
12.2 General Powers of Committee..............................................................12-1
12.3 Records of Plan..........................................................................12-2
12.4 Actions of Committee.....................................................................12-2
12.5 Compensation of Committee and Payment of Plan Administrative and
Investment Charges......................................................................12-3
12.6 Limits on Liability......................................................................12-3
12.7 Claims Procedure.........................................................................12-3
12.8 Limits on Duties.........................................................................12-5
12.9 Appointment of Investment Manager........................................................12-5
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SECTION 13 TERMINATION OR AMENDMENT.................................................................13-1
13.1 Right to Terminate.......................................................................13-1
13.2 Full Vesting Upon Termination or Complete Discontinuance of Contributions................13-1
13.3 Effect of Termination of Plan or Complete Discontinuance of Contributions................13-1
13.4 Amendment of Plan........................................................................13-2
SECTION 14 TOP HEAVY PROVISIONS.....................................................................14-1
14.1 Determination of Whether Plan Is Top Heavy...............................................14-1
14.2 Effect of Top Heavy Status on Vesting....................................................14-5
14.3 Effect of Top Heavy Status on Contributions..............................................14-5
14.4 Effect of Top Heavy Status on Combined Maximum Plan Limits...............................14-6
SECTION 15 MISCELLANEOUS............................................................................15-1
15.1 Trust....................................................................................15-1
15.2 Mergers, Consolidations, and Transfers of Assets.........................................15-1
15.3 Benefits and Service for Military Service................................................15-2
15.4 Correction of Inadvertent Errors.........................................................15-2
15.5 Application of Certain Plan Provisions to Prior Plans....................................15-2
15.6 Authority to Act for Federated or Other Employer.........................................15-2
15.7 Relationship of Plan to Employment Rights................................................15-3
15.8 Applicable Law...........................................................................15-3
15.9 Agent for Service of Process.............................................................15-3
15.10 Reporting and Disclosure.................................................................15-3
15.11 Separability of Provisions...............................................................15-3
15.12 Counterparts.............................................................................15-3
15.13 Headings.................................................................................15-3
15.14 Construction.............................................................................15-4
15.15 Applicable Benefit Provisions............................................................15-4
15.16 Employment Rule..........................................................................15-4
SIGNATURE PAGE......................................................................................... S-1
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SECTION 1
---------
DEFINITIONS
-----------
As used in this Plan, the following general terms shall have the
meanings indicated below unless it is clear from the context that another
meaning is intended:
1.1 ACCOUNTS - means, with respect to any Participant, the bookkeeping
accounts established by the Committee for the Participant in accordance with the
provisions of this Plan, and as to which contributions, forfeitures, and Trust
income and losses may be allocable under the Plan. The specific types and names
of Accounts provided for a Participant under the Plan are set forth in the
subsequent provisions of the Plan. Any reference to an Account (or to a portion
of an Account) in this Plan shall also be deemed a reference to all amounts
allocated to such Account (or to such Account portion) under this Plan.
1.2 AFFILIATED EMPLOYER - means each corporation which is a member of a
controlled group of corporations (within the meaning of Section 414(b) of the
Code as modified when applicable by Section 415(h) of the Code) of which the
Employer is a member, each trade or business which is under common control
(within the meaning of Section 414(c) of the Code as modified when applicable by
Section 415(h) of the Code) with the Employer, each member of an affiliated
service group (within the meaning of Section 414(m) of the Code) which includes
the Employer, and each other entity required to be aggregated with the Employer
under Section 414(o) of the Code; except that any corporation or trade or
business which is considered as part of the Employer as defined in Section 1.10
below shall not also be considered an Affiliated Employer hereunder.
1.3 ANNUITY - means a form of benefit without life insurance which
provides for equal payments at regular installments over more than a one-year
period.
1.4 BOARD - means the Board of Directors of Federated.
1.5 CODE - means the Internal Revenue Code of 1986 and the sections
thereof, as such law and sections exist as of the Effective Amendment Date or
may thereafter be amended or renumbered.
1.6 COMMITTEE - means the committee appointed by Federated to serve as
the administrative and investment committee described in Section 12 below.
Federated may appoint the same committee to perform the duties and
responsibilities of the committee under this Plan and the committee under any
other tax-qualified retirement or savings plan maintained by the Employer or any
Affiliated Employer.
1.7 COMPENSATION - means, with respect to an Employee and for any
period, the amount determined as follows:
1-1
<PAGE> 10
(a) Subject to paragraphs (b), (c), and (d) below, the
Employee's "Compensation" for any period shall mean his or her wages (within the
meaning of Section 3401(a) of the Code) and all other compensation paid to the
Employee by the Employer for his or her period of service as an Employee and for
which the Employer is required to furnish the Employee a written statement under
Section 6051(a)(3) of the Code (E.G., compensation reported in Box 1 on a Form
W-2). Such Compensation shall be determined without regard to any rules under
Section 3401(a) of the Code that limit the remuneration included in wages based
on the nature or location of the employment or the services performed. In
addition, the Employee's Compensation shall not be aggregated for Plan purposes
with the Compensation of any other Employee, including any other Employee who is
a family member of the subject Employee.
(b) Notwithstanding the foregoing, the following types of
irregular or additional compensation shall not be included in the "Compensation"
of an Employee for any period by reason of the provisions of paragraph (a)
above: director's fees; contributions made to or payments received from a plan
of deferred compensation; amounts realized from or recognized by reason of a
restricted stock award; amounts realized from or recognized by reason of stock
appreciation rights; amounts realized from or recognized by reason of the
exercise of a stock option or the disposition of stock acquired under a stock
option; long-term cash bonuses based on meeting performance goals which are
measured over more than a one year period; moving expense reimbursements or
payments made to cover mortgage interest differentials resulting from a move;
merchandise or savings bond awards; reimbursements for tuition or educational
expenses; cost of living allowances; amounts resulting from a forgiveness of a
loan; retention bonuses or severance pay paid by reason of or approved by an
order of a court; amounts which represent a sign-on bonus for agreeing to be
employed by the Employer; sick pay or disability payments made under a
third-party payor arrangement; any imputed income or the like arising under
welfare or other fringe benefit plans or programs (including but not limited to
group term life insurance, use of employer cars, financial counseling, and
employee discounts); any payments made to cover any personal income taxes
resulting from the imputing of income by reason of welfare or other fringe
benefits; and lump sum severance payments or lump sum payments in settlement of
disputes involving termination of employment which are not otherwise described
in this paragraph (b).
(c) In addition to the amounts included in the Employee's
"Compensation" for any period under paragraph (a) and paragraph (b) above, and
notwithstanding the provisions of such paragraphs, the Employee's "Compensation"
for any period shall also include (1) any amounts contributed to a plan
qualified under Section 401(a) of the Code and maintained by the Employer which
were subject to a cash or deferred election of the Employee made under and
pursuant to Section 401(k) of the Code and which are not includable in the
Employee's income for such period by reason of Section 402(e)(3) of the Code and
(2) any amounts treated as employer contributions to a cafeteria plan maintained
by the Employer by reason of an election of the Employee made under and pursuant
to Section 125 of the Code and which are not includable in the Employee's income
for such period by reason of Section 125 of the Code.
1-2
<PAGE> 11
(d) Finally, notwithstanding any of the provisions of the
foregoing paragraphs of this Section 1.7, the total amount of allocations under
the Plan for any Plan Year ending after the Effective Amendment Date with
respect to the Accounts of the Employee shall not exceed the maximum amount of
allocations which could result for such Plan Year if the "Compensation" of the
Employee for such Plan Year did not exceed $150,000 (or any higher amount to
which this figure is adjusted under Section 401(a)(17) of the Code by the
Secretary of the Treasury or his or her delegate for the calendar year in which
such Plan Year begins).
1.8 EFFECTIVE AMENDMENT DATE - means the effective date of this
amendment and restatement of the Plan, which is April 1, 1997.
1.9 EMPLOYEE - is used herein only to refer to an individual who is
eligible to be a Participant in the Plan if and after he or she meets all of the
participation requirements set forth in Section 3 below (including certain
minimum age and minimum service requirements set forth in Section 3 below) and
means an individual who qualifies as an "Employee" under the following
provisions:
(a) Subject to the other provisions of this Section 1.9, an
"Employee" means, at any point in time, an individual who is a common law
employee of the Employer and who is classified as an employee by the Employer
for payroll payment and withholding purposes at such time.
(b) Notwithstanding the foregoing, none of the following
individuals shall be considered an "Employee" for purposes of the Plan: (1) a
director of the Employer who is not employed by the Employer in any other
capacity; (2) except where Federated has otherwise agreed, any person whose
compensation is paid by the Employer for the lessee of a leased department in a
store operated by the Employer; (3) any person who is stationed outside the
United States from the time he or she first becomes employed by the Employer or
who receives his or her Compensation in foreign currency; (4) any person whose
compensation consists solely of a retainer or fee; or (5) any person who is
represented by a collective bargaining unit unless a collective bargaining
agreement between the authorized representatives of such collective bargaining
unit and the Employer approves such person's eligibility to participate in plans
both (x) which are qualified as tax-favored plans under Section 401(a) of the
Code and (y) the sponsor (as such term is defined in ERISA) of which is the
Employer.
(c) Also, subject to the following provisions of this
paragraph (c) but notwithstanding the foregoing, unless included in the Plan by
action of the Board or pursuant to an applicable collective bargaining
agreement, an "Employee" for purposes of the Plan shall not include any person
who is a participant, eligible for participation, or in the process of
qualifying for participation in any other defined contribution plan (within the
meaning of Section 414(i) of the Code) which qualifies under Section 401(a) of
the Code and the cost of which is borne, in whole or in part, by the Employer or
any Affiliated Employer. However, a person who otherwise qualifies as an
"Employee" under the other provisions of this Section 1.9 shall not be
considered other than an "Employee" merely because of his or her participation
in
1-3
<PAGE> 12
another plan if such participation relates solely to employment which preceded
the date on which he or she would otherwise become a Participant under the Plan
and the person's benefits under such other plan relate solely to contributions
made with respect to such past service.
(d) Further, when any corporation which is part of the
Employer at any point in time later loses its status as being part of the
Employer (because it no longer is part of a controlled group of corporations
which includes Federated or because of any other reason), all persons who are
considered "Employees" under this Plan by reason of their employment by such
corporation immediately prior to such corporation losing its status as part of
the Employer shall no longer be considered "Employees" under this Plan upon such
corporation's loss of Employer status.
(e) In addition, any Leased Employee shall be considered an
Employee only if he or she is both a Leased Employee of the Employer and
Federated has agreed to his or her being considered an Employee for purposes of
this Plan.
1.10 EMPLOYER - means each and every corporation which is a member of
the controlled group of corporations (within the meaning of Section 414(b) of
the Code) which includes Federated. Except where the context otherwise is clear,
any reference to the Employer in this Plan shall be deemed to be referring
collectively to all of the corporations which comprise the Employer.
1.11 ERISA - means the Employee Retirement Income Security Act of 1974
and the sections thereof, as such law and sections exist as of the Effective
Amendment Date or may thereafter be amended or renumbered.
1.12 FEDERATED - means Federated Department Stores, Inc., or any
corporate successor thereto. Federated is the sponsor of this Plan.
1.13 HIGHLY COMPENSATED EMPLOYEE - means, with respect to any Plan Year
(for purposes of this Section 1.13, the "subject Plan Year"), any person who is
a highly compensated employee (within the meaning of Section 414(q) of the Code)
for the subject Plan Year. Under the provisions of Code Section 414(q) as in
effect on the Effective Amendment Date, subject to any subsequent changes to
such Code Section, a person shall be considered as a highly compensated employee
for the subject Plan Year if he or she an Employee during at least part of such
Plan Year and (1) was at any time a 5% owner (as defined in Section 416(i)(1) of
the Code) of the Employer or any Affiliated Employer during the subject Plan
Year or the immediately preceding Plan Year (for purposes of this Section 1.13,
the "look-back Plan Year") or (2) received Compensation in excess of $80,000 in
the look-back Plan Year. The $80,000 amount set forth above shall be adjusted
for each Plan Year beginning after the Effective Amendment Date in accordance
with the adjustment to such amount made by the Secretary of the Treasury or his
or her delegate under Section 414(q)(1) of the Code. Finally, a person shall be
considered a highly compensated employee for the subject Plan Year under the
provisions of Code Section 414(q) as in effect on the Effective Amendment Date
if he or she separated from
1-4
<PAGE> 13
service (or was deemed to have separated from service under Treasury regulations
issued under Section 414(q) of the Code) prior to the subject Plan Year, if he
or she performs no services for the Employer during the subject Plan Year, and
if he or she was considered a highly compensated employee under the provisions
of Code Section 414(q) for either the Plan Year in which he or she separated
from service (or was deemed to have separated from service) or any Plan Year
ending on or after the person's 55th birthday.
1.14 INVESTMENT FUND - means one of the separate commingled investment
funds established under the Trust which are used for the investment of assets of
the Plan. The specific Investment Funds used for the Plan are described in the
subsequent provisions of the Plan.
1.15 LEASED EMPLOYEE - means any person who is a leased employee
(within the meaning of Section 414(n) of the Code) of the Employer or an
Affiliated Employer. Under Code Section 414(n), subject to any subsequent
changes to such Code Section, a leased employee is an individual who provides
services to a recipient, in a capacity other than as a common law employee of
the recipient, in accordance with each of the following three requirements: (1)
the services are provided pursuant to an agreement between the recipient and one
or more leasing organizations; (2) the individual has performed such services
for the recipient on a substantially full-time basis for a period of at least
one year; and (3) such services are performed under the primary direction or
control by the recipient. The determination of who is a Leased Employee shall be
consistent with any regulations issued under Section 414(n) of the Code.
1.16 LEAVE OF ABSENCE - means, with respect to an Employee, any period
of the Employee's absence from service with the Employer which does not
constitute a quit, retirement, or discharge under any uniform and
nondiscriminatory personnel policy of the Employer which applies to the class of
Employees to which such Employee belongs. For this purpose, if for any period
the Employee continues to be paid his or her regular salary or wages and to
perform any services required of him or her by the Employer, he or she is not
considered absent from service (and thereby is not on a Leave of Absence) for
such period. A Leave of Absence shall in any event include an absence of the
Employee from service for maternity or paternity reasons. An absence for
"maternity or paternity reasons" means an absence from service (1) by reason of
the pregnancy of the Employee, (2) by reason of the birth of a child of the
Employee, (3) by reason of the placement of a child with the Employee in
connection with the adoption of such child by the Employee, or (4) for purposes
of caring for such child for a period immediately following such birth or
placement. An Employee shall be treated as still being an Employee for purposes
of the Plan while on a Leave of Absence, but he or she shall be treated as
having terminated his or her employment with the Employer at the end of any
Leave of Absence unless at such time he or she returns to service with the
Employer or is granted by the Employer an extension of the approved leave of
absence period.
1.17 NON-HIGHLY COMPENSATED EMPLOYEE - means, with respect to any Plan
Year, any person who is an Employee during at least part of such Plan Year and
who is not a Highly Compensated Employee with respect to such Plan Year.
1-5
<PAGE> 14
1.18 NORMAL RETIREMENT AGE - means, with respect to any Participant,
the later of: (1) the date the Participant first reaches age 65; or (2) the
fifth annual anniversary of the date the Participant first becomes a Participant
in the Plan. A Participant shall be fully vested in his or her Accounts if,
while an Employee, he or she attains the date which would be his or her Normal
Retirement Age under this Section 1.18.
1.19 PARTICIPANT - means, at any relevant time, any person who at such
time either is eligible to actively participate in the Plan or still has accrued
benefits held under the Plan. Except as may otherwise be provided in Section 4.6
below, the provisions of Section 3 below determine when a person is a
Participant on or after the Effective Amendment Date.
1.20 PLAN - means the Federated Department Stores, Inc. Profit Sharing
401(k) Investment Plan, as currently set forth in this document and as may be
amended hereinafter. In addition, any reference to the "Plan" contained in this
document also refers to all defined contribution plans which preceded and were
continued by this current version of the Plan or any such other preceding plan,
and any defined contribution plans which are or were merged into or have or had
assets and liabilities directly transferred to this Plan as currently
constituted or any of such other preceding plans, with all such other preceding
and merged or transferred plans being referred to herein as the "Prior Plans."
The provisions of the Prior Plans are hereby incorporated by reference in this
document to the extent necessary to apply any provision of this document. In
this regard, the Prior Plans include, but are not limited to, the Federated
Department Stores, Inc. Retirement Income and Thrift Incentive Plan as in effect
prior to the Effective Amendment Date (for purposes of this Section 1.20, the
"prior Federated Savings Plan"), the Broadway Stores Inc. 401(k) Savings and
Investment Plan (which was merged into the prior Federated Savings Plan as of
March 31, 1997), the R.H. Macy & Co., Inc. Savings Plan (which was merged into
the prior Federated Savings Plan as of March 31, 1997), and the Federated
Savings Plan for Employees of Lazarus PA, Inc. (which was merged into the prior
Federated Savings Plan as of March 31, 1997).
1.21 PLAN ADMINISTRATOR - means Federated.
1.22 PLAN YEAR - means the calendar year.
1.23 SAVINGS AGREEMENT - means, with respect to a Participant and for
any specified period that the agreement is in effect, any agreement between the
Participant and the Employer under which the Participant's Compensation for the
specified period is reduced on a pre-tax basis and/or after-tax basis (in 1%
increments up to 15%) and the amount of such pre-tax and/or after-tax reduction
is contributed to the Trust by the Employer on behalf of the Participant. Any
Savings Agreement is also subject to the following provisions:
(a) In no event may a Participant reduce his or her
Compensation for any specified period on either a pre-tax or after-tax basis or
on an aggregate basis by more than 15% pursuant to a Savings Agreement. The
Committee may, in order to make it easier for the Plan to meet the limits set
forth in Sections 4A and 5A below, further restrict the amount by which
1-6
<PAGE> 15
any Participant who is then believed to be a Highly Compensated Employee may
reduce his or her Compensation on either a pre-tax or after-tax basis or on an
aggregate basis for a specified period pursuant to a Savings Agreement to some
lower percent.
(b) Also, in no event may a Participant reduce his or her
Compensation on a pre-tax basis for any calendar year by more than $9,500 (or
any higher amount to which this figure is adjusted by the Secretary of the
Treasury or his or her delegate for such calendar year pursuant to Section
402(g) of the Code).
(c) A Savings Agreement or an amendment of a Savings Agreement
must be made on a form prepared or approved for this purpose by the Committee
and filed with a Plan representative, by a communication to a Plan
representative under a telephonic system approved by the Committee, or under any
other method approved by the Committee, with the specific method or methods to
be used to be chosen in its discretion by the Committee. The Committee may
choose different methods to apply to Participants in different situations (E.G.,
requiring a form to be used for new Participant but a telephonic system to be
used for other Participants). Regardless of what method is to be used for a
Participant, if the Participant properly enters into a Salary Reduction
Agreement or amends such an agreement under the method for doing so which
applies to him or her and the type of election he or she is making, for all
other provisions of the Plan he or she will be deemed to have "filed" with a
Plan representative such agreement or amendment on the day he or she completes
all steps required by such method to enter into such agreement or amendment.
(d) Any election (by an appropriate method) that 0% of the
Participant's Compensation is to be reduced shall not be considered a Savings
Agreement for purposes of the Plan.
1.24 SPOUSE - means, with respect to an Employee and at any relevant
time, the Employee's husband or wife who is recognized as such under the laws of
the State in which the Employee resides at such time.
1.25 TOTAL DISABILITY OR TOTALLY DISABLED - means or refers, with
respect to any Participant, to the Participant's permanent and continuous mental
or physical inability by reason of injury, disease, or condition to meet the
requirements of any employment for wage or profit. A Participant shall be deemed
to be disabled for purposes of this Plan only when both of the following two
requirements are met. First, a licensed physician or psychiatrist must provide
to the Plan a written opinion that the Participant is totally disabled as that
term is defined above. Second, the Participant must be eligible for and receive
total disability benefits under Section 223 of the Federal Social Security Act,
as amended, or any similar or subsequent section or act of like intent or
purpose (unless the Committee determines, based on the written opinion of a
licensed physician or psychiatrist provided the Committee pursuant to the
immediately preceding sentence, that the Participant would be likely to qualify
for such total disability benefits if he or she survived a sufficient amount of
time to be processed for and receive such benefits but that he or she is also
likely to die before he or she would otherwise be determined
1-7
<PAGE> 16
by the Social Security Administration or other applicable government agency to
qualify for or to receive such benefits).
1.26 TRUST - means the trust agreement used from time to time as the
funding media for the Plan. The Trust is hereby deemed a part of this Plan.
1.27 TRUSTEE - means the person or entity serving from time to time as
the Trustee under the Trust.
1.28 TRUST FUND - means the trust fund established in accordance with
the Trust.
1-8
<PAGE> 17
SECTION 2
---------
SERVICE DEFINITIONS AND RULES
-----------------------------
2.1 SERVICE DEFINITIONS. For purposes of the Plan, the following terms
related to service shall have the meanings hereinafter set forth unless the
context otherwise requires:
2.1.1 BREAK-IN-SERVICE - means, with respect to an Employee,
any period which meets the following conditions:
(a) The Employee shall be considered to have incurred
a Break-in-Service for any Plan Year which ends after the Effective Amendment
Date and for which the Employee is credited with not more than 500 Hours of
Service.
(b) If the Employee participated in a Prior Plan
before the Effective Amendment Date, the Employee shall also be considered to
have incurred a Break-in-Service for any twelve month period which occurs prior
to January 1, 1997 to the extent that the provisions of the Prior Plan in which
he or she last actively participated prior to January 1, 1997 treated such
period as a break-in-service of the Employee as of December 31, 1996.
2.1.2 ELIGIBILITY SERVICE - means, with respect to an
Employee, the Employee's period of service with the Employer to be taken into
account for purposes of determining his or her eligibility to become a
Participant in the Plan, computed as follows:
(a) An Employee who completes at least 1,000 Hours of
Service during the twelve consecutive month period commencing on his or her
Employment Date shall be credited with one year of Eligibility Service at the
end of such twelve consecutive month period.
(b) Further, an Employee who fails to complete at
least 1,000 Hours of Service during the twelve consecutive month period
commencing on his or her Employment Date shall be credited with one year of
Eligibility Service at the end of the first Plan Year commencing after such
Employment Date during which he or she completes at least 1,000 Hours of
Service.
(c) For an Employee who both (1) ceases to be an
Employee of the Employer prior to his or her being credited with one year of
Eligibility Service, and (2) suffers a Break-in-Service before being
subsequently reemployed by the Employer, his or her service with the Employer
prior to his or her reemployment shall be disregarded in determining the
Eligibility Service he or she needs under the Plan to become a Participant (and
his or her Reemployment Date shall be treated as if it were his or her
Employment Date for such purposes).
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<PAGE> 18
2.1.3 EMPLOYMENT DATE - means, with respect to an Employee,
the date on which the Employee first performs an Hour of Service.
2.1.4 HOUR OF SERVICE - means, with respect to an Employee,
each hour for which the Employee: (1) is paid, or is entitled to payment, for
the performance of duties as an Employee; (2) is directly or indirectly paid, or
is entitled to payment, for a period of time (without regard to whether the
employment relationship is terminated) when he or she performs no duties as an
Employee due to vacation, holiday, illness, incapacity (including disability),
layoff, jury duty, military duty, or leave of absence; or (3) is paid for any
reason in connection with his or her employment as an Employee an amount as
"back pay," irrespective of mitigation of damages. The crediting of Hours of
Service to an Employee under the Plan shall also be subject to the following
provisions:
(a) Notwithstanding the foregoing provisions of this
Section 2.1.4, an Hour of Service shall not be credited to an Employee on
account of a payment which solely reimburses such Employee for medical, or
medically related, expenses incurred by or on behalf of the Employee.
(b) Also, subject to the other provisions of this
Section 2.1.4, Hour of Service credit shall be calculated in accordance with
paragraphs (b) and (c) of 29 C.F.R. Section 2530.200b-2 of the Department of
Labor Hour of Service Regulations, which paragraphs are hereby incorporated by
reference into this Plan.
(c) Any Employee who is exempt from the minimum wage
and overtime pay requirements of the Federal Fair Labor Standards Act, and as to
whom records of actual hours worked are thereby not needed to be kept for such
purposes, shall be credited with: (1) if the period on which such Employee is
paid is a week (or a multiple of a week), 45 Hours of Service for each week
included in each such period for which he or she would be credited with at least
one Hour of Service under the other provisions of this Section 2.1.4; (2) if the
period on which such Employee is paid is a semi-monthly period, 95 Hours of
Service for each such semi-monthly payroll period for which he or she would be
credited with at least one Hour of Service under the other provisions of this
Section 2.1.4; or (3) if the period on which such Employee is paid is a month
(or a multiple of a month), 190 Hours of Service for each month included in each
such period for which he or she would be credited with at least one Hour of
Service under the other provisions of this Section 2.1.4.
(d) Hours of Service to be credited to an Employee in
connection with each period (1) which is of no more than 31 days, (2) which
begins on the first day of a pay period for the Employee (for purposes of this
paragraph (d), the "initial pay period"), (3) which ends on the last day of the
Employee's pay period which includes the pay day for the initial pay period, and
(4) which overlaps two computation periods or occurs in a month which overlaps
two computation periods shall be credited on behalf of the Employee to the
computation period in which falls the first day of the month during which the
pay day for the initial pay period occurs.
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<PAGE> 19
2.1.5 REEMPLOYMENT DATE - means, with respect to an Employee
who has previously incurred a Break-in-Service, the first day after the
Employee's most recent Break-in-Service on which the Employee performs an Hour
of Service.
2.1.6 SIX-YEAR BREAK-IN-SERVICE - means, with respect to an
Employee who has ceased to be an Employee of the Employer, a period of six or
more Breaks-in-Service which is not interrupted by any period which is not
included in a period of a Break-in-Service.
2.1.7 VESTING SERVICE - means, with respect to a Participant,
the Participant's service with the Employer which is taken into account under
the Plan for vesting purposes (I.E., for purposes of determining the
Participant's nonforfeitable percentage of the Participant's Accounts under the
Plan), computed as follows:
(a) The Participant shall be credited with one year
of Vesting Service for each Plan Year which ends after the Effective Amendment
Date and for which the Participant is credited with at least 1,000 Hours of
Service.
(b) The Participant shall also be credited with years
of Vesting Service equal to the number of years of vesting service he or she was
credited with as of March 31, 1997 under the terms (as then in effect) of the
Prior Plans in which he or she participated prior to the Effective Amendment
Date (taking into account the provisions of each such Prior Plan for determining
vesting service, including each such plan's provisions concerning
breaks-in-service). In no event, however, shall any period which occurs prior to
the Effective Amendment Date be counted more than once in determining the
Participant's years of Vesting Service.
(c) Notwithstanding the foregoing, any Vesting
Service completed by the Participant prior to a Six-Year Break-in-Service of the
Participant which ends after the Effective Amendment Date shall be disregarded
under the Plan if the Participant did not have a nonforfeitable interest in any
retirement benefit under the Plan at the time such Break-in-Service began.
(d) As a special rule, if on March 31, 1997 the
Participant was a participant in a Prior Plan which generally determined vesting
service under the "elapsed time" approach described in Treas. Reg. Section
1.410(a)-7, then the Participant shall, in determining whether he or she is
credited with a year of Vesting Service for the Plan Year which ends on December
31, 1997, be credited with Hours of Service for the period of the first calendar
quarter of 1997 in accordance with the provisions of Section 2.1.4 above
(whether or not the Participant is exempt from the minimum wage and overtime pay
requirements of the Federal Fair Labor Standards Act).
2.2 SPECIAL CREDITED EMPLOYMENT. For purposes of the Plan, years during
which an Employee was employed by a corporate or other predecessor of any
corporation which becomes part of the Employer or an Affiliated Employer after
the Effective Amendment Date, or by any division (including any branch thereof)
of the Employer or an Affiliated Employer whose
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<PAGE> 20
business is acquired by the Employer or the Affiliated Employer after the
Effective Amendment Date, shall be considered in either case years of
Eligibility Service and Vesting Service for this Plan if they would have been so
considered under Section 2.1.2 or 2.1.7 above (as appropriate) had they been
completed with the Employer or the Affiliated Employer and if the Employee had
been employed by such predecessor or division at the time it so became part of
or had its business acquired by the Employer or the Affiliated Employer (unless
Federated provides, by appropriate corporate action exercised in a uniform and
nondiscriminatory manner prior to the Employee becoming a Participant in this
Plan, that such Eligibility Service and/or Vesting Service shall not be so
credited to the Employee). In addition, Federated may also in its discretion
provide, by appropriate corporate action exercised in a uniform and
nondiscriminatory manner, that, for purposes of the Plan, years of an Employee's
employment by a lessee of a leased department of a store operated by the
Employer whose business is directly assumed by the Employer shall be considered
years of Eligibility Service and/or Vesting Service for this Plan if they would
have been so considered under Section 2.1.2 or 2.1.7 above (as appropriate) had
they been completed with the Employer and if the Employee had been employed by
the lessee of such leased department at the time its business was directly
assumed by the Employer. Also, any period of service of an Employee with the
armed forces of the United States shall be credited as Eligibility Service
and/or Vesting Service to the extent required by Federal law.
2.3 AFFILIATED EMPLOYMENT. Notwithstanding any other provision of the
Plan to the contrary:
2.3.1 Any period of employment of a person with the Employer
during which the person is not considered an Employee, any period of employment
with an Affiliated Employer, and any period during which a person is a Leased
Employee shall in any such case, regardless of whether occurring prior to or
after employment as an Employee of the Employer, be considered in the same
manner as employment as an Employee of the Employer for purposes of crediting
years of Eligibility Service and Vesting Service under this Plan to such person,
determining if such person has incurred a Break-in-Service, and determining if
and when such person has a vested right to a benefit under the Plan.
2.3.2 Further, a transfer of status from that of being an
Employee to other employment with the Employer or to any employment with an
Affiliated Employer shall in any such case not be considered a termination of
employment from the Employer for purposes of determining when a benefit of this
Plan due a Participant, if any, is to be or begin to be distributed or whether
the lump sum value of such benefit is low enough so that the form of such
benefit is automatically to be paid in a lump sum form; rather, such termination
of employment and the time at which the lump sum value of the benefit is
determined for purposes of seeing if the Participant's benefit is automatically
to be paid in a lump sum form shall be deemed to occur only upon the
Participant's later termination of employment from the group composed of the
Employer and all Affiliated Employers.
2.3.3 In addition, any person who during any Plan Year is an
employee of the Employer other than as an Employee, is an employee of an
Affiliated Employer, or is a Leased
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<PAGE> 21
Employee shall be considered an Employee, and any compensation received in any
such capacity during such Plan Year shall (if determined under the same
principles as are set forth at Section 1.7 above) be considered as Compensation,
for purposes of determining the persons who are the Highly Compensated Employees
for any Plan Year.
2.3.4 Also, any compensation received during a period by a
person in the capacity of being an employee of the Employer other than as an
Employee, an employee of an Affiliated Employer, or a Leased Employee shall (if
determined under the same principles as are set forth at Section 1.7 above or,
if another definition of compensation is used under any of the below-named Plan
Sections, in accordance with such definition when being considered under such
Plan Section) be considered as Compensation of his or hers for such period for
purposes of Section 4A below (which provides Average Actual Deferral Percentage
Limits), Section 5A below (which provides Average Actual Contribution Percentage
limits), Section 6A below (which provides maximum annual addition limits), and
Section 14 below (which provides top heavy plan rules).
2.3.5 Finally, except as is otherwise expressly provided in
this Plan or by Federated pursuant to express authorization provided in this
Plan (including but not limited to Sections 4A, 5A, 6A, and 14 below), any
period of employment of a person by the Employer during which the person is not
considered an Employee, any period of employment with an Affiliated Employer,
and any period during which a person is a Leased Employee, and any compensation
or remuneration received during any such period, shall not be used in any manner
in calculating the amount of any benefit or contributions to which the person is
entitled under this Plan.
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<PAGE> 22
SECTION 3
---------
ELIGIBILITY AND PARTICIPATION
-----------------------------
3.1 ELIGIBILITY FOR PARTICIPATION. Persons shall remain or become
Participants in the Plan only in accordance with the following provisions:
3.1.1 Any person who was a Participant in the Plan on the date
immediately preceding the Effective Amendment Date shall continue to be a
Participant in this Plan as of the Effective Amendment Date, unless he or she is
no longer an Employee as of the Effective Amendment Date.
3.1.2 Further, each other person who, as of any Entry Date
which occurs on or after the Effective Amendment Date, (1) has completed at
least one year of Eligibility Service, (2) has attained at least age 21, and (3)
is an Employee shall become a Participant as of such Entry Date. Notwithstanding
the foregoing, if a person would become a Participant as of any Entry Date under
the foregoing provisions of this Section 3.1.2 but for the fact he or she is not
an Employee, and he or she subsequently becomes an Employee, such Employee shall
be deemed a Participant in the Plan on the date he or she so subsequently
becomes an Employee.
3.2 ENTRY DATE. For purposes of the Plan and Section 3.1 above in
particular, an "Entry Date" means the first day of any calendar month.
3.3 DURATION OF PARTICIPATION.
3.3.1 Each Participant in the Plan shall continue to be a
Participant until he or she is no longer entitled to receive Compensation and
the entire balance in his or her Accounts under the Plan has been distributed or
forfeited hereunder.
3.3.2 However, notwithstanding the foregoing, a Participant
shall be eligible to enter into or continue a Savings Agreement to the extent
allowed under Section 4 below only while he or she is considered an active
Participant. For this purpose and all other purposes of the Plan (and in
particular for purposes of Sections 3.4 and 4 below), a person is an "active
Participant" for any period only if both he or she is a Participant during such
period and the person is entitled to receive Compensation for such period.
3.4 REINSTATEMENT OF PARTICIPATION. Any person who ceases to be an
active Participant, but who is thereafter reemployed as an Employee by the
Employer, shall be reinstated as an active Participant as of the date on which
he or she next completes an Hour of Service on or after such reemployment.
3-1
<PAGE> 23
SECTION 4
---------
SAVINGS AND ROLLOVER CONTRIBUTIONS
----------------------------------
4.1 EFFECTIVE DATE OF SAVINGS AGREEMENT.
4.1.1 Any person who continues as an active Participant in the
Plan as of the Effective Amendment Date pursuant to Section 3.1.1 above and who
has a Savings Agreement in effect as of the date immediately preceding the
Effective Amendment Date shall continue to have such agreement apply on and
after the Effective Amendment Date, until and unless he or she amends or
suspends such Savings Agreement under the provisions of Section 4.2 below.
4.1.2 In addition, any person who becomes an active
Participant in the Plan on or after the Effective Amendment Date pursuant to
Section 3.1.2 above may have a Savings Agreement take effect as of the later of
the date he or she first becomes a Participant or the first pay day which occurs
after his or her Savings Agreement is filed with a Plan representative and by
which the Committee can reasonably put such agreement into effect.
4.1.3 Also, any person who is reinstated as an active
Participant pursuant to Section 3.4 above may have a new Savings Agreement take
effect as of the later of the date he or she is reinstated as an active
Participant or the first pay day which occurs after his or her new Savings
Agreement is filed with a Plan representative and by which the Committee can
reasonably put such agreement into effect.
4.1.4 Any Savings Agreement of an active Participant which
becomes effective under the foregoing provisions of this Section 4.1 shall not
be effective after the active Participant ceases to be an active Participant,
except with respect to Compensation paid for a prior period when he or she was
an active Participant.
4.2 AMENDMENT AND SUSPENSION OF SAVINGS AGREEMENT.
4.2.1 An active Participant may change or suspend his or her
then effective Savings Agreement in any manner (E.G., by amending the percent of
future Compensation subject to such agreement, changing the portion of his or
her Savings Contributions which are to be made on a pre-tax basis and/or an
after-tax basis, or suspending altogether his or her Savings Contributions) as
of the first pay day which occurs after an amended Savings Agreement or another
Plan form which reflects such change or suspension is filed with a Plan
representative and by which the Committee can reasonably put such amended
agreement or form into effect.
4.2.2 If an active Participant suspends his or her entire
Savings Agreement under the provisions of Section 4.2.1 above during a Plan
Year, he or she may enter into a new Savings Agreement as of the first pay day
which occurs after his or her new Savings Agreement is filed with a Plan
representative and by which the Committee can reasonably put such new
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<PAGE> 24
agreement into effect, provided that he or she is not then prohibited from
entering into a Savings Agreement by reason of a hardship withdrawal he or she
has taken under this Plan (pursuant to Section 7.4 below) or any other plan
maintained by the Employer or an Affiliated Employer.
4.3 SAVINGS CONTRIBUTIONS. Subject to the other provisions of the Plan,
the Employer shall contribute to the Trust, on behalf of each active Participant
who has a Savings Agreement in effect, those contributions called for under such
Savings Agreement. Such contributions are described in this Plan as "Savings
Contributions." Savings Contributions applicable to any Participant shall be
remitted by the Employer to the Trust, and allocated to the Participant's
Accounts, as soon as administratively practical. For purposes of allocating
Matching Contributions under the subsequent provisions of the Plan, any Savings
Contributions shall be deemed to be made for the pay day to which such
contributions relate and for the Plan Year during which such pay day occurs.
Savings Contributions shall be made in cash and shall not be dependent on net or
accumulated profits of the Employer.
4.4 PRE- AND AFTER-TAX NATURE OF SAVINGS CONTRIBUTIONS.
4.4.1 Any active Participant who enters into a Savings
Agreement or amended Savings Agreement under the Plan shall specify in such
agreement the portion of the Savings Contributions resulting from such agreement
which shall be considered under this Plan as "Pre-Tax Savings Contributions" and
the portion of such Savings Contributions which shall be considered "After-Tax
Savings Contributions." (The Committee may, in order to make it easier for the
Plan to meet the limits set forth in Sections 4A and 5A below, restrict the
maximum amount of the Savings Contributions applicable to an active Participant
who is then believed to be a Highly Compensated Employee which may be specified
by the Participant as Pre-Tax Savings Contributions, as After-Tax Savings
Contributions, or as Pre-Tax and After-Tax Savings Contributions in the
aggregate for any period to some percent of his or her Compensation for such
period which is less than the maximum percent of Compensation he or she is
otherwise permitted to elect to have contributed as Savings Contributions on his
or her behalf for such period.)
4.4.2 For purposes of the Plan, any Savings Contributions
applicable to an active Participant which are designated by the Participant as
Pre-Tax Savings Contributions shall be contributed to the Plan prior to the
Participant being deemed in receipt of such amounts for Federal income tax
purposes and shall thereby be considered to have been contributed on a "pre-tax"
basis.
4.4.3 Further, for purposes of the Plan, any Savings
Contributions applicable to an active Participant which are designated by the
Participant as After-Tax Savings Contributions shall be contributed to the Plan
after the Participant is deemed in receipt of such amounts for Federal income
tax purposes and shall thereby be considered to have been contributed on an
"after-tax" basis.
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<PAGE> 25
4.5 SAVINGS CONTRIBUTIONS ELIGIBLE FOR MATCH. For purposes of
determining the extent to which the Employer shall make Matching Contributions
under Section 5 below, certain Savings Contributions made on behalf of an active
Participant for any Plan Year are deemed to be "Basic Savings Contributions"
which are used to help determine the amount of Matching Contributions for such
Plan Year, and certain of such Savings Contributions are deemed to be
"Additional Savings Contributions" which are not used to determine the amount of
Matching Contributions for such Plan Year. For this purpose, the portion of the
Savings Contributions made on behalf of an active Participant for any Plan Year
are deemed to be Basic Savings Contributions or Additional Savings Contributions
in accordance with the following rules:
4.5.1 Any such Savings Contributions which are made for a pay
day which occurs on or after the Effective Amendment Date and designated by the
Participant as Pre-Tax Savings Contributions shall be deemed to be Basic Savings
Contributions for the Plan Year in which such pay day occurs to the extent they
do not exceed 5% of the Participant's Compensation for such pay day and shall be
deemed to be Additional Savings Contributions for the Plan Year in which such
pay day occurs to the extent they do exceed 5% of the Participant's Compensation
for such pay day.
4.5.2 Any such Savings Contributions which are made for a pay
day which occurs on or after the Effective Amendment Date and designated by the
Participant as After-Tax Savings Contributions shall be deemed to be Additional
Savings Contributions.
4.5.3 In addition, any savings contributions made on behalf of
the Participant with respect to any pay day which occurs on or after January 1,
1997 and prior to the Effective Amendment Date shall be deemed to be Basic
Savings Contributions for the Plan Year which ends December 31, 1997 to the
extent such contributions would have been used to determine matching
contributions for such Plan Year under the Prior Plan in which the Participant
was participating on such pay day (if such Prior Plan had continued in effect)
and shall be deemed to be Additional Savings Contributions for the Plan Year
which ends December 31, 1997 to the extent they would not have been used to
determine matching contributions for such Plan Year under such Prior Plan.
4.6 ROLLOVER CONTRIBUTIONS. An Employee may, whether or not he or she
is yet a Participant in the Plan under the provisions of Section 3 above, cause
any distribution applicable to him or her from another plan which he or she
certifies is an eligible rollover distribution (within the meaning of Section
402(c) of the Code) to be paid directly from such other plan to this Plan
pursuant to the terms of Section 401(a)(31) of the Code, provided that the
Committee receives a written notice from the plan administrator of such other
plan that the other plan has received a determination letter from the Internal
Revenue Service concluding that the other plan is qualified as a tax-favored
plan under Section 401(a) of the Code and provided that the Committee has no
information which shows that such payment is other than an eligible rollover
contribution under Section 402(c) of the Code. Any such payment to the Plan
shall be referred to as a "Rollover Contribution" under the Plan. If an Employee
makes a Rollover Contribution to the Plan but is not a Participant in the Plan
under the provisions of Section 3 above, he or she
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<PAGE> 26
shall still be considered a Participant under the other provisions of the Plan
to the extent such other provisions concern the establishment of an Account to
reflect such contribution, the investment, crediting of Plan earnings and
losses, loaning, withdrawing, and distribution of such Account, and the
administration of the Plan with respect to such Account, but he or she shall not
be considered a Participant for any other purposes of the Plan until he or she
qualifies as a Participant under the provisions of Section 3 above.
4.7 MISTAKE OF FACT.
4.7.1 Any After-Tax Savings Contributions contributed to the
Plan for a Participant which has been made in an amount in excess of the amount
of the After-Tax Savings Contributions elected by the Participant or which have
been taken from Compensation of the Participant paid when he or she was not a
Participant in the Plan may be paid by the Trustee to the Participant (unless
repayment is not administratively possible) as a correction of the mistake which
led it to be contributed to the Plan, upon the receipt by the Trustee of a
written notice of a Plan representative describing such mistake and requesting
the payment of such contribution to the Participant. Plan income attributable to
such contributions shall not be paid to the Participant in connection with such
payment, and Plan losses attributable to such contributions shall not reduce the
amount which is otherwise to be paid. (The Employer in its discretion may pay to
the Participant an additional amount, determined in any manner the Employer
chooses, to reflect interest which may have been earned by the Participant had
the returned Savings Contributions never been made to the Plan, but any such
payment shall only be made outside the Plan and shall not be paid by the Plan
itself.)
4.7.2 Any other Savings Contributions made upon the basis of a
mistaken factual assumption shall be repaid by the Trustee to the Employer
(unless repayment is not administratively possible) as a correction of such
mistaken factual assumption, upon the receipt by the Trustee within one year
from the date of such contribution of a written notice of the Employer
describing such mistaken factual assumption and requesting the return of such
contributions. Plan income attributable to such contributions shall not be paid
to the Employer, but Plan losses attributable to such contributions shall reduce
the amount which is otherwise to be paid.
4.7.3 Any Rollover Contribution of a Participant which the
Committee later determines was not an eligible rollover contribution under
Section 402(c) of the Code shall be distributed (after being adjusted by Plan
income and losses which the Committee reasonably determines were attributable to
such contribution) to the Participant within a reasonable administrative period
after the Committee makes such determination.
4-4
<PAGE> 27
SECTION 4A
----------
AVERAGE ACTUAL DEFERRAL PERCENTAGE RESTRICTIONS
-----------------------------------------------
4A.1 AVERAGE ACTUAL DEFERRAL PERCENTAGE LIMITS. The Average Actual
Deferral Percentage of the Highly Compensated Employees for any Plan Year which
ends after the Effective Amendment Date (for purposes of this Section 4A.1, the
"subject Plan Year") must satisfy one of the following limits:
4A.1.1 LIMITATION 1: The Average Actual Deferral Percentage of
the Highly Compensated Employees for the subject Plan Year may not exceed the
Average Actual Deferral Percentage of the Non-Highly Compensated Employees for
the subject Plan Year multiplied by 1.25; or
4A.1.2 LIMITATION 2: The Average Actual Deferral Percentage of
the Highly Compensated Employees for the subject Plan Year both may not exceed
the Average Actual Deferral Percentage of the Non-Highly Compensated Employees
for the subject Plan Year multiplied by 2.0 and may not exceed the Average
Actual Deferral Percentage of the Non-Highly Compensated Employees for the
subject Plan Year by more than two percentage points.
Notwithstanding the foregoing, for any subject Plan Year which begins on or
after January 1, 1998, the Average Actual Deferral Percentage of the Non-Highly
Compensated Employees for the Plan Year which immediately precedes such subject
Plan Year shall be used, instead of such percentage for such subject Plan Year,
in determining whether the above limitations are met for such subject Plan Year.
4A.2 SPECIAL RULES FOR AVERAGE ACTUAL DEFERRAL PERCENTAGE LIMITS. For
purposes of the limits set forth in Section 4A.1 above, the following special
rules apply:
4A.2.1 If, with respect to any Plan Year (for purposes of this
Section 4A.2.1, the "subject Plan Year"), an Eligible Participant who is a
Highly Compensated Employee for the subject Plan Year is or was eligible to
participate in a cash or deferred arrangement, which qualifies under Section
401(k) of the Code and is contained in an aggregatable plan, during at least a
part of such aggregatable plan's plan year which ends in the same calendar year
in which the subject Plan Year ends (for purposes of this Section 4A.2.1, the
"aggregatable plan's subject plan year"), then, for the purpose of determining
the Actual Deferral Percentage of the Eligible Participant for the subject Plan
Year under this Plan, any contributions made to such aggregatable plan for the
aggregatable plan's subject plan year which would be treated as Pre-Tax Savings
Contributions of the Eligible Participant for the subject Plan Year had they
been allowed and made under this Plan for the subject Plan Year shall be treated
as if they were Pre-Tax Savings Contributions of the Eligible Participant under
this Plan for the subject Plan Year. For purposes hereof, an "aggregatable plan"
is a plan other than this Plan which is qualified under Section 401(a) of the
Code, is maintained by the Employer or an
4A-1
<PAGE> 28
Affiliated Employer, and is not prohibited from being aggregated with this Plan
for purposes of Section 410(b) of the Code under Treas. Reg. Section 1.410(b)-7.
4A.2.2 For purposes of determining if the Average Actual
Deferral Percentage limit of Section 4A.1 above is met for any Plan Year (for
purposes of this Section 4A.2.2, the "subject Plan Year"), the Plan may treat
any Matching Contributions (as provided for in Section 5.1 below) which are made
on behalf of an Eligible Participant who is a Non-Highly Compensated Employee
for the subject Plan Year or the immediately preceding Plan Year (whichever of
such Plan Years is used to determine such percentage for purposes of the limits
of Section 4A.1 which apply to the subject Plan Year) as being Pre-Tax Savings
Contributions of such Eligible Participant for such Plan Year to the extent the
treatment of such Matching Contributions as Savings Contributions is helpful in
meeting the limits of Section 4A.1 above for the subject Plan Year, provided
that the Eligible Participant has been fully vested at all times in the portion
of his or her Accounts which is attributable to such Matching Contributions and
also provided that the limits of Section 5A.1 below are still met for such Plan
Year even if the Matching Contributions being treated as Savings Contributions
hereunder are disregarded for purposes of meeting such limit.
4A.2.3 To be counted in determining whether the Average Actual
Deferral Percentage limits are met for any Plan Year, any Pre-Tax Savings
Contributions must be paid to the Trust before the end of the Plan Year which
next follows the Plan Year to which such contributions relate.
4A.2.4 For purposes of this Section 4A, Pre-Tax Savings
Contributions are treated as being "made on behalf of an Eligible Participant"
for a Plan Year if such contributions relate to pay days of the Eligible
Participant which occur during such Plan Year.
4A.2.5 For purposes of this Section 4A, the Prior Plans shall
be considered as if they had been part of the "Plan" with respect to the Plan
Year which ends December 31, 1997, persons who were participants in the Prior
Plans between January 1, 1997 and the Effective Amendment Date shall be
considered as Participants in this Plan for the Plan Year which ends December
31, 1997, and contributions which are made under such Prior Plans with respect
to pay days occurring between January 1, 1997 and the Effective Amendment Date
and which would be considered as Pre-Tax Savings Contributions for the Plan Year
which ends December 31, 1997 if they had been made under this Plan shall be
treated as Pre-Tax Savings Contributions under this Plan for the Plan Year which
ends December 31, 1997.
4A.3 DISTRIBUTION OR RECHARACTERIZATION OF EXCESS CONTRIBUTIONS. Subject to the
provisions of this Section 4A.3 but notwithstanding any other provision of the
Plan to the contrary, any Excess Contributions applicable to any Plan Year which
ends after the Effective Amendment Date (for purposes of this Section 4A.3, the
"subject Plan Year") shall be distributed during (but no later than the last day
of) the immediately following Plan Year to Eligible Participants who were Highly
Compensated Employees for the subject Plan Year. (Such Excess Contributions,
even if distributed, shall still be treated as part of the Annual Addition,
4A-2
<PAGE> 29
as defined in Section 6A below, for the subject Plan Year.) The following
provisions apply to this distribution requirement:
4A.3.1(a) For purposes of the Plan, "Excess Contributions" for
any subject Plan Year means the amount (if any) by which the aggregate sum of
Pre-Tax Savings Contributions paid to the Trust for such Plan Year on behalf of
Eligible Participants who are Highly Compensated Employees for such Plan Year
exceeds the maximum amount of such Pre-Tax Savings Contributions which could
have been made and still have satisfied one of the limitations set forth in
Section 4A.1 above. The Excess Contributions for any subject Plan Year shall be
determined, and applied to Eligible Participants who are Highly Compensated
Employees for the subject Plan Year for distribution purposes, in accordance
with the methods described in paragraphs (b) and (c) below.
(b) The total amount of Excess Contributions for any
subject Plan Year shall be deemed to be the sum of the Excess Contributions
which are determined to apply to each Eligible Participant who is a Highly
Compensated Employee for the subject Plan Year under the leveling method which
is described in this paragraph (b). Under this leveling method, the Actual
Deferral Percentage of the Highly Compensated Employee(s) with the highest
Actual Deferral Percentage for the subject Plan Year is reduced to the extent
required to enable one of the applicable limitations set forth in Section 4A.1
above to be satisfied for the subject Plan Year or to cause such Actual Deferral
Percentage to equal the Actual Deferral Percentage of the Highly Compensated
Employee(s) with the next highest Actual Deferral Percentage for the subject
Plan Year, whichever comes first. This process is repeated as necessary until
one of the applicable limitations set forth in Section 4A.1 above is satisfied
for the subject Plan Year. For each Highly Compensated Employee, his or her
amount of Excess Contributions for the subject Plan Year under this leveling
method is equal to: (1) the total of the Pre-Tax Savings Contributions paid to
the Trust for the subject Plan Year on his or her behalf (determined before the
application of this leveling method), less (2) the amount determined by
multiplying the Highly Compensated Employee's Actual Deferral Percentage for the
subject Plan Year (determined after the application of this leveling method) by
his or her Compensation for the subject Plan Year. In no event shall the Excess
Contributions which are determined to apply to a Highly Compensated Employee for
the subject Plan Year under this leveling method exceed the total of the Pre-Tax
Savings Contributions paid to the Trust on his or her behalf for the subject
Plan Year (determined before application of this leveling method). However, the
leveling method described in this paragraph (b) is used only to determine the
total sum of Excess Contributions for the subject Plan Year and is not used to
determine the portion of such total sum of Excess Contributions which will be
distributed to any Eligible Participant who is a Highly Compensated Employee for
the subject Plan Year; instead, the method for determining the portion of such
Excess Contributions which will be distributed to each such Highly Compensated
Employee is described in paragraph (c) below.
(c) The portion of the total sum of Excess
Contributions for any subject Plan Year which will be distributed to any
Eligible Participant who is a Highly Compensated Employee for the subject Plan
Year shall be determined under the dollar amount reduction
4A-3
<PAGE> 30
method described in this paragraph (c). Under this dollar amount reduction
method, the dollar amount of the Pre-Tax Savings Contributions made to the Trust
for the subject Plan Year on behalf of the Highly Compensated Employee(s) with
the highest dollar amount of Pre-Tax Savings Contributions for the subject Plan
Year is reduced to the extent required to equal the dollar amount of the Pre-Tax
Savings Contributions made to the Trust for the subject Plan Year on behalf of
the Highly Compensated Employee(s) with the next highest dollar amount of
Pre-Tax Savings Contributions for the subject Plan Year or to cause the total
dollar amount of the reductions in Pre-Tax Savings Contributions for the subject
Plan Year under this dollar amount reduction method to equal the total sum of
the Excess Contributions for the subject Plan Year (as determined under
paragraph (b) above), whichever comes first. This process is repeated as
necessary until the total dollar amount of the reductions in Pre-Tax Savings
Contributions for the subject Plan Year equals the total sum of the Excess
Contributions for the subject Plan Year (as determined under paragraph (b)
above). For each Highly Compensated Employee, his or her portion of the total
amount of the Excess Contributions for the subject Plan Year which will be
distributed to him or her is equal to the total dollar amount of the reductions
made in his or her Pre-Tax Savings Contributions for the subject Plan Year under
this dollar amount reduction method.
4A.3.2 (a) The distribution of any portion of the Excess
Contributions for a subject Plan Year to an Eligible Participant under the
provisions of this Section 4A.3 shall be adjusted upward for the Trust's income
allocable thereto (or downward for the Trust's loss allocable thereto), as
determined under paragraph (b) below.
(b) For purposes hereof, the Trust's income (or loss)
allocable to any Excess Contributions applicable to a subject Plan Year and
applied to an Eligible Participant for distribution purposes shall be equal to
the product obtained by multiplying (1) the net income (or net loss) for the
subject Plan Year and for the gap period of the Investment Fund or Funds in
which the Eligible Participant's Savings Contributions were invested which is
allocable under Section 6.7 below to the portion of the Participant's Savings
Account attributable to Pre-Tax Savings Contributions by (2) a fraction, the
numerator of which is the amount of the Excess Contributions otherwise being
distributed to the Eligible Participant and the denominator of which is the
total balance as of the first day of the subject Plan Year of the portion of the
Eligible Participant's Savings Account attributable to Pre-Tax Savings
Contributions plus the Pre-Tax Savings Contributions allocated to that portion
of his or her Savings Account for the subject Plan Year and for the gap period.
For purposes hereof, the "gap period" refers to the period from the end of the
subject Plan Year through the last date for which investment returns of the
applicable Investment Fund or Funds have been completed and the results of which
are reasonably available to the Committee prior to the date the Excess
Contributions are being distributed.
(c) If any Excess Contributions applicable to an
Eligible Participant and for a subject Plan Year are distributed to the Eligible
Participant under the provisions of this Section 4A.3, then, pursuant to Section
411(a)(3)(G) of the Code and Treas. Reg. Section 1.411(a)-4(b)(7), any Matching
Contributions which are allocated to the Eligible Participant's
4A-4
<PAGE> 31
Matching Account for such Plan Year by reason of such Excess Contributions (and
not yet distributed or forfeited under the Plan by the date the Excess
Contributions are distributed) shall, together with the Trust's income allocable
thereto (or less the Trust's loss allocable thereto), be forfeited as of the day
such Excess Contributions are distributed to the Eligible Participant (and such
forfeited amounts shall be reallocated to Accounts of Participants in accordance
with later provisions of the Plan). For these purposes, the Trust's income (or
loss) allocable to any such forfeited Matching Contributions shall be equal to
the product obtained by multiplying (1) the total net income (or total net loss)
for the subject Plan Year and for the gap period of the Investment Fund or Funds
in which the Eligible Participant's Matching Contributions were invested which
is allocable under Section 6.7 below to the portion of the Eligible
Participant's Matching Account attributable to Matching Contributions by (2) a
fraction, the numerator of which is the Matching Contributions being forfeited
under this paragraph (c) and the denominator of which is the total balance as of
the first day of the subject Plan Year of the portion of the Eligible
Participant's Matching Account attributable to Matching Contributions plus the
Matching Contributions and forfeitures allocated to his or her Matching Account
for the subject Plan Year and for the gap period. For purposes hereof, the "gap
period" refers to the period from the end of the subject Plan Year through the
last date for which investment returns of the applicable Investment Fund or
Funds have been completed and the results of which are reasonably available to
the Committee prior to the date the Matching Contributions are being forfeited
hereunder.
(d) If the entire balance of the portion of an
Eligible Participant's Savings Account which is attributable to Pre-Tax Savings
Contributions is distributed to the Eligible Participant during a subject Plan
Year (and no balance remains in that portion of his or her Savings Account at
the end of such Plan Year), then such distribution shall be deemed for all
purposes of this Plan as a distribution under this Section 4A.3.2 of the Excess
Contributions applicable for distributions purposes to the Eligible Participant
for the subject Plan Year (and Trust income or loss allocable thereto) to the
extent Excess Contributions (and allocable Trust income or losses) would
otherwise have been required to be distributed to the Eligible Participant under
this Section 4A.3.
4A.3.3 Notwithstanding any other provision of the Plan to the
contrary, the limitations set forth in Section 4A.1 above shall be deemed met
for any subject Plan Year if the Excess Contributions for such Plan Year are
distributed in accordance with and to the extent required by the foregoing
provisions of this Section 4A.3.
4A.3.4 If any Excess Contributions applicable to a subject
Plan Year are not distributed to the appropriate Eligible Participants within
2-1/2 months after the last day of the subject Plan Year, an excise tax shall be
imposed under Code Section 4979 on the Employer in an amount generally equal to
10% of such Excess Contributions (unadjusted for income or loss allocable
thereto).
4A.4 DEFINITIONS FOR AVERAGE ACTUAL DEFERRAL PERCENTAGE LIMITS. For
purposes of the limits set forth in this Section 4A, the following definitions
shall apply:
4A-5
<PAGE> 32
4A.4.1 "Average Actual Deferral Percentage" for any Plan Year
means: (1) with respect to the Highly Compensated Employees, the average (to the
nearest one-hundredth of a percent) of the Actual Deferral Percentages of the
Eligible Participants who are Highly Compensated Employees for such Plan Year;
and (2) with respect to the Non-Highly Compensated Employees, the average (to
the nearest one-hundredth of a percent) of the Actual Deferral Percentages of
the Eligible Participants who are Non-Highly Compensated Employees for such Plan
Year.
4A.4.2 "Actual Deferral Percentage" for any Plan Year means,
with respect to any person who is an Eligible Participant for such Plan Year,
the ratio (expressed as a percentage to the nearest one-hundredth of a percent)
of the Pre-Tax Savings Contributions made on behalf of the Eligible Participant
for such Plan Year to the Compensation of the Eligible Participant for the
entire Plan Year (regardless of whether he or she is a Participant for the
entire Plan Year or for only part but not all of such Plan Year). The Actual
Deferral Percentage of a person who is an Eligible Participant for such Plan
Year but who does not have any Pre-Tax Savings Contributions made on his or her
behalf for such Plan Year is 0%.
4A.4.3 "Eligible Participant" means, for any Plan Year, each
person who is both a Participant under the Plan and an Employee during at least
part of such Plan Year.
4A.5 DISAGGREGATING PORTIONS OF PLAN. The provisions of Sections 4A.1
through 4A.4 above shall be applied separately for the portion of this Plan
which covers Participants who are not collectively bargained employees and the
portion of the Plan which covers Participants who are collectively bargained
employees and as if each such portion were a separate plan. For purposes hereof,
a "collectively bargained employee" is an Employee who is included in a unit of
employees covered by a collective bargaining agreement between employee
representatives and the Employer, provided retirement benefits were the subject
of good faith bargaining between such employee representatives and the Employer.
4A-6
<PAGE> 33
SECTION 5
---------
MATCHING CONTRIBUTIONS
----------------------
5.1 ANNUAL AMOUNT OF MATCHING CONTRIBUTIONS. For each Plan Year which
ends after the Effective Amendment Date, the Employer shall contribute amounts
to the Trust in addition to the Savings Contributions elected by Participants
for such Plan Year. Such additional contributions shall be referred to in the
Plan as "Matching Contributions." Subject to the other provisions of the Plan,
the amount of Matching Contributions which shall be made by the Employer for any
Plan Year which ends after the Effective Amendment Date (for purposes of this
Section 5.1, the "subject Plan Year") shall be the amount determined under the
following provisions of this Section 5:
5.1.1 Subject to the provisions of Sections 5.1.2 and 5.1.3
below, the amount of Matching Contributions which shall be made by the Employer
for the subject Plan Year shall be the lesser of the amounts set forth in
paragraphs (a) and (b) below:
(a) An amount equal to 100% of the aggregate Basic
Savings Contributions which are made for the subject Plan Year to the Plan on
behalf of those Participants who are employed by the Employer on the last day of
the subject Plan Year and who did not make any withdrawal during the subject
Plan Year from the portion of their Accounts which reflect Basic Savings
Contributions; or
(b) An amount equal to 3.5% of the Employer's Net
Income, as determined for the tax year of the Employer which begins in the
subject Plan Year, before deduction of any Matching Contributions to this Plan
and only after excluding the amount of any extraordinary items, by the
Federated's chief accounting officer in accordance with the standard accounting
procedures of Federated and as so categorized in the financial statements of the
Employer.
5.1.2 In addition to the amount determined under Section 5.1.1
above, the Employer shall, subject to the provisions of Section 5.1.3 below,
also make a further amount of Matching Contributions for the subject Plan Year
to the extent necessary so that each Participant who is employed by the Employer
on the last day of the subject Plan Year and who did not make any withdrawal
during the subject Plan Year from the portion of his or her Accounts which
reflect his or her Basic Savings Contributions is allocated under Section 6.2
below a total amount of Matching Contributions (after taking into account his or
her share of the Matching Contributions made pursuant to Section 5.1.1 above)
which is equal to 33-1/3% of the Basic Savings Contributions made by or for him
or her for the subject Plan Year.
5.1.3 To the extent permitted by Section 8.6 below, any
forfeitures arising during the subject Plan Year shall be used to reduce and be
substituted in place of those Matching Contributions otherwise required under
Sections 5.1.1 and 5.1.2 above for the subject
5-1
<PAGE> 34
Plan Year which exceed the amount of Matching Contributions which would be made
for the subject Plan Year if such amount were limited to the amount described in
paragraph (b) of Section 5.1.1 above. For purposes of Section 6.2 below, which
concerns the allocation of Matching Contributions, any forfeitures (or other
amounts) which are used to reduce and substitute for any amount of Matching
Contributions for the subject Plan Year shall be considered as if they were
Matching Contributions for the subject Plan Year.
5.2 TIME AND FORM OF MATCHING CONTRIBUTIONS.
5.2.1 Subject to the provisions of Section 5.2.2 below, the
Matching Contributions for any Plan Year may be paid in one or more
installments, but the total amount to be contributed must be paid to the Trust
on or before the last date permitted by applicable law for deduction of such
contributions for the tax year of the Employer in which such Plan Year ends. Any
such Matching Contributions shall be allocated among Participants' Accounts as
of the last day of the Plan Year for which such contributions are made or as
soon as administratively practical after such contributions are paid to the
Trust, whichever is later.
5.2.2 The actual amount paid as Matching Contributions for any
Plan Year may initially, to the extent determined with respect to the amount set
forth in Section 5.1.1(b) above, be based upon the Federated's Net Income as
estimated by Federated's chief accounting officer in accordance with data
available to him or her at the time the estimate is made. In the event that,
after Federated's chief accounting officer subsequently determines the final
calculation of the amount set forth in Section 5.1.1(b) above, an additional
amount is required to be contributed to the Plan by the Employer to meet the
required Matching Contribution provisions of Section 5.1 above, then the
Employer will make such additional contribution as soon as possible after such
final calculation is completed. In the event that the final calculation of the
amount set forth in Section 5.1.1(b) above shows that the Employer made Matching
Contributions for the subject Plan Year in excess of the amount required under
Section 5.1 above, the amount by which the actual amount of Matching
Contributions which were made exceeds the required Matching Contributions for
such Plan Year shall be deemed not to have been made for such Plan Year but
instead shall be deemed made in the next following Plan Year and shall be used
as soon as possible to reduce (and to substitute for) the next required Matching
Contributions to be made to the Plan.
5.2.3 The Matching Contributions made for any Plan Year shall
be made in cash or, in the discretion of the Employer, in common stock of
Federated.
5.3 MISTAKE OF FACT. Any Matching Contributions made upon the basis of
a mistaken factual assumption shall be repaid by the Plan to the Employer
(unless repayment is not administratively possible) as a correction of such
mistaken factual assumption, upon the receipt by the Trustee within one year
from the date of such contributions of a written notice of the Employer
describing such mistaken factual assumption and requesting the return of such
contributions. Plan income attributable to such contributions may not be paid to
the Employer,
5-2
<PAGE> 35
but Plan losses attributable to such contributions shall reduce the amount
which is otherwise to be paid.
5-3
<PAGE> 36
SECTION 5A
----------
AVERAGE ACTUAL CONTRIBUTION PERCENTAGE RESTRICTIONS
---------------------------------------------------
5A.1 AVERAGE ACTUAL CONTRIBUTION PERCENTAGE LIMITS.
5A.1.1 The Average Actual Contribution Percentage for Highly
Compensated Employees for any Plan Year which ends after the Effective Amendment
Date (for purposes of this Section 5A.1, the "subject Plan Year") must satisfy
one of the following limits:
(a) LIMITATION 1: The Average Actual Contribution
Percentage of the Highly Compensated Employees for the subject Plan Year may not
exceed the Average Actual Contribution Percentage of the Non-Highly Compensated
Employees for the subject Plan Year multiplied by 1.25; or
(b) LIMITATION 2: The Average Actual Contribution
Percentage of the Highly Compensated Employees for the subject Plan Year both
may not exceed the Average Actual Contribution Percentage of the Non-Highly
Compensated Employees for the subject Plan Year multiplied by 2.0 and may not
exceed the Average Actual Contribution Percentage of the Non-Highly Compensated
Employees for the subject Plan Year by more than two percentage points.
Notwithstanding the foregoing, for any subject Plan Year which begins on or
after January 1, 1998, the Average Actual Contribution Percentage of the
Non-Highly Compensated Employees for the Plan Year which immediately precedes
such subject Plan Year shall be used, instead of such percentage for such
subject Plan Year, in determining whether the above limitations are met for such
subject Plan Year.
5A.1.2 In addition, the Average Actual Contribution Percentage
of the Highly Compensated Employees for any subject Plan Year may not, when
added to the Average Actual Deferral Percentage of the Highly Compensated
Employees for the same Plan Year, exceed the Aggregate Limit. For purposes of
the limitation set forth in this Section 5A.1.2, such Average Actual Deferral
Percentage and Average Actual Contribution Percentage shall be determined as if
all Excess Contributions attributable to the limits set forth in Section 4A.1
above had previously been determined and distributed and as if all Excess
Aggregate Contributions attributable to the limits set forth in Section 5A.1.1
above had previously been determined and distributed or forfeited (and hence as
if such Average Actual Deferral Percentage and Average Actual Contribution
Percentage had been calculated without considering the contributions reflected
in such Excess Contributions and Excess Aggregate Contributions, respectively).
Also, notwithstanding the foregoing, the limitation set forth in this Section
5A.1.2 shall automatically be deemed met for a subject Plan Year if either the
Average Actual Deferral Percentage of the Highly Compensated Employees for the
subject Plan Year is not in excess of the Average Actual Deferral Percentage of
the Non-Highly Compensated Employees for the subject Plan Year multiplied by
1.25 or the Average Actual Contribution Percentage of the Highly Compensated
Employees for the
5A-1
<PAGE> 37
subject Plan Year is not in excess of the Average Actual Contribution Percentage
of the Non-Highly Compensated Employees for the subject Plan Year multiplied by
1.25. Notwithstanding the foregoing, for any subject Plan Year which begins on
or after January 1, 1998, the Average Actual Deferral Percentage and the Average
Actual Contribution Percentage of the Non-Highly Compensated Employees for the
Plan Year which immediately precedes such subject Plan Year shall be used,
instead of such percentages for such subject Plan Year, in determining whether
the conditions set forth in the immediately preceding sentence are met for such
subject Plan Year.
5A.1.3 As is provided in Section 5A.3 below, the Plan shall
correct any violation of the limitations of either Section 5A.1.1 above or
Section 5A.1.2 above for any subject Plan Year by reducing (in the manner set
forth in Section 5A.3 below) the Average Actual Contribution Percentage of the
Highly Compensated Employees for such subject Plan Year.
5A.2 SPECIAL RULES FOR AVERAGE ACTUAL CONTRIBUTION PERCENTAGE LIMITS.
For purposes of the limits set forth in Section 5A.1 above, the following
special rules apply:
5A.2.1 If, with respect to any Plan Year (for purposes of this
Section 5A.2.1, the "subject Plan Year"), an Eligible Participant who is a
Highly Compensated Employee for the subject Plan Year is or was eligible to
participate in an aggregatable plan, of which a part is subject to the
provisions of Section 401(m) of the Code, during at least a part of such
aggregatable plan's plan year which ends in the same calendar year in which the
subject Plan Year ends (for purposes of this Section 5A.2.1, the "aggregatable
plan's subject plan year"), then, for the purpose of determining the Actual
Contribution Percentage of the Eligible Participant for the subject Plan Year
under this Plan, any contributions made to such aggregatable plan for the
aggregatable plan's subject plan year which would be treated as After-Tax
Savings Contributions or Matching Contributions of the Eligible Participant for
the subject Plan Year had they been allowed and made under this Plan for the
subject Plan Year shall be treated as if they were After-Tax Savings
Contributions or Matching Contributions of the Eligible Participant under this
Plan for the subject Plan Year. For purposes hereof, an "aggregatable plan" is a
plan other than this Plan which is qualified under Section 401(a) of the Code,
is maintained by the Employer or an Affiliated Employer, and is not prohibited
from being aggregated with this Plan for purposes of Section 410(b) of the Code
under Treas. Reg. Section 1.410(b)-7.
5A.2.2 For purposes of determining if the Average Actual
Contribution Percentage limits of Section 5A.1 above are met for any Plan Year
(for purposes of this Section 5A.2.2, the "subject Plan Year"), the Plan may
treat any Pre-Tax Savings Contributions (as provided for in Section 4 above)
which are made on behalf of an Eligible Participant who is treated as a
Non-Highly Compensated Employee for purposes of determining the Average Actual
Deferral Percentage of the Non-Highly Compensated Employees for the subject Plan
Year or the immediately preceding Plan Year (whichever of such Plan Years is
used to determine such
5A-2
<PAGE> 38
percentage for purposes of the limits of Section 5A.1 which apply to the subject
Plan Year) as being Matching Contributions of such Eligible Participant for such
Plan Year to the extent the treatment of such Pre-Tax Savings Contributions as
Matching Contributions is helpful in meeting the limits of Section 5A.1 above
for the subject Plan Year, provided that the limits of Section 4A.1 above are
still met for the subject Plan Year even if the Pre-Tax Savings Contributions
being treated as Matching Contributions hereunder are disregarded for purposes
of meeting such limits.
5A.2.3 To be counted in determining whether the Average Actual
Contribution Percentage limits are met for any Plan Year, any Matching
Contributions or After-Tax Savings Contributions must be paid to the Trust
before the end of the Plan Year which next follows the Plan Year to which such
contributions relate.
5A.2.4 Notwithstanding any other provisions herein to the
contrary, any Matching Contributions which are forfeited under Section 4A.3.2(c)
above by reason of relating to Excess Contributions which are distributed to an
Eligible Participant shall not be taken into account in determining the Eligible
Participant's Actual Contribution Percentage for any Plan Year or considered as
Matching Contributions for any other purpose under this Section 5A.
5A.2.5 For purposes of this Section 5A, Matching Contributions
or After-Tax Savings Contributions are treated as being "made on behalf of an
Eligible Participant" for a Plan Year if such contributions are allocated to an
Account of the Eligible Participant by reason of Basic Savings Contributions
which relate to pay days of the Eligible Participant which occur during such
Plan Year.
5A.3 DISTRIBUTION OR FORFEITURE OF EXCESS AGGREGATE CONTRIBUTIONS.
Subject to the provisions of this Section 5A.3 but notwithstanding any other
provision of the Plan to the contrary, any Excess Aggregate Contributions
applicable to any Plan Year which ends after the Effective Amendment Date (for
purposes of this Section 5A.3, the "subject Plan Year") shall be distributed no
later than the last day of the immediately following Plan Year to Eligible
Participants who were Highly Compensated Employees for the subject Plan Year or
forfeited no later than as of the last day of such immediately following Plan
Year, in accordance with the following provisions of this Section 5A. (Such
Excess Aggregate Contributions shall still be treated as part of the Annual
Addition, as defined in Section 6A below, for the subject Plan Year.) The
following provisions apply to this distribution or forfeiture requirement:
5A.3.1(a) For purposes of the Plan, "Excess Aggregate
Contributions" for any subject Plan Year means the amount (if any) by which the
aggregate sum of Matching Contributions and After-Tax Savings Contributions paid
to the Trust for such Plan Year on behalf of Eligible Participants who are
Highly Compensated Employees for such Plan Year exceeds the maximum amount of
such Matching Contributions and After-Tax Savings Contributions which could have
been made and still have satisfied one of the limitations set forth in Section
5A.1.1 above and the limitation set forth in Section 5A.1.2 above. The Excess
Aggregate Contributions for any subject Plan Year shall be determined, and
applied to Eligible
5A-3
<PAGE> 39
Participants who are Highly Compensated Employees for the subject Plan Year for
distribution purposes, in accordance with the methods described in paragraphs
(b) and (c) below.
(b) The total amount of Excess Aggregate
Contributions for any Plan Year shall be deemed to be the sum of the Excess
Aggregate Contributions which are determined to apply to each Eligible
Participant who is a Highly Compensated Employee for the subject Plan Year under
the leveling method which is described in this paragraph (b). Under this
leveling method, the Actual Contribution Percentage of the Highly Compensated
Employee(s) with the highest Actual Contribution Percentage for the subject Plan
Year is reduced to the extent required to enable one of the applicable
limitations set forth in Section 5A.1.1 above and the limitation set forth in
Section 5A.1.2 above to be satisfied for the subject Plan Year or to cause such
Actual Contribution Percentage to equal the Actual Contribution Percentage of
the Highly Compensated Employee(s) with the next highest Actual Contribution
Percentage for the subject Plan Year, whichever comes first. This process is
repeated as necessary until one of the applicable limitations set forth in
Section 5A.1.1 above and the limitation set forth in Section 5A.1.2 above are
satisfied for the subject Plan Year. For each Highly Compensated Employee, his
or her amount of Excess Aggregate Contributions for the subject Plan Year under
this leveling method is equal to: (1) the total of the After-Tax Savings
Contributions and Matching Contributions paid to the Trust for the subject Plan
Year on his or her behalf (determined before the application of this leveling
method), less (2) the amount determined by multiplying the Highly Compensated
Employee's Actual Contribution Percentage for the subject Plan Year (determined
after the application of this leveling method) by his or her Compensation for
the subject Plan Year. In no event shall the Excess Aggregate Contributions
which is determined to apply to a Highly Compensated Employee for the subject
Plan Year under this leveling method exceed the total of the After-Tax Savings
Contributions and Matching Contributions paid to the Trust on his or her behalf
for the subject Plan Year (determined before application of this leveling
method). However, the leveling method described in this paragraph (b) is used
only to determine the total sum of Excess Aggregate Contributions for the
subject Plan Year and is not used to determine the portion of such total sum of
Excess Aggregate Contributions which will be distributed to any Eligible
Participant who is a Highly Compensated Employee for the subject Plan Year or
forfeited from such Highly Compensated Employee's Accounts; instead, the method
for determining the portion of such Excess Aggregate Contributions which will be
distributed to each such Highly Compensated Employee or forfeited from such
Highly Compensated Employee's Accounts is described in paragraph (c) below.
(c) The portion of the total sum of Excess Aggregate
Contributions for any subject Plan Year which will be distributed to any
Eligible Participant who is a Highly Compensated Employee for the subject Plan
Year or forfeited from such Highly Compensated Employee's Accounts shall be
determined under the dollar amount reduction method described in this paragraph
(c). Under this dollar amount reduction method, the dollar amount of the
After-Tax Savings Contributions
5A-4
<PAGE> 40
and Matching Contributions made to the Trust for the subject Plan Year on behalf
of the Highly Compensated Employee(s) with the highest dollar amount of
After-Tax Savings Contributions and Matching Contributions for the subject Plan
Year is reduced to the extent required to equal the dollar amount of the
After-Tax Savings Contributions and Matching Contributions made to the Trust for
the subject Plan Year on behalf of the Highly Compensated Employee(s) with the
next highest dollar amount of After-Tax Savings Contributions and Matching
Contributions for the subject Plan Year or to cause the total dollar amount of
the reductions in After-Tax Savings Contributions and Matching Contributions for
the subject Plan Year under this dollar amount reduction method to equal the
total sum of the Excess Aggregate Contributions for the subject Plan Year (as
determined under the leveling method described in paragraph (b) above),
whichever comes first. This process is repeated as necessary until the total
dollar amount of the reductions in After-Tax Savings Contributions and Matching
Contributions for the subject Plan Year equals the total sum of the Excess
Aggregate Contributions for the subject Plan Year (as determined under the
leveling method described in paragraph (b) above). For each Highly Compensated
Employee, his or her portion of the total sum of the Excess Aggregate
Contributions for the subject Plan Year which will be distributed to him or her
or forfeited from his or her Accounts is equal to the total dollar sum of the
reductions made in his or her After-Tax Savings Contributions and Matching
Contributions for the subject Plan Year under this dollar amount reduction
method.
5A.3.2 Excess Aggregate Contributions applicable to an
Eligible Participant for any subject Plan Year under the dollar amount reduction
method described in Section 5A.3.1(c) above shall be deemed composed of certain
types of contributions made to the Plan on behalf of such Eligible Participant
for the subject Plan Year and shall be, together with Trust income (or loss)
allocable thereto in accordance with Section 5A.3.3 below, distributed or
forfeited in the following order of steps:
(a) Step 1: First, such Excess Aggregate
Contributions shall be deemed composed of After-Tax Savings Contributions which
are treated as Additional Savings Contributions for the subject Plan Year. The
Excess Aggregate Contributions described in this first step shall be distributed
to the Eligible Participant;
(b) Step 2: Second, only to the extent still
necessary after the above step, such Excess Aggregate Contributions shall be
deemed composed of After-Tax Savings Contributions which are treated as Basic
Savings Contributions for the subject Plan Year and the corresponding amount of
Matching Contributions for such Plan Year which are made or allocated by reason
of or with respect to such After-Tax Savings Contributions. The Excess Aggregate
Contributions described in this second step which are deemed to be composed of
After-Tax Savings Contributions shall be distributed to the Eligible
Participant. The Excess Aggregate Contributions described in this second step
which are deemed to be composed of Matching Contributions shall, pursuant to
Section 411(a)(3)(G) of the Code and Treas. Reg. Section 1.411(d)-4(b)(7), be
forfeited as of the day the other Excess Aggregate Contributions described in
this second step are distributed to the Eligible Participant (and be reallocated
to Accounts of other Participants in accordance with later provisions of the
Plan). This second step shall not apply to any subject Plan Year which begins on
or after January 1, 1998, however; and
(c) Step 3: Third, only to the extent still necessary
after the above two steps, such Excess Aggregate Contributions shall be deemed
composed of Matching
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<PAGE> 41
Contributions for the subject Plan Year which were made or allocated by reason
of or with respect to Pre-Tax Savings Contributions which are treated as Basic
Savings Contributions for such Plan Year. A portion of the Excess Aggregate
Contributions described in this third step, which portion is equal to the amount
of such Excess Aggregate Contributions multiplied by the vested percentage which
applies under this Plan to the portion of the Participant's Matching Account to
which such Excess Aggregate Contributions would otherwise be allocated but for
the provisions of this Section 5A, shall be distributed to the Eligible
Participant. The remaining portion of the Excess Aggregate Contributions
described in this third step shall be forfeited as of the day the Committee
takes the steps outlined in this Section 5A.3.2.
5A.3.3(a) Any distribution or forfeiture of Excess Aggregate
Contributions which apply to a subject Plan Year and to an Eligible Participant
under the provisions of Sections 5A.3.1(c) and 5A.3.2 above shall be adjusted
upward for the Trust's income allocable thereto (or downward for the Trust's
loss allocable thereto), as determined under paragraph (b) below.
(b) For purposes hereof, the Trust's income (or loss)
allocable to any portion of the Excess Aggregate Contributions applicable to a
subject Plan Year and applied to an Eligible Participant for distribution or
forfeiture purposes which is composed of a certain type of contribution (E.G.,
After-Tax Savings Contributions or Matching Contributions) shall be equal to the
product obtained by multiplying (1) the net income (or net loss) for the subject
Plan Year and for the gap period of the Investment Fund or Funds in which such
type of contribution was invested which is allocable under Section 6.7 below to
the portion of the Participant's Accounts attributable to such type of
contribution by (2) a fraction, the numerator of which is the portion of the
Excess Aggregate Contributions otherwise being distributed to the Eligible
Participant or forfeited which is composed of such type of contribution and the
denominator of which is the total balance as of the first day of the subject
Plan Year of the portion of the Eligible Participant's Accounts attributable to
such type of contribution plus the contributions and forfeitures allocated to
such portion of the Eligible Participant's Accounts for the subject Plan Year
and for the gap period. For purposes hereof, the "gap period" refers to the
period from the end of the subject Plan Year through the last date for which
investment returns for the applicable Investment Fund or Funds have been
completed and the results of which are available to the Committee prior to the
date the applicable Excess Aggregate Contributions are being distributed or
forfeited.
5A.3.4 If the entire balance of the portion of an Eligible
Participant's Accounts which is attributable to a certain type of contribution
(E.G., After-Tax Savings Contributions or Matching Contributions) is distributed
to the Eligible Participant or forfeited during a subject Plan Year (and no
balance remains in that portion of his or her Accounts at the end of such Plan
Year), then such distribution or forfeiture shall be deemed for all purposes of
this Plan as a distribution or forfeiture under this Section 5A.3 of Excess
Aggregate Contributions applicable to the Eligible Participant for the subject
Plan Year (and Trust income or loss allocable thereto) to the extent Excess
Aggregate Contributions composed of such type
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<PAGE> 42
of contribution (and allocable Trust income or losses) would otherwise have been
required to be distributed to the Eligible Participant or forfeited under this
Section 5A.3.
5A.3.5 Notwithstanding any other provision of the Plan to the
contrary, the limitations set forth in Section 5A.1 above shall be deemed met
for any Plan Year if the Excess Aggregate Contributions for such Plan Year are
distributed or forfeited in accordance with the foregoing provisions of this
Section 5A.3.
5A.3.6 If any Excess Aggregate Contributions are distributed
to the appropriate Eligible Participants or forfeited more than 2-1/2 months
after the last day of the subject Plan Year, an excise tax shall be imposed
under Code Section 4979 on the Employer in an amount generally equal to 10% of
such Excess Aggregate Contributions (unadjusted for income or loss allocable
thereto).
5A.4 DEFINITIONS FOR AVERAGE ACTUAL CONTRIBUTION PERCENTAGE LIMITS. For
purposes of the limits set forth in this Section 5A, the following definitions
shall apply:
5A.4.1 "Average Actual Contribution Percentage" for any Plan
Year means: (1) with respect to the Highly Compensated Employees, the average
(to the nearest one-hundredth of a percent) of the Actual Contribution
Percentages of the Eligible Participants who are Highly Compensated Employees
for such Plan Year; and (2) with respect to the Non-Highly Compensated
Employees, the average (to the nearest one-hundredth of a percent) of the Actual
Contribution Percentages of the Eligible Participants who are Non-Highly
Compensated Employees for such Plan Year.
5A.4.2 "Actual Contribution Percentage" for any Plan Year
means, with respect to any person who is an Eligible Participant for such Plan
Year, the ratio, expressed as a percentage to the nearest one-hundredth of a
percent, of the Matching Contributions and After-Tax Savings Contributions made
on behalf of the Eligible Participant for such Plan Year to the Compensation of
the Eligible Participant for the entire Plan Year (regardless of whether he or
she is a Participant for the entire Plan Year or for only part but not all of
such Plan Year). The Actual Contribution Percentage of a person who is an
Eligible Participant for such Plan Year but who does not have any Matching
Contributions or After-Tax Savings Contributions made on his or her behalf for
such Plan Year is 0%.
5A.4.3 The "Aggregate Limit" for any Plan Year (for purposes
of this Section 5A.4.3, the "subject Plan Year") means the greater of the sums
set forth in paragraphs (a) and (b) below:
(a) The sum of: (1) 125% of the greater of the
Average Actual Deferral Percentage of the Non-Highly Compensated Employees for
the subject Plan Year or the Average
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<PAGE> 43
Actual Contribution Percentage of the Non-Highly Compensated Employees for the
subject Plan Year; and (2) the lesser of (i) 200% of the lesser of the Average
Actual Deferral Percentage of the Non-Highly Compensated Employees for the
subject Plan Year or the Average Actual Contribution Percentage of the
Non-Highly Compensated Employees for the subject Plan Year or (ii) 2% plus the
lesser of the Average Actual Deferral Percentage of the Non-Highly Compensated
Employees for the subject Plan Year or the Average Actual Contribution
Percentage of the Non-Highly Compensated Employees for the subject Plan Year.
(b) The sum of: (1) 125% of the lesser of the Average
Actual Deferral Percentage of the Non-Highly Compensated Employees for the
subject Plan Year or the Average Actual Contribution Percentage of the
Non-Highly Compensated Employees for the subject Plan Year; and (2) the lesser
of (i) 200% of the greater of the Average Actual Deferral Percentage of the
Non-Highly Compensated Employees for the subject Plan Year or the Average Actual
Contribution Percentage of the Non-Highly Compensated Employees for the subject
Plan Year or (ii) 2% plus the greater of the Average Actual Deferral Percentage
of the Non-Highly Compensated Employees for the subject Plan Year or the Average
Actual Contribution Percentage of the Non-Highly Compensated Employees for the
subject Plan Year.
Notwithstanding the foregoing, for any subject Plan Year which begins on or
after January 1, 1998, the Average Actual Deferral Percentage and the Average
Actual Contribution Percentage of the Non-Highly Compensated Employees for the
Plan Year which immediately precedes such subject Plan Year shall be used,
instead of such percentages for such subject Plan Year, in determining the
Aggregate Limit for such subject Plan Year.
5A.4.4 "Average Actual Deferral Percentage," "Actual Deferral
Percentage," and "Eligible Participant" shall have the same meanings as are set
forth in Section 4A.4 above, and "Excess Contributions" shall have the same
meaning as is set forth in Section 4A.3 above.
5A.5 DISAGGREGATING PORTIONS OF PLAN. The provisions of Sections 5A.1
through 5A.4 above shall be applied only for the portion of this Plan which
covers Participants who are not collectively bargained employees and as if such
portion were a separate plan. For purposes hereof, a "collectively bargained
employee" is an Employee who is included in a unit of employees covered by a
collective bargaining agreement between employee representatives and the
Employer, provided retirement benefits were the subject of good faith bargaining
between such employee representatives and the Employer.
5A-8
<PAGE> 44
SECTION 6
---------
ACCOUNTS AND THEIR ALLOCATIONS AND VESTING
------------------------------------------
6.1 SAVINGS ACCOUNTS AND ALLOCATION OF SAVINGS CONTRIBUTIONS THERETO.
6.1.1 The Committee shall establish and maintain a separate
bookkeeping account, called herein a "Savings Account," for each Participant.
Except as otherwise provided in the Plan, the Committee shall allocate to a
Participant's Savings Account all Savings Contributions made on or after the
Effective Amendment Date to the Trust on behalf of the Participant as soon as
administratively practical after they are contributed to the Trust.
6.1.2 In addition, any and all amounts which were (1)
attributable to contributions made under any Prior Plan by or at the election of
a Participant prior to the Effective Amendment Date and (2) credited to the
Participant's account under such Prior Plan before the Effective Amendment Date
shall be deemed to have been allocated to the Participant's Savings Account at
the time they were actually credited to the Participant's account under such
Prior Plan. Further, any and all amounts transferred to this Plan on behalf of a
Participant from another plan qualified under Section 401(a) of the Code on or
after the Effective Amendment Date shall, to the extent such amounts reflect
amounts which were contributed to such other plan by or at the election of the
Participant (not including matching-type contributions), be deemed to be
allocated to the Participant's Savings Account as of the date of such transfer.
6.1.3 The Committee shall keep records, to the extent
necessary to administer this Plan properly under the other provisions of the
Plan and under the applicable provisions of the Code, showing the portion of a
Participant's Savings Account which is attributable to each different type of
contribution reflected in it, E.G., Pre-Tax Savings Contributions or After-Tax
Savings Contributions. In this regard, to the extent any amounts allocated to a
Participant's Savings Account under this Plan reflect contributions made under a
Prior Plan or any other plan at the election of the Participant, such amounts
shall be deemed to reflect Pre-Tax Savings Contributions for purposes of this
Plan to the extent such amounts were made under such Prior Plan or other plan on
a "pre-tax" basis (I.E., prior to the Participant being deemed in receipt of
such amounts for Federal income tax purposes) and shall be deemed to reflect
After-Tax Savings Contributions for purposes of this Plan to the extent such
amounts were made under such other plan on an "after-tax" basis (I.E., after the
Participant was deemed in receipt of such amounts for Federal income tax
purposes). Further, to the extent any amounts allocated to a Participant's
Savings Account under this Plan reflect contributions made under any Prior Plan
or other plan at the election of the Participant (not including matching-type
contributions), such amounts shall be deemed to reflect Basic Savings
Contributions for purposes of this Plan to the extent employer matching
contributions were made by reason of such amounts under such Prior Plan or other
plan and shall be deemed to reflect Additional Savings Contributions for
purposes of this Plan to the extent no such employer matching contributions were
made by reason of such amounts under such Prior Plan or other plan.
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6.2 MATCHING ACCOUNTS AND ALLOCATION OF MATCHING CONTRIBUTIONS THERETO.
6.2.1 The Committee shall establish and maintain a separate
bookkeeping account, called herein a "Matching Account," for each Participant.
Except as otherwise provided in the Plan, the Committee shall allocate all
Matching Contributions made to the Trust for any Plan Year which ends after the
Effective Amendment Date among the Matching Accounts of all Participants who
both are employed on the last day of such Plan Year and made no withdrawal of
Basic Savings Contributions from their Savings Accounts during such Plan Year,
in accordance with the allocation method described in Section 6.2.2 below, as of
the last day of such Plan Year or as soon as administratively practical after
such contributions are made to the Trust, whichever is later.
6.2.2 The Matching Contributions made to the Trust for any
Plan Year which ends after the Effective Amendment Date (for purposes of this
Section 6.2.2, the "subject Plan Year") shall be allocated among the Matching
Accounts of the Participants who both are employed on the last day of the
subject Plan Year and made no withdrawal of Basic Savings Contributions from
their Savings Accounts during the subject Plan Year (for purposes of this
Section 6.2.2, the "Eligible Participants") in accordance with the following
provisions:
(a) The portion of the Matching Contributions made
for the subject Plan Year by reason of Section 5.1.1 above shall be allocated
among the Matching Accounts of the Eligible Participants, in the proportion that
the adjusted Basic Savings Contributions made for the subject Plan Year by or
for each Eligible Participant bears to the total adjusted Basic Savings
Contributions made for the subject Plan Year by or for all Eligible
Participants; except that no Eligible Participant's Matching Account shall be
allocated under this paragraph (a) an amount for the subject Plan Year which is
more than 100% of the Basic Savings Contributions made for the subject Plan Year
by or for the Eligible Participant. For purposes of this paragraph (a), an
Eligible Participant's "adjusted Basic Savings Contributions" for the subject
Plan Year means: (1) 100% of the Basic Savings Contributions made for the
subject Plan Year by or for the Eligible Participant if he or she has completed
less than 15 years of Vesting Service by the start of the subject Plan Year; or
(2) 150% of the Basic Savings Contributions made for the subject Plan Year by or
for the Eligible Participant if he or she has completed 15 or more years of
Vesting Service by the start of the subject Plan Year.
(b) The portion of the Matching Contributions made
for the subject Plan Year by reason of Section 5.1.2 above shall be allocated
among the Matching Accounts of the Eligible Participants in such a manner that
each Eligible Participant's Matching Account is allocated under both paragraph
(a) above and this paragraph (b), considered in the aggregate, an amount for the
subject Plan Year which is equal to 33-1/3% of the Basic Savings Contributions
made by or for such Eligible Participant for the subject Plan Year.
6.2.3 In addition, any and all amounts which were (1)
attributable to contributions made by the Employer under the prior matching
contribution or employee stock ownership portions of a Prior Plan for a
Participant prior to the Effective Amendment Date and
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<PAGE> 46
(2) credited to the Participant's account under such Prior Plan immediately
before the Effective Amendment Date shall be deemed to have been allocated to
the Participant's Matching Account at the time they were actually credited to
the Participant's account under such Prior Plan. Further, any and all amounts
transferred to this Plan on behalf of a Participant from another plan qualified
under Section 401(a) of the Code on or after the Effective Amendment Date shall,
to the extent such amounts reflect amounts which were contributed under the
matching contribution portion of such other plan, be deemed to be allocated to
the Participant's Matching Account as of the date of such transfer.
6.2.4 The Committee shall keep records, to the extent
necessary to administer this Plan properly under the other provisions of the
Plan and under the applicable provisions of the Code, showing the portion of a
Participant's Matching Account which is attributable to each different type of
contribution reflected in it.
6.3 ROLLOVER ACCOUNTS AND ALLOCATION OF ROLLOVER CONTRIBUTION THERETO.
The Committee shall establish and maintain a separate bookkeeping account,
called herein a "Rollover Account," for each Participant who makes a Rollover
Contribution to the Plan. Except as otherwise provided in the Plan, the
Committee shall allocate to a Participant's Rollover Account any Rollover
Contribution made on or after the Effective Amendment Date to the Trust on
behalf of the Participant as soon as administratively practical after it is
contributed to the Trust.
6.4 RETIREMENT INCOME ACCOUNTS. The Committee shall establish and
maintain a separate bookkeeping account, called herein a "Retirement Income
Account," for each Participant for whom amounts are allocable to such account
under the provisions of this Section 6.4. Any and all amounts which were (1)
attributable to contributions made by the Employer under the regular profit
sharing contribution portion of a Prior Plan prior to the Effective Amendment
Date and (2) credited to the Participant's account under such Prior Plan
immediately prior to the Effective Amendment Date shall be deemed to have been
allocated to the Participant's Retirement Income Account at the time they were
actually credited to the Participant's account under such Prior Plan. Further,
any and all amounts transferred to this Plan on behalf of a Participant from
another plan qualified under Section 401(a) of the Code on or after the
Effective Amendment Date shall, to the extent such amounts reflect amounts which
were contributed under a regular profit sharing portion of such other plan, be
deemed to be allocated to the Participant's Retirement Income Account as of the
date of such transfer. For purposes hereof, a "regular profit sharing portion"
of a Prior Plan or other plan refers to the part of any profit sharing plan
which is not attributable to contributions made by or at the election of a
participant or to matching contributions made with respect to such
participant-elected contributions. The Committee shall keep records, to the
extent necessary to administer this Plan properly under the other provisions of
the Plan and under the applicable provisions of the Code, showing the portion of
a Participant's Retirement Income Account which is attributable to contributions
of each different plan reflected in it.
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<PAGE> 47
6.5 ALLOCATION OF FORFEITURES. Any forfeitures from Accounts arising
under any of the provisions of the Plan during any Plan Year shall be allocated
to other Accounts pursuant to and in accordance with the provisions of Section
8.6 below.
6.6 MAXIMUM ANNUAL ADDITION TO ACCOUNTS. A Participant's Accounts held
under the Plan shall be subject to the maximum annual addition limits of Section
6A below.
6.7 INVESTMENT OF ACCOUNTS. A Participant's Accounts held under the
Plan shall be invested in accordance with the provisions of Section 6B below.
6.8 ALLOCATION OF INCOME AND LOSSES OF INVESTMENT FUNDS TO ACCOUNTS.
6.8.1 Each Investment Fund shall be valued at its fair market
value on a daily basis by the Trustee (or any other party designated for this
purpose by the Committee). Each Account which has amounts allocable thereto
invested at least in part in any such Investment Fund shall be credited with the
income of such Investment Fund, and charged with its losses, by any reasonable
accounting method approved by the Committee for this purpose. For purposes of
the Plan, any income of any such Investment Fund is deemed to include all income
and realized and unrealized gains of such Investment Fund; similarly, for
purposes of this Plan, any losses of an Investment Fund are deemed to include
all expenses and realized and unrealized losses of the Investment Fund.
6.8.2 As is indicated before in the Plan, the Committee shall
keep records, to the extent necessary to administer this Plan properly under the
other provisions of this Plan and under the applicable provisions of the Code,
showing the portion of each Account which is attributable to each different type
of contribution or to contributions under each different plan applicable to such
Account. In general, a pro rata portion of any income or losses of an Investment
Fund which is allocated under the foregoing provisions of this Section 6.8 to an
Account shall, when appropriate, be further allocated to any portion of such
Account for which a separate record is being maintained by the Committee. As a
result, any reference in the provisions of the Plan to a portion of a
Participant's Account which is attributable to a specific type of contribution
or to contributions previously made under a specific plan shall be deemed to be
referring to the balance of the portion of such Account which reflects not only
such specific type of contribution or contributions previously made under such
specific plan allocated to such Account but also the income or losses allocated
to such Account by reason of such specific type of contribution or contributions
previously made under such specific plan.
6.8.3 Further, when the investment of two or more Accounts in
the available Investment Funds is determined on an aggregate basis by a
Participant under later provisions of the Plan, the Committee shall keep
records, to the extent necessary to administer this Plan under the applicable
provisions of this Plan and under the applicable provisions of the Code, showing
the interest of each such Account in each such Investment Fund. In general, when
the investment of two or more Accounts in the available Investment Funds is
determined on an
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<PAGE> 48
aggregate basis, each such Account will be considered to be invested in a pro
rata portion of each different Investment Fund investment made on such aggregate
basis.
6.9 LOANS TO PARTICIPANTS. Notwithstanding any other provision of the
Plan to the contrary, beginning effective July 1, 1997, loans shall be made to
Participants in accordance with the following provisions:
6.9.1 Beginning as of July 1, 1997, subject to the following
provisions of this Section 6.9, a Participant may request a loan be made to him
or her from the Plan in accordance with the provisions of this Section 6.9. The
Committee shall approve or deny any request for a loan under the following
provisions of this Section 6.9. The Trust shall provide any requested loan
approved by the Committee.
6.9.2 Only one loan made under the Plan to a Participant may
be outstanding at any point in time. As a result, no loan shall be granted to a
Participant under the Plan unless any prior loan made by the Plan to the
Participant has been fully paid by the Participant prior to the date that the
new loan is made. In this regard, any loan made by the Plan to a Participant may
not be used to pay off a prior outstanding loan made by the Plan to such a
Participant.
6.9.3 The amount of any loan made under the Plan to a
Participant may not be less than $500 and may not exceed the lesser of: (1)
$50,000 (reduced by the highest outstanding balance of loans made from the Plan
to the Participant during the one year period ending on the day before the date
of the loan); or (2) 50% of the portions of the Participant's Accounts in which
the Participant is then vested under the other provisions of the Plan.
6.9.4 Each loan made to a Participant from the Plan shall bear
a rate of interest for the entire term of the loan equal to a rate or rates to
be determined by the Committee and to be generally based on the interest rate or
rates used on commercial loans which are comparable in risk and return to the
subject loan at the time the loan is made.
6.9.5 Each loan made to a Participant from the Plan shall be
adequately secured by a portion of the Participant's Accounts under the Plan, up
to but not in excess of 50% of the vested portion of the Participant's Accounts
under the Plan, with such specific portion being determined by the Committee.
Also, the Committee may require that the loan be paid by means of payroll
deductions to the extent feasible and that the Participant agree to give the
Employer the right to deduct from the Participant's salary or wages as payable
the amounts necessary to make payments to the Plan on such loan and the right to
forward such amounts to the Trust on behalf of the Participant as payments on
such loan are due.
6.9.6 The term of any loan made to a Participant from the Plan
shall not extend beyond five years.
6.9.7 Payments of principal and interest on any loan made to a
Participant from the Plan shall be made according to a definite payment
schedule, which generally shall call for
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<PAGE> 49
payments each payroll period but in no event shall call for payments to be made
on a basis slower than on a quarterly basis.
6.9.8 The entire unpaid balance of any loan made to a
Participant under the Plan and all accrued interest under the loan shall become
immediately due and payable without notice or demand, and in default, upon the
occurrence of any of the following: (1) the failure to make any payment of
principal or interest on the loan or any other payment required under the loan
by the date it is due (and within any grace period permitted under the written
loan policy of the Committee referred in the following provisions of this
Section 6.9); (2) any filing by or against the Participant or his or her
property of any proceedings under any bankruptcy, insolvency, or reorganization
law; or (3) the date on which the Plan pursuant to its terms otherwise begins
distributing any part of the Participant's vested Accounts under the Plan (or,
if earlier, the expiration of any grace period set forth in the written loan
policy of the Committee referred to in the following provisions of this Section
6.9 which begins on the first date by which the Plan pursuant to its terms could
otherwise begin distributing the Participant's entire vested Accounts under the
Plan if applicable requests and consents were given for such distribution).
6.9.9 In the event of a default on any loan made to a
Participant from the Plan, foreclosure on the loan and the attachment of the
security under the loan by the Plan shall be made when, but not until, an event
occurs which, under the other terms of the Plan, would otherwise allow the
complete distribution of the Participant's vested Accounts under the Plan (if
all applicable requests and consents were given for such distribution). A
foreclosure on the portion of the Participant's vested Accounts which are being
used as security for the loan shall be deemed to be an actual distribution of
such portion of the Participant's Accounts at the time of such foreclosure.
However, any outstanding loan balance plus accrued interest may be taxable upon
such default if required under the provisions of Section 72(p) of the Code,
regardless of whether or not the loan has been foreclosed and the security as to
the loan has been attached by the Plan. Interest shall continue to accrue until
a loan is paid in full or until a distributable event occurs under the foregoing
provisions, regardless of the taxability of the loan.
6.9.10 Notwithstanding any of the foregoing provisions of this
Section 6.9, no loans may be made to a Participant who is not an Employee,
except for a Participant who is a party in interest (within the meaning of
Section 3(14) of ERISA) with respect to the Plan. In the event a Participant who
is not an Employee but who is such a party in interest with respect to the Plan
requests a loan, the provisions of this Section 6.9 shall apply to such loan,
except that: (1) the Participant shall be allowed to make each required payment
under the loan in cash or by check; and (2) the loan shall not be in default
merely because the Participant has terminated employment with the Employer (when
he or she has not yet received his or her entire vested Accounts under the
Plan).
6.9.11 The expenses of originating and processing any loan, as
determined by the Committee, shall be charged to the Participant and shall have
to be paid by him or her to the Trust in order for the loan to be made.
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6.9.12 A Participant shall be required to sign a promissory
note and security agreement and any other documents deemed necessary by the
Committee to carry out the terms of any loan made to the Participant from the
Plan.
6.9.13 Unless otherwise provided by agreement between the
Participant and the Committee, the principal amount of any loan made by the Plan
to the Participant shall be charged, and the value of any payments made to the
Plan on such loan credited, (1) first to the portion of the Participant's
Savings Account which is attributable to his or her Pre-Tax Savings
Contributions made under the Plan; (2) second, to the extent still necessary, to
the Participant's Matching Account; (3) third, to the extent still necessary, to
the Participant's Retirement Income Account; (4) fourth, to the extent still
necessary, to the Participant's Rollover Account; and (5) fifth, to the extent
still necessary, to the portion of the Participant's Savings Account which is
attributable to his or her After-Tax Savings Contributions made under the Plan.
Further, any payment on the loan shall, to the extent it is credited to an
Account of the Participant, be invested in the Investment Fund or Funds in the
same manner as new contributions to such Account are being invested.
Notwithstanding any other provision of the Plan to the contrary, any Account of
a Participant shall not share in the other income and losses of the Trust to the
extent that the Account has been charged by reason of a loan made pursuant to
this Section 6.9; and no loan made to a Participant under the Plan or payments
thereon shall be charged or credited to the Accounts of any other Participants.
Instead, for purposes of the Plan, any loan made to a Participant shall be
considered as a separate Investment Fund in which a portion of the Participant's
Accounts is invested (and in which no other Accounts are invested).
6.9.14 If any Participant who is requesting a loan from the
Plan is married at the time of the loan, then, to the extent such loan is being
charged under Section 6.9.13 above to his or her Retirement Income Account, a
written consent of his or her Spouse to the loan shall be required to be made
within the 90 day period ending on the effective date of the loan. Such written
consent of his or her Spouse must acknowledge the effect on the Participant's
benefits under the Plan of such loan and be witnessed by a notary public.
6.9.15 The Committee shall be the party responsible for
administering the loan program provided for under this Section 6.9. The
Committee shall provide for a written loan policy which sets forth further and
more detailed rules concerning loans made to Participants under the Plan,
provided that such written loan policy is not inconsistent with any of the other
provisions set forth in this Section 6.9. Such written loan policy shall include
but not be limited to rules concerning procedures for requesting and repaying
loans, times when loans may be paid, and any other matters required to be in
such loan policy pursuant to the provisions of Department of Labor Regulations
Section 2550.408b-1. Such loan policy may also provide, but not be limited to,
rules for granting a suspension of required loan payments under the loan or any
adjustment in the installments as to the loan when a Participant is on a Leave
of Absence without pay or at a rate of pay (after income and employment tax
withholding) that is less than the amount of the installment payments otherwise
required on the loan. Any such written loan policy shall be deemed a part of
this Plan and incorporated by reference herein.
6-7
<PAGE> 51
6.10 DEDUCTION OF BENEFIT PAYMENTS, FORFEITURES, AND WITHDRAWALS. Any
benefit payment, forfeiture, or withdrawal made from the balance of an Account
of a Participant under the provisions of the Plan shall be deducted, as of the
date of such payment, forfeiture, or withdrawal, from such Account. If such
Account is invested in more than one Investment Fund and such payment,
forfeiture, or withdrawal is of less than the entire balance in such Account,
then, except to the extent otherwise provided by accounting rules adopted by the
Committee, the value of the investment of such Account among the Investment
Funds will be reduced on a pro-rata basis (I.E., in the proportion that the
balance of such Account then invested in each Investment Fund bears to the total
balance of such Account then invested in all such Investment Funds) to reflect
the amount of such payment, forfeiture, or withdrawal.
6.11 ACCOUNT BALANCES. For purposes of the Plan, the balance or value
of any Account as of any specific date shall be deemed to be the net sum of
amounts allocated or credited to, or charged or deducted from, such Account on
such date under the provisions of the Plan. No Participant, however, shall
acquire any right or interest in a specific asset of the Trust merely as a
result of any allocation provided for in the Plan, other than as expressly set
forth in the Plan.
6.12 VESTED RIGHTS. A Participant shall be deemed vested in (I.E., have
a nonforfeitable right to) his or her Accounts (and the balances therein) only
in accordance with the following provisions:
6.12.1 A Participant shall be fully vested at all times in his
or her Savings Account and any Rollover Account of his or hers.
6.12.2 Except as is otherwise provided in Section 6.12.5
below, a Participant who was a participant in a Prior Plan on or before March
31, 1997 shall be fully vested at all times in any Matching Account of his or
hers.
6.12.3 A Participant who was not a participant in any Prior
Plan on or before March 31, 1997 shall have a vested interest in any Matching
Account of his or hers as of any specific date equal to a percentage (for
purposes of this Section 6.12.3, the "vested percentage") of such Account,
determined in accordance with the following schedule (based upon his or her
years of Vesting Service completed to the subject date):
<TABLE>
<CAPTION>
YEARS OF VESTING SERVICE VESTED PERCENTAGE
- ------------------------ -----------------
<S> <C>
Less than 3 0%
3 but less than 4 20%
4 but less than 5 40%
5 but less than 6 60%
6 but less than 7 80%
7 or more 100%
</TABLE>
6-8
<PAGE> 52
Notwithstanding the foregoing, a Participant who was not a participant in any
Prior Plan on or before March 31, 1997 shall be fully vested in any Matching
Account of his or hers if he or she attains his or her Normal Retirement Age,
incurs a Total Disability, or dies while, in any such case, still an Employee.
In addition, and also notwithstanding the foregoing, a Participant who was not a
Participant in any Prior Plan on or before March 31, 1997 shall be fully vested
in any Matching Account of his or hers if he or she ceases to be an Employee by
reason of the closing or sale (not including the merger into any Employer or
Affiliated Employer or into any division or facility of an Employer or
Affiliated Employer) of any Employer (or any division or facility of an
Employer) while he or she is employed by such Employer (or division or facility
of such Employer).
6.12.4 Except as is otherwise provided in Section 6.12.5
below, a Participant shall be fully vested at all times in any Retirement Income
Account of his or hers.
6.12.5 Notwithstanding any of the provisions of Section 6.12.3
or 6.12.4 above, any Participant who fails to complete at least one Hour of
Service on or after the Effective Amendment Date shall have a vested interest in
any Matching Account and/or Retirement Income Account of his or hers to the
extent, and only to the extent, provided under each and any Prior Plan in which
the amounts reflected in such Account or Accounts were credited (in accordance
with the provisions of the Prior Plan as in effect at the time the Participant
ceased to be an employee for purposes of such Prior Plan).
6.13 VOTING OF FEDERATED COMMON SHARES HELD IN INVESTMENT FUND.
6.13.1 Any common shares of Federated which are held in the
Investment Fund described in Section 6B below as Fund F (for purposes of this
Section 6.13.1, "Fund F") shall be voted, on any matter on which such common
shares have a vote, in the manner directed by the Participants pursuant to this
Section 6.13.
6.13.2 Specifically, each Participant who has any portion of
his or her Account invested in Fund F as of the record date used by Federated to
determine the Federated common shares eligible to vote on any matter may direct
the Plan as to how a number of the Federated common shares held in Fund F as of
such record date are to be voted on such matter. The number of shares subject to
the Participant's direction shall be equal to the product produced by
multiplying the total number of Federated common shares held in Fund F as of
such record date by a fraction. Such fraction shall have a numerator equal to
the value of the portion of the Participant's Accounts which are invested in
Fund F determined as of such record date and a denominator equal to the total
value of Fund F as of such record date. If a Participant fails to instruct the
Plan on how to vote on any matter the number of Federated common shares held in
Fund F he or she is entitled to direct, such shares will not be voted on such
matter.
6.13.3 Before any annual or special meeting of Federated
shareholders, the Committee or a Committee representative will send each
Participant who is entitled to direct
6-9
<PAGE> 53
the vote of any Federated common shares held in Fund F on a matter being voted
on at such meeting a form allowing the Participant to instruct the Plan as to
how to vote such shares on such matter.
6-10
<PAGE> 54
SECTION 6A
----------
MAXIMUM ANNUAL ADDITION LIMITS
------------------------------
6A.1 MAXIMUM ANNUAL ADDITION LIMIT--SEPARATE LIMITATION AS TO THIS
PLAN.
6A.1.1 GENERAL RULES. Subject to the other provisions of this
Section 6A.1 but notwithstanding any other provision of the Plan to the
contrary, in no event shall the annual addition to a Participant's accounts for
any limitation year exceed the lesser of:
(a) $30,000 (or, if greater, 1/4 of the dollar
limitation for defined benefit plans in effect under Section 415(b)(1)(A) of the
Code for such limitation year); or
(b) 25% of the Participant's compensation for such
limitation year.
The part of the annual addition attributable to contributions to a defined
benefit plan for medical benefits under Code Section 401(h) or to contributions
to a welfare benefit fund for funding for post-retirement medical benefits under
Code Section 419A(d) shall not be applied against the limit set forth in
paragraph (b) above, however.
6A.1.2 NECESSARY TERMS. For purposes of the rules set forth in
this Section 6A.1, the following terms shall apply:
(a) The "annual addition" to a Participant's accounts
for a limitation year for purposes of this Plan shall be determined under the
provisions of the Code (and mainly Code Section 415(c)(2)) in effect for such
limitation year. In general, for any limitation year beginning after December
31, 1986, the annual addition is generally the sum of employer contributions,
employee contributions, and forfeitures allocated to the Participant's accounts
for such limitation year under all defined contribution plans (as defined in
Code Section 414(i)) maintained by the Employer or any Affiliated Employers,
plus any contributions made on behalf of the Participant for such limitation
year under Code Section 415(1) or Code Section 419A(d) (E.G., contributions to a
defined benefit plan for medical benefits or contributions on behalf of a key
employee to a welfare benefit fund for funding for post-retirement medical
benefits) under defined benefit plans or welfare benefit funds maintained by the
Employer or any Affiliated Employers. (It is noted that for any limitation year
beginning before January 1, 1987, not all employee contributions were included
in the annual addition; instead, only the lesser of the amount of the employee
contributions made for such limitation year in excess of 6% of the Participant's
annual compensation for such limitation year or one-half of the employee
contributions made for such limitation year were counted as part of the annual
addition. This determination need not be recalculated for any such pre-1987
limitation year. In addition, it is also noted that any Rollover Contributions
of a Participant or any restoration of a Participant's accounts under Section
8.4, 10.2, or 15.4 below shall not be considered part of an annual addition for
the limitation year in which the restoral occurs.)
6A-1
<PAGE> 55
(b) A Participant's "compensation" shall, for
purposes of the restrictions of Section 6A.1 hereof, refer to his or her
Compensation as defined in Section 1.7 above; except that, for purposes of this
Section 6A.1, paragraph (b) of Section 1.7 above shall not apply and, for any
limitation year which begins prior to January 1, 1998, paragraph (c) of Section
1.7 above shall also not apply.
(c) The "limitation year" for purposes of the
restrictions under Section 6A.1 above shall be the Plan Year.
6A.1.3 EXCESS ANNUAL ADDITIONS. If, as a result of the
allocation of forfeitures, a reasonable error in estimating a Participant's
compensation for a limitation year, a reasonable error in determining the amount
of any Pre-Tax Savings Contributions that may be made with respect to a
Participant under the limits of Section 415 of the Code, or under other limited
facts and circumstances which the Commissioner of Internal Revenue finds justify
the availability of the rules described in this Section 6A.1.3, the annual
addition for a Participant with respect to any limitation year would otherwise
cause the limits of Section 6A.1.1 above to be exceeded, such excess amount
shall not be deemed an annual addition in such limitation year for such
Participant and shall instead be adjusted under this Plan as follows:
(a) First, to the extent necessary to eliminate the
excess portion of the annual addition, the amount of the Matching Contributions
made for the Participant for the applicable limitation year and the forfeitures
allocated to the Participant's Matching Account for such limitation year (and
Plan earnings attributable to such Matching Contributions and forfeitures, which
shall be determined by the same method, or by a substantially similar method to
the method, used to determine Plan earnings attributable to Excess Aggregate
Contributions under Section 5A.3.3 above for the applicable limitation year)
shall be allocated to Accounts of other Participants in such a manner that they
are used to reduce the Matching Contributions to the Plan (and as if they were
the Matching Contributions which they replace) at the next earliest opportunity
in succeeding limitation years. Such reallocated Matching Contributions shall
not, notwithstanding any other provision of the Plan to the contrary, be taken
into account as Matching Contributions of the Participant for whose Account they
constituted an excess allocation in determining if the average actual
contribution percentage limits set forth in Section 5A.1 above (and Section
401(m)(2) of the Code) are met as to such Participant.
(b) Second, to the extent still necessary to
eliminate the excess portion of the annual addition, the amount of the
Participant's After-Tax Savings Contributions for the applicable limitation year
which are Additional Savings Contributions (and Plan earnings attributable
thereto, which shall be determined by the same method, or by a substantially
similar method to the method, used to determine Plan earnings attributable to
Excess Aggregate Contributions under Section 5A.3.3 above for the applicable
limitation year) shall be returned to the Participant. Such returned After-Tax
Savings Contributions shall not, notwithstanding any other provision of the Plan
to the contrary, be taken into account as After-Tax Savings Contributions of the
Participant in determining if the average actual contribution percentage
6A-2
<PAGE> 56
limits set forth in Section 5A.1 above (and Section 401(m)(2) of the Code) are
met as to such Participant.
(c) Third, to the extent still necessary to eliminate
the excess portion of the annual addition, the amount of the Participant's
Pre-Tax Savings Contributions for the applicable limitation year which were
Additional Savings Contributions (and Plan earnings attributable thereto, which
shall be determined by the same method, or a substantially similar method to the
method, used to determine Plan earnings attributable to Excess Contributions
under Section 4A.3.2 above for the applicable limitation year) shall be returned
to the Participant. Such returned Pre-Tax Savings Contributions shall not,
notwithstanding any other provision of the Plan to the contrary, be taken into
account as Pre-Tax Savings Contributions of the Participant in determining if
the average actual deferral percentage limits set forth in Section 4A.1 above
(and Section 401(k)(3) of the Code), and the dollar limit on Pre-Tax Savings
Contributions set forth in Section 1.23 above (and Section 402(g) of the Code),
are met as to such Participant.
(d) Fourth, to the extent still necessary to
eliminate the excess portion of the annual addition, the amount of After-Tax
Savings Contributions for the applicable limitation year which are Basic Savings
Contributions (and Plan earnings attributable thereto, which shall be determined
by the same method, or by a substantially similar method to the method, used to
determine Plan earnings attributable to Excess Aggregate Contributions under
Section 5A.3.3 above for the applicable limitation year) shall be returned to
the Participant. Such returned After-Tax Savings Contributions shall not,
notwithstanding any other provision of the Plan to the contrary, be taken into
account as After-Tax Savings Contributions of the Participant in determining if
the average actual contribution percentage limits set forth in Section 5A.1
above (and Section 401(m)(2) of the Code) are met as to such Participant. This
paragraph (d) shall not apply to any Plan Year which begins on or after January
1, 1998, however.
(e) Finally, to the extent still necessary to
eliminate the excess portion of the annual addition, the Participant's Pre-Tax
Savings Contributions for the applicable limitation year which are Basic Savings
Contributions (and Plan earnings attributable thereto, which shall be determined
by the same method, or by a substantially similar method to the method, used to
determine Plan earnings attributable to Excess Contributions under Section
4A.3.2 above for the applicable limitation year) shall be returned to the
Participant. Such returned Pre-Tax Savings Contributions shall not,
notwithstanding any other provision of the Plan to the contrary, be taken into
account as Pre-Tax Savings Contributions of the Participant in determining if
the average actual deferral percentage limits set forth in Section 4A.1 above
(and Section 401(k)(3) of the Code), and the dollar limit on Pre-Tax Savings
Contributions set forth in Section 1.23 above (and Section 402(g) of the Code),
are met as to such Participant.
Any contributions which are to be used in place of and to reduce future Matching
Contributions to the Plan shall be held in a suspense account until being able
to be so used. No Plan income
6A-3
<PAGE> 57
or losses shall be allocated to such suspense account. Also, while any suspense
account exists, the Employer shall make further contributions to the Plan for
any succeeding limitation year only if the amounts held in such suspense account
shall be able to be allocated to Participants' Accounts for such limitation
year.
6A.1.4 COMBINING OF PLANS. If any other defined contribution
plans (as defined in Section 414(i) of the Code) in addition to this Plan are
maintained by the Employer or any Affiliated Employers, then the limitations set
forth in this Section 6A.1 shall be applied as if this Plan and such other
defined contribution plans are a single plan. If any reduction or adjustment in
a Participant's annual addition is required by this Section 6A.1, such reduction
or adjustment shall when necessary be made to the extent possible under any of
such other defined contribution plans in which a portion of the annual addition
was allocated to the Participant's account as of a date in the applicable
limitation year which is later than the latest date in such year as of which any
portion of the annual addition was allocated to the Participant's account under
this Plan (provided such other plan or plans provide for such reduction or
adjustment in such situation). To the extent still necessary, such reduction or
adjustment shall be made under this Plan.
6A.2 MAXIMUM ANNUAL ADDITION LIMIT--COMBINED LIMITATION FOR THIS PLAN
AND OTHER DEFINED BENEFIT Plans.
6A.2.1 GENERAL RULE. Subject to the other provisions of this
Section 6A.2 but notwithstanding any other provision of this Plan to the
contrary, if a Participant in this Plan also participates in one or more defined
benefit plans (as defined in Section 414(j) of the Code) which are maintained by
the Employer or the Affiliated Employers, then in no event shall the sum of such
Participant's defined benefit plan fraction and defined contribution plan
fraction for any limitation year exceed 1.0. If and to the extent necessary, the
Participant's retirement benefits that are projected or payable under the
defined benefit plan or plans shall be reduced or frozen so that this limitation
is not exceeded (provided such defined benefit plan or plans provide for such
reduction or freezing of his or her retirement benefits in such situation). If
this limitation is still exceeded even after such reduction or freezing of the
Participant's retirement benefits, then the annual addition to the Participant's
Accounts under this Plan shall be reduced to the additional extent necessary so
that the limitation is not exceeded. Such reduction shall, to the extent
necessary, be made in the same manner as is described in Section 6A.1.3 above.
6A.2.2 DEFINED BENEFIT PLAN FRACTION. For purposes of this
Section 6A.2, a Participant's "defined benefit plan fraction" for any limitation
year is a fraction:
(a) The numerator of which is the Participant's
projected annual benefit under all of the defined benefit plans maintained by
the Employer and the Affiliated Employers (determined as of the close of the
subject limitation year and including any such plans whether or not terminated);
and
6A-4
<PAGE> 58
(b) The denominator of which is the lesser of (1)
1.25 multiplied by the dollar limitation in effect under Code Section
415(b)(1)(A) for such limitation year or (2) 1.4 multiplied by the amount which
may be taken into account for the Participant under Code Section 415(b)(1)(B) by
the close of such limitation year (I.E., 1.4 multiplied by 100% of his or her
average annual compensation for his or her high three years). If a Participant's
current accrued benefit as of the first day of the limitation year beginning on
January 1, 1987 exceeds the dollar limitation in effect under Code Section
415(b)(1)(A) for any limitation year, however, then the dollar limitation
referred to in clause (1) above shall be deemed to be not less than such current
accrued benefit. For purposes hereof, the Participant's "current accrued
benefit" means his or her accrued benefit when expressed as an annual benefit
and as determined under such defined benefit plans as of the close of the last
limitation year beginning before January 1, 1987 (but disregarding any change in
the terms and conditions of such plans after May 5, 1986 and any cost of living
adjustment occurring after May 5, 1986).
6A.2.3 DEFINED CONTRIBUTION PLAN FRACTION. For purposes of
this Section 6A.2, a Participant's "defined contribution plan fraction" for any
limitation year is a fraction:
(a) The numerator of which is the sum of all of the
annual additions to the Participant's accounts under this Plan and all other
defined contribution plans (and, to the extent annual additions are made
thereto, defined benefit plans and welfare benefit funds) maintained by the
Employer and the Affiliated Employers (whether or not terminated) which have
been made as of the close of the subject limitation year (including annual
additions made in prior limitation years); and
(b) The denominator of which is the sum of the lesser
of the following amounts determined for the subject limitation year and for each
prior limitation year in which the Participant performed service for the
Employer or an Affiliated Employer: (1) 1.25 multiplied by the dollar limitation
in effect under Code Section 415(c)(1)(A) for the applicable limitation year
(determined without regard to Code Section 415(c)(6)), or (2) 1.4 multiplied by
the amount which may be taken into account for the Participant under Code
Section 415(c)(1)(B) for the applicable limitation year. (In general, for
limitation years beginning after December 31, 1986, the dollar limitation in
effect under Code Section 415(c)(1)(A) for a limitation year is the greater of
$30,000 or 1/4 of the dollar limitation in effect under Code Section
415(b)(1)(A) for such limitation year, and the amount which may be taken into
account under Code Section 415(c)(1)(B) for a limitation year is 25% of the
Participant's compensation for such limitation year.)
6A.2.4 OTHER NECESSARY TERMS. For purposes of the rules set
forth in this Section 6A.2, the following terms shall apply:
(a) A Participant's "projected annual benefit" as of
the close of any limitation year means the annual benefit that the Participant
would be entitled to under all of the defined benefit plans maintained by the
Employer and the Affiliated Employers if (1) the Participant continued in
employment with his or her current employer on the same basis as exists
6A-5
<PAGE> 59
as of the close of the subject limitation year until attaining his or her Normal
Retirement Age (or, if he or she has already attained such age by the close of
the subject limitation year, he or she immediately terminated his or her
employment), (2) the Participant's annual compensation for the subject
limitation year remains the same each later limitation year until he or she
terminates employment, and (3) all other relevant factors used to determine
benefits under such plans for the subject limitation year remain constant for
all future limitation years.
(b) A Participant's "annual benefit" means a benefit
payable in the form of a single life annuity.
(c) A Participant's "annual addition," his or her
"compensation," and the "limitation year" shall all have the same meanings as
are given to those terms in Section 6A.1 above.
6A.2.5 ADJUSTMENT OF DEFINED CONTRIBUTION PLAN FRACTION. If
necessary, an amount shall be subtracted from the numerator of the defined
contribution plan fraction applicable to a Participant in accordance with
regulations prescribed by the Secretary of the Treasury or his or her delegate
so that the sum of the Participant's defined benefit plan fraction and defined
contribution plan fraction computed as of the end of the last limitation year
beginning before January 1, 1987 does not exceed 1.0 for such limitation year.
6A.2.6 COMBINING OF PLANS. If any other defined contribution
plans (as defined in Section 414(i) of the Code) in addition to this Plan are
maintained by the Employer or any Affiliated Employers, then the limitation set
forth in this Section 6A.2 shall be applied as if this Plan and such other
defined contribution plans are a single plan. If any reduction or adjustment in
a Participant's annual addition is required by this Section 6A.2, such reduction
or adjustment shall be made to the extent possible under any of such other
defined contribution plan or plans in which a portion of the annual addition was
allocated to the Participant's account as of a date in the applicable limitation
year which is later than the latest date in such year as of which any portion of
the annual addition was allocated to the Participant's account under this Plan
(provided such other plan or plans provide for such reduction or adjustment in
such situation). To the extent still necessary, such reduction or adjustment
shall be made under this Plan.
6A.2.7 TERMINATION OF LIMITATION. Notwithstanding any other
provision of the Plan to the contrary, the provisions set forth in this Section
6A.2 shall not apply, and shall no longer be effective, for any limitation year
which begins after December 31, 1999.
6A-6
<PAGE> 60
SECTION 6B
----------
INVESTMENT OF ACCOUNTS
----------------------
6B.1 GENERAL RULES FOR INVESTMENT OF ACCOUNTS. All of a Participant's
Accounts shall be invested on and after the Effective Amendment Date in the
manner provided under and in accordance with the following provisions of this
Section 6B.1.
6B.1.1 Each Participant may elect, to be effective as of the
next pay day of the Participant by which the Committee can reasonably put such
election into effect, to invest, as soon as practical after they are made, the
Participant's Savings Contributions and Rollover Contributions made to the Plan
(his or her "future Savings and Rollover Contributions") in 1% increments among
any or all of Funds A, B, C, D, E, and F. Notwithstanding the foregoing, the
Participant may not elect that more than 50% of his or her future Savings and
Rollover Contributions will be invested in Fund F. Further, if the Participant
never makes any election as to the investment of his or her future Savings and
Rollover Contributions, then he or she shall be deemed to have elected to invest
his or her future Savings and Rollover Contributions in Fund A until he or she
changes such election under this Section 6B.1.1.
6B.1.2 Any Matching Contributions made to the Plan which are
allocable to a Participant's Accounts shall be invested, as soon as practical
after they are made, in Fund F.
6B.1.3 Further, each Participant may at any time elect, to be
effective as of the next day by which the Committee can reasonably put such
election into effect, to change the investment of the then balance of his or her
Accounts (including for this purpose the portion of his or her Accounts
attributable to his or her Savings Contributions and Rollover Contributions, and
to Matching Contributions allocable to his or her Accounts, which were made
prior to such election) in 1% increments among any or all of Funds A, B, C, D,
E, and F. Notwithstanding the foregoing, such election may not result in more
than 50% of the then balance of his or her Accounts to be invested in Fund F.
6B.1.4 Unless a Participant changes the investment of the
balance of his or her Accounts as of any date under Section 6B.1.3 above, any
net income arising under Fund A, B, C, D, E, or F and allocable to the
Participant's Accounts shall be reinvested in such Fund.
6B.1.5 Any election made by a Participant under Section 6B.1.1
or 6B.1.3 above must be made by a communication to a Plan representative under a
telephonic system approved by the Committee or by any other method approved by
the Committee. If such election is made by a telephonic communication, it shall
be confirmed in writing by the Plan representative to the Participant.
6B.1.6 If a Participant fails at any time to make an election
as to the investment of his or her future Savings and Rollover Contributions or
the then balance of his or
6B-1
<PAGE> 61
her Accounts, then his or her future Savings and Rollover Contributions or the
then balance of his or her Accounts, as the case may be, shall continue to be
invested in the same manner as applied immediately prior to such time without
change until the Participant subsequently does elect a change under this Section
6B.1 (except that, if no election as to the investment of his or her future
Savings and Rollover Contributions or the then balance of his or her Accounts,
as the case may be, had ever previously been made as to such contributions or
balance, then the Participant shall be deemed to have elected to invest such
contributions or balance in Fund A.)
6B.2 INVESTMENT FUNDS. Several Funds shall be maintained in the Trust
Fund for the investment of Plan funds. For purposes hereof, a "Fund" means a
separate commingled investment fund established under the Trust Fund which is
used for the investment of assets of the Plan. Each of such Funds has a specific
investment focus and party or parties directing its investments, which in both
cases is chosen by the Committee or an investment committee appointed under the
provisions of the Trust. Each Fund is subject to all of the terms of the Trust
Fund. For purposes of the Plan, the funds listed below are Funds used for the
Plan, have the investment focus described below, and are the Funds referred to
in the other provisions of the Plan:
6B.2.1 "Fund A" invests in a variety of short-term fixed
income corporate and government securities, mortgage securities, investment
contracts with selected insurance or other companies, intermediate-term
fixed-income securities, and cash equivalents.
6B.2.2 "Fund B" invests in a variety of corporate and
government fixed-income securities, mortgage securities, equity securities, and
cash equivalents, as selected by the Committee or by one or more investment
managers appointed under the Trust Fund.
6B.2.3 "Fund C" invests in common stocks of well established
companies which are generally reflected in the Standard & Poor's 500 stock
equity index fund.
6B.2.4 "Fund D" invests in the common stocks of smaller, less
recognized companies than the companies reflected in Fund C.
6B.2.5 "Fund E" invests in the stocks of companies not based
in the United States.
6B.2.6 "Fund F" invests primarily in common stock of
Federated, except that a portion of such Fund may invest in certain cash
equivalents.
6B-2
<PAGE> 62
SECTION 7
---------
WITHDRAWALS DURING EMPLOYMENT
-----------------------------
7.1 WITHDRAWALS OF AFTER-TAX SAVINGS AND ROLLOVER CONTRIBUTIONS.
7.1.1 Upon written notice filed with a Plan representative, a
Participant may elect to withdraw from his or her Savings Account any portion of
the then value of such Account which is attributable to his or her After-Tax
Savings Contributions which are treated under other provisions of the Plan as
Additional Savings Contributions (for purposes of this Section 7.1, the
"After-Tax Additional Savings Contributions"), and/or to withdraw any portion of
the then value of his or her Rollover Account, and which he or she designates in
the notice.
7.1.2 Also upon written notice filed with a Plan
representative, any Participant may, provided he or she elects at the same time
to withdraw the maximum amount of After-Tax Additional Savings Contributions he
or she is permitted to withdraw under Section 7.1.1 above (if any), elect to
withdraw from his or her Savings Account any portion of the then value of such
Account which is attributable to his or her After-Tax Savings Contributions
which are treated under other provisions of the Plan as Basic Savings
Contributions and which he or she designates in the notice.
7.1.3 If a withdrawal under Section 7.1.1 above and/or Section
7.1.2 above is elected, the actual withdrawal payment shall be distributed in
cash to the Participant as soon as administratively practical after such
election.
7.2 WITHDRAWALS OF PRE-TAX SAVINGS CONTRIBUTIONS.
7.2.1 Upon written notice filed with a Plan representative, a
Participant may, provided he or she elects at the same time to withdraw the
maximum amount he or she is permitted to withdraw under Section 7.1 above (if
any), request a withdrawal from his or her Savings Account of any portion of the
then value of such Account which is attributable to his or her Pre-Tax Savings
Contributions and which he or she designates in the notice, so long as, if the
Participant has not yet attained age 59-1/2, the requested amount is not greater
than the difference between the dollar amount of the Pre-Tax Savings
Contributions previously made on his or her behalf to the Plan and the amount of
Pre-Tax Savings Contributions he or she has previously withdrawn from the Plan.
Further, no withdrawal may be allowed under this Section 7.2 unless the
withdrawal is requested (1) after the Participant has attained age 59-1/2 or (2)
because of a hardship.
7.2.2 If such a withdrawal is requested, the actual withdrawal
payment shall be distributed in cash to the Participant as soon as
administratively practical after such election, provided the Committee or a
Committee representative determines such request is to be granted under the
rules set forth in this Section 7.2 (and, if applicable, Section 7.3 below).
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7.2.3 Also, any withdrawal made by a Participant shall be
deemed for Plan purposes to consist first of those Pre-Tax Savings Contributions
which are treated under other provisions of the Plan as Additional Savings
Contributions and second (only to the extent still necessary) of those Pre-Tax
Savings Contributions which are treated under other provisions of the Plan as
Basic Savings Contributions.
7.2.4 Any withdrawal requested under this Section 7.2 because
of a hardship shall be granted by the Committee or a Committee representative if
(and only if) the Committee or the Committee representative determines that the
requested hardship withdrawal meets the requirements set forth in Section 7.3
below.
7.3 REQUIREMENTS FOR HARDSHIP WITHDRAWALS. Any withdrawal which is
requested by a Participant under Section 7.2 above because of a hardship must
meet the following requirements in order to be granted by the Committee or a
Committee representative:
7.3.1 Any such hardship withdrawal must be requested by the
Participant and certified to be on account of an immediate and heavy financial
need of the Participant. Also, written documentation of the reason for
requesting the withdrawal may be required by the Committee or a Committee
representative. Whether a withdrawal is requested on account of an immediate and
heavy financial need of the Participant shall be determined by the Committee or
a Committee representative on the basis of all facts and circumstances. In this
regard, a withdrawal shall be considered to be requested on account of an
immediate and heavy financial need of the Participant if the request is on
account of:
(a) Expenses for medical care (described in Section
213(d) of the Code) previously incurred by the Participant, his or her spouse,
or any dependents of his or hers (as defined in Section 152 of the Code) or
necessary for these persons to obtain medical care (described in Section 213(d)
of the Code);
(b) Costs directly related to the purchase (excluding
mortgage payments) of a principal residence of the Participant;
(c) The payment of tuition and related educational
fees for the next twelve months of post-secondary education for the Participant
or his or her spouse, children, or dependents (as defined in Section 152 of the
Code);
(d) The need to prevent the eviction of the
Participant from his or her principal residence or the foreclosure on the
mortgage of the Participant's principal residence;
(e) The need to pay funeral expenses of a family
member of the Participant;
(f) The need to pay expenses resulting from sudden or
unexpected damage to the Participant's principal residence or personal property;
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(g) To the extent not described in paragraph (a)
above, the need to pay expenses resulting from a sudden and unexpected illness
or accident of the Participant or a family member of the Participant; or
(h) To the extent not included in any of the
foregoing paragraphs, the need to pay expenses to alleviate the Participant's
severe financial hardship resulting from extraordinary and unforeseeable
circumstances beyond the control of the Participant.
7.3.2 Any such hardship withdrawal must also be necessary to
satisfy the need for the withdrawal. A withdrawal shall be deemed necessary to
satisfy such need if, and only if, all of the following conditions are certified
to by the Participant:
(a) The withdrawal is not in excess of the amount of
the immediate and heavy financial need of the applicable Participant which has
caused the Participant to request the withdrawal. The amount of an immediate and
heavy financial need of the Participant may include an amount permitted by the
Committee under uniform rules to cover Federal income taxes or penalties which
can reasonably be anticipated to result to the Participant from the
distribution;
(b) The Participant has obtained or is obtaining by
the date of the withdrawal all withdrawals (other than hardship withdrawals) and
all nontaxable (at the time of the loans) loans then available under the Plan
and all other plans of the Employer and the Affiliated Employers, including any
loans then available under Section 6.9 above and any withdrawal then available
under Section 7.1 above;
(c) The Participant shall be suspended from making
employee contributions or having contributions made by reason of his or her
election pursuant to an arrangement described in Section 401(k) of the Code
under the Plan, or any other plan of the Employer or an Affiliated Employer
which is qualified under Section 401(a) of the Code, for a one year period
beginning on the date on which the withdrawal payment is made;
(d) The Participant shall be suspended from making
employee contributions or having contributions made by reason of his or her
election under any plan of deferred compensation of the Employer or an
Affiliated Employer which is not qualified under Section 401(a) of the Code,
including for purposes hereof a stock option or stock purchase plan, for at
least one year after the date on which the withdrawal payment is made; and
(e) The Participant cannot relieve such need through
any other resources.
7.4 SUSPENSION OF SAVINGS CONTRIBUTIONS. Notwithstanding any other
provision in the Plan to the contrary, the ability of any Participant who makes
a withdrawal under Sections 7.2 and 7.3 above because of a hardship shall
automatically be suspended from making Savings Contributions under this Plan for
the one year period beginning on the date on which the
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withdrawal payment is made. The Participant may elect to have Savings
Contributions resume being made on his or her behalf as of any pay day which
occurs at least one year after such withdrawal date (or any subsequent day) only
by filing a new Savings Agreement with a Plan representative an administratively
reasonable number of days prior to such pay day.
7.5 REDUCTION OF POST-WITHDRAWAL PRE-TAX SAVINGS CONTRIBUTIONS.
Notwithstanding any other provision in the Plan to the contrary, any Participant
who makes a withdrawal under Sections 7.2 and 7.3 above because of a hardship
may not elect to have Pre-Tax Savings Contributions made to this Plan, and/or to
have any contributions made to any other plan of the Employer or an Affiliated
Employer by reason of an election pursuant to any arrangement described in
Section 401(k) of the Code, for the Participant's tax year next following his or
her tax year in which he or she receives such withdrawal which are in the
aggregate in excess of an amount equal to: (1) the applicable limit under
Section 402(g) of the Code for such next tax year (E.G., $9,500, as increased by
the Secretary of the Treasury or his or her delegate for such next tax year);
less (2) the aggregate sum of the Pre-Tax Savings Contributions made on behalf
of the Participant to this Plan, and the contributions made on his or her behalf
to any other plan of the Employer or an Affiliated Employer by reason of any
arrangement described in Section 401(k) of the Code, for the Participant's tax
year in which such withdrawal is made.
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SECTION 8
---------
DISTRIBUTIONS ON ACCOUNT OF TERMINATION
---------------------------------------
OF EMPLOYMENT FOR REASONS OTHER THAN DEATH
------------------------------------------
8.1 DISTRIBUTION OF RETIREMENT BENEFIT. Each Participant who is vested
in any Account under the Plan shall be entitled to a retirement benefit under
the Plan, which is payable in accordance with the following provisions:
8.1.1 The form of such benefit shall be determined under
Sections 8A and 8B below.
8.1.2 Further, subject to the other provisions of the Plan,
such benefit shall be paid or commence to be paid within a reasonable
administrative period after the date the Participant provides a Plan
representative with a written direction (on a form prepared or approved by the
Committee) to pay the benefit, except that in no event shall such benefit be
paid or commence to be paid prior to the earlier of the date the Participant
ceases to be an Employee or the Participant's Required Commencement Date or
later than the Participant's Required Commencement Date.
8.1.3 Notwithstanding the provisions of Section 8.1.2 above,
such benefit shall automatically be paid, with no direction or consent of the
Participant being required, within a reasonable administrative period after the
date the Participant ceases to be an Employee if the lump sum amount of such
benefit is then determined to be $3,500 or less and if the Participant's ceasing
to be an Employee occurs prior to his or her Required Commencement Date; except
that such benefit shall in no event be paid later than the Participant's
Required Commencement Date.
8.1.4 Also, in no event shall distribution of any benefit
under the Plan to a Participant under this Section 8.1 be made or commence,
provided the Participant has filed a written direction to pay the benefit (when
such direction is required) and the amount of the benefit can be determined,
later than 60 days after the end of the later of the Plan Year during which the
Participant attains his or her Normal Retirement Age or the Plan Year in which
he or she ceases to be an Employee.
8.1.5 If a Participant dies before the full distribution of
the retirement benefit to which he or she is entitled, his or her beneficiary
under the Plan shall be entitled to a benefit under Section 9 below and the
provisions of this Section 8.1 shall no longer apply.
8.2 REQUIRED COMMENCEMENT DATE. For purposes of the Plan and Section
8.1 above in particular, a Participant's "Required Commencement Date" means a
date determined by the Committee for administrative reasons to be the date on
which the Participant's vested Plan benefit (if any such benefit would then
exist and not yet have been distributed) is to commence in order to meet the
requirements of Section 401(a)(9) of the Code as such requirements are in
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effect in the first calendar year that the Participant reaches an age which
requires the commencement of the Participant's vested Plan benefit under such
Code Section in such calendar year or the immediately following calendar year.
Such date, for any Participant who has not in a calendar year ending prior to
the Effective Amendment Date reached an age which required the commencement of
the Participant's vested Plan benefit in such calendar year or the immediately
following calendar year, and subject to any subsequent changes to Code Section
401(a)(9), shall be in accordance with the following parameters:
8.2.2 For a Participant who is not a 5% owner of the Employer,
his or her Required Commencement Date must be no later than, and no earlier than
seven months prior to, the April 1 of the calendar year next following the later
of: (1) the calendar year in which he or she attains age 70-1/2; or (2) the
calendar year in which he or she ceases to be an Employee.
8.2.3 For a Participant who is a 5% owner of the Employer, his
or her Required Commencement Date must be no later than, and no earlier than
seven months prior to, the April 1 of the calendar year next following the later
of: (1) the calendar year in which he or she attains age 70-1/2; or (2) the
earlier of the calendar year with or within which ends the Plan Year in which he
or she becomes a 5% owner of the Employer or the calendar year in which he or
she ceases to be an Employee.
8.2.4 A Participant is deemed to be a 5% owner of the Employer
for purposes hereof if he or she is a 5% owner of the Employer (as determined
under Section 416(i)(1)(B) of the Code) at any time during the Plan Year ending
with or within the calendar year in which he or she attains age 66-1/2 or any
subsequent Plan Year. Once a Participant meets the criteria, he or she shall be
deemed a 5% owner of the Employer even if he or she ceases to own 5% of the
Employer in a later Plan Year.
8.2.5 Notwithstanding the foregoing, for any Participant who
has no amount at all allocated to any Account of his or hers under the Plan (or
who is not yet even a Participant) on the date which otherwise would be his or
her Required Commencement Date under the foregoing provisions of this Section
8.2, then his or her Required Commencement Date shall not be subject to such
foregoing provisions but rather must be a date which falls in, and is no later
than the December 31 of, the calendar year next following the first calendar
year in which falls a date as of which an amount is allocated to any Account of
his or hers under the Plan.
8.3 FORFEITURE OF NONVESTED ACCOUNTS ON TERMINATION OF EMPLOYMENT. If a
Participant ceases to be an Employee for any reason prior to a time when his or
her Accounts are fully vested, the Participant will forfeit from his or her
Accounts the nonvested balance therein (I.E., the total balance of such Accounts
less the vested portion, if any, of such balance), on and as determined as of
the earlier of (1) the date on which he or she receives distribution of the full
vested portion of his or her Accounts or (2) the end of the Plan Year in which
he or she first incurs a Six-Year Break-in-Service which ends after the
Participant ceases to be an Employee. The forfeited amount shall be allocated to
Accounts of other Participants in
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accordance with Section 8.6 below. For purposes hereof, a Participant who
terminates employment with the Employer at a time when he or she has no vested
balance in his or her Accounts at all shall be deemed to have received a
complete distribution of the vested portion of his or her Accounts on the date
of such termination of employment.
8.4 SPECIAL RULES AS TO EFFECT OF REHIRINGS ON ACCOUNTS.
8.4.1 If a former Participant who ceased to be an Employee and
thereby forfeited all of his or her Accounts is rehired as an Employee prior to
incurring a Six-Year Break-in-Service, the dollar amount which was previously
forfeited from such Accounts shall be restored, as of the last day of the Plan
Year in which he or she is rehired, to new Accounts (of the same types as the
ones from which he or she suffered the forfeiture) established for him or her
under the Plan. In addition, if a former Participant who ceased to be an
Employee, thereby forfeited a portion of but not all of his or her Accounts, and
received a distribution of the vested balance of such Accounts is rehired as an
Employee prior to incurring a Six-Year Break-in-Service, he or she may repay to
the Trust the dollar amount previously distributed to him or her which was
attributable to the vested portion of such prior Accounts. Such repayment must
be made prior to the earlier of the end of a Six-Year Break-in-Service or the
sixth annual anniversary of his or her reemployment as an Employee. If he or she
makes such repayment, the dollar amount previously forfeited from such prior
Accounts, together with the dollar amount of the repayment, shall be restored,
as of the last day of the Plan Year in which he or she makes the repayment, to
new Accounts (of the same types as the ones from which he or she suffered the
forfeiture and received the distribution) established for him or her under the
Plan.
8.4.2 If a former Participant who ceased to be an Employee and
forfeited a portion but not all of his or her Matching Account is rehired as an
Employee after incurring a Six-Year Break-in-Service but before receiving the
full vested portion of all of his or her Accounts, his or her Matching Account
shall be renamed as the "Prior Matching Account," shall at all future times only
reflect the then remaining vested balance therein and Trust earnings and income
which become allocable thereto, and shall be fully vested at all subsequent
times. A new Matching Account, to which future Matching Contributions can be
allocated and which shall be subject to the general vesting provisions of the
Plan, shall be established for the rehired Participant.
8.5 SOURCE OF RESTORALS. The restorals required under Section 8.4 above
for any Plan Year shall, to the extent indicated in Section 8.6 below, be made
from forfeitures arising in such Plan Year. If the amount of such forfeitures
are insufficient to make all such required restorals, then the amount of such
required restorals shall be made from a special contribution paid by the
Employer to the Trust. Such contribution shall not be considered an Employer
contribution for purposes of Section 6.1 or 6.2 above or a part of an annual
addition (as defined in Section 6A.1.2(a) above) to the Plan.
8.6 APPLICATION OF FORFEITURES. Any amount of forfeitures arising under
the Plan during a Plan Year: (1) shall first be allocated to make all restorals
of Accounts required under
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the provisions of Section 8.4 above; (2) shall second, to the extent any such
forfeitures still remain after such first step, be allocated to correct any
inadvertent errors made in crediting amounts to Accounts and to make all
restorals of Accounts required under the provisions of Section 10.2 below; (3)
shall third, to the extent any such forfeitures still remain after such two
steps, be used to reduce and be substituted in place of the amount of Matching
Contributions otherwise required for the subject Plan Year under the provisions
of Section 5.1.3 above; and (4) shall fourth, to the extent any such forfeitures
still remain after such three steps, be allocated among the Matching Accounts of
those Participants who are otherwise entitled to receive an allocation of
Matching Contributions for the subject Plan Year in the same manner as the
Matching Contributions of the Employer are allocated for such Plan Year and in
addition to such Matching Contributions.
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SECTION 8A
----------
FORM OF DISTRIBUTION OF SAVINGS, ROLLOVER,
------------------------------------------
AND MATCHING ACCOUNTS
---------------------
8A.1 SECTION APPLIES ONLY TO SAVINGS, ROLLOVER, AND MATCHING ACCOUNTS.
This Section 8A provides rules as to the form (except for the time of payout,
which is provided for in Section 8 above) of a Participant's retirement benefit
under the Plan with respect to the part of such benefit attributable to the
Savings Account, Rollover Account, and Matching Account of the Participant
(which part of such benefit is referred to in this Section 8A as the
Participant's "Savings Benefit"). Section 8B below provides the rules as to such
form with respect to the part of the retirement benefit attributable to any
Retirement Income Account of the Participant.
8A.2 NORMAL FORM OF SAVINGS BENEFIT -- LUMP SUM PAYMENT. Subject to the
other provisions of the Plan, a Participant's Savings Benefit shall be
distributed in the form of a lump sum payment. The amount of the lump sum
payment shall be equal to the vested balances in the Participant's Savings,
Rollover, and Matching Accounts, determined as of the date which is reasonably
chosen by the Committee or a Committee representative to be sufficiently in
advance of the distribution so as to allow the Committee time to process the
distribution (for purposes of this Section 8A.2, the "subject valuation date").
Such lump sum payment shall be made in cash, except that the Participant may
elect, on a form or writing prepared or approved by the Committee and filed with
a Plan representative prior to the date the payment is processed, that the
payment is to be made partly in the form of common shares of Federated if a
portion of his or her Savings and Matching Accounts then is invested in the
Investment Fund described in Section 6B above as Fund F (for purposes of this
Section 8A.2, "Fund F"). If such election is made, then such lump sum payment
will consist of: (1) to the extent sufficient Federated common shares are
available under Fund F, Federated common shares equal to the quotient produced
by dividing the vested balances of the portion of the Participant's Savings,
Rollover, and Matching Accounts which is invested in Fund F as of the subject
valuation date by the closing price (for purposes of this Section 8A.2, the
"subject closing price") of a Federated common share on the latest trading day
of the largest securities market in which Federated common shares are traded
which occurs on or before the subject valuation date; and (2) cash equal to the
difference between the total vested balances of the Participant's Savings and
Matching Accounts as of the subject valuation date and the value of the
Federated common shares being distributed in the payment (as determined on the
basis of the subject closing price of a Federated common share).
8A.3 OPTIONAL ANNUITY FORM OF BENEFIT RULES. Subject to the other
provisions of the Plan, a Participant may elect to receive his or her Savings
Benefit in an Annuity form instead of the normal form set forth in Section 8A.2
above (or to have part of his or her Savings Benefit paid in an Annuity form and
the remainder paid in the normal form set forth in Section 8A.2 above). Such an
election must be made on a form or writing prepared or approved by the Committee
and filed with a Plan representative prior to the date the benefit is payable
under the
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provisions of Section 8.1 above. If the Participant elects to receive his or her
Savings Benefit (or part of such benefit) in an Annuity form, the specific type
of Annuity in which such benefit shall be paid is determined under the
provisions of Sections 8A.4, 8A.5, and 8A.6 below. In addition, the election to
pay a Savings Benefit (or part of such benefit) in an Annuity form is subject to
the following provisions:
8A.3.1 The distribution of any Annuity shall be effected by
the application of an amount equal to the vested balances in the Participant's
Savings, Rollover, and Matching Accounts (determined as of a date which is
reasonably chosen by the Committee or a Committee representative to be
sufficiently in advance of the distribution so as to allow the Committee time to
process the distribution), or the part of such vested balances which the
Participant elects to have distributed in an Annuity form, to the purchase of a
nontransferable Annuity contract providing the applicable type of Annuity form
from an insurance company selected by the Committee and the subsequent
forwarding of such contract to the Participant. The purchase of such Annuity
shall be made on behalf of the Participant as a part of the Plan's
administrative procedures. If the Participant receives a benefit under Section
8B below in the same Annuity form as he or she receives his or her Savings
Benefit (or any part thereof), the Committee may choose to purchase one Annuity
contract to provide both such benefits.
8A.3.2 Any Annuity contract shall be purchased and distributed
on an immediate basis (I.E., payments under the contract shall begin as of a
date which coincides with or is within a reasonable administrative period after
the date as of which such purchase is made). As a result, the vested balances of
the Participant's Savings, Rollover, and Matching Accounts shall be maintained
in the Plan until just before the Annuity contract is to begin payments, at
which time the contract shall be purchased.
8A.3.3 The distribution of an Annuity contract hereunder
shall, for all purposes of the Plan, be deemed to constitute the full
distribution of the benefit attributable to the part of the Participant's
Savings, Rollover, and Matching Accounts which is due the Participant and is
being paid in the form of an Annuity.
8A.3.4 Notwithstanding any other provision of the Plan to the
contrary, the applicable Participant may not elect to receive his or her Savings
Benefit (or any part of such benefit) in an Annuity form if the value of such
benefit (or such part) at the time it is determined for distribution purposes,
when added to the value of any benefit under Section 8B below which the
Participant also is to receive in an Annuity form, is $3,500 or less. Instead,
in such case such benefit shall be distributed in a lump sum payment in
accordance with the provisions of Section 8A.2 above.
8A.3.5 If a Participant elects to receive part but not all of
his or her Savings Benefit in the form of an Annuity, then, for purposes of the
provisions of Sections 8A.4, 8A.5, and 8A.6 below, any reference in such
sections to a Participant's Savings Benefit shall be read to refer only to the
part of such benefit which the Participant elects to receive in the form of an
Annuity.
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8A.4 NORMAL FORM OF ANNUITY BENEFIT.
8A.4.1 Subject to the other terms of the Plan, if a
Participant elects to receive his or her Savings Benefit in an Annuity form
under the provisions of Section 8A.3 above and he or she is not married as of
the date payments under the Annuity are to begin being paid, then such benefit
shall be paid in the form of a Single Life Annuity.
8A.4.2 Subject to the other terms of the Plan, if a
Participant elects to receive his or her Savings Benefit in an Annuity form
under the provisions of Section 8A.3 above and he or she is married as of the
date payments under the Annuity are to begin being paid, then such benefit shall
be paid in the form of a Qualified Joint and Survivor Annuity.
8A.5 ELECTION OUT OF NORMAL ANNUITY FORM.
8A.5.1 A Participant who elects to receive his or her Savings
Benefit in an Annuity form under the provisions of Section 8A.3 above may elect
to waive the normal Annuity form in which such benefit shall otherwise be paid
under Section 8A.4 above and instead to have such benefit paid in any specific
optional Annuity form permitted him or her under Section 8A.6 below, provided:
(1) such election is made in writing to a Plan representative (on a form or
writing prepared or approved by the Committee) both prior to the date on which
the Savings Benefit is otherwise distributed in the absence of this election and
within the 90 day period ending on the date on which his or her Savings Benefit
is distributed; and (2) for a Participant who is married on the date as of which
his or her Savings Benefit commences under the Annuity form, the person who is
the Spouse of the Participant on such date consents, in writing to a Plan
representative, to such election within the same 90 day period, with the
Spouse's consent acknowledging the effect of such consent and being witnessed by
a notary public. Any such Spouse's consent shall be irrevocable once received by
a Plan representative.
8A.5.2 Notwithstanding the provisions of clause (2) in Section
8A.5.1 above, a consent of a Spouse shall not be required for purposes of
Section 8A.5.1 above if it is established to the satisfaction of a Plan
representative that the otherwise required consent cannot be obtained because
the Plan representative reasonably determines no Spouse exists, because the
Spouse cannot reasonably be located, or because of such other circumstances as
the Secretary of the Treasury or his or her delegate allows in regulations.
8A.5.3 The Participant may amend or revoke his or her election
of an optional Annuity form under this Section 8A.5 by written notice filed with
a Plan representative at any time before his or her Savings Benefit is processed
for distribution to him or her under the Plan; provided that if the Participant
attempts upon such an amendment to elect another Annuity form of payment
different than the normal Annuity form applicable to him or her, the conditions
of Sections 8A.5.1 and 8A.5.2 above must be satisfied as if such amendment were
a new election.
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<PAGE> 73
8A.6 OPTIONAL ANNUITY FORMS. A Participant who elects to receive his or
her Savings Benefit in an Annuity form may elect to receive such benefit, in
lieu of the normal Annuity form otherwise payable under Section 8A.4 above and
provided all of the election provisions of Section 8A.5 above are met, in any of
the following Annuity forms: (1) a Single Life Annuity (which is an optional
Annuity form only for a Participant who is married on the date as of which his
or her Savings Benefit is distributed to him); (2) a Life and Ten Year Certain
Annuity; (3) a Full Cash Refund Annuity; or (4) a Period Certain Annuity.
8A.7 ANNUITY DEFINITIONS. For purposes of this Section 8A, the
following Annuity definitions apply:
8A.7.1 "Single Life Annuity" means an Annuity payable as
follows. Monthly payments are made to a Participant for his or her life and end
with the last monthly payment due for the month in which the Participant dies.
8A.7.2 "Qualified Joint and Survivor Annuity" means an Annuity
payable as follows. Monthly payments are made to a Participant for his or her
life, and after his or her death monthly survivor payments continue to the
person who is the Spouse of the Participant on the date as of which payments
under the Annuity begin being paid to the Participant (provided such person
survives the Participant) for such person's life. Each monthly survivor payment
to such person is equal in amount to 50% (or, if the Participant so elects in
writing to the applicable Plan representative within the 90 day period ending on
the date on which payments under the Annuity begin being paid, 66-2/3%, 75%, or
100%) of the monthly payment amount made during the life of the Participant
under the same Annuity.
8A.7.3 "Life and Ten Year Certain Annuity" means an Annuity
payable as follows. Monthly payments are made to a Participant for his or her
life, and such payments end with the payment due for the month in which the
Participant dies if at least 120 monthly payments have been made on behalf of
the Participant. If not, the monthly payments continue after the Participant's
death to a contingent beneficiary until 120 monthly payments have been made,
when aggregated, to the Participant and the contingent beneficiary. The
Participant shall name the contingent beneficiary in his or her election of this
form.
8A.7.4 "Full Cash Refund Annuity" means an Annuity payable as
follows. Monthly payments are made to a Participant for his or her life and end
with the last payment due for the month in which the Participant dies. Further,
if the cost of such Annuity exceeds the total of all monthly payments made under
the Annuity through the month in which the Participant dies, then the amount of
such excess shall be paid to a contingent beneficiary. The Participant shall
name the contingent beneficiary for purposes of such Annuity in his or her
election of this form.
8A.7.5 "Period Certain Annuity" means an Annuity payable as
follows. Monthly payments are made to a Participant for a certain number of
months (the "period certain") and end with the payment for the last month in
such period certain. If the Participant
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<PAGE> 74
dies before the end of the period certain, then the monthly payments due for the
remaining months in the period certain after the month of the Participant's
death shall be paid to a contingent beneficiary. The Participant shall specify
the period certain to be used and name the contingent beneficiary in his or her
election of this form. The period certain may be of any number of months,
provided it is not less than 36 months and not more than 180 months.
8A-5
<PAGE> 75
SECTION 8B
----------
FORM OF DISTRIBUTION OF
-----------------------
RETIREMENT INCOME ACCOUNTS
--------------------------
8B.1 SECTION APPLIES ONLY TO RETIREMENT INCOME ACCOUNTS. This Section
8B provides rules as to the form (except for the time of payout, which is set
forth in Section 8 above) of a Participant's retirement benefit under the Plan
with respect to the part of such benefit attributable to any Retirement Income
Account of the Participant (which part of such benefit is referred to in this
Section 8B as the Participant's "Profit Sharing Benefit"), if any. Section 8A
above provides the rules as to such form with respect to the part of the
retirement benefit attributable to any Savings, Rollover, and Matching Accounts
of the Participant (which part of such benefit is referred to in this Section 8B
as the Participant's "Savings Benefit").
8B.2 NORMAL FORM OF PROFIT SHARING BENEFIT -- QUALIFIED ANNUITY FORMS.
8B.2.1 Subject to the other terms of the Plan, if a
Participant is not married as of the date payment of his or her Profit Sharing
Benefit is to commence, then such benefit shall be paid in the form of a Single
Life Annuity.
8B.2.2 Subject to the other terms of the Plan, if a
Participant is married as of the date payment of his or her Profit Sharing
Benefit is to commence, then such benefit shall be paid in the form of a
Qualified Joint and Survivor Annuity.
8B.3 ELECTION OUT OF NORMAL FORM.
8B.3.1 A Participant may elect to waive the normal form in
which his or her Profit Sharing Benefit shall otherwise be paid under Section
8B.2 above and instead to have such benefit (or any part of such benefit) paid
in any specific optional form permitted him or her under Section 8B.4 below,
provided: (1) such election is made in writing to a Plan representative (on a
form or writing prepared or approved by the Committee) both prior to the date on
which the Profit Sharing Benefit is distributed in the absence of this election
and within the 90 day period ending on the date on which his or her Profit
Sharing Benefit is distributed or paid; and (2) for a Participant who is married
on the date as of which his or her Profit Sharing Benefit commences or is paid,
the person who is the Spouse of the Participant on such date consents, in
writing to a Plan representative, to such election within the same 90 day
period, with the Spouse's consent acknowledging the effect of such consent and
being witnessed by a notary public. Any such Spouse's consent shall be
irrevocable once received by a Plan representative.
8B.3.2 Notwithstanding the provisions of clause (2) in Section
8B.3.1 above, a consent of a Spouse shall not be required for purposes of
Section 8B.3.1 above if it is established to the satisfaction of a Plan
representative that the otherwise required consent cannot
8B-1
<PAGE> 76
be obtained because the Plan representative reasonably determines no Spouse
exists, because the Spouse cannot reasonably be located, or because of such
other circumstances as the Secretary of the Treasury or his or her delegate
allows in regulations.
8B.3.3 The Participant may amend or revoke his or her election
of an optional form under this Section 8B.3 by written notice filed with a Plan
representative at any time before his or her Profit Sharing Benefit is processed
for distribution to him or her under the Plan; provided that attempts upon such
an amendment to elect another form of payment different than the normal form
applicable to him or her, the conditions of Sections 8B.3.1 and 8B.3.2 above
must be satisfied as if such amendment were a new election.
8B.4 REGULAR OPTIONAL FORMS.
8B.4.1 Provided all of the election provisions of Section 8B.3
above are met, a Participant may elect to receive his or her Profit Sharing
Benefit in any of the following forms instead of the normal form otherwise
payable under Section 8B.2 above (or to have part of his or her Profit Sharing
Benefit paid in any of the following forms and the remainder paid in the normal
form otherwise payable under Section 8B.2 above):
(a) A Single Life Annuity (which is an optional form
only for a Participant who is married on the date as of which his or her Profit
Sharing Benefit commences to be paid to him);
(b) A Life and Ten Year Certain Annuity;
(c) A Full Cash Refund Annuity;
(d) A Period Certain Annuity; or
(e) A lump sum payment. The amount of the lump sum
payment shall be equal to the vested balance of the Participant's Retirement
Income Account, determined as of a date which is reasonably chosen by the
Committee or a Committee representative to be sufficiently in advance of the
distribution so as to allow the Committee time to process the distribution (for
purposes of this paragraph (e), the "subject valuation date"), or the part of
such vested balance which the Participant elects to have distributed in a lump
sum payment form, as the case may be. Such lump sum payment shall be made in
cash, except that the Participant may elect, on a form or writing prepared or
approved by the Committee and filed with a Plan representative prior to the date
the payment is processed, that the payment is to be made partly in the form of
common shares of Federated if a portion of his or her Retirement Income Account
then is invested in the Investment Fund described in Section 6B above as Fund F
(for purposes of this paragraph (e), "Fund F"). If such election is made, then
such lump sum payment will consist of: (1) to the extent sufficient Federated
common shares are available under Fund F, Federated common shares equal to the
quotient produced by dividing the vested balance of the portion of the
Participant's Retirement Income Account which is invested in Fund F as of the
8B-2
<PAGE> 77
subject valuation date by the closing price (for purposes of this paragraph (e),
the "subject closing price") of a Federated common share on the latest trading
day of the largest securities market in which Federated common shares are traded
which occurs on or before the subject valuation date; and (2) cash equal to the
difference between the total vested balance of the Participant's Retirement
Income Account as of the subject valuation date and the value of the Federated
common shares being distributed in the payment (as determined on the basis of
the subject closing price of a Federated common share).
8B.5 ANNUITY FORM OF BENEFIT RULES. If a Participant's Profit Sharing
Benefit is paid in any Annuity form under the provisions of this Section 8B,
such Annuity form shall be subject to the following provisions:
8B.5.1 The distribution of any Annuity shall be effected by
the application of an amount equal to the vested balance in the Participant's
Retirement Income Account (determined as of a date which is reasonably chosen by
the Committee or a Committee representative to be sufficiently in advance of the
distribution so as to allow the Committee time to process the distribution), or
the part of such vested balance which is to be distributed in an Annuity form,
to the purchase of a nontransferable Annuity contract providing the applicable
type of Annuity form from an insurance company selected by the Committee and the
subsequent forwarding of such contract to the Participant. The purchase of such
Annuity shall be made on behalf of the Participant as a part of the Plan's
administrative procedures. If the Participant receives his or her Savings
Benefit (or any part thereof) under Section 8A above in the same Annuity form as
he or she receives his or her Profit Sharing Benefit (or any part thereof), the
Committee may choose to purchase just one Annuity contract to provide both such
benefits.
8B.5.2 Any Annuity contract shall be purchased and distributed
on an immediate basis (I.E., payments under the contract shall begin as of a
date which coincides with or is within a reasonable administrative period after
the date as of which such purchase is made). As a result, the vested portion of
the Participant's Retirement Income Account shall be maintained in the Plan
until just before the Annuity contract is to begin payments, at which time the
contract shall be purchased.
8B.5.3 The distribution of an Annuity contract hereunder
shall, for all purposes of the Plan, be deemed to constitute the full
distribution of the benefit attributable to the part of the Participant's
Retirement Income Account which is due the Participant and is being paid in the
form of an Annuity.
8B.6 ANNUITY DEFINITIONS. For purposes of this Section 8B, a "Single
Life Annuity," "Qualified Joint and Survivor Annuity," "Life and Ten Year
Certain Annuity," "Full Cash Refund Annuity," and "Period Certain Annuity" shall
have the same meanings as are set forth for such terms in Section 8A.7 above.
8B.7 REQUIRED LUMP SUM FORM FOR SMALL PROFIT SHARING BENEFIT.
Notwithstanding any other provision of the Plan to the contrary, a Participant
shall automatically receive his or her
8B-3
<PAGE> 78
Profit Sharing Benefit in the form of a lump sum payment (and not in any Annuity
form) unless the value of such benefit at the time it is processed for
distribution, when added to the value of any benefit under Section 8A above
which the Participant elects to receive in an Annuity form, is in excess of
$3,500. The amount of the lump sum payment shall be equal to the vested balance
in the Participant's Retirement Income Account determined as of a date which is
reasonably chosen by the Committee or a Committee representative to be
sufficiently in advance of the distribution so as to allow the Committee time to
process the distribution (for purposes of this Section 8B.7, the "subject
valuation date"). Such lump sum payment shall be made in cash, except that the
Participant may elect, on a form or writing prepared or approved by the
Committee and filed with a Plan representative prior to the date the payment is
processed, that the payment is to be made partly in the form of common shares of
Federated if a portion of his or her Retirement Income Account then is invested
in the Investment Fund described in Section 6B above as Fund F (for purposes of
this Section 8B.7, "Fund F"). If such election is made, then such lump sum
payment will consist of: (1) to the extent sufficient Federated common shares
are available under Fund F, Federated common shares equal to the quotient
produced by dividing the vested balance of the portion of the Participant's
Retirement Income Account which is invested in Fund F as of the subject
valuation date by the closing price (for purposes of this Section 8B.7, the
"subject closing price") of a Federated common share on the latest trading day
of the largest securities market in which Federated common shares are traded
which occurs on or before the subject valuation date; and (2) cash equal to the
difference between the total vested balance of the Participant's Retirement
Income Account as of the subject valuation date and the value of the Federated
common shares being distributed in the payment (as determined on the basis of
the subject closing price of a Federated common share).
8B-4
<PAGE> 79
SECTION 9
---------
DISTRIBUTIONS ON ACCOUNT OF DEATH
---------------------------------
9.1 DISTRIBUTION OF DEATH BENEFIT. If a Participant dies, whether while
employed by the Employer or after such employment has ceased, prior to having a
retirement benefit paid (or at least commence to be paid) to him or her under
the provisions of Sections 8, 8A, and/or 8B above, the Participant's beneficiary
shall be entitled to receive a death benefit under the Plan. Such death benefit,
regardless of the form of payment, is payable solely from and attributable to
the vested portions of the Participant's Accounts.
9.2 TIME OF DEATH BENEFIT. Subject to the provisions of Section 9A
below, any death benefit payable under Section 9.1 above on behalf of a
Participant shall be distributed within a reasonable administrative period after
the Employer or the Committee receives notice of the Participant's death (and in
no event, subject only to the Employer or the Committee receiving notice of the
death, shall such benefit be distributed later than December 31 of the calendar
year next following the calendar year in which the Participant died).
9.3 NORMAL FORM OF DEATH BENEFIT -- LUMP SUM PAYMENT. Subject to the
provisions of Section 9A below and the other provisions of this Section 9, any
death benefit payable under Section 9.1 above on behalf of a Participant shall
be distributed in the form of a lump sum payment. The amount of the lump sum
payment shall be equal to the vested balances of the Participant's Accounts
determined as of a date which is reasonably chosen by the Committee or a
Committee representative to be sufficiently in advance of the distribution so as
to allow the Committee time to process the distribution (for purposes of this
Section 9.3, the "subject valuation date"). Such lump sum payment shall be made
in cash, except that the Participant's beneficiary may elect, on a form or
writing prepared or approved by the Committee and filed with a Plan
representative prior to the date the payment is processed, that the payment is
to be made partly in the form of common shares of Federated if a portion of the
Participant's Accounts then is invested in the Investment Fund described in
Section 6B above as Fund F (for purposes of this Section 9.3, "Fund F"). If such
election is made, then such lump sum payment will consist of: (1) to the extent
sufficient Federated common shares are available under Fund F, Federated common
shares equal to the quotient produced by dividing the vested balances of the
portion of the Participant's Accounts which is invested in Fund F as of the
subject valuation date by the closing price (for purposes of this Section 9.3,
the "subject closing price") of a Federated common share on the latest trading
day of the largest securities market in which Federated common shares are traded
which occurs on or before the subject valuation date; and (2) cash equal to the
difference between the total vested balances of the Participant's Accounts as of
the subject valuation date and the value of the Federated common shares being
distributed in the payment (as determined on the basis of the subject closing
price of a Federated common share).
9-1
<PAGE> 80
9.4 OPTIONAL ANNUITY FORM OF DEATH BENEFIT RULES. Subject to Section 9A
below and the other provisions of this Section 9, a Participant's beneficiary
who is entitled to a death benefit payable under Section 9.1 above on behalf of
the Participant may elect to receive such death benefit in either a Single Life
Annuity, a Life and Ten Year Certain Annuity, a Full Cash Refund Annuity, or a
Period Certain Annuity, instead of the normal form set forth in Section 9.3
above. Such an election must be made on a form or writing prepared or approved
by the Committee and filed with a Plan representative prior to the date the
death benefit is processed for payment under the provisions of Section 9.2
above. In addition, the election to pay a death benefit in an optional Annuity
form is subject to the following provisions:
9.4.1 The distribution of any Annuity shall be effected by the
application of an amount equal to the vested balances of the Participant's
Accounts (determined as of a date which is reasonably chosen by the Committee or
a Committee representative to be sufficiently in advance of the distribution so
as to allow the Committee time to process the distribution) to the purchase of a
nontransferable Annuity contract providing the applicable type of Annuity form
from an insurance company selected by the Committee and the subsequent
forwarding of such contract to the Participant's beneficiary. The purchase of
such Annuity shall be made on behalf of the Participant's beneficiary as a part
of the Plan's administrative procedures.
9.4.2 Any Annuity contract shall be purchased and distributed
on an immediate basis (I.E., payments under the contract shall begin as of a
date which coincides with or is within a reasonable administrative period after
the date as of which such purchase is made). As a result, the vested balances of
the Participant's Accounts shall be maintained in the Plan until just before the
Annuity contract is to begin payments, at which time the contract shall be
purchased.
9.4.3 The distribution of an Annuity contract hereunder shall,
for all purposes of the Plan, be deemed to constitute the full distribution of
the death benefit which is due the Participant's beneficiary.
9.4.4 Notwithstanding any other provisions of the Plan to the
contrary, the applicable beneficiary may not elect to receive the death benefit
due to be paid hereunder in an optional Annuity form if the value of such death
benefit at the time it is to be distributed is $3,500 or less. Instead, in such
case such benefit shall be distributed in a lump sum payment in accordance with
the provisions of Section 9.3 above.
9.5 ANNUITY DEFINITIONS. For purposes of this Section 9, the following
Annuity definitions apply:
9.5.1 "Single Life Annuity" means an Annuity payable as
follows. Monthly payments are made to a Participant's beneficiary for the
beneficiary's life and end with the last monthly payment due for the month in
which the beneficiary dies.
9.5.2 "Life and Ten Year Certain Annuity" means an Annuity
payable as follows. Monthly payments are made to a Participant's beneficiary for
the beneficiary's life,
9-2
<PAGE> 81
and such payments end with the last monthly payment due for the month in which
the beneficiary dies if at least 120 monthly payments have been made on behalf
of the beneficiary. If not, the monthly payments continue after the
beneficiary's death to a contingent beneficiary until 120 monthly payments have
been made, when aggregated, to the beneficiary and the contingent beneficiary.
The beneficiary shall name the contingent beneficiary in his or her election of
this form.
9.5.3 "Full Cash Refund Annuity" means an Annuity payable as
follows. Monthly payments are made to a Participant's beneficiary for the
beneficiary's life and end with the last monthly payment due for the month in
which the beneficiary dies. Further, if the cost of such Annuity exceeds the
total of all monthly payments made under the Annuity through the month in which
the beneficiary dies, then the amount of such excess shall be paid to a
contingent beneficiary. The beneficiary shall name the contingent beneficiary
for purposes of such Annuity in his or her election of this form.
9.5.4 "Period Certain Annuity" means an Annuity payable as
follows. Monthly payments are made to a Participant's beneficiary for a certain
number of months (the "period certain") and end with the payment for the last
month in such period certain. If the beneficiary dies before the end of the
period certain, then the monthly payments due for the remaining months in the
period certain after the month of the beneficiary's death shall be paid to a
contingent beneficiary. The beneficiary shall specify the period certain to be
used and name the contingent beneficiary in his or her election of this form.
The period certain may be of any number of months, provided it is not less than
36 months and not more than 180 months.
9.6 DESIGNATION OF BENEFICIARY. Subject to the provisions of Section 9A
below, a Participant's beneficiary for purposes of the Plan shall be deemed to
be the surviving Spouse of the Participant. The Participant may designate a
different beneficiary on a form or writing prepared or approved by the Committee
and filed with a Plan representative. Such a designation is not effective,
however, unless (1) no Spouse survives the death of the Participant (or it is
established to the satisfaction of a Plan representative that no Spouse survives
such death, the Spouse cannot reasonably be located, or there exist other
circumstances prescribed by the Secretary of the Treasury or his or her delegate
which warrant the disregarding of any need for spousal consent to the designated
beneficiary) or the Spouse irrevocably consents to the different beneficiary
before the Participant's death, (2) the subject form is filed with a Plan
representative prior to the Participant's death, and (3) the designated
beneficiary survives the death of the Participant. Such different beneficiary
may consist of one or more persons, trusts, or estates. The Participant may
amend or revoke such designation at any time prior to his or her death on a form
or writing prepared or approved by the Committee and filed (prior to his or her
death) with a Plan representative, provided that any designation of a
beneficiary other than his or her Spouse shall only be effective if such
designation meets all of the conditions of the second sentence of this Section
9.6. Any consent of a Spouse required hereunder must be made in writing,
acknowledge the effect of such consent, and be witnessed by a notary public. If
the Committee determines that the Participant is not survived by a Spouse or
other properly
9-3
<PAGE> 82
designated beneficiary, the Participant's beneficiary for purposes of the Plan
shall be deemed to be the estate of the Participant.
9-4
<PAGE> 83
SECTION 9A
----------
SPECIAL SPOUSAL DEATH BENEFIT DISTRIBUTION RULES FOR
----------------------------------------------------
RETIREMENT INCOME ACCOUNTS
--------------------------
9A.1 SECTION APPLIES ONLY TO RETIREMENT INCOME ACCOUNTS. This Section
9A provides special rules as to the form and time of payment and the designation
of beneficiary with respect to the part (if any) of any death benefit payable
under Section 9 above on behalf of a Participant which is attributable to the
Participant's Retirement Income Account (which part of such benefit is referred
to in this Section 9A as the Participant's "Profit Sharing Death Benefit") when
(and only when) the Participant's beneficiary for purposes of such Profit
Sharing Death Benefit is the Participant's Spouse. To the extent the provisions
of this Section 9A apply, such provisions shall govern the payment of the
Participant's Profit Sharing Death Benefit, and the provisions of Section 9
above shall apply only to the part of the death benefit otherwise described in
Section 9 above which is attributable to the Participant's Savings, Rollover,
and Matching Accounts (with such part being referred to in this Section 9A as
the Participant's "Savings Death Benefit" and with any reference to the Accounts
of the Participant contained in such Section 9 above being read to refer only to
the Participant's Savings and Matching Accounts).
9A.2 TIME OF PROFIT SHARING DEATH BENEFIT. If the Participant's
beneficiary for purposes of his or her Profit Sharing Death Benefit is his or
her Spouse, then the Participant's Profit Sharing Death Benefit shall be
distributed to his or her Spouse within a reasonable administrative period after
the later of the date the Employer or the Committee receives notice of the
Participant's death or the date the Spouse provides a written consent to payment
of such benefit (except that in no event, subject only to the Employer or the
Committee receiving notice of the death, shall such benefit be distributed later
than December 31 of the later of the calendar year next following the calendar
year in which the Participant died or the calendar year in which the Participant
would have attained age 70-1/2 had he or she survived).
9A.3 NORMAL FORM OF PROFIT SHARING DEATH BENEFIT. If the Participant's
beneficiary for purposes of his or her Profit Sharing Death Benefit is his or
her Spouse, then, subject to the other terms of this Section 9A, such Profit
Sharing Death Benefit shall be paid to the Spouse in the form of a Single Life
Annuity.
9A.4 ELECTION OUT OF NORMAL FORM. If the Spouse of a Participant is
entitled to receive the Participant's Profit Sharing Death Benefit in the form
of a Single Life Annuity under Section 9A.3 above, the Spouse may instead elect
to waive such Single Life Annuity form and have such benefit paid in any
specific optional form permitted the Spouse under Section 9A.5 below, provided
such election is made in writing to a Plan representative (on a form or writing
prepared or approved by the Committee) both prior to the date on which the
Profit Sharing Death Benefit is otherwise processed for distribution in the
absence of this election and within the 90 day period ending on the date on
which the Profit Sharing Death Benefit is distributed. The Spouse may amend or
revoke his or her election of an optional form under this Section 9A.4 by
written
9A-1
<PAGE> 84
notice filed with a Plan representative at any time before the Profit Sharing
Death Benefit is processed for distribution to him or her under the Plan.
9A.5 OPTIONAL FORMS. If the Spouse of a Participant is entitled to
receive the Participant's Profit Sharing Death Benefit in the form of a Single
Life Annuity under Section 9A.3 above, the Spouse may elect to receive such
benefit, in lieu of the Single Life Annuity form and provided all of the
election provisions of Section 9A.4 above are met, in any of the following
forms:
9A.5.1 A Life and Ten Year Certain Annuity;
9A.5.2 A Full Cash Refund Annuity;
9A.5.3 A Period Certain Annuity; or
9A.5.4 A lump sum payment. The amount of the lump sum payment
shall be equal to the vested balance in the Participant's Retirement Income
Account determined as of a date which is reasonably chosen by the Committee or a
Committee representative to be sufficiently in advance of the distribution so as
to allow the Committee time to process the distribution (for purposes of this
Section 9A.5.4, the "subject valuation date"). Such lump sum payment shall be
made in cash, except that the Spouse may elect, on a form or writing prepared or
approved by the Committee and filed with a Plan representative prior to the date
the payment is processed, that the payment is to be made partly in the form of
common shares of Federated if a portion of the Participant's Retirement Income
Account then is invested in the Investment Fund described in Section 6B above as
Fund F (for purposes of this Section 9A.5.4, "Fund F"). If such election is
made, then such lump sum payment will consist of: (1) to the extent sufficient
Federated common shares are available under Fund F, Federated common shares
equal to the quotient produced by dividing the vested balance of the portion of
the Participant's Retirement Income Account which is invested in Fund F as of
the subject valuation date by the closing price (for purposes of this Section
9A.5.4, the "subject closing price") of a Federated common share on the latest
trading day of the largest securities market in which Federated common shares
are traded which occurs on or before the subject valuation date; and (2) cash
equal to the difference between the total vested balance of the Participant's
Retirement Income Account as of the subject valuation date and the value of the
Federated common shares being distributed in the payment (as determined on the
basis of the subject closing price of a Federated common share).
9A.6 ANNUITY FORM OF BENEFIT RULES. If a Participant's Profit Sharing
Death Benefit is paid in any Annuity form to the Participant's Spouse under the
provisions of this Section 9A, such Annuity form shall be subject to the
following provisions:
9A.6.1 The distribution of any Annuity under the provisions of
this Section 9A shall be effected by the application of an amount equal to the
vested balance of the Participant's Retirement Income Account (determined as of
a date which is reasonably chosen
9A-2
<PAGE> 85
by the Committee or a Committee representative to be sufficiently in advance of
the distribution so as to allow the Committee time to process the distribution)
to the purchase of a nontransferable Annuity contract providing the applicable
type of Annuity form from an insurance company selected by the Committee and the
subsequent forwarding of such contract to the Participant's Spouse. The purchase
of such Annuity shall be made on behalf of the Participant's Spouse as a part of
the Plan's administrative procedures. If the Spouse receives the Savings Death
Benefit under Section 9 above in the same Annuity form as he or she receives the
Participant's Profit Sharing Death Benefit, the Committee may choose to purchase
just one Annuity contract to provide both such benefits.
9A.6.2 Any Annuity contract provided under this Section 9A
shall be purchased and distributed on an immediate basis (I.E., payments under
the contract shall begin as of a date which coincides with or is within a
reasonable administrative period after the date as of which such purchase is
made). As a result, the vested balance of the Participant's Retirement Income
Account shall be maintained in the Plan until just before the Annuity contract
is to begin payments, at which time the contract shall be purchased.
9A.6.3 The distribution of an Annuity contract under this
Section 9A shall, for all purposes of the Plan, be deemed to constitute the full
distribution of the benefit attributable to the Participant's Profit Sharing
Death Benefit which is due the Participant's Spouse.
9A.7 REQUIRED LUMP SUM FORM FOR SMALL PROFIT SHARING DEATH BENEFIT.
Notwithstanding any other provision of the Plan to the contrary, if the Spouse
of a Participant is entitled to receive the Participant's Profit Sharing Death
Benefit under the provisions of this Section 9A, then the Spouse shall
automatically receive such benefit in the form of a lump sum payment (and not in
any Annuity form) if the value of such benefit at the time it is processed for
distribution, when added to the value of any portion of the Savings Death
Benefit which is payable to the Spouse and which the Spouse elects to receive in
an Annuity form, is $3,500 or less. The amount of the lump sum payment shall be
equal to the vested balance in the Participant's Retirement Income Account
determined as of a date which is reasonably chosen by the Committee or a
Committee representative to be sufficiently in advance of the distribution so as
to allow the Committee time to process the distribution (for purposes of this
Section 9A.7, the "subject valuation date"). Such lump sum payment shall be made
in cash, except that the Spouse may elect, on a form or writing prepared or
approved by the Committee and filed with a Plan representative prior to the date
the payment is made, that the payment is to be made partly in the form of common
shares of Federated if a portion of the Participant's Retirement Income Account
then is invested in the Investment Fund described in Section 6B above as Fund F
(for purposes of this Section 9A.7, "Fund F"). If such election is made, then
such lump sum payment will consist of: (1) to the extent sufficient Federated
common shares are available under Fund F, Federated common shares equal to the
quotient produced by dividing the vested balance of the portion of the
Participant's Retirement Income Account which is invested in Fund F as of the
subject valuation date by the closing price (for purposes of this Section 9A.7,
the "subject closing price") of a Federated common share on the latest trading
day of the largest
9A-3
<PAGE> 86
securities market in which Federated common shares are traded which occurs on or
before the subject valuation date; and (2) cash equal to the difference between
the total vested balance of the Participant's Retirement Income Account as of
the subject valuation date and the value of the Federated common shares being
distributed in the payment (as determined on the basis of the subject closing
price of a Federated common share).
9A.8 ANNUITY DEFINITIONS. For purposes of this Section 9A, a "Single
Life Annuity," "Life and Ten Year Certain Annuity," "Full Cash Refund Annuity,"
and "Period Certain Annuity" shall have the same meanings as are set forth for
such terms in Section 9.5 above; except that any reference to a "beneficiary"
contained in each such section shall be read for purposes of this Section 9A to
refer to a "Spouse."
9A.9 DESIGNATION OF BENEFICIARY. The Spouse of a Participant shall
automatically be deemed to be the beneficiary of the Participant's Profit
Sharing Death Benefit, unless no Spouse survives the death of the Participant
(or it is established to the satisfaction of a Plan representative that no
Spouse survives such death, the Spouse cannot reasonably be located, or there
exist other circumstances prescribed by the Secretary of the Treasury or his or
her delegate which would warrant the disregarding of any need of a spousal
consent to a different beneficiary if one had been attempted to be named by the
Participant). If no Spouse survives the death of the Participant (or it is
established to the satisfaction of a Plan representative that no Spouse survives
such death, the Spouse cannot reasonably be located, or there exist other
circumstances prescribed by the Secretary of the Treasury or his or her delegate
which would warrant the disregarding of any need for a spousal consent to a
different beneficiary if one had been attempted to be named by the Participant),
the Participant's beneficiary for purposes of his or her Profit Sharing Death
Benefit shall be deemed to be the same as his or her beneficiary determined
under Section 9.6 above.
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SECTION 10
----------
ADDITIONAL DISTRIBUTION PROVISIONS
----------------------------------
10.1 ALLOCATION OF CONTRIBUTIONS AFTER DISTRIBUTION. Notwithstanding
any provision of the Plan to the contrary, any contributions which are allocated
to any Account of a Participant as of a date which is on or prior to the date of
a complete distribution of the vested balance of such Account to the Participant
(or his or her beneficiary) under Sections 8, 8A, 8B, 9, and/or 9A above but
which are actually paid to the Trust after the date such distribution is
processed and any contributions which both are allocated to such Account and
actually paid to the Trust after the date such distribution is processed (such
contributions being referred to under this Section 10.1 in either case as "late
contributions") shall be disregarded in the determination of the amount of the
vested balance of such Account to be distributed. Instead, subject to the other
provisions of the Plan, any late contributions (to the extent the Participant is
vested in such amounts under the other provisions of the Plan) shall be paid
within a reasonable administrative period after they are actually paid to the
Trust to the Participant (or, if the Participant dies before such payment, to
the appropriate beneficiary of the Participant under the other provisions of the
Plan) in the same type of Annuity form as is being paid to the Participant (or
beneficiary) immediately prior to the payment of the late contributions (if the
prior distribution was made in the form of an Annuity under the other provisions
of the Plan) or in a form of benefit which is in accordance with the other
provisions of the Plan concerning benefit forms and assuming for such purpose
that such late contributions were the sole retirement benefit applicable to the
Participant (if the prior distribution was not made in any type of Annuity
form).
10.2 DETERMINATION OF PROPER PARTY FOR DISTRIBUTION AND FORFEITURE WHEN
PROPER PARTY CANNOT BE LOCATED. The facts as shown by the records of the
Committee at the time of any payment due under the Plan shall be conclusive as
to the proper payee and of the amounts properly payable, and payment made in
accordance with such state of facts shall constitute a complete discharge of any
and all obligations under the Plan. If a Participant (or a person claiming
through him) who is entitled to a benefit hereunder cannot reasonably be
located, then such benefit may, in the discretion of the Committee, continue to
be held for the Participant or may be forfeited. If, however, such benefit is
forfeited but the lost Participant (or person claiming through him) thereafter
makes a claim for the amount previously forfeited hereunder, such benefit shall
be restored and paid to the proper party (without any interest credited on the
previously forfeited benefit) within a reasonable administrative period
thereafter. The restorals required under this Section 10.2 shall, to the extent
provided in Section 8.6 above, be made from forfeitures arising in such Plan
Year. If the amount of such forfeitures are insufficient to make all such
required restorals, then the amount of such required restorals shall be made
from a special contribution paid by the Employer to the Trust. Such contribution
shall not be considered an Employer contribution for purposes of Section 6.1 or
6.2 above or a part of an annual addition (as defined in Section 6A.1.2(a)
above) to the Plan.
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10.3 REEMPLOYED PARTICIPANT. Notwithstanding any other provision of the
Plan to the contrary, if a Participant in this Plan who ceased to be an Employee
and became thereby entitled to the distribution of all or any part of his or her
Plan Accounts resumes employment as an Employee prior to his or her Required
Commencement Date, the Committee shall then direct the Trustee to postpone or
cease distribution of such Accounts, to the extent such action is
administratively possible (E.G., no Annuity contract has been purchased or lump
sum payment made), until the Participant's later termination of employment (or,
if earlier, his or her Required Commencement Date).
10.4 NONALIENATION OF BENEFITS. To the extent permitted by law, no
benefit payable under the Plan shall be subject in any manner to alienation,
sale, transfer, assignment, pledge, encumbrance, or charge, whether voluntary or
involuntary, nor shall any such benefit be in any manner liable for or subject
to the debts, contracts, liabilities, engagements, or torts of the person
entitled to such benefit. The Committee shall, however, adopt procedures to
allow benefits to be assigned in connection with qualified domestic relations
orders (as defined in and in accordance with the provisions of Section 206(d) of
ERISA and Section 414(p) of the Code). In this regard, the Plan shall permit a
lump sum cash payment to be made at any time to a Participant's alternate payee
(as also is defined in ERISA Section 206(d) and Code Section 414(p)) if directed
by a qualified domestic relations order, even if the Participant has not yet
ceased to be an Employee and has not attained his or her earliest retirement
date (again as defined in ERISA Section 206(d) and Section 414(p) of the Code).
Further, the Plan shall permit any such alternate payee to have the same rights
to direct the investment of any part of any Account which is held under the Plan
on behalf of the alternate payee pursuant to a qualified domestic relations
order as a Participant would have.
10.5 INCOMPETENCY. Every person receiving or claiming benefits under
the Plan shall be conclusively presumed to be mentally or legally competent and
of age until the date on which the Committee receives written notice that such
person is incompetent or a minor for whom a guardian or other person legally
vested with the care of his or her person or estate has been appointed. If the
Committee finds that any person to whom a benefit is payable under the Plan is
unable to care for his or her affairs because he or she is incompetent or is a
minor, any payment due (unless a prior claim therefor has been made by a duly
appointed legal representative) may be paid to the spouse, a child, a parent, a
brother, or a sister of such person, or to any person or institution deemed by
the Committee to have incurred expense for such person. If a guardian of the
estate of any person receiving or claiming benefits under the Plan is appointed
by a court of competent jurisdiction, benefit payments may be made to such
guardian provided that proper proof of appointment and continuing qualification
is furnished in a form and manner acceptable to the Committee. Any payment made
pursuant to this Section 10.5 shall be a complete discharge of liability
therefor under the Plan.
10.6 LEGAL DISTRIBUTION LIMITS. Notwithstanding any other provision of
this Plan to the contrary, any payment of a retirement or death benefit in any
form must meet and be in accordance with the distribution requirements of
Section 401(a)(9) of the Code (as amended by the Federal Small Business Job
Protection Act of 1996), including the incidental death benefit
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requirements which are referred to in such section, and such section is hereby
incorporated by reference into this Plan.
10.7 DISTRIBUTION FORM NOTICES. The Plan shall provide a Participant
(or a beneficiary) with notices as to the forms in which he or she may receive
any retirement (or death) benefit to which he or she is entitled at such times
as shall allow the person to make a choice among his or her options. In this
regard, the Plan shall provide any written explanations to a Participant (or a
beneficiary) under Code Section 417(a)(3) to the extent such explanations apply
to the Participant. Further, if any distribution to a Participant made under the
Plan is one to which Code Sections 401(a)(11) and 417 do not apply, such
distribution may commence less than 30 days after the notice required under
Treas. Reg. Section 1.411(a)-11(c) is given, provided that: (1) the Participant
is clearly informed that he or she has a right to a period of at least 30 days
after receiving the notice to consider the decision of whether or not to elect a
distribution (and, if applicable, a particular distribution option); and (2) the
Participant, after receiving the notice, affirmatively elects a distribution. In
addition, to the extent any distribution to a Participant made under the Plan is
one to which Code Sections 401(a)(11) and 417 apply, such distribution may
commence less than 30 days after the notice required under Treas. Reg. Section
1.411(a)-11(c) is given, and the date as of which such distribution is made may
be less than 30 days after any written explanation required by Code Section
417(a)(3) to be given the Participant is so provided, if the requirements of
Treas. Reg. Section 1.417(e)-1T(b)(3) are met.
10.8 DIRECT ROLLOVER DISTRIBUTIONS.
10.8.1 This Section 10.8 applies to distributions made on or
after January 1, 1993. Notwithstanding any provision of the Plan to the contrary
that would otherwise limit a distributee's election under this Section 10.8, a
distributee may elect, at the time and in the manner prescribed by the
Committee, to have any portion of an eligible rollover distribution otherwise
payable to him or her paid directly to an eligible retirement plan specified by
the distributee in a direct rollover.
10.8.2 For purposes of this Section 10.8, the following terms
shall have the meanings indicated below:
(a) An "eligible rollover distribution" means, with
respect to any distributee, any distribution of all or any portion of the entire
benefit otherwise payable under the Plan to the distributee, except that an
eligible rollover distribution does not include: (1) any distribution that is
one of a series of substantially equal periodic payments (not less frequently
than annually) made for the life (or life expectancy) of the distributee or the
joint lives (or joint life expectancies) of the distributee and the
distributee's designated beneficiary, or for a specified period of ten years or
more; (2) any distribution to the extent such distribution is required to be
made under Section 401(a)(9) of the Code; and (3) the portion of any
distribution that is not includable in gross income of the distributee for
purposes of Federal income tax.
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(b) An "eligible retirement plan" means, with respect
to any distributee's eligible rollover distribution, an individual retirement
account described in Section 408(a) of the Code, an individual retirement
annuity described in Section 408(b) of the Code, an annuity plan described in
Section 403(a) of the Code, or a qualified trust described in Section 401(a) of
the Code, that accepts the distributee's eligible rollover distribution.
However, in the case of an eligible rollover distribution to a distributee who
is a distributee by reason of being the surviving spouse of a Participant, an
"eligible retirement plan" means only an individual retirement account described
in Section 408(a) of the Code or an individual retirement annuity described in
Section 408(b) of the Code.
(c) A "distributee" means a Participant. In addition,
a Participant's surviving spouse, or a Participant's spouse or former spouse who
is the alternate payee under a qualified domestic relations order (as defined in
Section 414(p) of the Code), is a distributee with regard to any interest of the
Participant which becomes payable under the Plan to such spouse or former
spouse.
(d) A "direct rollover" means, with respect to any
distributee, a payment by the Plan to an eligible retirement plan specified by
the distributee.
10.8.3 The Committee may prescribe reasonable rules in order
to provide for the Plan to meet the provisions of this Section 10.8. Any such
rules shall comply with the provisions of Code Section 401(a)(31) and any
applicable Treasury regulations which are issued with respect to the direct
rollover requirements. For example, subject to meeting the provisions of Code
Section 401(a)(31) and applicable Treasury regulations, the Committee may: (1)
prescribe the specific manner in which a direct rollover will be made by the
Plan, whether by wire transfer to the eligible retirement plan, by mailing a
check to the eligible retirement plan, by providing the distributee a check made
payable to the eligible retirement plan and directing the distributee to deliver
the check to the eligible retirement plan, and/or by some other method; (2)
prohibit any direct rollover of any eligible rollover distributions payable
during a calendar year to a distributee when the total of such distributions is
less than $200; or (3) refuse to make a direct rollover of an eligible rollover
distribution to more than one eligible retirement plan.
10.9 DISTRIBUTION RESTRICTIONS. No withdrawal or distribution of any
portion of a Participant's Accounts may be distributed unless such withdrawal or
distribution is authorized by another provision of this Plan. In addition, and
notwithstanding any other provision of this Plan to the contrary, in no event
may any amount held under the Plan which is attributable to the Participant's
Pre-Tax Savings Contributions under this Plan be distributed earlier than (1)
the Participant's separation from service from the Employer and the Affiliated
Employers, death, or Total Disability, (2) the Participant's attainment of age
59-1/2, (3) the hardship of the Participant (determined under the other
provisions of the Plan), or (4) any event described in Section 401(k)(10) of the
Code (E.G., a lump sum payment made by reason of the termination of the Plan
without the establishment or maintenance of another defined contribution plan
other than an employee stock ownership plan, the disposition by the Employer of
substantially all of its assets used by it in a trade or business when the
Participant continues employment with the
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corporation acquiring such assets, or the disposition by the Employer of its
interest in a subsidiary when the Participant continues employment with such
subsidiary).
10.10 COVERAGE OF PRE-EFFECTIVE AMENDMENT DATE PARTICIPANTS. Except as
is otherwise specifically provided in this Plan, the provisions of this Plan
only apply to persons who become Participants in this Plan under Section 3 above
and to benefits which have not been paid prior to the Effective Amendment Date.
However, any person who was a participant in one or more Prior Plans and, while
never becoming a Participant in this Plan under Section 3 above, still had a
nonforfeitable right to an unpaid benefit under the Prior Plans as of the date
immediately preceding the Effective Amendment Date shall be considered a
participant in this Plan to the extent of his or her interest in such benefit.
The amount of such benefit, the form in which such benefit is to be paid, and
the conditions (if any) which may cause such benefit not be paid shall, except
as is otherwise specifically provided in this Plan or in the Prior Plans, be
determined solely by the versions of the Prior Plans in effect at the time he or
she retired or terminated employment with the Employer.
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SECTION 11
----------
NAMED FIDUCIARIES
-----------------
Any person, committee, or entity which is designated or appointed under
the Plan or the Trust (or under a procedure set forth in the Plan or the Trust)
to have any responsibility for the control, management, or administration of
this Plan or the assets thereof (each such fiduciary being hereinafter referred
to individually as a "Named Fiduciary" and collectively as the "Named
Fiduciaries") shall have only such powers and responsibilities as are expressed
in the Plan or the Trust or are provided for in the procedure by which he or she
or it is designated or appointed, and any power or responsibility for the
control, management, or administration of the Plan or Trust Fund which is not
expressly allocated to any Named Fiduciary, or with respect to which an
allocation is in doubt, shall be deemed allocated to Federated. Each Named
Fiduciary shall have no responsibility to inquire into the acts or omissions of
any other Named Fiduciary in the exercise of powers or the discharge of
responsibilities assigned to such other Named Fiduciary under the Plan.
Any Named Fiduciaries may, by agreement among themselves, allocate any
responsibility or duty, other than the responsibility of the Trustee for the
management and control of the Trust Fund within the meaning of Section 405(c) of
ERISA, assigned to a Named Fiduciary hereunder to one or more other Named
Fiduciaries, provided, however, that any agreement respecting such allocation
must be in writing and filed with the Committee for placement with the records
of the Plan. No such agreement shall be effective as to any Named Fiduciary
which is not a party thereto until such Named Fiduciary has received written
notice of such agreement from the Named Fiduciaries involved. Any Named
Fiduciary may, by written instrument filed with the Committee for placement with
the records of the Plan, designate a person who is not a Named Fiduciary to
carry out any of its responsibilities under the Plan, other than the
responsibility of the Trustee for the management and control of the Trust Fund
within the meaning of Section 405(c) of ERISA, provided, however, that no such
designation shall be effective as to any other Named Fiduciary until such other
Named Fiduciary has received written notice thereof.
Any Named Fiduciary, or a person designated by a Named Fiduciary to
perform any responsibility of a Named Fiduciary pursuant to the procedure
described in the preceding paragraph, may employ one or more persons to render
advice with respect to any responsibility such Named Fiduciary has under the
Plan or such person has by reason of such designation. A person may serve the
Plan in more than one fiduciary capacity and may be a Participant.
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SECTION 12
----------
ADMINISTRATIVE AND INVESTMENT COMMITTEE
---------------------------------------
12.1 APPOINTMENT OF COMMITTEE. The Board shall appoint the Committee,
the members of which may be officers or other employees of the Employer or any
other persons. The Committee shall be composed of not less than three nor more
than 15 members, each of whom shall serve at the pleasure of the Board, and
vacancies in the Committee arising by reason of resignation, death, removal, or
otherwise shall be filled by the Board. Any member may resign of his or her own
accord by delivering his or her written resignation to the Board.
12.2 GENERAL POWERS OF COMMITTEE.
12.2.1 The Committee shall administer the Plan, is authorized
to make such rules and regulations as it may deem necessary to carry out the
provisions of the Plan, and is given complete discretionary authority to
determine any person's eligibility for benefits under the Plan, to construe the
terms of the Plan, and to decide any other matters pertaining to the Plan's
administration. The Committee shall determine any question arising in the
administration, interpretation, and application of the Plan, which determination
shall be binding and conclusive on all persons. In the administration of the
Plan, the Committee may: (1) employ or permit agents to carry out nonfiduciary
and/or fiduciary responsibilities (other than trustee responsibilities as
defined in Section 405(c)(3) of ERISA), (2) provide for the allocation of
fiduciary responsibilities (other than trustee responsibilities as defined in
Section 405(c)(3) of ERISA) among its members, and (3) limit to the extent it
deems advisable the maximum percent of Compensation which a Participant who is
then believed by the Committee to be a Highly Compensated Employee may elect to
have contributed to the Plan as Pre-Tax Savings Contributions and/or After-Tax
Savings Contributions for a specific Plan Year. Actions dealing with fiduciary
responsibilities shall be taken in writing and the performance of agents,
counsel, and fiduciaries to whom fiduciary responsibilities have been delegated
shall be reviewed periodically.
12.2.2 Further, the Committee shall administer the Plan and
adopt such rules and regulations as in the opinion of the Committee are
necessary or advisable to implement and administer the Plan and to transact its
business. In performing their duties, the members of the Committee shall act
solely in the interest of the Participants of the Plan and their beneficiaries
and:
(a) for the exclusive purpose of providing benefits
to Participants and their beneficiaries;
(b) with the care, skill, prudence, and diligence
under the circumstances then prevailing that a prudent man acting in a like
capacity and familiar with such matters would use in the conduct of an
enterprise of a like character and with like aims; and
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(c) in accordance with the documents and instruments
governing the Plan insofar as such documents and instruments are consistent with
the provisions of title I of ERISA.
12.2.3 Notwithstanding the foregoing provisions of this
Section 12.2, if the Committee cannot reasonably and economically determine or
verify, with respect to an Employee or a class of Employees, service,
compensation, date of hire, date of termination, or any other pertinent factor
in the administration of the Plan, the Committee shall adopt, with respect to
such Employee or class of Employees, reasonable and uniform assumptions
regarding the determination of such factor or factors, provided that no such
assumption shall (1) discriminate in favor of Highly Compensated Employees, (2)
reduce or eliminate a protected benefit (within the meaning of Treas. Reg.
Section 1.411(d)-4), or (3) operate to the disadvantage of such Employee or
class of Employees.
12.2.4 Unless otherwise provided in the Trust, the Committee
shall also establish guidelines with respect to the investment of all funds held
by the Trustee under the Plan and to make or direct all investments pursuant
thereto.
12.2.5 For purposes hereof, any party which has been
authorized by the Plan or under a procedure authorized under the Plan to perform
fiduciary and/or nonfiduciary administrative duties hereunder, whether such
party is the Committee, Federated, an agent appointed or permitted by the
Committee to carry out its duties, or otherwise, shall, when properly acting
within the scope of his or her or its authority, sometimes be referred to in the
Plan as a "Plan representative" or, if appointed by the Committee directly to be
an agent thereof, a "Committee representative."
12.3 RECORDS OF PLAN. The Committee shall maintain or cause to be
maintained records showing the fiscal transactions of the Plan, and shall keep
or cause to be kept in convenient form such data as may be necessary for
valuations of assets and liabilities of the Plan. The Committee shall prepare or
have prepared annually a report showing in reasonable detail the assets and
liabilities of the Plan and giving a brief account of the operation of the Plan
for the past Plan Year. In preparing this report, the Committee may rely on
advice received from the Trustee or other persons or firms selected by it or may
adopt a report on such matters prepared by the Trustee.
12.4 ACTIONS OF COMMITTEE. The Committee shall appoint a Chairman and a
Secretary and such other officers, who may be, but need not be, members of the
Committee, as it shall deem advisable. The Committee shall act by a majority of
its members at the time in office, and any such action may be taken either by a
vote at a meeting or in writing without a meeting. The Committee may by such
majority action appoint subcommittees and may authorize any one or more of the
members or any agent to execute any document or documents or to take any other
action, including the exercise of discretion, on behalf of the Committee. The
Committee may provide for the allocation of responsibilities for the operation
and maintenance of the Plan.
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12.5 COMPENSATION OF COMMITTEE AND PAYMENT OF PLAN ADMINISTRATIVE AND
INVESTMENT CHARGES. Unless otherwise determined by the Board, the members of the
Committee shall serve without compensation for services as such. All expenses of
administration of the Plan (excluding brokerage fees, expenses related to
securities transactions, and any taxes on the assets held in the Trust Fund,
which expenses shall only be payable out of the Trust Fund), including, without
limitation, the fees and charges of the Trustee, any investment manager, any
attorney, any accountant, any specialist, or any other person employed by the
Committee or the Employer in the administration of the Plan, shall be paid out
of the Trust Fund (or, if the Employer so elects, by the Employer directly). In
this regard, the Plan administrative and investment expenses which shall be paid
out of the Trust Fund (unless the Employer elects to pay them itself) shall also
include compensation payable to any employees of the Employer or any Affiliated
Employer who perform administrative or investment services for the Plan to the
extent such compensation would not have been sustained had such services not
been provided, to the extent such compensation can be fairly allocated to such
services, to the extent such compensation does not represent an allocable
portion of overhead costs or compensation for performing "settlor" functions
(such as services incurred in establishing or designing the Plan), and to the
extent such compensation does not fail for some other reason to constitute a
"direct expense" within the meaning of 29 C.F.R. 2550.408c-2(b)(3).
12.6 LIMITS ON LIABILITY. Federated and each other Employer shall hold
each member of the Committee harmless from any loss, damage, or depreciation
which may result in connection with the execution of his or her duties or the
exercise of his or her discretion or from any other act or omission hereunder,
except when due to his or her own gross negligence or willful misconduct.
Federated and each other Employer shall indemnify and hold harmless each member
of the Committee from any and all claims, losses, damages, expenses (including
counsel fees approved by the Committee), and liabilities (including any amounts
paid in settlement with the Committee's approval) arising from any act or
omission of such member, except when the same is judicially determined to be due
to the gross negligence or willful misconduct of such member.
12.7 CLAIMS PROCEDURE.
12.7.1 In general, benefits due under this Plan will be paid
only if the applicable Participant (or beneficiary of a deceased Participant)
files a written notice with a Plan representative electing to receive such
benefits, except to the extent otherwise required under the Plan. Further, if a
Participant (or a person claiming through a Participant) has a dispute as to the
failure of the Plan to pay or provide a benefit, as to the amount of benefit
paid, or as to any other matter involving the Plan, the Participant (or such
person) may file a claim for the benefit or relief believed by the Participant
(or such person) to be due. Such claim must be provided by written notice to the
Committee or any Committee representative designated by the Committee for this
purpose. The Committee will decide any claims made pursuant to this Section
12.7.
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12.7.2 If a claim made pursuant to Section 12.7.1 above is
denied, in whole or in part, notice of the denial in writing will be furnished
by the Committee or a Committee representative to the claimant within 90 days
after receipt of the claim by the Committee or the Committee representative;
except that if special circumstances require an extension of time for processing
the claim, the period in which the Committee or the Committee representative is
to furnish the claimant written notice of the denial will be extended for up to
an additional 90 days (and the Committee or the Committee representative will
provide the claimant within the initial 90-day period a written notice
indicating the reasons for the extension and the date by which the Committee or
the Committee representative expects to render the final decision). The final
notice of denial will be written in a manner designed to be understood by the
claimant and set forth: (1) the specific reasons for the denial, (2) specific
reference to pertinent Plan provisions on which the denial is based, (3) a
description of any additional material or information necessary for the claimant
to perfect the claim and an explanation of why such material or information is
necessary, and (4) information as to the steps to be taken if the claimant
wishes to appeal such denial of his or her claim. If no written notice is
provided the claimant within the applicable 90-day period or 180-day period, as
the case may be, the claimant may assume his or her claim has been denied and go
immediately to the appeal process set forth in Section 12.7.3 below.
12.7.3 Any claimant who has a claim denied under Sections
12.7.1 and 12.7.2 above may appeal the denied claim to the Committee (or any
Committee representative designated by the Committee to perform this review).
Such an appeal must, in order to be considered, be filed by written notice to
the Committee (or such Committee representative) within 60 days of the receipt
by the claimant of a written notice of the denial of his or her initial claim
(unless it was not reasonably possible for the claimant to make such appeal
within such 60-day period, in which case the claimant must file his or her
appeal within 60 days after the time it becomes reasonable for him or her so to
file an appeal). If any appeal is filed in accordance with such rules, the
claimant, and any duly authorized representative of the claimant, will be given
the opportunity to review pertinent documents and submit issues and comments in
writing. A formal hearing may be allowed in its discretion by the Committee (or
such Committee representative) but is not required.
12.7.4 Upon any appeal of a denied claim made pursuant to
Section 12.7.3 above, the Committee (or such Committee representative who has
the authority to decide the appeal) will provide a full and fair review of the
subject claim and decide the appeal within 60 days after the filing of the
appeal; except that if special circumstances require an extension of time for
processing the appeal, the period in which the appeal is to be decided will be
extended for up to an additional 60 days (and the party deciding the appeal will
provide the claimant written notice of the extension prior to the end of the
initial 60-day period). The decision on appeal will be set forth in a writing
designed to be understood by the claimant, specify the reasons for the decision
and references to pertinent Plan provisions on which the decision is based, and
be furnished to the claimant by the Committee (or such Committee representative)
within the 60-day period or 120-day period, as is applicable, described above.
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12.7.5 The Committee may prescribe additional rules which are
consistent with the other provisions of this Section 12.7 in order to carry out
the Plan's claim procedures.
12.8 LIMITS ON DUTIES. The Committee shall have no duty to verify
independently any information supplied by the Employer and shall have no duty or
responsibility to collect from the Employer all or any portion of any Employer
contribution to the Plan. The Committee also shall have no duty or
responsibility to verify the status of any Employee or former Employee under
this Plan or to determine the identity or address of any person who is or may
become entitled to the payment of any benefit from this Plan, and the Committee
shall be entitled to delay taking any action respecting the payment of any
benefit until the identity of the person entitled to such benefit and his or her
address have been certified by the Employer.
12.9 APPOINTMENT OF INVESTMENT MANAGER.
12.9.1 The Committee, as a Named Fiduciary under the Plan, may
appoint in writing a person, or more than one person, who (1) is registered as
an investment adviser under the Investment Advisers Act of 1940 (the "Act"), (2)
is a Bank, as defined in the Act, or (3) is an insurance company which is
qualified, within the meaning of Section 3(38) of ERISA, to manage, acquire, and
dispose of the assets of an employee benefit plan, as an investment manager for
all or a specified portion of the assets of the Trust Fund or any Investment
Fund thereof. A person who is appointed as an investment manager shall have the
sole power, without prior consultation with the Trustee, to manage and direct
the acquisition and disposition of the assets of the Trust Fund which
specifically are allocated by the Committee to that person's management account
(his "Management Account"). The Committee at its discretion may terminate the
appointment of any person as an investment manager and may cause assets to be
added or deleted from any such person's Management Account.
12.9.2 The effective date of the appointment of a person as an
investment manager shall be the date such person delivers to the Committee and
to the Trustee a written statement which in the Committee's judgment adequately
covers items (a) through (d) below:
(a) An acknowledgment (1) that such person is a Plan
fiduciary within the meaning of Section 3(21)(A) of ERISA and (2) that such
person has assumed sole responsibility for the management and the direction of
the acquisition and disposition of the Trust Fund assets in his or her
Management Account;
(b) A representation that such person is registered
as an investment adviser under the Act, is a Bank as defined in the Act, or as
an insurance company has the power within the meaning of Section 3(38)(A) of
ERISA to manage, acquire, and dispose of the assets of an employee benefit plan;
(c) The names and signatures of individuals who are
authorized to act on behalf of such person in connection with the management of
his or her Management Account
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(the "List"), which List may be amended from time to time by delivering written
notice thereof to the Committee and to the Trustee and which List may be relied
upon by them; and
(d) If appropriate and negotiable, an agreement that
such person shall immediately notify the Committee of the commencement of any
Securities and Exchange Commission investigation of any of his or her investment
activities which may result either in a censure under the Act or in the
suspension or revocation of his or her registration as an investment adviser
under the Act.
12.9.3 The Committee may enter into a contract with an
investment manager in connection with his or her appointment as such, which
agreement may be subject to such terms and conditions as the Committee deems
appropriate under the circumstances, including the following types of
provisions:
(a) The appointment as investment manager may be
terminated on the delivery of 30 days' prior written notice;
(b) If appropriate, the appointment shall be
automatically terminated in the event the investment manager's registration as
an investment adviser under the Act is suspended or revoked, such automatic
termination to be effective coincident with such suspension or revocation;
(c) The investment manager shall make reports to the
Committee describing all transactions with respect to his or her Management
Account for each agreed upon reporting period; and
(d) All fees or other agreed upon compensation for
services rendered to the Plan by the investment manager shall be paid out of the
Trust Fund (or, if the Employer so elects, by the Employer directly).
12.9.4 An investment manager may exercise his or her powers
through written directions or, at his or her option, may communicate such
directions orally and as soon as practicable thereafter confirm them in writing,
provided all directions, written or oral, shall be communicated by or, as
applicable, signed by one of the individuals whose name and signature appear on
the List, or the investment manager may communicate and confirm such
instructions in any manner agreed upon between the investment manager and the
Trustee. The Trustee shall follow all such directions from an investment
manager, and shall not be liable in any respect to any person for acting in
accordance with such directions or for failing to act in the absence of such
directions. Pending receipt of directions from the investment manager, any cash
received by the Trustee from time to time for his or her Management Account may
be retained by it in short-term investments as may be prudent under all of the
facts and circumstances then prevailing, including, without limitation, savings
accounts, commingled short-term investment funds, commercial paper, and
governmental securities.
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12.9.5 The Committee shall establish an investment policy for
each investment manager and such policy shall preclude investments in employer
securities and employer real property within the meaning of Section 407 of ERISA
except to the extent that such investments are allowable under ERISA. The
Committee in addition shall implement an investment manager performance review
procedure and pursuant thereto shall regularly review the performance of the
investment manager to determine whether his or her appointment as such should be
continued. The period between such reviews shall be determined by considering
all the relevant facts and circumstances, including the volume of Trust Fund
transactions.
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SECTION 13
----------
TERMINATION OR AMENDMENT
------------------------
13.1 RIGHT TO TERMINATE. Federated and each other Employer expects this
Plan to be continued indefinitely, but Federated reserves the right to terminate
the Plan in its entirety or in part or to completely discontinue contributions
to the Plan. The procedure for Federated to terminate this Plan in its entirety
or in part or to completely discontinue contributions to the Plan is as follows.
In order to terminate the Plan in its entirety or in part or to completely
discontinue contributions to the Plan, the Board shall adopt resolutions,
pursuant and subject to the regulations or by-laws of Federated and any
applicable law, and either at a duly called meeting of the Board or by a written
consent in lieu of a meeting, to take such action with respect to the Plan. Such
resolutions shall set forth therein the effective date of the Plan's termination
or the date contributions cease being made to the Plan. In the event the Board
adopts resolutions completely terminating the Plan, the provisions of Sections
13.2 and 13.3 below shall apply.
13.2 FULL VESTING UPON TERMINATION OR COMPLETE DISCONTINUANCE OF
CONTRIBUTIONS. Should this Plan be completely terminated, should a partial
termination of this Plan occur by reason of the Board's action or under any
other facts and circumstances, or should contributions to the Plan be completely
discontinued, then each affected Participant shall immediately become fully
vested and nonforfeitable in his or her Plan Accounts (determined as of the date
of the complete or partial termination or complete discontinuance of
contributions).
13.3 EFFECT OF TERMINATION OF PLAN OR COMPLETE DISCONTINUANCE OF
CONTRIBUTIONS.
13.3.1 Upon a complete or partial termination of the Plan or
complete discontinuance of contributions to the Plan, the Committee shall
determine, and direct the Trustee accordingly, from among the following methods,
the method of discharging and satisfying all obligations on behalf of
Participants affected by the complete or partial termination or complete
discontinuance of contributions: (1) by the continuation of the Trust and the
distribution to Participants and their beneficiaries of the Participants' Plan
Accounts due under the terms of the Plan as in effect immediately prior to the
complete or partial termination or discontinuance of contributions, (2) by the
liquidation and distribution of the assets of the Trust, (3) by the purchase of
Annuity contracts, or (4) by a combination of such methods. Any distributions
made by reason of the complete or partial termination of the Plan or complete
discontinuance of contributions shall continue to meet the provisions of the
Plan concerning the form in which distributions from the Plan must be made.
13.3.2 Any amounts held under the Trust which are not able to
be allocated to any Participants' Accounts under the terms of the Plan as of the
date of a complete termination of the Plan (treating such date as if it were the
same as the last day of a Plan Year) shall be allocated among the Matching
Accounts of those Participants who were employed as Covered Employees during the
Plan Year in which the Plan's complete termination occurs, in
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proportion to each such Participant's Compensation for the period beginning on
the first day of the Plan Year in which such complete termination occurs and
ending on the date of such complete termination, and, to the extent such amounts
cannot be allocated to any Participants' Accounts by reason of the maximum
annual addition limitations of the Plan set forth in Section 6A above, they
shall be returned to the Employer.
13.4 AMENDMENT OF PLAN.
13.4.1 Subject to the other provisions of this Section 13.4,
Federated may amend this Plan at any time and from time to time in any respect,
provided that no such amendment shall make it possible, at any time prior to the
satisfaction of all liabilities with respect to Participants, for any part of
the income or corpus of the Trust Fund to be used for or diverted to any purpose
other than for the exclusive benefit of Participants and their beneficiaries.
The procedure for Federated to amend this Plan is as follows:
(a) Subject to paragraph (b) below, in order to amend
the Plan, the Board shall adopt resolutions, pursuant and subject to the
regulations or by-laws of Federated and any applicable law, and either at a duly
called meeting of the Board or by a written consent in lieu of a meeting, to
amend this Plan. Such resolutions shall either (1) set forth the express terms
of the Plan amendment or (2) simply set forth the nature of the amendment and
direct an officer of Federated or any other Federated employee to have prepared
and to sign on behalf of Federated the formal amendment to the Plan. In the
latter case, such officer or employee shall have prepared and shall sign on
behalf of Federated an amendment to the Plan which is in accordance with such
resolutions.
(b) In addition to the procedure for amending the
Plan set forth in paragraph (a) above, the Board may also adopt resolutions,
pursuant and subject to the regulations or by-laws of Federated and any
applicable law, and either at a duly called meeting of the Board or by a written
consent in lieu of a meeting, to delegate to any officer of Federated the
authority to amend the Plan. Such resolutions may either grant the officer broad
authority to amend the Plan in any manner the officer deems necessary or
advisable or may limit the scope of amendments he or she may adopt, such as by
limiting such amendments to matters related to the administration of the Plan or
to changes requested by the Internal Revenue Service. In the event of any such
delegation to amend the Plan, the officer to whom authority is delegated shall
amend the Plan by having prepared and signing on behalf of Federated an
amendment to the Plan which is within the scope of amendments which he or she
has authority to adopt. Also, any such delegation to amend the Plan may be
terminated at any time by later resolutions adopted by the Board. Finally, in
the event of any such delegation to amend the Plan, and even while such
delegation remains in effect, the Board shall continue to retain its own right
to amend the Plan pursuant to the procedure set forth in paragraph (a) above.
13.4.2 It is provided, however, that, except as is otherwise
permitted in Section 411(d)(6) of the Code or in Treasury regulations issued
thereunder, no amendment to the Plan shall decrease any Participant's Accrued
Benefit. In addition, except as is otherwise
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permitted in Section 411(d)(6) of the Code or in Treasury regulations issued
thereunder, no amendment to the Plan which eliminates or reduces an early
retirement benefit or eliminates an optional form of benefit shall be permitted
with respect to any Participant who meets (either before or after the amendment)
the pre-amendment conditions for such early retirement or optional form of
benefit, to the extent such early retirement or optional form of benefit is
based and calculated on the basis of the Participant's Accrued Benefit
determined at the time of such amendment.
13.4.3 Also, notwithstanding any other provisions hereof to
the contrary, no Plan amendment (including any change made by this Plan
amendment and restatement) which changes any vesting schedule or affects the
computation of the nonforfeitable percentage of Accounts under the Plan shall be
deemed to reduce the amount of the vested portion of any Account of a
Participant below the amount of the vested portion of such Account, as
determined as of the later of the date such amendment is adopted or the date
such amendment becomes effective, computed under the Plan without regard to such
amendment. Further, if a Plan amendment (including any change made by this Plan
amendment and restatement) is adopted which changes any vesting schedule under
the Plan or if the Plan is amended in any way which directly or indirectly
affects the computation of a Participant's nonforfeitable percentage, each
Participant who has completed at least three years of Vesting Service (as
defined in Section 2.1.10 above, disregarding for this purpose paragraph (b) of
Section 2.1.10 above) may elect, within the election period, to have his or her
nonforfeitable percentage computed under the Plan without regard to such
amendment. For purposes hereof, the "election period" is a period which begins
on the date the Plan amendment is adopted and ends on the date which is 60 days
after the latest of the following days: (1) the day the Plan amendment is
adopted, (2) the day the Plan amendment becomes effective, or (3) the day the
Participant is issued a written notice of the Plan amendment by Federated or the
Committee.
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SECTION 14
----------
TOP HEAVY PROVISIONS
--------------------
14.1 DETERMINATION OF WHETHER PLAN IS TOP HEAVY. For purposes of this
Section 14, this Plan shall be considered a "Top Heavy Plan" for any Plan Year
if, and only if, (1) this Plan is an Aggregation Group Plan during at least part
of such Plan Year, and (2) the ratio of the total Present Value of all accrued
benefits of Key Employees under all Aggregation Group Plans to the total Present
Value of all accrued benefits of both Key Employees and Non-Key Employees under
all Aggregation Group Plans equals or exceeds 0.6. All calculations called for
in clauses (1) and (2) above with respect to this Plan shall be made as of the
Determination Date which is applicable to the subject Plan Year, and all
calculations called for under clause (2) above with respect to any Aggregation
Group Plan other than this Plan shall be made as of that plan's Determination
Date which falls within the same calendar year as the Determination Date being
used by this Plan. For the purpose of this Section 14, the following terms shall
have the meanings hereinafter set forth:
14.1.1 AGGREGATION GROUP PLAN. "Aggregation Group Plan"
refers, with respect to any plan year of such plan, to a plan (1) which
qualifies under Code Section 401(a) or as a simplified employee pension plan
under Code Section 408 (k), (2) which is maintained by the Employer or an
Affiliated Employer, and (3) which either includes a Key Employee as a
participant (determined as of the Determination Date applicable to such plan
year) or allows another plan qualified under Code Section 401(a), maintained by
the Employer or an Affiliated Employer, and so including at least one Key
Employee as a participant to meet the requirements of Section 401(a)(4) or
Section 410(b) of the Code. In addition, the Employer may treat any plan which
meets clauses (1) and (2) but not (3) of the immediately preceding sentence as
an "Aggregation Group Plan" with respect to any plan year of such plan if the
group of such plan and all other Aggregation Group Plans shall meet the
requirements of Sections 401(a)(4) and 410(b) of the Code with such plan being
taken into account.
14.1.2 DETERMINATION DATE. The "Determination Date" which is
applicable to any plan year of an Aggregation Group Plan refers to the last day
of the immediately preceding plan year (except that, for the first plan year of
such a plan, the "Determination Date" applicable to such plan year shall be the
last day of such first plan year).
14.1.3 KEY EMPLOYEE. With respect to any Aggregation Group
Plan and as of any Determination Date, a "Key Employee" refers to a person who
at any time during the plan year which includes such Determination Date or
during any of the four immediately preceding plan years is an employee of the
Employer or an Affiliated Employer and:
(a) An officer (disregarding any person with the
title but not the authority of an officer) of the Employer or an Affiliated
Employer, provided such person receives compensation from the Employer and the
Affiliated Employers of an amount greater than 50%
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of the amount in effect under Section 415(b)(1) (A) of the Code (I.E., the
maximum dollar limit for defined benefit plans) for an applicable plan year in
which he or she is such an officer. For this purpose, no more than 50 employees
(or, if less, the greater of three or 10% of the employees of the Employer and
all Affiliated Employers) shall be treated as officers;
(b) One of the ten employees directly owning (or
considered as owning within the meaning of Code Section 318, except that
subparagraph (C) of Code Section 318(a)(2) shall be applied by substituting "5%"
for "50%") the largest employee-held interests in the Employer and the other
Affiliated Employers, provided such person owns at least 0.5% of the Employer or
any Affiliated Employer and receives compensation from the Employer and the
other Affiliated Employers of an amount greater than the amount in effect under
Code Section 415(c)(1)(A) (I.E., the maximum dollar annual addition limit for
defined contribution plans) for an applicable plan year in which he or she is
such an employee. For this purpose, if two employees have the same interest in
the Employer and the other Affiliated Employers, the employee having the greater
annual compensation from the Employer and the Affiliated Employers shall be
treated as having a larger interest;
(c) A 5% or more owner of the Employer; or
(d) A 1% or more owner of the Employer who receives
compensation of $150,000 or more from the Employer and the other Affiliated
Employers for an applicable plan year in which he or she owns such interest.
For purposes of paragraphs (c) and (d) above, a person is considered to own 5%
or 1%, as the case may be, of the Employer if he or she owns (or is considered
as owning within the meaning of Code Section 318, except that subparagraph (C)
of Code Section 318(a)(2) shall be applied by substituting "5%" for "50%") at
least 5% or 1%, as the case may be, of either the outstanding stock of the
Employer or the voting power of all stock of the Employer. Further, for purposes
of this entire Section 14.1.3, the term "Key Employee" includes any person who
is deceased as of the subject Determination Date but who when alive had been a
Key Employee during the plan year which includes the subject Determination Date
or any of the four immediately preceding plan years, and any accrued benefit
payable to his or her beneficiary shall be deemed to be the accrued benefit of
such person.
14.1.4 NON-KEY EMPLOYEE. With respect to any Aggregation Group
Plan and as of any Determination Date, a Non-Key Employee refers to a person who
at any time during the plan year which includes such Determination Date or
during any of the four immediately preceding plan years is an employee of the
Employer or an Affiliated Employer and who has never been considered a Key
Employee as of such or any earlier Determination Date. Further, for purposes of
this Section 14.1.4, the term "Non-Key Employee" includes any person who is
deceased as of the subject Determination Date and who when alive had been an
employee of the Employer or an Affiliated Employer during the plan year which
includes the subject Determination Date or any of the four immediately preceding
plan years, but had not been a Key
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Employee as of the subject or any earlier Determination Date, and any accrued
benefit payable to his or her beneficiary shall be deemed to be the accrued
benefit of such person.
14.1.5 PRESENT VALUE OF ACCRUED BENEFITS.
(a) For any Aggregation Group Plan which is a defined
benefit plan (as defined in Code Section 414(j)), including such a plan which
has been terminated, the "Present Value" of a participant's accrued benefit, as
determined as of any Determination Date, refers to the single sum value
(calculated as of the latest Valuation Date which coincides with or precedes
such Determination Date and in accordance with the actuarial assumptions adopted
under such defined benefit plan for valuing single sum forms of benefits for
purposes of such plan's top-heavy provisions which are in effect as of such
Valuation Date) of the monthly retirement or termination benefit which the
participant had accrued under such plan to such Valuation Date. For this
purpose, such accrued monthly retirement or termination benefit is calculated as
if it was to first commence as of the first day of the month next following the
month the participant first attains his or her normal retirement age under such
plan (or, if such normal retirement age had already been attained, as of the
first day of the month next following the month in which occurs such Valuation
Date) and as if it was to be paid in the form of a single life annuity. Also,
the accrued benefit of any participant under such plan (other than a participant
who is a Key Employee) shall be determined under the method which is used for
accrual purposes for all plans of the Employer and the Affiliated Employers (or,
if there is no such method, as if such benefit accrued not more rapidly than the
slowest accrual rates permitted under Section 411(b) (1)(C) of the Code). In
addition, the dollar amount of any distributions made from the plan (including
the value of any annuity contract distributed from the plan) actually paid to
such participant prior to the subject Valuation Date but still within the plan
year which includes such Valuation Date or one of the four immediately preceding
plan years shall be added in calculating such "Present Value" of the
participant's accrued benefit.
(b) For any Aggregation Group Plan which is a defined
contribution plan (as defined in Code Section 414(i)), including such a plan
which has been terminated, the "Present Value" of a participant's accrued
benefit, as determined as of any Determination Date, refers to the sum of (1)
the total of the participant's account balances under the plan (valued as of the
latest Valuation Date which coincides with or precedes such Determination Date),
and (2) an adjustment for contributions due as of such Determination Date. In
the case of a profit sharing or stock bonus plan, the adjustment in clause (2)
above shall be the amount of the contributions, if any, actually made after the
subject Valuation Date but on or before such Determination Date (and, in the
case of the first plan year, any amounts contributed to the plan after such
Determination Date which are allocated as of a date in such first plan year). In
the case of a money purchase pension or target benefit plan, the adjustment in
clause (2) above shall be the amount of the contributions, if any, which are
either actually made or due to be made after the subject Valuation Date but
before the expiration of the period allowed for meeting minimum funding
requirements under Code Section 412 for the plan year which includes the subject
Determination Date. In addition, the value of any distributions made from the
plan (including the value of any annuity contract distributed from the plan)
actually paid to such
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participant prior to the subject Valuation Date but still within the plan year
which includes such Valuation Date or one of the four immediately preceding plan
years shall be added in calculating such "Present Value" of the participant's
accrued benefit.
(c) In the case of any rollover (as defined in the
appropriate provisions of the Code) from an Aggregation Group Plan to another
plan qualified under Section 401(a) of the Code or vice versa, or a direct
qualified plan-to-qualified plan transfer to or from a subject Aggregation Group
Plan, which rollover or transfer is both initiated by a participant and made
between a plan maintained by the Employer or an Affiliated Employer and a plan
maintained by an employer other than the Employer or an Affiliated Employer, (1)
the Aggregation Group Plan, if it is the plan from which the rollover or
transfer is made, shall count the amount of the rollover or transfer as a
distribution made as of the date such amount is distributed by such plan in
determining the "Present Value" of the participant's accrued benefit under
paragraph (a) or (b) above, as applicable, and (2) the Aggregation Group Plan,
if it is the plan to which the rollover or transfer is made, shall not so
consider the amount of the rollover or transfer as part of the participant's
accrued benefit in determining such "Present Value" if such rollover was
accepted after December 31, 1983 and shall so consider such amount if such
rollover was accepted prior to January 1, 1984.
(d) In the case of any rollover (as defined in the
appropriate provisions of the Code) from an Aggregation Group Plan to another
plan qualified under Section 401(a) of the Code or vice versa, or a direct
qualified plan-to-qualified plan transfer to or from a subject Aggregation Group
Plan, which rollover or transfer is not described in paragraph (c) above, (1)
the subject Aggregation Group Plan, if it is the plan from which the rollover or
transfer is made, shall not consider the amount of the rollover or transfer as
part of the participant's accrued benefit in determining the "Present Value"
thereof under paragraph (a) or (b) above, as applicable, and (2) the subject
Aggregation Group Plan, if it is the plan to which the rollover or transfer is
made, shall consider the amount of the rollover or transfer when made as part of
the participant's accrued benefit in determining such "Present Value."
(e) As is noted in paragraphs (a) and (b) above, the
"Present Value" of any participant's accrued benefit under either a defined
benefit plan or a defined contribution plan as of any Determination Date
includes the value of any distribution from such a plan actually paid to such
participant prior to the last Valuation Date which coincides with or precedes
such Determination Date but still within the plan year which includes such
Valuation Date or one of the four immediately preceding plan years. This rule
shall also apply to any distribution under any terminated defined benefit or
defined contribution plan which, if it had not been terminated, would have been
required to be included as an Aggregation Group Plan.
(f) Notwithstanding the foregoing provisions, the
"Present Value" of a participant's accrued benefit under either a defined
benefit plan or a defined contribution plan as of any Determination Date shall
be deemed to be zero if the participant has not performed services for the
Employer or any Affiliated Employer at any time during the five year period
ending on such Determination Date.
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14.1.6 VALUATION DATE. A "Valuation Date" refers to: (1) in
the case of a defined benefit plan (as defined in Code Section 414(j)), the date
as of which the plan actuary computes plan costs for minimum funding
requirements under Code Section 412 (except that, for a defined benefit plan
which has terminated, a "Valuation Date" shall be deemed to be the same as a
Determination Date); and (2) in the case of a defined contribution plan (as
defined in Code Section 414(i)), the date as of which plan income, gains, and/or
contributions are allocated to plan accounts of participants.
14.1.7 COMPENSATION. For purposes hereof, a participant's
"compensation" shall, for purposes of the rules of this Section 14, refer to his
or her Compensation as defined in Section 1.7 above; except that, for purposes
of Section 14.3 below, paragraphs (b) and (c) of Section 1.7 above shall not
apply.
14.2 EFFECT OF TOP HEAVY STATUS ON VESTING.
14.2.1 For any Plan Year in which this Plan is considered a
Top Heavy Plan, each Participant who completes at least one Hour of Service in
such year and who is not fully vested in any of his or her Accounts under
Section 6.10 above shall be deemed fully vested in all such Accounts if he or
she has completed by the end of such year at least three years of Vesting
Service.
14.2.2 For any Plan Year in which this Plan is not considered
a Top Heavy Plan, the provisions of this Section 14.2 shall not be effective;
except that, if the Plan is not a Top Heavy Plan in a Plan Year after the Plan
was considered a Top Heavy Plan in the immediately preceding Plan Year, any
change back to the appropriate vesting schedule or provisions set forth in
Section 6.10 above shall be considered an amendment to the vesting schedule
(effective and adopted as of the first day of such new Plan Year) for purposes
of Section 13.4.2 above.
14.3 EFFECT OF TOP HEAVY STATUS ON CONTRIBUTIONS.
14.3.1 Subject to Sections 14.3.2 and 14.3.3 below, for any
Plan Year in which this Plan is considered a Top Heavy Plan, the amount of the
employer contributions and forfeitures allocated under all Aggregation Group
Plans which are defined contribution plans (as defined in Code Section 414(i))
for such Plan Year to the accounts of a Participant who is a Non-Key Employee on
the last day of such Plan Year (excluding any contributions made on behalf of
the Non-Key Employee by reason of his or her election under an arrangement
qualifying under Section 401(k) of the Code and also excluding any matching
contributions within the meaning of Code Section 401(m)(4)(A) which are
allocated to an account of the Non-Key Employee) must be at least equal to the
lesser of (1) 3% of the Participant's compensation for such Plan Year or (2) the
largest allocation of contributions and forfeitures made for such Plan Year to
the accounts of a Participant who is a Key Employee as of the Determination Date
applicable to such Plan Year under all such Aggregation Group Plans (measured as
a percent of the Key Employee's compensation for such Plan Year and including
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both any contributions made on behalf of the Key Employee by reason of his or
her election under an arrangement qualifying under Section 401(k) of the Code
and any matching contributions within the meaning of Code Section 401(m)(4)(A)
which are allocated to an account of the Key Employee). To the extent necessary,
and regardless of the existence of current or accumulated profits, the Employer
shall make additional contributions to this Plan which are just allocable to the
Accounts of Participants who are Non-Key Employees so that the requirement set
forth in the immediately preceding sentence is met for the subject Plan Year.
14.3.2 Notwithstanding the provisions of Section 14.3.1 above
but subject to the provisions of Section 14.3.3 below, in the case of any
Non-Key Employee who participates in both this Plan and another Aggregation
Group Plan that is a defined benefit plan (as defined in Code Section 414(j))
which is maintained by the Employer or in which the Employer participates, the
provisions of Section 14.3.1 shall be inapplicable if the Employer causes such
defined benefit plan to provide an accrued benefit (attributable only to
employer contributions) for such Non-Key Employee which, if expressed as a
single life annuity commencing on the first day of the month next following the
month in which the Non-Key Employee attains his or her Normal Retirement Age,
shall be equal at least to the product of (1) 2% of the Non-Key Employee's
average annual compensation for the five consecutive calendar years which
produce the highest result and (2) the Non-Key Employee's years of service (up
to but not exceeding ten such years). For purposes of computing the product in
the foregoing sentence: (1) compensation received in any Plan Year which began
prior to January 1, 1984 and in any calendar year which begins after the end of
the last Plan Year in which the Plan is considered a Top Heavy Plan shall all be
disregarded; and (2) years of service shall refer generally to years of Vesting
Service except that years of service for this purpose shall not include the
period of any Plan Year which began prior to January 1, 1984 or any Plan Year as
of which the Plan is not considered a Top Heavy Plan.
14.3.3 Notwithstanding the foregoing provisions of Sections
14.3.1 and 14.3.2 above, such provisions shall not apply so as to cause any
additional contribution or benefit to be provided a Participant for a Plan Year
under an Aggregation Group Plan maintained by the Employer or in which the
Employer participates if (1) such Participant actively participates in an
Aggregation Group Plan maintained by an Affiliated Employer at a date in the
applicable Plan Year which is later than the latest date in such year on which
he or she actively participates in this Plan and (2) such other plan provides
for the same contribution or benefit as would otherwise be required under
Sections 14.3.1 and 14.3.2 above for such Plan Year.
14.4 EFFECT OF TOP HEAVY STATUS ON COMBINED MAXIMUM PLAN LIMITS. For
any Plan Year in which this Plan is considered a Top Heavy Plan, the references
to "125%" contained in Section 6A.2 above shall be changed to "100%."
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SECTION 15
----------
MISCELLANEOUS
-------------
15.1 TRUST. Subject to the provisions of Section 16 below, all assets
of the Plan shall be held in the Trust for the benefit of the Participants and
their beneficiaries. Except as provided in Sections 4.6, 5.3, and 13.3 above, in
no event shall it be possible for any part of the assets of the Plan to be used
for, or diverted to, purposes other than for the exclusive benefit of the
Participants and their beneficiaries or for payment of the proper administrative
costs of the Plan and the Trust. No person shall have any interest in or right
to any part of the earnings of the Trust, or any rights in, to, or under the
Trust or any part of the assets thereof, except as and to the extent expressly
provided in the Plan. Any person having any claim for any benefit under the Plan
shall look solely to the assets of the Trust Fund for satisfaction. In no event
shall Federated or any other Employer or any of their officers or agents, or
members of the Board, the Committee, or the Trustee, be liable in their
individual capacities to any person whomsoever for the payment of benefits under
the provisions of the Plan.
15.2 MERGERS, CONSOLIDATIONS, AND TRANSFERS OF ASSETS. Notwithstanding
any other provision hereof to the contrary, in no event shall this Plan or the
Trust be merged or consolidated with any other plan and trust, nor shall any of
the assets or liabilities of this Plan and the Trust be transferred to any other
plan or trust or vice versa, unless (1) the Committee consents to such merger,
consolidation, or transfer of assets as consistent with the rules set forth
herein and the purposes of this Plan, (2) each Participant and beneficiary would
(if this Plan and the Trust then terminated) receive a benefit immediately after
the merger, consolidation, or transfer which is equal to or greater than the
benefit he or she would have been entitled to receive immediately before the
merger, consolidation, or transfer (if this Plan and the Trust had then
terminated), and (3) such merger, consolidation, or transfer of assets does not
cause any accrued benefit, early retirement benefit, or optional form of benefit
of a person under this Plan or the applicable other plan to be eliminated or
reduced except to the extent such elimination or reduction is permitted under
Section 411(d)(6) of the Code or in Treasury regulations issued thereunder. In
the event of any such merger, consolidation, or transfer, the requirements of
clause (2) set forth in the immediately preceding sentence shall be deemed to be
satisfied if the merger, consolidation, or transfer conforms to and is in
accordance with regulations issued under Section 414(1) of the Code. In
addition, in the case of any spin-off to this Plan from another plan which is
maintained by the Employer or an Affiliated Employer or of any spin-off from
this Plan to another Plan which is maintained by the Employer or an Affiliated
Employer, a percentage of the excess assets (as determined under Section
414(l)(2) of the Code) held in the plan from which the spin-off is made (if any)
shall be allocated to each of such plans to the extent required by Section
414(l)(2) of the Code. Subject to the provisions of this Section 15.2, the
Committee may take action to merge or consolidate this Plan and the Trust with
any other plan and trust, or permit the transfer of any assets and liabilities
of this Plan and the Trust to any other plan and trust or vice versa.
15-1
<PAGE> 110
15.3 BENEFITS AND SERVICE FOR MILITARY SERVICE. Notwithstanding any
provision of this Plan to the contrary, contributions, benefits and service
credit with respect to qualified military service shall be provided in
accordance with Section 414(u) of the Code.
15.4 CORRECTION OF INADVERTENT ERRORS. If any inadvertent errors are
made in crediting amounts to any Accounts which leave amounts held under the
Plan which are not reasonably able to be allocated to any specific Participant
or Account (for purposes of this Section 15.4, "overcrediting errors"), then
such amounts shall, except as noted below, be used to the extent possible to
correct any inadvertent errors made in crediting amounts to any Accounts which
leave such Accounts with balances which are less than the balances which should
exist under the Plan if no such errors had been made (for purposes of this
Section 15.4, "undercrediting errors"). To the extent the amounts attributable
to overcrediting errors which exist as of the last day of any Plan Year are not
needed to correct the undercrediting errors which are then known, the amounts
attributable to overcrediting errors shall be treated for all purposes of the
Plan as if they were forfeitures from Matching Accounts arising under the Plan
for the subject Plan Year. Further, any undercrediting errors shall be
corrected: (1) by use of overcrediting errors to the extent permitted by the
foregoing provisions of this Section 15.4; (2) to the extent not corrected by
such overcrediting errors, by use of forfeitures to the extent permitted under
Section 8.6 above; or (3) to the extent not corrected by use of overcrediting
errors or forfeitures, by payment made by the Employer to the Trust as a special
contribution in order to make such corrections. Such contribution shall not be
considered an Employer contribution for purposes of Section 6.1 or 6.2 or a part
of an annual addition (as defined in Section 6A.1.2(a) above) to the Plan.
15.5 APPLICATION OF CERTAIN PLAN PROVISIONS TO PRIOR PLANS.
Notwithstanding any other provision of the Plan to the contrary, while the
provisions of the Plan are generally effective only as of the Effective
Amendment Date, any provision of the Plan which reflects or is designed to meet
any requirement of the Federal Small Business Job Protection Act of 1996 (for
purposes of this Section 15.5, the "SBJPA") which is effective prior to the
Effective Amendment Date shall be deemed to apply to each Prior Plan from the
effective date of such provision under the SBJPA to the Effective Amendment
Date. In particular, but not by way of limitation, (1) the provisions of the
last sentence of Section 1.7(a), Section 1.13, Section 4A, Section 5A, and
Section 10.6 of this Plan shall apply from January 1, 1997 to the Effective
Amendment Date to each Prior Plan and (2) the provisions of Section 15.3 of this
Plan shall apply from December 12, 1994 to the Effective Amendment Plan to each
Prior Plan. In addition, notwithstanding any other provision of this Plan or any
Prior Plan to the contrary, the compensation limits of Section 401(a)(17) of the
Code shall be applied from January 1, 1997 to the Effective Amendment Date to
each Prior Plan in the manner set forth in paragraph (d) of Section 1.7 of this
Plan.
15.6 AUTHORITY TO ACT FOR FEDERATED OR OTHER EMPLOYER. Except as is
otherwise expressly provided elsewhere in this Plan, any matter or thing to be
done by Federated or any other employer included as part of the Employer shall
be done by its board of directors, except that the board may, by resolution,
delegate to any persons or entities all or part of its rights or
15-2
<PAGE> 111
duties hereunder. Any such delegation shall be valid and binding upon all
persons, and the persons or entities to whom or to which authority is delegated
shall have full power to act in all matters so delegated until the authority
expires by its terms or is revoked by resolution of such board.
15.7 RELATIONSHIP OF PLAN TO EMPLOYMENT RIGHTS. The adoption and
maintenance of the Plan is purely voluntary on the part of Federated and each
other Employer and neither the adoption nor the maintenance of the Plan shall be
construed as conferring any legal or equitable rights to employment on any
person.
15.8 APPLICABLE LAW. The provisions of the Plan shall be administered
and enforced according to Federal law and, only to the extent not preempted by
Federal law, to the laws of the State of Ohio. Either Federated or the Trustee
may at any time initiate any legal action or proceedings for the settlement of
the Trustee's accounts or for the determination of any question of construction
which arises or for instructions. Except as required by law, in any application
to, or proceeding or action in, any court with regard to the Plan or Trust, only
Federated and the Trustee shall be necessary parties, and no Participant,
beneficiary, or other person having or claiming any interest in the Plan or
Trust shall be entitled to any notice or service of process. Federated or the
Trustee may, if either so elects, include as parties defendant any other
persons. Any judgment entered into in such a proceeding or action shall be
conclusive upon all persons claiming under the Plan or Trust.
15.9 AGENT FOR SERVICE OF PROCESS. The agent for service of process for
the Plan shall be the Secretary of Federated.
15.10 REPORTING AND DISCLOSURE. Federated shall act as the Plan
Administrator for purposes of satisfying any requirement now or hereafter
imposed through Federal or State legislation to report and disclose to any
Federal or State department or agency, or to any Participant or other person,
any information respecting the establishment or maintenance of the Plan or the
Trust Fund. Any cost or expense incurred in satisfying any and all such
reporting and disclosure requirements shall be deemed to be a reasonable expense
of administering the Plan and may be paid from the Trust Fund if not otherwise
elected to be paid by the Employer.
15.11 SEPARABILITY OF PROVISIONS. If any provision of the Plan is held
invalid or unenforceable, such invalidity or unenforceability shall not affect
any other provision hereof, and the Plan shall be construed and enforced as if
such provision had not been included.
15.12 COUNTERPARTS. The Plan may be executed in any number of
counterparts, each of which shall be deemed an original, and the counterparts
shall constitute one and the same instrument, which shall be sufficiently
evidenced by any one thereof.
15.13 HEADINGS. Headings used throughout the Plan are for convenience
only and shall not be given legal significance.
15-3
<PAGE> 112
15.14 CONSTRUCTION. In the construction of this Plan, either gender
shall include the other gender, the singular shall include the plural, and the
plural shall include the singular, in all cases where such meanings would be
appropriate.
15.15 APPLICABLE BENEFIT PROVISIONS. Any benefit to which a Participant
becomes entitled under the Plan (or any death benefit to which a Participant's
Spouse or other beneficiary becomes entitled under the Plan) shall be determined
on the basis of the provisions of the Plan in effect as of the date the
Participant last ceases to be employed by the Employer or an Affiliated Employer
notwithstanding any amendment to the Plan adopted subsequent to such date,
except for subsequent amendments which are by their specific terms made
applicable to such Participant (or his or her Spouse or other beneficiary) or
which are required by applicable law to be applicable to such Participant (or
his or her Spouse or other beneficiary).
15.16 EMPLOYMENT RULE. Any individual who is a common law employee of a
corporation which is a member of the controlled group of corporations (within
the meaning of Section 414(b) of the Code) which includes Federated (for
purposes of this Section 15.16, the "Federated controlled group") shall, for all
purposes of this Plan, be considered to be the common law employee of the
corporation in the Federated controlled group from whose payroll the individual
is paid. If any individual participating in this Plan by reason of being paid
under the payroll of a corporation which is included as part of the Employer is
actually the common law employee of a corporation in the Federated controlled
group which is not included as part of the Employer, such other corporation
shall be considered an employer participating in this Plan for purposes of
Sections 401(a) and 404 of the Code.
15-4
<PAGE> 113
SIGNATURE PAGE
--------------
IN WITNESS WHEREOF, Federated Department Stores, Inc. has hereunto
caused its name to be subscribed to this amendment and restatement of the Plan
on the 31ST day of MARCH, 1997, but effective for all purposes, except as
otherwise provided herein, as of April 1, 1997.
FEDERATED DEPARTMENT STORES, INC.
By /s/ John R. Sims
--------------------------------
Title Vice President
-----------------------------
S-1
<PAGE> 1
Exhibit 10.49
FEDERATED DEPARTMENT STORES, INC.
CASH ACCOUNT PENSION PLAN
(As amended and restated effective as of January 1, 1997)
<PAGE> 2
FEDERATED DEPARTMENT STORES, INC.
CASH ACCOUNT PENSION PLAN
(As amended and restated effective as of January 1, 1997)
Federated Department Stores, Inc. adopted, effective as of January 1,
1984, the Retirement Income Plan. The said plan was subsequently renamed the
Federated Department Stores, Inc. Pension Plan and amended and restated. As of
January 1, 1997, Federated Department Stores, Inc. is again renaming such plan,
this time as the Federated Department Stores, Inc. Cash Account Pension Plan,
and amending and restating such plan in accordance with the provisions set forth
below. The provisions of this amended and restated plan will, except as
otherwise is herein expressly provided below, apply only to employees whose
service terminates on or after the effective date of this amended and restated
plan. The rights and benefits, if any, of a former employee will, except as
otherwise is required by law, be determined in accordance with the prior
provisions of this plan in effect on the date his or her employment terminated.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
SECTION 1 GENERAL DEFINITIONS..................................................................1-1
1.1 Accrued Benefit......................................................................1-1
1.2 Active Participant...................................................................1-1
1.3 Actuary..............................................................................1-1
1.4 Affiliated Employer..................................................................1-1
1.5 Annuity..............................................................................1-2
1.6 Board................................................................................1-2
1.7 Cash Balance Account.................................................................1-2
1.8 Code.................................................................................1-2
1.9 Committee............................................................................1-2
1.10 Compensation.........................................................................1-2
1.11 Effective Amendment Date.............................................................1-3
1.12 Employee.............................................................................1-3
1.13 Employer.............................................................................1-4
1.14 ERISA................................................................................1-5
1.15 Federated............................................................................1-5
1.16 Former Highly Compensated Employee...................................................1-5
1.17 Highly Compensated Employee..........................................................1-5
1.18 Leased Employee......................................................................1-6
1.19 Leave of Absence.....................................................................1-6
1.20 Normal Retirement Age................................................................1-6
1.21 Normal Retirement Date...............................................................1-6
1.22 Participant..........................................................................1-6
1.23 Plan.................................................................................1-7
1.24 Plan Administrator...................................................................1-7
1.25 Plan Year............................................................................1-7
1.26 Qualified Joint and Survivor Annuity.................................................1-7
1.27 Required Commencement Date...........................................................1-7
1.28 Retired Participant..................................................................1-8
1.29 Single Life Annuity..................................................................1-8
1.30 Social Security Retirement Age.......................................................1-8
1.31 Spouse...............................................................................1-9
1.32 Trust................................................................................1-9
1.33 Trustee..............................................................................1-9
1.34 Trust Fund...........................................................................1-9
SECTION 2 SERVICE DEFINITIONS AND RULES........................................................2-1
2.1 Service Definitions..................................................................2-1
2.2 Special Credited Employment..........................................................2-3
2.3 Affiliated Employment................................................................2-4
</TABLE>
i
<PAGE> 4
<TABLE>
<S> <C> <C>
SECTION 3 ELIGIBILITY AND PARTICIPATION........................................................3-1
3.1 Eligibility for Participation........................................................3-1
3.2 Entry Date...........................................................................3-1
3.3 Duration of Participation............................................................3-1
3.4 Reinstatement of Participation.......................................................3-1
SECTION 4 CASH BALANCE ACCOUNT.................................................................4-1
4.1 General Rules for Cash Balance Account...............................................4-1
4.2 Initial Balance Amounts..............................................................4-1
4.3 Pay Credit Amounts...................................................................4-1
4.4 Interest Credit Amounts..............................................................4-2
4.5 Reduction of Cash Balance Account....................................................4-2
SECTION 5 RETIREMENT BENEFITS..................................................................5-1
5.1 Normal Retirement....................................................................5-1
5.2 Late Retirement......................................................................5-1
5.3 Disability Retirement................................................................5-1
5.4 Vested Retirement....................................................................5-2
5.5 Premature Benefit Payments...........................................................5-3
5.6 Late Benefit Election................................................................5-3
5.7 Required Commencement of Benefits Under Section 401(a)(14) of Code...................5-4
5.8 Other Cessation of Employment........................................................5-4
SECTION 6 FORM OF RETIREMENT BENEFITS..........................................................6-1
6.1 Normal Form of Benefit...............................................................6-1
6.2 Election Out Of Normal Form and Of Optional Form.....................................6-1
6.3 Optional Benefit Forms...............................................................6-3
6.4 Automatic Lump Sum Payment...........................................................6-6
6.5 Minimum Benefits.....................................................................6-6
6.6 Effect on Retirement Benefit of Reemployment Prior to Required
Commencement Date...................................................................6-7
6.7 Additional Accruals After Required Commencement Date................................6-10
SECTION 7 PRE-PENSION DEATH BENEFITS...........................................................7-1
7.1 Eligibility for Pre-Pension Death Benefit............................................7-1
7.2 Beneficiary..........................................................................7-1
7.3 Rules as to Pre-Pension Death Benefit if Beneficiary is Participant's
Spouse..............................................................................7-1
7.4 Rules as to Pre-Pension Death Benefit if Beneficiary is Not Participant's
Spouse..............................................................................7-3
</TABLE>
ii
<PAGE> 5
<TABLE>
<S> <C> <C>
SECTION 8 MAXIMUM RETIREMENT BENEFIT LIMITATIONS...............................................8-1
8.1 Maximum Plan Benefit -- Separate Limitation as to This Plan..........................8-1
8.2 Maximum Plan Benefit -- Combined Limitation for This Plan and Other
Defined Contribution Plans..........................................................8-4
8.3 Restrictions on Benefits Payable to Certain Highly Compensated
Participants........................................................................8-7
SECTION 9 ADDITIONAL RETIREMENT AND DEATH BENEFIT
PROVISIONS..........................................................................9-1
9.1 Incompetency.........................................................................9-1
9.2 Commercial Annuity Contracts and Other Administrative Adjustments of
Benefits............................................................................9-1
9.3 Timing of Benefit Distributions......................................................9-1
9.4 Nonalienation of Benefits............................................................9-2
9.5 Actuarial Assumptions................................................................9-2
9.6 Applicable Benefit Provisions........................................................9-3
9.7 Coverage of Pre-Effective Amendment Date Participants................................9-4
9.8 Forfeitures..........................................................................9-5
9.9 Direct Rollover Distributions........................................................9-5
SECTION 10 TRUST FUND..........................................................................10-1
10.1 Contributions.......................................................................10-1
10.2 Prohibition Against Reversion.......................................................10-1
10.3 Investment of Trust Fund............................................................10-1
SECTION 11 NAMED FIDUCIARIES...................................................................11-1
SECTION 12 ADMINISTRATIVE AND INVESTMENT COMMITTEE.............................................12-1
12.1 Appointment of Committee............................................................12-1
12.2 General Powers of Committee.........................................................12-1
12.3 Records of Plan.....................................................................12-2
12.4 Actions of Committee................................................................12-2
12.5 Compensation of Committee and Payment of Plan Administrative and
Investment Charges.................................................................12-2
12.6 Limits on Liability.................................................................12-3
12.7 Claims Procedure....................................................................12-3
12.8 Limits on Duties....................................................................12-5
12.9 Appointment of Investment Manager...................................................12-5
SECTION 13 TERMINATION OR AMENDMENT............................................................13-1
13.1 Right and Procedure to Terminate....................................................13-1
13.2 Full Vesting Upon Termination.......................................................13-1
13.3 Allocation of Assets on Termination.................................................13-1
13.4 Amendment of Plan...................................................................13-3
</TABLE>
iii
<PAGE> 6
<TABLE>
<S> <C> <C>
SECTION 14 TOP HEAVY PROVISIONS................................................................14-1
14.1 Determination of Whether Plan Is Top Heavy..........................................14-1
14.2 Effect of Top Heavy Status on Entitlement to Retirement Benefit.....................14-5
14.3 Effect of Top Heavy Status on Benefit Amounts.......................................14-5
14.4 Effect of Top Heavy Status on Combined Maximum Plan Limits..........................14-6
SECTION 15 SPECIAL MINIMUM BENEFITS FOR CERTAIN
COLLECTIVELY BARGAINED MACY'S EMPLOYEES............................................15-1
15.1 General Rules for Minimum Benefits..................................................15-1
15.2 Special Disability Retirement Benefit for Certain Participants......................15-7
SECTION 16 MISCELLANEOUS.......................................................................16-1
16.1 Trust...............................................................................16-1
16.2 Mergers, Consolidations, and Transfers of Assets....................................16-1
16.3 Benefits and Service for Military Service...........................................16-2
16.4 Authority to Act for Federated or Other Employer....................................16-2
16.5 Relationship of Plan to Employment Rights...........................................16-2
16.6 Applicable Law......................................................................16-2
16.7 Agent for Service of Process........................................................16-2
16.8 Reporting and Disclosure............................................................16-2
16.9 Special Benefit Payment Rules for Certain Collectively Bargained
Employees..........................................................................16-2
16.10 Separability of Provisions..........................................................16-3
16.11 Counterparts........................................................................16-3
16.12 Headings............................................................................16-3
16.13 Construction........................................................................16-3
16.14 Employment Rule.....................................................................16-3
16.15 Schedules and Exhibits..............................................................16-4
SIGNATURE PAGE........................................................................Signature Page-1
SCHEDULE A ACTUARIAL ASSUMPTIONS....................................................Schedule A-1
SCHEDULE B MINIMUM BENEFIT SCHEDULES................................................Schedule B-1
</TABLE>
iv
<PAGE> 7
FEDERATED DEPARTMENT STORES, INC.
CASH ACCOUNT PENSION PLAN
(As amended and restated effective as of January 1, 1997)
SECTION 1
---------
GENERAL DEFINITIONS
-------------------
As used in this Plan (and any Schedules attached hereto), the following
general terms shall have the meanings indicated below unless it is clear from
the context that another meaning is intended:
1.1 ACCRUED BENEFIT - means, as of any specified date: (1) with respect
to a Participant who either has retired from or terminated employment with the
Employer or has started to receive a retirement benefit under the Plan, the
retirement benefit (or, if such benefit has already begun being paid as of such
specified date, the remaining portion of the retirement benefit) which the
Participant is then entitled under the Plan; (2) with respect to a Participant
who is still employed by the Employer and has not started to receive a
retirement benefit under the Plan, the retirement benefit to which the
Participant would be entitled under the Plan if it was determined as of the
specified date and if all Plan provisions which require the completion of a
certain number of years of Vesting Service or the attainment of any age while an
Employee in order to be entitled to a retirement benefit were disregarded; and
(3) with respect to a deceased Participant's Spouse or other beneficiary who as
of the subject date is entitled to a death benefit under the Plan or has started
to receive a death benefit under the Plan, the death benefit (or, if such
benefit has already begun being paid as of the subject date, the remaining
portion of the death benefit) to which the Spouse or other beneficiary is then
entitled under the Plan.
1.2 ACTIVE PARTICIPANT - means, at any relevant time, a person who at
such relevant time is a Participant in the Plan other than as a Retired
Participant.
1.3 ACTUARY - means an independent actuary, selected by Federated, who
is a Fellow of the Society of Actuaries and an enrolled actuary under ERISA or
which is a firm at least one of whose members is such an individual.
1.4 AFFILIATED EMPLOYER - means each corporation which is a member of a
controlled group of corporations (within the meaning of Section 414(b) of the
Code as modified when applicable by Section 415(h) of the Code) of which the
Employer is a member, each trade or business which is under common control
(within the meaning of Section 414(c) of the Code as modified when applicable by
Section 415(h) of the Code) with the Employer, each member of an affiliated
service group (within the meaning of Section 414(m) of the Code) which includes
the Employer, and each other entity required to be aggregated with the Employer
under
1-1
<PAGE> 8
Section 414(o) of the Code; except that any corporation or trade or business
which is considered a part of the Employer as defined in Section 1.13 below
shall not also be considered an Affiliated Employer hereunder.
1.5 ANNUITY - means a form of benefit without life insurance which
provides for equal payments at regular installments over more than a one-year
period.
1.6 BOARD - means the Board of Directors of Federated.
1.7 CASH BALANCE ACCOUNT - means, with respect to any Participant, the
bookkeeping account established with respect to the Participant under Section 4
below.
1.8 CODE - means the Internal Revenue Code of 1986 and the sections
thereof, as such law and sections exist as of the Effective Amendment Date or
may thereafter be amended or renumbered.
1.9 COMMITTEE - means the committee appointed by Federated to serve as
the administrative and investment committee described in Section 12 below.
Federated may appoint the same committee to perform the duties and
responsibilities of the committee under this Plan and the committee under any
other tax-qualified retirement or savings plan maintained by the Employer or any
Affiliated Employer.
1.10 COMPENSATION - means, with respect to an Employee and for any
period, the amount determined as follows:
(a) Subject to paragraphs (b), (c), and (d) below, the
Employee's "Compensation" for any period shall mean his or her wages (within the
meaning of Section 3401(a) of the Code) and all other compensation paid to the
Employee by the Employer for his or her period of service as an Employee and for
which the Employer is required to furnish the Employee a written statement under
Section 6051(a)(3) of the Code (E.G., compensation reported in Box 1 on a Form
W-2). Such Compensation shall be determined without regard to any rules under
Section 3401(a) of the Code that limit the remuneration included in wages based
on the nature or location of the employment or the services performed. In
addition, the Employee's Compensation shall not be aggregated for Plan purposes
with the Compensation of any other Employee, including any other Employee who is
a family member of the subject Employee.
(b) Notwithstanding the foregoing, the following types of
irregular or additional compensation shall not be included in the "Compensation"
of an Employee for any period by reason of the provisions of paragraph (a)
above: director's fees; contributions made to or payments received from a plan
of deferred compensation; amounts realized from or recognized by reason of a
restricted stock award; amounts realized from or recognized by reason of stock
appreciation rights; amounts realized from or recognized by reason of the
exercise of a stock option or the disposition of stock acquired under a stock
option; long-term cash bonuses based on meeting performance goals which are
measured over more than a one year period;
1-2
<PAGE> 9
moving expense reimbursements or payments made to cover mortgage interest
differentials resulting from a move; merchandise or savings bond awards;
reimbursements for tuition or educational expenses; cost of living allowances;
amounts resulting from a forgiveness of a loan; retention bonuses or severance
pay paid by reason of or approved by an order of a court; amounts which
represent a sign-on bonus for agreeing to be employed by the Employer; sick pay
or disability payments made under a third-party payor arrangement; any imputed
income or the like arising under welfare or other fringe benefit plans or
programs (including but not limited to group term life insurance, use of
employer cars, financial counseling, and employee discounts); any payments made
to cover any personal income taxes resulting from the imputing of income by
reason of welfare or other fringe benefits; and lump sum severance payments or
lump sum payments in settlement of disputes involving termination of employment
which are not otherwise described in this paragraph (b).
(c) In addition to the amounts included in the Employee's
"Compensation" for any period under paragraph (a) and paragraph (b) above, and
notwithstanding the provisions of such paragraphs, the Employee's "Compensation"
for any period shall also include (1) any amounts contributed to a plan
qualified under Section 401(a) of the Code and maintained by the Employer which
were subject to a cash or deferred election of the Employee made under and
pursuant to Section 401(k) of the Code and which are not includable in the
Employee's income for such period by reason of Section 402(e)(3) of the Code and
(2) any amounts treated as employer contributions to a cafeteria plan maintained
by the Employer by reason of an election of the Employee made under and pursuant
to Section 125 of the Code and which are not includable in the Employee's income
for such period by reason of Section 125 of the Code.
(d) Finally, notwithstanding any of the provisions of the
foregoing paragraphs of this Section 1.10, in determining benefit accruals in
any Plan Years beginning on or after the Effective Amendment Date, the
"Compensation" of the Employee which is taken into account for any Plan Year
under the Plan shall not exceed $150,000 (or any higher amount to which this
figure is adjusted under Section 401(a)(17) of the Code by the Secretary of the
Treasury or his or her delegate for the calendar year in which such Plan Year
begins).
1.11 EFFECTIVE AMENDMENT DATE - means the effective date of this
amendment and restatement of the Plan, which is January 1, 1997.
1.12 EMPLOYEE - is used herein only to refer to an individual who is
eligible to be a Participant in the Plan if and after he or she meets all of the
participation requirements set forth in Section 3 below (including certain
minimum age and minimum service requirements set forth in Section 3 below) and
means an individual who qualifies as an "Employee" under the following
provisions:
(a) Subject to the other provisions of this Section 1.12, an
"Employee" means, at any point in time, an individual who is a common law
employee of the Employer and who is classified as an employee by the Employer
for payroll payment and withholding purposes at such time.
1-3
<PAGE> 10
(b) Notwithstanding the foregoing, none of the following
individuals shall be considered an "Employee" for purposes of the Plan: (1) a
director of the Employer who is not employed by the Employer in any other
capacity; (2) except where Federated has otherwise agreed, any person who is
employed in a leased department in a store operated by the Employer; (3) any
person who is stationed outside the United States from the time he or she first
comes employed by the Employer or who receives his or her Compensation in
foreign currency; (4) any person whose compensation consists solely of a
retainer or fee; or (5) any person who is represented by a collective bargaining
unit unless a collective bargaining agreement between the authorized
representatives of such collective bargaining unit and the Employer approves
such person's eligibility to participate in plans both (x) which are qualified
as tax-favored plans under Section 401(a) of the Code and (y) the sponsor (as
such term is defined in ERISA) of which is the Employer.
(c) Also, subject to the following provisions of this
paragraph (c) but notwithstanding the foregoing, unless included in the Plan by
action of the Board or pursuant to an applicable collective bargaining
agreement, an "Employee" for purposes of the Plan shall not include any person
who is a participant, eligible for participation, or in the process of
qualifying for participation in any other defined benefit pension plan (within
the meaning of Section 414(j) of the Code) which qualifies under Section 401(a)
of the Code and the cost of which is borne, in whole or in part, by the Employer
or any Affiliated Employer. However, a person who otherwise qualifies as an
"Employee" under the other provisions of this Section 1.12 shall not be
considered other than as an "Employee" merely because of his or her
participation in another defined benefit pension plan if such participation
relates solely to employment which preceded the date on which he or she would
otherwise become a Participant under the Plan and the person's benefits under
such other plan relate solely to such past service.
(d) Further, when any corporation which is part of the
Employer at any point in time later loses its status as being part of the
Employer (because it no longer is part of a controlled group of corporations
which includes Federated or because of any other reason), all persons who are
considered "Employees" under this Plan by reason of their employment by such
corporation immediately prior to such corporation losing its status as part of
the Employer shall no longer be considered "Employees" under this Plan upon such
corporation's loss of Employer status.
(e) In addition, any Leased Employee shall be considered an
"Employee" for purposes of this Plan only if both he or she is a Leased Employee
of the Employer and Federated has agreed to his or her being considered an
Employee for purposes of this Plan.
1.13 EMPLOYER - means each and every corporation which is a member of
the controlled group of corporations (within the meaning of Section 414(b) of
the Code) which includes Federated. Except where the context otherwise is clear,
any reference to the Employer in this Plan shall be deemed to be referring
collectively to all of the corporations which comprise the Employer.
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<PAGE> 11
1.14 ERISA - means the Employee Retirement Income Security Act of 1974
and the sections thereof, as such law and sections exist as of the Effective
Amendment Date or may thereafter be amended or renumbered.
1.15 FEDERATED - means Federated Department Stores, Inc., or any
corporate successor thereto. Federated is the sponsor of this Plan.
1.16 FORMER HIGHLY COMPENSATED EMPLOYEE - means, with respect to any
Plan Year (for purposes of this Section 1.16, the "subject Plan Year"), any
person (1) who is a former Employee at the start of the subject Plan Year (or
who, while an Employee at the start of such year, performs no services for the
Employer during such year by reason of being on a Leave of Absence or for some
other reason), (2) who had a separation year prior to the subject Plan Year, and
(3) who was a highly compensated employee (within the meaning of Section 414(q)
of the Code) for the person's separation year or any other Plan Year which ended
on or after the person's 55th birthday. Except as otherwise provided herein, a
person's separation year refers to the Plan Year in which the person terminated
employment with the Employer. For purposes of this rule, an Employee who
performs no services for the Employer during the subject Plan Year shall be
treated as having terminated employment with the Employer in the Plan Year in
which such Employee last performed services for the Employer. In addition, if an
Employee in any Plan Year (for purposes of this Section 1.16, the "earlier Plan
Year"), prior to the first Plan Year which ends on or after his or her
attainment of age 55, receives Compensation in an amount less than 50% of the
Employee's average annual amount of Compensation for the period of the three
consecutive calendar years which both end prior to the earlier Plan Year and
produce the greatest amount of Compensation (or the entire period of his or her
service with the Employer, if it is or was less than three consecutive calendar
years prior to the earlier Plan Year), and if such Employee after such earlier
Plan Year never has his or her Compensation increase to be in excess of 50% of
such average annual amount of Compensation, then such Employee's separation year
shall, once he or she finally does terminate employment (or is finally treated
as having terminated employment) with the Employer, have his or her separation
year be deemed to be the earlier Plan Year.
1.17 HIGHLY COMPENSATED EMPLOYEE - means, with respect to any Plan Year
(for purposes of this Section 1.17, the "subject Plan Year"), any person who is
a highly compensated employee (within the meaning of Section 414(q) of the Code)
for the subject Plan Year. Under the provisions of Code Section 414(q) as in
effect on the Effective Amendment Date, subject to any subsequent changes to
such Code Section, a person shall be considered as a highly compensated employee
for the subject Plan Year if he or she is an Employee during at least part of
such Plan Year and (1) was at any time a 5% owner (as defined in Section
416(i)(1) of the Code) of the Employer or any Affiliated Employer during the
subject Plan Year or the immediately preceding Plan Year (for purposes of this
Section 1.17, the "look-back Plan Year") or (2) received Compensation in excess
of $80,000 in the look-back Plan Year. The $80,000 amount set forth above shall
be adjusted for each Plan Year beginning after the Effective Amendment Date in
accordance with the adjustment to such amount made by the Secretary of the
Treasury or his or her delegate under Section 414(q)(1) of the Code.
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<PAGE> 12
1.18 LEASED EMPLOYEE - means any person who is a leased employee
(within the meaning of Section 414(n) of the Code) of the Employer or an
Affiliated Employer. Under Code Section 414(n), subject to any subsequent
changes to such Code Section, a leased employee is an individual who provides
services to a recipient, in a capacity other than as a common law employee of
the recipient, in accordance with each of the following three requirements: (1)
the services are provided pursuant to an agreement between the recipient and one
or more leasing organizations; (2) the individual has performed such services
for the recipient on a substantially full-time basis for a period of at least
one year; and (3) such services are performed under the primary direction or
control by the recipient. The determination of who is a Leased Employee shall be
consistent with any regulations issued under Section 414(n) of the Code.
1.19 LEAVE OF ABSENCE - means, with respect to an Employee, any period
of the Employee's absence from service with the Employer which does not
constitute a quit, retirement, or discharge under any uniform and
nondiscriminatory personnel policy of the Employer which applies to the class of
Employees to which such Employee belongs. For this purpose, if for any period
the Employee continues to be paid his or her regular salary or wages and to
perform any services required of him or her by the Employer, he or she is not
considered absent from service (and is not on a Leave of Absence) for such
period. A Leave of Absence shall in any event include any absence of the
Employee from service for maternity or paternity reasons. An absence for
"maternity or paternity reasons" means an absence (1) by reason of the pregnancy
of the Employee, (2) by reason of the birth of a child of the Employee, (3) by
reason of the placement of a child with the Employee in connection with the
adoption of such child by the Employee, or (4) for purposes of caring for such
child for a period immediately following such birth or placement. An Employee
shall be treated as still being an Employee for purposes of the Plan while on a
Leave of Absence, but he or she shall be treated as having terminated his or her
employment with the Employer as an Employee at the end of such Leave of Absence
unless at such time he or she returns to service with the Employer or is granted
by the Employer an extension of the approved leave of absence period.
1.20 NORMAL RETIREMENT AGE - means, with respect to any Participant,
the later of: (1) the date the Participant first reaches age 65; or (2) the
fifth annual anniversary of the date the Participant first becomes a Participant
in the Plan. A Participant shall be fully vested in his or her Accrued Benefit
if, while an Employee, he or she attains the date which would be his or her
Normal Retirement Age under this Section 1.20.
1.21 NORMAL RETIREMENT DATE - means, with respect to any Participant,
the first day of the first month which begins on or after the date on which the
Participant first attains his or her Normal Retirement Age.
1.22 PARTICIPANT - means, at any relevant time, any person who at such
time either is accruing benefits under the Plan or still has accrued benefits
held under the Plan. The provisions of Section 3 below determine when a person
is a Participant on or after the Effective Amendment Date, and the provisions of
the Plan which were in effect prior to the Effective Amendment Date shall
determine when a person was a Participant prior to such date.
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<PAGE> 13
1.23 PLAN - means the Federated Department Stores, Inc. Pension Plan,
as currently set forth in this document and as may be amended hereinafter. In
addition, any reference to the "Plan" contained in this document also refers to
all defined benefit pension plans which preceded and were continued by this
current version of the Plan or any such other preceding plan, and any defined
benefit pension plans which are or were merged into or have or had assets and
liabilities directly transferred to this Plan as currently constituted or any of
such other preceding plans, with all such other preceding and merged or
transferred plans being referred to herein as the "Prior Plans." If the
provisions of this document refer to or require the determination of the amount
of any retirement benefits that would apply under any Prior Plan had such Prior
Plan continued in effect after the Effective Amendment Date, or the amount of
any retirement benefit that would apply under any Prior Plan if such benefit
were determined immediately prior to the Effective Amendment Date, the
provisions of the Prior Plan shall be used to make such determination. The
provisions of the Prior Plans are hereby incorporated by reference in this
document to the extent necessary to make any such determination. In this regard,
the Prior Plans include, but are not limited to, the Federated Department
Stores, Inc. Pension Plan as in effect prior to the Effective Amendment Date
(for purposes of this Section 1.23, the "prior Federated Pension Plan"), the
Allied Stores Corporation Retirement Benefit Plan (which was merged into the
prior Federated Pension Plan as of December 31, 1995), the Pension Plan for
Employees of Broadway Stores Inc. (which was merged into the prior Federated
Pension Plan as of January 31, 1996), the R.H. Macy & Co., Inc. Pension Plan
(which was merged into the prior Federated Pension Plan as of December 31,
1996), the Supplemental Pension Plan for Hourly Employees of The Emporium (which
was merged into the prior Federated Pension Plan as of December 31, 1996), and
the Amended and Restated Joseph Horne Co., Inc. Pension Plan (which was merged
into the prior Federated Pension Plan as of December 31, 1996).
1.24 PLAN ADMINISTRATOR - means Federated.
1.25 PLAN YEAR - means the calendar year.
1.26 QUALIFIED JOINT AND SURVIVOR ANNUITY - means the form of Annuity
described in Section 6.1.2(b) below.
1.27 REQUIRED COMMENCEMENT DATE - means, with respect to any
Participant, a date determined by the Committee for administrative reasons to be
the date on which the Participant's nonforfeitable retirement benefit (if any
such benefit would then exist and not yet have begun) is to commence in order to
meet the requirements of Section 401(a)(9) of the Code as such requirements are
in effect in the first calendar year that the Participant reaches an age which
requires the commencement of the Participant's nonforfeitable retirement benefit
under such Code Section in such calendar year or the immediately following
calendar year. Such date shall be a first day of a month and, for any
Participant who has not in a calendar year ending prior to the Effective
Amendment Date reached an age which required the commencement of the
Participant's nonforfeitable retirement benefit in such calendar year or the
immediately following calendar year, and subject to any subsequent changes to
Code Section 401(a)(9), shall be in accordance with the following parameters:
1-7
<PAGE> 14
(a) For a Participant who is not a 5% owner of the Employer,
his or her Required Commencement Date must be no later than, and no earlier than
seven months prior to, the April 1 of the calendar year next following the later
of: (1) the calendar year in which he or she attains age 70-1/2; or (2) the
calendar year in which he or she terminates employment with the Employer.
(b) For a Participant who is a 5% owner of the Employer, his
or her Required Commencement Date must be no later than, and no earlier than
seven months prior to, the April 1 of the calendar year next following the later
of: (1) the calendar year in which he or she attains age 70-1/2; or (2) the
earlier of the calendar year with or within which ends the Plan Year in which he
or she becomes a 5% owner of the Employer or the calendar year in which he or
she terminates employment with the Employer.
(c) A Participant is deemed to be a 5% owner of the Employer
for purposes hereof if he or she is a 5% owner of the Employer (as determined
under Section 416(i)(1)(B) of the Code) at any time during the Plan Year ending
with or within the calendar year in which he or she attains age 66-1/2 or any
subsequent Plan Year. Once a Participant meets this criteria, he or she shall be
deemed a 5% owner of the Employer even if he or she ceases to own 5% of the
Employer in a later Plan Year.
(d) Notwithstanding the foregoing, if a Participant first
earns a nonforfeitable retirement benefit under the Plan after the latest date
which could otherwise be his or her Required Commencement Date under the
foregoing paragraphs of this Section 1.27, then his or her Required Commencement
Date shall not be subject to such foregoing paragraphs but rather must be a date
within the calendar year next following the calendar year in which he or she
first earns a nonforfeitable retirement benefit under this Plan.
1.28 RETIRED PARTICIPANT - means, as of any relevant time, a
Participant who has previously ceased employment with the Employer when eligible
for a retirement benefit under the other provisions of the Plan, who is still
receiving or remains eligible for the payment of his or her benefit under this
Plan, and who has not again begun accruing additional benefits under the Plan
after the latest date he or she ceased employment.
1.29 SINGLE LIFE ANNUITY - means the form of Annuity described in
Section 6.1.1(b) below.
1.30 SOCIAL SECURITY RETIREMENT AGE - means, with respect to any
Participant, the age used as the Participant's retirement age under Section
216(l) of the Federal Social Security Act, as amended, except that such section
shall be applied without regard to the age increase factor and as if the early
retirement age under such section were age 62. Accordingly, as of the Effective
Amendment Date, the Social Security Retirement Age for purposes of the Plan is:
(1) age 65 for a Participant who is born before January 1, 1938; (2) age 66 for
a Participant who is born after December 31, 1937 and before January 1, 1955;
and (3) age 67 for a Participant who is born after December 31, 1954.
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<PAGE> 15
1.31 SPOUSE - means, with respect to any Employee and at any relevant
time, the Employee's husband or wife who is recognized as such under the laws of
the State in which the Employee resides at such time.
1.32 TRUST - means the trust agreement used from time to time as the
funding media for the Plan. The Trust is hereby deemed a part of this Plan and
incorporated into the Plan by reference.
1.33 TRUSTEE - means the person or entity serving from time to time as
the Trustee under the Trust.
1.34 TRUST FUND - means the trust fund established in accordance with
the Trust.
1-9
<PAGE> 16
SECTION 2
---------
SERVICE DEFINITIONS AND RULES
-----------------------------
2.1 SERVICE DEFINITIONS. For purposes of the Plan, the following terms
related to service shall have the meanings hereinafter set forth unless the
context otherwise requires:
2.1.1 BREAK-IN-SERVICE - means, with respect to an Employee,
any period which meets the following conditions:
(a) The Employee shall be considered to have
incurred a Break-in-Service for any Plan Year which begins on or after the
Effective Amendment Date and for which the Employee is credited with not more
than 500 Hours of Service.
(b) If the Employee participated in a Prior Plan
before the Effective Amendment Date, the Employee shall also be considered to
have incurred a Break-in-Service for any twelve month period which occurs prior
to the Effective Amendment Date to the extent that the provisions of the Prior
Plan in which he or she last actively participated prior to the Effective
Amendment Date treated such period as a break-in-service of the Employee as of
December 31, 1996.
2.1.2 ELIGIBILITY SERVICE - means, with respect to an
Employee, the Employee's period of service with the Employer to be taken into
account for purposes of determining his or her eligibility to become a
Participant in the Plan, computed as follows:
(a) An Employee who completes at least 1,000 Hours
of Service during the twelve consecutive month period commencing on his or her
Employment Date shall be credited with one year of Eligibility Service at the
end of such twelve consecutive month period.
(b) Further, an Employee who fails to complete at
least 1,000 Hours of Service during the twelve consecutive month period
commencing on his or her Employment Date shall be credited with one year of
Eligibility Service at the end of the first Plan Year commencing after such
Employment Date during which he or she completes at least 1,000 Hours of
Service.
(c) For an Employee who both (1) ceases to be an
Employee of the Employer prior to his or her being credited with one year of
Eligibility Service, and (2) suffers a Break-in-Service before being
subsequently reemployed by the Employer, his or her service with the Employer
prior to his or her reemployment shall be disregarded in determining the
Eligibility Service he or she needs under the Plan to become a Participant (and
his or her Reemployment Date shall be treated as if it were his or her
Employment Date for such purposes).
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<PAGE> 17
2.1.3 EMPLOYMENT DATE - means, with respect to an Employee,
the date on which the Employee first performs an Hour of Service.
2.1.4 HOUR OF SERVICE - means, with respect to an Employee,
each hour for which the Employee: (1) is paid, or is entitled to payment, for
the performance of duties as an Employee; (2) is directly or indirectly paid, or
is entitled to payment, for a period of time (without regard to whether the
employment relationship is terminated) when he or she performs no duties as an
Employee due to vacation, holiday, illness, incapacity (including disability),
layoff, jury duty, military duty, or leave of absence; or (3) is paid for any
reason in connection with his or her employment as an Employee an amount as
"back pay," irrespective of mitigation of damages. The crediting of Hours of
Service to an Employee under the Plan shall also be subject to the following
provisions:
(a) Notwithstanding the foregoing provisions of
this Section 2.1.4, an Hour of Service shall not be credited to an Employee on
account of a payment which solely reimburses such Employee for medical, or
medically related, expenses incurred by or on behalf of the Employee.
(b) Also, subject to the other provisions of this
Section 2.1.4, Hour of Service credit shall be calculated in accordance with
paragraphs (b) and (c) of 29 C.F.R. Section 2530.200b-2 of the Department of
Labor Hour of Service Regulations, which paragraphs are hereby incorporated by
reference into this Plan.
(c) Any Employee who is exempt from the minimum
wage and overtime pay requirements of the Federal Fair Labor Standards Act, and
as to whom records of actual hours worked are thereby not needed to be kept for
such purposes, shall be credited with: (1) if the period on which such Employee
is paid is a week (or a multiple of a week), 45 Hours of Service for each week
included in each such period for which he or she would be credited with at least
one Hour of Service under the other provisions of this Section 2.1.4; (2) if the
period on which such Employee is paid is a semi-monthly period, 95 Hours of
Service for each such semi-monthly payroll period for which he or she would be
credited with at least one Hour of Service under the other provisions of this
Section 2.1.4; or (3) if the period on which such Employee is paid is a month
(or a multiple of a month), 190 Hours of Service for each month included in each
such period for which he or she would be credited with at least one Hour of
Service under the other provisions of this Section 2.1.4.
(d) Hours of Service to be credited to an Employee
in connection with each period (1) which is of no more than 31 days, (2) which
begins on the first day of a pay period for the Employee (for purposes of this
paragraph (d), the "initial pay period"), (3) which ends on the last day of the
Employee's pay period which includes the pay day for the initial pay period, and
(4) which overlaps two computation periods or occurs in a month which overlaps
two computation periods shall be credited on behalf of the Employee to the
computation period in which falls the first day of the month during which the
pay day for the initial pay period occurs.
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<PAGE> 18
2.1.5 REEMPLOYMENT DATE - means, with respect to an Employee
who has previously incurred a Break-in-Service, the first day after the
Employee's most recent Break-in-Service on which the Employee performs an Hour
of Service.
2.1.6 SIX-YEAR BREAK-IN-SERVICE - means, with respect to an
Employee who has ceased to be an Employee of the Employer, a period of six or
more Breaks-in-Service which is not interrupted by any period which is not
included in a period of a Break-in-Service.
2.1.7 VESTING SERVICE - means, with respect to a Participant,
the Participant's service with the Employer which is taken into account under
the Plan for vesting purposes (I.E., for purposes of determining the
Participant's eligibility for and the nonforfeitable percentage of a retirement
benefit under the Plan), and for purposes of helping to determine the pay credit
amounts to be credited to the Participant's Cash Balance Account under the
subsequent provisions of the Plan, computed as follows:
(a) The Participant shall be credited with one year
of Vesting Service for each Plan Year which begins on or after the Effective
Amendment Date and for which the Participant is credited with at least 1,000
Hours of Service.
(b) The Participant shall also be credited with
years of Vesting Service equal to the number of years of vesting service he or
she was credited with as of December 31, 1996 under the terms (as then in
effect) of the Prior Plans in which he or she participated prior to the
Effective Amendment Date (taking into account the provisions of each such Prior
Plan for determining benefit accrual service, including each such plan's
provisions concerning breaks-in-service). In no event, however, shall any period
which occurs prior to the Effective Amendment Date be counted more than once in
determining the Participant's years of Vesting Service.
(c) Notwithstanding the foregoing, any Vesting
Service completed by the Participant prior to a Six-Year Break-in-Service of the
Participant which ends after the Effective Amendment Date shall be disregarded
under the Plan if the Participant did not have a nonforfeitable interest in any
retirement benefit under the Plan at the time such Break-in-Service began.
2.2 SPECIAL CREDITED EMPLOYMENT. For purposes of the Plan, years during
which an Employee was employed by a corporate or other predecessor of any
corporation which becomes part of the Employer or an Affiliated Employer after
the Effective Amendment Date, or by any division (including any branch thereof)
of the Employer or an Affiliated Employer whose business is acquired by the
Employer or the Affiliated Employer after the Effective Amendment Date, shall be
considered in either case years of Eligibility Service and Vesting Service for
this Plan if they would have been so considered under Section 2.1.2 or 2.1.7
above (as appropriate) had they been completed with the Employer or the
Affiliated Employer and if the Employee had been employed by such predecessor or
division at the time it so became part of or had its business acquired by the
Employer or the Affiliated Employer (unless Federated provides, by
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<PAGE> 19
appropriate corporate action exercised in a uniform and nondiscriminatory manner
prior to the Employee becoming a Participant in this Plan, that such Eligibility
Service and/or Vesting Service shall not be so credited to the Employee). In
addition, Federated may also in its discretion provide, by appropriate corporate
action exercised in a uniform and nondiscriminatory manner, that, for purposes
of the Plan, years of an Employee's employment by a lessee of a leased
department of a store operated by the Employer whose business is directly
assumed by the Employer shall be considered years of Eligibility Service and/or
Vesting Service for this Plan if they would have been so considered under
Section 2.1.2 or 2.1.7 above (as appropriate) had they been completed with the
Employer and if the Employee had been employed by the lessee of such leased
department at the time its business was directly assumed by the Employer. Also,
any period of service of an Employee with the armed forces of the United States
shall be credited as Eligibility Service and/or Vesting Service to the extent
required by Federal law.
2.3 AFFILIATED EMPLOYMENT. Notwithstanding any other provision of the
Plan to the contrary:
2.3.1 Any period of employment of a person with the Employer
during which the person is not considered an Employee, any period of employment
with an Affiliated Employer, and any period during which a person is a Leased
Employee shall in any such case, regardless of whether occurring prior to or
after employment as an Employee of the Employer, be considered in the same
manner as employment as an Employee of the Employer for purposes of crediting
years of Eligibility Service and Vesting Service under this Plan to such person
(other than for purposes of determining the pay credit amounts to be credited to
the person's Cash Balance Account under the subsequent provisions of this Plan),
determining if such person has incurred a Break-in-Service, and determining if
and when such person has a vested right to a benefit under the Plan.
2.3.2 Further, a transfer of status from that of being an
Employee to other employment with the Employer or to any employment with an
Affiliated Employer shall in any such case not be considered a termination of
employment from the Employer for purposes of determining when a benefit of this
Plan due a Participant, if any, is to be or begin to be distributed or whether
the lump sum value of such benefit is low enough so that the form of such
benefit is automatically to be paid in a lump sum form; rather, such termination
of employment and the time at which the lump sum value of the benefit is
determined for purposes of seeing if the Participant's benefit is automatically
to be paid in a lump sum form shall be deemed to occur only upon the
Participant's later termination of employment from the group composed of the
Employer and all Affiliated Employers.
2.3.3 In addition, any person who during any Plan Year is an
employee of the Employer other than as an Employee, is an employee of an
Affiliated Employer, or is a Leased Employee shall be considered an Employee,
and any compensation received in any such capacity during such Plan Year shall
(if determined under the same principles as are set forth at Section 1.10 above)
be considered as Compensation, for purposes of determining the persons
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<PAGE> 20
who are the Highly Compensated Employees, and the Former Highly Compensated
Employees for such Plan Year or the immediately following Plan Year.
2.3.4 Also, any compensation received during a period by a
person in the capacity of being an employee of the Employer other than as an
Employee, an employee of an Affiliated Employer, or a Leased Employee shall (if
determined under the same principles as are set forth at Section 1.10 above or,
if another definition of compensation is used under any of the below-named Plan
Sections, in accordance with such definition when being considered under such
Plan Section) be considered as Compensation of his or hers for such period for
purposes of Section 8 below (which provides maximum benefit limits and limits on
benefits payable on or prior to the Plan's termination) and Section 14 below
(which provides top heavy plan rules).
2.3.5 Finally, except as is otherwise expressly provided in
this Plan or by Federated pursuant to express authorization provided in this
Plan (including but not limited to Sections 8 and 14 below), any period of
employment of a person by the Employer during which the person is not considered
an Employee, any period of employment with an Affiliated Employer, and any
period during which a person is a Leased Employee, and any compensation or
remuneration received during any such period, shall not be used in any manner in
calculating the amount of any benefit to which the person is entitled under this
Plan.
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<PAGE> 21
SECTION 3
---------
ELIGIBILITY AND PARTICIPATION
-----------------------------
3.1 ELIGIBILITY FOR PARTICIPATION. Persons shall remain or become
Participants in the Plan on or after the Effective Amendment Date only in
accordance with the following provisions:
3.1.1 Any person who was a participant in the Plan on the date
immediately preceding the Effective Amendment Date shall continue to be a
Participant in this Plan as of the Effective Amendment Date, unless he or she is
no longer an Employee as of the Effective Amendment Date.
3.1.2 Further, each other person who, as of any Entry Date
which occurs on or after the Effective Amendment Date, (1) has completed at
least one year of Eligibility Service, (2) has attained at least age 21, and (3)
is an Employee shall become a Participant as of such Entry Date. Notwithstanding
the foregoing, if a person would become a Participant as of any Entry Date under
the foregoing provisions of this Section 3.1.2 but for the fact he or she is not
an Employee, and he or she subsequently becomes an Employee, such Employee shall
be deemed a Participant in the Plan on the date he or she so subsequently
becomes an Employee.
3.2 ENTRY DATE. For purposes of the Plan and Section 3.1 above in
particular, an "Entry Date" means the first day of any calendar month.
3.3 DURATION OF PARTICIPATION. Each Participant in the Plan shall
continue to be a Participant until he or she has ceased to be an Employee and
the entire amount of his or her Accrued Benefit determined at such time has been
distributed or forfeited hereunder.
3.4 REINSTATEMENT OF PARTICIPATION. Any person who ceases to be a
Participant, but who is thereafter reemployed as an Employee by the Employer,
shall be reinstated as a Participant as of the date on which he or she next
completes an Hour of Service on or after such reemployment.
3-1
<PAGE> 22
SECTION 4
---------
CASH BALANCE ACCOUNT
--------------------
4.1 GENERAL RULES FOR CASH BALANCE ACCOUNT. The Committee shall
establish a bookkeeping account, known as a "Cash Balance Account" in this Plan,
with respect to each Participant who is an Active Participant in this Plan on or
after the Effective Amendment Date. The monthly or lump sum amount of a
Participant's retirement benefit under the subsequent provisions of this Plan,
if any, is generally determined on the basis of the dollar amount credited to
the Participant's Cash Balance Account on the date as of such benefit is paid or
commences to be paid to the Participant. A Participant's Cash Balance Account
does not represent an actual funded account under which the Participant has a
specific right to assets under the Trust or an account which reflects a specific
part of the Trust; instead, it represents only a bookkeeping account to which
bookkeeping amounts are credited and which is generally used to determine the
amount of the Participant's retirement benefit, if any, which exists under the
Plan. The Cash Balance Account of a Participant is credited with (1) an initial
balance amount to the extent provided in Section 4.2 below, (2) pay credit
amounts to the extent provided in Section 4.3 below, and (3) interest credit
amounts to the extent provided in Section 4.4 below.
4.2 INITIAL BALANCE AMOUNTS. If a Participant becomes an Active
Participant in this Plan on or after the Effective Amendment Date, after having
participated in any Prior Plan prior to the Effective Amendment Date, and if the
Participant's accrued benefit under any such Prior Plan has not commenced to be
paid prior to such date, then the Participant's Cash Balance Account shall be
credited on the later of the Effective Amendment Date or the date he or she
first becomes an Active Participant in this Plan on or after the Effective
Amendment Date with an amount, called an "initial balance amount" in this Plan,
equal to the present value on such date of the sum of the Participant's accrued
benefits (which have not commenced to be paid) under the Prior Plans as
determined immediately prior to such date (and as if each such accrued benefit
was payable in the form of Annuity under which the applicable Prior Plan's
accrued benefit was determined under such plan's benefit formula terms and as if
such accrued benefit commenced as of the later of the Participant's Normal
Retirement Date or the date on which such initial balance amount is credited to
the Participant's Cash Balance Account).
4.3 PAY CREDIT AMOUNTS. The Cash Balance Account of each Participant
shall be credited with a certain amount, called a "pay credit amount" in this
Plan, for each Plan Year which meets all of the following conditions: (1) it is
a Plan Year which begins on or after the Effective Amendment Date, (2) it is a
Plan Year for which the Participant is credited with a year of Vesting Service,
(3) it is a Plan Year in which the Participant is a Participant during at least
part of such year, and (4) it is a Plan Year for which the Participant has
Compensation. Any pay credit amount to be credited to a Participant's Cash
Balance Account for a specific Plan Year shall be credited to such account as of
the last day of such Plan Year (or, if the Participant both ceases to be an
Employee during such Plan Year or any earlier Plan Year and thereafter receives
or begins receiving a retirement benefit under the Plan as of a date during but
prior to
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<PAGE> 23
the last day of the Plan Year for which the pay credit amount is being credited,
on the date as of which such benefit is paid or begins being paid under the
Plan). The pay credit amount which will be credited to a Participant's Cash
Balance Account for any Plan Year (for which such an amount is required to be so
credited) shall be determined from the following table (based on the
Participant's total number of years of Vesting Service credited to him or her at
the start of such Plan Year and on his or her Compensation for the period which
begins on the first date in such Plan Year on which he or she is a Participant
and ends on the date on which such pay credit amount is credited):
<TABLE>
<CAPTION>
YEARS OF VESTING SERVICE
(credited to Participant at the start
of the Plan Year for which the pay
credit amount is credited) PAY CREDIT AMOUNT
- --------------------------------------- -----------------
<S> <C>
1 but less than 3 2.0% of Participant's Compensation for Plan Year
3 but less than 5 2.5% of Participant's Compensation for Plan Year
5 but less than 10 3.0% of Participant's Compensation for Plan Year
10 but less than 15 4.0% of Participant's Compensation for Plan Year
15 but less than 20 5.0% of Participant's Compensation for Plan Year
20 but less than 25 6.0% of Participant's Compensation for Plan Year
25 or more 8.0% of Participant's Compensation for Plan Year
</TABLE>
4.4 INTEREST CREDIT AMOUNTS. The Cash Balance Account of each
Participant shall be credited with a certain amount, called an "interest credit
amount" in this Plan, for each calendar quarter which begins on or after the
Effective Amendment Date, provided that such Cash Balance Account has a positive
balance both at the start and at the end of such calendar quarter. The interest
credit amount to be credited to the Participant's Cash Balance Account for any
calendar quarter (for which such an amount is required to be so credited) shall
be credited as of the last day of such calendar quarter and shall be equal to
the amount of interest that would be generated by the dollar amount credited to
the Participant's Cash Balance Account as of the first day of such calendar
quarter if such amount earned interest to the last day of such calendar quarter
based on the greater of (1) the annual interest rate on 30-year U.S. Treasury
securities for the second calendar month which precedes the start of the Plan
Year during which such interest credit amount is credited or (2) an interest
rate equal to 5-1/4% per annum.
4.5 REDUCTION OF CASH BALANCE ACCOUNT. The entire amount credited to a
Participant's Cash Balance Account will be reduced to zero on any date that a
retirement benefit (or an additional amount of retirement benefit) which is
based on the balance of such Cash Balance Account as of such date is paid or
begins to be paid to the Participant under the subsequent provisions of the Plan
or on any date that the Participant's entire Accrued Benefit is forfeited under
the subsequent provisions of the Plan.
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<PAGE> 24
SECTION 5
RETIREMENT BENEFITS
5.1 NORMAL RETIREMENT. A Participant who ceases to be an Employee
(other than by reason of his or her death) after attaining his or her Normal
Retirement Age, and within the calendar month in which he or she attains such
age, shall be entitled to a retirement benefit under the Plan (unless he or she
dies before the date as of which the benefit begins to be paid). Unless
otherwise provided under or pursuant to the other provisions of the Plan, such
retirement benefit shall: (1) commence as of the Participant's Normal Retirement
Date; (2) be paid in the form a Single Life Annuity; and (3) provide, if the
retirement benefit would be paid in the form of a Single Life Annuity which
commences as of the Participant's Normal Retirement Date, a monthly amount equal
to the amount which makes such monthly retirement benefit actuarially equivalent
to the amount credited to the Participant's Cash Balance Account on the date as
of which such monthly retirement benefit is to commence.
5.2 LATE RETIREMENT. A Participant who continues to be an Employee
following the calendar month in which he or she first attains Normal Retirement
Age shall be entitled to a retirement benefit under the Plan (unless he or she
dies before the commencement date as of which the benefit begins to be paid).
Unless otherwise provided under or pursuant to the other provisions of the Plan,
such retirement benefit shall: (1) commence as of the earlier of (A) the first
day of the first month which begins on or after the date the Participant ceases
to be an Employee or (B) the Participant's Required Commencement Date; (2) be
paid in the form of a Single Life Annuity; and (3) provide, if the retirement
benefit would be paid in the form of a Single Life Annuity which commences as of
the earlier of the dates set forth in clause (1) above, a monthly amount equal
to the amount which makes such monthly retirement benefit actuarially equivalent
to the amount credited to the Participant's Cash Balance Account on the date as
of which such monthly retirement benefit is to commence.
5.3 DISABILITY RETIREMENT.
5.3.1 A Participant who ceases to be an Employee by reason of
his or her total disability prior to his or her Normal Retirement Date shall be
entitled to a retirement benefit under the Plan (unless he or she dies, or
ceases to be totally disabled under the provisions of Section 5.3.4 below,
before the date as of which the benefit begins to be paid). Unless otherwise
provided under or pursuant to the other provisions of the Plan, such retirement
benefit shall: (1) commence as of the Participant's Normal Retirement Date; (2)
be paid in the form of a Single Life Annuity; and (3) provide, if the retirement
benefit would be paid in the form of a Single Life Annuity which commences as of
the Participant's Normal Retirement Date, a monthly amount equal to the amount
which makes such monthly retirement benefit actuarially equivalent to the amount
credited to the Participant's Cash Balance Account on the date as of which such
monthly retirement benefit is to commence.
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<PAGE> 25
5.3.2 For purposes of the Plan, "total disability" or "totally
disabled" means or refers, with respect to any Participant, to the Participant's
permanent and continuous mental or physical inability by reason of injury,
disease, or condition to meet the requirements of any employment for wage or
profit. A Participant shall be deemed to be disabled for purposes of this Plan
only when both of the following two requirements are met. First, a licensed
physician or psychiatrist must provide to the Plan a written opinion that the
Participant is totally disabled as that term is defined above. Second, the
Participant must be eligible for and receive total disability benefits under
Section 223 of the Federal Social Security Act, as amended, or any similar or
subsequent section or act of like intent or purpose (unless the Committee
determines, based on the written opinion of a licensed physician or psychiatrist
provided the Committee pursuant to the immediately preceding sentence, that the
Participant would be likely to qualify for such total disability benefits if he
or she survived a sufficient amount of time to be processed for and receive such
benefits but that he or she is also likely to die before he or she would
otherwise be determined by the Social Security Administration or other
applicable government agency to qualify for or to receive such benefits).
5.3.3 Further, and notwithstanding any other provision of the
Plan, a Participant who becomes totally disabled for purposes of this Plan while
an Employee shall be credited with a year of Vesting Service (as otherwise
defined in Section 2.1.7 above) for each full or partial Plan Year included in
the period from the date he or she becomes totally disabled and prior to the
earlier of the date as of which his or her retirement benefit under the Plan
commences (under Section 5.3.1 above or, if earlier, under Section 5.5 below) or
his or her Normal Retirement Date; except that the Participant shall not be
credited with a year of Vesting Service for a Plan Year under this Section 5.3.3
if he or she is credited with a year of Vesting Service for such Plan Year under
the other provisions of this Plan. The Participant shall also be deemed to
receive Compensation during each year of Vesting Service credited to the
Participant under this Section 5.3.3 equal to the Compensation he or she
received in the last full Plan Year which ended on or prior to the date he or
she became totally disabled.
5.3.4 If a Participant who becomes totally disabled while an
Employee has his or her Social Security disability benefit terminate (because he
or she is no longer deemed by the Social Security Administration to be totally
disabled) prior to the date as of which a disability retirement benefit under
this Section 5.4 begins to be paid, then such Participant shall cease at that
time to be considered totally disabled, shall cease at that time to accrue any
additional years of Vesting Service under Section 5.3.3 above, and, solely for
purposes of determining whether he or she is then entitled to a retirement
benefit under Section 5.4 below, shall be considered to have ceased to be an
Employee (for a reason other than total disability) at such time.
5.4 VESTED RETIREMENT.
5.4.1 A Participant who ceases to be an Employee (other than
by reason of his or her death) prior to becoming eligible for any other type of
retirement under the foregoing provisions of this Section 5, but who is eligible
to receive a vested retirement benefit pursuant to the provisions of Section
5.4.2 below, shall be entitled to a retirement benefit under the Plan
5-2
<PAGE> 26
(unless he or she dies before the date as of which the benefit begins to be
paid). Unless otherwise provided under or pursuant to the other provisions of
the Plan, such retirement benefit shall: (1) commence as of the Participant's
Normal Retirement Date; (2) be paid in the form of a Single Life Annuity; and
(3) provide, if the retirement benefit would be paid in the form of a Single
Life Annuity which commences as of the Participant's Normal Retirement Date, a
monthly amount equal to the amount which makes such monthly retirement benefit
actuarially equivalent to the amount credited to the Participant's Cash Balance
Account on the date as of which such monthly retirement benefit is to commence.
5.4.2 A Participant shall be deemed eligible to receive a
vested retirement benefit under this Section 5.4 if he or she ceases to be an
Employee (other than by reason of his or her death) either: (1) after completing
at least five years of Vesting Service; or (2) by reason of the closing or sale
(not including the merger into any Employer or Affiliated Employer or into any
division or facility of an Employer or Affiliated Employer) of any Employer (or
any division or facility of an Employer) while he or she is employed by such
Employer (or division or facility of such Employer).
5.5 PREMATURE BENEFIT PAYMENTS.
5.5.1 Subject to the other provisions of this Plan (including
but not limited to the provisions of Sections 5.6.1, 5.6.2, 6.2.4, and 6.2.5
below), a Participant who is eligible for a disability retirement benefit under
Section 5.3 above or a Participant who is eligible for a vested retirement
benefit under Section 5.4 above may (in either such case) elect in writing to a
Plan representative (on a form prepared or approved by the Committee) to begin
his or her retirement benefit as of the first day of any calendar month which
occurs (1) prior to the calendar month in which he or she attains his or her
Normal Retirement Date and (2) after the calendar month in which he or she
ceases to be employed by the Employer.
5.5.2 If a Participant elects to begin his or her retirement
benefit prior to his or her Normal Retirement Date under Section 5.5.1 above,
then the date as of which the Participant elects to begin such retirement
benefit shall be referred to herein as his or her "earlier commencement date."
For purposes of this Plan and notwithstanding any other provisions contained in
Section 5.3 or 5.4 above, if a Participant's retirement benefit were to begin as
of an earlier commencement date (by reason of the Participant's election under
this Section 5.5) and to be paid in the form of a Single Life Annuity, then the
monthly amount of such Single Life Annuity shall be equal to the amount which
makes such monthly retirement benefit actuarially equivalent to the amount
credited to the Participant's Cash Balance Account on the date as of which such
monthly retirement benefit is to commence.
5.6 LATE BENEFIT ELECTION.
5.6.1 Notwithstanding the foregoing provisions of this Section
5 but subject to the provisions of Section 5.6.2 below, the date as of which any
retirement benefit to which a Participant is entitled under this Plan is to
commence shall be deferred to the extent necessary
5-3
<PAGE> 27
so that it is not prior to the first day of the first calendar month which
begins on or after the date the latest written explanation described in Section
6.2.4 above which precedes the payment of the Participant's benefit was provided
to the Participant; except that in no event shall such retirement benefit
commence later than as of the Participant's Required Commencement Date.
5.6.2 For purposes of the Plan, if a Participant's retirement
benefit were to begin as of any date after the date as of which such benefit
would otherwise commence under the provisions of this Section 5 which precede
this Section 5.6 (by reason of the provisions of this Section 5.6) and to be
paid in the form of a Single Life Annuity, then the monthly amount of such
Single Life Annuity shall be equal to the amount which makes such monthly
retirement benefit actuarially equivalent to the Participant's Cash Balance
Account on the date as of which such monthly retirement benefit is to commence.
5.7 REQUIRED COMMENCEMENT OF BENEFITS UNDER SECTION 401(A)(14) OF CODE.
Pursuant to Section 401(a)(14) of the Code and Treas. Reg. Section
1.401(a)-14(a), any retirement benefit which is to be paid to a Participant
under the other provisions of the Plan must begin to be paid to the Participant
(provided he or she survives to the date as of which his or her benefit
commences to be paid) as of a date which is not later than the 60th day after
the close of the Plan Year in which the latest of the following events occurs:
(1) the attainment by the Participant of age 65 (which is his or her earliest
possible Normal Retirement Age under the Plan); (2) the tenth annual anniversary
of the date on which the Participant commenced his or her participation in the
Plan; or (3) the termination of the Participant's service with the Employer and
the Affiliated Employers. Notwithstanding the preceding sentence, the Plan may
require, as an administrative convenience, that the Participant properly
complete and file a claim for his or her benefit before the payment of the
benefit commences. Also, by reason of Section 401(a)(9) of the Code, in no event
will the Participant's retirement benefit commence later than as of his or her
Required Commencement Date.
5.8 OTHER CESSATION OF EMPLOYMENT. Except as otherwise provided in
Section 7 below, if a Participant dies prior to the date as of which any
retirement benefit to which he or she is entitled under any of the provisions of
this Plan is to begin to be paid, or if the Participant ceases to be an Employee
for any reason at a time when he or she is not entitled to a retirement benefit
under any provision of the Plan, neither he or she nor any person claiming by or
through him or her shall be entitled to receive a benefit under the Plan. In
such case, his or her prior interest under this Plan (including his or her prior
interest in his or her Accrued Benefit) shall be forfeited pursuant to the
provisions of Section 9.8 below.
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<PAGE> 28
SECTION 6
---------
FORM OF RETIREMENT BENEFITS
---------------------------
6.1 NORMAL FORM OF BENEFIT.
6.1.1 (a) Subject to the other terms of the Plan, if a
Participant is not married as of the date a retirement benefit under the Plan
commences to be paid to him or her, such retirement benefit shall be paid in the
form of a Single Life Annuity.
(b) For purposes of the Plan, a "Single Life
Annuity" means an Annuity payable as follows. Monthly payments are made to a
Participant for his or her life and end with the last monthly payment due for
the month in which the Participant dies.
6.1.2 (a) Subject to the other terms of the Plan, if a
Participant is married as of the date a retirement benefit under the Plan
commences to be paid to him or her, such retirement benefit shall be paid in the
form of a Qualified Joint and Survivor Annuity. In such case, the monthly amount
payable to the Participant during his or her life under such Qualified Joint and
Survivor Annuity shall be equal to the monthly amount which makes such Qualified
Joint and Survivor Annuity actuarially equivalent to the Participant's
retirement benefit if it was paid in a Single Life Annuity form beginning as of
the same commencement date as applies to such Qualified Joint and Survivor
Annuity.
(b) For purposes of the Plan, a "Qualified Joint
and Survivor Annuity" means an Annuity payable as follows. Monthly payments are
made to a Participant for his or her life, and after his or her death monthly
survivor payments continue to the person who is the Spouse of the Participant on
the date as of which the Annuity commences to be paid to the Participant
(provided such Spouse survives the Participant) for such Spouse's life. Each
monthly survivor payment to such person is equal in amount to 50% (or, if the
Participant so elects in writing to a Plan representative within the 90 day
period ending on the date as of which the retirement benefit commences, 66-2/3%,
75%, or 100%) of the monthly payment amount made during the life of the
Participant under the same Annuity.
6.1.3 The date any retirement benefit, if paid in the normal
form under this Section 6.1, shall commence is determined under the provisions
of Section 5 above.
6.2 ELECTION OUT OF NORMAL FORM AND OF OPTIONAL FORM.
6.2.1 A Participant entitled to a retirement benefit under the
Plan may elect to waive the normal form in which such benefit shall otherwise be
paid under Section 6.1 above and instead to have such benefit paid in any
specific optional form permitted him or her under Section 6.3 below, provided
such election is made in writing and filed with a Plan representative (on a form
prepared or approved by the Committee) by the end of the 90 day period ending on
6-1
<PAGE> 29
the date as of which his or her retirement benefit commences to be paid, except
that: (1) if the written explanation described in Section 6.2.4 below is
provided to the Participant less than 30 days before the date as of his or her
retirement benefit is to commence to be paid under the other provisions of the
Plan, the period in which the Participant may elect to waive the normal form in
which his or her retirement benefit shall otherwise be paid and instead to have
such benefit paid in an optional form shall, subject to the provisions of clause
(2) below, not end before the 30th day after the date such written explanation
is provided to the Participant; and (2) if the conditions of Section 6.2.5 below
are met, the Participant may elect to waive the 30-day requirement set forth in
clause (1) above. In addition, for a Participant who is married on the date as
of which his or her retirement benefit commences, his or her election of any
optional form shall not be effective unless the person who is the Spouse of the
Participant consents, in a writing filed with a Plan representative, to such
election within the same period in which the Participant has to make his or her
election, with the Spouse's consent acknowledging the effect of such consent and
being witnessed by a notary public. Any such Spouse's consent shall be
irrevocable once received by a Plan representative.
6.2.2 Notwithstanding the provisions of Section 6.2.1 above, a
consent of a Spouse shall not be required for purposes of Section 6.2.1 above if
it is established to the satisfaction of a Plan representative that the
otherwise required consent cannot be obtained because no Spouse exists, because
the Spouse cannot reasonably be located, or because of such other circumstances
as the Secretary of the Treasury or his or her delegate allows in regulations.
6.2.3 The Participant may amend or revoke his or her election
of a form of payment different than the normal form applicable to him or her
under Section 6.1 above by written notice filed with a Plan representative at
any time before the date as of which his or her election of the optional form
had to have been made; provided that if the Participant attempts upon such an
amendment to elect another form of payment different from the normal form
applicable to him or her, the conditions of Sections 6.2.1 and 6.2.2 above must
be satisfied as if such amendment were a new election.
6.2.4 The Committee will provide each Participant who is
entitled to a retirement benefit under the Plan a written explanation of (1) the
terms and conditions of the normal form, (2) the Participant's rights to make
and the effect of an election out of the normal form, (3) the requirement, if
applicable, that the Participant's Spouse consent to any such election out, and
(4) the right of the Participant to revoke such an election out at any time
before the date as of which his or her retirement benefit commences to be paid
to him or her. Such written explanation shall be provided to the Participant:
(1) initially within a reasonable administrative period after the Participant,
if he or she had been provided such written explanation, first could elect to
commence the payment of his or her retirement benefit under the other provisions
of the Plan; and (2) also, if appropriate, within a reasonable administrative
period after the Participant notifies at any later time the Committee that he or
she desires to commence payment of his or her benefit (if he or she is then
eligible to commence such benefit) and/or within a reasonable administrative
period prior to the latest date that such benefit must commence under the other
provisions of the Plan. Except as is otherwise provided in the Plan,
6-2
<PAGE> 30
the date as of which the Participant's retirement benefit under the Plan may
commence may not be more than 90 days after the date such written explanation is
provided to the Participant. For purposes of this Plan, the Committee shall be
deemed to have provided the Participant with such written explanation on the
date such written explanation either is personally delivered or faxed to the
Participant or is deposited in the mail (first class or certified mail, postage
prepaid) by the Committee or a Plan representative.
6.2.5 Notwithstanding the provisions of Section 6.2.1 above,
the election of the Participant to waive the normal form in which his or her
retirement benefit shall otherwise be paid and instead to have such benefit paid
in an optional form may be made and put into effect less than 30 days after the
written explanation described in Section 6.2.4 above is provided to the
Participant, provided all of the following requirements are met: (1) the
Committee or a Plan representative provides written information to the
Participant clearly indicating that he or she has a right to at least 30 days to
consider whether to waive the normal form in which his or her retirement benefit
will otherwise be paid and consent to a different optional form of benefit; (2)
the Participant affirmatively elects the payment of his or her benefit in any
form no more than 90 days after the written explanation described in Section
6.2.4 above is provided to him or her; (3) the Participant is permitted to
revoke an affirmative election he or she makes for payment of his or her benefit
in any form at least until the later of the date as of which the Participant's
retirement benefit under the Plan will commence or the expiration of the
seven-day period that begins on the day after the written explanation described
in Section 6.2.4 above is provided to the Participant; and (4) the actual
distribution of the retirement benefit in accordance with the Participant's
affirmative election does not begin before the expiration of the seven-day
period that begins on the day after the written explanation described in Section
6.2.4 above is provided to the Participant.
6.3 OPTIONAL BENEFIT FORMS.
6.3.1 A Participant entitled to a retirement benefit under the
Plan may elect to receive such benefit, in lieu of the normal form of benefit
otherwise payable under Section 6.1 above and provided all of the election
provisions of Section 6.2 above are met, in any of the following optional forms:
(1) a Single Life Annuity (which is an optional form only for a Participant who
is married as of the date a retirement benefit commences to be paid to him or
her); (2) a Life and Five Year Certain Annuity; (3) a Life and Ten Year Certain
Annuity; (4) a Life and Twenty Year Certain Annuity; (5) a Joint and Survivor
Annuity; (6) a Social Security Leveling Annuity; or (7) a lump sum cash payment.
6.3.2 If a Participant's retirement benefit is to be paid in
an optional Annuity form, the date as of which such retirement benefit shall
commence shall be the same as the date determined under Section 5 above to be
the date as of which such benefit shall commence. If a Participant's retirement
benefit is to be paid in an optional lump sum payment form, the date as of which
such retirement benefit shall be paid shall be the later of the date determined
under Section 5 above to be the date as of which the Participant's benefit shall
commence or the first day of the month in which the lump sum payment is made.
6-3
<PAGE> 31
6.3.3 Except as may otherwise be provided in the Plan, if an
optional Annuity form of benefit (other than a Single Life Annuity) is elected
by any Participant for his or her retirement benefit under the Plan, then the
monthly amount of such optional form shall be equal to the amount which makes
such optional Annuity form actuarially equivalent to the Participant's
retirement benefit if it was paid in a Single Life Annuity form beginning as of
the same date as of which the optional Annuity form begins to be paid. Except as
may otherwise be provided in the Plan, if an optional lump sum payment form of
benefit is elected by any Participant for his or her retirement benefit under
the Plan, then the lump sum amount of such optional form shall be equal to the
amount credited to the Participant's Cash Balance Account on the date as of
which such optional lump sum payment form is to be paid.
6.3.4 Notwithstanding any other provision of this Plan to the
contrary, any payment of a retirement benefit in an optional form must meet and
be in accordance with the distribution requirements of Section 401(a)(9) of the
Code, including the incidental death benefit requirements which are referred to
in such section, and such section is hereby incorporated by reference into this
Plan.
6.3.5 For purposes of the Plan, the following terms related to
optional benefit forms shall have the meanings hereinafter set forth unless the
context otherwise requires:
(a) A "Life and Five Year Certain Annuity" means an
Annuity payable as follows. Monthly payments are made to a Participant for his
or her life, and such payments end with the last monthly payment due for the
month in which the Participant dies if at least 60 monthly payments have been
made on behalf of the Participant. If not, the monthly payments continue after
the Participant's death to a contingent beneficiary of the Participant until 60
monthly payments have been made, when aggregated, to the Participant and the
Participant's contingent beneficiary under this Annuity. The Participant shall
name the contingent beneficiary under this Annuity in his or her election of
this form.
(b) A "Life and Ten Year Certain Annuity" has the
same meaning and is subject to the same rules as apply to a Life and Five Year
Certain Annuity under paragraph (a) above, except that each reference to "60"
contained in paragraph (a) above shall be read for this purpose to be a
reference to "120."
(c) A "Life and Twenty Year Certain Annuity" has
the same meaning and is subject to the same rules as apply to a Life and Five
Year Certain Annuity under paragraph (a) above, except that each reference to
"60" contained in paragraph (a) above shall be read for this purpose to be a
reference to "240."
(d) A Joint and Survivor Annuity" means an Annuity
payable as follows. Monthly payments are made to a Participant for his or her
life, and after his or her death monthly survivor payments continue to a
contingent beneficiary of the Participant (provided such person survives the
Participant) for the contingent beneficiary's life. Each monthly survivor
payment to the contingent beneficiary shall be equal to 50%, 66-2/3%, 75%,
6-4
<PAGE> 32
or 100% (as the Participant chooses in his or her election of this form) of the
monthly payment amount made during the life of the Participant under the same
Annuity. The Participant shall name the contingent beneficiary in his or her
election of this form, who may be any person other than the Participant's
Spouse.
(e) A "Social Security Leveling Annuity" means an
Annuity payable as follows. Monthly payments must begin being paid to the
Participant prior to the first month (for purposes of this paragraph (e), the
"first Social Security month") in which the Participant would be entitled (upon
proper application) to receive on a reduced or unreduced basis his or her
primary old-age Federal Social Security Act benefit (which first Social Security
month is generally the month in which the Participant attains age 62). Further,
the monthly payments under such Annuity are made to the Participant in a manner
that (1) treats the monthly payments under such Annuity and the monthly payments
of the Participant's primary old-age Federal Social Security Act benefit that
the Committee reasonably determines would be received by the Participant
beginning in his or her first Social Security month (if such Social Security
benefit would begin in such month) as if they were part of one combined Single
Life Annuity (for purposes of this paragraph (e), the "combined Annuity") and
(2) makes, to the maximum extent possible, the payment under the combined
Annuity for each month prior to the Participant's first Social Security month
equal to the payment under the combined Annuity for each month on or after the
Participant's first Social Security month. For purposes hereof, the Committee
shall determine the monthly payments of the Participant's primary old-age
Federal Social Security Act benefit that would be received by the Participant
beginning in his or her first Social Security month on the basis of the benefit
and wage base levels in effect under the Federal Social Security Act on the date
as of which the Annuity is to commence and on the basis of a compensation record
determined in accordance with the following rules:
(i) For each of the first calendar year in
which the Participant completed an Hour of Service and all prior calendar years,
the Participant shall be deemed to have wages for Federal Social Security Act
purposes equal to the result produced by discounting his or her Compensation for
the calendar year immediately following the first calendar year in which the
Participant completed an Hour of Service backwards to the applicable calendar
year, using for this purpose the actual change in the average wages as
determined by the Federal Social Security Administration;
(ii) For each of the calendar years
beginning with the calendar year immediately following the first calendar year
in which the Participant first completed an Hour of Service and ending with the
last full calendar year ending on or before the latest date on which he or she
completed an Hour of Service, the Participant shall be deemed to have wages for
Federal Social Security Act purposes equal to his or her Compensation for the
applicable calendar year; and
(iii) For the period which begins on the
first day of the first calendar year ending after the latest date on which he or
she completed an Hour of Service and ends on the date the Participant first
attains his or her Normal Retirement Age, the Participant
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<PAGE> 33
shall be deemed to have an annual rate of wages for Federal Social Security Act
purposes equal to the Participant's Compensation for the last full calendar year
ending on or before the latest date on which he or she completed an Hour of
Service.
6.4 AUTOMATIC LUMP SUM PAYMENT. Notwithstanding any other provision of
the Plan to the contrary, if any retirement benefit payable under the Plan to a
Participant has a present value of $3,500 or less as of the first date after the
Participant terminates employment with the Employer on which the Plan is
administratively able to distribute such benefit (or, if earlier, as of his
Required Commencement Date), and if such Participant has not previously started
to receive such retirement benefit, then such retirement benefit shall be
converted to and paid as a lump sum cash payment as of such date (with the
amount of such payment equal to such present value amount). Except as may
otherwise be provided in the Plan, the present value of a Participant's
retirement benefit as of any date shall be deemed to be equal to the amount
credited to the Participant's Cash Balance Account on such date.
6.5 MINIMUM BENEFITS.
6.5.1 Notwithstanding any other provision of the Plan to the
contrary, in determining the monthly amount, lump sum amount, or present value
of any retirement benefit under this Plan which is applicable to any Participant
who was a participant in one or more of the Prior Plans on December 31, 1996,
the following minimum benefit provisions shall apply:
(a) The monthly amount of such Participant's
retirement benefit under this Plan, if such retirement benefit is paid in the
form of a Single Life Annuity which commences as of such Participant's Normal
Retirement Date (or any later date), shall not in any event be less than the
monthly amount which would have applied to such retirement benefit under the
terms of the Prior Plans as in effect on December 31, 1996 (including such
plans' terms as to actuarial assumptions) if such monthly amount had been
determined without regard to any service of the Participant as an Employee after
such date (and, if such Participant was a participant in more than one Prior
Plan on December 31, 1996, if the retirement benefits provided under the Prior
Plans to such Participant were aggregated and considered as one benefit).
(b) Further, the monthly amount of such
Participant's retirement benefit under this Plan, if such retirement benefit is
paid in any Annuity form which commences as of any date (other than in the form
of a Single Life Annuity which commences as of such Participant's Normal
Retirement Date or any later date), shall not in any event, if both the form of
Annuity and the date as of which the Participant's retirement benefit under this
Plan commences had been permitted to be an Annuity form of benefit and a
retirement benefit's commencement date under the Prior Plans in which the
Participant was a participant on December 31, 1996, be less than the monthly
amount which would have applied to such retirement benefit under the terms of
the Prior Plans as in effect on December 31, 1996 (including such plans' terms
as to actuarial assumptions) if such monthly amount had been determined without
regard to any service of the Participant as an Employee after such date (and,
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<PAGE> 34
if the Participant was a participant in more than one Prior Plan on December 31,
1996, if the retirement benefits provided under the Prior Plans to the
Participant were aggregated and considered one benefit).
(c) In addition, the lump sum amount or present
value of such Participant's retirement benefit under this Plan, if such
retirement benefit is paid in the form of a lump sum cash payment as of any date
or if the present value of such benefit is being determined as of any date under
the Plan, shall not in any event be less than the amount or present value which
makes such benefit actuarially equivalent (as determined under the provisions of
Section 9.5 below) to the retirement benefit which, if determined to be payable
in the form of a Single Life Annuity which commences as of the later of such
Participant's Normal Retirement Date or the date as of which such lump sum
payment is made or such present value is determined, would have been applicable
to the Participant under the terms of the Prior Plans as in effect on December
31, 1996 if such benefit had been determined without regard to any service of
the Participant as an Employee after such date (and, if such Participant was a
participant in more than one Prior Plan on December 31, 1996, if the retirement
benefits provided under the Prior Plans to such Participant were aggregated and
considered one benefit).
6.5.2 Further, and also notwithstanding any other provision of
the Plan to the contrary, if (1) any Participant who was a participant (and was
continuing to accrue benefits) in one or more of the Prior Plans on December 31,
1996 ceases to be an Employee prior to January 1, 2002, (2) such Participant has
both attained age 55 and completed at least ten years of Vesting Service at the
time he or she ceases to be an Employee, (3) such Participant becomes entitled
to receive a retirement benefit under this Plan, and (4) such retirement benefit
is to be paid under the terms of this Plan in the form of any Annuity which was
also permitted as a benefit form under all of the Prior Plans in which he or she
was a participant on December 31, 1996 (other than and not including the form of
a Single Life Annuity) and which commences as of any date permitted to be a
retirement benefit's commencement date under all of such Prior Plans, then the
monthly amount of such retirement benefit shall not in any event be less than
the monthly amount which would have applied to such retirement benefit under the
terms of such Prior Plans as in effect on December 31, 1996 (including such
plans' terms as to actuarial assumptions) if the terms of such Prior Plans as in
effect on such date had continued to be in effect through the date the
Participant ceases to be an Employee (except that the Participant's compensation
for any period occurring after December 31, 1996 which is taken into account
under such Prior Plans' terms shall be determined under the provisions of
Section 1.10 above instead of such Prior Plans' terms which define
compensation).
6.6 EFFECT ON RETIREMENT BENEFIT OF REEMPLOYMENT PRIOR TO REQUIRED
COMMENCEMENT DATE.
6.6.1 (a) Subject to the other provisions of this Section 6.6,
if a Participant has his or her employment with the Employer terminate, thereby
becomes entitled to the distribution of a retirement benefit under the other
provisions of this Plan, and is later reemployed as an Employee prior to his
Required Commencement Date, then the distribution
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<PAGE> 35
of the retirement benefit which is payable by reason of such prior termination
of employment (1) shall not begin to be paid at all by reason of such prior
termination of employment if payment of it has not begun by the time the
Participant is reemployed as an Employee (and can be stopped from beginning by
the Committee, under reasonable administrative procedures of the Committee,
before any part of it begins to be paid) prior to the earlier of the
Participant's subsequent termination of employment or his or her Required
Commencement Date or (2) shall, if it otherwise has begun to be paid or been
paid in its entirety under the other provisions of the Plan prior to his or her
reemployment as an Employee or in any event is not stopped from beginning by the
Committee before any part of it begins to be paid prior to the earlier of the
Participant's subsequent termination of employment or his or her Required
Commencement Date, not be suspended (or adjusted in amount or form) merely by
reason of such reemployment. If such retirement benefit begins to be paid or is
paid in its entirety prior to the earlier of the Participant's subsequent
termination of employment or his or her Required Commencement Date and thus is
not suspended under the immediately preceding sentence, then, as of the earlier
of (1) the first day of the first calendar month which begins after the next
date after his or her reemployment that the Participant again terminates his or
her employment with the Employer or (2) his or her Required Commencement Date,
the Participant may also be entitled to an additional retirement benefit, to be
determined in accordance with paragraph (b) below, in addition to the prior
retirement benefit which he or she is then receiving or has received.
(b) If the Participant may be entitled to an
additional retirement benefit by reason of the provisions of paragraph (a)
above, then the form and commencement date of his or her additional retirement
benefit shall be determined under the provisions of Section 5 above and the
foregoing provisions of this Section 6 as if no prior retirement benefit had
begun being paid to him or her. Further, the monthly amount of the Participant's
additional retirement benefit (if such benefit is paid in the form of any type
of Annuity) or the lump sum amount of the Participant's additional retirement
benefit (if such benefit is paid in the form of a lump sum cash payment) shall
be equal to the monthly amount or lump sum amount (as applicable) of the
retirement benefit that would be applicable to the Participant under the Plan
(1) if it was payable in the same form as the Participant's additional
retirement benefit is to be paid, (2) if it began to be paid or was paid in its
entirety as of the commencement date which is determined pursuant to the
immediately preceding sentence, and (3) if it was determined under the other
provisions of the Plan as of such commencement date but as if the monthly amount
or lump sum amount (as applicable) of such additional retirement benefit was
equal to what such monthly amount or lump sum amount (as applicable) would be as
of such commencement date under the Plan if any service for which a benefit had
been calculated in determining the monthly amount or lump sum amount (as
applicable) of the Participant's prior retirement benefit were disregarded.
6.6.2 (a) Notwithstanding the provisions of Section 6.6.1
above, if a Participant has his or her employment with the Employer terminate,
starts to receive a retirement benefit under the Plan in the form of any type of
Annuity by reason of such termination of employment, and is reemployed as an
Employee prior to his or her Required Commencement Date, the Participant may
elect in a writing to a Plan representative to suspend the distribution
6-8
<PAGE> 36
of such retirement benefit until his or her subsequent termination of employment
with the Employer (or, if earlier, his or her Required Commencement Date). In
such case, the suspension will begin with the payment otherwise due under the
form in which the prior distribution is then being made which next follows the
receipt by the Plan representative of such election.
(b) If the payment of a Participant's retirement
benefit is suspended pursuant to the provisions of paragraph (a) above, then, as
of the earlier of (1) the first day of the first calendar month which begins
after the next date after his or her reemployment that the Participant again
terminates his or her employment with the Employer or (2) his or her Required
Commencement Date, the Participant's suspended retirement benefit shall be
redetermined in accordance with the following provisions of this paragraph (b).
Such redetermined retirement benefit shall be paid in the same Annuity form as
the Participant's retirement benefit was being paid immediately prior to the
earlier suspension and shall commence as of the redetermination date. Further,
the monthly amount of such redetermined retirement benefit shall be equal to the
monthly amount of the retirement benefit that would be applicable to the
Participant under the Plan (1) if it was payable in the same Annuity form as the
Participant's retirement benefit was being paid immediately prior to the earlier
suspension of such benefit, (2) if it began to be paid as of the redetermination
date (and as if no payments of the retirement benefit had been made to the
Participant prior to the redetermination date), and (3) if it was determined by
multiplying subparagraph (i) by subparagraph (ii), where subparagraphs (i) and
(ii) are as follows:
(i) equals the monthly amount of the
retirement benefit that would be applicable to the Participant if clauses (1)
and (2) immediately above applied but it was determined under the other
provisions of the Plan as of the redetermination date and as if the Participant
had permanently ceased to be an Employee on his or her prior termination of
employment with the Employer; and
(ii) equals a fraction (1) having a
numerator equal to the monthly amount of the Participant's retirement benefit as
in effect immediately prior to the earlier suspension of such benefit and (2)
having a denominator equal to the monthly amount of the retirement benefit that
would be applicable to the Participant under the Plan (x) if it was payable in
the same Annuity form as the Participant's retirement benefit was being paid
immediately prior to the earlier suspension of such benefit, (2) if it began to
be paid as of the date as of which such earlier suspension went into effect, and
(3) if it was determined under the other provisions of the Plan as of the date
as of which such earlier suspension went into effect and as if the Participant
had permanently ceased to be an Employee on his or her prior termination of
employment with the Employer.
(c) In addition, if the payment of a Participant's
retirement benefit is suspended pursuant to the provisions of paragraph (a)
above, then, as of the earlier of (1) the first day of the first calendar month
which begins after the next date after his or her reemployment that the
Participant again terminates his or her employment with the Employer
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<PAGE> 37
or (2) his or her Required Commencement Date, the Participant may also be
entitled to an additional retirement benefit, to be determined in accordance
with the following provisions of this paragraph (c), in addition to the
redetermined retirement benefit which he or she is entitled to receive under
paragraph (b) above. If the Participant may be entitled to an additional
retirement benefit by reason of the provisions of this paragraph (c), then the
form and commencement date of his or her additional retirement benefit shall be
determined under the provisions of Section 5 above and the foregoing provisions
of this Section 6 as if no prior retirement benefit had begun being paid to him
or her. Further, the monthly amount of the Participant's additional retirement
benefit (if such benefit is paid in the form of any type of Annuity) or the lump
sum amount of the Participant's additional retirement benefit (if such benefit
is paid in the form of a lump sum cash payment) shall be equal to the monthly
amount or lump sum amount (as applicable) of the retirement benefit that would
be applicable to the Participant under the Plan (1) if it was payable in the
same form as the Participant's additional retirement benefit is to be paid, (2)
if it began to be paid or was paid in its entirety as of the commencement date
which is determined pursuant to the immediately preceding sentence, and (3) if
it was determined under the other provisions of the Plan as of such commencement
date but as if the monthly amount or lump sum amount (as applicable) of such
additional retirement benefit was equal to what such monthly amount or lump sum
amount (as applicable) would be as of such commencement date under the Plan if
any service for which a benefit had been calculated in determining the monthly
amount of the Participant's prior retirement benefit were disregarded.
6.7 ADDITIONAL ACCRUALS AFTER REQUIRED COMMENCEMENT DATE.
6.7.1 Subject to the other provisions of this Section 6.7, if
a Participant continues to be employed or is reemployed as an Employee after his
or her Required Commencement Date, any prior distribution of the Participant's
retirement benefit under the Plan shall not be suspended or adjusted in amount
or form merely by reason of such continued employment or reemployment. As of the
first day of any calendar month which occurs in the first Plan Year which begins
after his or her Required Commencement Date and as of the first day of any
calendar month which occurs in each subsequent Plan Year (the specific month in
any such Plan Year to be chosen by the Committee on a nondiscriminatory basis),
and as of any other date chosen by the Committee on a nondiscriminatory basis,
the Participant may also be entitled to an additional retirement benefit, to be
determined in accordance with Section 6.7.2 below, in addition to the prior
retirement benefit which he or she is then receiving or has received.
6.7.2 If the Participant may be entitled to an additional
retirement benefit by reason of the provisions of Section 6.7.1 above, then the
form and commencement date of his or her additional retirement benefit shall be
determined under the provisions of Section 5 above and the foregoing provisions
of this Section 6 as if no prior retirement benefit had begun being paid to him
or her. Further, the monthly amount of the Participant's additional retirement
benefit (if such benefit is paid in the form of any type of Annuity) or the lump
sum amount of the Participant's additional retirement benefit (if such benefit
is paid in the form of a lump sum
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<PAGE> 38
cash payment) shall be equal to the monthly amount or lump sum amount (as
applicable) of the retirement benefit that would be applicable to the
Participant under the Plan (1) if it was payable in the same form as the
Participant's additional retirement benefit is to be paid, (2) if it began to be
paid or was paid in its entirety as of the commencement date which is determined
pursuant to the immediately preceding sentence, and (3) if it was determined
under the other provisions of the Plan as of such commencement date but as if
the monthly amount or lump sum amount (as applicable) of such additional
retirement benefit was equal to what such monthly amount or lump sum amount (as
applicable) would be as of such commencement date under the Plan if any service
for which a benefit had been calculated in determining the monthly amount or
lump sum amount (as applicable) of the Participant's prior retirement benefit
were disregarded.
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<PAGE> 39
SECTION 7
---------
PRE-PENSION DEATH BENEFITS
--------------------------
7.1 ELIGIBILITY FOR PRE-PENSION DEATH BENEFIT.
7.1.1 A death benefit, called herein the "Pre-Pension Death
Benefit," shall be paid to the Beneficiary of a Participant who (1) dies while
still an Employee (and prior to any retirement benefit beginning to be paid to
him or her under the Plan) and (2) would have been entitled to a retirement
benefit under Section 5.1, 5.2, or 5.4 above if he or she had not died but had
ceased to be an Employee on the date of his or her death.
7.1.2 In addition, a Pre-Pension Death Benefit shall also be
paid to the Beneficiary of a Participant who dies after terminating employment
as an Employee when he or she is entitled to a retirement benefit under Section
5.1, 5.2, 5.3, or 5.4 above but prior to the date as of which the retirement
benefit to which he or she is entitled begins to be paid to him or her.
7.1.3 Except as may be provided in Sections 7.1.1 and 7.1.2
above, no Pre-Pension Death Benefit (or any other death benefit) is payable
under the Plan with respect to a Participant who dies prior to the date he or
she would be entitled to any retirement benefit if he or she terminated
employment as an Employee immediately prior to such death or who dies prior to
the date as of which any retirement benefit to which he or she has become
entitled to under the Plan begins to be paid to him or her.
7.2 BENEFICIARY. For purposes of this Section 7, the "Beneficiary" of
any Participant shall mean the person who is the Participant's Spouse at the
time of the Participant's death; except that, if it is established to the
satisfaction of a Plan representative that the Participant is not survived by a
Spouse or such Spouse cannot reasonably be located, the Participant's
"Beneficiary" shall be deemed to be the person or trust named by the Participant
as his or her beneficiary for purposes of the Plan's Pre-Pension Death Benefit
in a writing or form which is filed with the Committee prior to the
Participant's death; and except that, if the Committee determines that the
Participant is not survived by a Spouse or other properly designated beneficiary
who can reasonably be located, the Participant's "Beneficiary" shall be deemed
to be the Participant's estate.
7.3 RULES AS TO PRE-PENSION DEATH BENEFIT IF BENEFICIARY IS
PARTICIPANT'S SPOUSE. If a Participant's Beneficiary becomes entitled to a
Pre-Pension Death Benefit under this Section 7 and such Beneficiary is the
Participant's surviving Spouse, then the form, commencement date, and amount of
such death benefit shall be determined in accordance with the following
provisions:
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<PAGE> 40
7.3.1 (a) Except as provided in Sections 7.3.2 and 7.3.3
below, such death benefit shall be a monthly benefit which commences as of the
day which would have been the Participant's Normal Retirement Date had he or she
survived (or, if such Participant dies after his or her Normal Retirement Date,
the first day of the first calendar month which begins on or after the date of
such Participant's death). If such Participant dies before his or her Normal
Retirement Date and if the Participant's surviving Spouse so requests by written
notice to a Plan representative, however, such monthly death benefit may
commence to be paid as of the first day of any calendar month which begins prior
to the day which would have been such Participant's Normal Retirement Date had
he or she survived, but not before the first day of the first calendar month
which begins after such written notice is filed with a Plan representative.
(b) Further, such death benefit shall be payable
for the life of the Participant's surviving Spouse, ending with the last monthly
payment due for the month in which the Spouse dies.
(c) In addition, the monthly amount of such death
benefit shall be an amount which makes such death benefit actuarially equivalent
to the monthly retirement benefit that would have been payable to the
Participant under the terms of this Plan if (1) the Participant, if he or she
had not yet terminated employment with the Employer prior to his or her death,
had terminated such employment on the date of his or her death and (2) the
Participant had survived to the date as of which such death benefit commences
and began receiving as of such date his or her retirement benefit in the form of
a Single Life Annuity.
7.3.2 Notwithstanding the foregoing, in lieu of the form in
which such death benefit is otherwise payable under Section 7.3.1 above, the
Participant's surviving Spouse may elect to receive such death benefit in the
form of a lump sum cash payment. Such lump sum payment shall be made as of the
latest of the first day of the first calendar month which begins on or after the
date of the Participant's death, the first day of the first calendar month which
begins on or after the date the Spouse files with an applicable Plan
representative the election for the lump sum cash payment form, or the first day
of the calendar month in which the lump sum payment is made. Further, the amount
of such lump sum payment shall be equal to the lump sum amount that would have
been payable to the Participant under the terms of this Plan if (1) the
Participant, if he or she had not yet terminated employment with the Employer
prior to his or her death, had terminated such employment on the date of his or
her death and (2) the Participant had survived to the date as of which such
death benefit is paid and began receiving as of such date his or her retirement
benefit in the form of a lump sum cash payment.
7.3.3 Further, notwithstanding any other provision of this
Section 7.3 to the contrary, any death benefit payable under this Section 7.3 to
a Participant's surviving Spouse which has a present value of $3,500 or less as
of the first day of the first calendar month both which begins on or after the
date of the Participant's death and during which the Plan can administratively
determine and process the payment of the death benefit to the Spouse shall be
converted to and paid as a lump sum cash payment as of such date (with the
amount of such payment equal to such present value amount). For purposes hereof,
the present value of a death
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<PAGE> 41
benefit payable under this Section 7.3 to a Participant's surviving Spouse as of
any date shall be equal to the lump sum amount that would have been payable to
the Participant under the terms of this Plan if (1) the Participant, if he or
she had not yet terminated employment with the Employer prior to his or her
death, had terminated such employment on the date of his or her death and (2)
the Participant had survived to the date as of which such death benefit is paid
and began receiving as of such date his or her retirement benefit in the form of
a lump sum cash payment.
7.4 RULES AS TO PRE-PENSION DEATH BENEFIT IF BENEFICIARY IS NOT
PARTICIPANT'S SPOUSE. If a Participant's Beneficiary becomes entitled to a
Pre-Pension Death Benefit under this Section 7 and such Beneficiary is not the
Participant's surviving Spouse, then such death benefit shall be paid in the
form of a lump sum cash payment. Such lump sum payment shall be made as of the
first day of the first calendar month both which begins on or after the date of
the Participant's death and during which the Plan can administratively determine
and process the payment of the death benefit to the Beneficiary. Further, the
amount of such lump sum payment shall be equal to the lump sum amount that would
have been payable to the Participant under the terms of this Plan if (1) the
Participant, if he or she had not yet terminated employment with the Employer
prior to his or her death, had terminated such employment on the date of his or
her death and (2) the Participant had survived to the date as of which such
death benefit is paid and began receiving as of such date his or her retirement
benefit in the form of a lump sum cash payment.
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<PAGE> 42
SECTION 8
---------
MAXIMUM RETIREMENT BENEFIT LIMITATIONS
--------------------------------------
8.1 MAXIMUM PLAN BENEFIT -- SEPARATE LIMITATION AS TO THIS PLAN.
8.1.1 GENERAL RULES. Subject to the other provisions of this
Section 8.1 but notwithstanding any other provision of this Plan to the
contrary, in no event shall the annual amount of a Participant's retirement
benefit under this Plan exceed the lesser of:
(a) $90,000, multiplied by the adjustment factor;
or
(b) 100% of the Participant's average annual
compensation received during the period of the three consecutive calendar years
which produce the highest dollar result.
8.1.2 NECESSARY TERMS. For purposes of the rules set forth in
this Section 8.1, the following terms shall apply:
(a) The "adjustment factor" shall mean the cost of
living adjustment factor prescribed by the Secretary of the Treasury or his or
her delegate under Code Section 415(d) for limitation years beginning after
December 31, 1987, applied to such items and in such manner as the Secretary or
his or her delegate shall prescribe;
(b) A Participant's "compensation" shall, for
purposes of the restrictions of this Section 8.1, refer to his or her
Compensation as defined in Section 1.10 above; except that, for purposes of this
Section 8, paragraph (b) of Section 1.10 above shall not apply and, for any
limitation year which begins prior to January 1, 1998, paragraph (c) of Section
1.10 above shall also not apply.
(c) The "limitation year" for purposes of the
restrictions under this Section 8.1 shall be the Plan Year; and
(d) An "annual benefit" means a benefit payable in
the form of a Single Life Annuity.
8.1.3 ADJUSTMENT IF FORM OF BENEFIT IS OTHER THAN SINGLE LIFE
ANNUITY. If a Participant's retirement benefit is paid in any form other than a
Single Life Annuity, the determination as to whether the limitations set forth
in this Section 8.1 are satisfied shall be made, in accordance with regulations
prescribed by the Secretary of the Treasury or his or her delegate, by adjusting
the retirement benefit (for this purpose only) so that it is equivalent to the
retirement benefit if it were payable in the form of a Single Life Annuity. For
purposes of this
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<PAGE> 43
Section 8.1.3, however, the portion of any retirement benefit which constitutes
a Qualified Joint and Survivor Annuity shall not be taken into account.
8.1.4 ADJUSTMENT IF BENEFIT BEGINS BEFORE SOCIAL SECURITY
RETIREMENT AGE. If a Participant's retirement benefit begins before his or her
Social Security Retirement Age, the determination as to whether the dollar
limitation set forth in Section 8.1.1(a) above has been satisfied shall be made,
in accordance with regulations prescribed by the Secretary of the Treasury or
his or her delegate, by reducing such dollar limitation so that an annual
benefit of such dollar limitation as so reduced and beginning when the
Participant's retirement benefit begins is equivalent to an annual benefit of
such dollar limitation if it were not so reduced and began at the Participant's
Social Security Retirement Age. This reduction shall be made in such manner as
the Secretary of the Treasury or his or her delegate may prescribe which is
consistent with the reduction for old-age insurance benefits commencing before
the Social Security Retirement Age under the Federal Social Security Act, as
amended.
8.1.5 ADJUSTMENT IF BENEFIT BEGINS AFTER SOCIAL SECURITY
RETIREMENT AGE. If a Participant's retirement benefit begins after his or her
Social Security Retirement Age, the determination as to whether the dollar
limitation set forth in Section 8.1.1(a) above has been satisfied shall be made,
in accordance with regulations prescribed by the Secretary of the Treasury or
his or her delegate, by increasing such dollar limitation so that an annual
benefit of such dollar limitation as so increased and beginning when the
Participant's retirement benefit begins is equivalent to an annual benefit of
such dollar limitation if it were not so increased and began at the
Participant's Social Security Retirement Age.
8.1.6 LIMITATION ON CERTAIN ASSUMPTIONS.
(a) Except as provided in paragraph (b) below, for
purposes of adjusting any benefit or limitation under Section 8.1.3 or 8.1.4
above, any interest rate assumption which is used (except to the extent Internal
Revenue Service Notice 87-21 provides for specific reduction factors to use in
reducing the dollar limitation set forth in Section 8.1.1(a) above when the
Participant's benefit is to begin at or after age 62 and prior to the
Participant's Social Security Retirement Age) shall not be less than the greater
of 5% per annum or the interest rate or factors specified in the Plan for making
early retirement reductions.
(b) However, for purposes of adjusting the benefit
or limitation of any lump sum form of benefit, the applicable interest rate (as
such term is defined in paragraph (f) below) shall be substituted for "5% per
annum" in paragraph (a) above.
(c) Further, for purposes of adjusting any benefit
or limitation under Section 8.1.5 above, any interest rate assumption which is
used shall not be greater than the lesser of 5% per annum or the interest rate
or factors specified in the Plan for making late retirement increases.
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(d) In addition, for purposes of adjusting any
benefit or limitation under Section 8.1.3, 8.1.4, or 8.1.5 above, the mortality
assumption used shall be the applicable mortality assumption (as such term is
defined in paragraph (g) below).
(e) The provisions of paragraphs (b) and (d) above
shall not reduce any Participant's benefit under the Plan determined as of
December 31, 1996, after taking into account the commencement date and form of
the Participant's benefit and also after taking into account the provisions of
the Prior Plans in effect on December 31, 1996.
(f) For purposes hereof, the "applicable interest
rate" means, with respect to adjusting any benefit or limitation applicable to
any lump sum form of benefit, the annual interest rate on 30-year Treasury
securities for the second calendar month which precedes the first calendar month
included in the Plan Year in which the applicable lump sum form of benefit is
paid (as specified by the Commissioner of Internal Revenue or his or her
delegate for that month in revenue rulings, notices, or other guidance).
(g) Also for purposes hereof, the "applicable
mortality assumption" means, with respect to adjusting any benefit or limitation
of a retirement benefit, an appropriate mortality assumption based on the
mortality table prescribed by the Secretary of the Treasury or his or her
delegate under Section 417(e)(3) of the Code. Such table shall be based on the
prevailing commissioners' standard table (described in Section 807(d)(5)(A) of
the Code) used to determine reserves for group annuity contracts issued on the
date as of which the applicable retirement benefit begins to be paid or is paid
in its entirety (without regard to any other subparagraph of Section 807(d)(5)
of the Code).
8.1.7 ADJUSTMENTS IF YEARS OF PARTICIPATION OR SERVICE ARE
LESS THAN TEN.
(a) In the case of a Participant who has less than
ten years of participation in this Plan when his or her retirement benefit
commences, the dollar limitation referred to in Section 8.1.1(a) above shall be
adjusted so as to be equal to such dollar limitation (determined without regard
to this paragraph (a)) multiplied by a fraction. The numerator of such fraction
is the Participant's years (and fraction thereof) of participation in the Plan
at the time his or her benefit commences, and its denominator is ten.
(b) Further, in the case of a Participant who has
less than ten years of Vesting Service (disregarding for this purpose paragraph
(b) of Section 2.1.7 above), the limitation referred to in Section 8.1.1(b)
above shall be adjusted so as to be equal to such limitation (determined without
regard to this paragraph (b)) multiplied by a fraction. The numerator of such
fraction is the Participant's years of Vesting Service (and fraction thereof),
and its denominator is ten.
(c) In no event shall the provisions of paragraphs
(a) or (b) above reduce the limitations referred to in Section 8.1.1 above to an
amount less than 1/10 of such limitations (determined without regard to this
Section 8.1.7).
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8.1.8 ADJUSTMENTS IF JANUARY 1, 1987 ACCRUED BENEFIT HIGHER
THAN OTHER LIMITS. If a Participant's current accrued benefit under the Prior
Plans as of the first day of the limitation year beginning on January 1, 1987
exceeded the benefit limits set forth in the foregoing provisions of this
Section 8.1, then the dollar limitation referred to in Section 8.1.1(a) above
shall be deemed to be not less than such current accrued benefit. For purposes
hereof, the Participant's "current accrued benefit" means his or her Accrued
Benefit under the Prior Plans, determined as of the close of the last limitation
year beginning before January 1, 1987 but disregarding any change in the terms
and conditions of the Prior Plans or this Plan after May 5, 1986 and any cost of
living adjustment occurring after May 5, 1986.
8.1.9 COMBINING OF PLANS. If any other defined benefit plans
(as defined in Section 414(j) of the Code) in addition to this Plan are
maintained by the Employer or any Affiliated Employers, then the limitations set
forth in this Section 8.1 shall be applied as if this Plan and such other
defined benefit plans are a single plan. If any adjustment in a Participant's
retirement benefit is required by this Section 8.1, such adjustment shall when
necessary be made to the extent possible under the other defined benefit plan or
plans in which the Participant actively participated (I.E., performed service
which is taken into consideration in determining the amount of his or her
benefit under the benefit formulas of the other plan or plans) at a later point
in time in the applicable limitation year than he or she actively participated
in this Plan (provided such other plan or plans provides for such adjustment in
such situation). To the extent still necessary, such adjustment shall be made
under this Plan.
8.1.10 REGULATIONS. Certain of the foregoing provisions of
this Section 8.1 refer to regulations prescribed by the Secretary of the
Treasury or his or her delegate. Prior to the issuance of any such regulation,
the Plan may be construed in accordance with any other notice provided by the
Internal Revenue Service which provides guidance as to the matter with which
such regulation shall be concerned.
8.2 MAXIMUM PLAN BENEFIT -- COMBINED LIMITATION FOR THIS PLAN AND OTHER
DEFINED CONTRIBUTION PLANS.
8.2.1 GENERAL RULE. Subject to the other provisions of this
Section 8.2 but notwithstanding any other provision of this Plan to the
contrary, if a Participant in this Plan also participates in one or more defined
contribution plans (as defined in Section 414(i) of the Code) which are
maintained by the Employer or the Affiliated Employers, then in no event shall
the sum of such Participant's defined benefit plan fraction and defined
contribution plan fraction for any limitation year exceed 1.0. If and to the
extent necessary, the Participant's retirement benefit that is projected or
payable under this Plan shall be reduced or frozen so that this limitation is
not exceeded.
8.2.2 DEFINED BENEFIT PLAN FRACTION. For purposes of this
Section 8.2, a Participant's "defined benefit plan fraction" for any limitation
year is a fraction:
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(a) The numerator of which is the Participant's
projected annual benefit under the Plan (determined as of the close of the
subject limitation year); and
(b) The denominator of which is the lesser of (1)
1.25 multiplied by the dollar limitation in effect under Code Section
415(b)(1)(A) (and Section 8.1.1(a) above) for such limitation year or (2) 1.4
multiplied by the amount which may be taken into account for the Participant
under Code Section 415(b)(1)(B) (and Section 8.1.1(b) above) by the close of
such limitation year.
8.2.3 DEFINED CONTRIBUTION PLAN FRACTION. For purposes of this
Section 8.2, a Participant's "defined contribution plan fraction" for any
limitation year is a fraction:
(a) The numerator of which is the sum of all of the
annual additions to the Participant's accounts under all of the defined
contribution plans (and, to the extent annual additions are made thereto,
defined benefit plans and welfare benefit funds) maintained by the Employer and
the Affiliated Employers which have been made as of the close of the subject
limitation year (including annual additions made in prior limitation years); and
(b) The denominator of which is the sum of the
lesser of the following amounts determined for the subject limitation year and
for each prior limitation year in which the Participant performed service for
the Employer or an Affiliated Employer: (1) 1.25 multiplied by the dollar
limitation in effect under Code Section 415(c)(1)(A) for the applicable
limitation year (determined without regard to Code Section 415(c)(6)), or (2)
1.4 multiplied by the amount which may be taken into account for the Participant
under Code Section 415(c)(1)(B) for the applicable limitation year. (In general,
for limitation years beginning after December 31, 1986, the dollar limitation in
effect under Code Section 415(c)(1)(A) for a limitation year is the greater of
$30,000 or 1/4 of the dollar limitation in effect under Code Section
415(b)(1)(A) (and Section 8.1.1(a) above) for such limitation year, and the
amount which may be taken into account under Code Section 415(c)(1)(B) for a
limitation year is 25% of the Participant's compensation for such limitation
year.)
8.2.4 OTHER NECESSARY TERMS. For purposes of the rules set
forth in this Section 8.2, the following terms shall apply:
(a) A Participant's "projected annual benefit" as
of the close of any limitation year means the annual benefit that the
Participant would be entitled to under this Plan if (1) the Participant
continued in employment with his or her current employer on the same basis as
exists as of the close of the subject limitation year until attaining his or her
Normal Retirement Date (or, if he or she has already reached such date by the
close of the subject limitation year, he or she immediately terminated his or
her employment), (2) the Participant's annual compensation for the subject
limitation year remains the same each later limitation year until he or she
terminates employment, and (3) all other relevant factors used to determine
benefits under this Plan for the subject limitation year remain constant for all
future limitation years.
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(b) The "annual addition" to the Participant's
accounts for a limitation year shall be determined under the provisions of the
Code (and mainly Code Section 415(c)(2)) in effect for such limitation year. In
general, for any limitation year beginning after December 31, 1986, the annual
addition is generally the sum of employer contributions, employee contributions,
and forfeitures allocated to the Participant's defined contribution plan
accounts for such limitation year, plus any contributions made on behalf of the
Participant for such limitation year under Code Section 415(l) or Code Section
419A(d) (E.G., contributions to a defined benefit plan for medical benefits or
contributions on behalf of a key employee to a welfare benefit fund for funding
post-retirement medical benefits). (It is noted that for any limitation year
beginning before January 1, 1987, not all employee contributions were included
in the annual addition; instead, only the lesser of the amount of the employee
contributions made for such limitation year in excess of 6% of the Participant's
annual compensation for such limitation year or one-half of the employee
contributions made for such limitation year were counted as part of the annual
addition. This determination need not be recalculated for any such pre-1987
limitation year.)
(c) A Participant's "compensation," the "limitation
year," and an "annual benefit" shall all have the same meanings as are given to
those terms in Section 8.1.2 above.
8.2.5 ADJUSTMENT OF DEFINED CONTRIBUTION PLAN FRACTION. If
necessary, an amount shall be subtracted from the numerator of the defined
contribution plan fraction applicable to a Participant in accordance with
regulations prescribed by the Secretary of the Treasury or his or her delegate
so that the sum of the Participant's defined benefit plan fraction and defined
contribution plan fraction computed as of the end of the last limitation year
beginning before January 1, 1987 does not exceed 1.0 for such limitation year.
8.2.6 COMBINING OF PLANS. If any other defined benefit plans
(as defined in Section 414(j) of the Code) in addition to this Plan are
maintained by the Employer or any Affiliated Employers, then the limitation set
forth in this Section 8.2 shall be applied as if this Plan and such other
defined benefit plans are a single plan. If any adjustment in a Participant's
projected annual benefit is required by this Section 8.2, such adjustment shall
be made to the extent possible under the other defined benefit plan or plans in
which the Participant actively participated (I.E., performed service which is
taken into consideration in determining the amount of his or her benefit under
the benefit formulas used in the other plan or plans) at a later point in time
in the applicable limitation year than he or she actively participated in this
Plan (provided such other plan or plans provides for such adjustment in such
situation). To the extent still necessary, such adjustment shall be made under
this Plan.
8.2.7 TERMINATION OF LIMITATION. Notwithstanding any other
provision of the Plan to the contrary, the provisions of this Section 8.2 shall
not apply, and shall no longer be effective, for any limitation year which
begins after December 31, 1999.
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8.3 RESTRICTIONS ON BENEFITS PAYABLE TO CERTAIN HIGHLY COMPENSATED
PARTICIPANTS. The provisions set forth in this Section 8.3 shall apply
notwithstanding any other provision of this Plan.
8.3.1 In the event of the termination of the Plan, the benefit
otherwise payable under the Plan to any Participant who is a Highly Compensated
Employee (or a Former Highly Compensated Employee) with respect to the Plan Year
in which such Plan termination occurs shall be limited to a benefit which is
nondiscriminatory under Section 401(a)(4) of the Code. To the extent necessary,
any assets otherwise allocable upon the Plan's termination under Section 13.3
below to a Participant who is a Highly Compensated Employee (or Former Highly
Compensated Employee) for the Plan Year in which the Plan's termination occurs
shall be reallocated to other Participants so that this provision is not
violated. For purposes hereof, however, a benefit applicable to such a Highly
Compensated Employee (or Former Highly Compensated Employee) upon the Plan's
termination shall be considered to be nondiscriminatory under Section 401(a)(4)
of the Code if each Participant who is not a Highly Compensated Employee (or
Former Highly Compensated Employee) with respect to the Plan Year in which the
Plan's termination occurs and who is entitled to a benefit under the Plan upon
the Plan's termination receives upon such termination a proportion of the then
present value of his or her Accrued Benefit under the Plan which is at least
equal to the proportion of the then present value of the Accrued Benefit
receivable upon the Plan's termination by such Highly Compensated Employee (or
Former Highly Compensated Employee).
8.3.2 Subject to the provisions of Sections 8.3.3 and 8.3.4
below, prior to the complete termination of the Plan and distribution of all
Plan assets, the payments made during any Plan Year to a Participant who is a
Restricted Participant for such Plan Year shall be restricted to the extent
necessary so that such payments do not exceed the payments that would be made
for such Plan Year if the Participant's remaining Accrued Benefit under the Plan
was being paid in the form of a Single Life Annuity.
8.3.3 (a) Subject to the provisions of Section 8.3.4 below but
notwithstanding the provisions of Section 8.3.2 above, prior to the complete
termination of the Plan and distribution of all Plan assets, the retirement
benefit payments made during any Plan Year to a Participant who is a Restricted
Participant for such Plan Year may exceed the limit set forth in Section 8.3.2
above to the extent the method under which the Participant's retirement benefit
is being paid calls for such payments, provided that the Plan and the
Participant establish an agreement which meets the following provisions of this
Section 8.3.3 in order to secure repayment to the Plan of any amount necessary
for the distribution of assets upon the Plan's termination to satisfy Section
401(a)(4) of the Code.
(b) During any such Plan Year, the amount that may
be required to be repaid to the Plan by the Participant is the restricted
amount. For this purpose, the "restricted amount" means the excess of the
accumulated amount of the retirement benefit payments made to the Participant
over the accumulated amount of the Participant's nonrestricted limit. The
Participant's "nonrestricted limit" for this purpose means the retirement
benefit
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<PAGE> 49
payments that could have been made to the Participant, commencing when
retirement benefit payments initially commenced to the Participant, had the
Participant received his or her retirement benefit in the form of a Single Life
Annuity. Further, an "accumulated amount" means, with respect to any payment,
the amount of such payment plus interest thereon from the date of such payment
(or the date such payment would have been made) to the date of the determination
of the restricted amount, compounded annually from the date of such payment (or
the date such payment would have been made), at the rate determined under
Section 411(c)(2)(C) of the Code in effect on the date of the determination of
the restricted amount.
(c) In order to secure the Participant's repayment
obligation of the restricted amount, prior to receipt of a distribution the
Participant must agree that upon distribution the Participant will promptly
deposit in escrow with an acceptable depositary property having a fair market
value equal to at least 125% of the restricted amount. The obligation of the
Participant under the repayment agreement alternatively can be secured or
collateralized by posting a bond equal to at least 100% of the restricted
amount. For this purpose, the bond must be furnished by an insurance company,
bonding company, or other surety approved by the U.S. Treasury Department as an
acceptable surety for Federal bonds. As another alternative, the Participant's
obligation under the repayment agreement can be secured by a bank letter of
credit in an amount equal to at least 100% of the restricted amount.
(d) Amounts in the escrow account in excess of 125%
of the restricted amount may be withdrawn for the Participant. Similar rules
apply to the release of any liability in excess of 100% of the restricted amount
where the repayment obligation has been secured by a bond or a letter of credit.
If, however, the market value of the property in the escrow account falls below
110% of the restricted amount, the Participant is obligated to deposit
additional property to bring the value of the property held by the depositary up
to 125% of the restricted amount. In addition, the Participant may be given the
right to receive any income from the property placed in escrow, subject to the
obligation to maintain the value of the property as described.
(e) A depositary may not redeliver to the
Participant any property held under such an agreement, other than amounts in
excess of 125% of the restricted amount, and a surety or bank may not release
any liability on such a bond or letter of credit, unless the Committee certifies
to the depositary, surety, or bank that the Participant (or the Participant's
estate) is no longer obligated to repay any amount under the agreement. The
Committee will make such a certification if at any time after the distribution
commences either that any of the conditions of Section 8.3.4 below are met or
that the Plan has terminated and the benefit received by the Participant is
nondiscriminatory under Section 401(a)(4) of the Code. Such a certification by
the Committee terminates the agreement between the Participant and the Plan.
8.3.4 The restrictions set forth in Sections 8.3.2 and 8.3.3
above shall not apply to any Participant if either: (1) after payment to such
Participant of all benefits payable to him or her under the Plan, the value of
all assets of the Plan equals or exceeds 110% of the then value of the Plan's
current liabilities (as defined in Section 412(l)(7) of the Code); (2) the
8-8
<PAGE> 50
entire value of such Participant's retirement benefit under the Plan is less
than 1% of the then value of the Plan's current liabilities (as defined in
Section 412(l)(7) of the Code); or (3) the entire value of such Participant's
retirement benefit under the Plan is $3,500 or less.
8.3.5 For purposes of Sections 8.3.2 through 8.3.4 above, a
Participant shall be considered a "Restricted Participant" for any Plan Year if
he or she is one of the 25 Highly Compensated and Former Highly Compensated
Employees for such Plan Year with the greatest Compensation. In determining
which of the Highly Compensated and Former Highly Compensated Employees for any
Plan Year have the 25 greatest Compensations, the Compensation to be considered
for any such Highly Compensated or Former Highly Compensated Employee shall be
the highest Compensation he or she received in such Plan Year or any other Plan
Year under which his or her Compensation or ownership in the Employer made him
or her a Highly Compensated or Former Highly Compensated Employee for the
subject Plan Year.
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<PAGE> 51
SECTION 9
---------
ADDITIONAL RETIREMENT AND DEATH BENEFIT PROVISIONS
--------------------------------------------------
9.1 INCOMPETENCY. Every person receiving or claiming benefits under the
Plan shall be conclusively presumed to be mentally or legally competent and of
age until the date on which the Committee receives written notice that such
person is incompetent or a minor for whom a guardian or other person legally
vested with the care of his or her person or estate has been appointed. If the
Committee finds that any person to whom a benefit is payable under the Plan is
unable to care for his or her affairs because he or she is incompetent or is a
minor, any payment due (unless a prior claim therefor has been made by a duly
appointed legal representative) may be paid to the spouse, a child, a parent, a
brother, or a sister of such person, or to any person or institution deemed by
the Committee to have incurred expense for such person. If a guardian of the
estate of any person receiving or claiming benefits under the Plan is appointed
by a court of competent jurisdiction, benefit payments may be made to such
guardian provided that proper proof of appointment and continuing qualification
is furnished in a form and manner acceptable to the Committee. Any payment made
pursuant to this Section 9.1 shall be a complete discharge of liability therefor
under the Plan.
9.2 COMMERCIAL ANNUITY CONTRACTS AND OTHER ADMINISTRATIVE ADJUSTMENTS
OF BENEFITS.
9.2.1 Notwithstanding any other provision of the Plan to the
contrary, in its sole discretion, the Committee may elect to distribute a
retirement or death benefit by the purchase and delivery to the applicable
Participant (or beneficiary) of a commercial annuity contract from an insurance
company. In such an event delivery to and acceptance by such Participant (or
beneficiary) of such contract shall be in complete satisfaction of any claim the
Participant (or beneficiary) or any person claiming by or through such
Participant (or beneficiary) may have for benefits under this Plan. The use of
an annuity contract shall not itself cause any optional benefit form otherwise
available to the Participant (or, if a death benefit is involved, his or her
beneficiary) under the Plan to be eliminated.
9.2.2 Notwithstanding any other provision of the Plan to the
contrary, as an administrative convenience, if the monthly amount of any
retirement or death benefit which is payable under the Plan in the form of an
Annuity would otherwise be less than $50, the Committee may direct that such
benefit begin to be paid in quarterly installments instead of monthly
installments at any time.
9.3 TIMING OF BENEFIT DISTRIBUTIONS. For purposes of the Plan, each
benefit payment under the Plan shall always be made "as of" a certain date
specified in an appropriate section of the Plan, which means that the amount of
the payment shall be determined as of such date and the actual payment shall be
made on or as soon as practical after such date (to allow the Plan time to
ascertain the applicable person's entitlement to a benefit and the amount of
such benefit and to process and payout such benefit). Further, the date "as of"
which a benefit
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<PAGE> 52
commences to be paid to a person under the Plan is sometimes called such
benefit's "commencement date" in the other provisions of this Plan. If a person
entitled to a benefit hereunder dies subsequent to the date as of which such
payment was to have been made but, because of administrative reasons, prior to
the actual payment thereof, such benefit shall be paid to his or her estate. If,
notwithstanding the foregoing, a Participant (or a beneficiary claiming through
him or her) who is entitled to a benefit hereunder cannot reasonably be located,
then such benefit shall thereupon be deemed forfeited. If, however, the lost
Participant (or the beneficiary claiming through him or her) thereafter makes a
claim for the amount previously forfeited hereunder, such benefit shall be paid
or commence, with any unpaid installments thereof which otherwise would have
previously been paid also being paid (but without any interest credited on such
unpaid installments), as soon as administratively possible.
9.4 NONALIENATION OF BENEFITS. To the extent permitted by law, no
benefit payable under the Plan shall be subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance, or charge, whether
voluntary or involuntary, nor shall any such benefit be in any manner liable for
or subject to the debts, contracts, liabilities, engagements, or torts of the
person entitled to such benefit. The Committee shall, however, adopt procedures
as necessary so as to allow benefits to be assigned in connection with qualified
domestic relations orders (as defined in and in accordance with the provisions
of Section 206(d) of ERISA and Section 414(p) of the Code). In this regard, the
Plan will permit a benefit to be paid at any time to a Participant's alternate
payee (as also is defined in ERISA Section 206(d) and Code Section 414(p)) if
directed by a qualified domestic relations order and in compliance with all
requirements applicable to a qualified domestic relations order, even if the
Participant has not yet ceased to be an Employee and has not attained his or her
earliest retirement date (again as defined in ERISA Section 206(d) and Section
414(p) of the Code).
9.5 ACTUARIAL ASSUMPTIONS.
9.5.1 Under this Plan, any reference to actuarial equivalent,
actuarially equivalent, or actuarial equivalence means or refers to equality in
value of the aggregate amounts of a benefit when compared to the aggregate
amounts of such benefit if paid or determined in a different form, at a
different time, or both in a different form and at a different time, as the case
may be.
9.5.2 When the Plan requires the determination of an initial
credit amount to be credited to any Participant's Cash Balance Account under
Section 4.2 above, the actuarial assumptions to be used in calculating the
present value of the Participant's accrued benefit under the Prior Plans shall
be the assumptions set forth in part 1 of Schedule A to this Plan.
9.5.3 Unless otherwise set forth in an applicable section of
the Plan, when the Plan requires a determination that a benefit, if it were paid
in the form of an Annuity and to commence as of any particular date, would be
actuarially equivalent to such benefit if it were to be paid in a different form
of Annuity but to commence as of the same date, the actuarial
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<PAGE> 53
assumptions to be used in making such determination shall be the assumptions set
forth in part 2 of Schedule A to this Plan.
9.5.4 In addition, unless otherwise set forth in an applicable
section of the Plan, when the Plan requires (1) a determination that a benefit,
if it were paid in the form of a Single Life Annuity which commences as of any
date, is actuarially equivalent to the amount credited to a Participant's Cash
Balance Account as of such date or any earlier date, (2) a determination that a
benefit, if it were paid in the form of a lump sum cash payment which is made as
of any date, is actuarially equivalent to such benefit if it were to be paid in
the form of a Single Life Annuity which commences as of such date or any later
date, or (3) a determination of the present value of a benefit, the actuarial
assumptions to be used in making such determination shall be the applicable
mortality assumption and the applicable interest rate. For this purpose, the
"applicable mortality assumption" means an appropriate mortality assumption
based on the mortality table prescribed by the Secretary of the Treasury or his
or her delegate under Section 417(e)(3) of the Code. Such table shall be based
on the prevailing commissioners' standard table (described in Section
807(d)(5)(A) of the Code) used to determine reserves for group annuity contracts
issued on the date as of which the lump sum payment is determined (without
regard to any other subparagraph of Section 807(d)(5) of the Code). Also for
this purpose, the "applicable interest rate" means the annual interest rate on
30-year Treasury securities for the second calendar month which precedes the
first calendar month included in the Plan Year in which the lump sum payment is
made (as specified by the Commissioner of Internal Revenue or his or her
delegate for that month in revenue rulings, notices, or other guidance).
9.5.5 Except as otherwise provided in applicable Treasury
regulations, if this Plan is amended to change any of the actuarial assumptions
used in the Plan to determine actuarial equivalence or the present value of a
benefit, then any Plan benefit applicable to a Participant who is a Participant
on the effective date of the amendment which is determined in part by using the
Plan's factors for determining actuarial equivalence or present or lump sum
value shall have its amount determined in accordance with the provisions of the
Plan in effect as of the date the benefit is to commence or be paid; except that
if the value of such benefit would be increased by both (1) substituting the
Participant's Accrued Benefit determined as of the day next preceding the
effective date of the amendment for the Participant's then current Accrued
Benefit and (2) substituting the actuarial assumptions used in the Plan which
were in effect as of the day next preceding the effective date of the amendment
for the then current actuarial assumptions, such substitutions shall be made for
purposes of such determination.
9.6 APPLICABLE BENEFIT PROVISIONS. Subject to Sections 6.6 and 6.7
above, any benefit to which a Participant becomes entitled (or any death benefit
to which such Participant's Spouse or other beneficiary becomes entitled) shall
be determined on the basis of the provisions of the Plan in effect as of the
earlier of the date the Participant last terminates employment with the Employer
or his or her Required Commencement Date notwithstanding any amendment to the
Plan adopted subsequent to such date, except for subsequent amendments which are
by their specific terms or by applicable law made applicable to such Participant
(or his or her Spouse or other beneficiary).
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<PAGE> 54
9.7 COVERAGE OF PRE-EFFECTIVE AMENDMENT DATE PARTICIPANTS.
9.7.1 Except as is otherwise specifically provided in this
Plan, the provisions of this Plan only apply to persons who become Participants
in this Plan under Section 3 above and to benefits which have not begun to be
paid prior to the Effective Amendment Date. However, any person who was a
participant in one or more Prior Plans and, while never becoming a Participant
in this Plan under Section 3 above, still had a nonforfeitable right to an
unpaid benefit under the Prior Plans as of the date immediately preceding the
Effective Amendment Date shall be considered a participant in this Plan to the
extent of his or her interest in such benefit. The amount of such benefit, the
form in which such benefit is to be paid, and the conditions (if any) which may
cause such benefit not to be paid shall, except as otherwise specifically
provided in this Plan or in the Prior Plans, be determined solely by the
versions of the Prior Plans in effect at the time he or she retired or
terminated employment with the Employer.
9.7.2 Notwithstanding the foregoing or any other provision of
the Prior Plans, because the Prior Plan which was named the Pension Plan for
Employees of Broadway Stores Inc. (for purposes of this Section 9.7.2, the
"Broadway Main Plan") and the Prior Plan which was named the Supplemental
Pension Plan for Hourly Employees of The Emporium (for purposes of this Section
9.7.2, the "Emporium Plan") determined benefits prior to the Effective Amendment
Date on the basis of an accrual computation period which began on a July 1 and
ended the next following June 30, the following provisions apply to such Prior
Plans in determining any benefits accrued under such plans from July 1, 1996
through December 31, 1996:
(a) For purposes of determining any benefits
accrued under the Broadway Main Plan for the period from July 1, 1996 through
December 31, 1996 (and only for such purposes), any reference to a "Plan Year"
contained in Section 4.1(iv)(a) and (b) of such plan shall be deemed to refer to
the period which began July 1, 1996 and ended December 31, 1996 and any factor
contained in Section 4.1(iv)(a) and (b) of such plan (.01 or 0.15) shall be
multiplied by 50% before being used.
(b) For purposes of determining any benefits
accrued under the Emporium Plan for the period from July 1, 1996 through
December 31, 1996 (and only for such purposes), any reference to the "Plan Year"
contained in clause (ii) of the definition of Credited Service set forth under
Section 1.2 of such plan shall be deemed to refer to the period which began July
1, 1996 and ended December 31, 1996 and the provision in such clause (ii) that
indicates that Credited Service granted for any Plan Year may not exceed one
year shall be deemed to indicate that Credited Service granted for any Plan Year
may not exceed one-half of a year.
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9.8 FORFEITURES.
9.8.1 A Participant who terminates employment with the
Employer shall forfeit any portion of his or her Accrued Benefit which he or she
is not entitled to receive as a retirement benefit under the provisions of the
Plan (the "nonvested Accrued Benefit") as of the earlier of (1) the date he or
she receives a complete distribution of the portion of his or her Accrued
Benefit which he or she is entitled to receive as a retirement benefit under the
provisions of the Plan (the "vested Accrued Benefit") or (2) the date he or she
incurs a Six-Year Break-in-Service commencing after such termination of
employment. For purposes hereof, a Participant who terminates employment with
the Employer at a time when he or she has no vested Accrued Benefit at all shall
be deemed to have received a complete distribution of his or her vested Accrued
Benefit on the date of such termination of employment.
9.8.2 If a Participant who forfeits any portion of his or her
Accrued Benefit under Section 9.8.1 above is rehired by the Employer as an
Employee by the earlier of the sixth annual anniversary of the date on which he
or she completes his or her first Hour of Service after his or her reemployment
or the end of the first Six-Year Break-in-Service commencing after his or her
prior termination of employment with the Employer, he or she may repay to the
Plan the amount of the vested portion of his or her Accrued Benefit which he or
she previously received, plus interest thereon from the date of such
distribution to the date of repayment, compounded annually from the date of
distribution, at the rate determined under Section 411(c)(2)(C) of the Code in
effect on the date of repayment. If such repayment is made, or if such
Participant had not had any vested interest in his or her Accrued Benefit at the
time of his or her prior termination of employment with the Employer, the
portion of his or her Accrued Benefit which had previously been forfeited shall
be restored to his or her credit under the Plan.
9.9 DIRECT ROLLOVER DISTRIBUTIONS.
9.9.1 Notwithstanding any provision of the Plan to the
contrary that would otherwise limit a distributee's election under this Section
9.9, a distributee may elect, at the time and in the manner prescribed by the
Committee, to have any portion of an eligible rollover distribution otherwise
payable to him or her paid directly to an eligible retirement plan specified by
the distributee in a direct rollover.
9.9.2 For purposes of this Section 9.9, the following terms
shall have the meanings indicated below:
(a) An "eligible rollover distribution" means, with
respect to any distributee, any distribution of all or any portion of the entire
benefit otherwise payable under the Plan to the distributee, except that an
eligible rollover distribution does not include: (1) any distribution that is
one of a series of substantially equal periodic payments (not less frequently
than annually) made for the life (or life expectancy) of the distributee or the
joint lives (or joint life expectancies) of the distributee and the
distributee's designated beneficiary, or for a specified period of ten years or
more; (2) any distribution to the extent such distribution is required to be
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made under Section 401(a)(9) of the Code; and (3) the portion of any
distribution that is not includable in gross income of the distributee for
purposes of Federal income tax.
(b) An "eligible retirement plan" means, with
respect to any distributee's eligible rollover distribution, an individual
retirement account described in Section 408(a) of the Code, an individual
retirement annuity described in Section 408(b) of the Code, an annuity plan
described in Section 403(a) of the Code, or a qualified trust described in
Section 401(a) of the Code, that accepts the distributee's eligible rollover
distribution. However, in the case of an eligible rollover distribution to a
distributee who is a distributee by reason of being the surviving Spouse of a
Participant, an "eligible retirement plan" means only an individual retirement
account described in Section 408(a) of the Code or an individual retirement
annuity described in Section 408(b) of the Code.
(c) A "distributee" means a Participant. In
addition, a Participant's surviving Spouse, or a Participant's Spouse or former
Spouse who is the alternate payee under a qualified domestic relations order (as
defined in Section 414(p) of the Code), is a distributee with regard to any
interest of the Participant which becomes payable under the Plan to such Spouse
or former Spouse.
(d) A "direct rollover" means, with respect to any
distributee, a payment by the Plan to an eligible retirement plan specified by
the distributee.
9.9.3 The Committee may prescribe reasonable rules in order to
provide for the Plan to meet the provisions of this Section 9.9. Any such rules
shall comply with the provisions of Code Section 401(a)(31) and any applicable
Treasury regulations which are issued with respect to the direct rollover
requirements. For example, subject to meeting the provisions of Code Section
401(a)(31) and applicable Treasury regulations, the Committee may: (1) prescribe
the specific manner in which a direct rollover will be made by the Plan, whether
by wire transfer to the eligible retirement plan, by mailing a check to the
eligible retirement plan, by providing the distributee a check made payable to
the eligible retirement plan and directing the distributee to deliver the check
to the eligible retirement plan, and/or by some other method; (2) prohibit any
direct rollover of any eligible rollover distributions payable during a calendar
year to a distributee when the total of such distributions is less than $200; or
(3) refuse to make a direct rollover of an eligible rollover distribution to
more than one eligible retirement plan.
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SECTION 10
----------
TRUST FUND
----------
10.1 CONTRIBUTIONS. The Employer shall fund the Plan in such amounts
and at such times as are decided by the Employer. The Employer shall, in
determining its contributions to the Plan, take into account the advice of the
Actuary as to the level of contributions needed for the Plan to meet the minimum
funding requirements of Section 412 of the Code and the regulations thereunder.
Such level of contributions shall be determined on the basis of actuarial
computations made from time to time by the Actuary. Forfeitures which occur as a
result of death, termination of employment, or for any other reason shall be
applied to reduce the cost of the Plan and shall not operate to increase the
benefits otherwise payable under the Plan.
10.2 PROHIBITION AGAINST REVERSION. Notwithstanding any provision of
the Plan to the contrary, the Employer shall not have any present or prospective
right, claim, or interest in the Trust Fund or in any contribution made to the
Trustee prior to the satisfaction of all liabilities with respect to
Participants and beneficiaries under the Plan. This Section 10.2 shall not be
amended or revoked in any manner whatsoever to the end that any part of the
corpus or income of the Trust Fund may be used for or converted to purposes
other than for the exclusive benefit of such persons prior to the satisfaction
of all liabilities with respect to them; provided, however, that the Employer
shall still have the right to direct, and shall so direct, the Trustee (1) to
return any portion of a contribution which was made under mistake of fact as
described in ERISA Section 403(c)(2)(A), provided the return is made within one
year after the contribution is made, and (2) to return any portion of a
contribution for which a deduction is denied under Section 404 of the Code,
provided the contribution was made on the condition that it was deductible in
full and the return is made within one year after the disallowance of the
deduction as described in ERISA Section 403(c)(2)(C). In this regard, any
contribution made to the Plan is made on the condition that it is deductible in
full, except to the extent it is required to meet the minimum funding
requirements of Code Section 412 regardless of its deductibility.
10.3 INVESTMENT OF TRUST FUND. The Trustee shall hold and, except to
the extent that the Committee appoints one or more investment managers, shall
invest, reinvest, manage, and administer the Employer's contributions and the
assets of the Plan and the increment, increase, earnings, and income thereof as
a Trust Fund for the exclusive benefit of Participants and their beneficiaries.
The Committee shall establish a funding policy to insure adequate liquidity for
the payment of benefits under the Plan.
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SECTION 11
----------
NAMED FIDUCIARIES
-----------------
Any person, committee, or entity which is designated or appointed under
the Plan or the Trust (or under a procedure set forth in the Plan or the Trust)
to have any responsibility for the control, management, or administration of
this Plan or the assets thereof (each such fiduciary being hereinafter referred
to individually as a "Named Fiduciary" and collectively as the "Named
Fiduciaries") shall have only such powers and responsibilities as are expressed
in the Plan or the Trust or are provided for in the procedure by which he or she
is designated or appointed, and any power or responsibility for the control,
management, or administration of the Plan or Trust Fund which is not expressly
allocated to any Named Fiduciary, or with respect to which an allocation is in
doubt, shall be deemed allocated to Federated. Each Named Fiduciary shall have
no responsibility to inquire into the acts or omissions of any other Named
Fiduciary in the exercise of powers or the discharge of responsibilities
assigned to such other Named Fiduciary under the Plan.
Any Named Fiduciaries may, by agreement among themselves, allocate any
responsibility or duty, other than the responsibility of the Trustee for the
management and control of the Trust Fund within the meaning of Section 405(c) of
ERISA, assigned to a Named Fiduciary hereunder to one or more other Named
Fiduciaries, provided, however, that any agreement respecting such allocation
must be in writing and filed with the Committee for placement with the records
of the Plan. No such agreement shall be effective as to any Named Fiduciary
which is not a party thereto until such Named Fiduciary has received written
notice of such agreement from the Named Fiduciaries involved. Any Named
Fiduciary may, by written instrument filed with the Committee for placement with
the records of the Plan, designate a person who is not a Named Fiduciary to
carry out any of its responsibilities under the Plan, other than the
responsibility of the Trustee for the management and control of the Trust Fund
within the meaning of Section 405(c) of ERISA, provided, however, that no such
designation shall be effective as to any other Named Fiduciary until such other
Named Fiduciary has received written notice thereof.
Any Named Fiduciary, or a person designated by a Named Fiduciary to
perform any responsibility of a Named Fiduciary pursuant to the procedure
described in the preceding paragraph, may employ one or more persons to render
advice with respect to any responsibility such Named Fiduciary has under the
Plan or such person has by reason of such designation. A person may serve the
Plan in more than one fiduciary capacity and may be a Participant.
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SECTION 12
----------
ADMINISTRATIVE AND INVESTMENT COMMITTEE
---------------------------------------
12.1 APPOINTMENT OF COMMITTEE. The Board shall appoint the Committee,
the members of which may be officers or other employees of the Employer or any
other persons. The Committee shall be composed of not less than three members,
each of whom shall serve at the pleasure of the Board, and vacancies in the
Committee arising by reason of resignation, death, removal, or otherwise shall
be filled by the Board. Any member may resign of his or her own accord by
delivering his or her written resignation to the Board.
12.2 GENERAL POWERS OF COMMITTEE.
12.2.1 The Committee shall administer the Plan, is authorized
to make such rules and regulations as it may deem necessary to carry out the
provisions of the Plan, and is given complete discretionary authority to
determine any person's eligibility for benefits under the Plan, to construe the
terms of the Plan, and to decide any other matters pertaining to the Plan's
administration. The Committee shall determine any question arising in the
administration, interpretation, and application of the Plan, which determination
shall be binding and conclusive on all persons. In the administration of the
Plan, the Committee may: (1) employ or permit agents to carry out nonfiduciary
and/or fiduciary responsibilities (other than trustee responsibilities as
defined in Section 405(c)(3) of ERISA), and (2) provide for the allocation of
fiduciary responsibilities (other than trustee responsibilities as defined in
Section 405(c)(3) of ERISA) among its members. Actions dealing with fiduciary
responsibilities shall be taken in writing, and the performance of agents,
counsel, and fiduciaries to whom fiduciary responsibilities have been delegated
shall be reviewed periodically.
12.2.2 Further, the Committee shall administer the Plan and
adopt such rules and regulations as in the opinion of the Committee are
necessary or advisable to implement and administer the Plan and to transact its
business. In performing their duties, the members of the Committee shall act
solely in the interest of the Participants of the Plan and their beneficiaries
and:
(a) for the exclusive purpose of providing benefits
to Participants and their beneficiaries;
(b) with the care, skill, prudence, and diligence
under the circumstances then prevailing that a prudent man acting in a like
capacity and familiar with such matters would use in the conduct of an
enterprise of a like character and with like aims; and
(c) in accordance with the documents and
instruments governing the Plan insofar as such documents and instruments are
consistent with the provisions of title I of ERISA.
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12.2.3 Notwithstanding the foregoing provisions of this
Section 12.2, if the Committee cannot reasonably and economically determine or
verify, with respect to any Employee or a class of Employees, service,
compensation, date of hire, date of termination, or any other pertinent factor
in the administration of the Plan, the Committee shall adopt, with respect to
such Employee or class of Employees, reasonable and uniform assumptions
regarding the determination of such factor or factors, provided that no such
assumption shall (1) discriminate in favor of Highly Compensated Employees, (2)
reduce or eliminate a protected benefit (within the meaning of Treas. Reg.
Section 1.411(d)-4), or (3) operate to the disadvantage of such Employee or
class of Employees.
12.2.4 Unless otherwise provided in the Trust, the Committee
shall also establish guidelines with respect to the investment of all funds held
by the Trustee under the Plan and to make or direct all investments pursuant
thereto.
12.2.5 For purposes hereof, any party which has been
authorized by the Plan or under a procedure authorized under the Plan to perform
fiduciary and/or nonfiduciary administrative duties hereunder, whether such
party is the Committee, Federated, an agent appointed or permitted by the
Committee to carry out its duties, or otherwise, shall, when properly acting
within the scope of his or her or its authority, sometimes be referred to in the
Plan as a "Plan representative" or, if appointed by the Committee directly to be
an agent thereof, a "Committee representative."
12.3 RECORDS OF PLAN. The Committee shall maintain or cause to be
maintained records showing the fiscal transactions of the Plan, and shall keep
or cause to be kept in convenient form such data as may be necessary for
valuations of assets and liabilities of the Plan. The Committee shall prepare or
have prepared annually a report showing in reasonable detail the assets and
liabilities of the Plan and giving a brief account of the operation of the Plan
for the past Plan Year. In preparing this report, the Committee may rely on
advice received from the Trustee or other persons or firms selected by it or may
adopt a report on such matters prepared by the Trustee.
12.4 ACTIONS OF COMMITTEE. The Committee shall appoint a Chairman and a
Secretary and such other officers, who may be, but need not be, members of the
Committee, as it shall deem advisable. The Committee shall act by a majority of
its members at the time in office, and any such action may be taken either by a
vote at a meeting or in writing without a meeting. The Committee may by such
majority action appoint subcommittees and may authorize any one or more of the
members or any agent to execute any document or documents or to take any other
action, including the exercise of discretion, on behalf of the Committee. The
Committee may provide for the allocation of responsibilities for the operation
and maintenance of the Plan.
12.5 COMPENSATION OF COMMITTEE AND PAYMENT OF PLAN ADMINISTRATIVE AND
INVESTMENT CHARGES. Unless otherwise determined by the Board, the members of the
Committee shall serve without compensation for services as such. All expenses of
the administration and investment of the Plan (excluding brokerage fees,
expenses related to securities transactions, and any taxes
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<PAGE> 61
on the assets held in the Trust Fund, which expenses shall only be payable out
of the Trust Fund), including, without limitation, premiums due the Pension
Benefit Guaranty Corporation and the fees and charges of the Trustee, any
investment manager, any actuary, any attorney, any accountant, any specialist,
or any other person employed by the Committee or Federated in the administration
of the Plan, shall be paid out of the Trust Fund (or, if the Employer so elects,
by the Employer directly). In this regard, the Plan administrative and
investment expenses which shall be paid out of the Trust Fund (unless the
Employer elects to pay them itself) shall also include compensation payable to
any employees of the Employer or any Affiliated Employer who perform
administrative or investment services for the Plan to the extent such
compensation would not have been sustained had such services not been provided,
to the extent such compensation can be fairly allocated to such services, to the
extent such compensation does not represent an allocable portion of overhead
costs or compensation for performing "settlor" functions (such as services
incurred in establishing or designing the Plan), and to the extent such
compensation does not fail for some other reason to constitute a "direct
expense" within the meaning of 29 C.F.R. 2550.408c-2(b)(3).
12.6 LIMITS ON LIABILITY. Federated and each other Employer shall hold
each member of the Committee harmless from any loss, damage, or depreciation
which may result in connection with the execution of his or her duties or the
exercise of his or her discretion or from any other act or omission hereunder,
except when due to his or her own gross negligence or willful misconduct.
Federated and each other Employer shall indemnify and hold harmless each member
of the Committee from any and all claims, losses, damages, expenses (including
counsel fees approved by the Committee), and liabilities (including any amounts
paid in settlement with such Committee's approval) arising from any act or
omission of the member, except when the same is judicially determined to be due
to the gross negligence or willful misconduct of such member.
12.7 CLAIMS PROCEDURE.
12.7.1 In general, benefits due under this Plan will be paid
only if the applicable Participant (or beneficiary of a deceased Participant)
files a written notice with a Plan representative electing to receive such
benefits, except to the extent otherwise required under the Plan. Further, if a
Participant (or a person claiming through a Participant) has a dispute as to the
failure of the Plan to pay or provide a benefit, as to the amount of benefit
paid, or as to any other matter involving the Plan, the Participant (or such
person) may file a claim for the benefit or relief believed by the Participant
(or such person) to be due. Such claim must be provided by written notice to the
Committee or any Committee representative designated by the Committee for this
purpose. The Committee will decide any claims made pursuant to this Section
12.7.
12.7.2 If a claim made pursuant to Section 12.7.1 above is
denied, in whole or in part, notice of the denial in writing will be furnished
by the Committee or a Committee representative to the claimant within 90 days
after receipt of the claim by the Committee or the Committee representative;
except that if special circumstances require an extension of time for
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processing the claim, the period in which the Committee or the Committee
representative is to furnish the claimant written notice of the denial will be
extended for up to an additional 90 days (and the Committee or the Committee
representative will provide the claimant within the initial 90-day period a
written notice indicating the reasons for the extension and the date by which
the Committee or the Committee representative expects to render the final
decision). The final notice of denial will be written in a manner designed to be
understood by the claimant and set forth: (1) the specific reasons for the
denial, (2) specific reference to pertinent Plan provisions on which the denial
is based, (3) a description of any additional material or information necessary
for the claimant to perfect the claim and an explanation of why such material or
information is necessary, and (4) information as to the steps to be taken if the
claimant wishes to appeal such denial of his claim. If no written notice is
provided the claimant within the applicable 90-day period or 180-day period, as
the case may be, the claimant may assume his or her claim has been denied and go
immediately to the appeal process set forth in Section 12.7.3 below.
12.7.3 Any claimant who has a claim denied under Sections
12.7.1 and 12.7.2 above may appeal the denied claim to the Committee (or any
Committee representative designated by the Committee to perform this review).
Such an appeal must, in order to be considered, be filed by written notice to
the Committee (or such Committee representative) within 60 days of the receipt
by the claimant of a written notice of the denial of his or her initial claim
(unless it was not reasonably possible for the claimant to make such appeal
within such 60-day period, in which case the claimant must file his or her
appeal within 60 days after the time it becomes reasonable for him or her so to
file an appeal). If any appeal is filed in accordance with such rules, the
claimant, and any duly authorized representative of the claimant, will be given
the opportunity to review pertinent documents and submit issues and comments in
writing. A formal hearing may be allowed in its discretion by the Committee (or
such Committee representative) but is not required.
12.7.4 Upon any appeal of a denied claim made pursuant to
Section 12.7.3 above, the Committee (or such Committee representative who has
the authority to decide the appeal) will provide a full and fair review of the
subject claim and decide the appeal within 60 days after the filing of the
appeal; except that if special circumstances require an extension of time for
processing the appeal, the period in which the appeal is to be decided will be
extended for up to an additional 60 days (and the party deciding the appeal will
provide the claimant written notice of the extension prior to the end of the
initial 60-day period). The decision on appeal will be set forth in a writing
designed to be understood by the claimant, specify the reasons for the decision
and references to pertinent Plan provisions on which the decision is based, and
be furnished to the claimant by the Committee (or such Committee representative)
within the 60-day period or 120-day period, as is applicable, described above.
12.7.5 The Committee may prescribe additional rules which are
consistent with the other provisions of this Section 12.7 in order to carry out
the Plan's claim procedures.
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12.8 LIMITS ON DUTIES. The Committee shall have no duty to
independently verify any information supplied by the Employer and shall have no
duty or responsibility to collect from the Employer all or any portion of any
Employer contribution to the Plan. The Committee also shall have no duty or
responsibility to verify the status of any Employee or former Employee under
this Plan or to determine the identity or address of any person who is or may
become entitled to the payment of any benefit from this Plan, and the Committee
shall be entitled to delay taking any action respecting the payment of any
benefit until the identity of the person entitled to such benefit and his or her
address have been certified by the Employer.
12.9 APPOINTMENT OF INVESTMENT MANAGER.
12.9.1 The Committee, as a Named Fiduciary under the Plan, may
appoint in writing a person, or more than one person, who (1) is registered as
an investment adviser under the Investment Advisers Act of 1940 (the "Act"), (2)
is a Bank, as defined in the Act, or (3) is an insurance company which is
qualified, within the meaning of Section 3(38) of ERISA, to manage, acquire, and
dispose of the assets of an employee benefit plan, as an investment manager for
all or a specified portion of the assets of the Trust Fund. A person who is
appointed as an investment manager shall have the sole power, without prior
consultation with the Trustee, to manage and direct the acquisition and
disposition of the assets of the Trust Fund which specifically are allocated by
the Committee to that person's management account (his or her "Management
Account"). The Committee at its discretion may terminate the appointment of any
person as an investment manager and may cause assets to be added or deleted from
any such person's Management Account.
12.9.2 The effective date of the appointment of a person as an
investment manager shall be the date such person delivers to the Committee and
to the Trustee a written statement which in the Committee's judgment adequately
covers items (a) through (d) below:
(a) An acknowledgment (1) that such person is a
Plan fiduciary within the meaning of Section 3(21)(A) of ERISA and (2) that such
person has assumed sole responsibility for the management and the direction of
the acquisition and disposition of the Trust Fund assets in his or her
Management Account;
(b) A representation that such person is registered
as an investment adviser under the Act, is a Bank as defined in the Act, or as
an insurance company has the power within the meaning of Section 3(38)(A) of
ERISA to manage, acquire, and dispose of the assets of an employee benefit plan;
(c) The names and signatures of individuals who are
authorized to act on behalf of such person in connection with the management of
his or her Management Account (the "List"), which List may be amended from time
to time by delivering written notice thereof to the Committee and to the Trustee
and which List may be relied upon by them; and
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(d) If appropriate and negotiable, an agreement
that such person shall immediately notify the Committee of the commencement of
any Securities and Exchange Commission investigation of any of his or her
investment activities which may result either in a censure under the Act or in
the suspension or revocation of his or her registration as an investment adviser
under the Act.
12.9.3 The Committee may enter into a contract with an
investment manager in connection with his or her appointment as such, which
agreement may be subject to such terms and conditions as the Committee deems
appropriate under the circumstances, including the following types of
provisions:
(a) The appointment as investment manager may be
terminated on the delivery of 30 days' prior written notice;
(b) If appropriate, the appointment shall be
automatically terminated in the event the investment manager's registration as
an investment adviser under the Act is suspended or revoked, such automatic
termination to be effective coincident with such suspension or revocation;
(c) The investment manager shall make reports to
the Committee describing all transactions with respect to his or her Management
Account for each agreed upon reporting period; and
(d) All fees or other agreed upon compensation for
services rendered to the Plan by the investment manager shall be paid out of the
Trust Fund (or, if the Employer so elects, by the Employer directly).
12.9.4 An investment manager may exercise his or her powers
through written directions or, at his or her option, may communicate such
directions orally and as soon as practicable thereafter confirm them in writing,
provided all directions, written or oral, shall be communicated by or, as
applicable, signed by one of the individuals whose name and signature appear on
the List, or the investment manager may communicate and confirm such
instructions in any manner agreed upon between the investment manager and the
Trustee. The Trustee shall follow all such directions from an investment
manager, and shall not be liable in any respect to any person for acting in
accordance with such directions or for failing to act in the absence of such
directions. Pending receipt of directions from the investment manager, any cash
received by the Trustee from time to time for his or her Management Account may
be retained by it in short term investments as may be prudent under all of the
facts and circumstances then prevailing, including, without limitation, savings
accounts, commingled short term investment funds, commercial paper, and
governmental securities.
12.9.5 The Committee shall establish an investment policy for
each investment manager and such policy shall preclude investments in employer
securities and employer real property within the meaning of Section 407 of ERISA
except to the extent that such investments
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are allowable under ERISA. The Committee in addition shall implement an
investment manager performance review procedure and pursuant thereto shall
regularly review the performance of the investment manager to determine whether
his or her appointment as such should be continued. The period between such
reviews shall be determined by considering all the relevant facts and
circumstances, including the volume of Trust Fund transactions.
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SECTION 13
----------
TERMINATION OR AMENDMENT
------------------------
13.1 RIGHT AND PROCEDURE TO TERMINATE. Federated and each other
Employer expects this Plan to be continued indefinitely, but Federated reserves
the right to terminate the Plan in its entirety. The procedure for Federated to
terminate this Plan in its entirety is as follows. In order to completely
terminate the Plan, the Board shall adopt resolutions, pursuant and subject to
the regulations or by-laws of Federated and any applicable law, and either at a
duly called meeting of the Board or by a written consent in lieu of a meeting,
to terminate this Plan. Such resolutions shall set forth therein the effective
date of the Plan's termination. In the event the Board adopts resolutions
completely terminating the Plan, the provisions of Sections 13.2 and 13.3 below
shall apply.
13.2 FULL VESTING UPON TERMINATION. Should this Plan be completely
terminated pursuant to action of the Board under Section 13.1 above, or should a
partial termination of this Plan occur under any facts and circumstances, then
the Accrued Benefit, determined as of the date of the complete or partial
termination and to the extent then funded, of each affected Participant shall
immediately become fully vested and nonforfeitable as a result of such
termination.
13.3 ALLOCATION OF ASSETS ON TERMINATION.
13.3.1 Unless otherwise directed by the Pension Benefit
Guaranty Corporation (the "PBGC"), upon the complete termination of the Plan,
the Committee shall direct the allocation of the net assets of the Trust Fund
among the Participants, and their beneficiaries under the Plan, in the following
steps of priority:
(a) Step One:
(i) in the case of any Annuity benefit
which had commenced as of the beginning of the three-year period ending on the
date of termination, to each such benefit, based on the provisions of the Plan
(as in effect during the five-year period ending on such date) under which such
benefit would be the least, and
(ii) in the case of any Annuity benefit
which would have commenced as of the beginning of such three-year period if the
Participant had retired prior to the beginning of that period and if his or her
benefit had commenced in the normal form of Annuity provided under the Plan as
of the beginning of such period, to each such benefit based on the provisions of
the Plan (as in effect during the five-year period ending on such date) under
which such benefit would be the least.
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For purposes of subparagraph (i) above, the lowest benefit payable during the
applicable three-year period shall be considered to be the benefit payable for
such entire period.
(b) Step 2:
(i) to all other benefits (if any) under
the Plan which are guaranteed by the PBGC under title IV of ERISA, determined
without regard to Section 4022B(a) of ERISA, and
(ii) to the additional benefits (if any)
which would be determined under subparagraph (i) above if ERISA Section
4022(b)(5) does not apply.
For purposes of this Step Two, Section 4021 of ERISA shall be applied without
regard to subsection (c) thereof.
(c) Step Three: to all other nonforfeitable
benefits under the Plan (determined without regard to such benefits which become
nonforfeitable solely because of the termination of the Plan).
(d) Step Four: to all other benefits under the
Plan.
13.3.2 For purposes of taking the steps described in Section 13.2.1
above:
(a) The amount allocated under any step in Section
13.3.1 above with respect to any benefit shall be properly adjusted for any
allocation of assets with respect to that benefit under a prior step in that
Section;
(b) If the assets available for allocation under
any step (other than Step Three) are insufficient to satisfy in full the
benefits of all individuals which are described in that step, the assets shall
be allocated pro-rata among such individuals on the basis of the present value
(as of the termination date) of their respective benefits described in that
step;
(c) If the assets available for allocation under
Step Three are not sufficient to satisfy in full the benefits of the individuals
described in that step, then:
(i) Except as provided in subparagraph
(ii) below, the assets shall be allocated to the benefits of individuals
described in Step Three on the basis of the benefits of those individuals which
would have been described in such Step Three under the Plan as in effect at the
beginning of the five-year period ending on the date of Plan termination; and
(ii) If the assets available for
allocation under subparagraph (i) above are sufficient to satisfy in full the
benefits described in subparagraph (i) above (without regard to the provisions
of this subparagraph (ii)), then for purposes of subparagraph (i) above the
benefits of the individuals described therein shall be determined on the basis
of the Plan as
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amended by the most recent Plan amendment effective during such five-year period
under which the assets available for allocation are sufficient to satisfy in
full the benefits of the individuals described in subparagraph (i) above and any
assets remaining to be allocated shall be allocated on a pro-rata basis to the
additional benefits which would have been described in subparagraph (i) above
under the next succeeding Plan amendment effective during such period; and
(d) If the allocations made pursuant to this
Section 13.3 (without regard to this paragraph (d)) result in discrimination
prohibited by Section 401(a)(4) of the Code, then, to the extent required to
prevent the disqualification of the Plan (or any trust established under the
Plan) under Section 401(a)(4) of the Code: (1) the assets allocated under clause
(ii) of Step Two, under Step Three, and under Step Four shall be reallocated to
the extent necessary to avoid such discrimination, and, if still necessary to
avoid such discrimination after such reallocation, (2) the assets otherwise
allocable to benefits which are limited or restricted under Section 8.3 above
(and which are not otherwise allocated to subparagraph (ii) of Step Two, to Step
Three, or to Step Four under clause (1) above) shall also be reallocated to the
extent necessary to avoid such discrimination.
13.3.3 Upon a complete termination of the Plan, the Committee
shall determine, and direct the Trustee accordingly, from among the following
methods, the method of discharging and satisfying all obligations on behalf of
Participants affected by the termination: (1) by the purchase and distribution
of Annuity contracts; or (2) by a combination of the purchase and distribution
of Annuity contracts and the liquidation and distribution of the assets of the
Plan. Any distribution made by reason of the termination of the Plan shall
continue to meet the provisions of the Plan concerning the form in which
distributions from the Plan must be made.
13.3.4 Finally, in the case of a complete termination of the
Plan, any residual assets which remain after all foregoing liabilities under the
Plan to Participants, and their beneficiaries under the Plan, have been
satisfied shall be distributed to the Employer, so long as such reversion does
not violate applicable Federal law.
13.4 AMENDMENT OF PLAN.
13.4.1 Subject to the other provisions of this Section 13.4,
Federated may amend this Plan at any time and from time to time in any respect,
provided that no such amendment shall make it possible, at any time prior to the
satisfaction of all liabilities with respect to Participants, for any part of
the income or corpus of the Trust Fund to be used for or diverted to any purpose
other than for the exclusive benefit of Participants and their beneficiaries.
The procedure for Federated to amend this Plan is as follows:
(a) Subject to paragraph (b) below, in order to
amend the Plan, the Board shall adopt resolutions, pursuant and subject to the
regulations or by-laws of Federated and any applicable law, and either at a duly
called meeting of the Board or by a written consent in lieu of a meeting, to
amend this Plan. Such resolutions shall either (1) set forth the express
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terms of the Plan amendment or (2) simply set forth the nature of the amendment
and direct an officer of Federated or any other Federated employee to have
prepared and to sign on behalf of Federated the formal amendment to the Plan. In
the latter case, such officer or employee shall have prepared and shall sign on
behalf of Federated an amendment to the Plan which is in accordance with such
resolutions.
(b) In addition to the procedure for amending the
Plan set forth in paragraph (a) above, the Board may also adopt resolutions,
pursuant and subject to the regulations or by-laws of Federated and any
applicable law, and either at a duly called meeting of the Board or by a written
consent in lieu of a meeting, to delegate to any officer of Federated the
authority to amend the Plan. Such resolutions may either grant the officer broad
authority to amend the Plan in any manner the officer deems necessary or
advisable or may limit the scope of amendments he or she may adopt, such as by
limiting such amendments to matters related to the administration of the Plan or
to changes requested by the Internal Revenue Service. In the event of any such
delegation to amend the Plan, the officer to whom authority is delegated shall
amend the Plan by having prepared and signing on behalf of Federated an
amendment to the Plan which is within the scope of amendments which he or she
has authority to adopt. Also, any such delegation to amend the Plan may be
terminated at any time by later resolutions adopted by the Board. Finally, in
the event of any such delegation to amend the Plan, and even while such
delegation remains in effect, the Board shall continue to retain its own right
to amend the Plan pursuant to the procedure set forth in paragraph (a) above.
13.4.2 It is provided, however, that, except as is otherwise
permitted in Section 411(d)(6) of the Code or in Treasury regulations issued
thereunder, no amendment to the Plan shall decrease any Participant's Accrued
Benefit. In addition, except as is otherwise permitted in Section 411(d)(6) of
the Code or in Treasury regulations issued thereunder, no amendment to the Plan
which eliminates or reduces an early retirement benefit or a retirement-type
subsidy or eliminates an optional form of benefit shall be permitted with
respect to any Participant who meets (either before or after the amendment) the
pre-amendment conditions for such early retirement, retirement-type subsidy, or
optional form of benefit, to the extent such early retirement, retirement-type
subsidy, or optional form of benefit is based and calculated on the basis of the
Participant's Accrued Benefit determined at the time of such amendment.
13.4.3 Also, notwithstanding any other provisions hereof to
the contrary, no Plan amendment (including any change made by this Plan
amendment and restatement) which changes any vesting schedule or affects the
computation of the nonforfeitable percentage of retirement benefits under the
Plan shall be deemed to reduce the amount of the vested portion of any
retirement benefit of a Participant below the amount of the vested portion of
such retirement benefit, as determined as of the later of the date such
amendment is adopted or the date such amendment becomes effective, computed
under the Plan without regard to such amendment. Further, if a Plan amendment
(including any change made by this Plan amendment and restatement) is adopted
which changes any vesting schedule under the Plan or if the Plan is amended in
any way which directly or indirectly affects the computation of a Participant's
nonforfeitable percentage, each Participant who has completed at least three
years of Vesting
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Service (as defined in Section 2.1.7 above, disregarding for this purpose
paragraph (c) of Section 2.1.7 above) may elect, within the election period, to
have his or her nonforfeitable percentage computed under the Plan without regard
to such amendment. For purposes hereof, the "election period" is a period which
begins on the date the Plan amendment is adopted and ends on the date which is
60 days after the latest of the following days: (1) the day the Plan amendment
is adopted, (2) the day the Plan amendment becomes effective, or (3) the day the
Participant is issued a written notice of the Plan amendment by Federated or the
Committee.
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SECTION 14
----------
TOP HEAVY PROVISIONS
--------------------
14.1 DETERMINATION OF WHETHER PLAN IS TOP HEAVY. For purposes of this
Section 14, this Plan shall be considered a "Top Heavy Plan" for any Plan Year
if, and only if, (1) this Plan is an Aggregation Group Plan during at least part
of such Plan Year, and (2) the ratio of the total Present Value of all accrued
benefits of Key Employees under all Aggregation Group Plans to the total Present
Value of all accrued benefits of both Key Employees and Non-Key Employees under
all Aggregation Group Plans equals or exceeds 0.6. All calculations called for
in clauses (1) and (2) above with respect to this Plan shall be made as of the
Determination Date which is applicable to the subject Plan Year, and all
calculations called for under clause (2) above with respect to any Aggregation
Group Plan other than this Plan shall be made as of that plan's Determination
Date which falls within the same calendar year as the Determination Date being
used by this Plan. For the purpose of this Section 14, the following terms shall
have the meanings hereinafter set forth:
14.1.1 AGGREGATION GROUP PLAN. "Aggregation Group Plan"
refers, with respect to any plan year of such plan, to a plan (1) which
qualifies under Code Section 401(a), (2) which is maintained by the Employer or
an Affiliated Employer, and (3) which either includes a Key Employee as a
participant (determined as of the Determination Date applicable to such plan
year) or allows another plan qualified under Code Section 401(a), maintained by
the Employer or an Affiliated Employer, and so including at least one Key
Employee as a participant to meet the requirements of Section 401(a)(4) or
Section 410(b) of the Code. In addition, the Employer may treat any plan which
meets clauses (1) and (2) but not (3) of the immediately preceding sentence as
an "Aggregation Group Plan" with respect to any plan year of such plan if the
group of such plan and all other Aggregation Group Plans shall meet the
requirements of Sections 401(a)(4) and 410(b) of the Code with such plan being
taken into account.
14.1.2 DETERMINATION DATE. The "Determination Date" which is
applicable to any plan year of an Aggregation Group Plan refers to the last day
of the immediately preceding plan year (except that, for the first plan year of
such a plan, the "Determination Date" applicable to such plan year shall be the
last day of such first plan year).
14.1.3 KEY EMPLOYEE. With respect to any Aggregation Group
Plan and as of any Determination Date, a "Key Employee" refers to a person who
at any time during the plan year which includes such Determination Date or
during any of the four immediately preceding plan years is an employee of the
Employer or an Affiliated Employer and:
(a) An officer (disregarding any person with the
title but not the authority of an officer) of the Employer or an Affiliated
Employer, provided such person receives compensation from the Employer and the
Affiliated Employers of an amount greater than 50% of the amount in effect under
Section 415(b)(1)(A) of the Code (I.E., the maximum
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dollar limit for defined benefit plans) for an applicable plan year in which he
or she is such a officer. For this purpose, no more than 50 employees (or, if
less, the greater of three or 10% of the employees of the Employer and all
Affiliated Employers) shall be treated as officers;
(b) One of the ten employees directly owning (or
considered as owning within the meaning of Code Section 318, except that
subparagraph (C) of Code Section 318(a)(2) shall be applied by substituting "5%"
for "50%") the largest employee-held interests in the Employer and the other
Affiliated Employers, provided such person owns (or is so considered as owning)
at least 0.5% of the Employer or any Affiliated Employer and receives
compensation from the Employer and the other Affiliated Employers of an amount
greater than the amount in effect under Section 415(c)(1) (A) of the Code (I.E.,
the maximum dollar annual addition limit for defined contribution plans) for an
applicable plan year in which he or she is such an employee. For this purpose,
if two employees have the same interest in the Employer and the other Affiliated
Employers, the employee having the greater annual compensation from the Employer
and the Affiliated Employers shall be treated as having a larger interest;
(c) A 5% or more owner of the Employer; or
(d) A 1% or more owner of the Employer who receives
compensation of $150,000 or more from the Employer and the other Affiliated
Employers for an applicable plan year in which he or she owns such interest.
For purposes of paragraphs (3) and (4) above, a person is considered to own 5%
or 1%, as the case may be, of the Employer if he or she owns (or is considered
as owning within the meaning of Code Section 318, except that subparagraph (C)
of Code Section 318(a)(2) shall be applied by substituting "5%" for "50%") at
least 5% or 1%, as the case may be, of either the outstanding stock of the
Employer or the voting power of all stock of the Employer. Further, for purposes
of this entire Section 14.1.3, the term "Key Employee" includes any person who
is deceased as of the subject Determination Date but who when alive had been a
Key Employee during the plan year which includes the subject Determination Date
or any of the four immediately preceding plan years, and any accrued benefit
payable to his or her beneficiary shall be deemed to be the accrued benefit of
such person.
14.1.4 NON-KEY EMPLOYEE. With respect to any Aggregation Group
Plan and as of any Determination Date, a Non-Key Employee refers to a person who
at any time during the plan year which includes such Determination Date or
during any of the four immediately preceding plan years is an employee of the
Employer or an Affiliated Employer and who has never been considered a Key
Employee as of such or any earlier Determination Date. Further, for purposes of
this Section 14.1.4, the term "Non-Key Employee" includes any person who is
deceased as of the subject Determination Date and who when alive had been an
employee of the Employer or an Affiliated Employer during the plan year which
includes the subject Determination Date or any of the four immediately preceding
plan years, but had not been a Key Employee as of the subject or any earlier
Determination Date, and any accrued benefit payable to his or her beneficiary
shall be deemed to be the accrued benefit of such person.
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14.1.5 PRESENT VALUE OF ACCRUED BENEFITS.
(a) For any Aggregation Group Plan which is a
defined benefit plan (as defined in Code Section 414(j)), including such a plan
which has been terminated, the "Present Value" of a participant's accrued
benefit, as determined as of any Determination Date, refers to the single sum
value (calculated as of the latest Valuation Date which coincides with or
precedes such Determination Date and in accordance with the actuarial
assumptions referred to in the next sentence) of the monthly retirement or
termination benefit which the participant had accrued under such plan to such
Valuation Date. For this purpose, the actuarial assumptions to be used shall be
the actuarial assumptions used by the actuary for the plan in its valuation of
the plan as of the subject Valuation Date. Also, for this purpose, such accrued
monthly retirement or termination benefit is calculated as if it was to first
commence as of the first day of the month next following the month in which the
participant first attains his or her normal retirement age under such plan (or,
if such normal retirement age had already been attained, as of the first day of
the month next following the month in which occurs such Valuation Date) and as
if it was to be paid in the form of a single life annuity. Further, the accrued
benefit of any participant under such plan (other than a participant who is a
Key Employee) shall be determined under the method which is used for accrual
purposes for all plans of the Employer and the Affiliated Employers (or, if
there is no such method, as if such benefit accrued not more rapidly than the
allowed accrual rates permitted under Section 411(b)(1)(C) of the Code). In
addition, the dollar amount of any distributions made from the plan (including
the value of any annuity contract distributed from the plan) actually paid to
such participant prior to the subject Valuation Date but still within the plan
year which includes such Valuation Date or one of the four immediately preceding
plan years shall be added in calculating such "Present Value" of the
Participant's accrued benefit.
(b) For any Aggregation Group Plan which is a
defined contribution plan (as defined in Code Section 414(i)), including such a
plan which has been terminated, the "Present Value" of a participant's accrued
benefit, as determined as of any Determination Date, refers to the sum of (1)
the total of the participant's account balances under the plan (valued as of the
latest Valuation Date which coincides with or precedes such Determination Date),
and (2) an adjustment for contributions due as of such Determination Date. In
the case of a profit sharing or stock bonus plan, the adjustment in clause (2)
above shall be the amount of the contributions, if any, actually made after the
subject Valuation Date but on or before such Determination Date (and, in the
case of the first plan year, any amounts contributed to the plan after such
Determination Date which are allocated as of a date in such first plan year). In
the case of a money purchase pension or target benefit plan, the adjustment in
clause (2) above shall be the amount of the contributions, if any, which are
either actually made or due to be made after the subject Valuation Date but
before the expiration of the period allowed for meeting minimum funding
requirements under Code Section 412 for the plan year which includes the subject
Determination Date. In addition, the value of any distributions made from the
plan (including the value of any annuity contract distributed from the plan)
actually paid to such participant prior to the subject Valuation Date but still
within the plan year which includes such
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Valuation Date or one of the four immediately preceding plan years shall be
added in calculating such "Present Value" of the participant's accrued benefit.
(c) In the case of any rollover (as defined in the
appropriate provisions of the Code) from an Aggregation Group Plan to another
plan qualified under Section 401(a) of the Code or vice versa, or a direct
qualified plan-to-qualified plan transfer to or from a subject Aggregation Group
Plan, which rollover or transfer is both initiated by a participant and made
between a plan maintained by the Employer or an Affiliated Employer and a plan
maintained by an employer other than the Employer or an Affiliated Employer, (1)
the Aggregation Group Plan, if it is the plan from which the rollover or
transfer is made, shall count the amount of the rollover or transfer as a
distribution made as of the date such amount is distributed by such plan in
determining the "Present Value" of the participant's accrued benefit under
paragraph (a) or (b) above, as applicable, and (2) the Aggregation Group Plan,
if it is the plan to which the rollover or transfer is made, shall not so
consider the amount of the rollover or transfer as part of the participant's
accrued benefit in determining such "Present Value" if such rollover or transfer
was accepted after December 31, 1983 and shall so consider such amount if such
rollover or transfer was accepted prior to January 1, 1984.
(d) In the case of any rollover (as defined in the
appropriate provisions of the Code) from an Aggregation Group Plan to another
plan qualified under Section 401(a) of the Code or vice versa, or a direct
qualified plan-to-qualified plan transfer to or from a subject Aggregation Group
Plan, which rollover or transfer is not described in paragraph (c) above, (1)
the subject Aggregation Group Plan, if it is the plan from which the rollover or
transfer is made, shall not consider the amount of the rollover or transfer as
part of the participant's accrued benefit in determining the "Present Value"
thereof under paragraph (a) or (b) above, as applicable, and (2) the subject
Aggregation Group Plan, if it is the plan to which the rollover or transfer is
made, shall consider the amount of the rollover or transfer when made as part of
the participant's accrued benefit in determining such "Present Value."
(e) As is noted in paragraphs (a) and (b) above,
the "Present Value" of any participant's accrued benefit under either a defined
benefit plan or a defined contribution plan as of any Determination Date
includes the value of any distribution from such a plan actually paid to such
participant prior to the last Valuation Date which coincides with or precedes
such Determination Date but still within the plan year which includes such
Valuation Date or one of the four immediately preceding plan years. This rule
shall also apply to any distribution under any terminated defined benefit or
defined contribution plan which, if it had not been terminated, would have been
required to be included as an Aggregation Group Plan.
(f) Notwithstanding the foregoing provisions, the
"Present Value" of a participant's accrued benefit under either a defined
benefit plan or a defined contribution plan as of any Determination Date shall
be deemed to be zero if the participant has not performed services for the
Employer or any Affiliated Employer at any time during the five year period
ending on such Determination Date.
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14.1.6 VALUATION DATE. A "Valuation Date" refers to: (1) in
the case of a defined benefit plan (as defined in Code Section 414(j)), the date
as of which the plan actuary computes plan costs for minimum funding
requirements under Code Section 412 (except that, for a defined benefit plan
which has terminated, a "Valuation Date" shall be deemed to be the same as a
Determination Date); and (2) in the case of a defined contribution plan (as
defined in Code Section 414(i)), the date as of which plan income, gains, and/or
contributions are allocated to plan accounts of participants.
14.1.7 COMPENSATION. For purposes hereof, a Participant's
"compensation" shall refer to his or her Compensation as defined in Section 1.10
above; except that, for purposes of Section 14.3 below, paragraph (b) and
paragraph (c) of Section 1.10 above shall not apply.
14.2 EFFECT OF TOP HEAVY STATUS ON ENTITLEMENT TO RETIREMENT BENEFIT.
If for any Plan Year this Plan is a Top Heavy Plan, then any Participant who is
a Participant at some time during such Plan Year and who ceases to be an
Employee during such or any later Plan Year without being or becoming entitled
to any other retirement benefit under the Plan, but after completing at least
three years of Vesting Service (not including any years of Vesting Service
completed after the last Plan Year in which this Plan is considered a Top Heavy
Plan), shall still be entitled to a retirement benefit under the Plan (unless he
or she dies before the commencement date of the benefit). Subject to the other
provisions of the Plan, any such retirement benefit shall: (1) commence as of
the earlier of the Participant's Normal Retirement Date or his or her Required
Commencement Date; (2) be paid in the form of a Single Life Annuity; and (3)
provide, if the retirement benefit would be paid in the form of a Single Life
Annuity which commences as of the earlier of the dates set forth in clause (1)
above, a monthly amount equal to the amount which makes such monthly retirement
benefit actuarially equivalent to the amount credited to the Participant's Cash
Balance Account on the date as of which such monthly retirement benefit is to
commence. The provisions of the Plan (other than Sections 5.1 through 5.4
above), including Sections 5.5, 5.6, 5.7, 6, 7, 8, and 9 above, shall apply to
the retirement benefit payable under this Section 14.2 as if such retirement
benefit was described in Section 5.4 above.
14.3 EFFECT OF TOP HEAVY STATUS ON BENEFIT AMOUNTS.
14.3.1 For any Plan Year in which this Plan is considered a
Top Heavy Plan, the annual amount of any retirement benefit to which a
Participant becomes entitled under Section 5 or 14.2 above shall not, if paid in
the form of a Single Life Annuity which commences as of the later of the
Participant's Normal Retirement Date or the first day of the first month which
begins on or after the date he or she ceases to be an Employee (or, if earlier,
as of his or her Required Commencement Date), be less than: (1) 2% of the
Participant's average annual compensation (as defined in Section 14.3.2 below),
multiplied by (2) the Participant's years of Vesting Service (as modified
below), up to but not exceeding ten such years.
14.3.2 For purposes of this Section 14.3, a Participant's
"average annual compensation" refers to the annual average of his or her
compensation received from the
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Employer and all Affiliated Employers for the five consecutive calendar years
which produce the highest result (excluding from consideration, however,
compensation received in any Plan Year which began prior to January 1, 1984 and
in any calendar year which begins after the end of the last Plan Year in which
the Plan is considered a Top Heavy Plan).
14.3.3 For purposes of this Section 14.3, a Participant's
years of Vesting Service shall not include the period of any Plan Year which
began prior to January 1, 1984 or any Plan Year as of which the Plan is not
considered a Top Heavy Plan.
14.3.4 For purposes of the foregoing provisions of this
Section 14.3, a Participant's benefit accruals under any other defined benefit
plan (as defined in Section 414(j) of the Code) maintained by the Employer or
any Affiliated Employer and which is an Aggregation Group Plan for the subject
Plan Year, other than benefit accruals made by reason of any special top heavy
provisions of such other plan, shall be considered as benefit accruals under
this Plan.
14.3.5 Notwithstanding the foregoing provisions of this
Section 14.3, such provisions shall not apply so as to cause any additional
benefit to be provided a Participant for a Plan Year under this Plan if (1) such
Participant actively participates in an Aggregation Group Plan maintained by an
Affiliated Employer at any time in such Plan Year which is later than any date
in such year on which he or she actively participates in this Plan and (2) such
other plan provides for the same benefit as would otherwise be required under
the foregoing provisions of this Section 14.3 for such Plan Year.
14.4 EFFECT OF TOP HEAVY STATUS ON COMBINED MAXIMUM PLAN LIMITS. For
any Plan Year in which this Plan is considered a Top Heavy Plan, the references
to "125%" contained in Section 8.2 above shall be changed to "100%."
Notwithstanding the foregoing, the provisions of this Section 14.4 shall not
apply, and shall no longer be effective, after December 31, 1999.
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SECTION 15
----------
SPECIAL MINIMUM BENEFITS FOR CERTAIN
------------------------------------
COLLECTIVELY BARGAINED MACY'S EMPLOYEES
---------------------------------------
15.1 GENERAL RULES FOR MINIMUM BENEFITS. If any Participant who is an
Eligible Collectively Bargained Macy's Participant is entitled to receive a
retirement benefit under any of the foregoing provisions of this Plan, then the
monthly amount of such benefit determined as of any date (called in this Section
15.1 the "subject date"), if such benefit would be determined to be paid in the
form of a Single Life Annuity which commences as of the later of such
Participant's Normal Retirement Date or the subject date, shall not in any event
be less than such Participant's Minimum Monthly Benefit Formula Amount. For
purposes of this Section 15, an "Eligible Collectively Bargained Macy's
Participant" means a Participant who is represented by Local 1-S of the Retail,
Wholesale, Department Store Workers Union, AFL-CIO (called in this Section 15
the "Union"), and who is therefore also assigned to a store which is classified
by Federated as part of the "Macy's East" or "Macy's New York" division or
group. In addition, the following provisions of this Section 15.1 determine, for
these purposes, an Eligible Collectively Bargained Macy's Participant's "Minimum
Monthly Benefit Formula Amount" as of any subject date.
15.1.1 GENERAL RULES FOR DETERMINING MINIMUM MONTHLY BENEFIT
FORMULA AMOUNT. For purposes of the Plan, subject to the other provisions of the
Plan, an Eligible Collectively Bargained Macy's Participant's "Minimum Monthly
Benefit Formula Amount" shall be equal to the sum of: (1) the monthly amount of
the aggregate benefit, determined as if such benefit was payable in the form of
a Single Life Annuity beginning as of the later of such Participant's Normal
Retirement Date or the first day of the first month which begins on or after the
subject date, accrued by such Participant under the Prior Plan which was named
the R.H. Macy & Co., Inc. Pension Plan (called in this Section 15.1, the "Macy's
Plan") as of December 31, 1996 and which was known as the "Additional Monthly
Benefit Formula Amount" under the terms of the Macy's Plan as in effect on
December 31, 1996; and (2) the sum, for each Post-December 31, 1996 Accrual
Period which begins prior to the subject date and for which such Participant is
credited with a whole or partial year of Minimum Benefit Credited Service, of
the product obtained by multiplying (x) the Annual Full-Time Remaining Service
Accrual Rate in effect as of the first day of such Post-December 31, 1996
Accrual Period by (2) such Participant's Minimum Benefit Credited Service
credited for such Post-December 31, 1996 Accrual Period. Notwithstanding the
foregoing, in no event will such Participant's "Minimum Monthly Benefit Formula
Amount" as of any subject date be deemed to be less than the highest Minimum
Monthly Benefit Formula Amount of such Participant which could be determined as
of any preceding date.
15.1.2 DEFINITIONS FOR DETERMINING MINIMUM MONTHLY BENEFIT
FORMULA AMOUNT. As used in the provisions of this Section 15, in determining an
Eligible Collectively Bargained Macy's Participant's Minimum Monthly Benefit
Formula Amount as of any subject date, the
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following terms shall have the meanings indicated below unless it is clear from
the context that another meaning is intended:
(a) ANNUAL FULL-TIME REMAINING SERVICE ACCRUAL RATE
- - means, with respect to any Eligible Collectively Bargained Macy's Participant
and as of the first day of any Post-December 31, 1996 Accrual Period for which
such Participant earns a whole or partial year of Minimum Benefit Credited
Service, the quotient produced by dividing (1) such Participant's Projected
Remaining Full-Time Accrual determined as of the first day of such Post-December
31, 1996 Accrual Period by (2) such Participant's Projected Remaining Full-Time
Service.
(b) DETERMINATION DATE - means, with respect to any
Eligible Collectively Bargained Macy's Participant, each of the following dates:
(i) The date which is the later of (1) the
date on which such Participant attained age 25 (or, if such Participant attained
age 25 on or after August 1, 1985, the later of August 1, 1985 or the date he or
she attains age 21) or (2) the first day of the first computation period for
which he or she is credited with a year of Eligibility Service;
(ii) Each date on which such Participant
first becomes an Employee after both he or she had previously terminated
employment as an Employee and his or her prior Track Service was cancelled
pursuant to paragraph (l) below; and
(iii) Each other date as of which his or
her Minimum Benefit Schedule changes pursuant to a Plan amendment.
(c) FULL-TIME EMPLOYEE - means, with respect to any
specific period and when used for purposes of determining the Minimum Monthly
Benefit Formula Amount of any Eligible Collectively Bargained Macy's
Participant's, an employee who is represented by Local 1-S and credited with a
number of Hours of Service during such period which is not less than the
customary and prevailing number of Hours of Service scheduled during such period
for full-time employees who are represented by Local 1-S at the location at
which such Eligible Collectively Bargained Macy's Participant works.
(d) FULL-TIME IMPUTED ACCRUED BENEFIT - means, with
respect to any Eligible Collectively Bargained Macy's Participant and as of the
first day of any Post-December 31, 1996 Accrual Period for which such
Participant earns a whole or partial year of Minimum Benefit Credited Service:
(1) if such Participant has at all times during the periods for which he or she
has been credited with Track Service (up to the first day of such Post-December
31, 1996 Accrual Period) been a Full-Time Employee, the Participant's Minimum
Monthly Benefit Formula Amount determined as of the day immediately preceding
the first day of such Post-December 31, 1996 Accrual Period; or (2) if such
Participant has not at all times during such periods been a Full-Time Employee,
the amount that such Participant's
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Minimum Monthly Benefit Formula Amount would have been if he or she had been a
Full-Time Employee during all such periods.
(e) MINIMUM BENEFIT CREDITED SERVICE - means, with
respect to any Eligible Collectively Bargained Macy's Participant, such
Participant's service with the Employer which is taken into account under the
Plan for purposes of determining such Participant's Minimum Monthly Benefit
Formula Amount, computed as follows:
(i) Subject to the following provisions of
this paragraph (e), such Participant shall be credited, for each Post-December
31, 1996 Accrual Period, with an amount of Minimum Benefit Credited Service
equal to:
(A) If such Participant was
regularly scheduled to work as a Full-Time Employee throughout such
Post-December 31, 1996 Accrual Period, a part of a year (expressed as a decimal
fraction of a year), not more than 1.00 year, which is equal to the ratio that
the Post-December 31, 1996 Accrual Period's duration is to an entire calendar
year;
(B) If such Participant was not
regularly scheduled to work as a Full-Time Employee throughout such
Post-December 31, 1996 Accrual Period but does average at least 831/3 Hours of
Service per month as an Employee who is represented by Local 1-S during such
Post-December 31, 1996 Accrual Period (or, if such Post-December 31, 1996
Accrual Period occurs before 1995, is regularly scheduled to work 20 or more
hours per week while an Employee who is represented by Local 1-S during such
Post-December 31, 1996 Accrual Period), a part of a year (expressed as a decimal
fraction of year), not more than 1.00 year, which is equal to the product
obtained by multiplying (1) the part of a year (expressed as a decimal fraction
of a year), not more than 1.00 year, which is equal to the ratio that the
Post-December 31, 1996 Accrual Period's duration is to an entire calendar year
by (2) a fraction, not to exceed one, having a numerator equal to the number of
such Participant's Hours of Service as an Employee who is represented by Local
1-S during such Post-December 31, 1996 Accrual Period and a denominator equal to
the number of Hours of Service that a Full-Time Employee would customarily
complete during such entire Post-December 31, 1996 Accrual Period; or
(C) If such Participant is not
credited with a whole or partial year of Minimum Benefit Credited Service for
such Post-December 31, 1996 Accrual Period under (A) or (B) above, no year.
(ii) Notwithstanding the foregoing
provisions, such Participant shall not in any event be credited with a whole or
partial year of Minimum Benefit Credited Service for any Post-December 31, 1996
Accrual Period which ends prior to the first Determination Date applicable to
such Participant.
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<PAGE> 80
(iii) In addition, subject to the
following provisions of this paragraph (e), such Participant shall also be
credited with Minimum Benefit Credited Service equal to the total number of
years (and decimal fraction thereof) of "additional benefit credited service"
(as defined in the Macy's Plan as in effect on December 31, 1996) which were
credited under the Macy's Plan to the Participant for benefit accrual purposes
as of December 31, 1996 (taking into account all of the Macy's Plan's provisions
for determining such service, including such plan's provisions concerning
breaks-in-service, which were in effect during the periods prior to December 31,
1996).
(iv) Further, also notwithstanding any of
the foregoing provisions of this paragraph (e), any Minimum Benefit Credited
Service completed by such Participant prior to a Break-in-Service of such
Participant (as defined for purposes of determining such Participant's
Eligibility Service) shall be disregarded by the Plan if both (1) such
Participant did not have a nonforfeitable interest in any retirement benefit
under the Plan at the time such Break-in-Service began and (2) such
Participant's Eligibility Service completed prior to such Break-in-Service is
disregarded pursuant to Section 2.1.2(c) above.
(v) Similarly, and also notwithstanding
any of the foregoing provisions of this paragraph (e), any Minimum Benefit
Credited Service completed by such Participant prior to a Break-in-Service of
such Participant (as defined for purposes of determining the Participant's
Vesting Service) shall be disregarded by the Plan if both (1) such Participant
did not have a nonforfeitable interest in any retirement benefit under the Plan
at the time such Break-in-Service began and (2) such Participant's Vesting
Service completed prior to such Break-in-Service is disregarded pursuant to
Section 2.1.7(c) above.
(f) MINIMUM BENEFIT SCHEDULE - means, with respect
to any Eligible Collectively Bargained Macy's Participant and as of any
Determination Date, the benefit schedule set forth in Schedule B to this Plan
which applies on such Determination Date pursuant to the provisions of Schedule
B to this Plan. For purposes of this Section 15, once a Minimum Benefit Schedule
is established for an Eligible Collectively Bargained Macy's Participant as of
any Determination Date, such schedule shall continue to constitute such
Participant's Minimum Benefit Schedule and to remain in effect for such
Participant until the next Determination Date which is applicable to such
Participant.
(g) POST-DECEMBER 31, 1996 ACCRUAL PERIOD - means
each calendar year which begins on or after January 1, 1997. Notwithstanding the
foregoing, in the event that one or more Determination Dates occur during the
course of (and other than on the first day of) any period which otherwise would
constitute a Post-December 31, 1996 Accrual Period under the immediately
preceding sentence (called in this paragraph (g) a "year accrual period"), such
year accrual period shall be divided into more than one Post-December 31, 1996
Accrual Period, with the first such Post-December 31, 1996 Accrual Period
beginning on the first day of such year accrual period and ending on the day
immediately preceding the next Determination Date and with each following
Post-December 31, 1996 Accrual Period which falls in such year accrual period
beginning on the first day following the end of the immediately preceding
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Post-December 31, 1996 Accrual Period and ending on the earlier of the day
immediately preceding the next following Determination Date or the last day of
such year accrual period.
(h) PROJECTED REMAINING FULL-TIME ACCRUAL - means,
with respect to any Eligible Collectively Bargained Macy's Participant and as of
the first day of any Post-December 31, 1996 Accrual Period for which such
Participant earns a whole or partial year of Minimum Benefit Credited Service,
the amount (if any) by which (1) the Participant's Target Monthly Benefit
determined as of the first day of such Post-December 31, 1996 Accrual Period
exceeds (2) such Participant's Full-Time Imputed Accrued Benefit determined as
of the first day of such Post-December 31, 1996 Accrual Period.
(i) PROJECTED REMAINING FULL-TIME SERVICE - means,
with respect to any Eligible Collectively Bargained Macy's Participant and as of
the first day of any Post-December 31, 1996 Accrual Period for which such
Participant earns a whole or partial year of Minimum Benefit Credited Service,
the period (expressed in whole years and decimal fraction thereof) of Minimum
Benefit Credited Service which would be credited to such Participant from the
first day of such Post-December 31, 1996 Accrual Period to the later of the date
such Participant first attains his or her Normal Retirement Age or the subject
date as of which such Participant's Minimum Monthly Benefit Formula Amount is
being determined if the Participant were a Full-Time Employee throughout such
period. For purposes of determining the decimal fraction of a year of Projected
Remaining Full-Time Service that a partial month represents, a partial month of
15 or more days will constitute one-twelfth of a year and a partial month of
less than 15 days will not constitute any part of a year.
(j) PROJECTED TOTAL TRACK SERVICE - means, with
respect to any Eligible Collectively Bargained Macy's Participant and as of the
first day of any Post-December 31, 1996 Accrual Period for which such
Participant earns a whole or partial year of Minimum Benefit Credited Service,
the number of whole years of Track Service which would be credited to such
Participant from the first Determination Date applicable to such Participant
(even if such Determination Date precedes the first day of such Post-December
31, 1996 Accrual Period) to the later of the date such Participant first attains
his or her Normal Retirement Age or the subject date as of which such
Participant's Minimum Monthly Benefit Formula Amount is being determined if such
Participant were a Full-Time Employee throughout such period.
(k) TARGET MONTHLY BENEFIT - means, with respect to
any Eligible Collectively Bargained Macy's Participant and as of the first day
of any Post-December 31, 1996 Accrual Period for which such Participant earns a
whole or partial year of Minimum Benefit Credited Service, the product produced
by multiplying (1) the amount of the "Monthly Benefit Per Year of Projected
Total Track Service" which is indicated as applying to the number of years of
such Participant's Projected Total Track Service as of the first day of such
Post-December 31, 1996 Accrual Period under and pursuant to the Minimum Benefit
Schedule which is in effect for such Participant on the first day of such
Post-December 31, 1996 Accrual Period (I.E., under and pursuant to the Minimum
Benefit Schedule applicable to such Participant on the latest Determination Date
which occurs on or before the first day of such
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<PAGE> 82
Post-December 31, 1996 Accrual Period) by (2) the number of years of such
Participant's Projected Total Track Service as of the first day of such
Post-December 31, 1996 Accrual Period; except that such Target Monthly Benefit
shall in no event exceed the amount set forth as the "Maximum Target Monthly
Benefit" in such Minimum Benefit Schedule.
(l) TRACK SERVICE - means, with respect to any
Eligible Collectively Bargained Macy's Participant and as of any date, the
number of whole years included in the periods described in the immediately
following sentence, but in any event excluding any periods which occur prior to
the later of (1) the date on which such Participant attained age 25 (or, if such
Participant attained age 25 on or after August 1, 1985, the later of August 1,
1985 or the date he or she attains age 21) or (2) the first day of the first
computation period for which he or she is credited with a year of Eligibility
Service. For purposes of determining the part of a whole year of Track Service
that a partial month represents, a partial month of 15 or more days will
constitute one-twelfth of a year and a partial month of less than 15 days will
not constitute any part a year. Subject to the limitations set forth in the
foregoing provisions of this paragraph (l), the periods for which Track Service
shall be credited for an Eligible Collectively Bargained Macy's Participant are
the following periods:
(i) Each period of time occurring prior to
the Effective Amendment Date which was credited to him or her as "Track Service"
under the Macy's Plan as of December 31, 1996;
(ii) Each period of time occurring on or
after the Effective Amendment Date during which he or she is an Employee who is
represented by Local I-S;
(iii) Each period of time (to the extent
not otherwise credited under subparagraph (ii) above) during which he or she is
not an Employee who is represented by Local 1-S by reason of an established
uniform and nondiscriminatory leave or layoff policy of the Employer (or any
part of the Employer, E.G., any corporation or division included as part of the
Employer);
(iv) Each period of time (to the extent
not otherwise credited under subparagraphs (ii) and (iii) above) during which he
or she is not an Employee who is represented by Local 1-S and which occurs
between two periods of his or her employment as an Employee who is represented
by Local 1-S which are separated by a break of no more than five consecutive
years; or
(v) Each other period of time (to the
extent not otherwise credited under subparagraphs (i), (ii), (iii), and (iv)
above) which the Board determines in a uniform and nondiscriminatory manner
shall apply as Track Service or which is granted as Track Service pursuant to a
uniform and nondiscriminatory written policy of the Employer (or any part
thereof).
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<PAGE> 83
15.2 SPECIAL DISABILITY RETIREMENT BENEFIT FOR CERTAIN PARTICIPANTS. If
any Eligible Collectively Bargained Macy's Participant ceases to be an Employee
by reason of his or her disability prior to attaining his or her Normal
Retirement Age but after completing at least ten years of Vesting Service, and
if such Participant's retirement benefit under the Plan is being paid in the
form of a Single Life Annuity commencing as of any date prior to such
Participant's Normal Retirement Date, then the monthly amount of such benefit
shall not in any event be less than such Participant's Minimum Monthly Benefit
Formula Amount (as determined under the provisions of Section 15.1 above as of
the date as of which such retirement benefit is to commence), without such
Minimum Monthly Benefit Formula Amount being reduced by reason of such
retirement benefit commencing prior to such Participant's Normal Retirement
Date. For purposes of this Section 15.2, such Participant's "disability" means
such Participant's physical or mental impairment (resulting from anatomical,
physiological, or psychological abnormalities which are demonstrable by
medically accepted clinical and laboratory techniques) which in the opinion of a
qualified physician selected or approved by the Committee renders such
Participant totally and permanently disabled. Further, such Participant shall be
considered to be suffering from a "disability" only if (1) the impairment can be
expected to result in death or to last for a period of not less than twelve
months and (2) the impairment renders such Participant unable to do his or her
previous work and, considering his or her age, education, and work experience,
unable to engage in any other kind of substantial gainful work.
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SECTION 16
----------
MISCELLANEOUS
-------------
16.1 TRUST. All assets of the Plan shall be held in the Trust for the
benefit of the Participants and their beneficiaries. Except as provided in
Sections 10.2 and 13.3 above, in no event shall it be possible for any part of
the assets of the Plan to be used for, or diverted to, purposes other than for
the exclusive benefit of the Participants and their beneficiaries or for payment
of the proper administrative costs of the Plan and the Trust. No person shall
have any interest in or right to any part of the earnings of the Trust, or any
rights in, to, or under the Trust or any part of the assets thereof, except as
and to the extent expressly provided in the Plan. Any person having any claim
for any benefit under the Plan shall look solely to the assets of the Trust Fund
for satisfaction. In no event shall Federated or any other Employer or any of
their officers or agents, or members of the Board, the Committee, or the
Trustee, be liable in their individual capacities to any person whomsoever for
the payment of benefits under the provisions of the Plan.
16.2 MERGERS, CONSOLIDATIONS, AND TRANSFERS OF ASSETS. Notwithstanding
any other provision hereof to the contrary, in no event shall this Plan or the
Trust be merged or consolidated with any other plan and trust, nor shall any of
the assets or liabilities of this Plan and the Trust be transferred to any other
plan or trust or vice versa, unless (1) the Committee consents to such merger,
consolidation, or transfer of assets as consistent with the rules set forth
herein and the purposes of this Plan, (2) each Participant and beneficiary would
(if this Plan and the Trust then terminated) receive a benefit immediately after
the merger, consolidation, or transfer which is equal to or greater than the
benefit he or she would have been entitled to receive immediately before the
merger, consolidation, or transfer (if this Plan and the Trust had then
terminated), and (3) such merger, consolidation, or transfer of assets does not
cause any accrued benefit, early retirement benefit, retirement-type subsidy, or
optional form of benefit of a person under this Plan or the applicable other
plan to be eliminated or reduced except to the extent such elimination or
reduction is permitted under Section 411(d)(6) of the Code or in Treasury
regulations issued thereunder. In the event of any such merger, consolidation,
or transfer, the requirements of clause (2) set forth in the immediately
preceding sentence shall be deemed to be satisfied if the merger, consolidation,
or transfer conforms to and is in accordance with regulations issued under
Section 414(1) of the Code. In addition, in the case of any spin-off to this
Plan from another plan which is maintained by the Employer or an Affiliated
Employer or of any spin-off from this Plan to another plan which is maintained
by the Employer or an Affiliated Employer, a percentage of the excess assets (as
determined under Section 414(l)(2) of the Code) held in the plan from which the
spin-off is made (if any) shall be allocated to each of such plans to the extent
required by Section 414(l)(2) of the Code. Subject to the provisions of this
Section 16.2, the Committee may take action to merge or consolidate this Plan
and the Trust with any other plan and trust, or permit the transfer of any
assets and liabilities of this Plan and the Trust to any other plan and trust or
vice versa.
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16.3 BENEFITS AND SERVICE FOR MILITARY SERVICE. Notwithstanding any
provision of this Plan to the contrary, contributions, benefits, and service
credit with respect to qualified military service will be provided in accordance
with Section 414(u) of the Code.
16.4 AUTHORITY TO ACT FOR FEDERATED OR OTHER EMPLOYER. Except as is
otherwise expressly provided elsewhere in this Plan, any matter or thing to be
done by Federated or any other employer included as part of the Employer shall
be done by its board of directors, except that the board may, by resolution,
delegate to any persons or entities all or part of its rights or duties
hereunder. Any such delegation shall be valid and binding upon all persons, and
the persons or entities to whom or to which authority is delegated shall have
full power to act in all matters so delegated until the authority expires by its
terms or is revoked by resolution of such board.
16.5 RELATIONSHIP OF PLAN TO EMPLOYMENT RIGHTS. The adoption and
maintenance of the Plan is purely voluntary on the part of Federated and any
other Employer and neither the adoption nor the maintenance of the Plan shall be
construed as conferring any legal or equitable rights to employment on any
person.
16.6 APPLICABLE LAW. The provisions of the Plan shall be administered
and enforced according to Federal law and, only to the extent not preempted by
Federal law, to the laws of the State of Ohio. Either Federated or the Trustee
may at any time initiate any legal action or proceedings for the settlement of
the Trustee's accounts or for the determination of any question of construction
which arises or for instructions. Except as required by law, in any application
to, or proceeding or action in, any court with regard to the Plan or Trust, only
Federated and the Trustee shall be necessary parties, and no Participant,
beneficiary, or other person having or claiming any interest in the Plan or
Trust shall be entitled to any notice or service of process. Federated or the
Trustee may, if either so elects, include as parties defendant any other
persons. Any judgment entered into in such a proceeding or action shall be
conclusive upon all persons claiming under the Plan or Trust.
16.7 AGENT FOR SERVICE OF PROCESS. The agent for service of process for
the Plan shall be the Secretary of Federated.
16.8 REPORTING AND DISCLOSURE. Federated shall act as the Plan
Administrator for purposes of satisfying any requirement now or hereafter
imposed through Federal or State legislation to report and disclose to any
Federal or State department or agency, or to any Participant or other person,
any information respecting the establishment or maintenance of the Plan or the
Trust Fund. Any cost or expense incurred in satisfying any and all such
reporting and disclosure requirements shall be deemed to be a reasonable expense
of administering the Plan and may be paid from the Trust Fund if not otherwise
elected to be paid by the Employer.
16.9 SPECIAL BENEFIT PAYMENT RULES FOR CERTAIN COLLECTIVELY BARGAINED
EMPLOYEES. Subject to the other provisions of this Section 16.9 but
notwithstanding any other provision of the Plan to the contrary, any Participant
whose principal work location is in California and who
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is a member of a group which is identified below shall have his or her
retirement benefit under this Plan increased to the extent necessary so that the
actuarial value of his or her aggregate retirement benefits under this Plan and
any other plan which is qualified under Code Section 401(a) and maintained by
the Employer or an Affiliated Employer is not less than the actuarial value of
the benefits he or she would have been entitled to under the Western Conference
of Teamsters Pension Plan had he or she been covered by such plan solely with
respect to his or her service for the Employer as a member of such group. The
provisions of this Section 16.9 shall not apply to such Participant, however, if
and once either: (1) the Western Conference of Teamsters Pension Plan is no
longer qualified under Section 401(a) of the Code, or (2) the provisions of this
Section 16.9 are no longer required by a collective bargaining agreement which
applies to the Participant. The groups which are subject to the provisions of
this Section 16.9 are Employees represented by: the Warehouse Union, Local 860;
the Freight, Construction General Drivers, Warehousemen and Helpers Union, Local
287, IBT; the International Brotherhood of Teamsters, Chauffeurs, Warehousemen
and Helpers of America, Local 315; the Warehouse and Production Workers' Union,
Local 860; the Warehouse, Mail Order and Retail Employees, Local 853; the
Chauffeurs, Teamsters, Warehousemen and Helpers, Local 150; the International
Brotherhood of Teamsters, Chauffeurs, Warehousemen and Helpers of America,
General Teamsters Local 439; or the General Teamsters, Warehousemen and Helpers
Union, Local 890.
16.10 SEPARABILITY OF PROVISIONS. If any provision of the Plan is held
invalid or unenforceable, such invalidity or unenforceability shall not affect
any other provision hereof, and the Plan shall be construed and enforced as if
such provision had not been included.
16.11 COUNTERPARTS. The Plan may be executed in any number of
counterparts, each of which shall be deemed an original, and the counterparts
shall constitute one and the same instrument, which shall be sufficiently
evidenced by any one thereof.
16.12 HEADINGS. Headings used throughout the Plan are for convenience
only and shall not be given legal significance.
16.13 CONSTRUCTION. In the construction of this Plan, the masculine
shall include the feminine, the singular shall include the plural, and the
plural shall include the singular, in all cases where such meanings would be
appropriate.
16.14 EMPLOYMENT RULE. Any individual who is a common law employee of a
corporation which is a member of the controlled group of corporations (within
the meaning of Section 414(b) of the Code) which includes Federated (called in
this Section 16.12 the "Federated controlled group") shall, for all purposes of
this Plan, be considered to be the common law employee of the corporation in the
Federated controlled group from whose payroll the individual is paid. If any
individual participating in this Plan by reason of being paid under the payroll
of a corporation which is included as part of the Employer is actually the
common law employee of a corporation in the Federated controlled group which is
not included as part
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<PAGE> 87
of the Employer, such other corporation shall be considered an employer
participating in this Plan for purposes of Sections 401(a) and 404 of the Code.
16.15 SCHEDULES AND EXHIBITS. Any Schedules attached to this Plan are
hereby deemed to be part of this Plan. In this regard: (1) Schedule A sets forth
certain actuarial assumptions used in this Plan and; (2) Schedule B provides
information concerning the determination of minimum monthly benefit amounts
which are applicable to certain Participants.
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SIGNATURE PAGE
--------------
IN WITNESS WHEREOF, the sponsor of the Plan hereby signs this amendment
and restatement of the Plan this 13TH day of DECEMBER, 1996, effective for all
purposes as of January 1, 1997.
FEDERATED DEPARTMENT STORES, INC.
By /s/ John R. Sims
---------------------------------
Title Vice President
------------------------------
Signature Page-1
<PAGE> 89
SCHEDULE A
----------
ACTUARIAL ASSUMPTIONS
---------------------
Subject to the other provisions of the Plan, the (1) the actuarial
assumptions to be used in calculating the present value of a Participant's
accrued benefit under the Prior Plans for purposes of determining the initial
credit amount to be credited to such Participant's Cash Balance Account under
Section 4.2 of the Plan and (2) the actuarial assumptions to be used in
determining the actuarial equivalence of different annuity forms and/or times
for payment of a benefit under the Plan shall be determined under the following
provisions of this Schedule A.
PART 1. CONVERSION OF PRIOR ACCRUED BENEFITS INTO INITIAL CREDIT
------- --------------------------------------------------------
AMOUNTS.
--------
When the Plan requires the determination of an initial credit amount to
be credited to any Participant's Cash Balance Account under Section 4.2 of the
Plan, the actuarial assumptions to be used in calculating the present value of
the Participant's accrued benefit under the Prior Plans as of the later of the
Effective Amendment Date or the date he or she first becomes an active
Participant in this Plan on or after the Effective Amendment Date (the later of
such dates being called in this Part 1 the "subject date") shall be the
following assumptions:
A. An appropriate mortality assumption based on the 1983 Group
Annuity Mortality Tables; and
B. An interest rate assumption determined in accordance with
the following provisions:
(1) With respect to any benefit of an applicable
Participant which has been accrued under the Prior Plan which was named the R.H.
Macy & Co., Inc. Pension Plan, such interest rate assumption shall be 8% per
annum;
(2) With respect to any benefit of an applicable
Participant which has been accrued under any Prior Plan other than the R.H. Macy
& Co., Inc. Pension Plan, such interest rate assumption shall be: (i) 8% per
annum if the applicable Participant is younger than age 45 on the subject date,
(ii) 7% per annum if the applicable Participant is at least age 45 but is not
yet age 50 on the subject date, or (iii) 6% per annum if the applicable
Participant is at least age 50 on the subject date.
PART 2. DETERMINATION OF ACTUARIAL EQUIVALENCE BETWEEN ANNUITY FORMS.
------- -------------------------------------------------------------
Unless otherwise set forth in an applicable section of the Plan, when
the Plan requires a determination that a benefit, if it were paid in an Annuity
and to commence as of any particular date, would be actuarially equivalent to
such benefit if it were to be paid in a different
Schedule A-1
<PAGE> 90
form of Annuity but to commence as of the same date, the actuarial assumptions
to be used in making such calculation shall be determined in accordance with the
following provisions:
A. ANNUITY FORM FACTORS. The following actuarial factors are
used under the Plan in determining the actuarial equivalence of a benefit
payable in one of the following benefit forms and commencing as of any date when
compared to such benefit if it was paid in the form of a Single Life Annuity
which commences as of the same date:
<TABLE>
<S> <C>
Qualified Joint and
100% Survivor Annuity
or Joint 100% Annuity: Multiply the monthly amount of the benefit when
paid in the form of a Single Life Annuity by the
following factor: 0.800 + (0.005 x (65-A)) + (0.01
x (B-A)), where A is the age of the Participant as
of the date the benefit commences to be paid and B
is the age of the contingent beneficiary under the
benefit as of the same date. The maximum amount
of such factor shall be 0.975. Such factor is called
herein the "100% factor."
Qualified Joint and
75% Survivor Annuity
or Joint and 75% Survivor
Annuity: Multiply the monthly amount of the benefit when
paid in the form of a Single Life Annuity by the
following factor: (4 x 100% factor) / (3 + 100%
factor).
Qualified Joint and
66-2/3% Survivor
Annuity or Joint and
66-2/3% Survivor Annuity: Multiply the monthly amount of the benefit when paid
in the form of a Single Life Annuity by the follow-
ing factor: (3 x 100% factor) / (2 + 100%
factor).
Qualified Joint and
50% Survivor Annuity
or Joint and 50% Survivor
Annuity: Multiply the monthly amount of the benefit when
paid in the form of a Single Life Annuity by the
following factor: (2 x 100% factor) / (1 + 100%
factor).
</TABLE>
Schedule A-2
<PAGE> 91
<TABLE>
<S> <C>
Life and Five Year
Certain Annuity: Multiply the monthly amount of the benefit when
paid in the form of a Single Life Annuity by the
following factor: 0.980 + (0.003 x (65-A)), where
A is the age of the Participant as of the date the
benefit commences to be paid. The maximum
amount of such factor shall be 0.999.
Life and Ten Year
Certain Annuity: Multiply the monthly amount of the benefit when
paid in the form of a Single Life Annuity by the
following factor: 0.940 + (0.006 x (65-A)), where
A is the age of the Participant as of the date the
benefit commences to be paid. The maximum
amount of such factor shall be 0.999.
Life and Twenty
Year Certain Annuity: Multiply the monthly amount of the benefit when
paid in the form of a Single Life Annuity by the
following factor: 0.800 + (0.015 x (65-A)), where
A is the age of the Participant as of the date the
benefit commences to be paid. The maximum
amount of such factor shall be 0.999.
Social Security
Leveling Annuity: Subject to the immediately following paragraph, the
monthly amount of the benefit under this Annuity
until the Participant's entitlement date shall be equal
to: (1) the monthly amount of the benefit if it was
payable in the form of a Single Life Annuity;
multiplied by (2) the factor set forth in column B
below which is appropriate to the Participant's
attained age as of the date the benefit commences to
be paid. The amount determined under the above
two clauses shall be called herein the Participant's
"initially determined pre-entitlement date amount."
Notwithstanding the foregoing, if the amount the
Committee estimates would be the Participant's
primary old-age benefit under the Federal Social
Security Act, as amended, as of his entitlement date
is less than his or her initially determined
pre-entitlement date amount, then, instead of being
determined under the immediately preceding
</TABLE>
Schedule A-3
<PAGE> 92
<TABLE>
<S> <C>
paragraph, the monthly amount of the benefit
under this Annuity until the Participant's entitlement
date shall be equal to: (1) the monthly amount of the
benefit if it was payable in the form of a Single Life
Annuity; plus (2) the product produced by multiplying
the amount the Committee estimates would be the
Participant's primary old-age benefit under the
Federal Social Security Act, as amended, as of his or
her entitlement date by the factor set forth in column
A below which is appropriate to the Participant's
attained age as of the date the benefit commences to
be paid.
Further, the monthly amount of the benefit under this
Annuity on and after the Participant's entitlement
date shall be equal to: (1) monthly amount of the
benefit under this Annuity until the Participant's
entitlement date, as determined under the two
immediately preceding paragraphs; less (2) the amount
the Committee estimates would be the Participant's
primary old-age benefit under the Federal Social
Security Act, as amended, as of his or her entitlement
date. In no event shall the monthly amount of the
benefit under this Annuity on and after the
Participant's entitlement date be less than zero.
For purposes hereof, the Participant's "entitlement
date" means the first day on which a Participant
would be entitled (on proper application) to receive
his or her primary old-age benefit under the Federal
Social Security Act, as amended, on either an
unreduced or reduced basis.
</TABLE>
Schedule A-4
<PAGE> 93
Attained Age of Column
Participant as of Date ------
Benefit Commences A B
----------------- ---- ----
61 0.9219 12.7973
60 0.8513 6.7271
59 0.7875 4.7068
58 0.7296 3.6989
57 0.6770 3.0959
56 0.6290 2.6952
55 0.5851 2.4102
54 0.5449 2.1975
53 0.5081 2.0328
52 0.4742 1.9019
51 0.4430 1.7954
50 0.4143 1.7072
49 0.3877 1.6332
48 0.3631 1.5702
47 0.3404 1.5161
46 0.3193 1.4691
45 0.2997 1.4280
44 0.2815 1.3919
43 0.2646 1.3598
42 0.2488 1.3313
41 0.2341 1.3057
40 0.2204 1.2827
39 0.2076 1.2620
38 0.1956 1.2432
37 0.1844 1.2261
36 0.1739 1.2105
35 0.1641 1.1963
34 0.1549 1.1832
33 0.1462 1.1712
32 0.1381 1.1602
31 0.1304 1.1500
30 0.1233 1.1406
29 0.1165 1.1319
28 0.1102 1.1238
27 0.1042 1.1163
26 0.0985 1.1093
Schedule A-5
<PAGE> 94
SCHEDULE B
----------
MINIMUM BENEFIT SCHEDULES
-------------------------
This Schedule B sets forth certain benefit information concerning each
Minimum Benefit Schedule applicable to the Plan.
MINIMUM BENEFIT SCHEDULE IN EFFECT ON EFFECTIVE AMENDMENT DATE
--------------------------------------------------------------
<TABLE>
<CAPTION>
Projected Total Monthly Benefit Per Year of
Track Service Projected Total Track Service
--------------- -----------------------------
<S> <C>
Less than 15 $6.75
15-19 $7.25
20-24 $8.75
25-29 $12.00
30 or more $13.50
Maximum Target Monthly Benefit: $540.00
------------------------------
</TABLE>
Schedule B-1
<PAGE> 1
EXHIBIT 11
FEDERATED DEPARTMENT STORES, INC.
EXHIBIT OF PRIMARY AND FULLY DILUTED EARNINGS PER SHARE
(THOUSANDS, EXCEPT PER SHARE DATA)
================================================================================
<TABLE>
<CAPTION>
52 WEEKS ENDED 53 WEEKS ENDED
FEBRUARY 1, 1997 FEBRUARY 3, 1996
---------------------------- ----------------------------
SHARES INCOME SHARES INCOME
------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Net income and average number of
shares outstanding.................. 207,537 $265,864 191,503 $ 74,553
Earnings per share.................... $1.28 $0.39
PRIMARY COMPUTATION:
Average number of common share
equivalents:
Shares to be issued to the U.S.
Treasury....................... 40 81
Deferred compensation plan....... 234 164
Warrants......................... 1,706 383
Stock options.................... 1,547 926
------- -------- -------
Adjusted number of common and
common equivalent shares
outstanding and adjusted net
income...................... 211,064 $265,864 193,057 $ 74,553
Primary earnings per share..... $1.26 $0.39
FULLY DILUTED COMPUTATION:
Additional adjustments to a fully
diluted basis:
Convertible notes................ 10,239 10,637 --
Warrants......................... 57 166
Stock options.................... 48 113
------- -------- -------
Adjusted number of shares
outstanding and net income
on a fully diluted basis.... 221,408 $276,501 193,336 $ 74,553
======= ======== =======
Fully diluted earnings per
share....................... $1.25 $0.39
</TABLE>
E-1
<PAGE> 1
Exhibit 21
<TABLE>
<CAPTION> STATE OF
NAME INCORPORATION TRADENAME
---- ------------- ---------
<S> <C> <C>
22 East Advertising Agency, Inc. Florida
22 East Realty Corporation Florida
3240 Properties Corp. Delaware
A&S Real Estate, Inc. Delaware
Allied Mortgage Financing Corp. Delaware
Allied Stores General Real Estate Company Delaware
Allied Stores International Sales Company, Inc. New York
Allied Stores International, Inc. New York
Allied Stores Marketing Corp. New York
Astoria Realty, Inc. Delaware
Auburndale Realty, Inc. Delaware
Bamrest Del, Inc. Delaware
Bamrest Penn, Inc. Pennsylvania
BFC Real Estate Company Delaware
Bloomingdale's By Mail Ltd. New York
Bloomingdale's Real Estate, Inc. Delaware
Bloomingdale's, Inc. Ohio Bloomingdale's
Broadway Receivables, Inc. Delaware
Broadway Stores, Inc. Delaware Macy's
Bullock's, Inc. Ohio Macy's
Burdine's Main Store Real Estate, Inc. Delaware
Burdine's Real Estate II, Inc. Delaware
Burdine's Real Estate, Inc. Delaware
Burdines, Inc. Ohio Burdines
Calclove Realty Corp. California
Camelback Funding Corporation Delaware
Carter Hawley Hale Properties, Inc. California
Cowie & Company, Limited New York
Davrest Ga., Inc. Georgia
Delphis Corporation Delaware
Douglaston Plaza, Inc. Delaware
Executive Placements Consultants, Inc. New York
FACS Group, Inc. Ohio FACS
FDS National Bank Ohio
Federated Claims Administration, Inc. Ohio
Federated Claims Services Group, Inc. Delaware
</TABLE>
<PAGE> 2
<TABLE>
<CAPTION> STATE OF
NAME INCORPORATION TRADENAME
---- ------------- ---------
<S> <C> <C>
Federated Corporate Services, Inc. Delaware
Federated Credit Holdings Corporation Delaware
Federated Department Stores Foundation Ohio
Federated Department Stores Insurance Company, Ltd. Bermuda
Federated Department Stores, Inc. Delaware
Federated Noteholding Corporation Delaware
Federated Noteholding Corporation II Delaware
Federated Real Estate, Inc. Delaware
Federated Retail Holdings, Inc. Delaware
Federated Specialty Stores, Inc. Ohio
Federated Stores Realty, Inc. Delaware
Federated Systems Group, Inc. Delaware
Finite Limited Hong Kong
Garage Park Corp. New York
Hamilton By Appointment Delaware
Hunt Valley Properties Corp. Maryland
I. Magnin Properties Corp. Delaware
I. Magnin Properties Corp. II Delaware
I. Magnin, Inc. Delaware
Jordan Marsh Insurance Agency, Inc. Massachusetts
Jordan Servicenter, Inc. Delaware
Jor-Mar, Inc. Delaware
Kings Plaza Shopping Center of Avenue U, Inc. New York
L&K Properties Corp. Ohio
Lazarus PA, Inc. Ohio Lazarus
Lazarus Real Estate, Inc. Delaware
Lazarus, Inc. Ohio Lazarus
M H L Properties Corp. of Massachusetts Massachusetts
Macy Credit Corp. Delaware
Macy Financial, Inc. Delaware
Macy N. R. Properties Corp. New York
Macy Special Real Estate Capital Corp. Delaware
Macy's Close-Out, Inc. Ohio
Macy's Data and Credit Services Corp. Delaware
Macy's East, Inc. Ohio Macy's
Macy's Kings Plaza Real Estate, Inc. Delaware
</TABLE>
2
<PAGE> 3
<TABLE>
<CAPTION> STATE OF
NAME INCORPORATION TRADENAME
---- ------------- ---------
<S> <C> <C>
Macy's Primary Real Estate, Inc. Delaware
Macy's Real Estate, Inc. Delaware
Macy's Secondary Real Estate, Inc. Delaware
Macy's West, Inc. Ohio Macy's
MOA Rest, Inc. Minnesota
MSS-Delaware, Inc. Delaware Carter Club & Aeropostale
Nasstock, Inc. New York
New Haven Properties Corp. Connecticut
Paramustock, Inc. New Jersey
Pasadena Properties Corp. Delaware
Prime II Receivables Corporation Delaware
Prime Receivables Corporation Delaware
R. H. Macy (France) S.A.R.L. France
R. H. Macy Holdings (HK), Ltd. Delaware
R. H. Macy Overseas Finance N.V. Netherlands Antilles
R. H. Macy Warehouse (HK), Ltd. Delaware
Rest Tex, Inc. Texas
Rich's Department Stores, Inc. Ohio Goldsmith's & Rich's
Rich's Main Store Real Estate, Inc. Delaware
Rich's Real Estate, Inc. Delaware
Sabugo, Limited Hong Kong
Sacvent Garage California
Sanstoff East Properties Corp. California
Saramaas Realty Corp. Florida
Seven Hills Funding Corporation Delaware
Seven West Seventh, Inc. Delaware
Shop 34 Advertising, Inc. New York
Stern's Department Stores, Inc. Ohio Stern's
Stern's-Echelon, Inc. Delaware
Stern's-Granite Run, Inc. Delaware
Stern's-Moorestown, Inc. Delaware
Sunsac Properties Corp. California
The Bon, Inc. Ohio The Bon Marche
U & F Realty Corp. New York
W. P. Properties Corp. New York
Wise Chat Limited Hong Kong
</TABLE>
3
<PAGE> 1
Exhibit 23
INDEPENDENT AUDITORS' CONSENT
The Board of Directors and Shareholders
Federated Department Stores, Inc.:
We consent to the incorporation by reference in the registration
statements (Nos. 33-88240 and 33-88242) on Form S-8 of Federated Department
Stores, Inc. of our report dated March 4, 1997, relating to the consolidated
balance sheets of Federated Department Stores, Inc. and subsidiaries as of
February 1, 1997 and February 3, 1996 and the related consolidated statements of
income and cash flows for the fifty-two week period ended February 1, 1997, the
fifty-three week period ended February 3, 1996 and the fifty-two week period
ended January 28, 1995, which report appears in the February 1, 1997 annual
report on Form 10-K of Federated Department Stores, Inc.
KPMG PEAT MARWICK LLP
Cincinnati, Ohio
April 17, 1997
<PAGE> 1
Exhibit 24
POWER OF ATTORNEY
-----------------
The undersigned, a director and/or officer of Federated Department
Stores, Inc., a Delaware corporation (the "Company"), hereby constitutes and
appoints Dennis J. Broderick, John R. Sims and Padma Tatta Cariappa, or any of
them, my true and lawful attorneys-in-fact and agents, each with full power of
substitution and resubstitution, to do any and all acts and things in my name
and behalf in my capacities as director and/or officer of the Company and to
execute any and all instruments for me and in my name in the capacities
indicated above, which said attorneys-in-fact and agents, or any of them, may
deem necessary or advisable to enable the Company to comply with the Securities
Act of 1934, as amended (the "Exchange Act"), and any rules, regulations, and
requirements of the Securities and Exchange Commission (the "Commission"), in
connection with an Annual Report on Form 10-K to be filed by the Company
pursuant to Section 13 of the Exchange Act, including without limitation, power
and authority to sign for me, in my name in the capacity or capacities referred
to above, such Annual Report, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Commission, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or their
substitute or substitutes, or any one of them, shall do or cause to be done by
virtue hereof.
Dated: April 17, 1997 /s/ Allen I. Questrom
------------------------------
Allen I. Questrom
<PAGE> 2
POWER OF ATTORNEY
-----------------
The undersigned, a director and/or officer of Federated Department
Stores, Inc., a Delaware corporation (the "Company"), hereby constitutes and
appoints Dennis J. Broderick, John R. Sims and Padma Tatta Cariappa, or any of
them, my true and lawful attorneys-in-fact and agents, each with full power of
substitution and resubstitution, to do any and all acts and things in my name
and behalf in my capacities as director and/or officer of the Company and to
execute any and all instruments for me and in my name in the capacities
indicated above, which said attorneys-in-fact and agents, or any of them, may
deem necessary or advisable to enable the Company to comply with the Securities
Act of 1934, as amended (the "Exchange Act"), and any rules, regulations, and
requirements of the Securities and Exchange Commission (the "Commission"), in
connection with an Annual Report on Form 10-K to be filed by the Company
pursuant to Section 13 of the Exchange Act, including without limitation, power
and authority to sign for me, in my name in the capacity or capacities referred
to above, such Annual Report, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Commission, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or their
substitute or substitutes, or any one of them, shall do or cause to be done by
virtue hereof.
Dated: April 17, 1997 /s/ Ronald W. Tysoe
------------------------------
Ronald W. Tysoe
<PAGE> 3
POWER OF ATTORNEY
-----------------
The undersigned, a director and/or officer of Federated Department
Stores, Inc., a Delaware corporation (the "Company"), hereby constitutes and
appoints Dennis J. Broderick, John R. Sims and Padma Tatta Cariappa, or any of
them, my true and lawful attorneys-in-fact and agents, each with full power of
substitution and resubstitution, to do any and all acts and things in my name
and behalf in my capacities as director and/or officer of the Company and to
execute any and all instruments for me and in my name in the capacities
indicated above, which said attorneys-in-fact and agents, or any of them, may
deem necessary or advisable to enable the Company to comply with the Securities
Act of 1934, as amended (the "Exchange Act"), and any rules, regulations, and
requirements of the Securities and Exchange Commission (the "Commission"), in
connection with an Annual Report on Form 10-K to be filed by the Company
pursuant to Section 13 of the Exchange Act, including without limitation, power
and authority to sign for me, in my name in the capacity or capacities referred
to above, such Annual Report, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Commission, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or their
substitute or substitutes, or any one of them, shall do or cause to be done by
virtue hereof.
Dated: April 17, 1997 /s/ Joel A. Belsky
-------------------------------
Joel A. Belsky
<PAGE> 4
POWER OF ATTORNEY
-----------------
The undersigned, a director and/or officer of Federated Department
Stores, Inc., a Delaware corporation (the "Company"), hereby constitutes and
appoints Dennis J. Broderick, John R. Sims and Padma Tatta Cariappa, or any of
them, my true and lawful attorneys-in-fact and agents, each with full power of
substitution and resubstitution, to do any and all acts and things in my name
and behalf in my capacities as director and/or officer of the Company and to
execute any and all instruments for me and in my name in the capacities
indicated above, which said attorneys-in-fact and agents, or any of them, may
deem necessary or advisable to enable the Company to comply with the Securities
Act of 1934, as amended (the "Exchange Act"), and any rules, regulations, and
requirements of the Securities and Exchange Commission (the "Commission"), in
connection with an Annual Report on Form 10-K to be filed by the Company
pursuant to Section 13 of the Exchange Act, including without limitation, power
and authority to sign for me, in my name in the capacity or capacities referred
to above, such Annual Report, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Commission, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or their
substitute or substitutes, or any one of them, shall do or cause to be done by
virtue hereof.
Dated: April 17, 1997 /s/ Lyle Everingham
------------------------------
Lyle Everingham
<PAGE> 5
POWER OF ATTORNEY
-----------------
The undersigned, a director and/or officer of Federated Department
Stores, Inc., a Delaware corporation (the "Company"), hereby constitutes and
appoints Dennis J. Broderick, John R. Sims and Padma Tatta Cariappa, or any of
them, my true and lawful attorneys-in-fact and agents, each with full power of
substitution and resubstitution, to do any and all acts and things in my name
and behalf in my capacities as director and/or officer of the Company and to
execute any and all instruments for me and in my name in the capacities
indicated above, which said attorneys-in-fact and agents, or any of them, may
deem necessary or advisable to enable the Company to comply with the Securities
Act of 1934, as amended (the "Exchange Act"), and any rules, regulations, and
requirements of the Securities and Exchange Commission (the "Commission"), in
connection with an Annual Report on Form 10-K to be filed by the Company
pursuant to Section 13 of the Exchange Act, including without limitation, power
and authority to sign for me, in my name in the capacity or capacities referred
to above, such Annual Report, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Commission, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or their
substitute or substitutes, or any one of them, shall do or cause to be done by
virtue hereof.
Dated: April 17, 1997 /s/ Meyer Feldberg
------------------------------
Meyer Feldberg
<PAGE> 6
POWER OF ATTORNEY
-----------------
The undersigned, a director and/or officer of Federated Department
Stores, Inc., a Delaware corporation (the "Company"), hereby constitutes and
appoints Dennis J. Broderick, John R. Sims and Padma Tatta Cariappa, or any of
them, my true and lawful attorneys-in-fact and agents, each with full power of
substitution and resubstitution, to do any and all acts and things in my name
and behalf in my capacities as director and/or officer of the Company and to
execute any and all instruments for me and in my name in the capacities
indicated above, which said attorneys-in-fact and agents, or any of them, may
deem necessary or advisable to enable the Company to comply with the Securities
Act of 1934, as amended (the "Exchange Act"), and any rules, regulations, and
requirements of the Securities and Exchange Commission (the "Commission"), in
connection with an Annual Report on Form 10-K to be filed by the Company
pursuant to Section 13 of the Exchange Act, including without limitation, power
and authority to sign for me, in my name in the capacity or capacities referred
to above, such Annual Report, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Commission, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or their
substitute or substitutes, or any one of them, shall do or cause to be done by
virtue hereof.
Dated: April 17, 1997 /s/ Earl G. Graves, Sr.
------------------------------
Earl G. Graves, Sr.
<PAGE> 7
POWER OF ATTORNEY
-----------------
The undersigned, a director and/or officer of Federated Department
Stores, Inc., a Delaware corporation (the "Company"), hereby constitutes and
appoints Dennis J. Broderick, John R. Sims and Padma Tatta Cariappa, or any of
them, my true and lawful attorneys-in-fact and agents, each with full power of
substitution and resubstitution, to do any and all acts and things in my name
and behalf in my capacities as director and/or officer of the Company and to
execute any and all instruments for me and in my name in the capacities
indicated above, which said attorneys-in-fact and agents, or any of them, may
deem necessary or advisable to enable the Company to comply with the Securities
Act of 1934, as amended (the "Exchange Act"), and any rules, regulations, and
requirements of the Securities and Exchange Commission (the "Commission"), in
connection with an Annual Report on Form 10-K to be filed by the Company
pursuant to Section 13 of the Exchange Act, including without limitation, power
and authority to sign for me, in my name in the capacity or capacities referred
to above, such Annual Report, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Commission, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or their
substitute or substitutes, or any one of them, shall do or cause to be done by
virtue hereof.
Dated: April 17, 1997 /s/ George V. Grune
------------------------------
George V. Grune
<PAGE> 8
POWER OF ATTORNEY
-----------------
The undersigned, a director and/or officer of Federated Department
Stores, Inc., a Delaware corporation (the "Company"), hereby constitutes and
appoints Dennis J. Broderick, John R. Sims and Padma Tatta Cariappa, or any of
them, my true and lawful attorneys-in-fact and agents, each with full power of
substitution and resubstitution, to do any and all acts and things in my name
and behalf in my capacities as director and/or officer of the Company and to
execute any and all instruments for me and in my name in the capacities
indicated above, which said attorneys-in-fact and agents, or any of them, may
deem necessary or advisable to enable the Company to comply with the Securities
Act of 1934, as amended (the "Exchange Act"), and any rules, regulations, and
requirements of the Securities and Exchange Commission (the "Commission"), in
connection with an Annual Report on Form 10-K to be filed by the Company
pursuant to Section 13 of the Exchange Act, including without limitation, power
and authority to sign for me, in my name in the capacity or capacities referred
to above, such Annual Report, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Commission, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or their
substitute or substitutes, or any one of them, shall do or cause to be done by
virtue hereof.
Dated: April 17, 1997 /s/ Joseph Neubauer
------------------------------
Joseph Neubauer
<PAGE> 9
POWER OF ATTORNEY
-----------------
The undersigned, a director and/or officer of Federated Department
Stores, Inc., a Delaware corporation (the "Company"), hereby constitutes and
appoints Dennis J. Broderick, John R. Sims and Padma Tatta Cariappa, or any of
them, my true and lawful attorneys-in-fact and agents, each with full power of
substitution and resubstitution, to do any and all acts and things in my name
and behalf in my capacities as director and/or officer of the Company and to
execute any and all instruments for me and in my name in the capacities
indicated above, which said attorneys-in-fact and agents, or any of them, may
deem necessary or advisable to enable the Company to comply with the Securities
Act of 1934, as amended (the "Exchange Act"), and any rules, regulations, and
requirements of the Securities and Exchange Commission (the "Commission"), in
connection with an Annual Report on Form 10-K to be filed by the Company
pursuant to Section 13 of the Exchange Act, including without limitation, power
and authority to sign for me, in my name in the capacity or capacities referred
to above, such Annual Report, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Commission, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or their
substitute or substitutes, or any one of them, shall do or cause to be done by
virtue hereof.
Dated: April 17, 1997 /s/ Paul W. Van Orden
------------------------------
Paul W. Van Orden
<PAGE> 10
POWER OF ATTORNEY
-----------------
The undersigned, a director and/or officer of Federated Department
Stores, Inc., a Delaware corporation (the "Company"), hereby constitutes and
appoints Dennis J. Broderick, John R. Sims and Padma Tatta Cariappa, or any of
them, my true and lawful attorneys-in-fact and agents, each with full power of
substitution and resubstitution, to do any and all acts and things in my name
and behalf in my capacities as director and/or officer of the Company and to
execute any and all instruments for me and in my name in the capacities
indicated above, which said attorneys-in-fact and agents, or any of them, may
deem necessary or advisable to enable the Company to comply with the Securities
Act of 1934, as amended (the "Exchange Act"), and any rules, regulations, and
requirements of the Securities and Exchange Commission (the "Commission"), in
connection with an Annual Report on Form 10-K to be filed by the Company
pursuant to Section 13 of the Exchange Act, including without limitation, power
and authority to sign for me, in my name in the capacity or capacities referred
to above, such Annual Report, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Commission, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or their
substitute or substitutes, or any one of them, shall do or cause to be done by
virtue hereof.
Dated: April 17, 1997 /s/ Karl M. von der Heyden
-------------------------------
Karl M. von der Heyden
<PAGE> 11
POWER OF ATTORNEY
-----------------
The undersigned, a director and/or officer of Federated Department
Stores, Inc., a Delaware corporation (the "Company"), hereby constitutes and
appoints Dennis J. Broderick, John R. Sims and Padma Tatta Cariappa, or any of
them, my true and lawful attorneys-in-fact and agents, each with full power of
substitution and resubstitution, to do any and all acts and things in my name
and behalf in my capacities as director and/or officer of the Company and to
execute any and all instruments for me and in my name in the capacities
indicated above, which said attorneys-in-fact and agents, or any of them, may
deem necessary or advisable to enable the Company to comply with the Securities
Act of 1934, as amended (the "Exchange Act"), and any rules, regulations, and
requirements of the Securities and Exchange Commission (the "Commission"), in
connection with an Annual Report on Form 10-K to be filed by the Company
pursuant to Section 13 of the Exchange Act, including without limitation, power
and authority to sign for me, in my name in the capacity or capacities referred
to above, such Annual Report, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Commission, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or their
substitute or substitutes, or any one of them, shall do or cause to be done by
virtue hereof.
Dated: April 17, 1997 /s/ Marna C. Whittington
------------------------------
Marna C. Whittington
<PAGE> 12
POWER OF ATTORNEY
-----------------
The undersigned, a director and/or officer of Federated Department
Stores, Inc., a Delaware corporation (the "Company"), hereby constitutes and
appoints Dennis J. Broderick, John R. Sims and Padma Tatta Cariappa, or any of
them, my true and lawful attorneys-in-fact and agents, each with full power of
substitution and resubstitution, to do any and all acts and things in my name
and behalf in my capacities as director and/or officer of the Company and to
execute any and all instruments for me and in my name in the capacities
indicated above, which said attorneys-in-fact and agents, or any of them, may
deem necessary or advisable to enable the Company to comply with the Securities
Act of 1934, as amended (the "Exchange Act"), and any rules, regulations, and
requirements of the Securities and Exchange Commission (the "Commission"), in
connection with an Annual Report on Form 10-K to be filed by the Company
pursuant to Section 13 of the Exchange Act, including without limitation, power
and authority to sign for me, in my name in the capacity or capacities referred
to above, such Annual Report, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Commission, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or their
substitute or substitutes, or any one of them, shall do or cause to be done by
virtue hereof.
Dated: April 17, 1997 /s/ James M. Zimmerman
------------------------------
James M. Zimmerman
<PAGE> 13
POWER OF ATTORNEY
-----------------
The undersigned, a director and/or officer of Federated Department
Stores, Inc., a Delaware corporation (the "Company"), hereby constitutes and
appoints Dennis J. Broderick, John R. Sims and Padma Tatta Cariappa, or any of
them, my true and lawful attorneys-in-fact and agents, each with full power of
substitution and resubstitution, to do any and all acts and things in my name
and behalf in my capacities as director and/or officer of the Company and to
execute any and all instruments for me and in my name in the capacities
indicated above, which said attorneys-in-fact and agents, or any of them, may
deem necessary or advisable to enable the Company to comply with the Securities
Act of 1934, as amended (the "Exchange Act"), and any rules, regulations, and
requirements of the Securities and Exchange Commission (the "Commission"), in
connection with an Annual Report on Form 10-K to be filed by the Company
pursuant to Section 13 of the Exchange Act, including without limitation, power
and authority to sign for me, in my name in the capacity or capacities referred
to above, such Annual Report, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Commission, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or their
substitute or substitutes, or any one of them, shall do or cause to be done by
virtue hereof.
Dated: April 17, 1997 /s/ Craig E. Weatherup
------------------------------
Craig E. Weatherup
<TABLE> <S> <C>
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<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> FEB-01-1997
<PERIOD-START> FEB-04-1996
<PERIOD-END> FEB-01-1997
<CASH> 148,794
<SECURITIES> 0
<RECEIVABLES> 2,834,321
<ALLOWANCES> 0
<INVENTORY> 3,245,996
<CURRENT-ASSETS> 6,427,302<F1>
<PP&E> 6,524,757
<DEPRECIATION> 0
<TOTAL-ASSETS> 14,264,143<F2>
<CURRENT-LIABILITIES> 3,595,699
<BONDS> 4,605,916
0
0
<COMMON> 0
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<TOTAL-LIABILITY-AND-EQUITY> 14,264,143<F3>
<SALES> 15,228,999
<TOTAL-REVENUES> 0
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<OTHER-EXPENSES> 4,981,433
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<INCOME-PRETAX> 441,435<F4>
<INCOME-TAX> 175,571
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<NET-INCOME> 265,864
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<EPS-DILUTED> 1.25
<FN>
<F1>Supplies and prepaid expenses 109,678
Deferred income tax assets 88,513
<F2>Intangible assets - net 717,404
Notes receivable 204,400
Other assets 390,280
<F3>Deferred income taxes 830,943
Other liabilities 562,431
Shareholders' Equity 4,669,154
<F4>Interest Income 46,852
</FN>
</TABLE>
