SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the fiscal quarter ended May
1, 1999.
FEDERATED DEPARTMENT STORES, INC.
151 West 34th Street
New York, New York 10001
(212) 494-1602
and
7 West Seventh St.
Cincinnati, Ohio 45202
(513) 579-7000
Delaware 1-13536 13-3324058
(State of (Commission File No.) (I.R.S. Employer
Incorporation) Identification Number)
The Registrant 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.
209,531,928 shares of the Registrant's Common Stock, $.01 par
value, were outstanding as of May 29, 1999.
PART I -- FINANCIAL INFORMATION
FEDERATED DEPARTMENT STORES, INC.
Consolidated Statements of Income
(Unaudited)
(millions, except per share figures)
13 Weeks Ended 13 Weeks Ended
May 1, 1999 May 2, 1998
Net Sales $ 3,707 $ 3,456
Cost of sales 2,266 2,106
Selling, general and
administrative expenses 1,216 1,169
Operating Income 225 181
Interest expense (78) (83)
Interest income 3 6
Income Before Income Taxes 150 104
Federal, state and local income
tax expense (63) (44)
Net Income $ 87 $ 60
Basic earnings per share $ .42 $ .29
Diluted earnings per share $ .40 $ .27
The accompanying notes are an integral part of these unaudited
Consolidated Financial Statements.
FEDERATED DEPARTMENT STORES, INC.
Consolidated Balance Sheets
(Unaudited)
(millions)
May 1, January 30, May 2,
1999 1999 1998
ASSETS:
Current Assets:
Cash $ 239 $ 307 $ 179
Accounts receivable 2,165 2,209 2,446
Merchandise inventories 3,599 3,259 3,336
Supplies and prepaid expenses 200 117 105
Deferred income tax assets 142 80 62
Total Current Assets 6,345 5,972 6,128
Property and Equipment - net 6,624 6,572 6,422
Intangible Assets - net 1,889 631 684
Other Assets 572 289 319
Total Assets $ 15,430 $ 13,464 $ 13,553
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current Liabilities:
Short-term debt $ 1,225 $ 524 $ 357
Accounts payable and
accrued liabilities 2,699 2,446 2,375
Income taxes 75 98 24
Total Current Liabilities 3,999 3,068 2,756
Long-Term Debt 3,806 3,057 3,920
Deferred Income Taxes 1,236 1,060 975
Other Liabilities 576 570 557
Shareholders' Equity 5,813 5,709 5,345
Total Liabilities and
Shareholders' Equity $ 15,430 $ 13,464 $ 13,553
The accompanying notes are an integral part of these unaudited
Consolidated Financial Statements.
FEDERATED DEPARTMENT STORES, INC.
Consolidated Statements of Cash Flows
(Unaudited)
(millions)
13 Weeks Ended 13 Weeks Ended
May 1, 1999 May 2, 1998
Cash flows from operating activities:
Net income $ 87 $ 60
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 158 149
Amortization of intangible assets 15 6
Amortization of financing costs 1 2
Changes in assets and liabilities:
Decrease in accounts receivable 158 194
Increase in merchandise inventories (175) (97)
Decrease in supplies and prepaid
expenses 2 10
Decrease in other assets not
separately identified 43 4
Decrease in accounts payable and accrued
liabilities not separately identified (114) (116)
Decrease in current income taxes (23) (64)
Increase in deferred income taxes 1 32
Decrease in other liabilities not
separately identified (7) (6)
Net cash provided by operating
activities 146 174
Cash flows from investing activities:
Purchase of property and equipment (52) (51)
Acquisition of Fingerhut Companies,
Inc., net of cash acquired (1,539) -
Capitalized software (6) -
Investments in affiliated companies (9) -
Disposition of property and equipment 3 16
Net cash used by
investing activities (1,603) (35)
Cash flows from financing activities:
Debt issued 1,326 300
Financing costs (10) (7)
Debt repaid (1) (499)
Increase in outstanding checks 69 75
Issuance of common stock 5 29
Net cash provided (used) by
financing activities 1,389 (102)
(Continued)
FEDERATED DEPARTMENT STORES, INC.
Consolidated Statements of Cash Flows
(Unaudited)
(millions)
13 Weeks Ended 13 Weeks Ended
May 1, 1999 May 2, 1998
Net increase (decrease) in cash (68) 37
Cash at beginning of period 307 142
Cash at end of period $ 239 $ 179
Supplemental cash flow information:
Interest paid $ 73 $ 80
Interest received 3 6
Income taxes paid (net of refunds
received) 84 68
Schedule of noncash investing and financing
activities:
Debt assumed in acquisition 125 -
Equity issued in acquisition 12 -
The accompanying notes are an integral part of these unaudited
Consolidated Financial Statements.
FEDERATED DEPARTMENT STORES, INC.
Notes to Consolidated Financial Statements
(Unaudited)
1. Summary of Significant Accounting Policies
A description of the Company's significant accounting policies
is included in the Company's Annual Report on Form 10-K for
the fiscal year ended January 30, 1999 (the "1998 10-K"). The
accompanying Consolidated Financial Statements should be read
in conjunction with the Consolidated Financial Statements and
notes thereto in the 1998 10-K.
Substantially all department store merchandise inventories are
valued by the retail method and stated on the LIFO (last-in,
first-out) basis, which is generally lower than market.
Direct-to-customer merchandise inventories are stated at the
lower of FIFO (first-in, first-out) cost or market.
Because of the seasonal nature of the general merchandising
business, the results of operations for the 13 weeks ended
May 1, 1999 and May 2, 1998 (which do not include the
Christmas season) are not indicative of such results for the
fiscal year.
The Consolidated Financial Statements for the 13 weeks ended
May 1, 1999 and May 2, 1998, in the opinion of management,
include all adjustments (consisting only of normal recurring
adjustments) considered necessary to present fairly, in all
material respects, the consolidated financial position and
results of operations of the Company and its subsidiaries.
2. Acquisition
On March 18, 1999, the Company purchased Fingerhut Companies,
Inc. ("Fingerhut"), a database marketing company that sells a
broad range of products and services directly to consumers via
catalogs, direct marketing and the Internet. The total
purchase price of the Fingerhut acquisition was approximately
$1,720 million, including the assumption of $125 million of
debt and transaction costs.
The Fingerhut acquisition is being accounted for under the
purchase method of accounting and, accordingly, the Company's
results of operations do not include any revenues or expenses
related to the acquisition prior to the closing date and the
purchase price has been allocated to Fingerhut's assets and
liabilities based on the estimated fair value of these assets
and liabilities as of that date.
FEDERATED DEPARTMENT STORES, INC.
Notes to Consolidated Financial Statements
(Unaudited)
3. Segment Data
The Company conducts its business through two segments,
department stores and direct-to-customer. The Company
operates over 400 department stores throughout the country
that sell a wide range of merchandise, including men's,
women's and children's apparel and accessories, cosmetics,
home furnishings and other consumer goods. On March 18, 1999,
the Company acquired Fingerhut which, together with
Bloomingdale's By Mail, Macy's By Mail, macys.com and certain
other direct marketing activities, comprises its direct-to-
customer segment. This segment sells a broad range of
products and services directly to consumers via catalogs,
direct marketing and the Internet. Corporate and other
consists of the assets and liabilities, and related income or
expense, associated with the corporate office and certain
items managed on a company-wide basis (e.g., intangibles,
financial instruments, income taxes, retirement benefits and
properties held for sale or disposition).
The financial information for each segment is reported on the
basis used internally by the Company to evaluate performance
and allocate resources. Prior year results have not been
restated to conform to the current presentation as it is not
practicable to do so.
13 Weeks Ended
May 1, May 2,
(millions) 1999 1998
Revenues by segment were as follows:
Department Stores $3,544 $3,456
Direct-to-Customer 163 -
Total $3,707 $3,456
Operating income by segment was
as follows:
Department Stores $ 273 $ 220
Direct-to-Customer (2) -
Total segment operating income 271 220
Corporate and other (46) (39)
Operating income $ 225 $ 181
Depreciation and amortization by
segment was as follows:
Department Stores $ 153 $ 147
Direct-to-Customer 3 -
Corporate and other 17 8
Total $ 173 $ 155
FEDERATED DEPARTMENT STORES, INC.
Notes to Consolidated Financial Statements
(Unaudited)
13 Weeks Ended
May 1, May 2,
(millions) 1999 1998
Capital expenditures (purchase of
property and equipment)
by segment were as follows:
Department Stores $ 51 $ 51
Direct-to-Customer 1 -
Corporate and other - -
Total $ 52 $ 51
Total assets for each segment at
the end of the reporting
period were as follows:
Department Stores $12,083 $12,236
Direct-to-Customer 900 -
Corporate and other 2,447 1,317
Total $15,430 $13,553
4. Earnings Per Share
The following table sets forth the computation of basic and
diluted earnings per share:
13 Weeks Ended
May 1, 1999 May 2, 1998
Shares Income Shares Income
(millions, except per share data)
Net income and average number of
shares outstanding 208.6 $ 87 210.4 $ 60
Shares to be issued under
deferred compensation plan .4 - .3 -
209.0 $ 87 210.7 $ 60
Basic earnings per share $ .42 $ .29
Effect of dilutive securities:
Warrants 5.7 8.1
Stock options 1.7 2.6
Convertible notes - - 10.2 3
216.4 $ 87 231.6 $ 63
Diluted earnings per share $ .40 $ .27
FEDERATED DEPARTMENT STORES, INC.
Notes to Consolidated Financial Statements
(Unaudited)
In addition to the warrants and stock options reflected in the
foregoing table, warrants and stock options to purchase 6.6
million and 4.5 million shares of common stock at prices
ranging from $41.50 to $79.44 per share were outstanding at
May 1, 1999 and May 2, 1998, respectively, but were not
included in the computation of diluted earnings per share
because the exercise price thereof exceeded the average market
price and would have been antidilutive.
FEDERATED DEPARTMENT STORES, INC.
Management's Discussion and Analysis
of Financial Condition and Results of Operations
The Company acquired Fingerhut on March 18, 1999. The
acquisition is being accounted for under the purchase method
of accounting and, accordingly, the Company's results of
operations do not include any revenues or expenses related to
the acquisition prior to the closing date. The results of
operations of Fingerhut have been grouped with the Company's
Bloomingdale's By Mail, Macy's By Mail and macys.com
operations and certain other direct marketing activities as
the direct-to-customer segment.
For purposes of the following discussion, all references to
"first quarter of 1999" and "first quarter of 1998" are to the
Company's 13-week fiscal periods ended May 1, 1999 and May 2,
1998, respectively.
Results of Operations
Comparison of the 13 Weeks Ended May 1, 1999 and May 2, 1998
Net sales for the first quarter of 1999 totaled $3,707
million, compared to net sales of $3,456 million for the first
quarter of 1998, an increase of 7.3%. Net sales for
department stores for the first quarter of 1999 were $3,544
million compared to $3,456 million for the first quarter of
1998, an increase of 2.5%. On a comparable store basis (sales
from stores opened prior to February 1, 1998), net sales for
the first quarter of 1999 increased 4.0% compared to the first
quarter of 1998. Net sales for the direct-to-customer
business segment were $163 million for the first quarter of
1999.
Cost of sales was 61.1% of net sales for the first quarter of
1999, compared to 61.0% for the first quarter of 1998. Due to
the highly competitive environment, cost of sales as a percent
of net sales for department stores was up 0.4% in the first
quarter of 1999 compared to the same period a year ago. Due to
the lower cost of sales from the direct-to-customer business
in the first quarter of 1999, compared to cost of sales for
department stores, total cost of sales as a percent of net
sales increased only slightly from the same year-ago period.
Cost of sales was not impacted by the valuation of department
store merchandise inventory on the last-in, first-out basis in
the first quarter of 1999 or in the first quarter of 1998.
Selling, general and administrative ("SG&A") expenses were
32.8% of net sales for the first quarter of 1999 compared to
33.8% for the first quarter of 1998. Department store SG&A
expenses improved 1.8% as a percent of department store net
sales, reflecting the impact of higher sales with flat
nonpayroll expenses and lower bad debt expense, which was
partially offset by reduced finance charge income resulting
from lower receivable balances. The higher SG&A expense rate
for the direct-to-customer segment, including recently
launched businesses, and higher amortization expense due to
the Fingerhut acquisition combined to reduce the overall
improvement in the SG&A expense rate to 1.0%.
Net interest expense was $75 million for the first quarter of
1999, compared to $77 million for the first quarter of 1998.
The lower interest expense for the first quarter of 1999 is
due to lower interest rates resulting from refinancings
completed in 1998, which was partially offset by the increased
outstanding debt resulting from the Fingerhut acquisition.
FEDERATED DEPARTMENT STORES, INC.
Management's Discussion and Analysis
of Financial Condition and Results of Operations (Continued)
The Company's effective income tax rate of 42.0% for the first
quarter of 1999 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 and from other non-
deductible items.
Liquidity and Capital Resources
The Company's principal sources of liquidity are cash from
operations, cash on hand and certain available credit
facilities.
Net cash provided by operating activities in the first quarter
of 1999 was $146 million, a decrease of $28 million from the
net cash provided by operating activities in the first quarter
of 1998. The decrease in net cash provided by operating
activities reflects increased payments of non-merchandise
accounts payable due primarily to the Fingerhut acquisition.
The increase in merchandise inventories was offset by a
greater increase in merchandise accounts payable.
Net cash used by investing activities was $1,603 million for
the first quarter of 1999, including the purchase of
Fingerhut. Investing activities for the first quarter of 1999
also included purchases of property and equipment totaling $52
million and $9 million invested in Internet companies. During
the first quarter of 1999, the Company opened one new
department store and plans to open two additional department
stores during the remainder of 1999.
Net cash provided by the Company from all financing activities
was $1,389 million for the first quarter of 1999. The Company
funded the acquisition of Fingerhut through a combination of
cash on hand and short-term borrowings. During the first
quarter of 1999, the Company issued $350 million of 6.3%
Senior Notes due 2009 and $400 million of 6.9% Senior
Debentures due 2029, the proceeds of which were used to
refinance a portion of the short-term borrowings used by the
Company to acquire Fingerhut.
Management believes the department store business and other
retail businesses will continue to consolidate. Accordingly,
the Company intends from time to time to consider additional
acquisitions of, and investments in, department stores,
Internet-related companies, catalog companies and other
complementary 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 existing indebtedness or for other corporate
purposes.
FEDERATED DEPARTMENT STORES, INC.
Management's Discussion and Analysis
of Financial Condition and Results of Operations (Continued)
Year 2000
The Company relies on computer-based technology and utilizes
a variety of third-party hardware and proprietary and
third-party software. The Company's retail functions, such as
merchandise procurement and distribution, inventory control,
point-of-sale information systems and proprietary credit card
account servicing, generally use proprietary software, with
third-party software being used more extensively for
administrative functions, such as accounting and human
resource management. In
addition to such information technology ("IT") systems, the
Company's operations rely on various non-IT equipment and
systems that contain embedded computer technology, such as
elevators, escalators and energy management systems. Third
parties with whom the Company has commercial relationships,
including vendors of merchandise for resale by the Company and
of products and services used by the Company in its operations
(such as banking and financial services, data processing
services, telecommunications services and utilities), are also
highly reliant on computer-based technology.
In February 1996, the Company commenced an assessment of the
potential effects of the Year 2000 issue on the Company's
business, financial condition and results of operations. In
conjunction with such assessment, the Company developed and
commenced the implementation of the compliance program
described below.
As discussed separately under the caption "Fingerhut" below,
Fingerhut undertook a similar program prior to being
acquired by the Company.
The Company's Year 2000 Compliance Program
Proprietary IT Systems. Pursuant to the Company's Year 2000
compliance program, the Company has undertaken an examination
of the Company's proprietary IT systems. All such systems
that have been identified as relating to a critical function
and as not being Year 2000 compliant have been or are being
remediated or replaced. The Company believes that the
remediation of its proprietary IT systems is substantially
complete, and nearly all of the proprietary IT systems that
have been remediated have been installed and placed into
production. The Company commenced testing of such remediated
systems for Year 2000 compliance in August 1998 and has
completed a comprehensive, integrated test of all of its main-
frame and mid-range IT systems (including third-party and
proprietary hardware, software, network components and
interfaces). The Company is presently conducting varying
levels of follow-up testing of selected systems.
Third-Party IT Systems. The strategy instituted by the
Company to identify and address Year 2000 issues affecting
third-party IT systems used by the Company includes contacting
all third-party providers of computer hardware and software to
secure appropriate representations to the effect that such
hardware or software is or will timely be Year 2000 compliant.
The Company has received Year 2000 compliant versions of
almost all third-party software and is currently engaged in
testing those third-party software programs that have been
identified as being critical to the Company's operations. The
Company is also developing contingency plans as to third-party
hardware and software used by the Company in respect of which
the Company has not received adequate compliance assurances to
date.
FEDERATED DEPARTMENT STORES, INC.
Management's Discussion and Analysis
of Financial Condition and Results of Operations (Continued)
Non-IT Systems. The Company has undertaken a review of its
non-IT systems and has substantially completed the remediation
of those systems that are within the Company's control. In
addition, the Company's centralized real estate department has
communicated to the developers, landlords and property
managers of all of the Company's properties the Company's
expectation that the systems utilized in the management and
operation of such properties that are not within the Company's
control are or will timely be Year 2000 compliant. As a
further step, the Company has engaged in written or oral
communications with its key developers, landlords and property
managers in order to assess the Year 2000 readiness of their
respective operations.
Non-IT Vendors and Suppliers. The Company procures its
merchandise for resale and supplies for operational purposes
from a vast network of vendors located both within and outside
the United States, and is not dependent on any one vendor for
more than 5% of its merchandise purchases. The Company
procures its private label merchandise, which constitutes
approximately 15% of the Company's total sales, principally
from manufacturers located outside the United States. All of
the Company's vendors have been notified in writing of the
Company's expectation that the systems and operations of such
vendors will be Year 2000 compliant. Selected key vendors
have provided to the Company written or oral assurances that
they are in the process of implementing compliance programs
that are intended to address the Year 2000 issues affecting
their respective operations.
Contingency Planning. The Company's Year 2000 compliance
program is directed primarily towards ensuring that the
Company will be able to continue to perform three critical
functions: (i) effect sales, (ii) order and receive
merchandise, and (iii) pay its employees. The Company has
substantially completed the process of gathering data in order
to assess the potential effects on these mission critical
functions of a failure of the Company's Year 2000 compliance
program to be fully effective and, to the extent deemed
appropriate, is currently developing a contingency plan to
address such effects. The Company expects to complete its
contingency plan by July 31, 1999.
Fingerhut. Fingerhut implemented a program to address the
effects of the Year 2000 issue prior to being acquired by the
Company. The actions contemplated by Fingerhut's Year 2000
compliance program have been substantially completed and
substantially all of the costs Fingerhut expected to incur
have been incurred. The foregoing discussion of the Company's
Year 2000 compliance program does not address Fingerhut's
systems or vendors or any aspect of Fingerhut's Year 2000
compliance program. However, the discussion below of risks
associated with the Year 2000 issue apply equally to the
Company and Fingerhut and their respective Year 2000
compliance programs.
Costs. The Company (excluding Fingerhut) has incurred to
date approximately $30 million of costs to implement its Year
2000 compliance program and presently expects to incur
approximately $46 million of costs in the aggregate, of which
approximately 25% represents capitalized expenditures for
hardware purchases. All of the Company's Year 2000 compliance
costs have been or are expected to be funded from operating
cash flows. The Company's Year 2000 compliance budget does
not include material amounts for hardware replacement because
the Company has historically employed a strategy
FEDERATED DEPARTMENT STORES, INC.
Management's Discussion and Analysis
of Financial Condition and Results of Operations (Continued)
to continually upgrade its main-frame and mid-range computer
systems and to install state of the art point-of-sale systems
with respect to both pre-existing operations and in
conjunction with the acquisitions and mergers effected by the
Company in recent years. Consequently, the Company's Year
2000 budget has not required the diversion of funds from or
the postponement of the implementation of other planned IT
projects.
Risks. The novelty and complexity of the issues presented
and the proposed solutions therefor and the Company's
dependence on the technical skills of employees and
independent contractors and on the representations and
preparedness of third parties are among the factors that could
cause the Company's Year 2000 compliance efforts to be less
than fully effective. Moreover, Year 2000 issues present a
number of risks that are beyond the Company's reasonable
control, such as the failure of utility companies to deliver
electricity, the failure of telecommunications companies to
provide voice and data services, the failure of financial
institutions to process transactions and transfer funds, the
failure of vendors to deliver merchandise or perform services
required by the Company and the collateral effects on the
Company of the effects of Year 2000 issues on the economy in
general or on the Company's business partners and customers in
particular. Although the Company believes that its Year 2000
compliance program is designed to appropriately identify and
address those Year 2000 issues that are subject to the
Company's reasonable control, there can be no assurance that
the Company's efforts in this regard will be fully effective
or that Year 2000 issues will not have a material adverse
effect on the Company's business, financial condition or
results of operations.
PART II -- OTHER INFORMATION
FEDERATED DEPARTMENT STORES, INC.
Item 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of the Company's stockholders
was held on May 21, 1999. The Company's
stockholders voted on the following items at such
meeting:
i. The stockholders approved the election of
four Directors for a three-year
term expiring at the 2002 Annual Meeting of
the Company's stockholders. The votes for
such elections were as follows: Meyer
Feldberg - 172,932,103 votes in favor and
35,644,459 votes withheld; Terry J. Lundgren
- 173,383,157 votes in favor and 35,193,405
votes withheld; Ronald W. Tysoe - 173,392,688
votes in favor and 35,183,874 votes withheld;
and Marna C. Whittington - 173,391,085 votes
in favor and 35,185,477 votes withheld.
There were no broker non-votes on this item.
ii. The stockholders ratified the employment of KPMG LLP
as the Company's independent accountants for the
fiscal year ending January 29, 2000. The
votes for the ratification were 174,951,900,
the votes against the ratification were
319,530, the votes abstained were 83,723, and
there were no broker non-votes.
iii. The stockholders approved a proposal to amend
the 1995 Executive
Equity Incentive Plan to increase the number
of shares of common stock of the Company
available for issuance thereunder. The votes
for the proposal were 122,088,623, the votes
against the proposal were 486,707, the votes
abstained were 52,143,421, and there were no
broker non-votes.
Item 5. Other Information
This report and other reports, statements and
information previously or subsequently filed by
the Company with the Securities and Exchange
Commission (the "SEC") contain or may contain
forward-looking statements. Such statements are
based upon the beliefs and assumptions of, and on
information available to, the management of the
Company at the time such statements are made. The
following are or may constitute forward-looking
statements within the meaning of the Private
Securities Litigation Reform Act of 1995: (i)
statements preceded by, followed by or that
include the words "may," "will," "could,"
"should," "believe," "expect," "future,"
"potential," "anticipate," "intend," "plan,"
"estimate," or "continue" or the negative or other
variations thereof and (ii) statements regarding
matters that are not historical facts. Such
forward-looking statements are subject to various
risks and uncertainties, including (i) risks and
uncertainties relating to the possible
PART II -- OTHER INFORMATION
FEDERATED DEPARTMENT STORES, INC. (continued)
invalidity of the underlying beliefs and
assumptions, (ii) possible changes or developments
in social, economic, business, industry, market,
legal and regulatory circumstances and
conditions, and (iii) actions taken or omitted
to be taken by third parties, including customers,
suppliers, business partners, competitors and
legislative, regulatory, judicial and other
governmental authorities and officials. In
addition to any risks and uncertainties
specifically identified in the text surrounding
such forward-looking statements, the statements in
the immediately preceding sentence and the
statements under captions such as "Risk Factors"
and "Special Considerations" in reports,
statements and information filed by the Company
with the SEC from time to time constitute
cautionary statements identifying important
factors that could cause actual amounts, results,
events and circumstances to differ materially from
those reflected in such forward-looking
statements.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Agreement and Plan of Merger, dated as of
February 10, 1999, among Federated Department
Stores, Inc., Bengal Subsidiary Corporation
and Fingerhut Companies, Inc. (incorporated
by reference to Exhibit (c)(1) of the
Schedule 14D-1, filed by Federated and Bengal
on February 18, 1999.
10.2 Commercial Paper Dealer Agreement, dated as
of March 12, 1999, between Federated
Department Stores, Inc., as Issuer, and
Goldman, Sachs & Co., as Dealer.
10.3 Commercial Paper Dealer Agreement, dated as
of March 12, 1999, between Federated
Department Stores, Inc., as Issuer, and First
Chicago Capital Markets, Inc., as Dealer.
10.4 Commercial Paper Dealer Agreement, dated as of
March 12, 1999, between Federated Department Stores,
Inc., as Issuer, and Chase Securities Inc., as Dealer.
10.5 Purchase Agreement, dated as of March 18,
1999, between Federated Department Stores,
Inc. and Credit Suisse First Boston
Corporation, Salomon Smith Barney Inc., Chase
Securities Inc., NationsBanc Montgomery
Securities LLC and PNC Capital Markets, Inc.,
as representatives of the Several Purchasers
(incorporated by reference to Exhibit 4.1 to
Federated Department Stores, Inc.'s
Registration Statement on Form S-4
(Registration No. 333-76795) filed on April
22, 1999 (the "Registration Statement")).
PART II -- OTHER INFORMATION
FEDERATED DEPARTMENT STORES, INC. (continued)
10.6 Registration Rights Agreement, dated as of
March 18, 1999, between Federated Department
Stores, Inc. and Credit Suisse First Boston
Corporation, Salomon Smith Barney Inc., Chase
Securities Inc., NationsBanc Montgomery
Securities LLC and PNC Capital Markets, Inc.
(incorporated by reference to Exhibit 4.3 to
the Registration Statement).
10.7 Third Supplemental Trust Indenture, dated as
of March 24, 1999, between Federated
Department Stores, Inc. and Citibank, N.A.,
as Trustee (incorporated by reference to
Exhibit 4.2 to the Registration Statement).
10.8 Amended and Restated Pooling and Servicing
Agreement dated as of March 18, 1998 between
Fingerhut Receivables, Inc., as Transferor,
Fingerhut National Bank as Servicer, and The
Bank of New York (Delaware) as Trustee
(incorporated by reference to Exhibit 4(d) to
Fingerhut Receivables, Inc. Registration
Statement on Form S-1 (File No. 333-45599)).
10.9 Series 1998-1 Supplement dated as of April
28, 1998 to Amended and Restated Pooling and
Servicing Agreement.
10.10 Series 1998-2 Supplement dated as of
April 28, 1998 to Amended and Restated
Pooling and Servicing Agreement.
10.11 Series 1998-3 Supplement dated as of
April 28, 1998 to Amended and Restated
Pooling and Servicing Agreement.
10.12 First Amendment dated as of March 17,
1999 to Series 1998-1 Supplement.
10.13 First Amendment dated as of March 17,
1999 to Series 1998-2 Supplement.
10.14 First Amendment dated as of March 17,
1999 to Series 1998-3 Supplement.
10.15 Amended and Restated Purchase Agreement
dated as of March 18, 1998 between Fingerhut
Receivables, Inc., as Buyer and Fingerhut
Companies, Inc., as Seller (incorporated by
reference to Exhibit 10(d) to Fingerhut
Receivables, Inc. Registration Statement on
Form S-1 (File No. 333-45599)).
PART II -- OTHER INFORMATION
FEDERATED DEPARTMENT STORES, INC. (continued)
10.16 Amended and Restated Bank Receivables Purchase
Agreement dated as of March 18, 1998 between Fingerhut
Companies, Inc., as Buyer, and Fingerhut National Bank, as
Seller (incorporated by reference to Exhibit 10(e) to
Fingerhut Receivables, Inc. Registration Statement (File No.
333-45599)).
10.17 Indenture dated as of September 15, 1996
between Fingerhut Companies, Inc. and First
Bank, National Association, as trustee (now
know as U.S. Bank) (incorporated by reference
to Exhibit 4.1 to Fingerhut Companies, Inc.
Registration Statement on Form S-4 (File No.
333-15491)).
27 Financial Data Schedule
(b) Reports on Form 8-K
Current report on Form 8-K, dated March 18, 1999,
reporting matters under items 2, 5 and 7 thereof.
FEDERATED DEPARTMENT STORES, INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned thereunder duly
authorized.
FEDERATED DEPARTMENT STORES, INC.
Date June 15, 1999
/s/ Dennis J. Broderick
Dennis J. Broderick
Senior Vice President, General Counsel
and Secretary
/s/ Joel A.Belsky
Joel A. Belsky
Vice President and Controller
(Principal Accounting Officer)
COMMERCIAL PAPER DEALER AGREEMENT
4(2) PROGRAM
between
Federated Department Stores, Inc., as Issuer
and
Goldman, Sachs & Co., 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
March 12, 1999
COMMERCIAL PAPER DEALER AGREEMENT
This agreement ("Agreement") sets forth the understandings
between the Issuer and the Dealer, each named on the cover page
hereof, in connection with the issuance and sale by the Issuer of
its short-term promissory notes (the "Notes") through the Dealer.
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.
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 those contained in
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 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 maturity 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 and issuance of, and payment for,
the Notes shall be effected in accordance with the Issuing and
Paying Agency Agreement, and the Notes shall be either individual
physical certificates or book-entry notes evidenced by a Master
Note 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 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
Issuing and Paying Agent, for the account of 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 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 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 by or through the
Dealer shall be made only to: (i) investors reasonably
believed by the Dealer to be Qualified Institutional Buyers
("QIBs"), Institutional Accredited Investors or
Sophisticated Individual Accredited Investors and (ii) non-
bank fiduciaries or agents that will be purchasing Notes for
one or more accounts, each of which is reasonably believed
by the Dealer to be an Institutional Accredited Investor or
Sophisticated Individual Accredited Investor.
(b) Resales and other transfers of the Notes by the
holders thereof shall be made only in accordance with the
restrictions in the legend 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 the 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
(or such other materials as may from time to time be
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 offers
and sales of Notes hereunder, as well as on each individual
certificate representing a Note and each Master Note
representing book-entry Notes offered and sold pursuant to
this Agreement.
(f) The Dealer shall furnish or shall have furnished
to each purchaser of Notes for which it has acted as the
Dealer 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 the Dealer would be ineligible for resale under
Rule 144A, the Issuer shall immediately notify the Dealer
(by telephone, confirmed in writing) of such fact and shall
promptly prepare and deliver to the 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.
(i) The Issuer represents that it is not currently
issuing commercial paper in the United States market in
reliance upon, and in compliance with, the exemption
provided by Section 3(a)(3) of the Securities Act. However,
the Issuer agrees that if the Issuer were to issue such
3(a)(3) commercial paper, (a) the proceeds from the sale of
the Notes would be segregated from the proceeds of the sale
of any such commercial paper by being placed in a separate
account; (b) the Issuer would institute appropriate
corporate procedures to ensure that the offers and sales of
notes issued by the Issuer pursuant to the Section 3(a)(3)
exemption would not be integrated with offerings and sales
of Notes hereunder; and (c) the Issuer would comply with
each of the requirements of Section 3(a)(3) of the
Securities Act in selling commercial paper or other short-
term debt securities other than the Notes in the United
States.
(j) The Issuer hereby agrees that, not later than 15
days after the first sale of Notes as contemplated by this
Agreement, it will file with the SEC a notice on Form D in
accordance with Rule 503 under the Securities Act and that
it will thereafter file such amendments to such notice as
Rule 503 may require.
1.7 The Issuer hereby represents and warrants to the
Dealer, in connection with offers, sales and resales of Notes, as
follows:
(a) The Issuer hereby confirms to the Dealer that
(except as permitted by Section 1.6(i)) within the preceding
six months neither the Issuer nor any person other than the
Dealer or the other dealers referred to in Section 1.2
hereof acting on behalf of the Issuer has offered or sold
any Notes, or any substantially similar security of the
Issuer (including, without limitation, medium-term notes
issued by the Issuer), to, or solicited offers to buy any
such security from, any person other than the Dealer or the
other dealers referred to in Section 1.2 hereof (including
for purposes of this Section 1.7(a) other dealers who would
be so referred to but for the fact that they executed
agreements of the type referred to in such Section 1.2 prior
to the date hereof). The Issuer also agrees that (except as
permitted by Section 1.6(i)), as long as the Notes are being
offered for sale by the Dealer and the other dealers
referred to in Section 1.2 hereof as contemplated hereby and
until at least six months after the offer of Notes hereunder
has been terminated, neither the Issuer nor any person other
than the Dealer or the other dealers referred to in Section
1.2 hereof (except as contemplated by Section 1.2 hereof)
will offer the Notes or any substantially similar security
of the Issuer for sale to, or solicit offers to buy any such
security from, any person other than the Dealer or the other
dealers referred to in Section 1.2 hereof, it being
understood that such agreement is made with a view to
bringing the offer and sale of the Notes within the
exemption provided by Section 4(2) of the Securities Act and
Rule 506 thereunder and shall survive any termination of
this Agreement. The Issuer hereby represents and warrants
that it has not taken or omitted to take, and will not take
or omit to take, any action that would cause the offering
and sale of Notes hereunder to be integrated with any other
offering of securities, whether such offering is made by the
Issuer or some other party or parties.
(b) 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 either (i) 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 or (ii) in a manner which would not cause a violation
of Regulation T and the interpretations thereunder.
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 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
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 as
provided in the Issuing and Paying Agency Agreement, will be duly
and validly issued 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 Regulation D thereunder,
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 will rank at least pari passu with all other
unsecured and unsubordinated indebtedness of the Issuer.
2.6 Except as provided in Section 1.6(j), no consent or
action of, or filing or registration with, any governmental or
public regulatory body or authority, including 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 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
a 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
default might have a material adverse effect on the condition
(financial or otherwise), operations or business prospects of the
Issuer or the ability of the Issuer to perform its obligations
under this Agreement, the Notes or the Issuing and Paying Agency
Agreement.
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 change in the condition (financial
or otherwise), operations or business prospects of the Issuer or
the ability of the Issuer to perform its obligations under this
Agreement, the Notes or the Issuing and Paying Agency Agreement.
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.
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 the Issuer makes no representation and warranty
regarding 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 business prospects of the Issuer 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 change
in the Issuer's condition (financial or otherwise), operations or
business prospects or any development or occurrence in relation
to the Issuer that would be material to holders of the Notes or
potential holders of the Notes (including 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 nationally 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 change, development or occurrence.
3.3 The Issuer shall from time to time furnish to the
Dealer such information as the Dealer may reasonably request,
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, however, 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.
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, satisfactory in form and
substance to the Dealer, (b) a copy of the executed Issuing and
Paying Agency Agreement as then in effect, (c) a copy of
resolutions adopted by the Board of Directors of the Issuer,
satisfactory in form and substance to the Dealer 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 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 to promptly 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 Company Information
then in existence to include an untrue statement of a 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 the 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.
(c) In the event that (i) the Issuer gives the Dealer
notice pursuant to Section 4.3(a), (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.
Section 5. Indemnification and Contribution.
5.1 The Issuer 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 "Indemnitees")
against any and all liabilities, penalties, suits, causes of
action, losses, damages, claims, costs and expenses (including,
without limitation, fees and disbursements of counsel) or
judgments of whatever kind or nature (each a "Claim"), imposed
upon, incurred by or asserted against the 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 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 Provisions relating to claims made for indemnification
under this Section 5 are set forth on Exhibit B to this
Agreement.
5.3 In order to provide for just and equitable contribution
in circumstances in which the indemnification provided for in
this Section 5 is held to be unavailable or insufficient to hold
harmless the Indemnitees, although applicable in accordance with
the terms of this Section 5, the Issuer shall contribute to the
aggregate costs incurred by the Dealer in connection with any
Claim in the proportion of the respective economic interests of
the Issuer and the Dealer; provided, however, that such
contribution by the Issuer shall be in an amount such that the
aggregate costs incurred by the Dealer do not exceed the
aggregate of the commissions and fees earned by the Dealer
hereunder with respect to the issue or issues of Notes to which
such Claim relates. The respective economic interests shall be
calculated by reference to the aggregate proceeds to the Issuer
of the Notes issued hereunder and the aggregate commissions and
fees earned by the Dealer hereunder.
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 the
Private Placement Memorandum together with, 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 material concerning the
Dealer 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 "Indemnitee" shall have the meaning set forth in
Section 5.1.
6.7 "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.
6.8 "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.
6.9 "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, or any successor thereto in accordance with the
Issuing and Paying Agency Agreement.
6.10 "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.
6.11 "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).
6.12 "Qualified Institutional Buyer" shall have the meaning
assigned to that term in Rule 144A under the Securities Act.
6.13 "Regulation D" shall mean Regulation D (Rules 501 et
seq.) under the Securities Act.
6.14 "Rule 144A" shall mean Rule 144A under the Securities
Act.
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 Issuer 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; provided,
however, that the Dealer may assign its rights and obligations
under this Agreement to any affiliate of the Dealer.
7.6 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.
7.7 This Agreement is for the exclusive benefit of the
parties hereto, and their respective permitted successors and
assigns hereunder, 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.
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, Treasurer
and Chief Financial Officer
Goldman, Sachs & Co., as Dealer
By: /s/ J. Christopher Kersey
Name: J. Christopher Kersey
Title: Vice President
ADDENDUM
The following additional clauses shall apply to the
Agreement and be deemed a part thereof.
1. The other dealers referred to in clause (b) of Section 1.2
of the Agreement are Chase Securities Inc. and First Chicago
Capital Markets, Inc.
2. 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: Goldman, Sachs & Co.
Address: 85 Broad Street
New York, New York 10004
Attention: Money Markets Origination
Telephone number: 212-902-7594
Fax number: 212-902-0683
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 SOPHISTICATED INDIVIDUAL
INVESTOR THAT IS AN ACCREDITED INVESTOR WITHIN THE
MEANING OF RULE 501(a) UNDER THE ACT AND WHICH, IN THE
CASE OF AN INDIVIDUAL, (i) POSSESSES 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) HAS A NET
WORTH OF AT LEAST $5 MILLION (AN "INSTITUTIONAL
ACCREDITED INVESTOR" OR "SOPHISTICATED INDIVIDUAL
ACCREDITED INVESTOR", RESPECTIVELY) AND THAT EITHER 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 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 GOLDMAN,
SACHS & CO. 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,
SOPHISTICATED INDIVIDUAL ACCREDITED INVESTOR OR A QIB,
OR (3) TO A QIB IN A TRANSACTION THAT MEETS THE
REQUIREMENTS OF RULE 144A AND (B) IN MINIMUM AMOUNTS OF
$250,000.
EXHIBIT B
FURTHER PROVISIONS RELATING
TO INDEMNIFICATION
(a) The Issuer 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 Issuer, notify the
Issuer in writing of the existence thereof; provided that (i) the
omission so to notify the Issuer will not relieve the Issuer 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 Issuer of substantial
rights and defenses, and (ii) the omission so to notify the
Issuer 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 Issuer of the existence thereof, the Issuer 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 Issuer, 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 Issuer, the Issuer 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 Issuer to such Indemnitee of the
Issuer's election so to assume the defense of such Claim and
approval by the Indemnitee of counsel, the Issuer 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
Issuer 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), approved by the
Dealer, representing the Indemnitee who is party to such Claim),
(ii) the Issuer 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 Issuer has authorized in writing the employment of counsel
for the Indemnitee. The indemnity, reimbursement and
contribution obligations of the Issuer hereunder shall be in
addition to any other liability the Issuer 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 Issuer and any Indemnitee. The Issuer agrees that without
the Dealer'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 (whether or not the
Dealer or any other Indemnitee is an actual or potential party to
such Claim).
COMMERCIAL PAPER DEALER AGREEMENT
4(2) PROGRAM
between
Federated Department Stores, Inc., as Issuer
and
First Chicago Capital Markets, 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
March 12, 1999
COMMERCIAL PAPER DEALER AGREEMENT
This agreement ("Agreement") sets forth the understandings
between the Issuer and the Dealer, each named on the cover page
hereof, in connection with the issuance and sale by the Issuer of
its short-term promissory notes (the "Notes") through the Dealer.
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.
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 those contained in
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 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 maturity 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 and issuance of, and payment for,
the Notes shall be effected in accordance with the Issuing and
Paying Agency Agreement, and the Notes shall be either individual
physical certificates or book-entry notes evidenced by a Master
Note 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 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
Issuing and Paying Agent, for the account of 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 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 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 by or through the
Dealer shall be made only to: (i) investors reasonably
believed by the Dealer to be Qualified Institutional Buyers
("QIBs"), Institutional Accredited Investors or
Sophisticated Individual Accredited Investors and (ii) non-
bank fiduciaries or agents that will be purchasing Notes for
one or more accounts, each of which is reasonably believed
by the Dealer to be an Institutional Accredited Investor or
Sophisticated Individual Accredited Investor.
(b) Resales and other transfers of the Notes by the
holders thereof shall be made only in accordance with the
restrictions in the legend 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 the 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
(or such other materials as may from time to time be
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 offers
and sales of Notes hereunder, as well as on each individual
certificate representing a Note and each Master Note
representing book-entry Notes offered and sold pursuant to
this Agreement.
(f) The Dealer shall furnish or shall have furnished
to each purchaser of Notes for which it has acted as the
Dealer 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 the Dealer would be ineligible for resale under
Rule 144A, the Issuer shall immediately notify the Dealer
(by telephone, confirmed in writing) of such fact and shall
promptly prepare and deliver to the 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.
(i) The Issuer represents that it is not currently
issuing commercial paper in the United States market in
reliance upon, and in compliance with, the exemption
provided by Section 3(a)(3) of the Securities Act. However,
the Issuer agrees that if the Issuer were to issue such
3(a)(3) commercial paper, (a) the proceeds from the sale of
the Notes would be segregated from the proceeds of the sale
of any such commercial paper by being placed in a separate
account; (b) the Issuer would institute appropriate
corporate procedures to ensure that the offers and sales of
notes issued by the Issuer pursuant to the Section 3(a)(3)
exemption would not be integrated with offerings and sales
of Notes hereunder; and (c) the Issuer would comply with
each of the requirements of Section 3(a)(3) of the
Securities Act in selling commercial paper or other short-
term debt securities other than the Notes in the United
States.
(j) The Issuer hereby agrees that, not later than 15
days after the first sale of Notes as contemplated by this
Agreement, it will file with the SEC a notice on Form D in
accordance with Rule 503 under the Securities Act and that
it will thereafter file such amendments to such notice as
Rule 503 may require.
1.7 The Issuer hereby represents and warrants to the
Dealer, in connection with offers, sales and resales of Notes, as
follows:
(a) The Issuer hereby confirms to the Dealer that
(except as permitted by Section 1.6(i)) within the preceding
six months neither the Issuer nor any person other than the
Dealer or the other dealers referred to in Section 1.2
hereof acting on behalf of the Issuer has offered or sold
any Notes, or any substantially similar security of the
Issuer (including, without limitation, medium-term notes
issued by the Issuer), to, or solicited offers to buy any
such security from, any person other than the Dealer or the
other dealers referred to in Section 1.2 hereof (including
for purposes of this Section 1.7(a) other dealers who would
be so referred to but for the fact that they executed
agreements of the type referred to in such Section 1.2 prior
to the date hereof). The Issuer also agrees that (except as
permitted by Section 1.6(i)), as long as the Notes are being
offered for sale by the Dealer and the other dealers
referred to in Section 1.2 hereof as contemplated hereby and
until at least six months after the offer of Notes hereunder
has been terminated, neither the Issuer nor any person other
than the Dealer or the other dealers referred to in Section
1.2 hereof (except as contemplated by Section 1.2 hereof)
will offer the Notes or any substantially similar security
of the Issuer for sale to, or solicit offers to buy any such
security from, any person other than the Dealer or the other
dealers referred to in Section 1.2 hereof, it being
understood that such agreement is made with a view to
bringing the offer and sale of the Notes within the
exemption provided by Section 4(2) of the Securities Act and
Rule 506 thereunder and shall survive any termination of
this Agreement. The Issuer hereby represents and warrants
that it has not taken or omitted to take, and will not take
or omit to take, any action that would cause the offering
and sale of Notes hereunder to be integrated with any other
offering of securities, whether such offering is made by the
Issuer or some other party or parties.
(b) 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 either (i) 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 or (ii) in a manner which would not cause a violation
of Regulation T and the interpretations thereunder.
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 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
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 as
provided in the Issuing and Paying Agency Agreement, will be duly
and validly issued 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 Regulation D thereunder,
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 will rank at least pari passu with all other
unsecured and unsubordinated indebtedness of the Issuer.
2.6 Except as provided in Section 1.6(j), no consent or
action of, or filing or registration with, any governmental or
public regulatory body or authority, including 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 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
a 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
default might have a material adverse effect on the condition
(financial or otherwise), operations or business prospects of the
Issuer or the ability of the Issuer to perform its obligations
under this Agreement, the Notes or the Issuing and Paying Agency
Agreement.
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 change in the condition (financial
or otherwise), operations or business prospects of the Issuer or
the ability of the Issuer to perform its obligations under this
Agreement, the Notes or the Issuing and Paying Agency Agreement.
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.
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 the Issuer makes no representation and warranty
regarding 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 business prospects of the Issuer 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 change
in the Issuer's condition (financial or otherwise), operations or
business prospects or any development or occurrence in relation
to the Issuer that would be material to holders of the Notes or
potential holders of the Notes (including 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 nationally 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 change, development or occurrence.
3.3 The Issuer shall from time to time furnish to the
Dealer such information as the Dealer may reasonably request,
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, however, 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.
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, satisfactory in form and
substance to the Dealer, (b) a copy of the executed Issuing and
Paying Agency Agreement as then in effect, (c) a copy of
resolutions adopted by the Board of Directors of the Issuer,
satisfactory in form and substance to the Dealer 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 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 to promptly 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 Company Information
then in existence to include an untrue statement of a 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 the 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.
(c) In the event that (i) the Issuer gives the Dealer
notice pursuant to Section 4.3(a), (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.
Section 5. Indemnification and Contribution.
5.1 The Issuer 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 "Indemnitees")
against any and all liabilities, penalties, suits, causes of
action, losses, damages, claims, costs and expenses (including,
without limitation, fees and disbursements of counsel) or
judgments of whatever kind or nature (each a "Claim"), imposed
upon, incurred by or asserted against the 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 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 Provisions relating to claims made for indemnification
under this Section 5 are set forth on Exhibit B to this
Agreement.
5.3 In order to provide for just and equitable contribution
in circumstances in which the indemnification provided for in
this Section 5 is held to be unavailable or insufficient to hold
harmless the Indemnitees, although applicable in accordance with
the terms of this Section 5, the Issuer shall contribute to the
aggregate costs incurred by the Dealer in connection with any
Claim in the proportion of the respective economic interests of
the Issuer and the Dealer; provided, however, that such
contribution by the Issuer shall be in an amount such that the
aggregate costs incurred by the Dealer do not exceed the
aggregate of the commissions and fees earned by the Dealer
hereunder with respect to the issue or issues of Notes to which
such Claim relates. The respective economic interests shall be
calculated by reference to the aggregate proceeds to the Issuer
of the Notes issued hereunder and the aggregate commissions and
fees earned by the Dealer hereunder.
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 the
Private Placement Memorandum together with, 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 material concerning the
Dealer 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 "Indemnitee" shall have the meaning set forth in
Section 5.1.
6.7 "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.
6.8 "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.
6.9 "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, or any successor thereto in accordance with the
Issuing and Paying Agency Agreement.
6.10 "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.
6.11 "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).
6.12 "Qualified Institutional Buyer" shall have the meaning
assigned to that term in Rule 144A under the Securities Act.
6.13 "Regulation D" shall mean Regulation D (Rules 501 et
seq.) under the Securities Act.
6.14 "Rule 144A" shall mean Rule 144A under the Securities
Act.
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 Issuer 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; provided,
however, that the Dealer may assign its rights and obligations
under this Agreement to any affiliate of the Dealer.
7.6 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.
7.7 This Agreement is for the exclusive benefit of the
parties hereto, and their respective permitted successors and
assigns hereunder, 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.
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, Treasurer
and Chief Financial Officer
First Chicago Capital Markets, Inc., as Dealer
By: /s/ Kimberly A. Hunter
Name: Kimberly A. Hunter
Title: Managing Director
ADDENDUM
The following additional clauses shall apply to the
Agreement and be deemed a part thereof.
1. The other dealers referred to in clause (b) of Section 1.2
of the Agreement are Goldman, Sachs & Co. and Chase Securities
Inc.
2. 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: First Chicago Capital Markets, Inc.
Address: One First National Plaza
Suite IL1-0033
Chicago, Illinois 60670
Attention: Edward G. Austin
Telephone number: 312-732-7324
Fax number: 312-732-1041
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 SOPHISTICATED INDIVIDUAL
INVESTOR THAT IS AN ACCREDITED INVESTOR WITHIN THE
MEANING OF RULE 501(a) UNDER THE ACT AND WHICH, IN THE
CASE OF AN INDIVIDUAL, (i) POSSESSES 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) HAS A NET
WORTH OF AT LEAST $5 MILLION (AN "INSTITUTIONAL
ACCREDITED INVESTOR" OR "SOPHISTICATED INDIVIDUAL
ACCREDITED INVESTOR", RESPECTIVELY) AND THAT EITHER 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 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 FIRST
CHICAGO CAPITAL MARKETS, 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, SOPHISTICATED INDIVIDUAL ACCREDITED
INVESTOR OR A QIB, OR (3) TO A QIB IN A TRANSACTION THAT
MEETS THE REQUIREMENTS OF RULE 144A AND (B) IN MINIMUM
AMOUNTS OF $250,000.
EXHIBIT B
FURTHER PROVISIONS RELATING
TO INDEMNIFICATION
(a) The Issuer 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 Issuer, notify the
Issuer in writing of the existence thereof; provided that (i) the
omission so to notify the Issuer will not relieve the Issuer 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 Issuer of substantial
rights and defenses, and (ii) the omission so to notify the
Issuer 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 Issuer of the existence thereof, the Issuer 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 Issuer, 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 Issuer, the Issuer 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 Issuer to such Indemnitee of the
Issuer's election so to assume the defense of such Claim and
approval by the Indemnitee of counsel, the Issuer 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
Issuer 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), approved by the
Dealer, representing the Indemnitee who is party to such Claim),
(ii) the Issuer 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 Issuer has authorized in writing the employment of counsel
for the Indemnitee. The indemnity, reimbursement and
contribution obligations of the Issuer hereunder shall be in
addition to any other liability the Issuer 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 Issuer and any Indemnitee. The Issuer agrees that without
the Dealer'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 (whether or not the
Dealer or any other Indemnitee is an actual or potential party to
such Claim).
COMMERCIAL PAPER DEALER AGREEMENT
4(2) PROGRAM
between
Federated Department Stores, Inc., as Issuer
and
Chase 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
March 12, 1999
COMMERCIAL PAPER DEALER AGREEMENT
This agreement ("Agreement") sets forth the understandings
between the Issuer and the Dealer, each named on the cover page
hereof, in connection with the issuance and sale by the Issuer of
its short-term promissory notes (the "Notes") through the Dealer.
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.
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 those contained in
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 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 maturity 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 and issuance of, and payment for,
the Notes shall be effected in accordance with the Issuing and
Paying Agency Agreement, and the Notes shall be either individual
physical certificates or book-entry notes evidenced by a Master
Note 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 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
Issuing and Paying Agent, for the account of 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 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 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 by or through the
Dealer shall be made only to: (i) investors reasonably
believed by the Dealer to be Qualified Institutional Buyers
("QIBs"), Institutional Accredited Investors or
Sophisticated Individual Accredited Investors and (ii) non-
bank fiduciaries or agents that will be purchasing Notes for
one or more accounts, each of which is reasonably believed
by the Dealer to be an Institutional Accredited Investor or
Sophisticated Individual Accredited Investor.
(b) Resales and other transfers of the Notes by the
holders thereof shall be made only in accordance with the
restrictions in the legend 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 the 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
(or such other materials as may from time to time be
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 offers
and sales of Notes hereunder, as well as on each individual
certificate representing a Note and each Master Note
representing book-entry Notes offered and sold pursuant to
this Agreement.
(f) The Dealer shall furnish or shall have furnished
to each purchaser of Notes for which it has acted as the
Dealer 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 the Dealer would be ineligible for resale under
Rule 144A, the Issuer shall immediately notify the Dealer
(by telephone, confirmed in writing) of such fact and shall
promptly prepare and deliver to the 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.
(i) The Issuer represents that it is not currently
issuing commercial paper in the United States market in
reliance upon, and in compliance with, the exemption
provided by Section 3(a)(3) of the Securities Act. However,
the Issuer agrees that if the Issuer were to issue such
3(a)(3) commercial paper, (a) the proceeds from the sale of
the Notes would be segregated from the proceeds of the sale
of any such commercial paper by being placed in a separate
account; (b) the Issuer would institute appropriate
corporate procedures to ensure that the offers and sales of
notes issued by the Issuer pursuant to the Section 3(a)(3)
exemption would not be integrated with offerings and sales
of Notes hereunder; and (c) the Issuer would comply with
each of the requirements of Section 3(a)(3) of the
Securities Act in selling commercial paper or other short-
term debt securities other than the Notes in the United
States.
(j) The Issuer hereby agrees that, not later than 15
days after the first sale of Notes as contemplated by this
Agreement, it will file with the SEC a notice on Form D in
accordance with Rule 503 under the Securities Act and that
it will thereafter file such amendments to such notice as
Rule 503 may require.
1.7 The Issuer hereby represents and warrants to the
Dealer, in connection with offers, sales and resales of Notes, as
follows:
(a) The Issuer hereby confirms to the Dealer that
(except as permitted by Section 1.6(i)) within the preceding
six months neither the Issuer nor any person other than the
Dealer or the other dealers referred to in Section 1.2
hereof acting on behalf of the Issuer has offered or sold
any Notes, or any substantially similar security of the
Issuer (including, without limitation, medium-term notes
issued by the Issuer), to, or solicited offers to buy any
such security from, any person other than the Dealer or the
other dealers referred to in Section 1.2 hereof (including
for purposes of this Section 1.7(a) other dealers who would
be so referred to but for the fact that they executed
agreements of the type referred to in such Section 1.2 prior
to the date hereof). The Issuer also agrees that (except as
permitted by Section 1.6(i)), as long as the Notes are being
offered for sale by the Dealer and the other dealers
referred to in Section 1.2 hereof as contemplated hereby and
until at least six months after the offer of Notes hereunder
has been terminated, neither the Issuer nor any person other
than the Dealer or the other dealers referred to in Section
1.2 hereof (except as contemplated by Section 1.2 hereof)
will offer the Notes or any substantially similar security
of the Issuer for sale to, or solicit offers to buy any such
security from, any person other than the Dealer or the other
dealers referred to in Section 1.2 hereof, it being
understood that such agreement is made with a view to
bringing the offer and sale of the Notes within the
exemption provided by Section 4(2) of the Securities Act and
Rule 506 thereunder and shall survive any termination of
this Agreement. The Issuer hereby represents and warrants
that it has not taken or omitted to take, and will not take
or omit to take, any action that would cause the offering
and sale of Notes hereunder to be integrated with any other
offering of securities, whether such offering is made by the
Issuer or some other party or parties.
(b) 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 either (i) 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 or (ii) in a manner which would not cause a violation
of Regulation T and the interpretations thereunder.
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 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
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 as
provided in the Issuing and Paying Agency Agreement, will be duly
and validly issued 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 Regulation D thereunder,
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 will rank at least pari passu with all other
unsecured and unsubordinated indebtedness of the Issuer.
2.6 Except as provided in Section 1.6(j), no consent or
action of, or filing or registration with, any governmental or
public regulatory body or authority, including 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 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
a 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
default might have a material adverse effect on the condition
(financial or otherwise), operations or business prospects of the
Issuer or the ability of the Issuer to perform its obligations
under this Agreement, the Notes or the Issuing and Paying Agency
Agreement.
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 change in the condition (financial
or otherwise), operations or business prospects of the Issuer or
the ability of the Issuer to perform its obligations under this
Agreement, the Notes or the Issuing and Paying Agency Agreement.
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.
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 the Issuer makes no representation and warranty
regarding 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 business prospects of the Issuer 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 change
in the Issuer's condition (financial or otherwise), operations or
business prospects or any development or occurrence in relation
to the Issuer that would be material to holders of the Notes or
potential holders of the Notes (including 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 nationally 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 change, development or occurrence.
3.3 The Issuer shall from time to time furnish to the
Dealer such information as the Dealer may reasonably request,
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, however, 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.
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, satisfactory in form and
substance to the Dealer, (b) a copy of the executed Issuing and
Paying Agency Agreement as then in effect, (c) a copy of
resolutions adopted by the Board of Directors of the Issuer,
satisfactory in form and substance to the Dealer 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 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 to promptly 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 Company Information
then in existence to include an untrue statement of a 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 the 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.
(c) In the event that (i) the Issuer gives the Dealer
notice pursuant to Section 4.3(a), (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.
Section 5. Indemnification and Contribution.
5.1 The Issuer 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 "Indemnitees")
against any and all liabilities, penalties, suits, causes of
action, losses, damages, claims, costs and expenses (including,
without limitation, fees and disbursements of counsel) or
judgments of whatever kind or nature (each a "Claim"), imposed
upon, incurred by or asserted against the 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 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 Provisions relating to claims made for indemnification
under this Section 5 are set forth on Exhibit B to this
Agreement.
5.3 In order to provide for just and equitable contribution
in circumstances in which the indemnification provided for in
this Section 5 is held to be unavailable or insufficient to hold
harmless the Indemnitees, although applicable in accordance with
the terms of this Section 5, the Issuer shall contribute to the
aggregate costs incurred by the Dealer in connection with any
Claim in the proportion of the respective economic interests of
the Issuer and the Dealer; provided, however, that such
contribution by the Issuer shall be in an amount such that the
aggregate costs incurred by the Dealer do not exceed the
aggregate of the commissions and fees earned by the Dealer
hereunder with respect to the issue or issues of Notes to which
such Claim relates. The respective economic interests shall be
calculated by reference to the aggregate proceeds to the Issuer
of the Notes issued hereunder and the aggregate commissions and
fees earned by the Dealer hereunder.
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 the
Private Placement Memorandum together with, 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 material concerning the
Dealer 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 "Indemnitee" shall have the meaning set forth in
Section 5.1.
6.7 "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.
6.8 "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.
6.9 "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, or any successor thereto in accordance with the
Issuing and Paying Agency Agreement.
6.10 "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.
6.11 "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).
6.12 "Qualified Institutional Buyer" shall have the meaning
assigned to that term in Rule 144A under the Securities Act.
6.13 "Regulation D" shall mean Regulation D (Rules 501 et
seq.) under the Securities Act.
6.14 "Rule 144A" shall mean Rule 144A under the Securities
Act.
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 Issuer 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; provided,
however, that the Dealer may assign its rights and obligations
under this Agreement to any affiliate of the Dealer.
7.6 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.
7.7 This Agreement is for the exclusive benefit of the
parties hereto, and their respective permitted successors and
assigns hereunder, 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.
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, Treasurer
and Chief Financial Officer
Chase Securities Inc., as Dealer
By: /s/ Richard Chenel
Name: Richard Chenel
Title: Vice President
ADDENDUM
The following additional clauses shall apply to the
Agreement and be deemed a part thereof.
1. The other dealers referred to in clause (b) of Section 1.2
of the Agreement are Chase Securities Inc. and First Chicago
Capital Markets, Inc.
2. 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: Chase Securities Inc.
Address: 270 Park Avenue
New York, New York 10017
Attention: Money Markets Division
Telephone number: 212-270-5070
Fax number: 212-270-6560
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 SOPHISTICATED INDIVIDUAL
INVESTOR THAT IS AN ACCREDITED INVESTOR WITHIN THE
MEANING OF RULE 501(a) UNDER THE ACT AND WHICH, IN THE
CASE OF AN INDIVIDUAL, (i) POSSESSES 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) HAS A NET
WORTH OF AT LEAST $5 MILLION (AN "INSTITUTIONAL
ACCREDITED INVESTOR" OR "SOPHISTICATED INDIVIDUAL
ACCREDITED INVESTOR", RESPECTIVELY) AND THAT EITHER 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 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 CHASE
SECURITIES 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,
SOPHISTICATED INDIVIDUAL ACCREDITED INVESTOR OR A QIB,
OR (3) TO A QIB IN A TRANSACTION THAT MEETS THE
REQUIREMENTS OF RULE 144A AND (B) IN MINIMUM AMOUNTS OF
$250,000.
EXHIBIT B
FURTHER PROVISIONS RELATING
TO INDEMNIFICATION
(a) The Issuer 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 Issuer, notify the
Issuer in writing of the existence thereof; provided that (i) the
omission so to notify the Issuer will not relieve the Issuer 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 Issuer of substantial
rights and defenses, and (ii) the omission so to notify the
Issuer 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 Issuer of the existence thereof, the Issuer 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 Issuer, 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 Issuer, the Issuer 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 Issuer to such Indemnitee of the
Issuer's election so to assume the defense of such Claim and
approval by the Indemnitee of counsel, the Issuer 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
Issuer 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), approved by the
Dealer, representing the Indemnitee who is party to such Claim),
(ii) the Issuer 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 Issuer has authorized in writing the employment of counsel
for the Indemnitee. The indemnity, reimbursement and
contribution obligations of the Issuer hereunder shall be in
addition to any other liability the Issuer 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 Issuer and any Indemnitee. The Issuer agrees that without
the Dealer'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 (whether or not the
Dealer or any other Indemnitee is an actual or potential party to
such Claim).
FINGERHUT RECEIVABLES, INC.
Transferor
FINGERHUT NATIONAL BANK
Servicer
and
THE BANK OF NEW YORK (DELAWARE)
Trustee
on behalf of the Series 1998-1 Securityholders
SERIES 1998-1 SUPPLEMENT
Dated as of April 28, 1998
to
AMENDED AND RESTATED
POOLING AND SERVICING AGREEMENT
Dated as of March 18, 1998
____________________________________
FINGERHUT MASTER TRUST
$337,500,000 6.07% Asset Backed
Securities, Series 1998-1, Class A
$51,136,000 6.29% Asset Backed
Securities, Series 1998-1, Class B
$61,364,000 Floating Rate Asset Backed
Collateralized Trust Obligation, Series 1998-1
$61,364,000 0% Asset Backed Securities,
Series 1998-1, Class D
TABLE OF CONTENTS
Page
SECTION 1. Designation 1
SECTION 2. Definitions 1
SECTION 3. Reassignment Terms 24
SECTION 4. Delivery and Payment for the Series 1998-1
Securities 25
SECTION 5. Form of Delivery of Series 1998-1 Securities;
Denominations; Depositary 25
SECTION 6. Article IV of Agreement 27
ARTICLE IV
RIGHTS OF SECURITYHOLDERS AND
ALLOCATION AND APPLICATION OF COLLECTIONS
SECTION 4.4 Rights of Securityholders 27
SECTION 4.5 Collections and Allocation; Payments on
Exchangeable Transferor Security 28
SECTION 4.6 Determination of Interest for the Series
1998-1 Securities 29
SECTION 4.7 Determination of Principal Amounts 31
SECTION 4.8 Shared Principal Collections 32
SECTION 4.9 Application of Funds on Deposit in the
Collection Account for the Securities 33
SECTION 4.10 Coverage of Required Amount for the Series
1998-1 Securities 41
SECTION 4.11 Payment of Interest on Securities 42
SECTION 4.12 Payment of Security Principal 42
SECTION 4.13 Series Charge-Offs 44
SECTION 4.14 Redirected Principal Collections for the
Series 1998-1 Securities 45
SECTION 4.15 Determination of LIBOR 47
SECTION 4.16 Defeasance Funding Account 47
SECTION 4.17 Defeasance Reserve Account 49
SECTION 4.18 Defeasance 50
SECTION 4.19 Revolving Receivables Reserve Account 51
SECTION 4.20 CTO Trigger 52
SECTION 4.21 CTO Reserve Account 53
SECTION 4.22 Payment Reserve Account 54
SECTION 4.23 Constituent Class D Securities 55
SECTION 7.Article V of the Agreement 56
ARTICLE V
DISTRIBUTIONS AND REPORTS TO INVESTOR
SECURITYHOLDERS
SECTION 5.1 Distributions 56
SECTION 5.2 Securityholders' Statement 58
SECTION 8. Series 1998-1 Pay Out Events 61
SECTION 9. Collateralized Trust Obligation Defaults and
Remedies 63
SECTION 10. Series 1998-1 Termination 64
SECTION 11. Legends; Transfer and Exchange; Restrictions
on Transfer of Series 1998-1 Securities;
Tax Treatment 64
SECTION 12. Compliance with Withholding Requirements 68
SECTION 13. Ratification of Agreement 68
SECTION 14. Counterparts 68
SECTION 15. GOVERNING LAW 68
SECTION 16. Instructions in Writing 69
SECTION 17. Paired Series 69
EXHIBITS
Exhibit A-1 Form of Class A Investor Security
Exhibit A-2 Form of Class B Investor Security
Exhibit A-3 Form of CTO Investor Security
Exhibit A-4 Form of Class D Investor Security
Exhibit B Form of Monthly Securityholder's Statement
Exhibit C Form of Clearing System Certificate
Exhibit D Form of Member Organization Certificate
Exhibit E Form of Regulation S Transfer Certificate
Exhibit F Form of Rule 144A Transfer Certificate
SERIES 1998-1 SUPPLEMENT, dated as of April 28,
1998 (this "Series Supplement") by and among FINGERHUT
RECEIVABLES, INC., a corporation organized and existing under the
laws of the State of Delaware, as Transferor (the "Transferor"),
FINGERHUT NATIONAL BANK, a national banking association organized
under the laws of the United States, as Servicer (the
"Servicer"), and THE BANK OF NEW YORK (DELAWARE), a Delaware
banking corporation organized and existing under the laws of the
State of Delaware as trustee (together with its successors in
trust thereunder as provided in the Agreement referred to below,
the "Trustee"), under the Amended and Restated Pooling and
Servicing Agreement dated as of March 18, 1998, as amended,
supplemented or otherwise modified from time to time (the
"Agreement"), among the Transferor, the Servicer and the Trustee.
Section 6.9 of the Agreement provides, among other
things, that the Transferor and the Trustee may at any time and
from time to time enter into a supplement to the Agreement for
the purpose of authorizing the issuance by the Trustee to the
Transferor, for execution and redelivery to the Trustee for
authentication, of one or more Series of Securities.
Pursuant to this Series Supplement, the Transferor and
the Trustee shall create a new Series of Investor Securities and
shall specify the Principal Terms thereof.
SECTION 1. Designation. There is hereby created a
Series to be issued pursuant to the Agreement and this Series
Supplement to be known generally as the "Series 1998-1
Securities." Series 1998-1 shall consist of four Classes, which
shall be designated generally as the 6.07% Asset Backed
Securities, Series 1998-1, Class A (the "Class A Securities"),
the 6.29% Asset Backed Securities, Series 1998-1, Class B (the
"Class B Securities"), the Floating Rate Asset Backed
Collateralized Trust Obligations, Series 1998-1 (the
"Collateralized Trust Obligations") and the 0% Asset Backed
Securities, Series 1998-1, Class D (the "Class D Securities").
SECTION 2. Definitions. In the event that any term
or provision contained herein shall conflict with or be
inconsistent with any provision contained in the Agreement, the
terms and provisions of this Series Supplement shall govern with
respect to the Series 1998-1 Securities. All Article, Section or
subsection references herein shall mean Articles, Sections or
subsections of the Agreement, as amended or supplemented by this
Series Supplement, except as otherwise provided herein. All
capitalized terms not otherwise defined herein are defined in the
Agreement. Each capitalized term defined herein shall relate
only to the Series 1998-1 Securities and no other Series of
Securities issued by the Trust.
"ABC Adjusted Invested Amount" shall mean as of any
Business Day the sum of the Class A Adjusted Invested Amount, the
Class B Adjusted Invested Amount and the CTO Adjusted Invested
Amount minus the amount then on deposit in the Defeasance Funding
Account.
"ABC Invested Amount" shall mean as of any Business Day
the sum of the Class A Invested Amount, the Class B Invested
Amount and the CTO Invested Amount.
"Additional Interest" shall mean, at any time of
determination, the sum of the Class A Additional Interest, Class
B Additional Interest and CTO Additional Interest.
"Adjusted Invested Amount" shall mean as of any
Business Day the Invested Amount minus the sum of the amount then
on deposit in the Principal Account and the Series 1998-1
Percentage of the amount then on deposit in the Excess Funding
Account.
"Amortization Period" shall mean the period commencing
on the Amortization Period Commencement Date and continuing until
the earlier of (x) the Invested Amount of the Securities being
paid in full or (y) the Series 1998-1 Termination Date.
"Amortization Period Commencement Date" shall mean the
earlier of the first day of the August 2000 Monthly Period or the
Pay Out Commencement Date.
"Available Defeasance Reserve Account Amount" shall
mean, with respect to any Business Day, the lesser of (a) the
amount on deposit in the Defeasance Reserve Account as of such
Business Day (before giving effect to any withdrawal made or to
be made pursuant to Section 4.17 of the Agreement from the
Defeasance Reserve Account on such Transfer Date) and (b) the
Required Defeasance Reserve Account Amount for such Transfer
Date.
"Available Series 1998-1 Finance Charge Collections"
shall have the meaning specified in subsection 4.9(a) of the
Agreement.
"Available Series 1998-1 Principal Collections" shall
mean, with respect to any Monthly Period or portion thereof
commencing on the Amortization Period Commencement Date, an
amount equal to the sum of (i) an amount equal to the Fixed/
Floating Percentage on each Business Day during such period of
all Principal Collections (less the amount of Redirected
Principal Collections) received during such period, (ii) any
amount on deposit in the Excess Funding Account allocated to the
Series 1998-1 Securities pursuant to subsection 4.3(f) of the
Agreement with respect to such period , (iii) an amount equal to
the sum of the aggregate Series Default Amount with respect to
such period and the Series 1998-1 Percentage of any unpaid
Adjustment Payments paid pursuant to subsections 4.9(a)(v) and
4.9(a)(vi) of the Agreement with respect to such period and any
reimbursements of unreimbursed Series Charge-Offs pursuant to
subsections 4.9(a)(vii), (x), (xi) and (xii) of the Agreement
with respect to such period plus in each case, amounts applied
with respect thereto pursuant to subsections 4.10(a) and (b),
4.14(a), (b) and (c), 4.16(b) and 4.17(b), (c) and (d) of the
Agreement, and (iv) the aggregate Shared Principal Collections
allocated to the Series 1998-1 Securities pursuant to Section 4.8
of the Agreement with respect to such period.
"Base Rate" shall mean, with respect to any Monthly
Period, the sum of (i) the weighted average of the Class A
Interest Rate, the Class B Interest Rate, the CTO Interest Rate
and, if an interest rate is assigned to the Class D Securities
pursuant to Section 4.23 of the Agreement, the Class D Interest
Rate as of the last day of such Monthly Period (weighted based on
the Class A Invested Amount, the Class B Invested Amount, the CTO
Invested Amount and, following the assignment of an interest rate
to the Class D Securities, the Class D Invested Amount or portion
thereof with respect to which an interest rate has been assigned,
respectively, as of the last day of such Monthly Period) plus
(ii) the product of 2.00% per annum and the percentage equivalent
of a fraction the numerator of which is the Adjusted Invested
Amount and the denominator of which is the Invested Amount, each
as of the beginning of the day on the first day of such Monthly
Period.
"Carryover Class A Monthly Interest" shall mean with
respect to any Business Day (a) any Class A Monthly Interest
Shortfall with respect to the Distribution Date in the then
current Monthly Period plus (b) any Class A Additional Interest
due on the Distribution Date in the next succeeding Monthly
Period.
"Carryover Class B Monthly Interest" shall mean with
respect to any Business Day (a) any Class B Monthly Interest
Shortfall with respect to the Distribution Date in the then
current Monthly Period plus (b) any Class B Additional Interest
due on the next succeeding Distribution Date in the next
succeeding Monthly Period.
"Carryover CTO Monthly Interest" shall mean with
respect to any Business Day (a) any CTO Monthly Interest
Shortfall with respect to the Distribution Date in the then
current Monthly Period plus (b) any CTO Additional Interest due
on the next succeeding Distribution Date in the next succeeding
Monthly Period.
"Class A Additional Interest" shall have the meaning
specified in subsection 4.6(a) of the Agreement.
"Class A Adjusted Invested Amount" shall mean, for any
date of determination, an amount not less than zero equal to the
then current Class A Invested Amount minus the amount then on
deposit in the Principal Account on such date of determination.
"Class A Charge-Offs" shall have the meaning specified
in subsection 4.13(d) of the Agreement.
"Class A Controlled Amortization Amount" shall mean
$22,500,000.
"Class A Controlled Distribution Amount" shall mean,
with respect to any Distribution Date, an amount equal to the
Class A Controlled Amortization Amount plus any existing Class A
Deficit Controlled Amortization Amount determined on the
preceding Distribution Date, if any.
"Class A Deficit Controlled Amortization Amount" shall
mean zero on the initial Distribution Date with respect to the
Controlled Amortization Period and, on any subsequent
Distribution Date, the excess, if any, of (i) the Class A
Controlled Distribution Amount over (ii) the Available Series
1998-1 Principal Collections with respect to the related Monthly
Period.
"Class A Expected Final Payment Date" shall mean the
November 2001 Distribution Date.
"Class A Fixed/Floating Percentage" shall mean for any
Business Day on or after the Amortization Period Commencement
Date, the percentage equivalent of a fraction, the numerator of
which is the Class A Invested Amount at the end of the last day
of the Revolving Period and the denominator of which is the
greater of (a) the sum of the aggregate amount of Principal
Receivables and the amount on deposit in the Excess Funding
Account at the end of the preceding Business Day and (b) the sum
of the numerators used to calculate the applicable floating or
fixed/floating percentages with respect to all Participations and
all Classes of all Series then outstanding.
"Class A Floating Percentage" shall mean, with respect
to any Business Day, the percentage equivalent of a fraction, the
numerator of which is the Class A Adjusted Invested Amount as of
the beginning of such Business Day after giving effect to any
deposits to be made to the Principal Account on such Business Day
and the denominator of which is the greater of (a) the sum of the
aggregate amount of Principal Receivables as of the beginning of
such Business Day and the amount on deposit in the Excess Funding
Account as of the beginning of such Business Day after giving
effect to any deposits or withdrawals to be made to the Excess
Funding Account on such Business Day and (b) the sum of the
numerators used to calculate the applicable floating or
fixed/floating percentages with respect to all Participations and
all Classes of all Series then outstanding.
"Class A Initial Invested Amount" shall mean
$337,500,000.
"Class A Interest Rate" shall mean 6.07% per annum.
"Class A Invested Amount" shall mean, with respect to
any Business Day, an amount equal to (a) the Class A Initial
Invested Amount minus (b) the aggregate amount of principal
payments made to Class A Securityholders through and including
such Business Day, minus (c) the aggregate amount of Class A
Charge-Offs for all prior Distribution Dates, plus (d) the sum of
the aggregate amount reimbursed with respect to reductions of the
Class A Invested Amount through and including such Business Day
pursuant to subsection 4.9(a)(vii) of the Agreement plus, with
respect to such subsection, amounts applied thereto pursuant to
subsections 4.10(a) and (b) and 4.14(a), (b) and (c) of the
Agreement, for the purpose of reimbursing amounts deducted
pursuant to the foregoing clause (c); provided, however, that the
Class A Invested Amount may not be reduced below zero.
"Class A Monthly Interest" shall mean the interest
distributable in respect of the Class A Securities as calculated
in accordance with subsection 4.6(a) of the Agreement.
"Class A Monthly Interest Shortfall" shall have the
meaning specified in subsection 4.6(a) of the Agreement.
"Class A Outstanding Principal Amount" shall mean, with
respect to the Class A Securities, when used with respect to any
Business Day, an amount equal to (a) the Class A Initial Invested
Amount minus (b) the aggregate amount of principal payments made
to the Class A Securityholders on or prior to such Business Day.
"Class A Percentage" shall mean a fraction the
numerator of which is the Class A Invested Amount and the
denominator of which is the sum of the Class A Invested Amount,
the Class B Invested Amount and the CTO Invested Amount.
"Class A Principal" shall mean the principal
distributable in respect of the Class A Securities as calculated
in accordance with subsection 4.7(a) of the Agreement.
"Class A Required Amount" shall mean the amount
determined by the Servicer for each Business Day equal to the
excess, if any, of (x) the sum of (i) the Class A Monthly
Interest for the Interest Accrual Period beginning in the then
current Monthly Period, (ii) any Carryover Class A Monthly
Interest, (iii) the Class A Percentage of the Monthly Servicing
Fee for the then current Monthly Period, (iv) the Class A
Percentage of the Series Default Amount, if any, for such
Business Day and for any previous Business Day in such Monthly
Period and (v) the Class A Percentage of the Series 1998-1
Percentage of any Adjustment Payment the Transferor is required
but fails to make pursuant to subsection 3.8(a) of the Agreement
on such Business Day and on each previous Business Day during
such Monthly Period over (y) the Available Series 1998-1 Finance
Charge Collections plus any Excess Finance Charge Collections
from other Series and any Transferor Finance Charge Collections
allocated with respect to the amounts described in clauses (x)(i)
through (v) above with respect to such Business Day and all
previous Business Days in such Monthly Period.
"Class A Securities" shall mean any of the Securities
executed by the Transferor and authenticated by or on behalf of
the Trustee, substantially in the form of Exhibit A-1 hereto.
"Class A Securityholder" shall mean the Person in whose
name a Class A Security is registered in the Security Register.
"Class A Securityholders' Interest" shall mean the
portion of the Series 1998-1 Securityholders' Interest evidenced
by the Class A Securities.
"Class B Additional Interest" shall have the meaning
specified in subsection 4.6(b) of the Agreement.
"Class B Adjusted Invested Amount" shall mean, for any
date of determination, an amount not less than zero equal to the
then current Class B Invested Amount minus the excess, if any, of
the amount on deposit in the Principal Account over the Class A
Invested Amount on such date of determination.
"Class B Charge-Offs" shall have the meaning specified
in subsection 4.13(c) of the Agreement.
"Class B Controlled Amortization Amount" shall mean
$17,045,333.33.
"Class B Controlled Distribution Amount" shall mean,
with respect to any Distribution Date, an amount equal to the
Class B Controlled Amortization Amount plus any existing Class B
Deficit Controlled Amortization Amount determined on the
preceding Distribution Date, if any.
"Class B Deficit Controlled Amortization Amount" shall
mean zero on the Class B Principal Payment Commencement Date and,
on any subsequent Distribution Date, means the excess, if any, of
(i) the Class B Controlled Distribution Amount over (ii) the
Available Series 1998-1 Principal Collections with respect to the
related Monthly Period.
"Class B Expected Final Payment Date" shall mean the
February 2002 Distribution Date.
"Class B Fixed/Floating Percentage" shall mean for any
Business Day on or after the Amortization Period Commencement
Date, the percentage equivalent of a fraction, the numerator of
which is the Class B Invested Amount at the end of the last day
of the Revolving Period and the denominator of which is the
greater of (a) the sum of the aggregate amount of Principal
Receivables and the amount on deposit in the Excess Funding
Account as of the beginning of such Business Day after giving
effect to any deposits or withdrawals to be made to the Excess
Funding Account on such Business Day and (b) the sum of the
numerators used to calculate the applicable floating or
fixed/floating percentages with respect to all Participations and
all Classes of all Series then outstanding.
"Class B Floating Percentage" shall mean, with respect
to any Business Day, the percentage equivalent of a fraction, the
numerator of which is the Class B Adjusted Invested Amount as of
the beginning of such Business Day after giving effect to any
deposits to be made to the Principal Account on such Business Day
and the denominator of which is the greater of (a) the sum of the
aggregate amount of Principal Receivables and the amount on
deposit in the Excess Funding Account as of the beginning of such
Business Day after giving effect to any deposits or withdrawals
to be made to the Excess Funding Account on such Business Day and
(b) the sum of the numerators used to calculate the applicable
floating or fixed/floating percentages with respect to all
Participations and all Classes of all Series then outstanding.
"Class B Initial Invested Amount" shall mean
$51,136,000.
"Class B Interest Rate" shall mean 6.29% per annum.
"Class B Invested Amount" shall mean, with respect to
any Business Day, an amount equal to (a) the Class B Initial
Invested Amount, minus (b) the aggregate amount of principal
payments made to Class B Securityholders through and including
such Business Day, minus (c) the aggregate amount of Class B
Charge-Offs for all prior Distribution Dates, minus (d) the
aggregate amount of Redirected Class B Principal Collections
through and including such Business Day for which neither the
Class D Invested Amount nor the CTO Invested Amount has been
reduced on all prior Distribution Dates pursuant to subsection
4.14(d) of the Agreement, plus (e) the sum of the aggregate
amount reimbursed with respect to reductions of the Class B
Invested Amount through and including such Business Day pursuant
to subsection 4.9(a)(x) of the Agreement plus, with respect to
such subsection, amounts applied thereto pursuant to subsections
4.10(a) and (b) and 4.14(a) and (b) of the Agreement, for the
purpose of reimbursing amounts deducted pursuant to the foregoing
clauses (c) and (d); provided, however, that the Class B Invested
Amount may not be reduced below zero.
"Class B Monthly Interest" shall mean the interest
distributable in respect of the Class B Securities as calculated
in accordance with subsection 4.6(b) of the Agreement.
"Class B Monthly Interest Shortfall" shall have the
meaning specified in subsection 4.6(b) of the Agreement.
"Class B Outstanding Principal Amount" shall mean, with
respect to the Class B Securities, when used with respect to any
Business Day, an amount equal to (a) the Class B Initial Invested
Amount minus (b) the aggregate amount of principal payments made
to the Class B Securityholders on or prior to such Business Day.
"Class B Percentage" shall mean a fraction the
numerator of which is the Class B Invested Amount and the
denominator of which is the sum of the Class A Invested Amount,
the Class B Invested Amount and the CTO Invested Amount.
"Class B Principal" shall mean the principal
distributable in respect of the Class B Securities as calculated
in accordance with subsection 4.7(b) of the Agreement.
"Class B Principal Payment Commencement Date" shall
mean the earlier of (a) the Distribution Date on which the Class
A Invested Amount is paid in full or, if the Class A Invested
Amount is paid in full on the Class A Expected Final Payment
Date, and the Early Amortization Period has not commenced, the
Distribution Date following the Class A Expected Final Payment
Date and (b) the Distribution Date following a sale or repurchase
of the Receivables as set forth in Section 2.4(e), 10.2(a), 12.1
or 12.2 of the Agreement or Section 3 of this Series Supplement.
"Class B Required Amount" shall mean the amount
determined by the Servicer for each Business Day equal to the
excess, if any, of (x) the sum of (i) the Class B Monthly
Interest for the Interest Accrual Period beginning in the then
current Monthly Period, (ii) any Carryover Class B Monthly
Interest, (iii) the Class B Percentage of the Monthly Servicing
Fee for the then current Monthly Period, (iv) the Class B
Percentage of the Series Default Amount, if any, for such
Business Day and for any previous Business Day in such Monthly
Period and (v) the Class B Percentage of the Series 1998-1
Percentage of any Adjustment Payment the Transferor is required
but fails to make pursuant to subsection 3.8(a) of the Agreement
on such Business Day and on each previous Business Day during
such Monthly Period over (y) the Available Series 1998-1 Finance
Charge Collections plus any Excess Finance Charge Collections
from other Series and any Transferor Finance Charge Collections
allocated with respect to the amounts described in clauses (x)(i)
through (v) above with respect to such Business Day and all
previous Business Days in such Monthly Period.
"Class B Securities" shall mean any of the Securities
executed by the Transferor and authenticated by or on behalf of
the Trustee, substantially in the form of Exhibit A-2 hereto.
"Class B Securityholder" shall mean the Person in whose
name a Class B Security is registered in the Security Register.
"Class B Securityholders' Interest" shall mean the
portion of the Series 1998-1 Securityholders' Interest evidenced
by the Class B Securities.
"Class D Charge-Offs" shall have the meaning specified
in subsection 4.13(a) of the Agreement.
"Class D Excess Amounts" shall mean, with respect to
any Business Day, the excess of the Class D Invested Amount over
the Stated Class D Amount on such Business Day after taking into
account all adjustments of the ABC Adjusted Invested Amount on
such day.
"Class D Fixed/Floating Percentage" shall mean for any
Business Day on or after the Amortization Period Commencement
Date, the percentage equivalent of a fraction, the numerator of
which is the Class D Invested Amount at the end of the last day
of the Revolving Period and the denominator of which is the
greater of (a) the sum of the aggregate amount of Principal
Receivables and the amount on deposit in the Excess Funding
Account as of the beginning of such Business Day after giving
effect to any deposits or withdrawals to be made to the Excess
Funding Account on such Business Day and (b) the sum of the
numerators used to calculate the applicable floating or
fixed/floating percentages with respect to all Participations and
all Classes of all Series then outstanding.
"Class D Floating Percentage" shall mean, with respect
to any Business Day, the percentage equivalent of a fraction, the
numerator of which is the Class D Invested Amount as of the
beginning of such Business Day and the denominator of which is
the greater of (a) the sum of the aggregate amount of Principal
Receivables as of the beginning of such Business Day and the
amount on deposit in the Excess Funding Account as of the
beginning of such Business Day after giving effect to any
deposits or withdrawals to be made to the Excess Funding Account
on such Business Day and (b) the sum of the numerators used to
calculate the applicable floating or fixed/floating percentages
with respect to all Participations and all Classes of all Series
then outstanding.
"Class D Initial Invested Amount" shall mean
$61,364,000.
"Class D Interest Rate" shall have the meaning
specified in subsection 4.23 of the Agreement.
"Class D Invested Amount" shall mean with respect to
any Business Day, an amount equal to (a) the Class D Initial
Invested Amount, minus (b) the aggregate amount of principal
payments made to Class D Securityholders through and including
such Business Day and reductions of the Class D Invested Amount
pursuant to subsection 4.12(d), minus (c) the aggregate amount of
Class D Charge-Offs for all prior Distribution Dates, minus (d)
the aggregate amount of Redirected Principal Collections through
and including such Business Day for which the Class D Invested
Amount has been reduced pursuant to subsection 4.14(d) of the
Agreement, plus (e) the aggregate amount reimbursed with respect
to reductions of the Class D Invested Amount through and
including such Business Day pursuant to subsection 4.9(a)(xii) of
the Agreement plus, with respect to such subsection, amounts
applied thereto pursuant to subsections 4.10(a) and (b) of the
Agreement, for the purpose of reimbursing amounts deducted
pursuant to the foregoing clauses (c) and (d); provided, however,
that the Class D Invested Amount may not be reduced below zero.
"Class D Outstanding Principal Amount" shall mean, with
respect to the Class D Securities, when used with respect to any
Business Day, an amount equal to (a) the Class D Initial Invested
Amount minus (b) the aggregate amount of principal payments made
to Class D Securityholders prior to such Business Day.
"Class D Principal" shall mean the principal
distributable in respect of the Class D Security as specified in
subsection 4.7(d) of the Agreement.
"Class D Principal Payment Commencement Date" shall
mean the earlier of (a) during the Amortization Period, the first
Distribution Date on which the CTO Invested Amount is paid in
full or, if there are no Principal Collections allocable to the
Series 1998-1 Securities remaining after payments have been made
to the Collateralized Trust Obligations on such Distribution
Date, the Distribution Date following the first Distribution Date
on which the CTO Invested Amount is paid in full and (b) the
Distribution Date following a sale or repurchase of the
Receivables as set forth in Section 2.4(e), 10.2(a), 12.1 or 12.2
of the Agreement or Section 3 of this Series Supplement.
"Class D Securities" shall mean any of the Securities
executed by the Transferor and authenticated by or on behalf of
the Trustee, substantially in the form of Exhibit A-4 hereto.
"Class D Securityholder" shall mean the Person in whose
name a Class D Security is registered in the Security Register.
"Class D Securityholders' Interest" shall mean the
portion of the Series 1998-1 Securityholders' Interest evidenced
by the Class D Security.
"Clearing System Certificate" shall mean a certificate
in substantially the form of Exhibit C hereto or such other form
of certificate as shall be satisfactory to the Trustee, the
Euroclear Operator and Cedel.
"Closing Date" shall mean April 28, 1998.
"Collateralized Trust Obligations" shall mean any of
the Securities executed by the Transferor and authenticated by or
on behalf of the Trustee, substantially in the form of Exhibit A-
3 hereto.
"Controlled Amortization Period" shall mean, with
respect to the Series 1998-1 Securities, unless a Pay Out Event
shall have occurred with respect to such Series prior thereto,
the period commencing on the Amortization Period Commencement
Date and ending upon the earliest to occur of (x) the payment in
full to the Series 1998-1 Securityholders of the Invested Amount,
and (y) the Series 1998-1 Termination Date.
"CTO Additional Interest" shall have the meaning
specified in subsection 4.6(c) of the Agreement.
"CTO Adjusted Invested Amount" shall mean, for any date
of determination, an amount not less than zero equal to the then
current CTO Invested Amount minus the excess, if any, of the
amount then on deposit in the Principal Account over the Class A
Invested Amount and the Class B Invested Amount on such date of
determination.
"CTO Charge-Offs" shall have the meaning specified in
subsection 4.13(b) of the Agreement.
"CTO Default" shall have the meaning specified in
Section 9.
"CTO Exchange Date" shall mean the 40th day after the
later of the commencement of the offering and the Closing Date.
"CTO Expected Final Payment Date" means the April 2002
Distribution Date.
"CTO Fixed/Floating Percentage" shall mean for any
Business Day on or after the Amortization Period Commencement
Date, the percentage equivalent of a fraction, the numerator of
which is the CTO Invested Amount at the end of the last day of
the Revolving Period and the denominator of which is the greater
of (a) the sum of the aggregate amount of Principal Receivables
and the amount on deposit in the Excess Funding Account as of the
beginning of such Business Day after giving effect to any
deposits or withdrawals to be made to the Excess Funding Account
on such Business Day and (b) the sum of the numerators used to
calculate the floating or fixed/floating percentages with respect
to all Participations and all Classes of all Series then
outstanding.
"CTO Floating Percentage" shall mean, with respect to
any Business Day, the percentage equivalent of a fraction, the
numerator of which is the CTO Adjusted Invested Amount as of the
beginning of such Business Day after giving effect to any deposit
to be made to the Principal Account on such Business Day and the
denominator of which is the greater of (a) the sum of the
aggregate amount of Principal Receivables as of the beginning of
such Business Day and the amount on deposit in the Excess Funding
Account as of the beginning of such Business Day after giving
effect to any deposits or withdrawals to be made to the Excess
Funding Account on such Business Day and (b) the sum of the
numerators used to calculate the applicable floating or
fixed/floating percentages with respect to all Participations and
all Classes of all Series then outstanding.
"CTO Global Security" shall mean a CTO Temporary
Regulation S Global Security, a CTO Regulation S Global Security
or a CTO Rule 144A Global Security.
"CTO Initial Invested Amount" shall mean $61,364,000.
"CTO Interest Rate" shall mean 6.45625% per annum from
the Closing Date through and including June 14, 1998 and, with
respect to each Interest Accrual Period thereafter, a per annum
rate .80% in excess of LIBOR as determined on the related LIBOR
Determination Date.
"CTO Invested Amount" shall mean with respect to any
Business Day, an amount equal to (a) the CTO Initial Invested
Amount minus (b) the aggregate amount of principal payments made
to CTO Securityholders through and including such Business Day,
minus (c) the aggregate amount of CTO Charge-Offs for all prior
Distribution Dates, minus (d) the aggregate amount of Redirected
CTO Principal Collections and Redirected Class B Principal
Collections through and including such Business Day for which the
Class D Invested Amount has not been reduced pursuant to
subsection 4.14(d) of the Agreement, plus (e) the aggregate
amount reimbursed with respect to reductions of the CTO Invested
Amount through and including such Business Day pursuant to
subsection 4.9(a)(xi) of the Agreement plus, with respect to such
subsection, amounts applied thereto pursuant to subsections
4.10(a) and (b) and 4.14(a) of the Agreement, for the purpose of
reimbursing amounts deducted pursuant to the foregoing clauses
(c) and (d); provided, however, that the CTO Invested Amount may
not be reduced below zero.
"CTO Monthly Interest" shall mean the interest
distributable in respect of the Collateralized Trust Obligations
as calculated in accordance with subsection 4.6(c) of the
Agreement.
"CTO Monthly Interest Shortfall" shall have the meaning
specified in subsection 4.6(c) of the Agreement.
"CTO Outstanding Principal Amount" shall mean, with
respect to the Collateralized Trust Obligations when used with
respect to any Business Day, an amount equal to (a) the CTO
Initial Invested Amount minus (b) the aggregate amount of
principal payments made to CTO Securityholders prior to such
Business Day.
"CTO Percentage" shall mean a fraction the numerator of
which is the CTO Invested Amount and the denominator of which is
the sum of the Class A Invested Amount, the Class B Invested
Amount and the CTO Invested Amount.
"CTO Principal" shall mean the principal distributable
in respect of the Collateralized Trust Obligations as calculated
in accordance with subsection 4.7(c) of the Agreement.
"CTO Principal Payment Commencement Date" shall mean
the earlier of (a) the Distribution Date on which the Class A
Invested Amount and the Class B Invested Amount have each been
paid in full or, if the Class B Invested Amount is paid in full
on the Class B Expected Final Payment Date and the Early
Amortization Period has not commenced, the Distribution Date
following the Class B Expected Final Payment Date and (b) the
Distribution Date following a sale or repurchase of the
Receivables as set forth in subsections 2.4(e), 10.2(a), 12.1 or
12.2 of the Agreement or Section 3 of this Series Supplement.
"CTO Regulation S Global Security" shall mean a
Collateralized Trust Obligation, sold in an offshore transaction
in reliance on Regulation S under the Securities Act, represented
by one or more Global Securities in definitive, fully registered
form without interest coupons, deposited with DTC, as initial
Clearing Agency, or any successor, with the applicable legends
set forth in Exhibit A-3 hereto included in the form of such
Collateralized Trust Obligation.
"CTO Required Amount" shall mean the amount determined
by the Servicer for each Business Day equal to the excess, if
any, of (x) the sum of (i) the CTO Monthly Interest for the
Interest Accrual Period beginning in the then current Monthly
Period, (ii) any Carryover CTO Monthly Interest, (iii) the CTO
Percentage of the Monthly Servicing Fee for the then current
Monthly Period, (iv) the CTO Percentage of the Series Default
Amount, if any, for such Business Day and for any previous
Business Day in such Monthly Period and (v) the CTO Percentage of
the Series 1998-1 Percentage of any Adjustment Payment the
Transferor is required but fails to make pursuant to subsection
3.8(a) of the Agreement on such Business Day and on each previous
Business Day during such Monthly Period over (y) the Available
Series 1998-1 Finance Charge Collections plus any Excess Finance
Charge Collections from other Series and any Transferor Finance
Charge Collections allocated with respect to the amounts
described in clauses (x)(i) through (v) above with respect to
such Business Day and all previous Business Days in such Monthly
Period.
"CTO Reserve Account" shall have the meaning specified
in subsection 4.21(a) of the Agreement.
"CTO Rule 144A Global Security" shall mean a
Collateralized Trust Obligation, sold within the United States to
U.S. persons that are QIBs, issued in definitive, fully
registered form without interest coupons, in the form of
beneficial interests in one or more Global Securities, deposited
with DTC, as initial Clearing Agency, or any successor, with the
applicable legends set forth in Exhibit A-3 hereto included in
the form of such Collateralized Trust Obligation.
"CTO Securityholder" shall mean the Person in whose
name a Collateralized Trust Obligation is registered in the
Security Register.
"CTO Securityholders' Interest" shall mean the portion
of the Series 1998-1 Securityholders' Interest evidenced by the
Collateralized Trust Obligations.
"CTO Temporary Regulation S Global Security" shall mean
a Collateralized Trust Obligation, sold in an offshore
transaction in reliance on Regulation S under the Securities Act,
represented by one or more Global Securities in definitive, fully
registered form without interest coupons, deposited with DTC, as
initial Clearing Agency , or any successor, with the applicable
legends set forth in Exhibit A-3 hereto included in the form of
such Collateralized Trust Obligation.
"CTO Trigger Event" shall have the meaning specified in
subsection 4.20.
"Defeasance" shall have the meaning specified in
subsection 4.18 of the Agreement.
"Defeasance Funding Account" shall have the meaning set
forth in subsection 4.16 of the Agreement.
"Defeasance Funding Account Balance" shall mean, with
respect to any date of determination during the Amortization
Period, the principal amount, if any, on deposit in the
Defeasance Funding Account on such date of determination.
"Defeasance Funding Account Investment Proceeds" shall
mean, with respect to each Transfer Date following the initial
deposit to the Defeasance Funding Account, the investment
earnings on funds on deposit in the Defeasance Funding Account,
if any, (net of investment losses and expenses) for the related
Interest Accrual Period.
"Defeasance Reserve Account" shall have the meaning set
forth in subsection 4.17 of the Agreement.
"Defeasance Reserve Account Funding Date" shall mean
the first day of the Monthly Period prior to the Defeasance, or
such earlier date as the Transferor may determine.
"Distribution Date" shall mean June 15, 1998 and the
fifteenth day of each month thereafter, or if such day is not a
Business Day, the next succeeding Business Day.
"DTC" shall mean The Depository Trust Company.
"Early Amortization Period" shall mean the period
beginning on the earlier of (a) the day on which a Pay Out Event
occurs or is deemed to have occurred and (b) the CTO Expected
Final Payment Date if the CTO Invested Amount has not been paid
in full on or prior to such date, and ending on the earlier of
(i) the date on which the Class A Invested Amount, the Class B
Invested Amount, the CTO Invested Amount and the Class D Invested
Amount have been paid in full and (ii) the Scheduled Series 1998-
1 Termination Date.
"Enhancement" shall mean, with respect to each Class,
the amount, if any, on deposit from time to time in the Revolving
Receivables Reserve Account and with respect to the Class A
Securities, the subordination of the Class B Invested Amount, the
CTO Invested Amount, and the Class D Invested Amount, with
respect to the Class B Securities, the subordination of the CTO
Invested Amount and the Class D Invested Amount, and with respect
to the Collateralized Trust Obligations, the subordination of the
Class D Invested Amount and the amount, if any, on deposit from
time to time in the CTO Reserve Account.
"Excess Finance Charge Collections" shall mean, with
respect to any Business Day, as the context requires, either (x)
the amount described in subsection 4.9(a)(xviii) of the Agreement
allocated to the Series 1998-1 Securities but available to cover
shortfalls in amounts paid from Finance Charge Collections for
other Series, if any, or (y) the aggregate amount of Finance
Charge Collections allocable to other Series in excess of the
amounts necessary to make required payments with respect to such
Series, if any, and available to cover shortfalls with respect to
the Series 1998-1 Securities.
"Fixed/Floating Percentage" shall mean for any Business
Day on or after the Amortization Period Commencement Date, the
sum of the Class A Fixed/Floating Percentage, the Class B
Fixed/Floating Percentage, the CTO Fixed/Floating Percentage and
the Class D Fixed/Floating Percentage.
"Floating Percentage" shall mean for any Business Day
the sum of the applicable Class A Floating Percentage, Class B
Floating Percentage, CTO Floating Percentage, and Class D
Floating Percentage.
"Initial Invested Amount" shall mean an amount equal to
the sum of (i) the Class A Initial Invested Amount; (ii) the
Class B Initial Invested Amount; (iii) the CTO Initial Invested
Amount; and (iv) the Class D Initial Invested Amount.
"Interest Accrual Period" shall mean, with respect to a
Distribution Date, the period from and including the preceding
Distribution Date to but excluding such Distribution Date;
provided, however, that the initial Interest Accrual Period shall
be the period from the Closing Date to but excluding the initial
Distribution Date.
"Invested Amount" shall mean, when used with respect to
any Business Day, an amount equal to the sum of (a) the Class A
Invested Amount as of such Business Day, (b) the Class B Invested
Amount as of such Business Day, (c) the CTO Invested Amount as of
such Business Day and (d) the Class D Invested Amount as of such
Business Day.
"Investor Percentage" shall mean, (a) with respect to
Finance Charge Collections prior to the commencement of the Early
Amortization Period, Default Amounts at any time and Principal
Collections during the Revolving Period, the Floating Percentage
and (b) with respect to Finance Charge Collections during the
Early Amortization Period and Principal Collections during the
Amortization Period, the Fixed/Floating Percentage, and with
respect to any other Series of Securities, the percentage
specified in the related Supplement.
"Investor Securityholder" shall mean the Holder of
record of an Investor Security of Series 1998-1.
"LIBOR" shall have the meaning specified in subsection
4.15(a) of the Agreement.
"LIBOR Determination Date" shall mean the second
Business Day prior to the commencement of the second and each
subsequent Interest Accrual Period. For purposes of this
definition, a Business Day is any day on which banks in London
and New York are open for the transaction of international
business.
"Member Organization Certificate" shall mean a
certificate substantially in the form of Exhibit D hereto or such
other form of certificate as shall be satisfactory to the
Trustee, the Euroclear Operator and Cedel.
"Minimum Retained Percentage" shall mean 2%.
"Minimum Transferor Percentage" shall mean 0%;
provided, however, that in certain circumstances such percentage
may be increased.
"Monthly Period" shall have the meaning specified in
the Agreement, except that the first Monthly Period with respect
to the Series 1998-1 Securities shall begin on and include the
Closing Date and shall end on and include May 29, 1998.
"Monthly Servicing Fee" shall mean for any Monthly
Period, an amount equal to the product of (i) a fraction, the
numerator of which is the actual number of days in such Monthly
Period and the denominator of which is 365 or 366, (ii) the
Series Monthly Servicing Fee Percentage and (iii) the Adjusted
Invested Amount as of the beginning of the day on the first day
of such Monthly Period, or, in the case of the first Distribution
Date, the Initial Invested Amount.
"Negative Carry Amount" shall have the meaning
specified in subsection 4.10(a) of the Agreement.
"Paired Series" shall have the meaning specified in
Section 17 of this Series Supplement.
"Paying Agent" shall mean, for the Series 1998-1
Securities, initially The Bank of New York and in certain limited
circumstances the Banque Generale du Luxembourg, S.A.
"Payment Reserve Account" shall have the meaning
specified in subsection 4.22 of the Agreement.
"Pay Out Commencement Date" shall mean the date on
which a Trust Pay Out Event is deemed to occur pursuant to
Section 9.1 of the Agreement or a Series 1998-1 Pay Out Event is
deemed to occur pursuant to Section 8 of this Series Supplement.
"Portfolio Yield" shall mean, with respect to any
Monthly Period, the annualized percentage equivalent of a
fraction, the numerator of which is the sum of (i) the aggregate
amount of Available Series 1998-1 Finance Charge Collections for
each Business Day during such Monthly Period (not including (a)
the amounts withdrawn from the Payment Reserve Account, (b)
Adjustment Payments made by the Transferor with respect to
Adjustment Payments required to be made but not made in prior
Monthly Periods, if any, and (c) the amount of any Finance Charge
Collections received with respect to the final payment of any
Closed End Receivable that is refinanced with a receivable
arising under a revolving credit card account) and (ii) amounts
withdrawn from the Defeasance Reserve Account with respect to
such Monthly Period calculated on a cash basis after subtracting
the aggregate Series Default Amount for such Monthly Period and
the Series 1998-1 Percentage of any Adjustment Payments which the
Transferor is required but fails to make pursuant to the Pooling
and Servicing Agreement for each Business Day during such Monthly
Period, and the denominator of which is the average daily
Invested Amount during such Monthly Period; provided, however,
that Excess Finance Charge Collections applied for the benefit of
the Series 1998-1 Securityholders may be added to the numerator
if the Transferor shall have provided ten Business Days prior
written notice of such action to each Rating Agency and the
Transferor, the Servicer and the Trustee shall have received
notification in writing that such action will not result in
Standard & Poor's reducing or withdrawing its then existing
rating of the Investor Securities of any outstanding Series or
Class with respect to which it is a Rating Agency.
"Principal Shortfalls" shall mean for any Business Day
(x) for Series 1998-1, (i) during the Controlled Amortization
Period on or prior to the CTO Principal Payment Commencement
Date, the excess of the Class A Controlled Distribution Amount or
the Class B Controlled Distribution Amount, as applicable, over
the aggregate amount applied with respect thereto for such
Business Day and for each prior Business Day in such Monthly
Period, and (ii) at all other times, the Invested Amount of the
Class then receiving principal payments, if any, after the
application of Principal Collections on such Business Day or (y)
for any other Series the amounts specified as such in the
Supplement for such other Series.
"QIB" shall mean a "qualified institutional buyer"
within the meaning of Rule 144A under the Securities Act.
"Rating Agency" shall mean Standard & Poor's and
Moody's
"Redirected Class B Principal Collections" shall have
the meaning specified in subsection 4.14(c) of the Agreement.
"Redirected Class D Principal Collections" shall have
the meaning specified in subsection 4.14(a) of the Agreement.
"Redirected CTO Principal Collections" shall have the
meaning specified in subsection 4.14(b) of the Agreement.
"Redirected Principal Collections" shall mean the sum
of Redirected Class B Principal Collections, Redirected CTO
Principal Collections and Redirected Class D Principal
Collections.
"Regulation S Transfer Certificate" shall mean a
certificate substantially in the form of Exhibit E hereto.
"Required Amount" shall have the meaning specified in
subsection 4.10(b) of the Agreement.
"Required Defeasance Reserve Account Amount" shall
mean, with respect to any Business Day on or after the Defeasance
Reserve Account Funding Date, an amount equal to the excess of
the sum of the Class A Monthly Interest, the Class B Monthly
Interest and the estimated amount of the CTO Monthly Interest
over the estimated amount of investment earnings on amounts in
the Defeasance Funding Account, as estimated by the Transferor,
for each of the Interest Accrual Periods during the period from
the date of the deposit to the Defeasance Funding Account through
the April 2002 Distribution Date.
"Reserve Account Investment Proceeds" shall mean, with
respect to any Business Day, the sum of the investment earnings
on funds on deposit in (i) the CTO Reserve Account available in
accordance with subsection 4.21(c) of the Agreement on such
Business Day and (ii) the Payment Reserve Account available in
accordance with subsection 4.22(c) of the Agreement on such
Business Day.
"Revolving Period" shall mean the period from and
including the Closing Date to, but not including, the
Amortization Period Commencement Date.
"Revolving Receivables Reserve Account" shall have the
meaning specified in subsection 4.19 of the Agreement.
"Rule 144A Transfer Certificate" shall mean a
certificate substantially in the form of Exhibit F hereto.
"Scheduled Series 1998-1 Termination Date" shall mean
the February 2005 Distribution Date.
"Series 1998-1" shall mean the Series of the Fingerhut
Master Trust represented by the Series 1998-1 Securities.
"Series 1998-1 Pay Out Event" shall have the meaning
specified in Section 8 of this Series Supplement.
"Series 1998-1 Percentage" shall mean, on any date of
determination, the percentage equivalent of a fraction the
numerator of which is the Invested Amount and the denominator of
which is the sum of the Invested Amounts relating to all other
Series then outstanding.
"Series 1998-1 Securities" shall mean the Class A
Securities, the Class B Securities, the Collateralized Trust
Obligations and the Class D Security.
"Series 1998-1 Securityholder" shall mean the holder of
record of any Series 1998-1 Security.
"Series 1998-1 Securityholders' Interest" shall have
the meaning specified in Section 4.4 of the Agreement.
"Series 1998-1 Termination Date" shall mean the earlier
to occur of (i) the day after the Distribution Date on which the
Series 1998-1 Securities are paid in full, or (ii) the Scheduled
Series 1998-1 Termination Date.
"Series Charge-Offs" shall mean the sum of Class A
Charge-Offs, Class B Charge-Offs, CTO Charge-Offs and Class D
Charge-Offs.
"Series Default Amount" shall mean, with respect to
each Business Day, an amount equal to the product of the Default
Amount identified since the prior reporting date and the Floating
Percentage for such Business Day.
"Series Monthly Servicing Fee Percentage" shall mean
2.00% per annum.
"Shared Principal Collections" shall mean, as the
context requires, (a) the amount of Principal Collections for any
Business Day allocated to the Series 1998-1 Securities which, in
accordance with subsections 4.9(b) and 4.9(c)(ii) of the
Agreement, may be applied in accordance with Section 4.3(d) of
the Agreement or (b) the amounts allocated to the Investor
Securities of other Series which the applicable Series
Supplements for such Series specify are to be treated as "Shared
Principal Collections" or (c) the amounts specified in any
Participation Supplement to be treated as "Shared Principal
Collections" and which may be applied to cover Principal
Shortfalls with respect to the Series 1998-1 Securities.
"Specified CTO Reserve Amount" shall mean, on any date
of determination following a CTO Trigger Event, subject to
Section 9 of this Supplement, the amount, if any, which if added
to the numerator of the Target Percentage on such date would
cause such percentage to be equal to 6%; provided, however, that
except as specified in the immediately succeeding proviso, the
Specified CTO Reserve Amount shall not exceed the product of 5%
and the Invested Amount on any Business Day; and provided,
further, that following a CTO Default, in the circumstances
specified in Section 9 of this Series Supplement, the Specified
CTO Reserve Amount will be equal to the CTO Outstanding Principal
Amount.
"Specified Revolving Receivables Reserve Amount" shall
mean, on any date of determination, an amount equal to the
product of (x) the Floating Percentage on such date and (y) 1% of
the aggregate amount of Principal Receivables which are Revolving
Receivables on such date; provided, however, that such percentage
may be reduced at the option of the Transferor at any time if the
Rating Agency Condition shall have been satisfied with respect
thereto.
"Stated Class D Amount" shall mean on any Business Day
the greater of (i) zero and (ii) a number rounded to the nearest
Dollar equal to 13.64% of the ABC Adjusted Invested Amount as of
such Business Day; provided, however, that during any Early
Amortization Period the Stated Class D Amount shall be equal to
the Stated Class D Amount immediately preceding the commencement
of the Early Amortization Period; provided, further, that on any
Business Day after the earlier of (a) the Class A Expected Final
Payment Date if the Class A Invested Amount was not paid in full
on the Class A Expected Final Payment Date or (b) the Class B
Expected Final Payment Date if the Class B Invested Amount was
not paid in full on the Class B Expected Final Payment Date the
Stated Class D Amount shall be equal to the Stated Class D Amount
on the Class A Expected Final Payment Date or the Class B
Expected Final Payment Date, as applicable; and provided,
further, that there shall be no reduction in the Stated Class D
Amount on any day on which the amount on deposit in the Revolving
Receivables Reserve Account is less than the Specified Revolving
Receivables Reserve Amount or the amount on deposit in the CTO
Reserve Account is less than the Specified CTO Reserve Amount
and; provided, further, that the Stated Class D Amount shall not
be less than $15,340,920 prior to the date on which each of the
Class A Outstanding Principal Balance, the Class B Outstanding
Principal Balance and the CTO Outstanding Principal Balance have
been reduced to zero.
"Target Percentage" shall have the meaning specified in
subsection 4.20 of the Agreement.
"Telerate Page 3750" shall mean the display page
currently so designated on the Dow Jones Telerate Service (or
such other page as may replace that page on that service for the
purpose of displaying comparable rates or prices).
"Transferor Finance Charge Collections" shall mean on
any Business Day the Series 1998-1 Percentage of the Finance
Charge Collections allocable to the Exchangeable Transferor
Security.
"Transferor Retained Securities" shall mean Investors
Securities of any Series which the Transferor retains, including
the Class D Securities for so long as they are held by the
Transferor, but only to the extent that and for so long as the
Transferor is the Holder of such Securities.
SECTION 3. Reassignment Terms. The Series 1998-1
Securities shall be subject to termination by the Transferor at
its option, in accordance with the terms specified in subsection
12.2(a) of the Agreement, on any Distribution Date on or after
the Distribution Date on which the sum of the Class A Invested
Amount, the Class B Invested Amount and the CTO Invested Amount
would be reduced to an amount less than or equal to 10% of the
sum of the Class A Initial Invested Amount, the Class B Initial
Invested Amount and the CTO Initial Invested Amount. The deposit
required in connection with any such termination and final
distribution shall be equal to the sum of the unpaid Class A
Invested Amount, the unpaid Class B Invested Amount and the
unpaid CTO Invested Amount plus accrued and unpaid interest on
the Class A Securities, Class B Securities and Collateralized
Trust Obligations through the day prior to the Distribution Date
on which the final distribution occurs, in each case after giving
effect to any payments on such date.
SECTION 4. Delivery and Payment for the Series 1998-
1 Securities. The Transferor shall execute and deliver the
Series 1998-1 Securities to the Trustee for authentication in
accordance with Section 6.1 of the Agreement. The Trustee shall
deliver the Series 1998-1 Securities to or upon the order of the
Transferor when authenticated in accordance with Section 6.2 of
the Agreement.
SECTION 5. Form of Delivery of Series 1998-1
Securities; Denominations; Depositary. The Class A Securities,
the Class B Securities and the Collateralized Trust Obligations
shall be delivered as Book-Entry Securities as provided in
Sections 6.1 and 6.10 of the Agreement. The Class A Securities
and the Class B Securities shall be issued in minimum
denominations of $1,000 and integral multiples thereof. The
Collateralized Trust Obligations shall be issued in minimum
denominations of $100,000 and integral multiples of $1,000 in
excess thereof. The Class D Security shall be delivered as a
Registered Security as provided in Section 6.1 of the Agreement.
The Depositary for Series 1998-1 shall be DTC and the
Class A Securities and the Class B Securities shall be initially
registered in the name of Cede & Co., its nominee and will
initially be held by the Trustee as custodian for DTC.
The Transferor shall execute and the Trustee shall
authenticate (i) one or more CTO Temporary Regulation S Global
Securities, (ii) one or more CTO Regulation S Global Securities,
and (iii) one or more CTO Rule 144A Global Securities, each
having a principal balance as shall have been indicated to the
Trustee by the Transferor and having an aggregate principal
balance equal to the CTO Invested Amount as of the date of
execution of such Global Securities by the Transferor.
The CTO Global Securities (i) shall be delivered by the
Trustee to DTC acting as the initial Clearing Agency, and (ii) in
each case shall be registered in the name of Cede & Co. The CTO
Global Securities shall bear a legend substantially in the form
set forth in Exhibit A-3. The CTO Global Securities initially
will be held by the Trustee as custodian for DTC.
So long as any of the CTO Global Securities remains
outstanding and are held by or on behalf of the Clearing Agency,
transfers of beneficial interests in any of such CTO Global
Securities may be made only in accordance with this Section 5 and
in accordance with the rules of the Clearing Agency and the
Euroclear Operator or Cedel.
A beneficial interest in the CTO Temporary Regulation
S Global Security may be transferred to a transferee that takes
delivery in the form of a beneficial interest in the CTO Rule
144A Global Securities only upon receipt by the Trustee of a Rule
144A Transfer Certificate.
On and after the CTO Exchange Date, a beneficial
interest in the CTO Temporary Regulation S Global Security may be
transferred to a transferee that takes delivery in the form of a
beneficial interest in the CTO Regulation S Global Security only
upon receipt by the Trustee of a Clearing System Certificate from
the Euroclear Operator or Cedel, as applicable, and a Member
Organization Certificate, relating to the appropriate portion of
the CTO Temporary Regulation S Global Security.
A beneficial interest in a CTO Rule 144A Global
Security may be transferred to a transferee that takes delivery
in the form of a beneficial interest in a CTO Regulation S Global
Security or CTO Temporary Regulation S Global Security only upon
receipt by the Transfer Agent and Registrar of a Regulation S
Transfer Certificate.
No restrictions shall apply with respect to the
transfer or registration of transfer of (x) a beneficial interest
in a CTO Rule 144A Global Security to a transferee that takes
delivery in the form of a beneficial interest in the CTO Rule
144A Global Security, or (y) a beneficial interest in a CTO
Regulation S Global Security to a transferee that takes delivery
in the form of a beneficial interest in the CTO Regulation S
Global Security.
An exchange of a beneficial interest in the CTO
Temporary Regulation S Global Security for a beneficial interest
in the CTO Regulation S Global Security, may be made only on or
after the CTO Exchange Date and only upon receipt by the Trustee
of a Clearing System Certificate from the Euroclear Operator or
Cedel, as applicable, relating to the appropriate portion of the
CTO Temporary Regulation S Global Security.
Upon acceptance for transfer of a beneficial
interest in any CTO Global Security for a beneficial interest in
another CTO Global Security as provided herein, the Trustee shall
(or shall request the Clearing Agency to) endorse on the
schedules affixed to each of such CTO Global Securities (or on
continuations of such schedules affixed to each of such CTO
Global Securities and made parts thereof) appropriate notations
evidencing the date of such transfer and (x) in the case of the
CTO Global Security from which such transfer is made, a decrease
in the outstanding balance of such CTO Global Security equal to
the outstanding balance being transferred and (y) in the case of
the CTO Global Security into which such transfer is made, an
increase in the outstanding balance of such CTO Global Security
equal to the outstanding balance being transferred.
SECTION 6. Article IV of Agreement. Sections 4.1,
4.2 and 4.3 of the Agreement shall read in their entirety as
provided in the Agreement. Article IV of the Agreement (except
for Sections 4.1, 4.2 and 4.3 thereof) shall read in its entirety
as follows and shall be applicable only to the Series 1998-1
Securities:
ARTICLE IV
RIGHTS OF SECURITYHOLDERS ANDALLOCATION
AND APPLICATION OF COLLECTIONS
SECTION 4.4 Rights of Securityholders.
The Series 1998-1 Securities shall represent undivided
interests in the Trust, including the right to receive,
to the extent necessary to make the required payments
with respect to such Series 1998-1 Securities at the
times and in the amounts specified in this Agreement,
(a) the Floating Percentage and the Fixed/Floating
Percentage (as applicable from time to time) of
Collections (including Finance Charge Collections)
available in the Collection Account, (b) funds
allocable to the Series 1998-1 Securities on deposit in
the Excess Funding Account and (c) funds on deposit in
the Interest Funding Account, the Principal Account,
the Revolving Receivables Reserve Account, the
Defeasance Funding Account, the Defeasance Reserve
Account, the Distribution Account, the CTO Reserve
Account and the Payment Reserve Account (for such
Series, the "Series 1998-1 Securityholders' Interest").
The Class B Invested Amount, the CTO Invested Amount
and the Class D Invested Amount shall be subordinated
to the Class A Securities; the CTO Invested Amount and
the Class D Invested Amount shall be subordinated to
the Class B Securities; and the Class D Invested Amount
shall be subordinated to the Collateralized Trust
Obligations, in each case to the extent provided in
this Article IV. The Class B Securities will not have
the right to receive payments of principal until the
Class A Invested Amount has been paid in full. The
Collateralized Trust Obligations will not have the
right to receive payments of principal until the Class
A Invested Amount and the Class B Invested Amount have
been paid in full. The Class D Securities will not
have the right to receive payments of principal, other
than to the extent of Class D Excess Amounts, until the
Class A Invested Amount, the Class B Invested Amount
and the CTO Invested Amount have been paid in full.
SECTION 4.5 Collections and Allocation;
Payments on Exchangeable Transferor Security.
Collections and Allocations. The Servicer
will apply or will instruct the Trustee to apply all
funds on deposit in the Collection Account and the
Excess Funding Account allocable to the Series 1998-1
Securities, and all funds on deposit in the Interest
Funding Account, the Principal Account, the Revolving
Receivables Reserve Account, the Defeasance Funding
Account, the Defeasance Reserve Account, the
Distribution Account, the CTO Reserve Account and the
Payment Reserve Account, as described in this Article
IV. On each Business Day, (i) the amount of Finance
Charge Collections available in the Collection Account
allocable to the Series 1998-1 Securities shall be
determined by multiplying the aggregate amount of such
Finance Charge Collections by (x) prior to the Pay Out
Commencement Date, the Floating Percentage and (y) on
and after the Pay Out Commencement Date, the
Fixed/Floating Percentage, (ii) the amount of Principal
Collections available in the Collection Account
allocable to the Series 1998-1 Securities shall be
determined by multiplying the aggregate amount of such
Principal Collections by (x) during the Revolving
Period, the Floating Percentage and (y) during any
Amortization Period, the Fixed/Floating Percentage, and
(iii) the Default Amount on such Business Day allocable
to the Series 1998-1 Securities shall be determined by
multiplying the Default Amount by the Floating
Percentage. In addition, on the Closing Date the
Transferor shall make a deposit to the Interest Funding
Account in the amount of $2,000,000 to be allocated to
the Series 1998-1 Securities and applied as Available
Series 1998-1 Finance Charge Collections in accordance
with subsection 4.9(a) of the Agreement.
Payments to the Holder of the Exchangeable
Transferor Security. On each Business Day, the
Servicer shall allocate and pay Collections in
accordance with the Daily Report to the Holder of the
Exchangeable Transferor Security in accordance with
subsection 4.3(b) of the Agreement; provided, however,
that such amounts shall be applied in accordance with
Section 4.10 hereof to the extent specified therein.
Notwithstanding the foregoing and any other
provisions of this Supplement, amounts payable to the
Transferor shall instead be deposited in the Excess
Funding Account to the extent necessary to prevent the
Transferor Interest from being less than the Minimum
Transferor Interest.
SECTION 4.6 Determination of Interest for
the Series 1998-1 Securities. The amount of monthly
interest (the "Class A Monthly Interest") which shall
accrue for the benefit of the Class A Securities with
respect to any Interest Accrual Period shall be an
amount equal to one-twelfth of the product of (i) the
Class A Interest Rate and (ii) the Class A Outstanding
Principal Amount as of the close of business on the
first day of such Interest Accrual Period (or in the
case of the initial Distribution Date, an amount equal
to the product of (u) the Class A Initial Invested
Amount, (v) 47 divided by 360, and (w) the Class A
Interest Rate).
On the first Business Day of each Monthly
Period, the Servicer shall determine an amount (the
"Class A Monthly Interest Shortfall") with respect to
the Distribution Date in such Monthly Period equal to
the excess, if any, of (x) the Class A Monthly Interest
for the Interest Accrual Period ending in such Monthly
Period over (y) the amount available to be paid to the
Class A Securityholders in respect of interest on such
Distribution Date. If there is a Class A Monthly
Interest Shortfall with respect to any Distribution
Date, an additional amount ("Class A Additional
Interest") shall be payable as provided herein with
respect to the Class A Securities on each Distribution
Date following such Distribution Date, to and including
the Distribution Date on which such Class A Monthly
Interest Shortfall is paid to Class A Securityholders,
equal to one-twelfth of the product of (i) the Class A
Interest Rate and (ii) such Class A Monthly Interest
Shortfall remaining unpaid. Notwithstanding anything
to the contrary herein, Class A Additional Interest
shall be payable or distributed to Class A
Securityholders only to the extent permitted by
applicable law.
The amount of monthly interest (the "Class
B Monthly Interest") which shall accrue for the benefit
of the Class B Securities with respect to any Interest
Accrual Period shall be an amount equal to one-twelfth
of the product of (i) the Class B Interest Rate and
(ii) the Class B Invested Amount as of the close of
business on the first day of such Interest Accrual
Period (or in the case of the initial Distribution
Date, an amount equal to the product of (u) the Class B
Initial Invested Amount, (v) 47 divided by 360, and (w)
the Class B Interest Rate).
On the first Business Day of each Monthly
Period, the Servicer shall determine an amount (the
"Class B Monthly Interest Shortfall") with respect to
the Distribution Date in such Monthly Period equal to
the excess, if any, of (x) the aggregate Class B
Monthly Interest for the Interest Accrual Period ending
in such Monthly Period over (y) the amount available to
be paid to the Class B Securityholders in respect of
interest on such Distribution Date. If there is a
Class B Monthly Interest Shortfall with respect to any
Distribution Date, an additional amount ("Class B
Additional Interest") shall be payable as provided
herein with respect to the Class B Securities on each
Distribution Date following such Distribution Date, to
and including the Distribution Date on which such Class
B Monthly Interest Shortfall is paid to Class B
Securityholders, equal to one-twelfth of the product of
(i) the Class B Interest Rate and (ii) such Class B
Monthly Interest Shortfall remaining unpaid.
Notwithstanding anything to the contrary herein, Class
B Additional Interest shall be payable or distributed
to Class B Securityholders only to the extent permitted
by applicable law.
The amount of monthly interest (for the
Series 1998-1 Securities, the "CTO Monthly Interest")
which shall accrue for the benefit of the
Collateralized Trust Obligations with respect to any
Interest Accrual Period shall be an amount equal to the
product of (i) the CTO Interest Rate for the related
Interest Accrual Period, (ii) a fraction the numerator
of which is the actual number of days in the related
Interest Accrual Period and the denominator of which is
360 and (iii) the CTO Invested Amount as of the close
of business on the first day of such Interest Accrual
Period (or in the case of the initial Distribution
Date, an amount equal to the product of (u) the CTO
Initial Invested Amount, (v) 48 divided by 360, and
(w) the CTO Interest Rate for the initial Interest
Accrual Period).
On the first Business Day of each Monthly
Period, the Servicer shall determine an amount (the
"CTO Monthly Interest Shortfall") with respect to the
Distribution Date in such Monthly Period equal to the
excess, if any, of (x) the aggregate CTO Monthly
Interest for the Interest Accrual Period ending in such
Monthly Period over (y) the amount available to be paid
to the CTO Securityholders in respect of interest on
such Distribution Date. If there is a CTO Monthly
Interest Shortfall with respect to any Distribution
Date, an additional amount ("CTO Additional Interest")
shall be payable as provided herein with respect to the
Collateralized Trust Obligations on each Distribution
Date following such Distribution Date, to and including
the Distribution Date on which such CTO Monthly
Interest Shortfall is paid to CTO Securityholders,
equal to the product of (i) the CTO Interest Rate, (ii)
such CTO Monthly Interest Shortfall remaining unpaid
and (iii) a fraction the numerator of which is the
actual number of days in the related Interest Accrual
Period and the denominator of which is 360.
Notwithstanding anything to the contrary herein, CTO
Additional Interest shall be payable or distributed to
CTO Securityholders only to the extent permitted by
applicable law.
SECTION 4.7 Determination of Principal
Amounts. The amount of principal (the "Class A
Principal") distributable from the Distribution Account
with respect to the Class A Securities for each
Distribution Date with respect to the Amortization
Period shall be equal to the Available Series 1998-1
Principal Collections on deposit in the Principal
Account with respect to the related Monthly Period;
provided, however, that with respect to any
Distribution Date during the Controlled Amortization
Period, Class A Principal shall not exceed the lesser
of (i) the Class A Controlled Distribution Amount and
(ii) the Class A Invested Amount; provided, further
that with respect to any Distribution Date with respect
to the Early Amortization Period following a
Defeasance, Class A Principal shall be equal to the
lesser of (i) the Defeasance Funding Account Balance
and (ii) the Class A Invested Amount; provided, further
that with respect to the Series 1998-1 Termination
Date, Class A Principal shall be an amount equal to the
Class A Invested Amount.
The amount of principal (the "Class B
Principal") distributable from the Distribution Account
with respect to the Class B Securities for each
Distribution Date, beginning on the Class B Principal
Payment Commencement Date, shall be equal to the
Available Series 1998-1 Principal Collections remaining
on deposit in the Principal Account with respect to the
related Monthly Period after application thereof to
Class A Principal, if any; provided, however, that with
respect to any Distribution Date during the Controlled
Amortization Period, Class B Principal shall not exceed
the lesser of (i) the Class B Controlled Distribution
Amount and (ii) the Class B Invested Amount; provided,
further that with respect to any Distribution Date with
respect to the Early Amortization Period following a
Defeasance, Class B Principal shall be equal to the
lesser of (i) the Defeasance Funding Account Balance
after application of amounts on deposit therein to
Class A Principal and (ii) the Class B Invested Amount;
provided, further that with respect to the Series 1998-
1 Termination Date, Class B Principal shall be an
amount equal to the Class B Invested Amount.
The amount of principal (the "CTO
Principal") distributable from the Distribution Account
with respect to the Collateralized Trust Obligations
for each Distribution Date, beginning on or after the
CTO Principal Payment Commencement Date, shall be equal
to the Available Series 1998-1 Principal Collections
remaining on deposit in the Principal Account with
respect to the related Monthly Period after application
thereof to Class A Principal and Class B Principal, if
any; provided that with respect to any Distribution
Date with respect to the Early Amortization Period
following a Defeasance, CTO Principal shall be equal to
the lesser of (i) the Defeasance Funding Account
Balance after application of amounts on deposit therein
to Class A Principal and Class B Principal and (ii) the
CTO Invested Amount; provided, further with respect to
the Series 1998-1 Termination Date, CTO Principal shall
be an amount equal to the CTO Invested Amount.
The amount of principal (the "Class D
Principal") distributable from the Distribution Account
with respect to the Class D Securities for each
Distribution Date, beginning on the Class D Principal
Payment Commencement Date, and on each Distribution
Date thereafter until the Trust is terminated or until
the Class D Invested Amount is paid in full, shall be
equal to the Available Series 1998-1 Principal
Collections remaining on deposit in the Principal
Account with respect to the related Monthly Period
after application thereof to Class A Principal, Class B
Principal and CTO Principal, if any, and the Trustee,
acting in accordance with instructions from the
Servicer, will withdraw such amounts from the Principal
Account and, to the extent of the Class D Invested
Amount, deposit such amounts in the Distribution
Account for distribution to the Class D Securityholder
on the next succeeding Distribution Date.
SECTION 4.8 Shared Principal Collections.
Shared Principal Collections allocated to Available
Series 1998-1 Principal Collections for the Series 1998-
1 Securities and to be applied to Class A Principal,
Class B Principal, CTO Principal and Class D Principal
pursuant to subsection 4.9(c)(i)(y) of the Agreement
for any Business Day with respect to the Amortization
Period shall be equal to the product of (x) Shared
Principal Collections for all Series for such Business
Day and (y) a fraction, the numerator of which is the
Principal Shortfall for the Series 1998-1 Securities
for such Business Day and the denominator of which is
the aggregate amount of Principal Shortfalls for all
Series for such Business Day. For any Business Day
with respect to the Revolving Period, Shared Principal
Collections allocated to Available Series 1998-1
Principal Collections for the Series 1998-1 Securities
shall be zero.
SECTION 4.9 Application of Funds on
Deposit in the Collection Account for the Securities.
Available Series 1998-1 Finance Charge Collections. On
each Business Day, the Servicer shall deliver to the
Trustee a Daily Report in which it shall instruct the
Trustee to withdraw, and the Trustee, acting in
accordance with such instructions, shall withdraw
amounts from the appropriate accounts, to the extent of
the sum of (i) the amount of Finance Charge Collections
allocated to the Series 1998-1 Securities pursuant to
subsection 4.5(a) of the Agreement, (ii) amounts on
deposit in the Payment Reserve Account, if any, if and
to the extent the Transferor designates that such
amounts are to be so applied, (iii) Reserve Account
Investment Proceeds and investment earnings on amounts
on deposit in the Interest Funding Account and the
Principal Account and (iv) Defeasance Funding Account
Investment Proceeds and other amounts withdrawn from
the Defeasance Reserve Account pursuant to subsections
4.17(b), (c) and (d) and the Revolving Receivables
Reserve Account pursuant to subsections 4.19(c), (d)
and (e), which amounts shall be applied on each
Transfer Date as if such amounts had been available on
the last Business Day of the preceding Monthly Period
(collectively, the "Available Series 1998-1 Finance
Charge Collections"; provided that with respect to the
Closing Date the amount deposited by the Transferor
into the Interest Funding Account pursuant to
subsection 4.5(a) of the Agreement shall also
constitute Available Series 1998-1 Finance Charge
Collections; and provided further that, with respect to
any Business Day, amounts applied pursuant to Section
4.10 and Section 4.14 of the Agreement shall be applied
as if such amounts were Available Series 1998-1 Finance
Charge Collections). The Trustee shall apply Available
Series 1998-1 Finance Charge Collections in the
priority set forth below:
Class A Monthly Interest. On each Business
Day during a Monthly Period, the Trustee, acting in
accordance with instructions from the Servicer, shall
deposit into the Interest Funding Account for
distribution on the next Distribution Date to the Class
A Securityholders, to the extent of the Available
Series 1998-1 Finance Charge Collections for such
Business Day, an amount equal to the lesser of (x) the
Available Series 1998-1 Finance Charge Collections and
(y) the excess of (1) the sum of Class A Monthly
Interest for the Interest Accrual Period beginning in
such Monthly Period and Carryover Class A Monthly
Interest over (2) any amounts with respect thereto
previously deposited into the Interest Funding Account
during such Monthly Period. Notwithstanding anything
to the contrary herein, the portion of Carryover Class
A Monthly Interest that constitutes Class A Additional
Interest shall be payable or distributable to Class A
Securityholders only to the extent permitted by
applicable law.
Class B Monthly Interest. On each Business
Day during a Monthly Period, the Trustee, acting in
accordance with instructions from the Servicer, shall
deposit into the Interest Funding Account for
distribution on the next Distribution Date to the Class
B Securityholders, to the extent of any Available
Series 1998-1 Finance Charge Collections remaining
after giving effect to the application pursuant to
subsection 4.9(a)(i) of the Agreement, an amount equal
to the lesser of (x) any such remaining Available
Series 1998-1 Finance Charge Collections and (y) the
excess of (1) the sum of Class B Monthly Interest for
the Interest Accrual Period beginning in such Monthly
Period and Carryover Class B Monthly Interest over (2)
any amounts with respect thereto previously deposited
into the Interest Funding Account during such Monthly
Period. Notwithstanding anything to the contrary
herein, the portion of Carryover Class B Monthly
Interest that constitutes Class B Additional Interest
shall be payable or distributable to Class B
Securityholders only to the extent permitted by
applicable law.
CTO Monthly Interest. On each Business Day
during a Monthly Period, the Trustee, acting in
accordance with instructions from the Servicer, shall
deposit into the Interest Funding Account for
distribution on the next Distribution Date to the CTO
Securityholders, to the extent of any Available Series
1998-1 Finance Charge Collections remaining after
giving effect to the applications pursuant to
subsections 4.9(a)(i) and (ii) of the Agreement, an
amount equal to the lesser of (x) any such remaining
Available Series 1998-1 Finance Charge Collections and
(y) the excess of (1) the sum of CTO Monthly Interest
for the Interest Accrual Period beginning in such
Monthly Period and Carryover CTO Monthly Interest over
(2) any amounts with respect thereto previously
deposited into the Interest Funding Account during such
Monthly Period. Notwithstanding anything to the
contrary herein, the portion of Carryover Class C
Monthly Interest that constitutes CTO Additional
Interest shall be payable or distributable to CTO
Securityholders only to the extent permitted by
applicable law.
Monthly Servicing Fee. On each Business
Day during a Monthly Period, the Trustee, acting in
accordance with instructions from the Servicer, shall
distribute to the Servicer, to the extent of any
Available Series 1998-1 Finance Charge Collections
remaining after giving effect to the applications
pursuant to subsections 4.9(a)(i) through (iii) of the
Agreement, an amount equal to the lesser of (x) any
such remaining Available Series 1998-1 Finance Charge
Collections and (y) the excess of (i) the Monthly
Servicing Fee for such Monthly Period plus any unpaid
Monthly Servicing Fees from prior Monthly Periods over
(ii) any amounts with respect thereto previously
distributed to the Servicer during such Monthly Period.
Series Default Amount. On each Business
Day during a Monthly Period, the Trustee, acting in
accordance with instructions from the Servicer, shall
apply to the extent of any Available Series 1998-1
Finance Charge Collections remaining after giving
effect to the applications pursuant to subsections
4.9(a)(i) through (iv) of the Agreement, an amount
equal to the lesser of (x) any such remaining Available
Series 1998-1 Finance Charge Collections and (y) the
sum of (1) the aggregate Series Default Amount for such
Business Day plus (2) the unpaid Series Default Amount
for each previous Business Day during such Monthly
Period, such amount to be (A) treated as Shared
Principal Collections during the Revolving Period, and
(B) treated as Available Series 1998-1 Principal
Collections during the Amortization Period.
Adjustment Payment Shortfalls. On each
Business Day, the Trustee, acting in accordance with
instructions from the Servicer, shall apply to the
extent of any Available Series 1998-1 Finance Charge
Collections remaining after giving effect to the
applications pursuant to subsections 4.9(a)(i) through
(v) of the Agreement, an amount equal to the lesser of
(x) any such remaining Available Series 1998-1 Finance
Charge Collections and (y) an amount equal to the
Series 1998-1 Percentage of any Adjustment Payment
which the Transferor is required but fails to make
pursuant to subsection 3.8(a) of the Agreement on such
Business Day and on each previous Business Day during
such Monthly Period less any amounts previously
withdrawn pursuant to this subsection 4.9(a)(vi) on
account of such unpaid Adjustment Payments, such amount
to be (i) treated as Shared Principal Collections
during the Revolving Period, and (ii) treated as
Available Series 1998-1 Principal Collections during
the Amortization Period.
Reimbursement of Class A Charge-Offs. On
each Business Day, the Trustee, acting in accordance
with instructions from the Servicer, shall apply to the
extent of any Available Series 1998-1 Finance Charge
Collections remaining after giving effect to the
applications pursuant to subsections 4.9(a)(i) through
(vi) of the Agreement, an amount equal to the lesser of
(x) any such remaining Available Series 1998-1 Finance
Charge Collections and (y) the unreimbursed Class A
Charge-Offs, if any, in order to reimburse Class A
Charge-Offs, such amount to be (A) treated as Shared
Principal Collections during the Revolving Period, and
(B) treated as Available Series 1998-1 Principal
Collections during the Amortization Period.
Unpaid Class B Monthly Interest. On each
Business Day, the Trustee, acting in accordance with
the instructions from the Servicer, shall deposit in
the Interest Funding Account for distribution to the
Class B Securityholders on the next Distribution Date,
to the extent of any Available Series 1998-1 Finance
Charge Collections remaining after giving effect to the
applications pursuant to subsections 4.9(a)(i) through
(vii) of the Agreement, an amount equal to the lesser
of (x) any such remaining Available Series 1998-1
Finance Charge Collections and (y) the sum of (1) the
amount of interest which would accrue with respect to
the Class B Securities on the Class B Outstanding
Principal Amount at the Class B Interest Rate during
the related Interest Accrual Period beginning in the
then current Monthly Period but which has not been
deposited into the Interest Funding Account or paid to
the Class B Securityholders and (2) any additional
interest (to the extent permitted by applicable law) at
the Class B Interest Rate on interest that was payable
on any prior Distribution Date pursuant to this
subsection but was not deposited in the Interest
Funding Account or paid to the Class B Securityholders.
Unpaid CTO Monthly Interest. On each
Business Day, the Trustee, acting in accordance with
the instructions from the Servicer, shall deposit in
the Interest Funding Account for distribution to the
CTO Securityholders on the next Distribution Date, to
the extent of any Available Series 1998-1 Finance
Charge Collections remaining after giving effect to the
applications pursuant to subsections 4.9(a)(i) through
(viii) of the Agreement, an amount equal to the lesser
of (x) any such remaining Available Series 1998-1
Finance Charge Collections and (y) the sum of (1) the
amount of interest which would accrue with respect to
the Collateralized Trust Obligations on the CTO
Outstanding Principal Amount at the CTO Interest Rate
during the Interest Accrual Period beginning in the
then current Monthly Period but which has not been
deposited into the Interest Funding Account or paid to
the CTO Securityholders and (2) any additional interest
(to the extent permitted by applicable law) at the CTO
Interest Rate on interest that was payable on any prior
Distribution Date pursuant to this subsection but was
not deposited in the Interest Funding Account or paid
to the CTO Securityholders.
Reimbursement of Certain Reductions of
Class B Invested Amount. On each Business Day, the
Trustee, acting in accordance with instructions from
the Servicer, shall apply, to the extent of any
Available Series 1998-1 Finance Charge Collections
remaining after giving effect to the applications
pursuant to subsections 4.9(a)(i) through (ix) of the
Agreement, an amount equal to the lesser of (x) any
such remaining Available Series 1998-1 Finance Charge
Collections and (y) the unreimbursed amount by which
the Class B Invested Amount has been reduced on prior
Business Days pursuant to clauses (c) and (d) of the
definition of Class B Invested Amount, if any, such
amount to be (A) treated as Shared Principal
Collections during the Revolving Period, and (B)
treated as Available Series 1998-1 Principal
Collections during the Amortization Period.
Reimbursement of Certain Reductions of CTO
Invested Amount. On each Business Day, the Trustee,
acting in accordance with instructions from the
Servicer, shall apply, to the extent of any Available
Series 1998-1 Finance Charge Collections remaining
after giving effect to the applications pursuant to
subsections 4.9(a)(i) through (x) of the Agreement, an
amount equal to the lesser of (x) any such remaining
Available Series 1998-1 Finance Charge Collections and
(y) the unreimbursed amount by which the CTO Invested
Amount has been reduced on prior Business Days pursuant
to clauses (c) and (d) of the definition of CTO
Invested Amount, if any, such amount to be (A) treated
as Shared Principal Collections during the Revolving
Period, and (B) treated as Available Series 1998-1
Principal Collections during the Amortization Period.
Reimbursement of Certain Reductions of
Class D Invested Amount. On each Business Day, the
Trustee, acting in accordance with instructions from
the Servicer, shall apply, to the extent of any
Available Series 1998-1 Finance Charge Collections
remaining after giving effect to the applications
pursuant to subsections 4.9(a)(i) through (xi) of the
Agreement, an amount equal to the lesser of (x) any
such remaining Available Series 1998-1 Finance Charge
Collections and (y) the unreimbursed amount by which
the Class D Invested Amount has been reduced on prior
Business Days pursuant to clauses (c) and (d) of the
definition of Class D Invested Amount, if any, such
amount to be (A) treated as Shared Principal
Collections during the Revolving Period, and (B)
treated as Available Series 1998-1 Principal
Collections during the Amortization Period.
Class D Interest. On each Business Day
during a Monthly Period, the Trustee, acting in
accordance with the instructions from the Servicer,
shall deposit in the Interest Funding Account for
distribution to the Class D Securityholders on the next
Distribution Date, to the extent of any Available
Series 1998-1 Finance Charge Collections remaining
after giving effect to the applications pursuant to
subsections 4.9(a)(i) through (xii) of the Agreement,
an amount equal to the lesser of (x) any such remaining
Available Series 1998-1 Finance Charge Collections and
(y) the sum of (1) the amount of interest which has
accrued with respect to the Class D Securities on the
Class D Outstanding Principal Amount at the applicable
Class D Interest Rate but which has not been deposited
into the Interest Funding Account on any prior Business
Day or paid to the Class D Securityholders and (2) any
additional interest (to the extent permitted by
applicable law) at the Class D Interest Rate on
interest that was payable during a prior Monthly Period
pursuant to this subsection but was not deposited in
the Interest Funding Account or paid to the Class D
Securityholders.
Revolving Receivables Reserve Account. On
each Business Day, the Trustee, acting in accordance
with instructions from the Servicer, shall deposit in
the Revolving Receivables Reserve Account, to the
extent of any Available Series 1998-1 Finance Charge
Collections remaining after giving effect to the
applications pursuant to subsections 4.9(a)(i) through
(xiii) of the Agreement an amount equal to the lesser
of (x) any such remaining Available Series 1998-1
Finance Charge Collections and (y) an amount equal to
the excess, if any, of the Specified Revolving
Receivables Reserve Amount on such date over the amount
then on deposit in the Revolving Receivables Reserve
Account.
Defeasance Reserve Account. At the option
of the Transferor, on each Business Day on and after
the Defeasance Reserve Account Funding Date, but prior
to the date on which a Defeasance occurs pursuant to
subsection 4.18 of the Agreement, the Trustee, acting
in accordance with instructions from the Servicer,
shall deposit in the Defeasance Reserve Account, to the
extent of any Available Series 1998-1 Finance Charge
Collections remaining after giving effect to the
applications pursuant to subsections 4.9(a)(i) through
(xiv) of the Agreement, an amount equal to the lesser
of (x) any such remaining Available Series 1998-1
Finance Charge Collections and (y) the excess, if any,
of the Required Defeasance Reserve Account Amount over
the Available Defeasance Reserve Account Amount.
CTO Reserve Account. Following the
occurrence of a CTO Trigger Event, on each Business
Day, the Trustee, acting in accordance with
instructions from the Servicer, shall deposit in the
CTO Reserve Account, to the extent of any Available
Series 1998-1 Finance Charge Collections remaining
after giving effect to the applications pursuant to
subsections 4.9(a)(i) through (xv) of the Agreement, an
amount equal to the lesser of (x) any such remaining
Available Series 1998-1 Finance Charge Collections and
(y) an amount equal to the excess, if any, of the
Specified CTO Reserve Amount on such date over the
amount then on deposit in the CTO Reserve Account.
Payment Reserve Account. On each Business
Day, the Trustee, acting in accordance with
instructions from the Transferor, shall deposit in the
Payment Reserve Account, to the extent of any Available
Series 1998-1 Finance Charge Collections remaining
after giving effect to the applications pursuant to
subsections 4.9(a)(i) through (xvi) of the Agreement,
an amount equal to the lesser of (x) any such remaining
Available Series 1998-1 Finance Charge Collections and
(y) the amount, if any, designated by the Transferor in
writing (which includes facsimile transmission) in its
instructions to the Trustee on such Business Day.
Excess Finance Charge Collections. Any
Available Series 1998-1 Finance Charge Collections
remaining after giving effect to the applications
pursuant to subsection 4.9(a)(i) through (xvii) of the
Agreement shall be treated as Excess Finance Charge
Collections, and the Servicer shall direct the Trustee
in writing on each Business Day to first make such
amounts available to pay to Securityholders of other
Series to the extent of shortfalls, if any, in amounts
payable to such Securityholders 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, then to reserve for
(or pay when due) any taxes and related expenses
anticipated by the Servicer to be payable by the Trust
with respect to the related Monthly Period or prior
Monthly Periods and then on each Business Day to pay
any remaining Excess Finance Charge Collections to the
Transferor.
Revolving Period Principal Collections.
For each Business Day with respect to the Revolving
Period, the funds on deposit in the Collection Account
to the extent of the product of (i) the Floating
Percentage and (ii) Principal Collections (less the
amount of Redirected Principal Collections) with
respect to such Business Day will be treated as Shared
Principal Collections and applied, pursuant to the
written direction of the Servicer in the Daily Report
for such Business Day, as provided in Section 4.3(e) of
the Agreement.
Amortization Period Principal Collections
and Other Funds. For each Business Day on and after
the Amortization Period Commencement Date, the amount
of funds on deposit in the Collection Account or the
Excess Funding Account as described below will be
distributed, pursuant to the written direction of the
Servicer in the Daily Report for such Business Day in
the following priority:
an amount (not in excess of the Invested
Amount) equal to the sum of (v) the product of the
Fixed/Floating Percentage and Principal Collections
(less the amount thereof applied as Redirected
Principal Collections) for such Business Day, (w) any
amount on deposit in the Excess Funding Account
allocated to the Series 1998-1 Securities on such
Business Day pursuant to subsection 4.3(f) of the
Agreement, (x) amounts to be treated as Available
Series 1998-1 Principal Collections for such Business
Day pursuant to subsections 4.9(a)(v), (vi), (vii),
(x), (xi) and (xii) of the Agreement (including amounts
available pursuant to subsections 4.10(a) and (b) and
4.14(a), (b) and (c) of the Agreement for such Business
Day) and (y) the amount of Shared Principal Collections
allocated to the Series 1998-1 Securities in accordance
with Section 4.8 of the Agreement for such Business
Day, will be deposited into the Principal Account;
provided, however, that with respect to any Monthly
Period during the Controlled Amortization Period, the
aggregate amount required to be deposited in the
Principal Account pursuant to this subsection 4.9(c)(i)
shall not exceed the sum of (I) (A) prior to the
Monthly Period related to the Class B Principal Payment
Commencement Date, the Class A Controlled Distribution
Amount, (B) during and after the Monthly Period related
to the Class B Principal Payment Commencement Date but
prior to the Monthly Period related to the CTO
Principal Payment Commencement Date, the Class B
Controlled Distribution Amount or (C) during and after
the Monthly Period related to the CTO Principal Payment
Commencement Date but prior to the Monthly Period
related to the Class D Principal Payment Commencement
Date, the CTO Invested Amount and (II) at the option of
the Transferor, the Class D Excess Amount; and
an amount equal to the excess, if any, of
(A) the sum of the amounts described in subsection
4.9(c)(i)(v) and (x) above over (B) the sum of Class A
Principal, Class B Principal, CTO Principal and Class D
Principal will be treated as Shared Principal
Collections and applied as provided in subsection
4.3(e) of the Agreement.
SECTION 4.10 Coverage of Required Amount
for the Series 1998-1 Securities. Coverage of
Negative Carry Amount. To the extent that any amounts
are on deposit in the Excess Funding Account on any
Business Day, the Servicer shall apply, in the manner
specified for application of Available Series 1998-1
Finance Charge Collections in subsections 4.9(a)(i)
through (xiii) of the Agreement, Transferor Finance
Charge Collections in an amount (the "Negative Carry
Amount") equal to the excess of (x) the product of (a)
the Base Rate, (b) the product of (i) the amounts on
deposit in the Excess Funding Account and (ii) the
number of days elapsed since the previous Business Day
divided by 360 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.
Required Amount from Other Series Excess
Finance Charge Collections. To the extent that on any
Business Day payments are being made pursuant to any of
subsections 4.9(a)(i) through (xiii) of the Agreement,
respectively, and the full amount to be paid pursuant
to any such subsection receiving payments on such
Business Day is not paid in full on such Business Day,
the Servicer shall apply, in the manner specified for
application of Available Series 1998-1 Finance Charge
Collections in subsections 4.9(a)(i) through (xiii) of
the Agreement, all or a portion of the Excess Finance
Charge Collections from other Series with respect to
such Business Day allocable to the Series 1998-1
Securities in an amount equal to the excess of the full
amount to be allocated or paid pursuant to the
applicable subsection over the amount applied with
respect thereto from Available Series 1998-1 Finance
Charge Collections and Transferor Finance Charge
Collections on such Business Day (the "Required
Amount"). Excess Finance Charge Collections allocated
to the Series 1998-1 Securities for any Business Day
shall mean an amount equal to the product of (x) Excess
Finance Charge Collections available from all other
Series for such Business Day and (y) a fraction, the
numerator of which is the Required Amount for such
Business Day and the denominator of which is the
aggregate amount of shortfalls in required amounts or
other amounts to be paid from Finance Charge
Collections for all Series for such Business Day.
SECTION 4.11 Payment of Interest on
Securities. On each Transfer Date, the Trustee, acting
in accordance with instructions from the Servicer set
forth in the Daily Report for such day, shall withdraw
the amount on deposit in the Interest Funding Account
with respect to the preceding Monthly Period allocable
to the Series 1998-1 Securities and deposit such amount
in the Distribution Account. On each Distribution
Date, the Paying Agent shall pay in accordance with
Section 5.1 of the Agreement to (w) the Class A
Securityholders from the Distribution Account such
amount deposited into the Distribution Account on the
related Transfer Date allocable thereto from amounts
deposited in the Interest Funding Account pursuant to
subsection 4.9(a)(i) of the Agreement, (x) the Class B
Securityholders from the Distribution Account the
amount deposited into the Distribution Account on the
related Transfer Date allocable thereto from amounts
deposited in the Interest Funding Account pursuant to
subsections 4.9(a)(ii) and (viii) of the Agreement,
(y) the CTO Securityholders from the Distribution
Account the amount deposited into the Distribution
Account on the related Transfer Date allocable thereto
from amounts deposited in the Interest Funding Account
pursuant to subsections 4.9(a)(iii) and (ix) of the
Agreement, and (z) the Class D Securityholder from the
Distribution Account the amount deposited into the
Distribution Account on the related Transfer Date
allocable thereto from amounts deposited in the
Interest Funding Account pursuant to subsection
4.9(a)(xiii) of the Agreement.
SECTION 4.12 Payment of Security Principal.
Class A Principal. On the Transfer Date
preceding each Distribution Date with respect to the
Amortization Period, the Trustee, acting in accordance
with instructions from the Servicer set forth in the
Daily Report for such day, shall withdraw from the
Principal Account or, following the occurrence of a
Defeasance, from the Defeasance Funding Account, and
deposit into the Distribution Account, to the extent of
funds available, an amount equal to the Class A
Principal for such Distribution Date. On each
Distribution Date with respect to the Amortization
Period until the Class A Invested Amount is paid in
full, the Paying Agent shall pay in accordance with
Section 5.1 of the Agreement to the Class A
Securityholders from the Distribution Account such
amounts deposited with respect to Class A Principal
into the Distribution Account on the related Transfer
Date.
Class B Principal. On the Transfer Date
preceding the Class B Principal Payment Commencement
Date and each Transfer Date thereafter, the Trustee,
acting in accordance with instructions from the
Servicer set forth in the Daily Report for such day,
shall withdraw from the Principal Account or, following
the occurrence of a Defeasance, the Defeasance Funding
Account and deposit in the Distribution Account, to the
extent of funds available, an amount equal to the Class
B Principal for the related Distribution Date. On and
after the Class B Principal Payment Commencement Date,
on each Distribution Date until the Class B Invested
Amount is paid in full, the Paying Agent shall pay in
accordance with Section 5.1 of the Agreement to the
Class B Securityholders from the Distribution Account
such amounts deposited with respect to Class B
Principal into the Distribution Account on the related
Transfer Date.
CTO Principal. On the Transfer Date
preceding the CTO Principal Payment Commencement Date
and each Transfer Date thereafter, the Trustee, acting
in accordance with instructions from the Servicer set
forth in the Daily Report for such day, shall withdraw
from the Principal Account or, following the occurrence
of a Defeasance, the Defeasance Funding Account and
deposit in the Distribution Account, to the extent of
funds available, an amount equal to the CTO Principal
for the related Distribution Date. On and after the
CTO Principal Payment Commencement Date, on each
Distribution Date until the CTO Invested Amount is paid
in full, the Paying Agent shall pay in accordance with
Section 5.1 of the Agreement to the CTO Securityholders
from the Distribution Account such amounts deposited
with respect to CTO Principal into the Distribution
Account on the related Transfer Date.
Class D Principal. On the Transfer Date
preceding the Class D Principal Payment Commencement
Date and each Transfer Date thereafter, or, in the case
of distributions of Class D Excess Amounts, on each
Transfer Date during the Controlled Amortization Period
preceding a Distribution Date on which a distribution
shall be made of Class D Excess Amounts, the Trustee,
acting in accordance with instructions from the
Servicer set forth in the Daily Report for such day,
shall withdraw from the Principal Account and deposit
in the Distribution Account, to the extent of funds
available after giving effect to withdrawals pursuant
to subsections 4.12(a), (b) or (c) of the Agreement, an
amount equal to the Class D Principal for the related
Distribution Date. On the Class D Principal Payment
Commencement Date after the payment of any principal
amounts to the Class A Securities, the Class B
Securities and the Collateralized Trust Obligations on
such day, and on each Distribution Date thereafter
until the Class D Invested Amount is paid in full and
on each Distribution Date during the Controlled
Amortization Period on which amounts are to be
distributed with respect to Class D Excess Amounts, the
Paying Agent shall pay in accordance with Section 5.1
of the Agreement to the Class D Securityholder from the
Distribution Account such amounts deposited with
respect to Class D Principal into the Distribution
Account on the related Transfer Date. Notwithstanding
the foregoing, if so designated in writing by the
Transferor with respect to any such Transfer Date, any
such payment of Class D Principal shall not be made to
the Class D Securityholder but such amount shall
nonetheless be subtracted from the Class D Invested
Amount and added to the Transferor Interest and Class D
Excess Amounts may be subtracted from the Class D
Invested Amount and added to the Transferor Interest
whether or not such amount has been deposited into the
Distribution Account..
Any amounts remaining in the Principal
Account and allocable to the Series 1998-1 Securities,
after the Class D Invested Amount has been paid in
full, will be treated as Shared Principal Collections
and applied in accordance with Section 4.3(e) of the
Agreement.
SECTION 4.13 Series Charge-Offs. If, on
any Determination Date, the sum of the aggregate Series
Default Amount and the Series 1998-1 Percentage of
unpaid Adjustment Payments, if any, required to be made
by the Transferor but not made for all Business Days in
the preceding Monthly Period exceeds the sum of (x) the
aggregate amount of the Available Series 1998-1 Finance
Charge Collections applied to the payment thereof
pursuant to subsections 4.9(a)(v) and (vi) of the
Agreement, (y) the aggregate amount of Transferor
Finance Charge Collections and Excess Finance Charge
Collections allocated thereto pursuant to Section 4.10
of the Agreement, and (z) the aggregate amount of
Redirected Principal Collections applied with respect
thereto pursuant to Section 4.14 of the Agreement, the
Class D Invested Amount will be reduced by the
aggregate amount of such excess (a "Class D Charge-
Off").
In the event that any such reduction of the
Class D Invested Amount would cause the Class D
Invested Amount to be a negative number, the Class D
Invested Amount will be reduced to zero, and the CTO
Invested Amount will be reduced by the amount by which
the Class D Invested Amount would have been reduced
below zero, but not by more than the remaining
aggregate Series Default Amount and Series 1998-1
Percentage of unpaid Adjustment Payments for such
Monthly Period (a "CTO Charge-Off").
In the event that any such reduction of the
CTO Invested Amount would cause the CTO Invested Amount
to be a negative number, the CTO Invested Amount will
be reduced to zero, and the Class B Invested Amount
will be reduced by the amount by which the CTO Invested
Amount would have been reduced below zero, but not by
more than the remaining aggregate Series Default Amount
and Series 1998-1 Percentage of unpaid Adjustment
Payments for such Monthly Period (a "Class B Charge-
Off").
In the event that any such reduction of the
Class B Invested Amount would cause the Class B
Invested Amount to be a negative number, the Class B
Invested Amount will be reduced to zero, and the Class
A Invested Amount will be reduced by the amount by
which the Class B Invested Amount would have been
reduced below zero, but not by more than the remaining
aggregate Series Default Amount and Series 1998-1
Percentage of unpaid Adjustment Payments for such
Monthly Period (a "Class A Charge-Off").
SECTION 4.14 Redirected Principal
Collections for the Series 1998-1 Securities. On
each Business Day, the Servicer will apply or cause the
Trustee to apply an amount equal to the least of (i)
the Class D Invested Amount, (ii) the product of (x)(I)
during the Revolving Period, the Class D Floating
Percentage or (II) during an Amortization Period, the
Class D Fixed/Floating Percentage and (y) the amount of
Principal Collections with respect to such Business Day
and (iii) an amount equal to the sum of (a) the Class A
Required Amount for such Business Day, (b) the Class B
Required Amount for such Business Day and (c) the CTO
Required Amount for such Business Day (such amount
called "Redirected Class D Principal Collections") and
shall apply Principal Collections allocable to the
Series 1998-1 Securities in an amount equal to such
amount in accordance with subsection 4.9(a) as if such
amounts were Available Series 1998-1 Finance Charge
Collections.
On each Business Day, the Servicer will
apply or cause the Trustee to apply an amount equal to
the least of (i) the CTO Invested Amount, (ii) the
product of (x)(I) during the Revolving Period, the CTO
Floating Percentage or (II) during an Amortization
Period, the CTO Fixed/Floating Percentage and (y) the
amount of Principal Collections for such Business Day
and (iii) an amount equal to the sum of (a) the excess,
if any, of the Class A Required Amount for such
Business Day over the amount of Redirected Class D
Principal Collections applied with respect thereto for
such Business Day and (b) the excess, if any, of the
Class B Required Amount for such Business Day over the
amount of Redirected Class D Principal Collections
applied with respect thereto for such Business Day
(such amount called "Redirected CTO Principal
Collections") and shall apply Principal Collections
allocable to the Series 1998-1 Securities in an amount
equal to such amount in accordance with subsection
4.9(a) as if such amounts were Available Series 1998-1
Finance Charge Collections.
On each Business Day, the Servicer will
apply or cause the Trustee to apply an amount equal to
the least of (i) the Class B Invested Amount, (ii) the
product of (x)(I) during the Revolving Period, the
Class B Floating Percentage or (II) during an
Amortization Period, the Class B Fixed/Floating
Percentage and (y) the amount of Principal Collections
for such Business Day and (iii) an amount equal to the
excess, if any, of the Class A Required Amount for such
Business Day over the sum of the amount of Redirected
Class D Principal Collections and Redirected CTO
Principal Collections applied with respect thereto for
such Business Day (such amount called "Redirected Class
B Principal Collections") and shall apply Principal
Collections allocable to the Series 1998-1 Securities
equal to such amount in accordance with subsection
4.9(a) as if such amounts were Available Series 1998-1
Finance Charge Collections.
On each Distribution Date, the Class D
Invested Amount will be reduced by the aggregate amount
of unreimbursed Redirected Principal Collections for
the related Monthly Period. In the event that such
reduction would cause the Class D Invested Amount to be
a negative number, the Class D Invested Amount will be
reduced to zero and the CTO Invested Amount will be
reduced by the amount by which the Class D Invested
Amount would have been reduced below zero. In the event
that the amount of unreimbursed Redirected Principal
Collections for such Distribution Date would cause the
CTO Invested Amount to be a negative number, the CTO
Invested Amount will be reduced to zero and the Class B
Invested Amount will be reduced by the amount by which
the CTO Invested Amount would have been reduced below
zero. In the event that the amount of unreimbursed
Redirected Principal Collections would cause the Class
B Invested Amount to be a negative number on any
Distribution Date, the amount of Class B Redirected
Principal Collections on such Distribution Date will be
an amount not to exceed the amount which would cause
the Class B Invested Amount to be reduced to zero.
SECTION 4.15 Determination of LIBOR.
"LIBOR" shall mean, as of any LIBOR Determination Date,
the rate for deposits in United States dollars for one
month (commencing on the first day of the relevant
Interest Accrual Period) which appears on Telerate Page
3750 as of 11:00 A.M., London time, on the LIBOR
Determination Date for such Interest Accrual Period.
If such rate does not appear on Telerate Page 3750, the
rate for such LIBOR Determination Date will be
determined on the basis of the rates at which deposits
in United States dollars are offered by four major
banks in the London interbank market selected by the
Servicer at approximately 11:00 a.m., London time, on
such LIBOR Determination Date to prime banks in the
London interbank market for a period equal to one month
(commencing on the first day of the relevant Interest
Accrual Period). The Trustee will request the
principal London office of each such bank to provide a
quotation of its rate. If at least two such quotations
are provided, the rate for such LIBOR Determination
Date will be the arithmetic mean of the quotations. If
fewer than two quotations are provided as requested,
the rate for such LIBOR Determination Date will be the
arithmetic mean of the rates quoted by four major banks
in New York City, selected by the Trustee, at
approximately 11:00 a.m., New York City time, on the
LIBOR Determination Date for loans in United States
dollars to leading European banks for a period equal to
one month (commencing on the first day of such Interest
Accrual Period).
The CTO Interest Rate applicable to the
then current and the immediately preceding Interest
Accrual Periods may be obtained by any CTO
Securityholder by telephoning the Trustee at (212) 815-
5737.
On each LIBOR Determination Date, the
Trustee shall send to the Servicer by facsimile
notification of LIBOR for such LIBOR Determination
Date.
SECTION 4.16 Defeasance Funding Account.
Establishment of the Defeasance Funding
Account. The Servicer shall establish and maintain or
cause to be established and maintained with a Qualified
Institution, which may be the Trustee, in the name of
the Trustee, on behalf of the Series 1998-1
Securityholders, the "Defeasance Funding Account,"
which shall be a segregated trust account with the
corporate trust department of such Qualified
Institution, bearing a designation clearly indicating
that the funds deposited therein are held for the
benefit of the Series 1998-1 Securityholders. The
Trustee shall possess all right, title and interest in
all funds on deposit from time to time in the
Defeasance Funding Account and in all proceeds thereof.
The Defeasance Funding Account shall be under the sole
dominion and control of the Trustee for the benefit of
the Series 1998-1 Securityholders. If, at any time,
the institution holding the Defeasance Funding Account
ceases to be a Qualified Institution, the Trustee shall
within 10 Business Days establish a new Defeasance
Funding Account meeting the conditions specified above
with a Qualified Institution, and shall transfer any
cash or any investments to such new Defeasance Funding
Account. From the date such new Defeasance Funding
Account is established, it shall be the "Defeasance
Funding Account." The Trustee and the Transferor shall
have the right to make deposits to the Defeasance
Funding Account in accordance with Section 4.18. The
Trustee, at the written direction of the Servicer,
shall (i) make withdrawals from the Defeasance Funding
Account from time to time, in the amounts and for the
purposes set forth in this Series Supplement, and (ii)
on each Transfer Date from and after the commencement
of the Defeasance and prior to termination of the
Defeasance Funding Account make a deposit into the
Principal Account in the amount specified in, and
otherwise in accordance with, subsection 4.12 of the
Agreement.
Investment of Funds in Defeasance Funding
Account. Funds on deposit in the Defeasance Funding
Account shall be invested by the Trustee at the
direction of the Servicer in Cash Equivalents maturing
no later than the following Transfer Date. Investment
earnings (net of investment losses and expenses) on
funds on deposit in the Defeasance Funding Account (the
"Defeasance Funding Account Investment Proceeds") will
be applied on each Transfer Date as if such amount were
Available Series 1998-1 Finance Charge Collections on
the last Business Day of the preceding Monthly Period.
If, for any Interest Accrual Period, the Defeasance
Funding Account Investment Proceeds for the related
Monthly Period are less than the sum of the Class A
Monthly Interest, the Class B Monthly Interest and the
CTO Monthly Interest for such Interest Accrual Period,
the amount of such deficiency will be paid from the
Defeasance Reserve Account to the extent of the
Available Defeasance Reserve Account Amount and applied
on the applicable Transfer Date as Available Series
1998-1 Finance Charge Collections as if such amounts
were available to be applied pursuant to subsection
4.9(a) on the last Business Day of the preceding
Monthly Period.
Termination of Defeasance Funding Account.
The Defeasance Funding Account shall be terminated
following the earliest to occur of (a) the termination
of the Trust pursuant to the Agreement, (b) the date on
which the ABC Invested Amount is paid in full and (c)
after Defeasance, the earlier of the first Transfer
Date with respect to the Early Amortization Period and
the CTO Expected Final Payment Date. Upon the
termination of the Defeasance Funding Account, all
amounts remaining on deposit therein after the payment
in full of the Series 1998-1 Securities shall be
treated as Shared Principal Collections.
SECTION 4.17 Defeasance Reserve Account.
Establishment of the Defeasance Reserve Account. The
Servicer shall establish and maintain or cause to be
established and maintained with a Qualified
Institution, which may be the Trustee, in the name of
the Trustee, on behalf of the Series 1998-1
Securityholders, the "Defeasance Reserve Account,"
which shall be a segregated trust account with the
corporate trust department of such Qualified
Institution, bearing a designation clearly indicating
that the funds deposited therein are held for the
benefit of the Series 1998-1 Securityholders. The
Trustee shall possess all right, title and interest in
all funds on deposit from time to time in the
Defeasance Reserve Account and in all proceeds thereof.
The Defeasance Reserve Account shall be under the sole
dominion and control of the Trustee for the benefit of
the Series 1998-1 Securityholders. If, at any time,
the institution holding the Defeasance Reserve Account
ceases to be a Qualified Institution, the Trustee shall
within 10 Business Days establish a new Defeasance
Reserve Account meeting the conditions specified above
with a Qualified Institution, and shall transfer any
cash or any investments to such new Defeasance Reserve
Account. From the date such new Defeasance Reserve
Account is established, it shall be the "Defeasance
Reserve Account." The Trustee, at the written
direction of the Servicer, shall (i) make withdrawals
from the Defeasance Reserve Account from time to time,
in the amounts and for the purposes set forth in this
Series Supplement, and (ii) on each Transfer Date (from
and after the Defeasance Reserve Account Funding Date)
prior to a Defeasance, make a deposit into the
Defeasance Reserve Account in the amount specified in,
and otherwise in accordance with, subsection 4.9(a)(xv)
of the Agreement.
Administration of Defeasance Reserve
Account. On or before each Transfer Date following
Defeasance and on the first Transfer Date with respect
to the Early Amortization Period, the Trustee at the
direction of the Servicer shall withdraw from the
Defeasance Reserve Account, up to the Available
Defeasance Reserve Account Amount, an amount equal to
the excess of the sum of the Class A Monthly Interest,
the Class B Monthly Interest, the CTO Monthly Interest
and the amount of monthly interest payable with respect
to the Class D Securities for the related Interest
Accrual Period over the Defeasance Funding Account
Investment Proceeds with respect to such Transfer Date,
and the amount of such withdrawal shall be applied as
Available Series 1998-1 Finance Charge Collections as
if such amounts were available to be applied pursuant
to subsection 4.9(a) on the last Business Day of the
preceding Monthly Period.
Investment of Funds in Defeasance Reserve
Account. Funds on deposit in the Defeasance Reserve
Account shall be invested by the Trustee at the
direction of the Servicer in Cash Equivalents maturing
no later than the following Transfer Date. The
interest and other investment income (net of investment
expenses and losses) earned on such investments will be
retained in the Defeasance Reserve Account (to the
extent the amount on deposit therein is less than the
Required Defeasance Reserve Account Amount) or applied
on each Transfer Date as Available Series 1998-1
Finance Charge Collections as if such amounts were
available to be applied pursuant to subsection 4.9(a)
on the last Business Day of the preceding Monthly
Period.
Termination of Defeasance Reserve Account.
The Defeasance Reserve Account shall be terminated
following the earliest to occur of (a) the termination
of the Trust pursuant to the Agreement, (b) the date on
which the ABC Invested Amount is paid in full, (c)
prior to Defeasance, the Pay Out Commencement Date and
(d) after Defeasance, the earlier of the first Transfer
Date with respect to the Early Amortization Period and
the CTO Expected Final Payment Date. Upon the
termination of the Defeasance Reserve Account, all
amounts on deposit therein (after giving effect to any
withdrawal from the Defeasance Reserve Account on such
date as described above) shall be applied as Available
Series 1998-1 Finance Charge Collections as if such
amounts were available to be applied pursuant to
subsection 4.9(a) on the last Business Day of the
preceding Monthly Period.
SECTION 4.18 Defeasance. On the date
during the Amortization Period that the following
conditions shall have been satisfied: (i) an amount
shall have been deposited (x) in the Defeasance Funding
Account equal to the sum of the Class A Outstanding
Principal Amount, the Class B Outstanding Principal
Amount and the CTO Outstanding Principal Amount, which
amount shall be invested in Cash Equivalents and (y) in
the Defeasance Reserve Account equal to or greater than
the excess of the sum of the Class A Monthly Interest,
the Class B Monthly Interest and the estimated CTO
Monthly Interest over the estimated amount of
investment earnings on amounts in the Defeasance
Funding Account, as estimated by the Transferor, for
each of the Interest Accrual Periods during the period
from the date of the deposit to the Defeasance Funding
Account through the CTO Expected Final Payment Date
(the "Required Defeasance Reserve Account Amount");
(ii) the Transferor shall have delivered to the Trustee
an Opinion of Counsel to the effect that such deposit
and termination of obligations will not result in the
Trust being required to register as an "investment
company" within the meaning of the Investment Company
Act and an Opinion of Counsel to the effect that
following such deposit none of the Trust, the
Defeasance Reserve Account or the Defeasance Funding
Account will be deemed to be an association (or
publicly traded partnership) taxable as a corporation;
(iii) the Transferor shall have delivered to the
Trustee a certificate of an officer of the Transferor
stating that the Transferor reasonably believes that
such deposit and termination of its obligations will
not constitute a Pay Out Event or any event that, with
the giving of notice or the lapse of time, would cause
a Pay Out Event to occur; and (iv) the Rating Agency
Condition shall have been satisfied; then, the Series
1998-1 Securities will no longer be entitled to the
security interest of the Trust in the Receivables and,
except those set forth in clause (i) above, other Trust
assets ("Defeasance"), the percentages applicable to
the allocation to the Series 1998-1 Securityholders of
Principal Collections, Finance Charge Collections,
unpaid Adjustment Payments and Default Amounts shall be
reduced to zero and the Monthly Servicing Fee shall be
reduced to zero; provided, however, that no such
Defeasance shall occur for so long as any Class A
Charge-Offs, Class B Charge-Offs or CTO Charge-Offs
exist. Upon the satisfaction of the foregoing
conditions, the Class D Invested Amount shall be
reduced to zero.
SECTION 4.19 Revolving Receivables Reserve
Account. Establishment of the Revolving Receivables
Reserve Account. The Servicer shall establish and
maintain or cause to be established and maintained with
a Qualified Institution, which may be the Trustee, in
the name of the Trustee, on behalf of the Series 1998-1
Securityholders, the "Revolving Receivables Reserve
Account," which shall be a segregated trust account
with the corporate trust department of such Qualified
Institution, bearing a designation clearly indicating
that the funds deposited therein are held for the
benefit of the Series 1998-1 Securityholders. The
Trustee shall possess all right, title and interest in
all funds on deposit from time to time in the Revolving
Receivables Reserve Account and in all proceeds
thereof. The Revolving Receivables Reserve Account
shall be under the sole dominion and control of the
Trustee for the benefit of the Series 1998-1
Securityholders. If at any time, the institution
holding the Revolving Receivables Reserve Account
ceases to be a Qualified Institution, the Trustee shall
within 10 Business Days establish a new Revolving
Receivables Reserve Account meeting the conditions
specified above with a Qualified Institution, and shall
transfer any cash or any investments to such new
Revolving Receivables Reserve Account. From the date
such new Revolving Receivables Reserve Account is
established, it shall be the "Revolving Receivables
Reserve Account."
Deposits to the Revolving Receivables
Reserve Account. On the Closing Date, the Transferor
shall make an initial deposit of $200,000 to the
Revolving Receivables Reserve Account. Amounts shall
be deposited in the Revolving Receivables Reserve
Account on each Business Day to the extent specified
pursuant to subsection 4.9(a)(xiv) of the Agreement.
Withdrawals from the Revolving Receivables
Reserve Account. Funds on deposit in the Revolving
Receivables Reserve Account shall be withdrawn by the
Servicer on each Transfer Date to the extent of any
shortfalls in amounts to be paid or deposited pursuant
to subsections 4.9(a)(i) through (xiii) of the
Agreement as of the end of the day on the last Business
Day of the preceding Monthly Period and shall be
applied in accordance with subsections 4.9(a)(i)
through (xiii) of the Agreement as Available Series
1998-1 Finance Charge Collections as if such amounts
were available on the last Business Day of the
preceding Monthly Period.
Investment of Funds in Revolving
Receivables Reserve Account. Funds on deposit in the
Revolving Receivables Reserve Account shall be invested
by the Trustee at the direction of the Servicer in Cash
Equivalents maturing no later than the following
Transfer Date. The interest and other investment
income (net of investment expenses and losses) earned
on such investments will be retained in the Revolving
Receivables Reserve Account (to the extent the amount
on deposit therein is less than the Required Reserve
Account Amount) or applied on each Transfer Date as
Available Series 1998-1 Finance Charge Collections as
if such amounts were available to be applied pursuant
to subsection 4.9(a) of the Agreement on the last
Business Day of the preceding Monthly Period.
Termination of Revolving Receivables
Reserve Account. The Revolving Receivables Reserve
Account shall be terminated following the earliest to
occur of (a) the termination of the Trust pursuant to
the Agreement and (b) the date on which the ABC
Invested Amount is paid in full. Upon the termination
of the Revolving Receivables Reserve Account, all
amounts on deposit therein (after giving effect to any
withdrawal from the Revolving Receivables Reserve
Account on such date as described above) shall be
applied as Available Series 1998-1 Finance Charge
Collections as if such amounts were available to be
applied pursuant to subsection 4.9(a) of the Agreement
on the last Business Day of the preceding Monthly
Period.
SECTION 4.20 CTO Trigger Event. If (i)
the rating of Fingerhut Companies, Inc.'s senior
secured notes and, if rated, the rating of Fingerhut
Companies, Inc.'s corporate revolving lines of credit
facility is reduced below BBB from Standard & Poor's
and below Baa2 from Moody's (a "CTO Trigger Event") and
(ii) with respect to any Business Day (x) the
percentage equivalent of a fraction the numerator of
which is the Series 1998-1 Percentage of the Transferor
Interest and the denominator of which is the sum of the
Invested Amount and the Series 1998-1 Percentage of the
Transferor Interest (the "Target Percentage") is less
than 6%, and (y) the amount on deposit in the CTO
Reserve Account is less than the Specified CTO Reserve
Amount, then (a) the Transferor shall, in connection
with increases in the aggregate amount of Principal
Receivables in the Trust, the scheduled paydown of
other Series or, with respect to any Series of Variable
Funding Securities, an optional payment of principal,
allow the Transferor Interest to increase such that the
Target Percentage shall be equal to or in excess of 6%
and/or (b) the Servicer shall cause amounts available
pursuant to subsection 4.9(a)(xvi) of the Agreement to
be deposited in the CTO Reserve Account until the
amount on deposit therein is equal to the Specified CTO
Reserve Amount. The Transferor may allow the
Transferor Interest to decrease on any Business Day, to
the extent that it exceeds the Minimum Transferor
Interest and the amount on deposit in the CTO Reserve
Account following any such decrease and after giving
effect to any deposit therein on such Business Day is
at least equal to the Specified CTO Reserve Amount.
SECTION 4.21 CTO Reserve Account.
Establishment of the CTO Reserve Account. The
Servicer, for the benefit of the CTO Securityholders,
shall, upon the occurrence of a CTO Trigger Event,
establish and maintain or cause to be established and
maintained with a Qualified Institution, which may be
the Trustee, in the name of the Trustee, on behalf of
the CTO Securityholders, the "CTO Reserve Account,"
which shall be a segregated trust account with the
corporate trust department of such Qualified
Institution, bearing a designation clearly indicating
that the funds deposited therein are held for the
benefit of the CTO Securityholders. The Trustee shall
possess all right, title and interest in all funds on
deposit from time to time in the CTO Reserve Account
and in all proceeds thereof. The CTO Reserve Account
shall be under the sole dominion and control of the
Trustee for the benefit of the CTO Securityholders.
If, at any time, the institution holding the CTO
Reserve Account ceases to be a Qualified Institution,
the Trustee shall within 10 Business Days establish a
new CTO Reserve Account meeting the conditions
specified above with a Qualified Institution, and shall
transfer any cash or any investments to such new CTO
Reserve Account. From the date such new CTO Reserve
Account is established, it shall be the "CTO Reserve
Account."
Administration of CTO Reserve Account. On
each Business Day following the occurrence of a CTO
Trigger Event, amounts will be deposited in the CTO
Reserve Account in accordance with subsection
4.9(a)(xvi) of the Agreement. Funds on deposit in the
CTO Reserve Account shall be withdrawn by the Servicer
and applied in accordance with subsection 4.9(a)(xi) of
the Agreement as if they were Available Series 1998-1
Finance Charge Collections on any Business Day after
the payment in full of the Class A Invested Amount and
the Class B Invested Amount to the extent of the
aggregate amount of CTO Charge-Offs, if any. Amounts
on deposit in the CTO Reserve Account in excess of the
Specified CTO Reserve Amount on any Business Day shall
be released therefrom and paid to the Transferor. All
amounts on deposit in the CTO Reserve Account shall be
released therefrom and paid to the Transferor, if the
rating of Fingerhut Companies, Inc.'s senior secured
notes or, if rated, the rating of Fingerhut Companies,
Inc.'s corporate revolving lines of credit facility is
subsequently increased to BBB or higher by Standard &
Poor's and Baa2 or higher by Moody's or the CTO
Invested Amount has been paid in full.
Investment of Funds in CTO Reserve Account.
Funds on deposit in the CTO Reserve Account shall be
invested by the Trustee (or, at the direction of the
Trustee, by the Servicer on behalf of the Trustee) at
the direction of the Servicer in Cash Equivalents that
will mature so that such funds will be available for
withdrawal on or prior to the following Business Day.
The interest and other investment income (net of
investment expenses and losses) earned on such
investments will be retained in the CTO Reserve Account
(to the extent the amount on deposit therein is less
than the Specified CTO Reserve Amount) or applied on
each Business Day as Reserve Account Investment
Proceeds.
Termination of CTO Reserve Account. The
CTO Reserve Account shall be terminated following the
earliest to occur of (a) the termination of the Trust
pursuant to the Agreement and (b) the date on which the
CTO Invested Amount is paid in full. Upon the
termination of the CTO Reserve Account, all amounts on
deposit therein (after giving effect to any withdrawal
from the CTO Reserve Account on such date as described
above) shall be released therefrom and paid to the
Transferor.
SECTION 4.22 Payment Reserve Account.
Establishment of the Payment Reserve Account. The
Servicer shall establish and maintain or cause to be
established and maintained with a Qualified
Institution, which may be the Trustee, in the name of
the Trustee, on behalf of the Series 1998-1
Securityholders, the "Payment Reserve Account," which
shall be a segregated trust account with the corporate
trust department of such Qualified Institution, bearing
a designation clearly indicating that the funds
deposited therein are held for the benefit of the
Series 1998-1 Securityholders. The Trustee shall
possess all right, title and interest in all funds on
deposit from time to time in the Payment Reserve
Account and in all proceeds thereof. The Payment
Reserve Account shall be under the sole dominion and
control of the Trustee for the benefit of the Series
1998-1 Securityholders. If, at any time, the
institution holding the Payment Reserve Account ceases
to be a Qualified Institution, the Trustee shall within
10 Business Days establish a new Payment Reserve
Account meeting the conditions specified above with a
Qualified Institution, and shall transfer any cash or
any investments to such new Payment Reserve Account.
From the date such new Payment Reserve Account is
established, it shall be the "Payment Reserve Account."
Administration of Payment Reserve Account.
The Transferor, at its discretion, may on any Business
Day withdraw all or a part of any amounts then on
deposit in the Payment Reserve Account and apply such
funds as Available Series 1998-1 Finance Charge
Collections in accordance with Section 4.9(a) of the
Agreement.
Investment on Funds in Payment Reserve
Account. Funds on deposit in the Payment Reserve
Account shall be invested by the Trustee (or, at the
direction of the Trustee, by the Servicer on behalf of
the Trustee) at the direction of the Servicer in Cash
Equivalents that will mature so that such funds will be
available for withdrawal on or prior to the following
Business Day. The interest and other investment income
(net of investment expenses and losses) earned on such
investments will be applied on each Business Day as
Reserve Account Investment Proceeds.
Termination of Payment Reserve Account.
The Payment Reserve Account shall be terminated
following the earliest to occur of (a) the termination
of the Trust pursuant to the Agreement and (b) the date
on which the ABC Adjusted Invested Amount is paid in
full. Upon the termination of the Payment Reserve
Account, all amounts on deposit therein (after giving
effect to any withdrawal from the Payment Reserve
Account on such date as described above) shall be
applied as if they were Available Series 1998-1 Finance
Charge Collections available to be applied pursuant to
subsection 4.9(a) on the last Business Day of the
preceding Monthly Period.
SECTION 4.23 Constituent Class D
Securities. The Transferor as holder of the Class D
Securities may at any time (i) subdivide the Class D
Securities into two or more subsidiary Securities, or
(ii) redirect all or any portion of the amounts
distributable to the Class D Securityholders (pursuant
to the application of collections allocable to the
Class D Securityholders) to any other Securityholder.
In connection with such subdivision, the Transferor may
assign an interest rate to the Class D Securities, the
"Class D Interest Rate," or a portion thereof and make
payments of interest with respect to such Securities
from amounts initially allocated to the Series 1998-1
Securities and available pursuant to subsection
4.9(a)(xiii). Before any Class D Securities can be
subdivided or transferred, the following conditions
must be met: (i) the Trustee and the Transferor shall
have received an Opinion of Counsel that such transfer
does not adversely affect the conclusions reached in
any of the federal or state income tax opinions issued
in connection with the original issuance of the Series
1998-1 Securities, (ii) the Transferor shall deliver to
the Trustee an officers' certificate stating that in
the reasonable belief of the Transferor, such
subdivision would not cause a Trust Pay Out Event or a
Series 1998-1 Pay Out Event to occur, or an event
which, with notice or lapse of time or both, would
constitute a Trust Pay Out Event or a Series 1998-1 Pay
Out Event, and (ii) the Rating Agency Condition shall
have been satisfied.
SECTION 7 Article V of the Agreement. Article V of
the Agreement shall read in its entirety as follows and shall be
applicable only to the Series 1998-1 Securities:
ARTICLE V
DISTRIBUTIONS AND REPORTS TO INVESTORSECURITYHOLDERS
SECTION 5.1 Distributions. On each
Distribution Date, the Paying Agent shall distribute
(in accordance with the Settlement Statement delivered
by the Servicer to the Trustee and the Paying Agent
pursuant to subsection 3.4(c)) to each Class A
Securityholder of record on the preceding Record Date
(other than as provided in subsection 2.4(e) or in
Section 12.3 respecting a final distribution) such
Securityholder's pro rata share (based on the aggregate
Undivided Interests represented by each Class A
Security held by such Securityholder) of amounts on
deposit in the Distribution Account as are payable to
the Class A Securityholders pursuant to Sections 4.11
and 4.12 of the Agreement by check mailed to each Class
A Securityholder at such Securityholder's address as it
appears on the Security Register or, in the case of
Class A Securityholders holding Class A Securities
evidencing not less than 80% of the Class A Invested
Amount, by wire transfer, at the expense of such Class
A Securityholder, to an account or accounts designated
by such Class A Securityholder by written notice given
to the Paying Agent not less than five days prior to
the related Distribution Date; provided, however, that
the final payment in retirement of the Class A
Securities will be made only upon presentation and
surrender of the Class A Securities at the office or
offices specified in the notice of such final
distribution delivered by the Trustee pursuant to
Section 12.3.
On each Distribution Date, the Paying Agent
shall distribute (in accordance with the Settlement
Statement delivered by the Servicer to the Trustee and
the Paying Agent pursuant to subsection 3.4(c)) to each
Class B Securityholder of record on the preceding
Record Date (other than as provided in subsection
2.4(e) or in Section 12.3 respecting a final
distribution) such Securityholder's pro rata share
(based on the aggregate Undivided Interests represented
by Class B Securities held by such Securityholder) of
amounts on deposit in the Distribution Account as are
payable to the Class B Securityholders pursuant to
Sections 4.11 and 4.12 of the Agreement by check mailed
to each Class B Securityholder at such Securityholder's
address as it appears on the Security Register or, in
the case of Class B Securityholders holding Class B
Securities evidencing not less than 80% of the Class B
Invested Amount, by wire transfer, at the expense of
such Class B Securityholder, to an account or accounts
designated by such Class B Securityholder by written
notice given to the Paying Agent not less than five
days prior to the related Distribution Date; provided,
however, that the final payment in retirement of the
Class B Securities will be made only upon presentation
and surrender of the Class B Securities at the office
or offices specified in the notice of such final
distribution delivered by the Trustee pursuant to
Section 12.3.
On each Distribution Date, the Paying Agent
shall distribute (in accordance with the Settlement
Statement delivered by the Servicer to the Trustee and
the Paying Agent pursuant to subsection 3.4(c)) to each
CTO Securityholder of record on the preceding Record
Date (other than as provided in subsection 2.4(e) or in
Section 12.3 respecting a final distribution) such
Securityholder's pro rata share (based on the aggregate
Undivided Interests represented by Collateralized Trust
Obligations held by such Securityholder) of amounts on
deposit in the Distribution Account as are payable to
the CTO Securityholders pursuant to Sections 4.11 and
4.12 of the Agreement by check mailed to each CTO
Securityholder at such Securityholder's address as it
appears on the Security Register or, in the case of
Securityholders holding Collateralized Trust
Obligations evidencing not less than 80% of the CTO
Invested Amount, by wire transfer, at the expense of
such CTO Securityholder, to an account or accounts
designated by such CTO Securityholder by written notice
given to the Paying Agent not less than five days prior
to the related Distribution Date; provided, however,
that the final payment in retirement of the
Collateralized Trust Obligations will be made only upon
presentation and surrender of the Collateralized Trust
Obligations at the office or offices specified in the
notice of such final distribution delivered by the
Trustee pursuant to Section 12.3.
On each Distribution Date, the Paying Agent
shall distribute (in accordance with the Settlement
Statement delivered by the Servicer to the Trustee and
the Paying Agent pursuant to subsection 3.4(c)) to each
Class D Securityholder of record other than the
Transferor on the preceding Record Date (other than as
provided in subsection 2.4(e) or in Section 12.3
respecting a final distribution) such Securityholder's
pro rata share (based on the aggregate Undivided
Interests represented by Class D Securities held by
such Securityholder) of amounts on deposit in the
Distribution Account as are payable to the Class D
Securityholders pursuant to Sections 4.11 and 4.12 of
the Agreement by wire transfer to each Class D
Securityholder to an account or accounts designated by
such Class D Securityholder by written notice given to
the Paying Agent not less than five days prior to the
related Distribution Date; provided, however, that the
final payment in retirement of the Class D Securities
will be made only upon presentation and surrender of
the Class D Securities at the office or offices
specified in the notice of such final distribution
delivered by the Trustee pursuant to Section 12.3.
SECTION 5.2 Securityholders' Statement.
On the 15th day of each calendar month (or if such day
is not a Business Day the next succeeding Business
Day), the Paying Agent shall forward to each
Securityholder and the Rating Agencies a statement
substantially in the form of Exhibit B prepared by the
Servicer and delivered to the Trustee and the Paying
Agent on the preceding Determination Date setting forth
the following information (which, in the case of (i),
(ii) and (iii) below, shall be stated on the basis of
an original principal amount of $1,000 per Security
and, in the case of (ix) and (x), shall be stated on an
aggregate basis and on the basis of an original
principal amount of $1,000 per Security):
the total amount distributed;
the amount of such distribution allocable
to Class A Principal, Class B Principal, CTO Principal
and Class D Principal;
the amount of such distribution allocable
to Class A Monthly Interest and Carryover Class A
Monthly Interest, Class B Monthly Interest and
Carryover Class B Monthly Interest, CTO Monthly
Interest and Carryover CTO Monthly Interest and any
amounts payable to the Class D Securityholders with
respect to interest;
the amount of Principal Collections
processed in the Collection Account during the
preceding Monthly Period and allocated in respect of
the Class A Securities, the Class B Securities, the
Collateralized Trust Obligations and the Class D
Securities, respectively;
the amount of Finance Charge Collections
processed during the preceding Monthly Period and
allocated in respect of the Class A Securities, the
Class B Securities, the Collateralized Trust
Obligations and the Class D Securities, respectively,
and, after the Defeasance Reserve Account Funding Date,
the amount of Defeasance Funding Account Investment
Proceeds and investment earnings on amounts on deposit
in the Defeasance Reserve Account;
the aggregate amount of Principal
Receivables, the Invested Amount, the Class A Invested
Amount, the Class B Invested Amount, the CTO Invested
Amount, the Class D Invested Amount, the Floating
Percentage and, during the Amortization Period, the
Fixed/Floating Percentage as of the end of the day on
the last day of the related Monthly Period;
the aggregate outstanding balance of
Receivables which are current, 30-59, 60-89, and 90
days and over delinquent as of the end of the day on
the last day of the related Monthly Period;
the aggregate Series Default Amount for the
preceding Monthly Period;
the aggregate amount of Class A Charge-
Offs, Class B Charge-Offs, CTO Charge-Offs and Class D
Charge-Offs for the preceding Monthly Period;
the amount of the Monthly Servicing Fee for
the preceding Monthly Period;
the amount of unreimbursed Redirected Class
B Principal Collections, Redirected CTO Principal
Collections and Redirected Class D Principal
Collections for the related Monthly Period;
the aggregate amount of funds in the Excess
Funding Account as of the last day of the Monthly
Period immediately preceding the Distribution Date;
whether a CTO Trigger Event has occurred
and, if so, the Specified CTO Reserve Amount and the
amount then on deposit in the CTO Reserve Account;
the number of new Accounts the Receivables
in which have been added to the Trust during the
related Monthly Period;
the Portfolio Yield for the related Monthly
Period;
the Base Rate for the related Monthly
Period;
the Defeasance Funding Account Balance on
the related Transfer Date;
the Revolving Receivables Reserve Account
balance on the related Transfer Date; and
the amount of Defeasance Funding Account
Investment Proceeds deposited in the Collection Account
on the related Transfer Date, the Required Defeasance
Reserve Account Amount and the Available Defeasance
Reserve Account Amount as of the related Transfer Date.
Annual Securityholders' Tax Statement. On
or before January 31 of each calendar year, beginning
with calendar year 1999, the Paying Agent shall
distribute to each Person who at any time during the
preceding calendar year was a Series 1998-1
Securityholder, a statement prepared by the Servicer
containing the information required to be contained in
the regular report to Series 1998-1 Securityholders, as
set forth in subclauses (i), (ii) and (iii) above,
aggregated for such calendar year or the applicable
portion thereof during which such Person was a Series
1998-1 Securityholder, together with, on or before
January 31 of each year, beginning in 1999, such other
customary information (consistent with the treatment of
the Securities as debt) as the Trustee or the Servicer
deems necessary or desirable to enable the Series 1998-
1 Securityholders to prepare their tax returns. Such
obligations of the Trustee shall be deemed to have been
satisfied to the extent that substantially comparable
information shall be provided by the Trustee pursuant
to any requirements of the Internal Revenue Code as
from time to time in effect.
SECTION 8 Series 1998-1 Pay Out Events. If any one of
the following events shall occur with respect to the Series 1998-
1 Securities:
failure on the part of the Transferor (i) to make any
payment or deposit required to be made by the Transferor by the
terms of (A) the Agreement or (B) this Series Supplement, on or
before the date occurring five Business Days after the date such
payment or deposit is required to be made herein, (ii) to perform
in all material respects the Transferor's covenant not to sell,
pledge, assign, or transfer to any Person, or grant any
unpermitted lien on, any Receivable; or (iii) duly to observe or
perform in any material respect any covenants or agreements of
the Transferor set forth in the Agreement or this Series
Supplement, which failure has a material adverse effect on the
Series 1998-1 Securityholders and which continues unremedied for
a period of 60 days after the date on which written notice of
such failure, requiring the same to be remedied, shall have been
given to the Transferor by the Trustee, or to the Transferor and
the Trustee by the Holders of Series 1998-1 Securities evidencing
Undivided Interests aggregating not less than 50% of the Invested
Amount of this Series 1998-1, and continues to affect materially
and adversely the interests of the Series 1998-1 Securityholders
for such period;
any representation or warranty made by the Transferor
in the Agreement or this Series Supplement, (i) shall prove to
have been incorrect in any material respect when made, which
continues to be incorrect in any material respect for a period of
60 days after the date on which written notice of such failure,
requiring the same to be remedied, shall have been given to the
Transferor by the Trustee, or to the Transferor and the Trustee
by the Holders of the Series 1998-1 Securities evidencing
Undivided Interests aggregating more than 50% of the Invested
Amount of this Series 1998-1, and (ii) as a result of which the
interests of the Series 1998-1 Securityholders are materially and
adversely affected and continue to be materially and adversely
affected for such period; provided, however, that a Series 1998-1
Pay Out Event pursuant to this subsection 8(b) shall not be
deemed to have occurred hereunder if the Transferor has accepted
reassignment of the related Receivable, or all of such
Receivables, if applicable, during such period (or such longer
period as the Trustee may specify) in accordance with the
provisions of the Agreement;
(c) Fingerhut shall consent to the appointment of a
bankruptcy trustee or receiver or liquidator in any bankruptcy
proceeding or any other insolvency, readjustment of debt,
marshalling of assets and liabilities or similar proceedings of
or relating to all or substantially all of its property; or a
decree or order of a court or agency or supervisory authority
having jurisdiction in the premises for the appointment of a
bankruptcy trustee or receiver or liquidator in any bankruptcy
proceeding or any other insolvency, readjustment of debt,
marshalling of assets and liabilities or similar proceedings, or
for the winding-up or liquidation of its affairs, shall have been
entered against Fingerhut; or Fingerhut shall admit in writing
its inability to pay its debts generally as they become due, file
a petition to take advantage of any applicable insolvency or
reorganization statute including the U.S. bankruptcy code, make
an assignment for the benefit of its creditors or voluntarily
suspend payment of its obligations;
(d) the average of the Portfolio Yields for any three
consecutive Monthly Periods is reduced to a rate which is less
than the weighted average Base Rates for such three consecutive
Monthly Periods;
(e) (i) the Transferor Interest shall be less than the
Minimum Transferor Interest, (ii) the total amount of Principal
Receivables and the amount on deposit in the Excess Funding
Account shall be less than the Minimum Aggregate Principal
Receivables or (iii) the Retained Percentage shall be equal to or
less than 2%, in each case as of any Determination Date and, in
each case, shall not exceed the required amount on or prior to
the tenth Business Day following such Determination Date;
(f) any Servicer Default shall occur which would have
a material adverse effect on the Series 1998-1 Securityholders;
then, in the case of any event described in subparagraph (a), (b)
or (f), after the applicable grace period, if any, set forth in
such subparagraphs, the Holders of Series 1998-1 Securities
evidencing more than 50% of the Invested Amount of this Series
1998-1, by notice then given in writing to the Trustee, the
Transferor and the Servicer may declare that a pay out event (a
"Series 1998-1 Pay Out Event") has occurred as of the date of
such notice, and in the case of any event described in
subparagraphs (c), (d) or (e), a Series 1998-1 Pay Out Event
shall occur without any notice or other action on the part of the
Trustee or the Series 1998-1 Securityholders immediately upon the
occurrence of such event.
SECTION 9 Collateralized Trust Obligation Defaults and
Remedies. (a) "CTO Default," wherever used herein, means any
one of the following events (whatever the reason for such CTO
Default and whether it shall be voluntary or involuntary or be
effected by operation of law or pursuant to any judgment, decree
or order of any court or any order, rule or regulation of any
administrative or governmental body):
(1) There is a CTO Monthly Interest Shortfall on two
consecutive Distribution Dates; or
(2) There is a CTO Charge-Off on three consecutive
Distribution Dates.
(b) If a CTO Default shall have occurred, upon the
direction of CTO Securityholders holding more than 50% of the CTO
Invested Amount:
(i) the Specified CTO Reserve Amount shall thereafter
be equal to the CTO Outstanding Principal Amount;
(ii) following the payment in full of the Class A
Invested and the Class B Invested Amount, the Trustee shall sell
or cause to be sold, and the Trustee shall pay the proceeds to
the Series 1998-1 Securityholders in final payment of all
principal of and accrued interest on such Series to be applied
first to the CTO Invested Amount until paid in full and then to
the Class D Invested Amount until paid in full, an amount of
Principal Receivables and the related Finance Charge Receivables
(or interests therein) up to 110% of the Invested Amount at the
close of business on such date; provided, that the amount of such
Principal Receivables shall not exceed the sum of (1) the product
of (A) the Transferor Percentage on the date of any such sale,
(B) the aggregate outstanding Principal Receivables on such date
and (C) a fraction the numerator of which is the Invested Amount
on such date and the denominator of which is the sum of the
invested amounts of all Series and the aggregate Participation
Amounts of all Participations then outstanding and (2) the
Invested Amount on such date. The Transferor shall be permitted
to purchase such Receivables in such case and shall have a right
of first refusal with respect thereto to the extent of a bona
fide offer by an unrelated third party for fair value. Any
proceeds of such sale in excess of such principal and interest
paid shall be paid to the Transferor. Upon such sale, final
payment of all amounts allocable to any Class of such Series
shall be made in the manner provided in Section 12.3 of the
Agreement.
The Servicer shall provide written notice to the Rating Agencies
of any such direction of a majority of the CTO Invested Amount.
SECTION 10 Series 1998-1 Termination. The right of
the Series 1998-1 Securityholders to receive payments from the
Trust will terminate on the first Business Day following the
Series 1998-1 Termination Date unless such Series is an Affected
Series as specified in Section 12.1(c) of the Agreement and the
sale contemplated therein has not occurred by such date, in which
event the Series 1998-1 Securityholders shall remain entitled to
receive proceeds of such sale when such sale occurs.
SECTION 11 Legends; Transfer and Exchange;
Restrictions on Transfer of Series 1998-1 Securities; Tax
Treatment. Each Class A Security, Class B Security and
Collateralized Trust Obligation will bear a legend or legends in
substantially the following form:
EACH PURCHASER REPRESENTS AND WARRANTS FOR THE
BENEFIT OF FINGERHUT RECEIVABLES, INC. AND THE TRUSTEE
THAT SUCH PURCHASER IS NOT (I) AN EMPLOYEE BENEFIT PLAN
(AS DEFINED IN SECTION 3(3) OF THE EMPLOYEE RETIREMENT
INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA")) THAT
IS SUBJECT TO THE PROVISIONS OF TITLE I OF ERISA, (II)
A PLAN DESCRIBED IN SECTION 4975(e)(1) OF THE INTERNAL
REVENUE CODE OF 1986, AS AMENDED (THE "CODE") THAT IS
SUBJECT TO SECTION 4975 OF THE CODE, (III) A
GOVERNMENTAL PLAN, AS DEFINED IN SECTION 3(32) OF
ERISA, SUBJECT TO ANY FEDERAL, STATE OR LOCAL LAW WHICH
IS, TO A MATERIAL EXTENT, SIMILAR TO THE PROVISIONS OF
SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE, (IV)
AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE "PLAN ASSETS"
(AS DEFINED IN 29 C.F.R. SECTION 2510.3-101 OR
OTHERWISE UNDER ERISA) BY REASON OF A PLAN'S INVESTMENT
IN THE ENTITY OR (V) A PERSON INVESTING "PLAN ASSETS"
OF ANY SUCH PLAN (INCLUDING WITHOUT LIMITATION, FOR
PURPOSES OF CLAUSE (IV) AND THIS CLAUSE (V), AS
APPLICABLE, AN INSURANCE COMPANY GENERAL ACCOUNT, BUT
EXCLUDING ANY ENTITY REGISTERED UNDER THE INVESTMENT
COMPANY ACT OF 1940, AS AMENDED).
Each Security Owner by virtue of its beneficial
interest in the Class A Securities or Class B Securities, as
applicable, shall be deemed to have made the representations and
warranties stated in such legend.
Each Class A Security and Class B Security and each
Collateralized Trust Obligation that is a CTO Global Security
deposited with DTC, or a custodian on behalf of DTC, shall bear
the following legend:
UNLESS THIS SECURITY IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW
YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS AGENT
FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND
ANY SECURITY ISSUED IS REGISTERED IN THE NAME OF CEDE &
CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS
MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS
THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.
Each Collateralized Trust Obligation that is issued
pursuant to Rule 144A shall bear the following legend:
THIS SECURITY HAS NOT BEEN AND WILL NOT BE
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS.
THE HOLDER HEREOF, BY PURCHASING THIS SECURITY, AGREES
THAT THIS SECURITY MAY BE REOFFERED, RESOLD, PLEDGED OR
OTHERWISE TRANSFERRED ONLY IN COMPLIANCE WITH THE
SECURITIES ACT AND OTHER APPLICABLE LAWS AND ONLY (1)
PURSUANT TO RULE 144A UNDER THE SECURITIES ACT TO A
PERSON WHO THE HOLDER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER ("QIB") WITHIN THE
MEANING OF RULE 144A, PURCHASING FOR ITS OWN ACCOUNT,
OR A QIB PURCHASING FOR THE ACCOUNT OF A QIB, WHOM THE
HOLDER HAS INFORMED, IN EACH CASE, THAT SUCH REOFFER,
RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN
RELIANCE ON RULE 144A OR (2) IN AN OFFSHORE TRANSACTION
IN ACCORDANCE WITH RULE 903 OR RULE 904 OF REGULATION S
UNDER THE SECURITIES ACT. EACH SECURITY OWNER BY
ACCEPTING A BENEFICIAL INTEREST IN THIS SECURITY,
UNLESS SUCH PERSON ACQUIRED THIS SECURITY IN A TRANSFER
DESCRIBED IN CLAUSE (2) ABOVE, IS DEEMED TO REPRESENT
THAT IT IS EITHER A QIB PURCHASING FOR ITS OWN ACCOUNT
OR A QIB PURCHASING FOR THE ACCOUNT OF ANOTHER QIB.
Each Collateralized Trust Obligation that is issued
pursuant to Regulation S shall bear the following legend:
THIS SECURITY HAS NOT BEEN AND WILL NOT BE
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND PRIOR TO
THE DATE THAT IS 40 DAYS AFTER THE LATER OF THE
COMMENCEMENT OF THE OFFERING AND THE CLOSING DATE MAY
NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED
IN THE UNITED STATES OR TO A U.S. PERSON EXCEPT
PURSUANT TO AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT.
Each Class D Security will bear legends substantially
in the following form:
THIS SECURITY WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"). THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAW
OF ANY STATE AND MAY NOT BE OFFERED, SOLD, PLEDGED OR
OTHERWISE TRANSFERRED UNLESS REGISTERED PURSUANT TO OR
EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT AND
ANY OTHER APPLICABLE SECURITIES LAW. TRANSFERS OF THIS
SECURITY SHALL BE SUBJECT TO THE RESTRICTIONS SET FORTH
IN THE POOLING AND SERVICING AGREEMENT.
EACH PURCHASER REPRESENTS AND WARRANTS FOR THE
BENEFIT OF FINGERHUT RECEIVABLES, INC. AND THE TRUSTEE
THAT SUCH PURCHASER IS NOT (I) AN EMPLOYEE BENEFIT PLAN
(AS DEFINED IN SECTION 3(3) OF THE EMPLOYEE RETIREMENT
INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA")) THAT
IS SUBJECT TO THE PROVISIONS OF TITLE I OF ERISA, (II)
A PLAN DESCRIBED IN SECTION 4975(e)(1) OF THE INTERNAL
REVENUE CODE OF 1986, AS AMENDED (THE "CODE") THAT IS
SUBJECT TO SECTION 4975 OF THE CODE, (III) A
GOVERNMENTAL PLAN, AS DEFINED IN SECTION 3(32) OF
ERISA, SUBJECT TO ANY FEDERAL, STATE OR LOCAL LAW WHICH
IS, TO A MATERIAL EXTENT, SIMILAR TO THE PROVISIONS OF
SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE, (IV)
AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE PLAN ASSETS
(AS DEFINED IN 29 C.F.R. SECTION 2510.3-101 OR
OTHERWISE UNDER ERISA) BY REASON OF A PLAN'S INVESTMENT
IN THE ENTITY OR (V) A PERSON INVESTING PLAN ASSETS OF
ANY SUCH PLAN (INCLUDING WITHOUT LIMITATION, FOR
PURPOSES OF CLAUSE (IV) AND THIS CLAUSE (V), AS
APPLICABLE, AN INSURANCE COMPANY GENERAL ACCOUNT, BUT
EXCLUDING ANY ENTITY REGISTERED UNDER THE INVESTMENT
COMPANY ACT OF 1940, AS AMENDED).
SECTION 12 Compliance with Withholding
Requirements. Notwithstanding any other provision of the
Agreement, the Trustee and any Paying Agent shall comply with all
Federal withholding requirements with respect to payments to the
Series 1998-1 Securityholders of interest, original issue
discount, or other amounts that the Trustee, any Paying Agent,
the Servicer or the Transferor reasonably believes are applicable
under the Internal Revenue Code. The consent of the Series 1998-
1 Securityholders shall not be required for any such withholding.
In the event the Trustee or the Paying Agent withholds any amount
from payments made to any Series 1998-1 Securityholder pursuant
to federal withholding requirements, the Trustee or the Paying
Agent shall indicate to such Series 1998-1 Securityholder the
amount withheld and all such amounts shall be deemed to have been
paid to such Series 1998-1 Securityholders and the Series 1998-1
Securityholders shall have no claim therefor.
SECTION 13 Ratification of Agreement. As
supplemented by this Series Supplement, the Agreement is in all
respects ratified and confirmed and the Agreement as so
supplemented by this Series Supplement shall be read, taken, and
construed as one and the same instrument. The Transferor hereby
confirms the conveyance of the Trust Property to the Trustee for
the benefit of the Series 1998-1 Securityholders.
For so long as any of the Collateralized Trust
Obligations are "restricted securities" within the meaning of
Rule 144(a)(3) under the Securities Act and during any period in
which the Trust is not subject to Section 13 or 15(d) of the
Exchange Act, each of the Transferor, the Servicer and the
Trustee agree to cooperate with each other to provide to any CTO
Securityholder, and to any prospective purchaser of
Collateralized Trust Obligations designated by such CTO
Securityholder upon the request of such CTO Securityholder or
prospective purchaser, the information required by Rule
144A(d)(4) under the Securities Act.
SECTION 14 Counterparts. This Series Supplement
may be executed in any number of counterparts, each of which so
executed shall be deemed to be an original, but all of such
counterparts shall together constitute but one and the same
instrument.
SECTION 15 GOVERNING LAW. THIS SERIES SUPPLEMENT
SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
DELAWARE WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND
THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER
SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
SECTION 16 Instructions in Writing. All
instructions or other communications given by the Servicer or any
other Person to the Trustee pursuant to this Series Supplement
shall be in writing, and, with respect to the Servicer, may be
included in a Daily Report or Settlement Statement.
SECTION 17. Paired Series. Subject to the
satisfaction of the Rating Agency Condition, prior to the
commencement of the Early Amortization Period the Series 1998-1
Securities may be paired with one or more other Series (each, a
"Paired Series"). Each Paired Series either will be pre-funded
with an initial deposit to a pre-funding account in an amount up
to the initial principal amount of such Paired Series primarily
from the proceeds of the sale of such Paired Series or will have
a variable principal amount. Any such pre-funding account will
be held for the benefit of such Paired Series and not for the
benefit of the Series 1998-1 Securityholders. As amounts are
paid for the benefit of the Class A Securityholders, Class B
Securityholders and CTO Securityholders, either (i) in the case
of a pre-funded Paired Series, an equal amount of funds on
deposit in any pre-funding account for such pre-funded Paired
Series will be released (which funds will be distributed to the
Transferor) or (ii) in the case of a Paired Series having a
variable principal amount, an interest in such variable Paired
Series in an equal or lesser amount may be sold by the Trust (and
the proceeds thereof will be distributed to the Transferor) and,
in either case, the invested amount in the Trust of such Paired
Series will increase by up to a corresponding amount. Upon
payment in full of the Series 1998-1 Securities, assuming that
there have been no unreimbursed charge-offs with respect to any
related Paired Series, the aggregate invested amount of such
related Paired Series will have been increased by an amount up to
an aggregate amount equal to the Invested Amount paid to the
Series 1998-1 Securityholders since the issuance of such Paired
Series. The issuance of a Paired Series will be subject to the
conditions described in subsection 6.9(b) of the Agreement.
SECTION 18 Registration of the Class A Securities
under the Securities Exchange Act of 1934. The Transferor shall
cause the Class A Securities to be registered under the
Securities Exchange Act of 1934, as amended, on or before
February, 1999.
IN WITNESS WHEREOF, the Transferor, the Servicer and
the Trustee have caused this Series 1998-1 Supplement to be duly
executed by their respective officers as of the day and year
first above written.
FINGERHUT RECEIVABLES, INC.
Transferor
By: /s/ James M. Wehmann
Name: James M. Wehmann
Title:President and Treasurer
FINGERHUT NATIONAL BANK
Servicer
By: /s/ James M. Wehmann
Name: James M. Wehmann
Title:Treasurer
THE BANK OF NEW YORK (DELAWARE)
Trustee
By: /s/ Cheryl L. Laser
Name: Cheryl L. Laser
Title:Assistant Vice President
Exhibit A-1
FORM OF CLASS A INVESTOR SECURITY
UNLESS THIS SECURITY IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK
CORPORATION ("DTC"), TO THE TRUSTEE OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY
SECURITY ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR
IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO.
OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO.
HAS AN INTEREST HEREIN.
EACH PURCHASER REPRESENTS AND WARRANTS FOR THE BENEFIT
OF FINGERHUT RECEIVABLES, INC. AND THE TRUSTEE THAT SUCH
PURCHASER IS NOT (I) AN EMPLOYEE BENEFIT PLAN (AS DEFINED IN
SECTION 3(3) OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT
OF 1974, AS AMENDED ("ERISA")) THAT IS SUBJECT TO THE
PROVISIONS OF TITLE I OF ERISA, (II) A PLAN DESCRIBED IN
SECTION 4975(e)(1) OF THE INTERNAL REVENUE CODE OF 1986, AS
AMENDED (THE "CODE") THAT IS SUBJECT TO SECTION 4975 OF THE
CODE, (III) A GOVERNMENTAL PLAN, AS DEFINED IN SECTION 3(32)
OF ERISA, SUBJECT TO ANY FEDERAL, STATE OR LOCAL LAW WHICH
IS, TO A MATERIAL EXTENT, SIMILAR TO THE PROVISIONS OF
SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE, (IV) AN
ENTITY WHOSE UNDERLYING ASSETS INCLUDE "PLAN ASSETS" (AS
DEFINED IN 29 C.F.R. SECTION 2510.3-101 OR OTHERWISE UNDER
ERISA) BY REASON OF A PLAN'S INVESTMENT IN THE ENTITY OR (V)
A PERSON INVESTING "PLAN ASSETS" OF ANY SUCH PLAN (INCLUDING
WITHOUT LIMITATION, FOR PURPOSES OF CLAUSE (IV) AND THIS
CLAUSE (V), AS APPLICABLE, AN INSURANCE COMPANY GENERAL
ACCOUNT, BUT EXCLUDING ANY ENTITY REGISTERED UNDER THE
INVESTMENT COMPANY ACT OF 1940, AS AMENDED).
No. ___ $_________
CUSIP NO. 31786YAD2
FINGERHUT MASTER TRUST
6.07% ASSET BACKED SECURITY,
SERIES 1998-1, CLASS A
Evidencing an undivided interest in a trust, the corpus
of which consists of receivables generated from time to time in
the ordinary course of business from a portfolio of consumer
revolving consumer credit card accounts and closed-end
installment sale or closed-end loan contracts transferred or to
be transferred by Fingerhut Receivables, Inc. (the "Transferor")
and other assets and interests constituting the Trust under the
Agreement described below.
(Not an interest in or a recourse obligation of
Fingerhut Receivables, Inc., Fingerhut Companies, Inc., Fingerhut
National Bank or any affiliate of any of them.)
This certifies that _________ (the "Securityholder") is
the registered owner of a fractional undivided interest in the
Fingerhut Master Trust (the "Trust") issued pursuant to the
Amended and Restated Pooling and Servicing Agreement, dated as of
March 18, 1998 (the "Pooling and Servicing Agreement"; such term
to include any amendment thereto) by and between the Transferor,
Fingerhut National Bank, as Servicer (the "Servicer"), and The
Bank of New York (Delaware) as Trustee (the "Trustee"), and the
Series 1998-1 Supplement, dated as of April 28, 1998 (the "Series
1998-1 Supplement"), among the Transferor, the Servicer and the
Trustee. The Pooling and Servicing Agreement, as supplemented by
the Series 1998-1 Supplement, is herein referred to as the
"Agreement"). The corpus of the Trust consists of all of the
Transferor's right, title and interest in, to and under the Trust
Property (as defined in the Agreement).
This Security does not purport to summarize the
Agreement and reference is made to that Agreement for information
with respect to the interests, rights, benefits, obligations,
proceeds, and duties evidenced hereby and the rights, duties and
obligations of the Trustee. To the extent not defined herein,
the capitalized terms used herein have the meanings ascribed to
them in the Agreement. This Security is one of a series of
Securities entitled "Fingerhut Master Trust 6.07% Asset Backed
Securities, Series 1998-1, Class A" (the "Class A Securities"),
each of which represents a fractional undivided interest in the
Trust, and is issued under and is subject to the terms,
provisions and conditions of the Agreement, to which Agreement,
as amended from time to time, the Securityholder by virtue of the
acceptance hereof assents and by which the Securityholder is
bound.
The Transferor has structured the Agreement, the Class
A Securities, the Fingerhut Master Trust 6.29% Asset Backed
Securities, Series 1998-1, Class B (the "Class B Securities" and
collectively with the Class A Securities, the "Offered
Securities") and the Fingerhut Master Trust Floating Rate Asset
Backed Securities, Series 1998-1, Collateralized Trust
Obligations (the "Collateralized Trust Obligations") with the
intention that the Offered Securities and the Collateralized
Trust Obligations will qualify under applicable tax law as
indebtedness, and both the Transferor and each holder of a Class
A Security (a "Class A Securityholder") or any interest therein
by acceptance of its Security or any interest therein, agrees to
treat the Class A Securities for purposes of federal, state and
local income or franchise taxes and any other tax imposed on or
measured by income, as indebtedness.
No principal will be payable to the Class A
Securityholders until the first Distribution Date in the
Amortization Period. No principal will be payable to the Class B
Securityholders, CTO Securityholders or Class D Securityholders
(other than with respect to Class D Excess Amounts) until all
principal payments have been made to the Class A Securityholders.
Interest on the Class A Securities will be payable on
June 15, 1998 and on the 15th day of each month thereafter or, if
such day is not a business day, on the next succeeding business
day (each, a "Distribution Date"), in an amount equal to the
product of (i) the Class A Interest Rate, (ii) a fraction the
numerator of which is the actual number of days in the related
Interest Accrual Period and the denominator of which is 360 and
(iii) the outstanding principal balance of the Class A Securities
as of the close of business on the first day of such Interest
Accrual Period provided that interest for the first Distribution
Date will be an amount equal to the product of (u) the initial
Class A Invested Amount, (v) 47 divided by 360, and (w) the Class
A Interest Rate.
Interest payments on the Class A Securities on each
Distribution Date will be funded from Available Series 1998-1
Finance Charge Collections with respect to the preceding Monthly
Period (or, with respect to the first Distribution Date, such
collections from and including the Closing Date to and including
May 29, 1998 plus the amount of the initial deposit to the
Interest Funding Account to be made on the Closing Date) and from
certain other funds allocated as set forth in the Pooling and
Servicing Agreement to the respective classes of the Securities
and deposited on each business day during such Monthly Period in
the Interest Funding Account.
"Class A Invested Amount" shall mean, with respect to
any Business Day, an amount equal to (a) the Class A Initial
Invested Amount minus (b) the aggregate amount of principal
payments made to Class A Securityholders through and including
such Business Day, minus (c) the aggregate amount of Class A
Charge-Offs for all prior Distribution Dates, plus (d) the sum of
the aggregate amount reimbursed with respect to reductions of the
Class A Invested Amount through and including such Business Day
pursuant to subsection 4.9(a)(vii) of the Agreement plus, with
respect to such subsection, amounts applied thereto pursuant to
subsections 4.10(a) and (b) and 4.14(a), (b) and (c) of the
Agreement, for the purpose of reimbursing amounts deducted
pursuant to the foregoing clause (c); provided, however, that the
Class A Invested Amount may not be reduced below zero.
Subject to the Agreement, payments of principal are
limited to the unpaid Class A Invested Amount of the Class A
Securities, which may be less than the unpaid balance of the
Class A Securities pursuant to the terms of the Agreement. All
principal on the Class A Securities is due and payable no later
than the February 2005 Distribution Date (or if such day is not a
Business Day, the next succeeding Business Day) (the "Scheduled
Series 1998-1 Termination Date"). After the earlier to occur of
(i) the Scheduled Series 1998-1 Termination Date and (ii) the day
after the Distribution Date on which the Series 1998-1 Securities
are paid in full (the "Series 1998-1 Termination Date") neither
the Trust nor the Transferor will have any further obligation to
distribute principal or interest on the Class A Securities. In
the event that the Class A Invested Amount is greater than zero
on the Series 1998-1 Termination Date, the Trustee will sell or
cause to be sold, to the extent necessary, an amount of interests
in the Receivables or certain of the Receivables up to 110% of
the Class A Invested Amount, the Class B Invested Amount, the CTO
Invested Amount and the Class D Invested Amount at the close of
business on such date (but not more than the total amount of
Receivables allocable to the Series 1998-1 Securities), and shall
pay the proceeds to the Class A Securityholders pro rata in final
payment of the Class A Securities, then to the Class B
Securityholders pro rata in final payment of the Class B
Securities, then to the CTO Securityholders pro rata in final
payment of the Collateralized Trust Obligations and finally to
the Class D Securityholders pro rata in final payment of the
Class D Securities.
Unless the certificate of authentication hereon has
been executed by or on behalf of the Trustee, by manual
signature, this Security shall not be entitled to any benefit
under the Agreement, or be valid for any purpose.
IN WITNESS WHEREOF, the Transferor has caused this
Security to be duly executed.
FINGERHUT RECEIVABLES, INC.
By:
Name:
Title:
Dated:
CERTIFICATE OF AUTHENTICATION
This is one of the Class A Securities referred to in
the within-mentioned Pooling and Servicing Agreement.
THE BANK OF NEW YORK (DELAWARE)
By:
Name:
Title:
Exhibit A-2
FORM OF CLASS B INVESTOR SECURITY
EACH PURCHASER REPRESENTS AND WARRANTS FOR THE
BENEFIT OF FINGERHUT RECEIVABLES, INC. AND THE TRUSTEE
THAT SUCH PURCHASER IS NOT (I) AN EMPLOYEE BENEFIT PLAN
(AS DEFINED IN SECTION 3(3) OF THE EMPLOYEE RETIREMENT
INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA")) THAT
IS SUBJECT TO THE PROVISIONS OF TITLE I OF ERISA, (II)
A PLAN DESCRIBED IN SECTION 4975(e)(1) OF THE INTERNAL
REVENUE CODE OF 1986, AS AMENDED (THE "CODE") THAT IS
SUBJECT TO SECTION 4975 OF THE CODE, (III) A
GOVERNMENTAL PLAN, AS DEFINED IN SECTION 3(32) OF
ERISA, SUBJECT TO ANY FEDERAL, STATE OR LOCAL LAW WHICH
IS, TO A MATERIAL EXTENT, SIMILAR TO THE PROVISIONS OF
SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE, (IV)
AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE "PLAN ASSETS"
(AS DEFINED IN 29 C.F.R. SECTION 2510.3-101 OR
OTHERWISE UNDER ERISA) BY REASON OF A PLAN'S INVESTMENT
IN THE ENTITY OR (V) A PERSON INVESTING "PLAN ASSETS"
OF ANY SUCH PLAN (INCLUDING WITHOUT LIMITATION, FOR
PURPOSES OF CLAUSE (IV) AND THIS CLAUSE (V), AS
APPLICABLE, AN INSURANCE COMPANY GENERAL ACCOUNT, BUT
EXCLUDING ANY ENTITY REGISTERED UNDER THE INVESTMENT
COMPANY ACT OF 1940, AS AMENDED).
UNLESS THIS SECURITY IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK
CORPORATION ("DTC"), TO THE TRUSTEE OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY
SECURITY ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR
IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO.
OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO.
HAS AN INTEREST HEREIN.
No. ___ $__________
CUSIP NO. 31786YAE0
FINGERHUT MASTER TRUST
6.29% ASSET BACKED SECURITY,
SERIES 1998-1, CLASS B
Evidencing an undivided interest in a trust, the corpus
of which consists of receivables generated from time to time in
the ordinary course of business from a portfolio of consumer
revolving consumer credit card accounts and closed-end
installment sale or closed-end loan contracts transferred or to
be transferred by Fingerhut Receivables, Inc. (the "Transferor")
and other assets and interests constituting the Trust under the
Agreement described below.
(Not an interest in or a recourse obligation of
Fingerhut Receivables, Inc., Fingerhut Companies, Inc., Fingerhut
National Bank or any affiliate of any of them.)
This certifies that __________ (the "Securityholder")
is the registered owner of a fractional undivided interest in the
Fingerhut Master Trust (the "Trust") issued pursuant to the
Amended and Restated Pooling and Servicing Agreement, dated as of
March 18, 1998 (the "Pooling and Servicing Agreement"; such term
to include any amendment thereto) by and between the Transferor,
Fingerhut National Bank, as the Servicer (the "Servicer"), and
The Bank of New York (Delaware), as Trustee (the "Trustee"), and
the Series 1998-1 Supplement, dated as of April 28, 1998 (the
"Series 1998-1 Supplement"), among the Transferor, the Servicer
and the Trustee. The Pooling and Servicing Agreement, as
supplemented by the Series 1998-1 Supplement, is herein referred
to as the "Agreement". The corpus of the Trust consists of all
of the Transferor's right, title and interest in, to and under
the Trust Property (as defined in the Agreement).
This Security does not purport to summarize the
Agreement and reference is made to that Agreement for information
with respect to the interests, rights, benefits, obligations,
proceeds, and duties evidenced hereby and the rights, duties and
obligations of the Trustee. To the extent not defined herein,
the capitalized terms used herein have the meanings ascribed to
them in the Agreement. This Security is one of a series of
Securities entitled "Fingerhut Master Trust 6.29% Asset Backed
Securities, Series 1998-1, Class B" (the "Class B Securities"),
each of which represents a fractional undivided interest in the
Trust, and is issued under and is subject to the terms,
provisions and conditions of the Agreement, to which Agreement,
as amended from time to time, the Securityholder by virtue of the
acceptance hereof assents and by which the Securityholder is
bound.
The Transferor has structured the Agreement, the Class
B Securities, the Fingerhut Master Trust 6.07% Asset Backed
Securities, Series 1998-1, Class A (the "Class A Securities" and
collectively with the Class B Securities the "Offered
Securities") and the Fingerhut Master Trust Floating Rate Asset
Backed Securities, Series 1998-1, Collateralized Trust
Obligations (the "Collateralized Trust Obligations") with the
intention that the Offered Securities and the Collateralized
Trust Obligations will qualify under applicable tax law as
indebtedness, and both the Transferor and each holder of a Class
B Security (a "Class B Securityholder") or any interest therein
by acceptance of its Security or any interest therein, agrees to
treat the Class B Securities for purposes of federal, state and
local income or franchise taxes and any other tax imposed on or
measured by income, as indebtedness.
No principal will be payable to the Class B
Securityholders until the earlier of the Class B Expected Final
Payment Date and, upon the occurrence of a Pay Out Event, the
Distribution Date following the Monthly Period in which the Pay
Out Event occurs but in no event earlier than the Distribution
Date either on or following the Distribution Date on which the
Class A Invested Amount had been paid in full. No principal will
be payable to the Class B Securityholders until all principal
payments have been made to the Class A Securityholders. No
principal payments will be made to the CTO Securityholders or
Class D Securityholders (other than with respect to Class D
Excess Amounts) until the Distribution Date either on or
following the Distribution Date on which the Class B Invested
Amount has been paid in full.
Interest on the Offered Securities will be payable on
June 15, 1998 and on the 15th day of each month thereafter or, if
such day is not a business day, on the next succeeding business
day (each, a "Distribution Date"), in an amount equal to (1) with
respect to the Class A Securities an amount equal to the product
of (i) the Class A Interest Rate, (ii) a fraction the numerator
of which is the actual number of days in the related Interest
Accrual Period and the denominator of which is 360 and (iii) the
outstanding principal balance of the Class A Securities as of the
close of business on the first day of such Interest Accrual
Period and (2) with respect to the Class B Securities (a) the
product of (i) the Class B Interest Rate, (ii) a fraction the
numerator of which is the actual number of days in the related
Interest Accrual Period and the denominator of which is 360 and
(iii) the outstanding principal balance of the Class B Securities
as of the close of business on the first day of such Interest
Accrual Period (or in the case of the initial Distribution Date,
an amount equal to the product of (u) the initial Class B
Invested Amount, (v) 47 divided by 360, and (w) the Class B
Interest Rate.
Interest payments on the Class A Securities on each
Distribution Date will be funded from Available Series 1998-1
Finance Charge Collections with respect to the preceding Monthly
Period (or, with respect to the first Distribution Date, such
collections from and including the Closing Date to and including
May 29, 1998 plus the amount of the initial deposit to the
Interest Funding Account to be made on the Closing Date) and from
certain other funds allocated as set forth in the Pooling and
Servicing Agreement to the respective classes of the Securities
and deposited on each business day during such Monthly Period in
the Interest Funding Account.
Subject to the prior payment of interest on the Class A
Securities, interest payments on the Class B Securities on each
Distribution Date will be funded from the portion of Available
Series 1998-1 Finance Charge Collections with respect to the
preceding Monthly Period and from certain other funds allocated
as set forth in the Pooling and Servicing Agreement to the Class
B Securities and deposited on each business day during such
Monthly Period in the Interest Funding Account.
"Class B Invested Amount" shall mean, with respect to
any Business Day, an amount equal to (a) the Class B Initial
Invested Amount minus (b) the aggregate amount of principal
payments made to Class B Securityholders through and including
such Business Day, minus (c) the aggregate amount of Class B
Charge-Offs for all prior Distribution Dates, minus (d) the
aggregate amount of Redirected Class B Principal Collections
through and including such Business Day for which neither the
Class D Invested Amount nor the CTO Invested Amount has been
reduced on all prior Distribution Dates pursuant to subsection
4.14(e) of the Agreement, and plus (e) the sum of the aggregate
amount reimbursed with respect to reductions of the Class B
Invested Amount through and including such Business Day pursuant
to subsection 4.9(a)(x) of the Agreement plus, with respect to
such subsection, amounts applied thereto pursuant to subsections
4.10(a) and (b) and 4.14(a) and (b), of the Agreement, for the
purpose of reimbursing amounts deducted pursuant to the foregoing
clauses (c) and (d); provided, however, that the Class B Invested
Amount may not be reduced below zero.
Subject to the Agreement, payments of principal are
limited to the unpaid Class B Invested Amount of the Class B
Securities, which may be less than the unpaid balance of the
Class B Securities pursuant to the terms of the Agreement. All
principal on the Class B Securities is due and payable no later
than the February 2005 Distribution Date (or if such day is not a
Business Day, the next succeeding Business Day) (the "Scheduled
Series 1998-1 Termination Date"). After the earlier to occur of
(i) the Scheduled Series 1998-1 Termination Date and (ii) the day
after the Distribution Date on which the Series 1998-1 Securities
are paid in full (the "Series 1998-1 Termination Date") neither
the Trust nor the Transferor will have any further obligation to
distribute principal or interest on the Class B Securities. In
the event that the Class B Invested Amount is greater than zero
on the Series 1998-1 Termination Date, the Trustee will sell or
cause to be sold, to the extent necessary, an amount of interests
in the Receivables or certain of the Receivables up to 110% of
the Class A Invested Amount, the Class B Invested Amount, the CTO
Invested Amount and the Class D Invested Amount at the close of
business on such date (but not more than the total amount of
Receivables allocable to the Series 1998-1 Securities), and
shall pay the proceeds to the Class A Securityholders pro rata -
in final payment of the Class A Securities, then to the Class B
Securityholders pro rata in final payment of the Class B
Securities, then to the CTO Securityholders pro rata in final
payment of the Collateralized Trust Obligations and finally to
the Class D Securityholders pro rata in final payment of the
Class D Securities.
Unless the certificate of authentication hereon has
been executed by or on behalf of the Trustee, by manual
signature, this Security shall not be entitled to any benefit
under the Agreement, or be valid for any purpose.
IN WITNESS WHEREOF, the Transferor has caused this
Security to be duly executed.
FINGERHUT RECEIVABLES, INC.
By:
Name:
Title:
Dated:
CERTIFICATE OF AUTHENTICATION
This is one of the Class B Securities referred to in
the within-mentioned Pooling and Servicing Agreement.
THE BANK OF NEW YORK (DELAWARE)
By:
Name:
Title:
Exhibit A-3
FORM OF COLLATERALIZED TRUST OBLIGATION
[Each Collateralized Trust Obligation that is a CTO
Global Security deposited with DTC, or a custodian on behalf of
DTC, shall bear the following legend:]
UNLESS THIS SECURITY IS PRESENTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST
COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER
OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT, AND ANY SECURITY ISSUED IS REGISTERED IN THE
NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND
ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER
ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE
OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL
INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO.,
HAS AN INTEREST HEREIN.
[Each Collateralized Trust Obligation that is issued
pursuant to Rule 144A shall bear the following legend:]
THIS SECURITY HAS NOT BEEN AND WILL NOT BE
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS.
THE HOLDER HEREOF, BY PURCHASING THIS SECURITY, AGREES
THAT THIS SECURITY MAY BE REOFFERED, RESOLD, PLEDGED OR
OTHERWISE TRANSFERRED ONLY IN COMPLIANCE WITH THE
SECURITIES ACT AND OTHER APPLICABLE LAWS AND ONLY
(1) PURSUANT TO RULE 144A UNDER THE SECURITIES ACT TO A
PERSON WHO THE HOLDER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER ("QIB") WITHIN THE
MEANING OF RULE 144A, PURCHASING FOR ITS OWN ACCOUNT,
OR A QIB PURCHASING FOR THE ACCOUNT OF A QIB, WHOM THE
HOLDER HAS INFORMED, IN EACH CASE, THAT SUCH REOFFER,
RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN
RELIANCE ON RULE 144A OR (2) IN AN OFFSHORE TRANSACTION
IN ACCORDANCE WITH RULE 903 OR RULE 904 OF REGULATION S
UNDER THE SECURITIES ACT. EACH SECURITY OWNER BY
ACCEPTING A BENEFICIAL INTEREST IN THIS SECURITY,
UNLESS SUCH PERSON ACQUIRED THIS SECURITY IN A TRANSFER
DESCRIBED IN CLAUSE (2) ABOVE, IS DEEMED TO REPRESENT
THAT IT IS EITHER A QIB PURCHASING FOR ITS OWN ACCOUNT
OR A QIB PURCHASING FOR THE ACCOUNT OF ANOTHER QIB.
[Each Collateralized Trust Obligation that is issued
pursuant to Regulation S shall bear the following legend:]
THIS SECURITY HAS NOT BEEN AND WILL NOT BE
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND PRIOR TO
THE DATE THAT IS 40 DAYS AFTER THE LATER OF THE
COMMENCEMENT OF THE OFFERING AND THE CLOSING DATE MAY
NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED
IN THE UNITED STATES OR TO A U.S. PERSON EXCEPT
PURSUANT TO AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT.
[Each Collateralized Trust Obligation shall bear the
following legends:]
EACH PURCHASER REPRESENTS AND WARRANTS FOR THE
BENEFIT OF FINGERHUT RECEIVABLES, INC. AND THE TRUSTEE
THAT SUCH PURCHASER IS NOT (I) AN EMPLOYEE BENEFIT PLAN
(AS DEFINED IN SECTION 3(3) OF THE EMPLOYEE RETIREMENT
INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA")) THAT
IS SUBJECT TO THE PROVISIONS OF TITLE I OF ERISA, (II)
A PLAN DESCRIBED IN SECTION 4975(e)(1) OF THE INTERNAL
REVENUE CODE OF 1986, AS AMENDED (THE "CODE") THAT IS
SUBJECT TO SECTION 4975 OF THE CODE, (III) A
GOVERNMENTAL PLAN, AS DEFINED IN SECTION 3(32) OF
ERISA, SUBJECT TO ANY FEDERAL, STATE OR LOCAL LAW WHICH
IS, TO A MATERIAL EXTENT, SIMILAR TO THE PROVISIONS OF
SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE, (IV)
AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE "PLAN ASSETS"
(AS DEFINED IN 29 C.F.R. SECTION 2510.3-101 OR
OTHERWISE UNDER ERISA) BY REASON OF A PLAN'S INVESTMENT
IN THE ENTITY OR (V) A PERSON INVESTING "PLAN ASSETS"
OF ANY SUCH PLAN (INCLUDING WITHOUT LIMITATION, FOR
PURPOSES OF CLAUSE (IV) AND THIS CLAUSE (V), AS
APPLICABLE, AN INSURANCE COMPANY GENERAL ACCOUNT, BUT
EXCLUDING ANY ENTITY REGISTERED UNDER THE INVESTMENT
COMPANY ACT OF 1940, AS AMENDED).
No. ___ $__________
CUSIP NO. 31786YAH3
FINGERHUT MASTER TRUST
FLOATING RATE ASSET BACKED
COLLATERALIZED TRUST OBLIGATION, SERIES 1998-1
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 consumer credit card accounts and closed-end
installment sale or closed-end loan contracts transferred or to
be transferred by certain subsidiaries of Fingerhut Receivables,
Inc. (the "Transferor") and other assets and interests
constituting the Trust under the Agreement described below.
(Not an interest in or a recourse obligation of
Fingerhut Receivables, Inc., Fingerhut Companies, Inc., Fingerhut
National Bank or any affiliate of any of them.)
This certifies that ___________________ (the
"Securityholder") is the registered owner of a fractional
undivided interest in the Fingerhut Master Trust (the "Trust")
issued pursuant to the Amended and Restated Pooling and
Servicing Agreement, dated as of March 18, 1998 (the "Pooling and
Servicing Agreement"; such term to include any amendment thereto)
by and between the Transferor, Fingerhut National Bank as the
Servicer (the "Servicer"), and The Bank of New York (Delaware),
as Trustee (the "Trustee"), and the Series 1998-1 Supplement,
dated as of April 28, 1998 (the "Series 1998-1 Supplement"),
among the Transferor, the Servicer and the Trustee. The Pooling
and Servicing Agreement, as supplemented by the Series 1998-1
Supplement, is herein referred to as the "Agreement." The corpus
of the Trust consists of all of the Transferor's right, title and
interest in, to and under the Trust Property (as defined in the
Agreement).
This Security does not purport to summarize the
Agreement and reference is made to that Agreement for information
with respect to the interests, rights, benefits, obligations,
proceeds, and duties evidenced hereby and the rights, duties and
obligations of the Trustee. To the extent not defined herein,
the capitalized terms used herein have the meanings ascribed to
them in the Agreement. This Security is one of a series of
Securities entitled "Fingerhut Master Trust Floating Rate Asset
Backed Securities, Series 1998-1, Collateralized Trust
Obligations (the "Collateralized Trust Obligations"), each of
which represents a fractional undivided interest in the Trust,
and is issued under and is subject to the terms, provisions and
conditions of the Agreement, to which Agreement, as amended from
time to time, the CTO Securityholder by virtue of the acceptance
hereof assents and by which the CTO Securityholder is bound.
The Transferor has structured the Agreement, the
Collateralized Trust Obligations, the Fingerhut Master Trust
6.07% Asset Backed Securities, Series 1998-1, Class A (the
"Class A Securities") and the Fingerhut Master Trust 6.29% Asset
Backed Securities, Series 1998-1, Class B (the "Class B
Securities") with the intention that the Class A Securities,
Class B Securities and Collateralized Trust Obligations will
qualify under applicable tax law as indebtedness, and both the
Transferor and each holder of a Collateralized Trust Obligation
(a "CTO Securityholder") or any interest therein by acceptance of
its Collateralized Trust Obligation or any interest therein,
agrees to treat the Collateralized Trust Obligations for purposes
of federal, state and local income or franchise taxes and any
other tax imposed on or measured by income, as indebtedness.
No principal will be payable to the CTO Securityholders
until the earlier of the Class C Expected Final Payment Date and,
upon the occurrence of a Pay Out Event, the Distribution Date
following the Monthly Period in which the Pay Out Event occurs
but in no event earlier than the Distribution Date either on or
following the Distribution Date on which the Class A Invested
Amount and the Class B Invested Amount have been paid in full.
No principal payments will be payable to the CTO Securityholders
until the Distribution Date either on or following the
Distribution Date on which the Class A Invested Amount and Class
B Invested Amount have been paid in full.
Interest on the Collateralized Trust Obligations will
be payable on June 15, 1998 and on each Distribution Date
thereafter, in an amount equal to the product of (i) a per annum
rate .80% in excess of LIBOR (the "CTO Interest Rate"), (ii) a
fraction the numerator of which is the actual number of days in
the related Interest Accrual Period and the denominator of which
is 360 and (iii) the CTO Invested Amount as of the close of
business on the first day of such Interest Accrual Period (or in
the case of the initial Distribution Date, an amount equal to the
sum of (I) the product of (u) the initial CTO Invested Amount,
(v) 48 divided by 360, and (w) the CTO Interest Rate.
Subject to the prior payment of interest on the Class A
Securities and Class B Securities, interest payments on the
Class C Securities on each Distribution Date will be funded from
the portion of Available Series 1998-1 Finance Charge Collections
with respect to the preceding Monthly Period and from certain
other funds allocated as set forth in the Pooling and Servicing
Agreement to the Collateralized Trust Obligations and deposited
on each business day during such Monthly Period in the Interest
Funding Account.
"CTO Invested Amount" shall mean with respect to any
Business Day, an amount equal to (a) the CTO Initial Invested
Amount minus (b) the aggregate amount of principal payments made
to CTO Securityholders through and including such Business Day,
minus (c) the aggregate amount of CTO Charge-Offs for all prior
Distribution Dates, minus (d) the aggregate amount of Redirected
CTO Principal Collections and Redirected Class B Principal
Collections through and including such Business Day for which the
Class D Invested Amount has not been reduced pursuant to
subsection 4.14(d) of the Agreement, plus (e) the aggregate
amount reimbursed with respect to reductions of the CTO Invested
Amount through and including such Business Day pursuant to
subsection 4.9(a)(xi) of the Agreement plus, with respect to such
subsection, amounts applied thereto pursuant to subsections
4.10(a) and (b) and 4.14(a), of the Agreement, for the purpose of
reimbursing amounts deducted pursuant to the foregoing clauses
(c) and (d); provided, however, that the CTO Invested Amount may
not be reduced below zero.
Subject to the Agreement, payments of principal are
limited to the unpaid CTO Invested Amount of the Collateralized
Trust Obligations, which may be less than the unpaid balance of
the Collateralized Trust Obligations pursuant to the terms of the
Agreement. All principal on the Collateralized Trust Obligations
is due and payable no later than the February 2005 Distribution
Date (or if such day is not a Business Day, the next succeeding
Business Day) (the "Scheduled Series 1998-1 Termination Date").
After the earlier to occur of (i) the Scheduled Series 1998-1
Termination Date and (ii) the day after the Distribution Date on
which the Series 1998-1 Securities are paid in full (the "Series
1998-1 Termination Date") neither the Trust nor the Transferor
will have any further obligation to distribute principal or
interest on the Collateralized Trust Obligations. In the event
that the CTO 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 interests in the Receivables
or certain of the Receivables up to 110% of the Class A Invested
Amount, the Class B Invested Amount, the CTO Invested Amount and
the Class D Invested Amount at the close of business on such date
(but not more than the total amount of Receivables allocable to
the Series 1998-1 Securities), and shall pay the proceeds to the
Class A Securityholders pro rata in final payment of the Class A
Securities, then to the Class B Securityholders pro rata in final
payment of the Class B Securities, then to the CTO
Securityholders pro rata in final payment of the Collateralized
Trust Obligations and finally to the Class D Securityholders pro
rata in final payment of the Class D Securities.
Unless the certificate of authentication hereon has
been executed by or on behalf of the Trustee, by manual
signature, this Security shall not be entitled to any benefit
under the Agreement, or be valid for any purpose.
IN WITNESS WHEREOF, the Transferor has caused this
Security to be duly executed.
FINGERHUT RECEIVABLES, INC.
By:
Name:
Title:
Dated:
CERTIFICATE OF AUTHENTICATION
This is one of the Collateralized Trust Obligations
referred to in the within-mentioned Pooling and Servicing
Agreement.
THE BANK OF NEW YORK (DELAWARE)
By:
Name:
Title:
Exhibit A-4
FORM OF CLASS D INVESTOR SECURITY
THIS SECURITY WAS ORIGINALLY ISSUED IN A TRANSACTION
EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"). THIS SECURITY HAS NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OR ANY APPLICABLE
STATE SECURITIES LAW OF ANY STATE AND MAY NOT BE OFFERED,
SOLD, PLEDGED OR OTHERWISE TRANSFERRED UNLESS REGISTERED
PURSUANT TO OR EXEMPT FROM REGISTRATION UNDER THE SECURITIES
ACT AND ANY OTHER APPLICABLE SECURITIES LAW. TRANSFERS OF
THIS SECURITY SHALL BE SUBJECT TO THE RESTRICTIONS SET FORTH
IN THE POOLING AND SERVICING AGREEMENT.
EACH PURCHASER REPRESENTS AND WARRANTS FOR THE BENEFIT
OF FINGERHUT RECEIVABLES, INC. AND THE TRUSTEE THAT SUCH
PURCHASER IS NOT (I) AN EMPLOYEE BENEFIT PLAN (AS DEFINED IN
SECTION 3(3) OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT
OF 1974, AS AMENDED ("ERISA")) THAT IS SUBJECT TO THE
PROVISIONS OF TITLE I OF ERISA, (II) A PLAN DESCRIBED IN
SECTION 4975(e)(1) OF THE INTERNAL REVENUE CODE OF 1986, AS
AMENDED (THE "CODE") THAT IS SUBJECT TO SECTION 4975 OF THE
CODE, (III) A GOVERNMENTAL PLAN, AS DEFINED IN SECTION 3(32)
OF ERISA, SUBJECT TO ANY FEDERAL, STATE OR LOCAL LAW WHICH
IS, TO A MATERIAL EXTENT, SIMILAR TO THE PROVISIONS OF
SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE, (IV) AN
ENTITY WHOSE UNDERLYING ASSETS INCLUDE PLAN ASSETS (AS
DEFINED IN 29 C.F.R. SECTION 2510.3-101 OR OTHERWISE UNDER
ERISA) BY REASON OF A PLAN'S INVESTMENT IN THE ENTITY OR (V)
A PERSON INVESTING PLAN ASSETS OF ANY SUCH PLAN (INCLUDING
WITHOUT LIMITATION, FOR PURPOSES OF CLAUSE (IV) AND THIS
CLAUSE (V), AS APPLICABLE, AN INSURANCE COMPANY GENERAL
ACCOUNT, BUT EXCLUDING ANY ENTITY REGISTERED UNDER THE
INVESTMENT COMPANY ACT OF 1940, AS AMENDED).
No. ___ $_________
FINGERHUT MASTER TRUST
0% ASSET BACKED
SECURITY, SERIES 1998-1, CLASS D
Evidencing an undivided interest in a trust, the corpus
of which consists of receivables generated from time to time in
the ordinary course of business from a portfolio of consumer
revolving consumer credit card accounts and closed-end
installment sale or loan contracts transferred or to be
transferred by Fingerhut Receivables, Inc. (the "Transferor") and
other assets and interests constituting the Trust under the
Agreement described below.
(Not an interest in or a recourse obligation of
Fingerhut Receivables, Inc., Fingerhut Companies, Inc., Fingerhut
National Bank or any affiliate of any of them.)
This certifies that ______________ (the
"Securityholder") is the registered owner of a fractional
undivided interest in the Fingerhut Master Trust (the "Trust")
issued pursuant to the Amended and Restated Pooling and Servicing
Agreement, dated as of March 18, 1998 (the "Pooling and Servicing
Agreement"; such term to include any amendment or Supplement
thereto) by and between the Transferor, Fingerhut National Bank
as the Servicer (the "Servicer"), and The Bank of New York
(Delaware), as Trustee (the "Trustee"), and the Series 1998-1
Supplement, dated as of April 28, 1998 (the "Series 1998-1
Supplement"), among the Transferor, the Servicer and the Trustee.
The Pooling and Servicing Agreement, as supplemented by the
Series 1998-1 Supplement, is herein referred to as the
"Agreement." The corpus of the Trust consists of all of the
Transferor's right, title and interest in, to and under the Trust
Property (as defined in the Agreement).
This Security does not purport to summarize the
Agreement and reference is made to that Agreement for information
with respect to the interests, rights, benefits, obligations,
proceeds, and duties evidenced hereby and the rights, duties and
obligations of the Trustee. To the extent not defined herein,
the capitalized terms used herein have the meanings ascribed to
them in the Agreement. This Security is one of a series of
Securities entitled "Fingerhut Master Trust 0% Asset Backed
Securities, Series 1998-1, Class D" (the "Class D Securities"),
each of which represents a fractional undivided interest in the
Trust, and is issued under and is subject to the terms,
provisions and conditions of the Agreement, to which Agreement,
as amended from time to time, the Securityholder by virtue of the
acceptance hereof assents and by which the Securityholder is
bound.
Fingerhut Receivables, Inc. shall be prohibited from
transferring any interest in or portion of the Class D Security.
No principal will be payable to the Class D
Securityholders (other than with respect to Class D Excess
Amounts) until the earlier of the Expected Final Payment Date
and, upon the occurrence of a Pay Out Event, the Distribution
Date following the Monthly Period in which the Pay Out Event
occurs but in no event earlier than the Distribution Date either
on or following the Distribution Date on which Class A Invested
Amount, Class B Invested Amount and the CTO Invested Amount have
been paid in full. No principal will be payable to the Class D
Securityholders until all principal payments have first been made
to the Class A Securityholders, Class B Securityholders and CTO
Securityholders.
"Class D Invested Amount" shall mean with respect to
any Business Day, an amount equal to (a) the Class D Initial
Invested Amount, minus (b) the aggregate amount of principal
payments made to Class D Securityholders through and including
such Business Day and reductions of the Class D Invested Amount
pursuant to subsection 4.12(d), minus (c) the aggregate amount of
Class D Charge-Offs for all prior Distribution Dates, minus (d)
the aggregate amount of Redirected Principal Collections through
and including such Business Day for which the Class D Invested
Amount has been reduced pursuant to subsection 4.14(d) of the
Agreement, plus (e) the aggregate amount reimbursed with respect
to reductions of the Class D Invested Amount through and
including such Business Day pursuant to subsection 4.9(a)(xii) of
the Agreement plus, with respect to such subsection, amounts
applied thereto pursuant to subsections 4.10(a) and (b) of the
Agreement, for the purpose of reimbursing amounts deducted
pursuant to the foregoing clauses (c) and (d); provided, however,
that the Class D Invested Amount may not be reduced below zero.
Subject to the Agreement, payments of principal are
limited to the unpaid Class D Invested Amount of the Class D
Securities, which may be less than the unpaid balance of the
Class D Securities pursuant to the terms of the Agreement. All
principal on the Class D Securities is due and payable no later
than the February 2005 Distribution Date (or if such day is not a
Business Day, the next succeeding Business Day) (the "Scheduled
Series 1998-1 Termination Date"). After the earlier to occur of
(i) the Scheduled Series 1998-1 Termination Date or (ii) the day
after the Distribution Date on which the Series 1998-1 Securities
are paid in full (the "Series 1998-1 Termination Date") neither
the Trust nor the Transferor will have any further obligation to
distribute principal or interest on the Class D Securities. In
the event that the Class D 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 interests in the
Receivables or certain of the Receivables up to 110% of the Class
A Invested Amount, the Class B Invested Amount, the CTO Invested
Amount and the Class D Invested Amount at the close of business
on such date (but not more than the total amount of Receivables
allocable to the Investors Securities), and shall pay the
proceeds to the Class A Securityholders pro rata in final payment
of the Class A Securities, then to the Class B Securityholders
pro rata in final payment of the Class B Securities, then to the
CTO Securityholders pro rata in final payment of the
Collateralized Trust Obligations and finally to the Class D
Securityholders pro rata in final payment of the Class D
Securities.
Unless the certificate of authentication hereon has
been executed by or on behalf of the Trustee, by manual
signature, this Security shall not be entitled to any benefit
under the Agreement, or be valid for any purpose.
IN WITNESS WHEREOF, the Transferor has caused this
Security to be duly executed.
FINGERHUT RECEIVABLES, INC.
By:
Name:
Title:
Dated:
CERTIFICATE OF AUTHENTICATION
This is one of the Class D Securities referred to in
the within-mentioned Pooling and Servicing Agreement.
THE BANK OF NEW YORK (DELAWARE)
By:
Name:
Title:
EXHIBIT B
[Form of Monthly Securityholders' Statement]
EXHIBIT C
FORM OF CLEARING SYSTEM CERTIFICATE
Fingerhut Receivables, Inc.
4400 Baker Road, Suite F470
Minnetonka, Minnesota 55343
The Bank of New York (Delaware)
White Clay Center
Route 273
Newark, Delaware 19711
Re: Fingerhut Master Trust Series 1998-1
Ladies and Gentlemen:
Reference is hereby made to the Amended and Restated
Pooling and Servicing Agreement dated as of March 18, 1998, as
supplemented by the Series 1998-1 Supplement thereto, dated April
28, 1998 (collectively, the "Pooling and Servicing Agreement"),
each by and among Fingerhut Receivables, Inc., as Transferor,
Fingerhut National Bank, as Servicer and The Bank of New York
(Delaware), as Trustee. Capitalized terms used but not defined
herein shall have the meanings given to them in the Pooling and
Servicing Agreement.
This is to certify that, based solely on certifications
we have received in writing, by telex or by electronic
transmission from member organizations appearing in our records
as Persons being entitled to a portion of the principal amount
set forth below (our "Member Organizations"), as of the date
hereof, $ principal amount of the Fingerhut Master
Trust, Series 1998-1, Collateralized Trust Obligations (the
"CTOs") (i) is beneficially owned by persons that are not U.S.
persons or (ii) is owned by U.S. persons who purchased the CTOs
in transactions that did not require registration under the
United States Securities Act of 1933, as amended (the "Securities
Act"). As used in this paragraph, the term "U.S. person" has the
meaning given to it by Regulation S under the Securities Act.
We further certify (i) that we are not making available
herewith for exchange (or, if relevant, for the payment of
interest on) any portion of the Temporary Regulation S Global
Security excepted in such Member Organization certifications and
(ii) that as of the date hereof we have not received any
notification from any of our Member Organizations to the effect
that the statements made by such Member Organizations with
respect to any portion of the part submitted herewith for
exchange (or, if relevant, for the payment of interest on) are no
longer true and cannot be relied upon at the date hereof.
We understand that this certification is required in
connection with certain tax laws of the United States. In
connection therewith, if administrative and legal proceedings are
commenced or threatened in connection with which this
certification is or would be relevant, we irrevocably authorize
you to produce this certification to any interested party in such
proceedings.
Date: ___ *.
Yours faithfully,
[MORGAN GUARANTY TRUST COMPANY OF NEW
YORK, Brussels office, as operator of
the Euroclear System
or
CEDEL BANK, SOCIETE ANONYME]**
By:_______________________________
EXHIBIT D
FORM OF MEMBER ORGANIZATION CERTIFICATE
Fingerhut Receivables, Inc.
4400 Baker Road, Suite F470
Minnetonka, Minnesota 55343
The Bank of New York (Delaware)
White Clay Center
Route 273
Newark, Delaware 19711
Re: Fingerhut Master Trust Series 1998-1
Ladies and Gentlemen:
Reference is hereby made to the Amended and Restated
Pooling and Servicing Agreement dated as of March 18, 1998, as
supplemented by the Series 1998-1 Supplement thereto, dated April
28, 1998 (collectively, the "Pooling and Servicing Agreement"),
each by and among Fingerhut Receivables, Inc., as Transferor,
Fingerhut National Bank, as Servicer and The Bank of New York
(Delaware) as Trustee. Capitalized terms used but not defined
herein shall have the meanings given to them in the Pooling and
Servicing Agreement.
This is to certify that, as of the date hereof and
except as set forth below, the Fingerhut Master Trust, Series
1998-1, Collateralized Trust Obligations (the "CTOs") held by you
for our account (i) are beneficially owned by persons that are
not U.S. persons or (ii) are owned by U.S. persons who purchased
the CTOs in transactions that did not require registration under
the United States Securities Act of 1933, as amended (the
"Securities Act"). As used in this paragraph, the term "U.S.
person" has the meaning given to it by Regulation S under the
Securities Act.
We undertake to advise you promptly by tested telex on
or prior to the date on which you intend to submit your
certification relating to the CTOs held by you for our account in
accordance with your documented procedures if any applicable
statement herein is not correct on such date, and in the absence
of any such notification it may be assumed that this certificate
applies as of such date.
This certificate excepts and does not relate to U.S.
$_______ in principal amount of CTOs held by you for our account,
in respect of which we are not able to certify beneficial
ownership. We understand that exchange and delivery of
beneficial interests in the Regulation S Global Security or Rule
144A Global Security cannot be made until we do so certify.
We understand that this certificate is required in
connection with certain securities and tax laws of the United
States of America. If administrative or legal proceedings are
commenced or threatened in connection with which this certificate
is or would be relevant, we irrevocably authorize you to produce
this certificate or a copy thereof to any interested party in
such proceedings. As used herein, "United States" means the
United States of America (including the States and the District
of Columbia), its territories, its possessions (including Puerto
Rico, the U.S. Virgin Islands, Guam, American Samoa, Wake Island,
and Northern Mariana Islands) and other areas subject to its
jurisdiction.
Dated: , 199_*
Yours faithfully,
[Name of Person giving
the certificate]
By:
EXHIBIT E
FORM OF REGULATION S TRANSFER CERTIFICATE
Fingerhut Receivables Inc.
4400 Baker Road, Suite F470
Minnetonka, Minnesota 55343
The Bank of New York (Delaware)
White Clay Center
Route 273
Newark, Delaware 19711
Attention: Corporate Trust Division
Re: Fingerhut Master Trust Series 1998-1
Ladies and Gentlemen:
Reference is hereby made to the Amended and Restated
Pooling and Servicing Agreement dated as of March 18, 1998, as
supplemented by the Series
1998-1 Supplement thereto, dated April 28, 1998 (collectively,
the "Pooling and Servicing Agreement") each by and among
Fingerhut Receivables, Inc. as Transferor, and Fingerhut National
Bank, as Servicer and The Bank of New York (Delaware), as
Trustee. Capitalized terms used but not defined herein shall
have the meanings given to them in the Pooling and Servicing
Agreement.
[NOTE: INSERT [A] FOR A TRANSFER PRIOR TO THE EXCHANGE DATE OF AN
INTEREST IN A RULE 144A GLOBAL SECURITY TO A TRANSFEREE THAT
TAKES DELIVERY IN THE FORM OF AN INTEREST IN A TEMPORARY
REGULATION S GLOBAL SECURITY. INSERT [B] FOR A TRANSFER ON OR
AFTER THE EXCHANGE DATE OF AN INTEREST IN A RULE 144A GLOBAL
SECURITY TO A TRANSFEREE THAT TAKES DELIVERY IN THE FORM OF AN
INTEREST IN A REGULATION S GLOBAL SECURITY.]
[A] This letter relates to U.S. $______ in principal
amount of Fingerhut Master Trust, Series 1998-1, Collateralized
Trust Obligations (the "CTOs") which are held as a beneficial
interest in the CTO Rule 144A Global Security (CUSIP No. ______)
with DTC in the name of [insert name of transferor] (the
"Transferor"). The Transferor has requested an exchange or
transfer of such beneficial interest for an interest in a CTO
Temporary Regulation S Global Security (CUSIP No. ______) to be
held with [the Euroclear System] [Cedel Bank, Societe Anonyme]
through DTC.
[B] This letter relates to U.S. $_________ in principal
amount of Fingerhut Master Trust, Series 1998-1, Collateralized
Trust Obligations (the "CTOs"), which are held as a beneficial
interest in the CTO Rule 144A Global Security (CUSIP No. ______)
with DTC in the name of [insert name of transferor] (the
"Transferor"). The Transferor has requested an exchange or
transfer of such beneficial interest for an interest in a CTO
Regulation S Global Security (CUSIP No. ______) to be held with
[the Euroclear System][Cedel Bank, Societe Anonyme] through DTC.
[NOTE: INSERT [C] IN ALL CASES UNLESS [D] IS INSERTED IN
ACCORDANCE WITH THE NEXT SENTENCE. AT THE OPTION OF THE
TRANSFEROR, [C] MAY BE INSERTED IN PLACE OF [D] ON AND AFTER THE
CTO EXCHANGE DATE IN CASES OF A TRANSFER INTO A CTO REGULATION S
GLOBAL SECURITY.]
[C] In connection with such request and in respect of
such CTOs, the Transferor does hereby certify that such exchange
or transfer has been effected in accordance with the transfer
restrictions set forth in the Pooling and Servicing Agreement and
such CTOs and pursuant to and in accordance with Regulation S
under the Securities Act of 1933, as amended (the "Securities
Act"), and accordingly the Transferor does hereby certify that:
(i) the offer of the CTOs was not made to a Person in the
United States,
(i) [ at the time the buy order was originated, the
transferee was outside the United States, or the Transferor and
any Person acting on its behalf reasonably believed that the
transferee was outside the United States,]**
[(2) the transaction was executed in, on or through the
facilities of a designated offshore securities market and
neither the Transferor nor any Person acting on its behalf
knows that the transaction was pre-arranged with a buyer in
the United States,]*
(i) no directed selling efforts have been made in
contravention of the requirements of Rule 903(b) or 904(b) of
Regulation S, as applicable, and
(i) the transaction is not part of a plan or scheme to
evade the registration requirements of the Securities Act.
[D] In connection with such request and in respect of
such CTOs, the Transferor does hereby certify that such transfer
has been effected in accordance with the transfer restrictions
set forth in the Pooling and Servicing Agreement and the CTOs,
and that the CTOs are being transferred in a transaction
permitted by Rule 144A under the Securities Act.
This certificate and the statements contained herein
are made for the benefit of the Trustee and the benefit of the
Transferor and the initial purchaser.
[Insert Name of Transferor]
By:___________________
Name:
Title:
Dated: _________________
EXHIBIT F
FORM OF RULE 144A TRANSFER CERTIFICATE
Fingerhut Receivables
4400 Baker Road, Suite F470
Minnetonka, Minnesota 55343
The Bank of New York (Delaware)
White Clay Center
Route 273
Newark, Delaware 19711
Re: Fingerhut Master Trust
Series 1998-1
Ladies and Gentlemen:
Reference is hereby made to the Amended and Restated
Pooling and Servicing Agreement, dated as of March 18, 1998, as
supplemented by the Series 1998-1 Supplement thereto, dated April
28, 1998 (collectively, the "Pooling and Servicing Agreement"),
each by and among Fingerhut Receivables, Inc., as Transferor,
Fingerhut National Bank, as Servicer and The Bank of New York
(Delaware), as Trustee. Capitalized terms used but not defined
herein shall have the meanings given to them in the Pooling and
Servicing Agreement.
[NOTE: INSERT [A] FOR A TRANSFER PRIOR TO THE EXCHANGE DATE OF AN
INTEREST IN A TEMPORARY REGULATION S GLOBAL SECURITY TO A
TRANSFEREE THAT TAKES DELIVERY IN THE FORM OF AN INTEREST IN A
RULE 144A GLOBAL SECURITY. INSERT [B] FOR A TRANSFER AFTER THE
EXCHANGE DATE OF AN INTEREST IN A REGULATION S GLOBAL SECURITY TO
A TRANSFEREE THAT TAKES DELIVERY IN THE FORM OF AN INTEREST IN A
RULE 144A GLOBAL SECURITY.]
[A] This letter relates to U.S. $_______ in principal
amount of Fingerhut Master Trust, Series 1998-1, Collateralized
Trust Obligations (the "CTOs") which are held in the form of a
beneficial interest in the CTO Temporary Regulation S Global
Security (CUSIP No. _________) with [The Euroclear System] [Cedel
Bank, Societe Anonyme] (Common Code No. _______) through DTC in
the name of [insert name of transferor] (the "Transferor"). The
Transferor has requested a transfer of such beneficial interest
in the CTOs for a beneficial interest in the CTO Rule 144A Global
Security (CUSIP No. _________) to be held with DTC in the name of
[insert name of transferee].
[B] This letter relates to U.S. $_______ in principal
amount of Fingerhut Master Trust, Series 1998-1, Collateralized
Trust Obligations (the "CTOs") which are held in the form of a
beneficial interest in the CTO Regulation S Global Security
(CUSIP No. _________) with [The Euroclear System] [Cedel Bank,
Societe anonyme] (Common Code No. _______) through the DTC in the
name of [insert name of transferor] (the "Transferor"). The
Transferor has requested a transfer of such beneficial interest
in the CTOs for a beneficial interest in the CTO Rule 144A Global
Security (CUSIP No. _________) to be held with the DTC in the
name of [insert name of transferee].
In connection with such request, and in respect of such
CTOs, the Transferor does hereby certify that such CTOs are being
transferred in accordance with (i) the transfer restrictions set
forth in the Pooling and Servicing Agreement and the CTOs and
(ii) Rule 144A under the Securities Act to a transferee that the
Transferor reasonably believes is purchasing the CTOs for its own
account or an account with respect to which the transferee
exercises sole investment discretion and the transferee and any
such account is a "qualified institutional buyer" within the
meaning of Rule 144A, and such transferee is aware that the sale
to it is being made in reliance upon Rule 144A, in each case in a
transaction meeting the requirements of Rule 144A and in
accordance with any applicable securities laws of any state of
the United States or any other jurisdiction.
This certificate and the statements contained herein
are made for the benefit of the Trustee, the benefit of the
Transferor and the initial purchaser.
[Insert Name of Transferor]
By:
Name:
Title:
Dated: ,
_______________________________
* This certificate is to be dated on the CTO Exchange Date or,
if applicable, the subsequent date on which the CTO
Regulation S Global Security is delivered to the undersigned
in definitive form.
** Delete the inappropriate reference.
* This certificate must be dated no earlier than 15 days prior
to the CTO Exchange Date.
** Insert one of these two provisions, which come from the
definition of "offshore transaction" in Regulation S.
FINGERHUT RECEIVABLES, INC.
Transferor
FINGERHUT NATIONAL BANK
Servicer
and
THE BANK OF NEW YORK (DELAWARE)
Trustee
on behalf of the Series 1998-2 Securityholders
SERIES 1998-2 SUPPLEMENT
Dated as of April 28, 1998
to
AMENDED AND RESTATED
POOLING AND SERVICING AGREEMENT
Dated as of March 18, 1998
____________________________________
FINGERHUT MASTER TRUST
$337,500,000 6.07% Asset Backed
Securities, Series 1998-2, Class A
$51,136,000 6.29% Asset Backed
Securities, Series 1998-2, Class B
$61,364,000 Floating Rate Asset Backed
Collateralized Trust Obligation, Series 1998-2
$61,364,000 0% Asset Backed Securities,
Series 1998-2, Class D
TABLE OF CONTENTS
Page
SECTION 1. Designation 1
SECTION 2. Definitions 1
SECTION 3. Reassignment Terms 24
SECTION 4. Delivery and Payment for the Series 1998-2
Securities 25
SECTION 5. Form of Delivery of Series 1998-2 Securities;
Denominations; Depositary 25
SECTION 6. Article IV of Agreement 27
ARTICLE IV
RIGHTS OF SECURITYHOLDERS AND
ALLOCATION AND APPLICATION OF COLLECTIONS
SECTION 4.4 Rights of Securityholders 27
SECTION 4.5 Collections and Allocation; Payments on
Exchangeable Transferor Security 28
SECTION 4.6 Determination of Interest for the Series
1998-2 Securities 29
SECTION 4.7 Determination of Principal Amounts 31
SECTION 4.8 Shared Principal Collections 32
SECTION 4.9 Application of Funds on Deposit in the
Collection Account for the Securities 33
SECTION 4.10 Coverage of Required Amount for the Series
1998-2 Securities 41
SECTION 4.11 Payment of Interest on Securities 42
SECTION 4.12 Payment of Security Principal 42
SECTION 4.13 Series Charge-Offs 44
SECTION 4.14 Redirected Principal Collections for the
Series 1998-2 Securities 45
SECTION 4.15 Determination of LIBOR 47
SECTION 4.16 Defeasance Funding Account 47
SECTION 4.17 Defeasance Reserve Account 49
SECTION 4.18 Defeasance 50
SECTION 4.19 Revolving Receivables Reserve Account 51
SECTION 4.20 CTO Trigger 52
SECTION 4.21 CTO Reserve Account 53
SECTION 4.22 Payment Reserve Account 54
SECTION 4.23 Constituent Class D Securities 55
SECTION 7. Article V of the Agreement 56
ARTICLE V
DISTRIBUTIONS AND REPORTS TO INVESTOR
SECURITYHOLDERS
SECTION 5.1 Distributions 56
SECTION 5.2 Securityholders' Statement 58
SECTION 8. Series 1998-2 Pay Out Events 61
SECTION 9. Collateralized Trust Obligation Defaults and
Remedies 63
SECTION 10. Series 1998-2 Termination 64
SECTION 11. Legends; Transfer and Exchange; Restrictions
on Transfer of Series 1998-2 Securities;
Tax Treatment 64
SECTION 12. Compliance with Withholding Requirements 68
SECTION 13. Ratification of Agreement 68
SECTION 14. Counterparts 68
SECTION 15. GOVERNING LAW 68
SECTION 16. Instructions in Writing 69
SECTION 17. Paired Series 69
EXHIBITS
Exhibit A-1 Form of Class A Investor Security
Exhibit A-2 Form of Class B Investor Security
Exhibit A-3 Form of CTO Investor Security
Exhibit A-4 Form of Class D Investor Security
Exhibit B Form of Monthly Securityholder's Statement
Exhibit C Form of Clearing System Certificate
Exhibit D Form of Member Organization Certificate
Exhibit E Form of Regulation S Transfer Certificate
Exhibit F Form of Rule 144A Transfer Certificate
SERIES 1998-2 SUPPLEMENT, dated as of April 28, 1998 (this
"Series Supplement") by and among FINGERHUT RECEIVABLES, INC., a
corporation organized and existing under the laws of the State of
Delaware, as Transferor (the "Transferor"), FINGERHUT NATIONAL
BANK, a national banking association organized under the laws of
the United States, as Servicer (the "Servicer"), and THE BANK OF
NEW YORK (DELAWARE), a Delaware banking corporation organized and
existing under the laws of the State of Delaware as trustee
(together with its successors in trust thereunder as provided in
the Agreement referred to below, the "Trustee"), under the
Amended and Restated Pooling and Servicing Agreement dated as of
March 18, 1998, as amended, supplemented or otherwise modified
from time to time (the "Agreement"), among the Transferor, the
Servicer and the Trustee.
Section 6.9 of the Agreement provides, among other things, that
the Transferor and the Trustee may at any time and from time to
time enter into a supplement to the Agreement for the purpose of
authorizing the issuance by the Trustee to the Transferor, for
execution and redelivery to the Trustee for authentication, of
one or more Series of Securities.
Pursuant to this Series Supplement, the Transferor and the
Trustee shall create a new Series of Investor Securities and
shall specify the Principal Terms thereof.
SECTION 1 Designation. There is hereby created a
Series to be issued pursuant to the Agreement and this Series
Supplement to be known generally as the "Series 1998-2
Securities." Series 1998-2 shall consist of four Classes, which
shall be designated generally as the 6.23% Asset Backed
Securities, Series 1998-2, Class A (the "Class A Securities"),
the 6.51% Asset Backed Securities, Series 1998-2, Class B (the
"Class B Securities"), the Floating Rate Asset Backed
Collateralized Trust Obligations, Series 1998-2 (the
"Collateralized Trust Obligations") and the 0% Asset Backed
Securities, Series 1998-2, Class D (the "Class D Securities").
SECTION 2 Definitions. In the event that any term or
provision contained herein shall conflict with or be inconsistent
with any provision contained in the Agreement, the terms and
provisions of this Series Supplement shall govern with respect to
the Series 1998-2 Securities. All Article, Section or subsection
references herein shall mean Articles, Sections or subsections of
the Agreement, as amended or supplemented by this Series
Supplement, except as otherwise provided herein. All capitalized
terms not otherwise defined herein are defined in the Agreement.
Each capitalized term defined herein shall relate only to the
Series 1998-2 Securities and no other Series of Securities issued
by the Trust.
"ABC Adjusted Invested Amount" shall mean as of any
Business Day the sum of the Class A Adjusted Invested Amount, the
Class B Adjusted Invested Amount and the CTO Adjusted Invested
Amount minus the amount then on deposit in the Defeasance Funding
Account.
"ABC Invested Amount" shall mean as of any Business Day
the sum of the Class A Invested Amount, the Class B Invested
Amount and the CTO Invested Amount.
"Additional Interest" shall mean, at any time of
determination, the sum of the Class A Additional Interest, Class
B Additional Interest and CTO Additional Interest.
"Adjusted Invested Amount" shall mean as of any
Business Day the Invested Amount minus the sum of the amount then
on deposit in the Principal Account and the Series 1998-2
Percentage of the amount then on deposit in the Excess Funding
Account.
"Amortization Period" shall mean the period commencing
on the Amortization Period Commencement Date and continuing until
the earlier of (x) the Invested Amount of the Securities being
paid in full or (y) the Series 1998-2 Termination Date.
"Amortization Period Commencement Date" shall mean the
earlier of the first day of the August 2002 Monthly Period or the
Pay Out Commencement Date.
"Available Defeasance Reserve Account Amount" shall
mean, with respect to any Business Day, the lesser of (a) the
amount on deposit in the Defeasance Reserve Account as of such
Business Day (before giving effect to any withdrawal made or to
be made pursuant to Section 4.17 of the Agreement from the
Defeasance Reserve Account on such Transfer Date) and (b) the
Required Defeasance Reserve Account Amount for such Transfer
Date.
"Available Series 1998-2 Finance Charge Collections"
shall have the meaning specified in subsection 4.9(a) of the
Agreement.
"Available Series 1998-2 Principal Collections" shall
mean, with respect to any Monthly Period or portion thereof
commencing on the Amortization Period Commencement Date, an
amount equal to the sum of (i) an amount equal to the Fixed/
Floating Percentage on each Business Day during such period of
all Principal Collections (less the amount of Redirected
Principal Collections) received during such period, (ii) any
amount on deposit in the Excess Funding Account allocated to the
Series 1998-2 Securities pursuant to subsection 4.3(f) of the
Agreement with respect to such period , (iii) an amount equal to
the sum of the aggregate Series Default Amount with respect to
such period and the Series 1998-2 Percentage of any unpaid
Adjustment Payments paid pursuant to subsections 4.9(a)(v) and
4.9(a)(vi) of the Agreement with respect to such period and any
reimbursements of unreimbursed Series Charge-Offs pursuant to
subsections 4.9(a)(vii), (x), (xi) and (xii) of the Agreement
with respect to such period plus in each case, amounts applied
with respect thereto pursuant to subsections 4.10(a) and (b),
4.14(a), (b) and (c), 4.16(b) and 4.17(b), (c) and (d) of the
Agreement, and (iv) the aggregate Shared Principal Collections
allocated to the Series 1998-2 Securities pursuant to Section 4.8
of the Agreement with respect to such period.
"Base Rate" shall mean, with respect to any Monthly
Period, the sum of (i) the weighted average of the Class A
Interest Rate, the Class B Interest Rate, the CTO Interest Rate
and, if an interest rate is assigned to the Class D Securities
pursuant to Section 4.23 of the Agreement, the Class D Interest
Rate as of the last day of such Monthly Period (weighted based on
the Class A Invested Amount, the Class B Invested Amount, the CTO
Invested Amount and, following the assignment of an interest rate
to the Class D Securities, the Class D Invested Amount or portion
thereof with respect to which an interest rate has been assigned,
respectively, as of the last day of such Monthly Period) plus
(ii) the product of 2.00% per annum and the percentage equivalent
of a fraction the numerator of which is the Adjusted Invested
Amount and the denominator of which is the Invested Amount, each
as of the beginning of the day on the first day of such Monthly
Period.
"Carryover Class A Monthly Interest" shall mean with
respect to any Business Day (a) any Class A Monthly Interest
Shortfall with respect to the Distribution Date in the then
current Monthly Period plus (b) any Class A Additional Interest
due on the Distribution Date in the next succeeding Monthly
Period.
"Carryover Class B Monthly Interest" shall mean with
respect to any Business Day (a) any Class B Monthly Interest
Shortfall with respect to the Distribution Date in the then
current Monthly Period plus (b) any Class B Additional Interest
due on the next succeeding Distribution Date in the next
succeeding Monthly Period.
"Carryover CTO Monthly Interest" shall mean with
respect to any Business Day (a) any CTO Monthly Interest
Shortfall with respect to the Distribution Date in the then
current Monthly Period plus (b) any CTO Additional Interest due
on the next succeeding Distribution Date in the next succeeding
Monthly Period.
"Class A Additional Interest" shall have the meaning
specified in subsection 4.6(a) of the Agreement.
"Class A Adjusted Invested Amount" shall mean, for any
date of determination, an amount not less than zero equal to the
then current Class A Invested Amount minus the amount then on
deposit in the Principal Account on such date of determination.
"Class A Charge-Offs" shall have the meaning specified
in subsection 4.13(d) of the Agreement.
"Class A Controlled Amortization Amount" shall mean
$22,500,000.
"Class A Controlled Distribution Amount" shall mean,
with respect to any Distribution Date, an amount equal to the
Class A Controlled Amortization Amount plus any existing Class A
Deficit Controlled Amortization Amount determined on the
preceding Distribution Date, if any.
"Class A Deficit Controlled Amortization Amount" shall
mean zero on the initial Distribution Date with respect to the
Controlled Amortization Period and, on any subsequent
Distribution Date, the excess, if any, of (i) the Class A
Controlled Distribution Amount over (ii) the Available Series
1998-2 Principal Collections with respect to the related Monthly
Period.
"Class A Expected Final Payment Date" shall mean the
November 2003 Distribution Date.
"Class A Fixed/Floating Percentage" shall mean for any
Business Day on or after the Amortization Period Commencement
Date, the percentage equivalent of a fraction, the numerator of
which is the Class A Invested Amount at the end of the last day
of the Revolving Period and the denominator of which is the
greater of (a) the sum of the aggregate amount of Principal
Receivables and the amount on deposit in the Excess Funding
Account at the end of the preceding Business Day and (b) the sum
of the numerators used to calculate the applicable floating or
fixed/floating percentages with respect to all Participations and
all Classes of all Series then outstanding.
"Class A Floating Percentage" shall mean, with respect
to any Business Day, the percentage equivalent of a fraction, the
numerator of which is the Class A Adjusted Invested Amount as of
the beginning of such Business Day after giving effect to any
deposits to be made to the Principal Account on such Business Day
and the denominator of which is the greater of (a) the sum of the
aggregate amount of Principal Receivables as of the beginning of
such Business Day and the amount on deposit in the Excess Funding
Account as of the beginning of such Business Day after giving
effect to any deposits or withdrawals to be made to the Excess
Funding Account on such Business Day and (b) the sum of the
numerators used to calculate the applicable floating or
fixed/floating percentages with respect to all Participations and
all Classes of all Series then outstanding.
"Class A Initial Invested Amount" shall mean
$337,500,000.
"Class A Interest Rate" shall mean 6.23% per annum.
"Class A Invested Amount" shall mean, with respect to
any Business Day, an amount equal to (a) the Class A Initial
Invested Amount minus (b) the aggregate amount of principal
payments made to Class A Securityholders through and including
such Business Day, minus (c) the aggregate amount of Class A
Charge-Offs for all prior Distribution Dates, plus (d) the sum of
the aggregate amount reimbursed with respect to reductions of the
Class A Invested Amount through and including such Business Day
pursuant to subsection 4.9(a)(vii) of the Agreement plus, with
respect to such subsection, amounts applied thereto pursuant to
subsections 4.10(a) and (b) and 4.14(a), (b) and (c) of the
Agreement, for the purpose of reimbursing amounts deducted
pursuant to the foregoing clause (c); provided, however, that the
Class A Invested Amount may not be reduced below zero.
"Class A Monthly Interest" shall mean the interest
distributable in respect of the Class A Securities as calculated
in accordance with subsection 4.6(a) of the Agreement.
"Class A Monthly Interest Shortfall" shall have the
meaning specified in subsection 4.6(a) of the Agreement.
"Class A Outstanding Principal Amount" shall mean, with
respect to the Class A Securities, when used with respect to any
Business Day, an amount equal to (a) the Class A Initial Invested
Amount minus (b) the aggregate amount of principal payments made
to the Class A Securityholders on or prior to such Business Day.
"Class A Percentage" shall mean a fraction the
numerator of which is the Class A Invested Amount and the
denominator of which is the sum of the Class A Invested Amount,
the Class B Invested Amount and the CTO Invested Amount.
"Class A Principal" shall mean the principal
distributable in respect of the Class A Securities as calculated
in accordance with subsection 4.7(a) of the Agreement.
"Class A Required Amount" shall mean the amount
determined by the Servicer for each Business Day equal to the
excess, if any, of (x) the sum of (i) the Class A Monthly
Interest for the Interest Accrual Period beginning in the then
current Monthly Period, (ii) any Carryover Class A Monthly
Interest, (iii) the Class A Percentage of the Monthly Servicing
Fee for the then current Monthly Period, (iv) the Class A
Percentage of the Series Default Amount, if any, for such
Business Day and for any previous Business Day in such Monthly
Period and (v) the Class A Percentage of the Series 1998-2
Percentage of any Adjustment Payment the Transferor is required
but fails to make pursuant to subsection 3.8(a) of the Agreement
on such Business Day and on each previous Business Day during
such Monthly Period over (y) the Available Series 1998-2 Finance
Charge Collections plus any Excess Finance Charge Collections
from other Series and any Transferor Finance Charge Collections
allocated with respect to the amounts described in clauses (x)(i)
through (v) above with respect to such Business Day and all
previous Business Days in such Monthly Period.
"Class A Securities" shall mean any of the Securities
executed by the Transferor and authenticated by or on behalf of
the Trustee, substantially in the form of Exhibit A-1 hereto.
"Class A Securityholder" shall mean the Person in whose
name a Class A Security is registered in the Security Register.
"Class A Securityholders' Interest" shall mean the
portion of the Series 1998-2 Securityholders' Interest evidenced
by the Class A Securities.
"Class B Additional Interest" shall have the meaning
specified in subsection 4.6(b) of the Agreement.
"Class B Adjusted Invested Amount" shall mean, for any
date of determination, an amount not less than zero equal to the
then current Class B Invested Amount minus the excess, if any, of
the amount on deposit in the Principal Account over the Class A
Invested Amount on such date of determination.
"Class B Charge-Offs" shall have the meaning specified
in subsection 4.13(c) of the Agreement.
"Class B Controlled Amortization Amount" shall mean
$17,045,333.33.
"Class B Controlled Distribution Amount" shall mean,
with respect to any Distribution Date, an amount equal to the
Class B Controlled Amortization Amount plus any existing Class B
Deficit Controlled Amortization Amount determined on the
preceding Distribution Date, if any.
"Class B Deficit Controlled Amortization Amount" shall
mean zero on the Class B Principal Payment Commencement Date and,
on any subsequent Distribution Date, means the excess, if any, of
(i) the Class B Controlled Distribution Amount over (ii) the
Available Series 1998-2 Principal Collections with respect to the
related Monthly Period.
"Class B Expected Final Payment Date" shall mean the
February 2004 Distribution Date.
"Class B Fixed/Floating Percentage" shall mean for any
Business Day on or after the Amortization Period Commencement
Date, the percentage equivalent of a fraction, the numerator of
which is the Class B Invested Amount at the end of the last day
of the Revolving Period and the denominator of which is the
greater of (a) the sum of the aggregate amount of Principal
Receivables and the amount on deposit in the Excess Funding
Account as of the beginning of such Business Day after giving
effect to any deposits or withdrawals to be made to the Excess
Funding Account on such Business Day and (b) the sum of the
numerators used to calculate the applicable floating or
fixed/floating percentages with respect to all Participations and
all Classes of all Series then outstanding.
"Class B Floating Percentage" shall mean, with respect
to any Business Day, the percentage equivalent of a fraction, the
numerator of which is the Class B Adjusted Invested Amount as of
the beginning of such Business Day after giving effect to any
deposits to be made to the Principal Account on such Business Day
and the denominator of which is the greater of (a) the sum of the
aggregate amount of Principal Receivables and the amount on
deposit in the Excess Funding Account as of the beginning of such
Business Day after giving effect to any deposits or withdrawals
to be made to the Excess Funding Account on such Business Day and
(b) the sum of the numerators used to calculate the applicable
floating or fixed/floating percentages with respect to all
Participations and all Classes of all Series then outstanding.
"Class B Initial Invested Amount" shall mean
$51,136,000.
"Class B Interest Rate" shall mean 6.51% per annum.
"Class B Invested Amount" shall mean, with respect to
any Business Day, an amount equal to (a) the Class B Initial
Invested Amount, minus (b) the aggregate amount of principal
payments made to Class B Securityholders through and including
such Business Day, minus (c) the aggregate amount of Class B
Charge-Offs for all prior Distribution Dates, minus (d) the
aggregate amount of Redirected Class B Principal Collections
through and including such Business Day for which neither the
Class D Invested Amount nor the CTO Invested Amount has been
reduced on all prior Distribution Dates pursuant to subsection
4.14(d) of the Agreement, plus (e) the sum of the aggregate
amount reimbursed with respect to reductions of the Class B
Invested Amount through and including such Business Day pursuant
to subsection 4.9(a)(x) of the Agreement plus, with respect to
such subsection, amounts applied thereto pursuant to subsections
4.10(a) and (b) and 4.14(a) and (b) of the Agreement, for the
purpose of reimbursing amounts deducted pursuant to the foregoing
clauses (c) and (d); provided, however, that the Class B Invested
Amount may not be reduced below zero.
"Class B Monthly Interest" shall mean the interest
distributable in respect of the Class B Securities as calculated
in accordance with subsection 4.6(b) of the Agreement.
"Class B Monthly Interest Shortfall" shall have the
meaning specified in subsection 4.6(b) of the Agreement.
"Class B Outstanding Principal Amount" shall mean, with
respect to the Class B Securities, when used with respect to any
Business Day, an amount equal to (a) the Class B Initial Invested
Amount minus (b) the aggregate amount of principal payments made
to the Class B Securityholders on or prior to such Business Day.
"Class B Percentage" shall mean a fraction the
numerator of which is the Class B Invested Amount and the
denominator of which is the sum of the Class A Invested Amount,
the Class B Invested Amount and the CTO Invested Amount.
"Class B Principal" shall mean the principal
distributable in respect of the Class B Securities as calculated
in accordance with subsection 4.7(b) of the Agreement.
"Class B Principal Payment Commencement Date" shall
mean the earlier of (a) the Distribution Date on which the Class
A Invested Amount is paid in full or, if the Class A Invested
Amount is paid in full on the Class A Expected Final Payment
Date, and the Early Amortization Period has not commenced, the
Distribution Date following the Class A Expected Final Payment
Date and (b) the Distribution Date following a sale or repurchase
of the Receivables as set forth in Section 2.4(e), 10.2(a), 12.1
or 12.2 of the Agreement or Section 3 of this Series Supplement.
"Class B Required Amount" shall mean the amount
determined by the Servicer for each Business Day equal to the
excess, if any, of (x) the sum of (i) the Class B Monthly
Interest for the Interest Accrual Period beginning in the then
current Monthly Period, (ii) any Carryover Class B Monthly
Interest, (iii) the Class B Percentage of the Monthly Servicing
Fee for the then current Monthly Period, (iv) the Class B
Percentage of the Series Default Amount, if any, for such
Business Day and for any previous Business Day in such Monthly
Period and (v) the Class B Percentage of the Series 1998-2
Percentage of any Adjustment Payment the Transferor is required
but fails to make pursuant to subsection 3.8(a) of the Agreement
on such Business Day and on each previous Business Day during
such Monthly Period over (y) the Available Series 1998-2 Finance
Charge Collections plus any Excess Finance Charge Collections
from other Series and any Transferor Finance Charge Collections
allocated with respect to the amounts described in clauses (x)(i)
through (v) above with respect to such Business Day and all
previous Business Days in such Monthly Period.
"Class B Securities" shall mean any of the Securities
executed by the Transferor and authenticated by or on behalf of
the Trustee, substantially in the form of Exhibit A-2 hereto.
"Class B Securityholder" shall mean the Person in whose
name a Class B Security is registered in the Security Register.
"Class B Securityholders' Interest" shall mean the
portion of the Series 1998-2 Securityholders' Interest evidenced
by the Class B Securities.
"Class D Charge-Offs" shall have the meaning specified
in subsection 4.13(a) of the Agreement.
"Class D Excess Amounts" shall mean, with respect to
any Business Day, the excess of the Class D Invested Amount over
the Stated Class D Amount on such Business Day after taking into
account all adjustments of the ABC Adjusted Invested Amount on
such day.
"Class D Fixed/Floating Percentage" shall mean for any
Business Day on or after the Amortization Period Commencement
Date, the percentage equivalent of a fraction, the numerator of
which is the Class D Invested Amount at the end of the last day
of the Revolving Period and the denominator of which is the
greater of (a) the sum of the aggregate amount of Principal
Receivables and the amount on deposit in the Excess Funding
Account as of the beginning of such Business Day after giving
effect to any deposits or withdrawals to be made to the Excess
Funding Account on such Business Day and (b) the sum of the
numerators used to calculate the applicable floating or
fixed/floating percentages with respect to all Participations and
all Classes of all Series then outstanding.
"Class D Floating Percentage" shall mean, with respect
to any Business Day, the percentage equivalent of a fraction, the
numerator of which is the Class D Invested Amount as of the
beginning of such Business Day and the denominator of which is
the greater of (a) the sum of the aggregate amount of Principal
Receivables as of the beginning of such Business Day and the
amount on deposit in the Excess Funding Account as of the
beginning of such Business Day after giving effect to any
deposits or withdrawals to be made to the Excess Funding Account
on such Business Day and (b) the sum of the numerators used to
calculate the applicable floating or fixed/floating percentages
with respect to all Participations and all Classes of all Series
then outstanding.
"Class D Initial Invested Amount" shall mean
$61,364,000.
"Class D Interest Rate" shall have the meaning
specified in subsection 4.23 of the Agreement.
"Class D Invested Amount" shall mean with respect to
any Business Day, an amount equal to (a) the Class D Initial
Invested Amount, minus (b) the aggregate amount of principal
payments made to Class D Securityholders through and including
such Business Day and reductions of the Class D Invested Amount
pursuant to subsection 4.12(d), minus (c) the aggregate amount of
Class D Charge-Offs for all prior Distribution Dates, minus (d)
the aggregate amount of Redirected Principal Collections through
and including such Business Day for which the Class D Invested
Amount has been reduced pursuant to subsection 4.14(d) of the
Agreement, plus (e) the aggregate amount reimbursed with respect
to reductions of the Class D Invested Amount through and
including such Business Day pursuant to subsection 4.9(a)(xii) of
the Agreement plus, with respect to such subsection, amounts
applied thereto pursuant to subsections 4.10(a) and (b) of the
Agreement, for the purpose of reimbursing amounts deducted
pursuant to the foregoing clauses (c) and (d); provided, however,
that the Class D Invested Amount may not be reduced below zero.
"Class D Outstanding Principal Amount" shall mean, with
respect to the Class D Securities, when used with respect to any
Business Day, an amount equal to (a) the Class D Initial Invested
Amount minus (b) the aggregate amount of principal payments made
to Class D Securityholders prior to such Business Day.
"Class D Principal" shall mean the principal
distributable in respect of the Class D Security as specified in
subsection 4.7(d) of the Agreement.
"Class D Principal Payment Commencement Date" shall
mean the earlier of (a) during the Amortization Period, the first
Distribution Date on which the CTO Invested Amount is paid in
full or, if there are no Principal Collections allocable to the
Series 1998-2 Securities remaining after payments have been made
to the Collateralized Trust Obligations on such Distribution
Date, the Distribution Date following the first Distribution Date
on which the CTO Invested Amount is paid in full and (b) the
Distribution Date following a sale or repurchase of the
Receivables as set forth in Section 2.4(e), 10.2(a), 12.1 or 12.2
of the Agreement or Section 3 of this Series Supplement.
"Class D Securities" shall mean any of the Securities
executed by the Transferor and authenticated by or on behalf of
the Trustee, substantially in the form of Exhibit A-4 hereto.
"Class D Securityholder" shall mean the Person in whose
name a Class D Security is registered in the Security Register.
"Class D Securityholders' Interest" shall mean the
portion of the Series 1998-2 Securityholders' Interest evidenced
by the Class D Security.
"Clearing System Certificate" shall mean a certificate
in substantially the form of Exhibit C hereto or such other form
of certificate as shall be satisfactory to the Trustee, the
Euroclear Operator and Cedel.
"Closing Date" shall mean April 28, 1998.
"Collateralized Trust Obligations" shall mean any of
the Securities executed by the Transferor and authenticated by or
on behalf of the Trustee, substantially in the form of Exhibit A-
3 hereto.
"Controlled Amortization Period" shall mean, with
respect to the Series 1998-2 Securities, unless a Pay Out Event
shall have occurred with respect to such Series prior thereto,
the period commencing on the Amortization Period Commencement
Date and ending upon the earliest to occur of (x) the payment in
full to the Series 1998-2 Securityholders of the Invested Amount,
and (y) the Series 1998-2 Termination Date.
"CTO Additional Interest" shall have the meaning
specified in subsection 4.6(c) of the Agreement.
"CTO Adjusted Invested Amount" shall mean, for any date
of determination, an amount not less than zero equal to the then
current CTO Invested Amount minus the excess, if any, of the
amount then on deposit in the Principal Account over the Class A
Invested Amount and the Class B Invested Amount on such date of
determination.
"CTO Charge-Offs" shall have the meaning specified in
subsection 4.13(b) of the Agreement.
"CTO Default" shall have the meaning specified in
Section 9.
"CTO Exchange Date" shall mean the 40th day after the
later of the commencement of the offering and the Closing Date.
"CTO Expected Final Payment Date" means the April 2004
Distribution Date.
"CTO Fixed/Floating Percentage" shall mean for any
Business Day on or after the Amortization Period Commencement
Date, the percentage equivalent of a fraction, the numerator of
which is the CTO Invested Amount at the end of the last day of
the Revolving Period and the denominator of which is the greater
of (a) the sum of the aggregate amount of Principal Receivables
and the amount on deposit in the Excess Funding Account as of the
beginning of such Business Day after giving effect to any
deposits or withdrawals to be made to the Excess Funding Account
on such Business Day and (b) the sum of the numerators used to
calculate the floating or fixed/floating percentages with respect
to all Participations and all Classes of all Series then
outstanding.
"CTO Floating Percentage" shall mean, with respect to
any Business Day, the percentage equivalent of a fraction, the
numerator of which is the CTO Adjusted Invested Amount as of the
beginning of such Business Day after giving effect to any deposit
to be made to the Principal Account on such Business Day and the
denominator of which is the greater of (a) the sum of the
aggregate amount of Principal Receivables as of the beginning of
such Business Day and the amount on deposit in the Excess Funding
Account as of the beginning of such Business Day after giving
effect to any deposits or withdrawals to be made to the Excess
Funding Account on such Business Day and (b) the sum of the
numerators used to calculate the applicable floating or
fixed/floating percentages with respect to all Participations and
all Classes of all Series then outstanding.
"CTO Global Security" shall mean a CTO Temporary
Regulation S Global Security, a CTO Regulation S Global Security
or a CTO Rule 144A Global Security.
"CTO Initial Invested Amount" shall mean $61,364,000.
"CTO Interest Rate" shall mean 6.60625% per annum from
the Closing Date through and including June 14, 1998 and, with
respect to each Interest Accrual Period thereafter, a per annum
rate .95% in excess of LIBOR as determined on the related LIBOR
Determination Date.
"CTO Invested Amount" shall mean with respect to any
Business Day, an amount equal to (a) the CTO Initial Invested
Amount minus (b) the aggregate amount of principal payments made
to CTO Securityholders through and including such Business Day,
minus (c) the aggregate amount of CTO Charge-Offs for all prior
Distribution Dates, minus (d) the aggregate amount of Redirected
CTO Principal Collections and Redirected Class B Principal
Collections through and including such Business Day for which the
Class D Invested Amount has not been reduced pursuant to
subsection 4.14(d) of the Agreement, plus (e) the aggregate
amount reimbursed with respect to reductions of the CTO Invested
Amount through and including such Business Day pursuant to
subsection 4.9(a)(xi) of the Agreement plus, with respect to such
subsection, amounts applied thereto pursuant to subsections
4.10(a) and (b) and 4.14(a) of the Agreement, for the purpose of
reimbursing amounts deducted pursuant to the foregoing clauses
(c) and (d); provided, however, that the CTO Invested Amount may
not be reduced below zero.
"CTO Monthly Interest" shall mean the interest
distributable in respect of the Collateralized Trust Obligations
as calculated in accordance with subsection 4.6(c) of the
Agreement.
"CTO Monthly Interest Shortfall" shall have the meaning
specified in subsection 4.6(c) of the Agreement.
"CTO Outstanding Principal Amount" shall mean, with
respect to the Collateralized Trust Obligations when used with
respect to any Business Day, an amount equal to (a) the CTO
Initial Invested Amount minus (b) the aggregate amount of
principal payments made to CTO Securityholders prior to such
Business Day.
"CTO Percentage" shall mean a fraction the numerator of
which is the CTO Invested Amount and the denominator of which is
the sum of the Class A Invested Amount, the Class B Invested
Amount and the CTO Invested Amount.
"CTO Principal" shall mean the principal distributable
in respect of the Collateralized Trust Obligations as calculated
in accordance with subsection 4.7(c) of the Agreement.
"CTO Principal Payment Commencement Date" shall mean
the earlier of (a) the Distribution Date on which the Class A
Invested Amount and the Class B Invested Amount have each been
paid in full or, if the Class B Invested Amount is paid in full
on the Class B Expected Final Payment Date and the Early
Amortization Period has not commenced, the Distribution Date
following the Class B Expected Final Payment Date and (b) the
Distribution Date following a sale or repurchase of the
Receivables as set forth in subsections 2.4(e), 10.2(a), 12.1 or
12.2 of the Agreement or Section 3 of this Series Supplement.
"CTO Regulation S Global Security" shall mean a
Collateralized Trust Obligation, sold in an offshore transaction
in reliance on Regulation S under the Securities Act, represented
by one or more Global Securities in definitive, fully registered
form without interest coupons, deposited with DTC, as initial
Clearing Agency, or any successor, with the applicable legends
set forth in Exhibit A-3 hereto included in the form of such
Collateralized Trust Obligation.
"CTO Required Amount" shall mean the amount determined
by the Servicer for each Business Day equal to the excess, if
any, of (x) the sum of (i) the CTO Monthly Interest for the
Interest Accrual Period beginning in the then current Monthly
Period, (ii) any Carryover CTO Monthly Interest, (iii) the CTO
Percentage of the Monthly Servicing Fee for the then current
Monthly Period, (iv) the CTO Percentage of the Series Default
Amount, if any, for such Business Day and for any previous
Business Day in such Monthly Period and (v) the CTO Percentage of
the Series 1998-2 Percentage of any Adjustment Payment the
Transferor is required but fails to make pursuant to subsection
3.8(a) of the Agreement on such Business Day and on each previous
Business Day during such Monthly Period over (y) the Available
Series 1998-2 Finance Charge Collections plus any Excess Finance
Charge Collections from other Series and any Transferor Finance
Charge Collections allocated with respect to the amounts
described in clauses (x)(i) through (v) above with respect to
such Business Day and all previous Business Days in such Monthly
Period.
"CTO Reserve Account" shall have the meaning specified
in subsection 4.21(a) of the Agreement.
"CTO Rule 144A Global Security" shall mean a
Collateralized Trust Obligation, sold within the United States to
U.S. persons that are QIBs, issued in definitive, fully
registered form without interest coupons, in the form of
beneficial interests in one or more Global Securities, deposited
with DTC, as initial Clearing Agency, or any successor, with the
applicable legends set forth in Exhibit A-3 hereto included in
the form of such Collateralized Trust Obligation.
"CTO Securityholder" shall mean the Person in whose
name a Collateralized Trust Obligation is registered in the
Security Register.
"CTO Securityholders' Interest" shall mean the portion
of the Series 1998-2 Securityholders' Interest evidenced by the
Collateralized Trust Obligations.
"CTO Temporary Regulation S Global Security" shall mean
a Collateralized Trust Obligation, sold in an offshore
transaction in reliance on Regulation S under the Securities Act,
represented by one or more Global Securities in definitive, fully
registered form without interest coupons, deposited with DTC, as
initial Clearing Agency , or any successor, with the applicable
legends set forth in Exhibit A-3 hereto included in the form of
such Collateralized Trust Obligation.
"CTO Trigger Event" shall have the meaning specified in
subsection 4.20.
"Defeasance" shall have the meaning specified in
subsection 4.18 of the Agreement.
"Defeasance Funding Account" shall have the meaning set
forth in subsection 4.16 of the Agreement.
"Defeasance Funding Account Balance" shall mean, with
respect to any date of determination during the Amortization
Period, the principal amount, if any, on deposit in the
Defeasance Funding Account on such date of determination.
"Defeasance Funding Account Investment Proceeds" shall
mean, with respect to each Transfer Date following the initial
deposit to the Defeasance Funding Account, the investment
earnings on funds on deposit in the Defeasance Funding Account,
if any, (net of investment losses and expenses) for the related
Interest Accrual Period.
"Defeasance Reserve Account" shall have the meaning set
forth in subsection 4.17 of the Agreement.
"Defeasance Reserve Account Funding Date" shall mean
the first day of the Monthly Period prior to the Defeasance, or
such earlier date as the Transferor may determine.
"Distribution Date" shall mean June 15, 1998 and the
fifteenth day of each month thereafter, or if such day is not a
Business Day, the next succeeding Business Day.
"DTC" shall mean The Depository Trust Company.
"Early Amortization Period" shall mean the period
beginning on the earlier of (a) the day on which a Pay Out Event
occurs or is deemed to have occurred and (b) the CTO Expected
Final Payment Date if the CTO Invested Amount has not been paid
in full on or prior to such date, and ending on the earlier of
(i) the date on which the Class A Invested Amount, the Class B
Invested Amount, the CTO Invested Amount and the Class D Invested
Amount have been paid in full and (ii) the Scheduled Series 1998-
2 Termination Date.
"Enhancement" shall mean, with respect to each Class,
the amount, if any, on deposit from time to time in the Revolving
Receivables Reserve Account and with respect to the Class A
Securities, the subordination of the Class B Invested Amount, the
CTO Invested Amount, and the Class D Invested Amount, with
respect to the Class B Securities, the subordination of the CTO
Invested Amount and the Class D Invested Amount, and with respect
to the Collateralized Trust Obligations, the subordination of the
Class D Invested Amount and the amount, if any, on deposit from
time to time in the CTO Reserve Account.
"Excess Finance Charge Collections" shall mean, with
respect to any Business Day, as the context requires, either (x)
the amount described in subsection 4.9(a)(xviii) of the Agreement
allocated to the Series 1998-2 Securities but available to cover
shortfalls in amounts paid from Finance Charge Collections for
other Series, if any, or (y) the aggregate amount of Finance
Charge Collections allocable to other Series in excess of the
amounts necessary to make required payments with respect to such
Series, if any, and available to cover shortfalls with respect to
the Series 1998-2 Securities.
"Fixed/Floating Percentage" shall mean for any Business
Day on or after the Amortization Period Commencement Date, the
sum of the Class A Fixed/Floating Percentage, the Class B
Fixed/Floating Percentage, the CTO Fixed/Floating Percentage and
the Class D Fixed/Floating Percentage.
"Floating Percentage" shall mean for any Business Day
the sum of the applicable Class A Floating Percentage, Class B
Floating Percentage, CTO Floating Percentage, and Class D
Floating Percentage.
"Initial Invested Amount" shall mean an amount equal to
the sum of (i) the Class A Initial Invested Amount; (ii) the
Class B Initial Invested Amount; (iii) the CTO Initial Invested
Amount; and (iv) the Class D Initial Invested Amount.
"Interest Accrual Period" shall mean, with respect to a
Distribution Date, the period from and including the preceding
Distribution Date to but excluding such Distribution Date;
provided, however, that the initial Interest Accrual Period shall
be the period from the Closing Date to but excluding the initial
Distribution Date.
"Invested Amount" shall mean, when used with respect to
any Business Day, an amount equal to the sum of (a) the Class A
Invested Amount as of such Business Day, (b) the Class B Invested
Amount as of such Business Day, (c) the CTO Invested Amount as of
such Business Day and (d) the Class D Invested Amount as of such
Business Day.
"Investor Percentage" shall mean, (a) with respect to
Finance Charge Collections prior to the commencement of the Early
Amortization Period, Default Amounts at any time and Principal
Collections during the Revolving Period, the Floating Percentage
and (b) with respect to Finance Charge Collections during the
Early Amortization Period and Principal Collections during the
Amortization Period, the Fixed/Floating Percentage, and with
respect to any other Series of Securities, the percentage
specified in the related Supplement.
"Investor Securityholder" shall mean the Holder of
record of an Investor Security of Series 1998-2.
"LIBOR" shall have the meaning specified in subsection
4.15(a) of the Agreement.
"LIBOR Determination Date" shall mean the second
Business Day prior to the commencement of the second and each
subsequent Interest Accrual Period. For purposes of this
definition, a Business Day is any day on which banks in London
and New York are open for the transaction of international
business.
"Member Organization Certificate" shall mean a
certificate substantially in the form of Exhibit D hereto or such
other form of certificate as shall be satisfactory to the
Trustee, the Euroclear Operator and Cedel.
"Minimum Retained Percentage" shall mean 2%.
"Minimum Transferor Percentage" shall mean 0%;
provided, however, that in certain circumstances such percentage
may be increased.
"Monthly Period" shall have the meaning specified in
the Agreement, except that the first Monthly Period with respect
to the Series 1998-2 Securities shall begin on and include the
Closing Date and shall end on and include May 29, 1998.
"Monthly Servicing Fee" shall mean for any Monthly
Period, an amount equal to the product of (i) a fraction, the
numerator of which is the actual number of days in such Monthly
Period and the denominator of which is 365 or 366, (ii) the
Series Monthly Servicing Fee Percentage and (iii) the Adjusted
Invested Amount as of the beginning of the day on the first day
of such Monthly Period, or, in the case of the first Distribution
Date, the Initial Invested Amount.
"Negative Carry Amount" shall have the meaning
specified in subsection 4.10(a) of the Agreement.
"Paired Series" shall have the meaning specified in
Section 17 of this Series Supplement.
"Paying Agent" shall mean, for the Series 1998-1
Securities, initially The Bank of New York and in certain limited
circumstances the Banque Generale du Luxembourg, S.A.
"Payment Reserve Account" shall have the meaning
specified in subsection 4.22 of the Agreement.
"Pay Out Commencement Date" shall mean the date on
which a Trust Pay Out Event is deemed to occur pursuant to
Section 9.1 of the Agreement or a Series 1998-2 Pay Out Event is
deemed to occur pursuant to Section 8 of this Series Supplement.
"Portfolio Yield" shall mean, with respect to any
Monthly Period, the annualized percentage equivalent of a
fraction, the numerator of which is the sum of (i) the aggregate
amount of Available Series 1998-2 Finance Charge Collections for
each Business Day during such Monthly Period (not including (a)
the amounts withdrawn from the Payment Reserve Account, (b)
Adjustment Payments made by the Transferor with respect to
Adjustment Payments required to be made but not made in prior
Monthly Periods, if any, and (c) the amount of any Finance Charge
Collections received with respect to the final payment of any
Closed End Receivable that is refinanced with a receivable
arising under a revolving credit card account) and (ii) amounts
withdrawn from the Defeasance Reserve Account with respect to
such Monthly Period calculated on a cash basis after subtracting
the aggregate Series Default Amount for such Monthly Period and
the Series 1998-2 Percentage of any Adjustment Payments which the
Transferor is required but fails to make pursuant to the Pooling
and Servicing Agreement for each Business Day during such Monthly
Period, and the denominator of which is the average daily
Invested Amount during such Monthly Period; provided, however,
that Excess Finance Charge Collections applied for the benefit of
the Series 1998-2 Securityholders may be added to the numerator
if the Transferor shall have provided ten Business Days prior
written notice of such action to each Rating Agency and the
Transferor, the Servicer and the Trustee shall have received
notification in writing that such action will not result in
Standard & Poor's reducing or withdrawing its then existing
rating of the Investor Securities of any outstanding Series or
Class with respect to which it is a Rating Agency.
"Principal Shortfalls" shall mean for any Business Day
(x) for Series 1998-2, (i) during the Controlled Amortization
Period on or prior to the CTO Principal Payment Commencement
Date, the excess of the Class A Controlled Distribution Amount or
the Class B Controlled Distribution Amount, as applicable, over
the aggregate amount applied with respect thereto for such
Business Day and for each prior Business Day in such Monthly
Period, and (ii) at all other times, the Invested Amount of the
Class then receiving principal payments, if any, after the
application of Principal Collections on such Business Day or (y)
for any other Series the amounts specified as such in the
Supplement for such other Series.
"QIB" shall mean a "qualified institutional buyer"
within the meaning of Rule 144A under the Securities Act.
"Rating Agency" shall mean Standard & Poor's and
Moody's
"Redirected Class B Principal Collections" shall have
the meaning specified in subsection 4.14(c) of the Agreement.
"Redirected Class D Principal Collections" shall have
the meaning specified in subsection 4.14(a) of the Agreement.
"Redirected CTO Principal Collections" shall have the
meaning specified in subsection 4.14(b) of the Agreement.
"Redirected Principal Collections" shall mean the sum
of Redirected Class B Principal Collections, Redirected CTO
Principal Collections and Redirected Class D Principal
Collections.
"Regulation S Transfer Certificate" shall mean a
certificate substantially in the form of Exhibit E hereto.
"Required Amount" shall have the meaning specified in
subsection 4.10(b) of the Agreement.
"Required Defeasance Reserve Account Amount" shall
mean, with respect to any Business Day on or after the Defeasance
Reserve Account Funding Date, an amount equal to the excess of
the sum of the Class A Monthly Interest, the Class B Monthly
Interest and the estimated amount of the CTO Monthly Interest
over the estimated amount of investment earnings on amounts in
the Defeasance Funding Account, as estimated by the Transferor,
for each of the Interest Accrual Periods during the period from
the date of the deposit to the Defeasance Funding Account through
the April 2004 Distribution Date.
"Reserve Account Investment Proceeds" shall mean, with
respect to any Business Day, the sum of the investment earnings
on funds on deposit in (i) the CTO Reserve Account available in
accordance with subsection 4.21(c) of the Agreement on such
Business Day and (ii) the Payment Reserve Account available in
accordance with subsection 4.22(c) of the Agreement on such
Business Day.
"Revolving Period" shall mean the period from and
including the Closing Date to, but not including, the
Amortization Period Commencement Date.
"Revolving Receivables Reserve Account" shall have the
meaning specified in subsection 4.19 of the Agreement.
"Rule 144A Transfer Certificate" shall mean a
certificate substantially in the form of Exhibit F hereto.
"Scheduled Series 1998-2 Termination Date" shall mean
the February 2007 Distribution Date.
"Series 1998-2" shall mean the Series of the Fingerhut
Master Trust represented by the Series 1998-2 Securities.
"Series 1998-2 Pay Out Event" shall have the meaning
specified in Section 8 of this Series Supplement.
"Series 1998-2 Percentage" shall mean, on any date of
determination, the percentage equivalent of a fraction the
numerator of which is the Invested Amount and the denominator of
which is the sum of the Invested Amounts relating to all other
Series then outstanding.
"Series 1998-2 Securities" shall mean the Class A
Securities, the Class B Securities, the Collateralized Trust
Obligations and the Class D Security.
"Series 1998-2 Securityholder" shall mean the holder of
record of any Series 1998-2 Security.
"Series 1998-2 Securityholders' Interest" shall have
the meaning specified in Section 4.4 of the Agreement.
"Series 1998-2 Termination Date" shall mean the earlier
to occur of (i) the day after the Distribution Date on which the
Series 1998-2 Securities are paid in full, or (ii) the Scheduled
Series 1998-2 Termination Date.
"Series Charge-Offs" shall mean the sum of Class A
Charge-Offs, Class B Charge-Offs, CTO Charge-Offs and Class D
Charge-Offs.
"Series Default Amount" shall mean, with respect to
each Business Day, an amount equal to the product of the Default
Amount identified since the prior reporting date and the Floating
Percentage for such Business Day.
"Series Monthly Servicing Fee Percentage" shall mean
2.00% per annum.
"Shared Principal Collections" shall mean, as the
context requires, (a) the amount of Principal Collections for any
Business Day allocated to the Series 1998-2 Securities which, in
accordance with subsections 4.9(b) and 4.9(c)(ii) of the
Agreement, may be applied in accordance with Section 4.3(d) of
the Agreement or (b) the amounts allocated to the Investor
Securities of other Series which the applicable Series
Supplements for such Series specify are to be treated as "Shared
Principal Collections" or (c) the amounts specified in any
Participation Supplement to be treated as "Shared Principal
Collections" and which may be applied to cover Principal
Shortfalls with respect to the Series 1998-2 Securities.
"Specified CTO Reserve Amount" shall mean, on any date
of determination following a CTO Trigger Event, subject to
Section 9 of this Supplement, the amount, if any, which if added
to the numerator of the Target Percentage on such date would
cause such percentage to be equal to 6%; provided, however, that
except as specified in the immediately succeeding proviso, the
Specified CTO Reserve Amount shall not exceed the product of 5%
and the Invested Amount on any Business Day; and provided,
further, that following a CTO Default, in the circumstances
specified in Section 9 of this Series Supplement, the Specified
CTO Reserve Amount will be equal to the CTO Outstanding Principal
Amount.
"Specified Revolving Receivables Reserve Amount" shall
mean, on any date of determination, an amount equal to the
product of (x) the Floating Percentage on such date and (y) 1% of
the aggregate amount of Principal Receivables which are Revolving
Receivables on such date; provided, however, that such percentage
may be reduced at the option of the Transferor at any time if the
Rating Agency Condition shall have been satisfied with respect
thereto.
"Stated Class D Amount" shall mean on any Business Day
the greater of (i) zero and (ii) a number rounded to the nearest
Dollar equal to 13.64% of the ABC Adjusted Invested Amount as of
such Business Day; provided, however, that during any Early
Amortization Period the Stated Class D Amount shall be equal to
the Stated Class D Amount immediately preceding the commencement
of the Early Amortization Period; provided, further, that on any
Business Day after the earlier of (a) the Class A Expected Final
Payment Date if the Class A Invested Amount was not paid in full
on the Class A Expected Final Payment Date or (b) the Class B
Expected Final Payment Date if the Class B Invested Amount was
not paid in full on the Class B Expected Final Payment Date the
Stated Class D Amount shall be equal to the Stated Class D Amount
on the Class A Expected Final Payment Date or the Class B
Expected Final Payment Date, as applicable; and provided,
further, that there shall be no reduction in the Stated Class D
Amount on any day on which the amount on deposit in the Revolving
Receivables Reserve Account is less than the Specified Revolving
Receivables Reserve Amount or the amount on deposit in the CTO
Reserve Account is less than the Specified CTO Reserve Amount
and; provided, further, that the Stated Class D Amount shall not
be less than $15,340,920 prior to the date on which each of the
Class A Outstanding Principal Balance, the Class B Outstanding
Principal Balance and the CTO Outstanding Principal Balance have
been reduced to zero.
"Target Percentage" shall have the meaning specified in
subsection 4.20 of the Agreement.
"Telerate Page 3750" shall mean the display page
currently so designated on the Dow Jones Telerate Service (or
such other page as may replace that page on that service for the
purpose of displaying comparable rates or prices).
"Transferor Finance Charge Collections" shall mean on
any Business Day the Series 1998-2 Percentage of the Finance
Charge Collections allocable to the Exchangeable Transferor
Security.
"Transferor Retained Securities" shall mean Investors
Securities of any Series which the Transferor retains, including
the Class D Securities for so long as they are held by the
Transferor, but only to the extent that and for so long as the
Transferor is the Holder of such Securities.
SECTION 3 Reassignment Terms. The Series 1998-2
Securities shall be subject to termination by the Transferor at
its option, in accordance with the terms specified in subsection
12.2(a) of the Agreement, on any Distribution Date on or after
the Distribution Date on which the sum of the Class A Invested
Amount, the Class B Invested Amount and the CTO Invested Amount
would be reduced to an amount less than or equal to 10% of the
sum of the Class A Initial Invested Amount, the Class B Initial
Invested Amount and the CTO Initial Invested Amount. The deposit
required in connection with any such termination and final
distribution shall be equal to the sum of the unpaid Class A
Invested Amount, the unpaid Class B Invested Amount and the
unpaid CTO Invested Amount plus accrued and unpaid interest on
the Class A Securities, Class B Securities and Collateralized
Trust Obligations through the day prior to the Distribution Date
on which the final distribution occurs, in each case after giving
effect to any payments on such date.
SECTION 4 Delivery and Payment for the Series 1998-2
Securities. The Transferor shall execute and deliver the Series
1998-2 Securities to the Trustee for authentication in accordance
with Section 6.1 of the Agreement. The Trustee shall deliver the
Series 1998-2 Securities to or upon the order of the Transferor
when authenticated in accordance with Section 6.2 of the
Agreement.
SECTION 5 Form of Delivery of Series 1998-2 Securities;
Denominations; Depositary. The Class A Securities, the Class B
Securities and the Collateralized Trust Obligations shall be
delivered as Book-Entry Securities as provided in Sections 6.1
and 6.10 of the Agreement. The Class A Securities and the Class
B Securities shall be issued in minimum denominations of $1,000
and integral multiples thereof. The Collateralized Trust
Obligations shall be issued in minimum denominations of $100,000
and integral multiples of $1,000 in excess thereof. The Class D
Security shall be delivered as a Registered Security as provided
in Section 6.1 of the Agreement.
The Depositary for Series 1998-2 shall be DTC and the
Class A Securities and the Class B Securities shall be initially
registered in the name of Cede & Co., its nominee and will
initially be held by the Trustee as custodian for DTC.
The Transferor shall execute and the Trustee shall
authenticate (i) one or more CTO Temporary Regulation S Global
Securities, (ii) one or more CTO Regulation S Global Securities,
and (iii) one or more CTO Rule 144A Global Securities, each
having a principal balance as shall have been indicated to the
Trustee by the Transferor and having an aggregate principal
balance equal to the CTO Invested Amount as of the date of
execution of such Global Securities by the Transferor.
The CTO Global Securities (i) shall be delivered by the
Trustee to DTC acting as the initial Clearing Agency, and (ii) in
each case shall be registered in the name of Cede & Co. The CTO
Global Securities shall bear a legend substantially in the form
set forth in Exhibit A-3. The CTO Global Securities initially
will be held by the Trustee as custodian for DTC.
So long as any of the CTO Global Securities remains
outstanding and are held by or on behalf of the Clearing Agency,
transfers of beneficial interests in any of such CTO Global
Securities may be made only in accordance with this Section 5 and
in accordance with the rules of the Clearing Agency and the
Euroclear Operator or Cedel.
A beneficial interest in the CTO Temporary Regulation
S Global Security may be transferred to a transferee that takes
delivery in the form of a beneficial interest in the CTO Rule
144A Global Securities only upon receipt by the Trustee of a Rule
144A Transfer Certificate.
On and after the CTO Exchange Date, a beneficial
interest in the CTO Temporary Regulation S Global Security may be
transferred to a transferee that takes delivery in the form of a
beneficial interest in the CTO Regulation S Global Security only
upon receipt by the Trustee of a Clearing System Certificate from
the Euroclear Operator or Cedel, as applicable, and a Member
Organization Certificate, relating to the appropriate portion of
the CTO Temporary Regulation S Global Security.
A beneficial interest in a CTO Rule 144A Global
Security may be transferred to a transferee that takes delivery
in the form of a beneficial interest in a CTO Regulation S Global
Security or CTO Temporary Regulation S Global Security only upon
receipt by the Transfer Agent and Registrar of a Regulation S
Transfer Certificate.
No restrictions shall apply with respect to the
transfer or registration of transfer of (x) a beneficial interest
in a CTO Rule 144A Global Security to a transferee that takes
delivery in the form of a beneficial interest in the CTO Rule
144A Global Security, or (y) a beneficial interest in a CTO
Regulation S Global Security to a transferee that takes delivery
in the form of a beneficial interest in the CTO Regulation S
Global Security.
An exchange of a beneficial interest in the CTO
Temporary Regulation S Global Security for a beneficial interest
in the CTO Regulation S Global Security, may be made only on or
after the CTO Exchange Date and only upon receipt by the Trustee
of a Clearing System Certificate from the Euroclear Operator or
Cedel, as applicable, relating to the appropriate portion of the
CTO Temporary Regulation S Global Security.
Upon acceptance for transfer of a beneficial
interest in any CTO Global Security for a beneficial interest in
another CTO Global Security as provided herein, the Trustee shall
(or shall request the Clearing Agency to) endorse on the
schedules affixed to each of such CTO Global Securities (or on
continuations of such schedules affixed to each of such CTO
Global Securities and made parts thereof) appropriate notations
evidencing the date of such transfer and (x) in the case of the
CTO Global Security from which such transfer is made, a decrease
in the outstanding balance of such CTO Global Security equal to
the outstanding balance being transferred and (y) in the case of
the CTO Global Security into which such transfer is made, an
increase in the outstanding balance of such CTO Global Security
equal to the outstanding balance being transferred.
SECTION 6 Article IV of Agreement. Sections 4.1, 4.2
and 4.3 of the Agreement shall read in their entirety as provided
in the Agreement. Article IV of the Agreement (except for
Sections 4.1, 4.2 and 4.3 thereof) shall read in its entirety as
follows and shall be applicable only to the Series 1998-2
Securities:
ARTICLE IV
RIGHTS OF SECURITYHOLDERS ANDALLOCATION AND APPLICATION OF
COLLECTIONS
SECTION 4.4 Rights of Securityholders.
The Series 1998-2 Securities shall represent undivided
interests in the Trust, including the right to receive,
to the extent necessary to make the required payments
with respect to such Series 1998-2 Securities at the
times and in the amounts specified in this Agreement,
(a) the Floating Percentage and the Fixed/Floating
Percentage (as applicable from time to time) of
Collections (including Finance Charge Collections)
available in the Collection Account, (b) funds
allocable to the Series 1998-2 Securities on deposit in
the Excess Funding Account and (c) funds on deposit in
the Interest Funding Account, the Principal Account,
the Revolving Receivables Reserve Account, the
Defeasance Funding Account, the Defeasance Reserve
Account, the Distribution Account, the CTO Reserve
Account and the Payment Reserve Account (for such
Series, the "Series 1998-2 Securityholders' Interest").
The Class B Invested Amount, the CTO Invested Amount
and the Class D Invested Amount shall be subordinated
to the Class A Securities; the CTO Invested Amount and
the Class D Invested Amount shall be subordinated to
the Class B Securities; and the Class D Invested Amount
shall be subordinated to the Collateralized Trust
Obligations, in each case to the extent provided in
this Article IV. The Class B Securities will not have
the right to receive payments of principal until the
Class A Invested Amount has been paid in full. The
Collateralized Trust Obligations will not have the
right to receive payments of principal until the Class
A Invested Amount and the Class B Invested Amount have
been paid in full. The Class D Securities will not
have the right to receive payments of principal, other
than to the extent of Class D Excess Amounts, until the
Class A Invested Amount, the Class B Invested Amount
and the CTO Invested Amount have been paid in full.
SECTION 4.5 Collections and Allocation;
Payments on Exchangeable Transferor Security.
Collections and Allocations. The Servicer
will apply or will instruct the Trustee to apply all
funds on deposit in the Collection Account and the
Excess Funding Account allocable to the Series 1998-2
Securities, and all funds on deposit in the Interest
Funding Account, the Principal Account, the Revolving
Receivables Reserve Account, the Defeasance Funding
Account, the Defeasance Reserve Account, the
Distribution Account, the CTO Reserve Account and the
Payment Reserve Account, as described in this Article
IV. On each Business Day, (i) the amount of Finance
Charge Collections available in the Collection Account
allocable to the Series 1998-2 Securities shall be
determined by multiplying the aggregate amount of such
Finance Charge Collections by (x) prior to the Pay Out
Commencement Date, the Floating Percentage and (y) on
and after the Pay Out Commencement Date, the
Fixed/Floating Percentage, (ii) the amount of Principal
Collections available in the Collection Account
allocable to the Series 1998-2 Securities shall be
determined by multiplying the aggregate amount of such
Principal Collections by (x) during the Revolving
Period, the Floating Percentage and (y) during any
Amortization Period, the Fixed/Floating Percentage, and
(iii) the Default Amount on such Business Day allocable
to the Series 1998-2 Securities shall be determined by
multiplying the Default Amount by the Floating
Percentage. In addition, on the Closing Date the
Transferor shall make a deposit to the Interest Funding
Account in the amount of $2,000,000 to be allocated to
the Series 1998-2 Securities and applied as Available
Series 1998-2 Finance Charge Collections in accordance
with subsection 4.9(a) of the Agreement.
Payments to the Holder of the Exchangeable
Transferor Security. On each Business Day, the
Servicer shall allocate and pay Collections in
accordance with the Daily Report to the Holder of the
Exchangeable Transferor Security in accordance with
subsection 4.3(b) of the Agreement; provided, however,
that such amounts shall be applied in accordance with
Section 4.10 hereof to the extent specified therein.
Notwithstanding the foregoing and any other
provisions of this Supplement, amounts payable to the
Transferor shall instead be deposited in the Excess
Funding Account to the extent necessary to prevent the
Transferor Interest from being less than the Minimum
Transferor Interest.
SECTION 4.6 Determination of Interest for
the Series 1998-2 Securities. The amount of monthly
interest (the "Class A Monthly Interest") which shall
accrue for the benefit of the Class A Securities with
respect to any Interest Accrual Period shall be an
amount equal to one-twelfth of the product of (i) the
Class A Interest Rate and (ii) the Class A Outstanding
Principal Amount as of the close of business on the
first day of such Interest Accrual Period (or in the
case of the initial Distribution Date, an amount equal
to the product of (u) the Class A Initial Invested
Amount, (v) 47 divided by 360, and (w) the Class A
Interest Rate).
On the first Business Day of each Monthly
Period, the Servicer shall determine an amount (the
"Class A Monthly Interest Shortfall") with respect to
the Distribution Date in such Monthly Period equal to
the excess, if any, of (x) the Class A Monthly Interest
for the Interest Accrual Period ending in such Monthly
Period over (y) the amount available to be paid to the
Class A Securityholders in respect of interest on such
Distribution Date. If there is a Class A Monthly
Interest Shortfall with respect to any Distribution
Date, an additional amount ("Class A Additional
Interest") shall be payable as provided herein with
respect to the Class A Securities on each Distribution
Date following such Distribution Date, to and including
the Distribution Date on which such Class A Monthly
Interest Shortfall is paid to Class A Securityholders,
equal to one-twelfth of the product of (i) the Class A
Interest Rate and (ii) such Class A Monthly Interest
Shortfall remaining unpaid. Notwithstanding anything
to the contrary herein, Class A Additional Interest
shall be payable or distributed to Class A
Securityholders only to the extent permitted by
applicable law.
The amount of monthly interest (the "Class
B Monthly Interest") which shall accrue for the benefit
of the Class B Securities with respect to any Interest
Accrual Period shall be an amount equal to one-twelfth
of the product of (i) the Class B Interest Rate and
(ii) the Class B Invested Amount as of the close of
business on the first day of such Interest Accrual
Period (or in the case of the initial Distribution
Date, an amount equal to the product of (u) the Class B
Initial Invested Amount, (v) 47 divided by 360, and (w)
the Class B Interest Rate).
On the first Business Day of each Monthly
Period, the Servicer shall determine an amount (the
"Class B Monthly Interest Shortfall") with respect to
the Distribution Date in such Monthly Period equal to
the excess, if any, of (x) the aggregate Class B
Monthly Interest for the Interest Accrual Period ending
in such Monthly Period over (y) the amount available to
be paid to the Class B Securityholders in respect of
interest on such Distribution Date. If there is a
Class B Monthly Interest Shortfall with respect to any
Distribution Date, an additional amount ("Class B
Additional Interest") shall be payable as provided
herein with respect to the Class B Securities on each
Distribution Date following such Distribution Date, to
and including the Distribution Date on which such Class
B Monthly Interest Shortfall is paid to Class B
Securityholders, equal to one-twelfth of the product of
(i) the Class B Interest Rate and (ii) such Class B
Monthly Interest Shortfall remaining unpaid.
Notwithstanding anything to the contrary herein, Class
B Additional Interest shall be payable or distributed
to Class B Securityholders only to the extent permitted
by applicable law.
The amount of monthly interest (for the
Series 1998-2 Securities, the "CTO Monthly Interest")
which shall accrue for the benefit of the
Collateralized Trust Obligations with respect to any
Interest Accrual Period shall be an amount equal to the
product of (i) the CTO Interest Rate for the related
Interest Accrual Period, (ii) a fraction the numerator
of which is the actual number of days in the related
Interest Accrual Period and the denominator of which is
360 and (iii) the CTO Invested Amount as of the close
of business on the first day of such Interest Accrual
Period (or in the case of the initial Distribution
Date, an amount equal to the product of (u) the CTO
Initial Invested Amount, (v) 48 divided by 360, and
(w) the CTO Interest Rate for the initial Interest
Accrual Period).
On the first Business Day of each Monthly
Period, the Servicer shall determine an amount (the
"CTO Monthly Interest Shortfall") with respect to the
Distribution Date in such Monthly Period equal to the
excess, if any, of (x) the aggregate CTO Monthly
Interest for the Interest Accrual Period ending in such
Monthly Period over (y) the amount available to be paid
to the CTO Securityholders in respect of interest on
such Distribution Date. If there is a CTO Monthly
Interest Shortfall with respect to any Distribution
Date, an additional amount ("CTO Additional Interest")
shall be payable as provided herein with respect to the
Collateralized Trust Obligations on each Distribution
Date following such Distribution Date, to and including
the Distribution Date on which such CTO Monthly
Interest Shortfall is paid to CTO Securityholders,
equal to the product of (i) the CTO Interest Rate, (ii)
such CTO Monthly Interest Shortfall remaining unpaid
and (iii) a fraction the numerator of which is the
actual number of days in the related Interest Accrual
Period and the denominator of which is 360.
Notwithstanding anything to the contrary herein, CTO
Additional Interest shall be payable or distributed to
CTO Securityholders only to the extent permitted by
applicable law.
SECTION 4.7 Determination of Principal
Amounts. The amount of principal (the "Class A
Principal") distributable from the Distribution Account
with respect to the Class A Securities for each
Distribution Date with respect to the Amortization
Period shall be equal to the Available Series 1998-2
Principal Collections on deposit in the Principal
Account with respect to the related Monthly Period;
provided, however, that with respect to any
Distribution Date during the Controlled Amortization
Period, Class A Principal shall not exceed the lesser
of (i) the Class A Controlled Distribution Amount and
(ii) the Class A Invested Amount; provided, further
that with respect to any Distribution Date with respect
to the Early Amortization Period following a
Defeasance, Class A Principal shall be equal to the
lesser of (i) the Defeasance Funding Account Balance
and (ii) the Class A Invested Amount; provided, further
that with respect to the Series 1998-2 Termination
Date, Class A Principal shall be an amount equal to the
Class A Invested Amount.
The amount of principal (the "Class B
Principal") distributable from the Distribution Account
with respect to the Class B Securities for each
Distribution Date, beginning on the Class B Principal
Payment Commencement Date, shall be equal to the
Available Series 1998-2 Principal Collections remaining
on deposit in the Principal Account with respect to the
related Monthly Period after application thereof to
Class A Principal, if any; provided, however, that with
respect to any Distribution Date during the Controlled
Amortization Period, Class B Principal shall not exceed
the lesser of (i) the Class B Controlled Distribution
Amount and (ii) the Class B Invested Amount; provided,
further that with respect to any Distribution Date with
respect to the Early Amortization Period following a
Defeasance, Class B Principal shall be equal to the
lesser of (i) the Defeasance Funding Account Balance
after application of amounts on deposit therein to
Class A Principal and (ii) the Class B Invested Amount;
provided, further that with respect to the Series 1998-
2 Termination Date, Class B Principal shall be an
amount equal to the Class B Invested Amount.
The amount of principal (the "CTO
Principal") distributable from the Distribution Account
with respect to the Collateralized Trust Obligations
for each Distribution Date, beginning on or after the
CTO Principal Payment Commencement Date, shall be equal
to the Available Series 1998-2 Principal Collections
remaining on deposit in the Principal Account with
respect to the related Monthly Period after application
thereof to Class A Principal and Class B Principal, if
any; provided that with respect to any Distribution
Date with respect to the Early Amortization Period
following a Defeasance, CTO Principal shall be equal to
the lesser of (i) the Defeasance Funding Account
Balance after application of amounts on deposit therein
to Class A Principal and Class B Principal and (ii) the
CTO Invested Amount; provided, further with respect to
the Series 1998-2 Termination Date, CTO Principal shall
be an amount equal to the CTO Invested Amount.
The amount of principal (the "Class D
Principal") distributable from the Distribution Account
with respect to the Class D Securities for each
Distribution Date, beginning on the Class D Principal
Payment Commencement Date, and on each Distribution
Date thereafter until the Trust is terminated or until
the Class D Invested Amount is paid in full, shall be
equal to the Available Series 1998-2 Principal
Collections remaining on deposit in the Principal
Account with respect to the related Monthly Period
after application thereof to Class A Principal, Class B
Principal and CTO Principal, if any, and the Trustee,
acting in accordance with instructions from the
Servicer, will withdraw such amounts from the Principal
Account and, to the extent of the Class D Invested
Amount, deposit such amounts in the Distribution
Account for distribution to the Class D Securityholder
on the next succeeding Distribution Date.
SECTION 4.8 Shared Principal Collections.
Shared Principal Collections allocated to Available
Series 1998-2 Principal Collections for the Series 1998-
2 Securities and to be applied to Class A Principal,
Class B Principal, CTO Principal and Class D Principal
pursuant to subsection 4.9(c)(i)(y) of the Agreement
for any Business Day with respect to the Amortization
Period shall be equal to the product of (x) Shared
Principal Collections for all Series for such Business
Day and (y) a fraction, the numerator of which is the
Principal Shortfall for the Series 1998-2 Securities
for such Business Day and the denominator of which is
the aggregate amount of Principal Shortfalls for all
Series for such Business Day. For any Business Day
with respect to the Revolving Period, Shared Principal
Collections allocated to Available Series 1998-2
Principal Collections for the Series 1998-2 Securities
shall be zero.
SECTION 4.9 Application of Funds on
Deposit in the Collection Account for the Securities.
Available Series 1998-2 Finance Charge Collections. On
each Business Day, the Servicer shall deliver to the
Trustee a Daily Report in which it shall instruct the
Trustee to withdraw, and the Trustee, acting in
accordance with such instructions, shall withdraw
amounts from the appropriate accounts, to the extent of
the sum of (i) the amount of Finance Charge Collections
allocated to the Series 1998-2 Securities pursuant to
subsection 4.5(a) of the Agreement, (ii) amounts on
deposit in the Payment Reserve Account, if any, if and
to the extent the Transferor designates that such
amounts are to be so applied, (iii) Reserve Account
Investment Proceeds and investment earnings on amounts
on deposit in the Interest Funding Account and the
Principal Account and (iv) Defeasance Funding Account
Investment Proceeds and other amounts withdrawn from
the Defeasance Reserve Account pursuant to subsections
4.17(b), (c) and (d) and the Revolving Receivables
Reserve Account pursuant to subsections 4.19(c), (d)
and (e), which amounts shall be applied on each
Transfer Date as if such amounts had been available on
the last Business Day of the preceding Monthly Period
(collectively, the "Available Series 1998-2 Finance
Charge Collections"; provided that with respect to the
Closing Date the amount deposited by the Transferor
into the Interest Funding Account pursuant to
subsection 4.5(a) of the Agreement shall also
constitute Available Series 1998-2 Finance Charge
Collections; and provided further that, with respect to
any Business Day, amounts applied pursuant to Section
4.10 and Section 4.14 of the Agreement shall be applied
as if such amounts were Available Series 1998-2 Finance
Charge Collections). The Trustee shall apply Available
Series 1998-2 Finance Charge Collections in the
priority set forth below:
Class A Monthly Interest. On each Business
Day during a Monthly Period, the Trustee, acting in
accordance with instructions from the Servicer, shall
deposit into the Interest Funding Account for
distribution on the next Distribution Date to the Class
A Securityholders, to the extent of the Available
Series 1998-2 Finance Charge Collections for such
Business Day, an amount equal to the lesser of (x) the
Available Series 1998-2 Finance Charge Collections and
(y) the excess of (1) the sum of Class A Monthly
Interest for the Interest Accrual Period beginning in
such Monthly Period and Carryover Class A Monthly
Interest over (2) any amounts with respect thereto
previously deposited into the Interest Funding Account
during such Monthly Period. Notwithstanding anything
to the contrary herein, the portion of Carryover Class
A Monthly Interest that constitutes Class A Additional
Interest shall be payable or distributable to Class A
Securityholders only to the extent permitted by
applicable law.
Class B Monthly Interest. On each Business
Day during a Monthly Period, the Trustee, acting in
accordance with instructions from the Servicer, shall
deposit into the Interest Funding Account for
distribution on the next Distribution Date to the Class
B Securityholders, to the extent of any Available
Series 1998-2 Finance Charge Collections remaining
after giving effect to the application pursuant to
subsection 4.9(a)(i) of the Agreement, an amount equal
to the lesser of (x) any such remaining Available
Series 1998-2 Finance Charge Collections and (y) the
excess of (1) the sum of Class B Monthly Interest for
the Interest Accrual Period beginning in such Monthly
Period and Carryover Class B Monthly Interest over (2)
any amounts with respect thereto previously deposited
into the Interest Funding Account during such Monthly
Period. Notwithstanding anything to the contrary
herein, the portion of Carryover Class B Monthly
Interest that constitutes Class B Additional Interest
shall be payable or distributable to Class B
Securityholders only to the extent permitted by
applicable law.
CTO Monthly Interest. On each Business Day
during a Monthly Period, the Trustee, acting in
accordance with instructions from the Servicer, shall
deposit into the Interest Funding Account for
distribution on the next Distribution Date to the CTO
Securityholders, to the extent of any Available Series
1998-2 Finance Charge Collections remaining after
giving effect to the applications pursuant to
subsections 4.9(a)(i) and (ii) of the Agreement, an
amount equal to the lesser of (x) any such remaining
Available Series 1998-2 Finance Charge Collections and
(y) the excess of (1) the sum of CTO Monthly Interest
for the Interest Accrual Period beginning in such
Monthly Period and Carryover CTO Monthly Interest over
(2) any amounts with respect thereto previously
deposited into the Interest Funding Account during such
Monthly Period. Notwithstanding anything to the
contrary herein, the portion of Carryover Class C
Monthly Interest that constitutes CTO Additional
Interest shall be payable or distributable to CTO
Securityholders only to the extent permitted by
applicable law.
Monthly Servicing Fee. On each Business
Day during a Monthly Period, the Trustee, acting in
accordance with instructions from the Servicer, shall
distribute to the Servicer, to the extent of any
Available Series 1998-2 Finance Charge Collections
remaining after giving effect to the applications
pursuant to subsections 4.9(a)(i) through (iii) of the
Agreement, an amount equal to the lesser of (x) any
such remaining Available Series 1998-2 Finance Charge
Collections and (y) the excess of (i) the Monthly
Servicing Fee for such Monthly Period plus any unpaid
Monthly Servicing Fees from prior Monthly Periods over
(ii) any amounts with respect thereto previously
distributed to the Servicer during such Monthly Period.
Series Default Amount. On each Business
Day during a Monthly Period, the Trustee, acting in
accordance with instructions from the Servicer, shall
apply to the extent of any Available Series 1998-2
Finance Charge Collections remaining after giving
effect to the applications pursuant to subsections
4.9(a)(i) through (iv) of the Agreement, an amount
equal to the lesser of (x) any such remaining Available
Series 1998-2 Finance Charge Collections and (y) the
sum of (1) the aggregate Series Default Amount for such
Business Day plus (2) the unpaid Series Default Amount
for each previous Business Day during such Monthly
Period, such amount to be (A) treated as Shared
Principal Collections during the Revolving Period, and
(B) treated as Available Series 1998-2 Principal
Collections during the Amortization Period.
Adjustment Payment Shortfalls. On each
Business Day, the Trustee, acting in accordance with
instructions from the Servicer, shall apply to the
extent of any Available Series 1998-2 Finance Charge
Collections remaining after giving effect to the
applications pursuant to subsections 4.9(a)(i) through
(v) of the Agreement, an amount equal to the lesser of
(x) any such remaining Available Series 1998-2 Finance
Charge Collections and (y) an amount equal to the
Series 1998-2 Percentage of any Adjustment Payment
which the Transferor is required but fails to make
pursuant to subsection 3.8(a) of the Agreement on such
Business Day and on each previous Business Day during
such Monthly Period less any amounts previously
withdrawn pursuant to this subsection 4.9(a)(vi) on
account of such unpaid Adjustment Payments, such amount
to be (i) treated as Shared Principal Collections
during the Revolving Period, and (ii) treated as
Available Series 1998-2 Principal Collections during
the Amortization Period.
Reimbursement of Class A Charge-Offs. On
each Business Day, the Trustee, acting in accordance
with instructions from the Servicer, shall apply to the
extent of any Available Series 1998-2 Finance Charge
Collections remaining after giving effect to the
applications pursuant to subsections 4.9(a)(i) through
(vi) of the Agreement, an amount equal to the lesser of
(x) any such remaining Available Series 1998-2 Finance
Charge Collections and (y) the unreimbursed Class A
Charge-Offs, if any, in order to reimburse Class A
Charge-Offs, such amount to be (A) treated as Shared
Principal Collections during the Revolving Period, and
(B) treated as Available Series 1998-2 Principal
Collections during the Amortization Period.
Unpaid Class B Monthly Interest. On each
Business Day, the Trustee, acting in accordance with
the instructions from the Servicer, shall deposit in
the Interest Funding Account for distribution to the
Class B Securityholders on the next Distribution Date,
to the extent of any Available Series 1998-2 Finance
Charge Collections remaining after giving effect to the
applications pursuant to subsections 4.9(a)(i) through
(vii) of the Agreement, an amount equal to the lesser
of (x) any such remaining Available Series 1998-2
Finance Charge Collections and (y) the sum of (1) the
amount of interest which would accrue with respect to
the Class B Securities on the Class B Outstanding
Principal Amount at the Class B Interest Rate during
the related Interest Accrual Period beginning in the
then current Monthly Period but which has not been
deposited into the Interest Funding Account or paid to
the Class B Securityholders and (2) any additional
interest (to the extent permitted by applicable law) at
the Class B Interest Rate on interest that was payable
on any prior Distribution Date pursuant to this
subsection but was not deposited in the Interest
Funding Account or paid to the Class B Securityholders.
Unpaid CTO Monthly Interest. On each
Business Day, the Trustee, acting in accordance with
the instructions from the Servicer, shall deposit in
the Interest Funding Account for distribution to the
CTO Securityholders on the next Distribution Date, to
the extent of any Available Series 1998-2 Finance
Charge Collections remaining after giving effect to the
applications pursuant to subsections 4.9(a)(i) through
(viii) of the Agreement, an amount equal to the lesser
of (x) any such remaining Available Series 1998-2
Finance Charge Collections and (y) the sum of (1) the
amount of interest which would accrue with respect to
the Collateralized Trust Obligations on the CTO
Outstanding Principal Amount at the CTO Interest Rate
during the Interest Accrual Period beginning in the
then current Monthly Period but which has not been
deposited into the Interest Funding Account or paid to
the CTO Securityholders and (2) any additional interest
(to the extent permitted by applicable law) at the CTO
Interest Rate on interest that was payable on any prior
Distribution Date pursuant to this subsection but was
not deposited in the Interest Funding Account or paid
to the CTO Securityholders.
Reimbursement of Certain Reductions of
Class B Invested Amount. On each Business Day, the
Trustee, acting in accordance with instructions from
the Servicer, shall apply, to the extent of any
Available Series 1998-2 Finance Charge Collections
remaining after giving effect to the applications
pursuant to subsections 4.9(a)(i) through (ix) of the
Agreement, an amount equal to the lesser of (x) any
such remaining Available Series 1998-2 Finance Charge
Collections and (y) the unreimbursed amount by which
the Class B Invested Amount has been reduced on prior
Business Days pursuant to clauses (c) and (d) of the
definition of Class B Invested Amount, if any, such
amount to be (A) treated as Shared Principal
Collections during the Revolving Period, and (B)
treated as Available Series 1998-2 Principal
Collections during the Amortization Period.
Reimbursement of Certain Reductions of CTO
Invested Amount. On each Business Day, the Trustee,
acting in accordance with instructions from the
Servicer, shall apply, to the extent of any Available
Series 1998-2 Finance Charge Collections remaining
after giving effect to the applications pursuant to
subsections 4.9(a)(i) through (x) of the Agreement, an
amount equal to the lesser of (x) any such remaining
Available Series 1998-2 Finance Charge Collections and
(y) the unreimbursed amount by which the CTO Invested
Amount has been reduced on prior Business Days pursuant
to clauses (c) and (d) of the definition of CTO
Invested Amount, if any, such amount to be (A) treated
as Shared Principal Collections during the Revolving
Period, and (B) treated as Available Series 1998-2
Principal Collections during the Amortization Period.
Reimbursement of Certain Reductions of
Class D Invested Amount. On each Business Day, the
Trustee, acting in accordance with instructions from
the Servicer, shall apply, to the extent of any
Available Series 1998-2 Finance Charge Collections
remaining after giving effect to the applications
pursuant to subsections 4.9(a)(i) through (xi) of the
Agreement, an amount equal to the lesser of (x) any
such remaining Available Series 1998-2 Finance Charge
Collections and (y) the unreimbursed amount by which
the Class D Invested Amount has been reduced on prior
Business Days pursuant to clauses (c) and (d) of the
definition of Class D Invested Amount, if any, such
amount to be (A) treated as Shared Principal
Collections during the Revolving Period, and (B)
treated as Available Series 1998-2 Principal
Collections during the Amortization Period.
Class D Interest. On each Business Day
during a Monthly Period, the Trustee, acting in
accordance with the instructions from the Servicer,
shall deposit in the Interest Funding Account for
distribution to the Class D Securityholders on the next
Distribution Date, to the extent of any Available
Series 1998-2 Finance Charge Collections remaining
after giving effect to the applications pursuant to
subsections 4.9(a)(i) through (xii) of the Agreement,
an amount equal to the lesser of (x) any such remaining
Available Series 1998-2 Finance Charge Collections and
(y) the sum of (1) the amount of interest which has
accrued with respect to the Class D Securities on the
Class D Outstanding Principal Amount at the applicable
Class D Interest Rate but which has not been deposited
into the Interest Funding Account on any prior Business
Day or paid to the Class D Securityholders and (2) any
additional interest (to the extent permitted by
applicable law) at the Class D Interest Rate on
interest that was payable during a prior Monthly Period
pursuant to this subsection but was not deposited in
the Interest Funding Account or paid to the Class D
Securityholders.
Revolving Receivables Reserve Account. On
each Business Day, the Trustee, acting in accordance
with instructions from the Servicer, shall deposit in
the Revolving Receivables Reserve Account, to the
extent of any Available Series 1998-2 Finance Charge
Collections remaining after giving effect to the
applications pursuant to subsections 4.9(a)(i) through
(xiii) of the Agreement an amount equal to the lesser
of (x) any such remaining Available Series 1998-2
Finance Charge Collections and (y) an amount equal to
the excess, if any, of the Specified Revolving
Receivables Reserve Amount on such date over the amount
then on deposit in the Revolving Receivables Reserve
Account.
Defeasance Reserve Account. At the option
of the Transferor, on each Business Day on and after
the Defeasance Reserve Account Funding Date, but prior
to the date on which a Defeasance occurs pursuant to
subsection 4.18 of the Agreement, the Trustee, acting
in accordance with instructions from the Servicer,
shall deposit in the Defeasance Reserve Account, to the
extent of any Available Series 1998-2 Finance Charge
Collections remaining after giving effect to the
applications pursuant to subsections 4.9(a)(i) through
(xiv) of the Agreement, an amount equal to the lesser
of (x) any such remaining Available Series 1998-2
Finance Charge Collections and (y) the excess, if any,
of the Required Defeasance Reserve Account Amount over
the Available Defeasance Reserve Account Amount.
CTO Reserve Account. Following the
occurrence of a CTO Trigger Event, on each Business
Day, the Trustee, acting in accordance with
instructions from the Servicer, shall deposit in the
CTO Reserve Account, to the extent of any Available
Series 1998-2 Finance Charge Collections remaining
after giving effect to the applications pursuant to
subsections 4.9(a)(i) through (xv) of the Agreement, an
amount equal to the lesser of (x) any such remaining
Available Series 1998-2 Finance Charge Collections and
(y) an amount equal to the excess, if any, of the
Specified CTO Reserve Amount on such date over the
amount then on deposit in the CTO Reserve Account.
Payment Reserve Account. On each Business
Day, the Trustee, acting in accordance with
instructions from the Transferor, shall deposit in the
Payment Reserve Account, to the extent of any Available
Series 1998-2 Finance Charge Collections remaining
after giving effect to the applications pursuant to
subsections 4.9(a)(i) through (xvi) of the Agreement,
an amount equal to the lesser of (x) any such remaining
Available Series 1998-2 Finance Charge Collections and
(y) the amount, if any, designated by the Transferor in
writing (which includes facsimile transmission) in its
instructions to the Trustee on such Business Day.
Excess Finance Charge Collections. Any
Available Series 1998-2 Finance Charge Collections
remaining after giving effect to the applications
pursuant to subsection 4.9(a)(i) through (xvii) of the
Agreement shall be treated as Excess Finance Charge
Collections, and the Servicer shall direct the Trustee
in writing on each Business Day to first make such
amounts available to pay to Securityholders of other
Series to the extent of shortfalls, if any, in amounts
payable to such Securityholders 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, then to reserve for
(or pay when due) any taxes and related expenses
anticipated by the Servicer to be payable by the Trust
with respect to the related Monthly Period or prior
Monthly Periods and then on each Business Day to pay
any remaining Excess Finance Charge Collections to the
Transferor.
Revolving Period Principal Collections.
For each Business Day with respect to the Revolving
Period, the funds on deposit in the Collection Account
to the extent of the product of (i) the Floating
Percentage and (ii) Principal Collections (less the
amount of Redirected Principal Collections) with
respect to such Business Day will be treated as Shared
Principal Collections and applied, pursuant to the
written direction of the Servicer in the Daily Report
for such Business Day, as provided in Section 4.3(e) of
the Agreement.
Amortization Period Principal Collections
and Other Funds. For each Business Day on and after
the Amortization Period Commencement Date, the amount
of funds on deposit in the Collection Account or the
Excess Funding Account as described below will be
distributed, pursuant to the written direction of the
Servicer in the Daily Report for such Business Day in
the following priority:
an amount (not in excess of the Invested
Amount) equal to the sum of (v) the product of the
Fixed/Floating Percentage and Principal Collections
(less the amount thereof applied as Redirected
Principal Collections) for such Business Day, (w) any
amount on deposit in the Excess Funding Account
allocated to the Series 1998-2 Securities on such
Business Day pursuant to subsection 4.3(f) of the
Agreement, (x) amounts to be treated as Available
Series 1998-2 Principal Collections for such Business
Day pursuant to subsections 4.9(a)(v), (vi), (vii),
(x), (xi) and (xii) of the Agreement (including amounts
available pursuant to subsections 4.10(a) and (b) and
4.14(a), (b) and (c) of the Agreement for such Business
Day) and (y) the amount of Shared Principal Collections
allocated to the Series 1998-2 Securities in accordance
with Section 4.8 of the Agreement for such Business
Day, will be deposited into the Principal Account;
provided, however, that with respect to any Monthly
Period during the Controlled Amortization Period, the
aggregate amount required to be deposited in the
Principal Account pursuant to this subsection 4.9(c)(i)
shall not exceed the sum of (I) (A) prior to the
Monthly Period related to the Class B Principal Payment
Commencement Date, the Class A Controlled Distribution
Amount, (B) during and after the Monthly Period related
to the Class B Principal Payment Commencement Date but
prior to the Monthly Period related to the CTO
Principal Payment Commencement Date, the Class B
Controlled Distribution Amount or (C) during and after
the Monthly Period related to the CTO Principal Payment
Commencement Date but prior to the Monthly Period
related to the Class D Principal Payment Commencement
Date, the CTO Invested Amount and (II) at the option of
the Transferor, the Class D Excess Amount; and
an amount equal to the excess, if any, of
(A) the sum of the amounts described in subsection
4.9(c)(i)(v) and (x) above over (B) the sum of Class A
Principal, Class B Principal, CTO Principal and Class D
Principal will be treated as Shared Principal
Collections and applied as provided in subsection
4.3(e) of the Agreement.
SECTION 4.10 Coverage of Required Amount
for the Series 1998-2 Securities. Coverage of
Negative Carry Amount. To the extent that any amounts
are on deposit in the Excess Funding Account on any
Business Day, the Servicer shall apply, in the manner
specified for application of Available Series 1998-2
Finance Charge Collections in subsections 4.9(a)(i)
through (xiii) of the Agreement, Transferor Finance
Charge Collections in an amount (the "Negative Carry
Amount") equal to the excess of (x) the product of (a)
the Base Rate, (b) the product of (i) the amounts on
deposit in the Excess Funding Account and (ii) the
number of days elapsed since the previous Business Day
divided by 360 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.
Required Amount from Other Series Excess
Finance Charge Collections. To the extent that on any
Business Day payments are being made pursuant to any of
subsections 4.9(a)(i) through (xiii) of the Agreement,
respectively, and the full amount to be paid pursuant
to any such subsection receiving payments on such
Business Day is not paid in full on such Business Day,
the Servicer shall apply, in the manner specified for
application of Available Series 1998-2 Finance Charge
Collections in subsections 4.9(a)(i) through (xiii) of
the Agreement, all or a portion of the Excess Finance
Charge Collections from other Series with respect to
such Business Day allocable to the Series 1998-2
Securities in an amount equal to the excess of the full
amount to be allocated or paid pursuant to the
applicable subsection over the amount applied with
respect thereto from Available Series 1998-2 Finance
Charge Collections and Transferor Finance Charge
Collections on such Business Day (the "Required
Amount"). Excess Finance Charge Collections allocated
to the Series 1998-2 Securities for any Business Day
shall mean an amount equal to the product of (x) Excess
Finance Charge Collections available from all other
Series for such Business Day and (y) a fraction, the
numerator of which is the Required Amount for such
Business Day and the denominator of which is the
aggregate amount of shortfalls in required amounts or
other amounts to be paid from Finance Charge
Collections for all Series for such Business Day.
SECTION 4.11 Payment of Interest on
Securities. On each Transfer Date, the Trustee, acting
in accordance with instructions from the Servicer set
forth in the Daily Report for such day, shall withdraw
the amount on deposit in the Interest Funding Account
with respect to the preceding Monthly Period allocable
to the Series 1998-2 Securities and deposit such amount
in the Distribution Account. On each Distribution
Date, the Paying Agent shall pay in accordance with
Section 5.1 of the Agreement to (w) the Class A
Securityholders from the Distribution Account such
amount deposited into the Distribution Account on the
related Transfer Date allocable thereto from amounts
deposited in the Interest Funding Account pursuant to
subsection 4.9(a)(i) of the Agreement, (x) the Class B
Securityholders from the Distribution Account the
amount deposited into the Distribution Account on the
related Transfer Date allocable thereto from amounts
deposited in the Interest Funding Account pursuant to
subsections 4.9(a)(ii) and (viii) of the Agreement,
(y) the CTO Securityholders from the Distribution
Account the amount deposited into the Distribution
Account on the related Transfer Date allocable thereto
from amounts deposited in the Interest Funding Account
pursuant to subsections 4.9(a)(iii) and (ix) of the
Agreement, and (z) the Class D Securityholder from the
Distribution Account the amount deposited into the
Distribution Account on the related Transfer Date
allocable thereto from amounts deposited in the
Interest Funding Account pursuant to subsection
4.9(a)(xiii) of the Agreement.
SECTION 4.12 Payment of Security Principal.
Class A Principal. On the Transfer Date
preceding each Distribution Date with respect to the
Amortization Period, the Trustee, acting in accordance
with instructions from the Servicer set forth in the
Daily Report for such day, shall withdraw from the
Principal Account or, following the occurrence of a
Defeasance, from the Defeasance Funding Account, and
deposit into the Distribution Account, to the extent of
funds available, an amount equal to the Class A
Principal for such Distribution Date. On each
Distribution Date with respect to the Amortization
Period until the Class A Invested Amount is paid in
full, the Paying Agent shall pay in accordance with
Section 5.1 of the Agreement to the Class A
Securityholders from the Distribution Account such
amounts deposited with respect to Class A Principal
into the Distribution Account on the related Transfer
Date.
Class B Principal. On the Transfer Date
preceding the Class B Principal Payment Commencement
Date and each Transfer Date thereafter, the Trustee,
acting in accordance with instructions from the
Servicer set forth in the Daily Report for such day,
shall withdraw from the Principal Account or, following
the occurrence of a Defeasance, the Defeasance Funding
Account and deposit in the Distribution Account, to the
extent of funds available, an amount equal to the Class
B Principal for the related Distribution Date. On and
after the Class B Principal Payment Commencement Date,
on each Distribution Date until the Class B Invested
Amount is paid in full, the Paying Agent shall pay in
accordance with Section 5.1 of the Agreement to the
Class B Securityholders from the Distribution Account
such amounts deposited with respect to Class B
Principal into the Distribution Account on the related
Transfer Date.
CTO Principal. On the Transfer Date
preceding the CTO Principal Payment Commencement Date
and each Transfer Date thereafter, the Trustee, acting
in accordance with instructions from the Servicer set
forth in the Daily Report for such day, shall withdraw
from the Principal Account or, following the occurrence
of a Defeasance, the Defeasance Funding Account and
deposit in the Distribution Account, to the extent of
funds available, an amount equal to the CTO Principal
for the related Distribution Date. On and after the
CTO Principal Payment Commencement Date, on each
Distribution Date until the CTO Invested Amount is paid
in full, the Paying Agent shall pay in accordance with
Section 5.1 of the Agreement to the CTO Securityholders
from the Distribution Account such amounts deposited
with respect to CTO Principal into the Distribution
Account on the related Transfer Date.
Class D Principal. On the Transfer Date
preceding the Class D Principal Payment Commencement
Date and each Transfer Date thereafter, or, in the case
of distributions of Class D Excess Amounts, on each
Transfer Date during the Controlled Amortization Period
preceding a Distribution Date on which a distribution
shall be made of Class D Excess Amounts, the Trustee,
acting in accordance with instructions from the
Servicer set forth in the Daily Report for such day,
shall withdraw from the Principal Account and deposit
in the Distribution Account, to the extent of funds
available after giving effect to withdrawals pursuant
to subsections 4.12(a), (b) or (c) of the Agreement, an
amount equal to the Class D Principal for the related
Distribution Date. On the Class D Principal Payment
Commencement Date after the payment of any principal
amounts to the Class A Securities, the Class B
Securities and the Collateralized Trust Obligations on
such day, and on each Distribution Date thereafter
until the Class D Invested Amount is paid in full and
on each Distribution Date during the Controlled
Amortization Period on which amounts are to be
distributed with respect to Class D Excess Amounts, the
Paying Agent shall pay in accordance with Section 5.1
of the Agreement to the Class D Securityholder from the
Distribution Account such amounts deposited with
respect to Class D Principal into the Distribution
Account on the related Transfer Date. Notwithstanding
the foregoing, if so designated in writing by the
Transferor with respect to any such Transfer Date, any
such payment of Class D Principal shall not be made to
the Class D Securityholder but such amount shall
nonetheless be subtracted from the Class D Invested
Amount and added to the Transferor Interest and Class D
Excess Amounts may be subtracted from the Class D
Invested Amount and added to the Transferor Interest
whether or not such amount has been deposited into the
Distribution Account..
Any amounts remaining in the Principal
Account and allocable to the Series 1998-2 Securities,
after the Class D Invested Amount has been paid in
full, will be treated as Shared Principal Collections
and applied in accordance with Section 4.3(e) of the
Agreement.
SECTION 4.13 Series Charge-Offs. If, on
any Determination Date, the sum of the aggregate Series
Default Amount and the Series 1998-2 Percentage of
unpaid Adjustment Payments, if any, required to be made
by the Transferor but not made for all Business Days in
the preceding Monthly Period exceeds the sum of (x) the
aggregate amount of the Available Series 1998-2 Finance
Charge Collections applied to the payment thereof
pursuant to subsections 4.9(a)(v) and (vi) of the
Agreement, (y) the aggregate amount of Transferor
Finance Charge Collections and Excess Finance Charge
Collections allocated thereto pursuant to Section 4.10
of the Agreement, and (z) the aggregate amount of
Redirected Principal Collections applied with respect
thereto pursuant to Section 4.14 of the Agreement, the
Class D Invested Amount will be reduced by the
aggregate amount of such excess (a "Class D Charge-
Off").
In the event that any such reduction of the
Class D Invested Amount would cause the Class D
Invested Amount to be a negative number, the Class D
Invested Amount will be reduced to zero, and the CTO
Invested Amount will be reduced by the amount by which
the Class D Invested Amount would have been reduced
below zero, but not by more than the remaining
aggregate Series Default Amount and Series 1998-2
Percentage of unpaid Adjustment Payments for such
Monthly Period (a "CTO Charge-Off").
In the event that any such reduction of the
CTO Invested Amount would cause the CTO Invested Amount
to be a negative number, the CTO Invested Amount will
be reduced to zero, and the Class B Invested Amount
will be reduced by the amount by which the CTO Invested
Amount would have been reduced below zero, but not by
more than the remaining aggregate Series Default Amount
and Series 1998-2 Percentage of unpaid Adjustment
Payments for such Monthly Period (a "Class B Charge-
Off").
In the event that any such reduction of the
Class B Invested Amount would cause the Class B
Invested Amount to be a negative number, the Class B
Invested Amount will be reduced to zero, and the Class
A Invested Amount will be reduced by the amount by
which the Class B Invested Amount would have been
reduced below zero, but not by more than the remaining
aggregate Series Default Amount and Series 1998-2
Percentage of unpaid Adjustment Payments for such
Monthly Period (a "Class A Charge-Off").
SECTION 4.14 Redirected Principal
Collections for the Series 1998-2 Securities. On
each Business Day, the Servicer will apply or cause the
Trustee to apply an amount equal to the least of (i)
the Class D Invested Amount, (ii) the product of (x)(I)
during the Revolving Period, the Class D Floating
Percentage or (II) during an Amortization Period, the
Class D Fixed/Floating Percentage and (y) the amount of
Principal Collections with respect to such Business Day
and (iii) an amount equal to the sum of (a) the Class A
Required Amount for such Business Day, (b) the Class B
Required Amount for such Business Day and (c) the CTO
Required Amount for such Business Day (such amount
called "Redirected Class D Principal Collections") and
shall apply Principal Collections allocable to the
Series 1998-2 Securities in an amount equal to such
amount in accordance with subsection 4.9(a) as if such
amounts were Available Series 1998-2 Finance Charge
Collections.
On each Business Day, the Servicer will
apply or cause the Trustee to apply an amount equal to
the least of (i) the CTO Invested Amount, (ii) the
product of (x)(I) during the Revolving Period, the CTO
Floating Percentage or (II) during an Amortization
Period, the CTO Fixed/Floating Percentage and (y) the
amount of Principal Collections for such Business Day
and (iii) an amount equal to the sum of (a) the excess,
if any, of the Class A Required Amount for such
Business Day over the amount of Redirected Class D
Principal Collections applied with respect thereto for
such Business Day and (b) the excess, if any, of the
Class B Required Amount for such Business Day over the
amount of Redirected Class D Principal Collections
applied with respect thereto for such Business Day
(such amount called "Redirected CTO Principal
Collections") and shall apply Principal Collections
allocable to the Series 1998-2 Securities in an amount
equal to such amount in accordance with subsection
4.9(a) as if such amounts were Available Series 1998-2
Finance Charge Collections.
On each Business Day, the Servicer will
apply or cause the Trustee to apply an amount equal to
the least of (i) the Class B Invested Amount, (ii) the
product of (x)(I) during the Revolving Period, the
Class B Floating Percentage or (II) during an
Amortization Period, the Class B Fixed/Floating
Percentage and (y) the amount of Principal Collections
for such Business Day and (iii) an amount equal to the
excess, if any, of the Class A Required Amount for such
Business Day over the sum of the amount of Redirected
Class D Principal Collections and Redirected CTO
Principal Collections applied with respect thereto for
such Business Day (such amount called "Redirected Class
B Principal Collections") and shall apply Principal
Collections allocable to the Series 1998-2 Securities
equal to such amount in accordance with subsection
4.9(a) as if such amounts were Available Series 1998-2
Finance Charge Collections.
On each Distribution Date, the Class D
Invested Amount will be reduced by the aggregate amount
of unreimbursed Redirected Principal Collections for
the related Monthly Period. In the event that such
reduction would cause the Class D Invested Amount to be
a negative number, the Class D Invested Amount will be
reduced to zero and the CTO Invested Amount will be
reduced by the amount by which the Class D Invested
Amount would have been reduced below zero. In the event
that the amount of unreimbursed Redirected Principal
Collections for such Distribution Date would cause the
CTO Invested Amount to be a negative number, the CTO
Invested Amount will be reduced to zero and the Class B
Invested Amount will be reduced by the amount by which
the CTO Invested Amount would have been reduced below
zero. In the event that the amount of unreimbursed
Redirected Principal Collections would cause the Class
B Invested Amount to be a negative number on any
Distribution Date, the amount of Class B Redirected
Principal Collections on such Distribution Date will be
an amount not to exceed the amount which would cause
the Class B Invested Amount to be reduced to zero.
SECTION 4.15 Determination of LIBOR.
"LIBOR" shall mean, as of any LIBOR Determination Date,
the rate for deposits in United States dollars for one
month (commencing on the first day of the relevant
Interest Accrual Period) which appears on Telerate Page
3750 as of 11:00 A.M., London time, on the LIBOR
Determination Date for such Interest Accrual Period.
If such rate does not appear on Telerate Page 3750, the
rate for such LIBOR Determination Date will be
determined on the basis of the rates at which deposits
in United States dollars are offered by four major
banks in the London interbank market selected by the
Servicer at approximately 11:00 a.m., London time, on
such LIBOR Determination Date to prime banks in the
London interbank market for a period equal to one month
(commencing on the first day of the relevant Interest
Accrual Period). The Trustee will request the
principal London office of each such bank to provide a
quotation of its rate. If at least two such quotations
are provided, the rate for such LIBOR Determination
Date will be the arithmetic mean of the quotations. If
fewer than two quotations are provided as requested,
the rate for such LIBOR Determination Date will be the
arithmetic mean of the rates quoted by four major banks
in New York City, selected by the Trustee, at
approximately 11:00 a.m., New York City time, on the
LIBOR Determination Date for loans in United States
dollars to leading European banks for a period equal to
one month (commencing on the first day of such Interest
Accrual Period).
The CTO Interest Rate applicable to the
then current and the immediately preceding Interest
Accrual Periods may be obtained by any CTO
Securityholder by telephoning the Trustee at (212) 815-
5737.
On each LIBOR Determination Date, the
Trustee shall send to the Servicer by facsimile
notification of LIBOR for such LIBOR Determination
Date.
SECTION 4.16 Defeasance Funding Account.
Establishment of the Defeasance Funding
Account. The Servicer shall establish and maintain or
cause to be established and maintained with a Qualified
Institution, which may be the Trustee, in the name of
the Trustee, on behalf of the Series 1998-2
Securityholders, the "Defeasance Funding Account,"
which shall be a segregated trust account with the
corporate trust department of such Qualified
Institution, bearing a designation clearly indicating
that the funds deposited therein are held for the
benefit of the Series 1998-2 Securityholders. The
Trustee shall possess all right, title and interest in
all funds on deposit from time to time in the
Defeasance Funding Account and in all proceeds thereof.
The Defeasance Funding Account shall be under the sole
dominion and control of the Trustee for the benefit of
the Series 1998-2 Securityholders. If, at any time,
the institution holding the Defeasance Funding Account
ceases to be a Qualified Institution, the Trustee shall
within 10 Business Days establish a new Defeasance
Funding Account meeting the conditions specified above
with a Qualified Institution, and shall transfer any
cash or any investments to such new Defeasance Funding
Account. From the date such new Defeasance Funding
Account is established, it shall be the "Defeasance
Funding Account." The Trustee and the Transferor shall
have the right to make deposits to the Defeasance
Funding Account in accordance with Section 4.18. The
Trustee, at the written direction of the Servicer,
shall (i) make withdrawals from the Defeasance Funding
Account from time to time, in the amounts and for the
purposes set forth in this Series Supplement, and (ii)
on each Transfer Date from and after the commencement
of the Defeasance and prior to termination of the
Defeasance Funding Account make a deposit into the
Principal Account in the amount specified in, and
otherwise in accordance with, subsection 4.12 of the
Agreement.
Investment of Funds in Defeasance Funding
Account. Funds on deposit in the Defeasance Funding
Account shall be invested by the Trustee at the
direction of the Servicer in Cash Equivalents maturing
no later than the following Transfer Date. Investment
earnings (net of investment losses and expenses) on
funds on deposit in the Defeasance Funding Account (the
"Defeasance Funding Account Investment Proceeds") will
be applied on each Transfer Date as if such amount were
Available Series 1998-2 Finance Charge Collections on
the last Business Day of the preceding Monthly Period.
If, for any Interest Accrual Period, the Defeasance
Funding Account Investment Proceeds for the related
Monthly Period are less than the sum of the Class A
Monthly Interest, the Class B Monthly Interest and the
CTO Monthly Interest for such Interest Accrual Period,
the amount of such deficiency will be paid from the
Defeasance Reserve Account to the extent of the
Available Defeasance Reserve Account Amount and applied
on the applicable Transfer Date as Available Series
1998-2 Finance Charge Collections as if such amounts
were available to be applied pursuant to subsection
4.9(a) on the last Business Day of the preceding
Monthly Period.
Termination of Defeasance Funding Account.
The Defeasance Funding Account shall be terminated
following the earliest to occur of (a) the termination
of the Trust pursuant to the Agreement, (b) the date on
which the ABC Invested Amount is paid in full and (c)
after Defeasance, the earlier of the first Transfer
Date with respect to the Early Amortization Period and
the CTO Expected Final Payment Date. Upon the
termination of the Defeasance Funding Account, all
amounts remaining on deposit therein after the payment
in full of the Series 1998-2 Securities shall be
treated as Shared Principal Collections.
SECTION 4.17 Defeasance Reserve Account.
Establishment of the Defeasance Reserve Account. The
Servicer shall establish and maintain or cause to be
established and maintained with a Qualified
Institution, which may be the Trustee, in the name of
the Trustee, on behalf of the Series 1998-2
Securityholders, the "Defeasance Reserve Account,"
which shall be a segregated trust account with the
corporate trust department of such Qualified
Institution, bearing a designation clearly indicating
that the funds deposited therein are held for the
benefit of the Series 1998-2 Securityholders. The
Trustee shall possess all right, title and interest in
all funds on deposit from time to time in the
Defeasance Reserve Account and in all proceeds thereof.
The Defeasance Reserve Account shall be under the sole
dominion and control of the Trustee for the benefit of
the Series 1998-2 Securityholders. If, at any time,
the institution holding the Defeasance Reserve Account
ceases to be a Qualified Institution, the Trustee shall
within 10 Business Days establish a new Defeasance
Reserve Account meeting the conditions specified above
with a Qualified Institution, and shall transfer any
cash or any investments to such new Defeasance Reserve
Account. From the date such new Defeasance Reserve
Account is established, it shall be the "Defeasance
Reserve Account." The Trustee, at the written
direction of the Servicer, shall (i) make withdrawals
from the Defeasance Reserve Account from time to time,
in the amounts and for the purposes set forth in this
Series Supplement, and (ii) on each Transfer Date (from
and after the Defeasance Reserve Account Funding Date)
prior to a Defeasance, make a deposit into the
Defeasance Reserve Account in the amount specified in,
and otherwise in accordance with, subsection 4.9(a)(xv)
of the Agreement.
Administration of Defeasance Reserve
Account. On or before each Transfer Date following
Defeasance and on the first Transfer Date with respect
to the Early Amortization Period, the Trustee at the
direction of the Servicer shall withdraw from the
Defeasance Reserve Account, up to the Available
Defeasance Reserve Account Amount, an amount equal to
the excess of the sum of the Class A Monthly Interest,
the Class B Monthly Interest, the CTO Monthly Interest
and the amount of monthly interest payable with respect
to the Class D Securities for the related Interest
Accrual Period over the Defeasance Funding Account
Investment Proceeds with respect to such Transfer Date,
and the amount of such withdrawal shall be applied as
Available Series 1998-2 Finance Charge Collections as
if such amounts were available to be applied pursuant
to subsection 4.9(a) on the last Business Day of the
preceding Monthly Period.
Investment of Funds in Defeasance Reserve
Account. Funds on deposit in the Defeasance Reserve
Account shall be invested by the Trustee at the
direction of the Servicer in Cash Equivalents maturing
no later than the following Transfer Date. The
interest and other investment income (net of investment
expenses and losses) earned on such investments will be
retained in the Defeasance Reserve Account (to the
extent the amount on deposit therein is less than the
Required Defeasance Reserve Account Amount) or applied
on each Transfer Date as Available Series 1998-2
Finance Charge Collections as if such amounts were
available to be applied pursuant to subsection 4.9(a)
on the last Business Day of the preceding Monthly
Period.
Termination of Defeasance Reserve Account.
The Defeasance Reserve Account shall be terminated
following the earliest to occur of (a) the termination
of the Trust pursuant to the Agreement, (b) the date on
which the ABC Invested Amount is paid in full, (c)
prior to Defeasance, the Pay Out Commencement Date and
(d) after Defeasance, the earlier of the first Transfer
Date with respect to the Early Amortization Period and
the CTO Expected Final Payment Date. Upon the
termination of the Defeasance Reserve Account, all
amounts on deposit therein (after giving effect to any
withdrawal from the Defeasance Reserve Account on such
date as described above) shall be applied as Available
Series 1998-2 Finance Charge Collections as if such
amounts were available to be applied pursuant to
subsection 4.9(a) on the last Business Day of the
preceding Monthly Period.
SECTION 4.18 Defeasance. On the date
during the Amortization Period that the following
conditions shall have been satisfied: (i) an amount
shall have been deposited (x) in the Defeasance Funding
Account equal to the sum of the Class A Outstanding
Principal Amount, the Class B Outstanding Principal
Amount and the CTO Outstanding Principal Amount, which
amount shall be invested in Cash Equivalents and (y) in
the Defeasance Reserve Account equal to or greater than
the excess of the sum of the Class A Monthly Interest,
the Class B Monthly Interest and the estimated CTO
Monthly Interest over the estimated amount of
investment earnings on amounts in the Defeasance
Funding Account, as estimated by the Transferor, for
each of the Interest Accrual Periods during the period
from the date of the deposit to the Defeasance Funding
Account through the CTO Expected Final Payment Date
(the "Required Defeasance Reserve Account Amount");
(ii) the Transferor shall have delivered to the Trustee
an Opinion of Counsel to the effect that such deposit
and termination of obligations will not result in the
Trust being required to register as an "investment
company" within the meaning of the Investment Company
Act and an Opinion of Counsel to the effect that
following such deposit none of the Trust, the
Defeasance Reserve Account or the Defeasance Funding
Account will be deemed to be an association (or
publicly traded partnership) taxable as a corporation;
(iii) the Transferor shall have delivered to the
Trustee a certificate of an officer of the Transferor
stating that the Transferor reasonably believes that
such deposit and termination of its obligations will
not constitute a Pay Out Event or any event that, with
the giving of notice or the lapse of time, would cause
a Pay Out Event to occur; and (iv) the Rating Agency
Condition shall have been satisfied; then, the Series
1998-2 Securities will no longer be entitled to the
security interest of the Trust in the Receivables and,
except those set forth in clause (i) above, other Trust
assets ("Defeasance"), the percentages applicable to
the allocation to the Series 1998-1 Securityholders of
Principal Collections, Finance Charge Collections,
unpaid Adjustment Payments and Default Amounts shall be
reduced to zero and the Monthly Servicing Fee shall be
reduced to zero; provided, however, that no such
Defeasance shall occur for so long as any Class A
Charge-Offs, Class B Charge-Offs or CTO Charge-Offs
exist. Upon the satisfaction of the foregoing
conditions, the Class D Invested Amount shall be
reduced to zero.
SECTION 4.19 Revolving Receivables Reserve
Account. Establishment of the Revolving Receivables
Reserve Account. The Servicer shall establish and
maintain or cause to be established and maintained with
a Qualified Institution, which may be the Trustee, in
the name of the Trustee, on behalf of the Series 1998-2
Securityholders, the "Revolving Receivables Reserve
Account," which shall be a segregated trust account
with the corporate trust department of such Qualified
Institution, bearing a designation clearly indicating
that the funds deposited therein are held for the
benefit of the Series 1998-2 Securityholders. The
Trustee shall possess all right, title and interest in
all funds on deposit from time to time in the Revolving
Receivables Reserve Account and in all proceeds
thereof. The Revolving Receivables Reserve Account
shall be under the sole dominion and control of the
Trustee for the benefit of the Series 1998-2
Securityholders. If at any time, the institution
holding the Revolving Receivables Reserve Account
ceases to be a Qualified Institution, the Trustee shall
within 10 Business Days establish a new Revolving
Receivables Reserve Account meeting the conditions
specified above with a Qualified Institution, and shall
transfer any cash or any investments to such new
Revolving Receivables Reserve Account. From the date
such new Revolving Receivables Reserve Account is
established, it shall be the "Revolving Receivables
Reserve Account."
Deposits to the Revolving Receivables
Reserve Account. On the Closing Date, the Transferor
shall make an initial deposit of $200,000 to the
Revolving Receivables Reserve Account. Amounts shall
be deposited in the Revolving Receivables Reserve
Account on each Business Day to the extent specified
pursuant to subsection 4.9(a)(xiv) of the Agreement.
Withdrawals from the Revolving Receivables
Reserve Account. Funds on deposit in the Revolving
Receivables Reserve Account shall be withdrawn by the
Servicer on each Transfer Date to the extent of any
shortfalls in amounts to be paid or deposited pursuant
to subsections 4.9(a)(i) through (xiii) of the
Agreement as of the end of the day on the last Business
Day of the preceding Monthly Period and shall be
applied in accordance with subsections 4.9(a)(i)
through (xiii) of the Agreement as Available Series
1998-2 Finance Charge Collections as if such amounts
were available on the last Business Day of the
preceding Monthly Period.
Investment of Funds in Revolving
Receivables Reserve Account. Funds on deposit in the
Revolving Receivables Reserve Account shall be invested
by the Trustee at the direction of the Servicer in Cash
Equivalents maturing no later than the following
Transfer Date. The interest and other investment
income (net of investment expenses and losses) earned
on such investments will be retained in the Revolving
Receivables Reserve Account (to the extent the amount
on deposit therein is less than the Required Reserve
Account Amount) or applied on each Transfer Date as
Available Series 1998-2 Finance Charge Collections as
if such amounts were available to be applied pursuant
to subsection 4.9(a) of the Agreement on the last
Business Day of the preceding Monthly Period.
Termination of Revolving Receivables
Reserve Account. The Revolving Receivables Reserve
Account shall be terminated following the earliest to
occur of (a) the termination of the Trust pursuant to
the Agreement and (b) the date on which the ABC
Invested Amount is paid in full. Upon the termination
of the Revolving Receivables Reserve Account, all
amounts on deposit therein (after giving effect to any
withdrawal from the Revolving Receivables Reserve
Account on such date as described above) shall be
applied as Available Series 1998-2 Finance Charge
Collections as if such amounts were available to be
applied pursuant to subsection 4.9(a) of the Agreement
on the last Business Day of the preceding Monthly
Period.
SECTION 4.20 CTO Trigger Event. If (i) the
rating of Fingerhut Companies, Inc.'s senior secured
notes and, if rated, the rating of Fingerhut Companies,
Inc.'s corporate revolving lines of credit facility is
reduced below BBB from Standard & Poor's or below Baa2
from Moody's (a "CTO Trigger Event") and (ii) with
respect to any Business Day (x) the percentage
equivalent of a fraction the numerator of which is the
Series 1998-2 Percentage of the Transferor Interest and
the denominator of which is the sum of the Invested
Amount and the Series 1998-2 Percentage of the
Transferor Interest (the "Target Percentage") is less
than 6%, and (y) the amount on deposit in the CTO
Reserve Account is less than the Specified CTO Reserve
Amount, then (a) the Transferor shall, in connection
with increases in the aggregate amount of Principal
Receivables in the Trust, the scheduled paydown of
other Series or, with respect to any Series of Variable
Funding Securities, an optional payment of principal,
allow the Transferor Interest to increase such that the
Target Percentage shall be equal to or in excess of 6%
and/or (b) the Servicer shall cause amounts available
pursuant to subsection 4.9(a)(xvi) of the Agreement to
be deposited in the CTO Reserve Account until the
amount on deposit therein is equal to the Specified CTO
Reserve Amount. The Transferor may allow the
Transferor Interest to decrease on any Business Day, to
the extent that it exceeds the Minimum Transferor
Interest and the amount on deposit in the CTO Reserve
Account following any such decrease and after giving
effect to any deposit therein on such Business Day is
at least equal to the Specified CTO Reserve Amount.
SECTION 4.21 CTO Reserve Account.
Establishment of the CTO Reserve Account. The
Servicer, for the benefit of the CTO Securityholders,
shall, upon the occurrence of a CTO Trigger Event,
establish and maintain or cause to be established and
maintained with a Qualified Institution, which may be
the Trustee, in the name of the Trustee, on behalf of
the CTO Securityholders, the "CTO Reserve Account,"
which shall be a segregated trust account with the
corporate trust department of such Qualified
Institution, bearing a designation clearly indicating
that the funds deposited therein are held for the
benefit of the CTO Securityholders. The Trustee shall
possess all right, title and interest in all funds on
deposit from time to time in the CTO Reserve Account
and in all proceeds thereof. The CTO Reserve Account
shall be under the sole dominion and control of the
Trustee for the benefit of the CTO Securityholders.
If, at any time, the institution holding the CTO
Reserve Account ceases to be a Qualified Institution,
the Trustee shall within 10 Business Days establish a
new CTO Reserve Account meeting the conditions
specified above with a Qualified Institution, and shall
transfer any cash or any investments to such new CTO
Reserve Account. From the date such new CTO Reserve
Account is established, it shall be the "CTO Reserve
Account."
Administration of CTO Reserve Account. On
each Business Day following the occurrence of a CTO
Trigger Event, amounts will be deposited in the CTO
Reserve Account in accordance with subsection
4.9(a)(xvi) of the Agreement. Funds on deposit in the
CTO Reserve Account shall be withdrawn by the Servicer
and applied in accordance with subsection 4.9(a)(xi) of
the Agreement as if they were Available Series 1998-2
Finance Charge Collections on any Business Day after
the payment in full of the Class A Invested Amount and
the Class B Invested Amount to the extent of the
aggregate amount of CTO Charge-Offs, if any. Amounts
on deposit in the CTO Reserve Account in excess of the
Specified CTO Reserve Amount on any Business Day shall
be released therefrom and paid to the Transferor. All
amounts on deposit in the CTO Reserve Account shall be
released therefrom and paid to the Transferor, if the
rating of Fingerhut Companies, Inc.'s senior secured
notes or, if rated, the rating of Fingerhut Companies,
Inc.'s corporate revolving lines of credit facility is
subsequently increased to BBB or higher by Standard &
Poor's and Baa2 or higher by Moody's or the CTO
Invested Amount has been paid in full.
Investment of Funds in CTO Reserve Account.
Funds on deposit in the CTO Reserve Account shall be
invested by the Trustee (or, at the direction of the
Trustee, by the Servicer on behalf of the Trustee) at
the direction of the Servicer in Cash Equivalents that
will mature so that such funds will be available for
withdrawal on or prior to the following Business Day.
The interest and other investment income (net of
investment expenses and losses) earned on such
investments will be retained in the CTO Reserve Account
(to the extent the amount on deposit therein is less
than the Specified CTO Reserve Amount) or applied on
each Business Day as Reserve Account Investment
Proceeds.
Termination of CTO Reserve Account. The
CTO Reserve Account shall be terminated following the
earliest to occur of (a) the termination of the Trust
pursuant to the Agreement and (b) the date on which the
CTO Invested Amount is paid in full. Upon the
termination of the CTO Reserve Account, all amounts on
deposit therein (after giving effect to any withdrawal
from the CTO Reserve Account on such date as described
above) shall be released therefrom and paid to the
Transferor.
SECTION 4.22 Payment Reserve Account.
Establishment of the Payment Reserve Account. The
Servicer shall establish and maintain or cause to be
established and maintained with a Qualified
Institution, which may be the Trustee, in the name of
the Trustee, on behalf of the Series 1998-2
Securityholders, the "Payment Reserve Account," which
shall be a segregated trust account with the corporate
trust department of such Qualified Institution, bearing
a designation clearly indicating that the funds
deposited therein are held for the benefit of the
Series 1998-1 Securityholders. The Trustee shall
possess all right, title and interest in all funds on
deposit from time to time in the Payment Reserve
Account and in all proceeds thereof. The Payment
Reserve Account shall be under the sole dominion and
control of the Trustee for the benefit of the Series
1998-2 Securityholders. If, at any time, the
institution holding the Payment Reserve Account ceases
to be a Qualified Institution, the Trustee shall within
10 Business Days establish a new Payment Reserve
Account meeting the conditions specified above with a
Qualified Institution, and shall transfer any cash or
any investments to such new Payment Reserve Account.
From the date such new Payment Reserve Account is
established, it shall be the "Payment Reserve Account."
Administration of Payment Reserve Account.
The Transferor, at its discretion, may on any Business
Day withdraw all or a part of any amounts then on
deposit in the Payment Reserve Account and apply such
funds as Available Series 1998-2 Finance Charge
Collections in accordance with Section 4.9(a) of the
Agreement.
Investment on Funds in Payment Reserve
Account. Funds on deposit in the Payment Reserve
Account shall be invested by the Trustee (or, at the
direction of the Trustee, by the Servicer on behalf of
the Trustee) at the direction of the Servicer in Cash
Equivalents that will mature so that such funds will be
available for withdrawal on or prior to the following
Business Day. The interest and other investment income
(net of investment expenses and losses) earned on such
investments will be applied on each Business Day as
Reserve Account Investment Proceeds.
Termination of Payment Reserve Account.
The Payment Reserve Account shall be terminated
following the earliest to occur of (a) the termination
of the Trust pursuant to the Agreement and (b) the date
on which the ABC Adjusted Invested Amount is paid in
full. Upon the termination of the Payment Reserve
Account, all amounts on deposit therein (after giving
effect to any withdrawal from the Payment Reserve
Account on such date as described above) shall be
applied as if they were Available Series 1998-2 Finance
Charge Collections available to be applied pursuant to
subsection 4.9(a) on the last Business Day of the
preceding Monthly Period.
SECTION 4.23 Constituent Class D
Securities. The Transferor as holder of the Class D
Securities may at any time (i) subdivide the Class D
Securities into two or more subsidiary Securities, or
(ii) redirect all or any portion of the amounts
distributable to the Class D Securityholders (pursuant
to the application of collections allocable to the
Class D Securityholders) to any other Securityholder.
In connection with such subdivision, the Transferor may
assign an interest rate to the Class D Securities, the
"Class D Interest Rate," or a portion thereof and make
payments of interest with respect to such Securities
from amounts initially allocated to the Series 1998-2
Securities and available pursuant to subsection
4.9(a)(xiii). Before any Class D Securities can be
subdivided or transferred, the following conditions
must be met: (i) the Trustee and the Transferor shall
have received an Opinion of Counsel that such transfer
does not adversely affect the conclusions reached in
any of the federal or state income tax opinions issued
in connection with the original issuance of the Series
1998-2 Securities, (ii) the Transferor shall deliver to
the Trustee an officers' certificate stating that in
the reasonable belief of the Transferor, such
subdivision would not cause a Trust Pay Out Event or a
Series 1998-2 Pay Out Event to occur, or an event
which, with notice or lapse of time or both, would
constitute a Trust Pay Out Event or a Series 1998-2 Pay
Out Event, and (ii) the Rating Agency Condition shall
have been satisfied.
SECTION 7 Article V of the Agreement. Article V of the
Agreement shall read in its entirety as follows and shall be
applicable only to the Series 1998-2 Securities:
ARTICLE V
DISTRIBUTIONS AND REPORTS TO INVESTORSECURITYHOLDERS
SECTION 5.1 Distributions. On each
Distribution Date, the Paying Agent shall distribute
(in accordance with the Settlement Statement delivered
by the Servicer to the Trustee and the Paying Agent
pursuant to subsection 3.4(c)) to each Class A
Securityholder of record on the preceding Record Date
(other than as provided in subsection 2.4(e) or in
Section 12.3 respecting a final distribution) such
Securityholder's pro rata share (based on the aggregate
Undivided Interests represented by each Class A
Security held by such Securityholder) of amounts on
deposit in the Distribution Account as are payable to
the Class A Securityholders pursuant to Sections 4.11
and 4.12 of the Agreement by check mailed to each Class
A Securityholder at such Securityholder's address as it
appears on the Security Register or, in the case of
Class A Securityholders holding Class A Securities
evidencing not less than 80% of the Class A Invested
Amount, by wire transfer, at the expense of such Class
A Securityholder, to an account or accounts designated
by such Class A Securityholder by written notice given
to the Paying Agent not less than five days prior to
the related Distribution Date; provided, however, that
the final payment in retirement of the Class A
Securities will be made only upon presentation and
surrender of the Class A Securities at the office or
offices specified in the notice of such final
distribution delivered by the Trustee pursuant to
Section 12.3.
On each Distribution Date, the Paying Agent
shall distribute (in accordance with the Settlement
Statement delivered by the Servicer to the Trustee and
the Paying Agent pursuant to subsection 3.4(c)) to each
Class B Securityholder of record on the preceding
Record Date (other than as provided in subsection
2.4(e) or in Section 12.3 respecting a final
distribution) such Securityholder's pro rata share
(based on the aggregate Undivided Interests represented
by Class B Securities held by such Securityholder) of
amounts on deposit in the Distribution Account as are
payable to the Class B Securityholders pursuant to
Sections 4.11 and 4.12 of the Agreement by check mailed
to each Class B Securityholder at such Securityholder's
address as it appears on the Security Register or, in
the case of Class B Securityholders holding Class B
Securities evidencing not less than 80% of the Class B
Invested Amount, by wire transfer, at the expense of
such Class B Securityholder, to an account or accounts
designated by such Class B Securityholder by written
notice given to the Paying Agent not less than five
days prior to the related Distribution Date; provided,
however, that the final payment in retirement of the
Class B Securities will be made only upon presentation
and surrender of the Class B Securities at the office
or offices specified in the notice of such final
distribution delivered by the Trustee pursuant to
Section 12.3.
On each Distribution Date, the Paying Agent
shall distribute (in accordance with the Settlement
Statement delivered by the Servicer to the Trustee and
the Paying Agent pursuant to subsection 3.4(c)) to each
CTO Securityholder of record on the preceding Record
Date (other than as provided in subsection 2.4(e) or in
Section 12.3 respecting a final distribution) such
Securityholder's pro rata share (based on the aggregate
Undivided Interests represented by Collateralized Trust
Obligations held by such Securityholder) of amounts on
deposit in the Distribution Account as are payable to
the CTO Securityholders pursuant to Sections 4.11 and
4.12 of the Agreement by check mailed to each CTO
Securityholder at such Securityholder's address as it
appears on the Security Register or, in the case of
Securityholders holding Collateralized Trust
Obligations evidencing not less than 80% of the CTO
Invested Amount, by wire transfer, at the expense of
such CTO Securityholder, to an account or accounts
designated by such CTO Securityholder by written notice
given to the Paying Agent not less than five days prior
to the related Distribution Date; provided, however,
that the final payment in retirement of the
Collateralized Trust Obligations will be made only upon
presentation and surrender of the Collateralized Trust
Obligations at the office or offices specified in the
notice of such final distribution delivered by the
Trustee pursuant to Section 12.3.
On each Distribution Date, the Paying Agent
shall distribute (in accordance with the Settlement
Statement delivered by the Servicer to the Trustee and
the Paying Agent pursuant to subsection 3.4(c)) to each
Class D Securityholder of record other than the
Transferor on the preceding Record Date (other than as
provided in subsection 2.4(e) or in Section 12.3
respecting a final distribution) such Securityholder's
pro rata share (based on the aggregate Undivided
Interests represented by Class D Securities held by
such Securityholder) of amounts on deposit in the
Distribution Account as are payable to the Class D
Securityholders pursuant to Sections 4.11 and 4.12 of
the Agreement by wire transfer to each Class D
Securityholder to an account or accounts designated by
such Class D Securityholder by written notice given to
the Paying Agent not less than five days prior to the
related Distribution Date; provided, however, that the
final payment in retirement of the Class D Securities
will be made only upon presentation and surrender of
the Class D Securities at the office or offices
specified in the notice of such final distribution
delivered by the Trustee pursuant to Section 12.3.
SECTION 5.2 Securityholders' Statement.
On the 15th day of each calendar month (or if such day
is not a Business Day the next succeeding Business
Day), the Paying Agent shall forward to each
Securityholder and the Rating Agencies a statement
substantially in the form of Exhibit B prepared by the
Servicer and delivered to the Trustee and the Paying
Agent on the preceding Determination Date setting forth
the following information (which, in the case of (i),
(ii) and (iii) below, shall be stated on the basis of
an original principal amount of $1,000 per Security
and, in the case of (ix) and (x), shall be stated on an
aggregate basis and on the basis of an original
principal amount of $1,000 per Security):
the total amount distributed;
the amount of such distribution allocable
to Class A Principal, Class B Principal, CTO Principal
and Class D Principal;
the amount of such distribution allocable
to Class A Monthly Interest and Carryover Class A
Monthly Interest, Class B Monthly Interest and
Carryover Class B Monthly Interest, CTO Monthly
Interest and Carryover CTO Monthly Interest and any
amounts payable to the Class D Securityholders with
respect to interest;
the amount of Principal Collections
processed in the Collection Account during the
preceding Monthly Period and allocated in respect of
the Class A Securities, the Class B Securities, the
Collateralized Trust Obligations and the Class D
Securities, respectively;
the amount of Finance Charge Collections
processed during the preceding Monthly Period and
allocated in respect of the Class A Securities, the
Class B Securities, the Collateralized Trust
Obligations and the Class D Securities, respectively,
and, after the Defeasance Reserve Account Funding Date,
the amount of Defeasance Funding Account Investment
Proceeds and investment earnings on amounts on deposit
in the Defeasance Reserve Account;
the aggregate amount of Principal
Receivables, the Invested Amount, the Class A Invested
Amount, the Class B Invested Amount, the CTO Invested
Amount, the Class D Invested Amount, the Floating
Percentage and, during the Amortization Period, the
Fixed/Floating Percentage as of the end of the day on
the last day of the related Monthly Period;
the aggregate outstanding balance of
Receivables which are current, 30-59, 60-89, and 90
days and over delinquent as of the end of the day on
the last day of the related Monthly Period;
the aggregate Series Default Amount for the
preceding Monthly Period;
the aggregate amount of Class A Charge-
Offs, Class B Charge-Offs, CTO Charge-Offs and Class D
Charge-Offs for the preceding Monthly Period;
the amount of the Monthly Servicing Fee for
the preceding Monthly Period;
the amount of unreimbursed Redirected Class
B Principal Collections, Redirected CTO Principal
Collections and Redirected Class D Principal
Collections for the related Monthly Period;
the aggregate amount of funds in the Excess
Funding Account as of the last day of the Monthly
Period immediately preceding the Distribution Date;
whether a CTO Trigger Event has occurred
and, if so, the Specified CTO Reserve Amount and the
amount then on deposit in the CTO Reserve Account;
the number of new Accounts the Receivables
in which have been added to the Trust during the
related Monthly Period;
the Portfolio Yield for the related Monthly
Period;
the Base Rate for the related Monthly
Period;
the Defeasance Funding Account Balance on
the related Transfer Date;
the Revolving Receivables Reserve Account
balance on the related Transfer Date; and
the amount of Defeasance Funding Account
Investment Proceeds deposited in the Collection Account
on the related Transfer Date, the Required Defeasance
Reserve Account Amount and the Available Defeasance
Reserve Account Amount as of the related Transfer Date.
Annual Securityholders' Tax Statement. On
or before January 31 of each calendar year, beginning
with calendar year 1999, the Paying Agent shall
distribute to each Person who at any time during the
preceding calendar year was a Series 1998-2
Securityholder, a statement prepared by the Servicer
containing the information required to be contained in
the regular report to Series 1998-2 Securityholders, as
set forth in subclauses (i), (ii) and (iii) above,
aggregated for such calendar year or the applicable
portion thereof during which such Person was a Series
1998-2 Securityholder, together with, on or before
January 31 of each year, beginning in 1999, such other
customary information (consistent with the treatment of
the Securities as debt) as the Trustee or the Servicer
deems necessary or desirable to enable the Series 1998-
2 Securityholders to prepare their tax returns. Such
obligations of the Trustee shall be deemed to have been
satisfied to the extent that substantially comparable
information shall be provided by the Trustee pursuant
to any requirements of the Internal Revenue Code as
from time to time in effect.
SECTION 8 Series 1998-2 Pay Out Events. If any one of
the following events shall occur with respect to the Series 1998-
2 Securities:
(a) failure on the part of the Transferor (i) to make
any payment or deposit required to be made by the Transferor by
the terms of (A) the Agreement or (B) this Series Supplement, on
or before the date occurring five Business Days after the date
such payment or deposit is required to be made herein, (ii) to
perform in all material respects the Transferor's covenant not to
sell, pledge, assign, or transfer to any Person, or grant any
unpermitted lien on, any Receivable; or (iii) duly to observe or
perform in any material respect any covenants or agreements of
the Transferor set forth in the Agreement or this Series
Supplement, which failure has a material adverse effect on the
Series 1998-2 Securityholders and which continues unremedied for
a period of 60 days after the date on which written notice of
such failure, requiring the same to be remedied, shall have been
given to the Transferor by the Trustee, or to the Transferor and
the Trustee by the Holders of Series 1998-2 Securities evidencing
Undivided Interests aggregating not less than 50% of the Invested
Amount of this Series 1998-2, and continues to affect materially
and adversely the interests of the Series 1998-2 Securityholders
for such period;
(b) any representation or warranty made by the
Transferor in the Agreement or this Series Supplement, (i) shall
prove to have been incorrect in any material respect when made,
which continues to be incorrect in any material respect for a
period of 60 days after the date on which written notice of such
failure, requiring the same to be remedied, shall have been given
to the Transferor by the Trustee, or to the Transferor and the
Trustee by the Holders of the Series 1998-2 Securities evidencing
Undivided Interests aggregating more than 50% of the Invested
Amount of this Series 1998-2, and (ii) as a result of which the
interests of the Series 1998-2 Securityholders are materially and
adversely affected and continue to be materially and adversely
affected for such period; provided, however, that a Series 1998-2
Pay Out Event pursuant to this subsection 8(b) shall not be
deemed to have occurred hereunder if the Transferor has accepted
reassignment of the related Receivable, or all of such
Receivables, if applicable, during such period (or such longer
period as the Trustee may specify) in accordance with the
provisions of the Agreement;
(c) Fingerhut shall consent to the appointment of a
bankruptcy trustee or receiver or liquidator in any bankruptcy
proceeding or any other insolvency, readjustment of debt,
marshalling of assets and liabilities or similar proceedings of
or relating to all or substantially all of its property; or a
decree or order of a court or agency or supervisory authority
having jurisdiction in the premises for the appointment of a
bankruptcy trustee or receiver or liquidator in any bankruptcy
proceeding or any other insolvency, readjustment of debt,
marshalling of assets and liabilities or similar proceedings, or
for the winding-up or liquidation of its affairs, shall have been
entered against Fingerhut; or Fingerhut shall admit in writing
its inability to pay its debts generally as they become due, file
a petition to take advantage of any applicable insolvency or
reorganization statute including the U.S. bankruptcy code, make
an assignment for the benefit of its creditors or voluntarily
suspend payment of its obligations;
(d) the average of the Portfolio Yields for any three
consecutive Monthly Periods is reduced to a rate which is less
than the weighted average Base Rates for such three consecutive
Monthly Periods;
(e) (i) the Transferor Interest shall be less than the
Minimum Transferor Interest, (ii) the total amount of Principal
Receivables and the amount on deposit in the Excess Funding
Account shall be less than the Minimum Aggregate Principal
Receivables or (iii) the Retained Percentage shall be equal to or
less than 2%, in each case as of any Determination Date and, in
each case, shall not exceed the required amount on or prior to
the tenth Business Day following such Determination Date;
(f) any Servicer Default shall occur which would have
a material adverse effect on the Series 1998-2 Securityholders;
then, in the case of any event described in subparagraph (a), (b)
or (f), after the applicable grace period, if any, set forth in
such subparagraphs, the Holders of Series 1998-2 Securities
evidencing more than 50% of the Invested Amount of this Series
1998-2, by notice then given in writing to the Trustee, the
Transferor and the Servicer may declare that a pay out event (a
"Series 1998-2 Pay Out Event") has occurred as of the date of
such notice, and in the case of any event described in
subparagraphs (c), (d) or (e), a Series 1998-2 Pay Out Event
shall occur without any notice or other action on the part of the
Trustee or the Series 1998-2 Securityholders immediately upon the
occurrence of such event.
SECTION 9 Collateralized Trust Obligation Defaults and
Remedies. (a) "CTO Default," wherever used herein, means any
one of the following events (whatever the reason for such CTO
Default and whether it shall be voluntary or involuntary or be
effected by operation of law or pursuant to any judgment, decree
or order of any court or any order, rule or regulation of any
administrative or governmental body):
There is a CTO Monthly Interest Shortfall on two consecutive
Distribution Dates; or
There is a CTO Charge-Off on three consecutive Distribution
Dates.
If a CTO Default shall have occurred, upon the direction of CTO
Securityholders holding more than 50% of the CTO Invested Amount:
the Specified CTO Reserve Amount shall thereafter be equal to
the CTO Outstanding Principal Amount;
following the payment in full of the Class A Invested and the
Class B Invested Amount, the Trustee shall sell or cause to be
sold, and the Trustee shall pay the proceeds to the Series 1998-2
Securityholders in final payment of all principal of and accrued
interest on such Series to be applied first to the CTO Invested
Amount until paid in full and then to the Class D Invested Amount
until paid in full, an amount of Principal Receivables and the
related Finance Charge Receivables (or interests therein) up to
110% of the Invested Amount at the close of business on such
date; provided, that the amount of such Principal Receivables
shall not exceed the sum of (1) the product of (A) the Transferor
Percentage on the date of any such sale, (B) the aggregate
outstanding Principal Receivables on such date and (C) a fraction
the numerator of which is the Invested Amount on such date and
the denominator of which is the sum of the invested amounts of
all Series and the aggregate Participation Amounts of all
Participations then outstanding and (2) the Invested Amount on
such date. The Transferor shall be permitted to purchase such
Receivables in such case and shall have a right of first refusal
with respect thereto to the extent of a bona fide offer by an
unrelated third party for fair value. Any proceeds of such sale
in excess of such principal and interest paid shall be paid to
the Transferor. Upon such sale, final payment of all amounts
allocable to any Class of such Series shall be made in the manner
provided in Section 12.3 of the Agreement.
The Servicer shall provide written notice to the Rating Agencies
of any such direction of a majority of the CTO Invested Amount.
SECTION 10 Series 1998-2 Termination. The right of
the Series 1998-2 Securityholders to receive payments from the
Trust will terminate on the first Business Day following the
Series 1998-2 Termination Date unless such Series is an Affected
Series as specified in Section 12.1(c) of the Agreement and the
sale contemplated therein has not occurred by such date, in which
event the Series 1998-2 Securityholders shall remain entitled to
receive proceeds of such sale when such sale occurs.
SECTION 11 Legends; Transfer and Exchange;
Restrictions on Transfer of Series 1998-2 Securities; Tax
Treatment. Each Class A Security, Class B Security and
Collateralized Trust Obligation will bear a legend or legends in
substantially the following form:
EACH PURCHASER REPRESENTS AND WARRANTS FOR THE BENEFIT OF
FINGERHUT RECEIVABLES, INC. AND THE TRUSTEE THAT SUCH
PURCHASER IS NOT (I) AN EMPLOYEE BENEFIT PLAN (AS DEFINED IN
SECTION 3(3) OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT
OF 1974, AS AMENDED ("ERISA")) THAT IS SUBJECT TO THE
PROVISIONS OF TITLE I OF ERISA, (II) A PLAN DESCRIBED IN
SECTION 4975(e)(1) OF THE INTERNAL REVENUE CODE OF 1986, AS
AMENDED (THE "CODE") THAT IS SUBJECT TO SECTION 4975 OF THE
CODE, (III) A GOVERNMENTAL PLAN, AS DEFINED IN SECTION 3(32)
OF ERISA, SUBJECT TO ANY FEDERAL, STATE OR LOCAL LAW WHICH
IS, TO A MATERIAL EXTENT, SIMILAR TO THE PROVISIONS OF
SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE, (IV) AN
ENTITY WHOSE UNDERLYING ASSETS INCLUDE "PLAN ASSETS" (AS
DEFINED IN 29 C.F.R. SECTION 2510.3-101 OR OTHERWISE UNDER
ERISA) BY REASON OF A PLAN'S INVESTMENT IN THE ENTITY OR (V)
A PERSON INVESTING "PLAN ASSETS" OF ANY SUCH PLAN (INCLUDING
WITHOUT LIMITATION, FOR PURPOSES OF CLAUSE (IV) AND THIS
CLAUSE (V), AS APPLICABLE, AN INSURANCE COMPANY GENERAL
ACCOUNT, BUT EXCLUDING ANY ENTITY REGISTERED UNDER THE
INVESTMENT COMPANY ACT OF 1940, AS AMENDED).
Each Security Owner by virtue of its beneficial interest in the
Class A Securities or Class B Securities, as applicable, shall be
deemed to have made the representations and warranties stated in
such legend.
Each Class A Security and Class B Security and each
Collateralized Trust Obligation that is a CTO Global Security
deposited with DTC, or a custodian on behalf of DTC, shall bear
the following legend:
UNLESS THIS SECURITY IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK
CORPORATION ("DTC"), TO THE ISSUER OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
SECURITY ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR
IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO.
OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE &
CO., HAS AN INTEREST HEREIN.
Each Collateralized Trust Obligation that is issued
pursuant to Rule 144A shall bear the following legend:
THIS SECURITY HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR ANY STATE SECURITIES LAWS. THE HOLDER HEREOF, BY
PURCHASING THIS SECURITY, AGREES THAT THIS SECURITY MAY BE
REOFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY IN
COMPLIANCE WITH THE SECURITIES ACT AND OTHER APPLICABLE LAWS
AND ONLY (1) PURSUANT TO RULE 144A UNDER THE SECURITIES ACT
TO A PERSON WHO THE HOLDER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER ("QIB") WITHIN THE MEANING OF
RULE 144A, PURCHASING FOR ITS OWN ACCOUNT, OR A QIB
PURCHASING FOR THE ACCOUNT OF A QIB, WHOM THE HOLDER HAS
INFORMED, IN EACH CASE, THAT SUCH REOFFER, RESALE, PLEDGE OR
OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A OR (2)
IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 903 OR
RULE 904 OF REGULATION S UNDER THE SECURITIES ACT. EACH
SECURITY OWNER BY ACCEPTING A BENEFICIAL INTEREST IN THIS
SECURITY, UNLESS SUCH PERSON ACQUIRED THIS SECURITY IN A
TRANSFER DESCRIBED IN CLAUSE (2) ABOVE, IS DEEMED TO
REPRESENT THAT IT IS EITHER A QIB PURCHASING FOR ITS OWN
ACCOUNT OR A QIB PURCHASING FOR THE ACCOUNT OF ANOTHER QIB.
Each Collateralized Trust Obligation that is issued pursuant to
Regulation S shall bear the following legend:
THIS SECURITY HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER
THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND PRIOR TO THE DATE THAT IS 40 DAYS
AFTER THE LATER OF THE COMMENCEMENT OF THE OFFERING AND THE
CLOSING DATE MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE
TRANSFERRED IN THE UNITED STATES OR TO A U.S. PERSON EXCEPT
PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT.
Each Class D Security will bear legends substantially
in the following form:
THIS SECURITY WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"). THIS SECURITY HAS NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAW OF ANY
STATE AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE
TRANSFERRED UNLESS REGISTERED PURSUANT TO OR EXEMPT FROM
REGISTRATION UNDER THE SECURITIES ACT AND ANY OTHER APPLICABLE
SECURITIES LAW. TRANSFERS OF THIS SECURITY SHALL BE SUBJECT TO
THE RESTRICTIONS SET FORTH IN THE POOLING AND SERVICING
AGREEMENT.
EACH PURCHASER REPRESENTS AND WARRANTS FOR THE BENEFIT OF
FINGERHUT RECEIVABLES, INC. AND THE TRUSTEE THAT SUCH PURCHASER
IS NOT (I) AN EMPLOYEE BENEFIT PLAN (AS DEFINED IN SECTION 3(3)
OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS
AMENDED ("ERISA")) THAT IS SUBJECT TO THE PROVISIONS OF TITLE I
OF ERISA, (II) A PLAN DESCRIBED IN SECTION 4975(e)(1) OF THE
INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") THAT IS
SUBJECT TO SECTION 4975 OF THE CODE, (III) A GOVERNMENTAL PLAN,
AS DEFINED IN SECTION 3(32) OF ERISA, SUBJECT TO ANY FEDERAL,
STATE OR LOCAL LAW WHICH IS, TO A MATERIAL EXTENT, SIMILAR TO THE
PROVISIONS OF SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE,
(IV) AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE PLAN ASSETS (AS
DEFINED IN 29 C.F.R. SECTION 2510.3-101 OR OTHERWISE UNDER ERISA)
BY REASON OF A PLAN'S INVESTMENT IN THE ENTITY OR (V) A PERSON
INVESTING PLAN ASSETS OF ANY SUCH PLAN (INCLUDING WITHOUT
LIMITATION, FOR PURPOSES OF CLAUSE (IV) AND THIS CLAUSE (V), AS
APPLICABLE, AN INSURANCE COMPANY GENERAL ACCOUNT, BUT EXCLUDING
ANY ENTITY REGISTERED UNDER THE INVESTMENT COMPANY ACT OF 1940,
AS AMENDED).
SECTION 12 Compliance with Withholding
Requirements. Notwithstanding any other provision of the
Agreement, the Trustee and any Paying Agent shall comply with all
Federal withholding requirements with respect to payments to the
Series 1998-2 Securityholders of interest, original issue
discount, or other amounts that the Trustee, any Paying Agent,
the Servicer or the Transferor reasonably believes are applicable
under the Internal Revenue Code. The consent of the Series 1998-
2 Securityholders shall not be required for any such withholding.
In the event the Trustee or the Paying Agent withholds any amount
from payments made to any Series 1998-2 Securityholder pursuant
to federal withholding requirements, the Trustee or the Paying
Agent shall indicate to such Series 1998-2 Securityholder the
amount withheld and all such amounts shall be deemed to have been
paid to such Series 1998-2 Securityholders and the Series 1998-2
Securityholders shall have no claim therefor.
SECTION 13 Ratification of Agreement. As
supplemented by this Series Supplement, the Agreement is in all
respects ratified and confirmed and the Agreement as so
supplemented by this Series Supplement shall be read, taken, and
construed as one and the same instrument. The Transferor hereby
confirms the conveyance of the Trust Property to the Trustee for
the benefit of the Series 1998-2 Securityholders.
For so long as any of the Collateralized Trust
Obligations are "restricted securities" within the meaning of
Rule 144(a)(3) under the Securities Act and during any period in
which the Trust is not subject to Section 13 or 15(d) of the
Exchange Act, each of the Transferor, the Servicer and the
Trustee agree to cooperate with each other to provide to any CTO
Securityholder, and to any prospective purchaser of
Collateralized Trust Obligations designated by such CTO
Securityholder upon the request of such CTO Securityholder or
prospective purchaser, the information required by Rule
144A(d)(4) under the Securities Act.
SECTION 14 Counterparts. This Series Supplement
may be executed in any number of counterparts, each of which so
executed shall be deemed to be an original, but all of such
counterparts shall together constitute but one and the same
instrument.
SECTION 15 GOVERNING LAW. THIS SERIES SUPPLEMENT
SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
DELAWARE WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND
THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER
SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
SECTION 16 Instructions in Writing. All
instructions or other communications given by the Servicer or any
other Person to the Trustee pursuant to this Series Supplement
shall be in writing, and, with respect to the Servicer, may be
included in a Daily Report or Settlement Statement.
SECTION 17 Paired Series. Subject to the
satisfaction of the Rating Agency Condition, prior to the
commencement of the Early Amortization Period the Series 1998-2
Securities may be paired with one or more other Series (each, a
"Paired Series"). Each Paired Series either will be pre-funded
with an initial deposit to a pre-funding account in an amount up
to the initial principal amount of such Paired Series primarily
from the proceeds of the sale of such Paired Series or will have
a variable principal amount. Any such pre-funding account will
be held for the benefit of such Paired Series and not for the
benefit of the Series 1998-2 Securityholders. As amounts are
paid for the benefit of the Class A Securityholders, Class B
Securityholders and CTO Securityholders, either (i) in the case
of a pre-funded Paired Series, an equal amount of funds on
deposit in any pre-funding account for such pre-funded Paired
Series will be released (which funds will be distributed to the
Transferor) or (ii) in the case of a Paired Series having a
variable principal amount, an interest in such variable Paired
Series in an equal or lesser amount may be sold by the Trust (and
the proceeds thereof will be distributed to the Transferor) and,
in either case, the invested amount in the Trust of such Paired
Series will increase by up to a corresponding amount. Upon
payment in full of the Series 1998-2 Securities, assuming that
there have been no unreimbursed charge-offs with respect to any
related Paired Series, the aggregate invested amount of such
related Paired Series will have been increased by an amount up to
an aggregate amount equal to the Invested Amount paid to the
Series 1998-2 Securityholders since the issuance of such Paired
Series. The issuance of a Paired Series will be subject to the
conditions described in subsection 6.9(b) of the Agreement.
SECTION 18 Registration of the Class A Securities
under the Securities Exchange Act of 1934. The Transferor shall
cause the Class A Securities to be registered under the
Securities Exchange Act of 1934, as amended, on or before
February, 1999.
IN WITNESS WHEREOF, the Transferor, the Servicer and the
Trustee have caused this Series 1998-2 Supplement to be duly
executed by their respective officers as of the day and year
first above written.
FINGERHUT RECEIVABLES, INC.
Transferor
By: /s/ James M. Wehmann
Name: James M. Wehmann
Title: President and Treasurer
FINGERHUT NATIONAL BANK
Servicer
By: /s/ James M. Wehman
Name: James M. Wehmann
Title: Treasurer
THE BANK OF NEW YORK (DELAWARE)
Trustee
By: /s/ Cheryl L. Laser
Name: Cheryl L. Laser
Title: Assistant Vice President
Exhibit A-1
FORM OF CLASS A INVESTOR SECURITY
UNLESS THIS SECURITY IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK
CORPORATION ("DTC"), TO THE TRUSTEE OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY
SECURITY ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR
IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO.
OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO.
HAS AN INTEREST HEREIN.
EACH PURCHASER REPRESENTS AND WARRANTS FOR THE BENEFIT
OF FINGERHUT RECEIVABLES, INC. AND THE TRUSTEE THAT SUCH
PURCHASER IS NOT (I) AN EMPLOYEE BENEFIT PLAN (AS DEFINED IN
SECTION 3(3) OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT
OF 1974, AS AMENDED ("ERISA")) THAT IS SUBJECT TO THE
PROVISIONS OF TITLE I OF ERISA, (II) A PLAN DESCRIBED IN
SECTION 4975(e)(1) OF THE INTERNAL REVENUE CODE OF 1986, AS
AMENDED (THE "CODE") THAT IS SUBJECT TO SECTION 4975 OF THE
CODE, (III) A GOVERNMENTAL PLAN, AS DEFINED IN SECTION 3(32)
OF ERISA, SUBJECT TO ANY FEDERAL, STATE OR LOCAL LAW WHICH
IS, TO A MATERIAL EXTENT, SIMILAR TO THE PROVISIONS OF
SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE, (IV) AN
ENTITY WHOSE UNDERLYING ASSETS INCLUDE "PLAN ASSETS" (AS
DEFINED IN 29 C.F.R. SECTION 2510.3-101 OR OTHERWISE UNDER
ERISA) BY REASON OF A PLAN'S INVESTMENT IN THE ENTITY OR (V)
A PERSON INVESTING "PLAN ASSETS" OF ANY SUCH PLAN (INCLUDING
WITHOUT LIMITATION, FOR PURPOSES OF CLAUSE (IV) AND THIS
CLAUSE (V), AS APPLICABLE, AN INSURANCE COMPANY GENERAL
ACCOUNT, BUT EXCLUDING ANY ENTITY REGISTERED UNDER THE
INVESTMENT COMPANY ACT OF 1940, AS AMENDED).
No. ___ $_________
CUSIP NO. 31786YAF7
FINGERHUT MASTER TRUST
6.23% ASSET BACKED SECURITY,
SERIES 1998-2, CLASS A
Evidencing an undivided interest in a trust, the corpus
of which consists of receivables generated from time to time in
the ordinary course of business from a portfolio of consumer
revolving consumer credit card accounts and closed-end
installment sale or closed-end loan contracts transferred or to
be transferred by Fingerhut Receivables, Inc. (the "Transferor")
and other assets and interests constituting the Trust under the
Agreement described below.
(Not an interest in or a recourse obligation of
Fingerhut Receivables, Inc., Fingerhut Companies, Inc., Fingerhut
National Bank or any affiliate of any of them.)
This certifies that _________ (the "Securityholder") is
the registered owner of a fractional undivided interest in the
Fingerhut Master Trust (the "Trust") issued pursuant to the
Amended and Restated Pooling and Servicing Agreement, dated as of
March 18, 1998 (the "Pooling and Servicing Agreement"; such term
to include any amendment thereto) by and between the Transferor,
Fingerhut National Bank, as Servicer (the "Servicer"), and The
Bank of New York (Delaware) as Trustee (the "Trustee"), and the
Series 1998-2 Supplement, dated as of April 28, 1998 (the "Series
1998-2 Supplement"), among the Transferor, the Servicer and the
Trustee. The Pooling and Servicing Agreement, as supplemented by
the Series 1998-2 Supplement, is herein referred to as the
"Agreement"). The corpus of the Trust consists of all of the
Transferor's right, title and interest in, to and under the Trust
Property (as defined in the Agreement).
This Security does not purport to summarize the
Agreement and reference is made to that Agreement for information
with respect to the interests, rights, benefits, obligations,
proceeds, and duties evidenced hereby and the rights, duties and
obligations of the Trustee. To the extent not defined herein,
the capitalized terms used herein have the meanings ascribed to
them in the Agreement. This Security is one of a series of
Securities entitled "Fingerhut Master Trust 6.23% Asset Backed
Securities, Series 1998-2, Class A" (the "Class A Securities"),
each of which represents a fractional undivided interest in the
Trust, and is issued under and is subject to the terms,
provisions and conditions of the Agreement, to which Agreement,
as amended from time to time, the Securityholder by virtue of the
acceptance hereof assents and by which the Securityholder is
bound.
The Transferor has structured the Agreement, the Class
A Securities, the Fingerhut Master Trust 6.51% Asset Backed
Securities, Series 1998-2, Class B (the "Class B Securities" and
collectively with the Class A Securities, the "Offered
Securities") and the Fingerhut Master Trust Floating Rate Asset
Backed Securities, Series 1998-2, Collateralized Trust
Obligations (the "Collateralized Trust Obligations") with the
intention that the Offered Securities and the Collateralized
Trust Obligations will qualify under applicable tax law as
indebtedness, and both the Transferor and each holder of a Class
A Security (a "Class A Securityholder") or any interest therein
by acceptance of its Security or any interest therein, agrees to
treat the Class A Securities for purposes of federal, state and
local income or franchise taxes and any other tax imposed on or
measured by income, as indebtedness.
No principal will be payable to the Class A
Securityholders until the first Distribution Date in the
Amortization Period. No principal will be payable to the Class B
Securityholders, CTO Securityholders or Class D Securityholders
(other than with respect to Class D Excess Amounts) until all
principal payments have been made to the Class A Securityholders.
Interest on the Class A Securities will be payable on
June 15, 1998 and on the 15th day of each month thereafter or, if
such day is not a business day, on the next succeeding business
day (each, a "Distribution Date"), in an amount equal to the
product of (i) the Class A Interest Rate, (ii) a fraction the
numerator of which is the actual number of days in the related
Interest Accrual Period and the denominator of which is 360 and
(iii) the outstanding principal balance of the Class A Securities
as of the close of business on the first day of such Interest
Accrual Period provided that interest for the first Distribution
Date will be an amount equal to the product of (u) the initial
Class A Invested Amount, (v) 47 divided by 360, and (w) the Class
A Interest Rate.
Interest payments on the Class A Securities on each
Distribution Date will be funded from Available Series 1998-2
Finance Charge Collections with respect to the preceding Monthly
Period (or, with respect to the first Distribution Date, such
collections from and including the Closing Date to and including
May 29, 1998 plus the amount of the initial deposit to the
Interest Funding Account to be made on the Closing Date) and from
certain other funds allocated as set forth in the Pooling and
Servicing Agreement to the respective classes of the Securities
and deposited on each business day during such Monthly Period in
the Interest Funding Account.
"Class A Invested Amount" shall mean, with respect to
any Business Day, an amount equal to (a) the Class A Initial
Invested Amount minus (b) the aggregate amount of principal
payments made to Class A Securityholders through and including
such Business Day, minus (c) the aggregate amount of Class A
Charge-Offs for all prior Distribution Dates, plus (d) the sum of
the aggregate amount reimbursed with respect to reductions of the
Class A Invested Amount through and including such Business Day
pursuant to subsection 4.9(a)(vii) of the Agreement plus, with
respect to such subsection, amounts applied thereto pursuant to
subsections 4.10(a) and (b) and 4.14(a), (b) and (c) of the
Agreement, for the purpose of reimbursing amounts deducted
pursuant to the foregoing clause (c); provided, however, that the
Class A Invested Amount may not be reduced below zero.
Subject to the Agreement, payments of principal are
limited to the unpaid Class A Invested Amount of the Class A
Securities, which may be less than the unpaid balance of the
Class A Securities pursuant to the terms of the Agreement. All
principal on the Class A Securities is due and payable no later
than the February 2007 Distribution Date (or if such day is not a
Business Day, the next succeeding Business Day) (the "Scheduled
Series 1998-2 Termination Date"). After the earlier to occur of
(i) the Scheduled Series 1998-2 Termination Date and (ii) the day
after the Distribution Date on which the Series 1998-2 Securities
are paid in full (the "Series 1998-2 Termination Date") neither
the Trust nor the Transferor will have any further obligation to
distribute principal or interest on the Class A Securities. In
the event that the Class A Invested Amount is greater than zero
on the Series 1998-2 Termination Date, the Trustee will sell or
cause to be sold, to the extent necessary, an amount of interests
in the Receivables or certain of the Receivables up to 110% of
the Class A Invested Amount, the Class B Invested Amount, the CTO
Invested Amount and the Class D Invested Amount at the close of
business on such date (but not more than the total amount of
Receivables allocable to the Series 1998-2 Securities), and shall
pay the proceeds to the Class A Securityholders pro rata in final
payment of the Class A Securities, then to the Class B
Securityholders pro rata in final payment of the Class B
Securities, then to the CTO Securityholders pro rata in final
payment of the Collateralized Trust Obligations and finally to
the Class D Securityholders pro rata in final payment of the
Class D Securities.
Unless the certificate of authentication hereon has
been executed by or on behalf of the Trustee, by manual
signature, this Security shall not be entitled to any benefit
under the Agreement, or be valid for any purpose.
IN WITNESS WHEREOF, the Transferor has caused this
Security to be duly executed.
FINGERHUT RECEIVABLES, INC.
By:
Name:
Title:
Dated:
CERTIFICATE OF AUTHENTICATION
This is one of the Class A Securities referred to in
the within-mentioned Pooling and Servicing Agreement.
THE BANK OF NEW YORK (DELAWARE)
By:
Name:
Title:
Exhibit A-2
FORM OF CLASS B INVESTOR SECURITY
EACH PURCHASER REPRESENTS AND WARRANTS FOR THE
BENEFIT OF FINGERHUT RECEIVABLES, INC. AND THE TRUSTEE
THAT SUCH PURCHASER IS NOT (I) AN EMPLOYEE BENEFIT PLAN
(AS DEFINED IN SECTION 3(3) OF THE EMPLOYEE RETIREMENT
INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA")) THAT
IS SUBJECT TO THE PROVISIONS OF TITLE I OF ERISA, (II)
A PLAN DESCRIBED IN SECTION 4975(e)(1) OF THE INTERNAL
REVENUE CODE OF 1986, AS AMENDED (THE "CODE") THAT IS
SUBJECT TO SECTION 4975 OF THE CODE, (III) A
GOVERNMENTAL PLAN, AS DEFINED IN SECTION 3(32) OF
ERISA, SUBJECT TO ANY FEDERAL, STATE OR LOCAL LAW WHICH
IS, TO A MATERIAL EXTENT, SIMILAR TO THE PROVISIONS OF
SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE, (IV)
AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE "PLAN ASSETS"
(AS DEFINED IN 29 C.F.R. SECTION 2510.3-101 OR
OTHERWISE UNDER ERISA) BY REASON OF A PLAN'S INVESTMENT
IN THE ENTITY OR (V) A PERSON INVESTING "PLAN ASSETS"
OF ANY SUCH PLAN (INCLUDING WITHOUT LIMITATION, FOR
PURPOSES OF CLAUSE (IV) AND THIS CLAUSE (V), AS
APPLICABLE, AN INSURANCE COMPANY GENERAL ACCOUNT, BUT
EXCLUDING ANY ENTITY REGISTERED UNDER THE INVESTMENT
COMPANY ACT OF 1940, AS AMENDED).
UNLESS THIS SECURITY IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK
CORPORATION ("DTC"), TO THE TRUSTEE OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY
SECURITY ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR
IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO.
OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO.
HAS AN INTEREST HEREIN.
No. ___ $__________
CUSIP NO. 31786YAG5
FINGERHUT MASTER TRUST
6.51% ASSET BACKED SECURITY,
SERIES 1998-2, CLASS B
Evidencing an undivided interest in a trust, the corpus
of which consists of receivables generated from time to time in
the ordinary course of business from a portfolio of consumer
revolving consumer credit card accounts and closed-end
installment sale or closed-end loan contracts transferred or to
be transferred by Fingerhut Receivables, Inc. (the "Transferor")
and other assets and interests constituting the Trust under the
Agreement described below.
(Not an interest in or a recourse obligation of
Fingerhut Receivables, Inc., Fingerhut Companies, Inc., Fingerhut
National Bank or any affiliate of any of them.)
This certifies that __________ (the "Securityholder")
is the registered owner of a fractional undivided interest in the
Fingerhut Master Trust (the "Trust") issued pursuant to the
Amended and Restated Pooling and Servicing Agreement, dated as of
March 18, 1998 (the "Pooling and Servicing Agreement"; such term
to include any amendment thereto) by and between the Transferor,
Fingerhut National Bank, as the Servicer (the "Servicer"), and
The Bank of New York (Delaware), as Trustee (the "Trustee"), and
the Series 1998-2 Supplement, dated as of April 28, 1998 (the
"Series 1998-2 Supplement"), among the Transferor, the Servicer
and the Trustee. The Pooling and Servicing Agreement, as
supplemented by the Series 1998-2 Supplement, is herein referred
to as the "Agreement". The corpus of the Trust consists of all
of the Transferor's right, title and interest in, to and under
the Trust Property (as defined in the Agreement).
This Security does not purport to summarize the
Agreement and reference is made to that Agreement for information
with respect to the interests, rights, benefits, obligations,
proceeds, and duties evidenced hereby and the rights, duties and
obligations of the Trustee. To the extent not defined herein,
the capitalized terms used herein have the meanings ascribed to
them in the Agreement. This Security is one of a series of
Securities entitled "Fingerhut Master Trust 6.51% Asset Backed
Securities, Series 1998-2, Class B" (the "Class B Securities"),
each of which represents a fractional undivided interest in the
Trust, and is issued under and is subject to the terms,
provisions and conditions of the Agreement, to which Agreement,
as amended from time to time, the Securityholder by virtue of the
acceptance hereof assents and by which the Securityholder is
bound.
The Transferor has structured the Agreement, the Class
B Securities, the Fingerhut Master Trust 6.23% Asset Backed
Securities, Series 1998-2, Class A (the "Class A Securities" and
collectively with the Class B Securities the "Offered
Securities") and the Fingerhut Master Trust Floating Rate Asset
Backed Securities, Series 1998-2, Collateralized Trust
Obligations (the "Collateralized Trust Obligations") with the
intention that the Offered Securities and the Collateralized
Trust Obligations will qualify under applicable tax law as
indebtedness, and both the Transferor and each holder of a Class
B Security (a "Class B Securityholder") or any interest therein
by acceptance of its Security or any interest therein, agrees to
treat the Class B Securities for purposes of federal, state and
local income or franchise taxes and any other tax imposed on or
measured by income, as indebtedness.
No principal will be payable to the Class B
Securityholders until the earlier of the Class B Expected Final
Payment Date and, upon the occurrence of a Pay Out Event, the
Distribution Date following the Monthly Period in which the Pay
Out Event occurs but in no event earlier than the Distribution
Date either on or following the Distribution Date on which the
Class A Invested Amount had been paid in full. No principal will
be payable to the Class B Securityholders until all principal
payments have been made to the Class A Securityholders. No
principal payments will be made to the CTO Securityholders or
Class D Securityholders (other than with respect to Class D
Excess Amounts) until the Distribution Date either on or
following the Distribution Date on which the Class B Invested
Amount has been paid in full.
Interest on the Offered Securities will be payable on
June 15, 1998 and on the 15th day of each month thereafter or, if
such day is not a business day, on the next succeeding business
day (each, a "Distribution Date"), in an amount equal to (1) with
respect to the Class A Securities an amount equal to the product
of (i) the Class A Interest Rate, (ii) a fraction the numerator
of which is the actual number of days in the related Interest
Accrual Period and the denominator of which is 360 and (iii) the
outstanding principal balance of the Class A Securities as of the
close of business on the first day of such Interest Accrual
Period and (2) with respect to the Class B Securities (a) the
product of (i) the Class B Interest Rate, (ii) a fraction the
numerator of which is the actual number of days in the related
Interest Accrual Period and the denominator of which is 360 and
(iii) the outstanding principal balance of the Class B Securities
as of the close of business on the first day of such Interest
Accrual Period (or in the case of the initial Distribution Date,
an amount equal to the product of (u) the initial Class B
Invested Amount, (v) 47 divided by 360, and (w) the Class B
Interest Rate.
Interest payments on the Class A Securities on each
Distribution Date will be funded from Available Series 1998-2
Finance Charge Collections with respect to the preceding Monthly
Period (or, with respect to the first Distribution Date, such
collections from and including the Closing Date to and including
May 29, 1998 plus the amount of the initial deposit to the
Interest Funding Account to be made on the Closing Date) and from
certain other funds allocated as set forth in the Pooling and
Servicing Agreement to the respective classes of the Securities
and deposited on each business day during such Monthly Period in
the Interest Funding Account.
Subject to the prior payment of interest on the Class A
Securities, interest payments on the Class B Securities on each
Distribution Date will be funded from the portion of Available
Series 1998-2 Finance Charge Collections with respect to the
preceding Monthly Period and from certain other funds allocated
as set forth in the Pooling and Servicing Agreement to the Class
B Securities and deposited on each business day during such
Monthly Period in the Interest Funding Account.
"Class B Invested Amount" shall mean, with respect to
any Business Day, an amount equal to (a) the Class B Initial
Invested Amount minus (b) the aggregate amount of principal
payments made to Class B Securityholders through and including
such Business Day, minus (c) the aggregate amount of Class B
Charge-Offs for all prior Distribution Dates, minus (d) the
aggregate amount of Redirected Class B Principal Collections
through and including such Business Day for which neither the
Class D Invested Amount nor the CTO Invested Amount has been
reduced on all prior Distribution Dates pursuant to subsection
4.14(e) of the Agreement, and plus (e) the sum of the aggregate
amount reimbursed with respect to reductions of the Class B
Invested Amount through and including such Business Day pursuant
to subsection 4.9(a)(x) of the Agreement plus, with respect to
such subsection, amounts applied thereto pursuant to subsections
4.10(a) and (b) and 4.14(a) and (b) of the Agreement, for the
purpose of reimbursing amounts deducted pursuant to the foregoing
clauses (c) and (d); provided, however, that the Class B Invested
Amount may not be reduced below zero.
Subject to the Agreement, payments of principal are
limited to the unpaid Class B Invested Amount of the Class B
Securities, which may be less than the unpaid balance of the
Class B Securities pursuant to the terms of the Agreement. All
principal on the Class B Securities is due and payable no later
than the February 2007 Distribution Date (or if such day is not a
Business Day, the next succeeding Business Day) (the "Scheduled
Series 1998-2 Termination Date"). After the earlier to occur of
(i) the Scheduled Series 1998-2 Termination Date and (ii) the day
after the Distribution Date on which the Series 1998-2 Securities
are paid in full (the "Series 1998-2 Termination Date") neither
the Trust nor the Transferor will have any further obligation to
distribute principal or interest on the Class B Securities. In
the event that the Class B Invested Amount is greater than zero
on the Series 1998-2 Termination Date, the Trustee will sell or
cause to be sold, to the extent necessary, an amount of interests
in the Receivables or certain of the Receivables up to 110% of
the Class A Invested Amount, the Class B Invested Amount, the CTO
Invested Amount and the Class D Invested Amount at the close of
business on such date (but not more than the total amount of
Receivables allocable to the Series 1998-2 Securities), and
shall pay the proceeds to the Class A Securityholders pro rata -
in final payment of the Class A Securities, then to the Class B
Securityholders pro rata in final payment of the Class B
Securities, then to the CTO Securityholders pro rata in final
payment of the Collateralized Trust Obligations and finally to
the Class D Securityholders pro rata in final payment of the
Class D Securities.
Unless the certificate of authentication hereon has
been executed by or on behalf of the Trustee, by manual
signature, this Security shall not be entitled to any benefit
under the Agreement, or be valid for any purpose.
IN WITNESS WHEREOF, the Transferor has caused this
Security to be duly executed.
FINGERHUT RECEIVABLES, INC.
By:
Name:
Title:
Dated:
CERTIFICATE OF AUTHENTICATION
This is one of the Class B Securities referred to in
the within-mentioned Pooling and Servicing Agreement.
THE BANK OF NEW YORK (DELAWARE)
By:
Name:
Title:
Exhibit A-3
FORM OF COLLATERALIZED TRUST OBLIGATION
[Each Collateralized Trust Obligation that is a CTO
Global Security deposited with DTC, or a custodian on behalf of
DTC, shall bear the following legend:]
UNLESS THIS SECURITY IS PRESENTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST
COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER
OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT, AND ANY SECURITY ISSUED IS REGISTERED IN THE
NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND
ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER
ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE
OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL
INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO.,
HAS AN INTEREST HEREIN.
[Each Collateralized Trust Obligation that is issued
pursuant to Rule 144A shall bear the following legend:]
THIS SECURITY HAS NOT BEEN AND WILL NOT BE
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS.
THE HOLDER HEREOF, BY PURCHASING THIS SECURITY, AGREES
THAT THIS SECURITY MAY BE REOFFERED, RESOLD, PLEDGED OR
OTHERWISE TRANSFERRED ONLY IN COMPLIANCE WITH THE
SECURITIES ACT AND OTHER APPLICABLE LAWS AND ONLY
(1) PURSUANT TO RULE 144A UNDER THE SECURITIES ACT TO A
PERSON WHO THE HOLDER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER ("QIB") WITHIN THE
MEANING OF RULE 144A, PURCHASING FOR ITS OWN ACCOUNT,
OR A QIB PURCHASING FOR THE ACCOUNT OF A QIB, WHOM THE
HOLDER HAS INFORMED, IN EACH CASE, THAT SUCH REOFFER,
RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN
RELIANCE ON RULE 144A OR (2) IN AN OFFSHORE TRANSACTION
IN ACCORDANCE WITH RULE 903 OR RULE 904 OF REGULATION S
UNDER THE SECURITIES ACT. EACH SECURITY OWNER BY
ACCEPTING A BENEFICIAL INTEREST IN THIS SECURITY,
UNLESS SUCH PERSON ACQUIRED THIS SECURITY IN A TRANSFER
DESCRIBED IN CLAUSE (2) ABOVE, IS DEEMED TO REPRESENT
THAT IT IS EITHER A QIB PURCHASING FOR ITS OWN ACCOUNT
OR A QIB PURCHASING FOR THE ACCOUNT OF ANOTHER QIB.
[Each Collateralized Trust Obligation that is issued
pursuant to Regulation S shall bear the following legend:]
THIS SECURITY HAS NOT BEEN AND WILL NOT BE
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND PRIOR TO
THE DATE THAT IS 40 DAYS AFTER THE LATER OF THE
COMMENCEMENT OF THE OFFERING AND THE CLOSING DATE MAY
NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED
IN THE UNITED STATES OR TO A U.S. PERSON EXCEPT
PURSUANT TO AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT.
[Each Collateralized Trust Obligation shall bear the
following legends:]
EACH PURCHASER REPRESENTS AND WARRANTS FOR THE
BENEFIT OF FINGERHUT RECEIVABLES, INC. AND THE TRUSTEE
THAT SUCH PURCHASER IS NOT (I) AN EMPLOYEE BENEFIT PLAN
(AS DEFINED IN SECTION 3(3) OF THE EMPLOYEE RETIREMENT
INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA")) THAT
IS SUBJECT TO THE PROVISIONS OF TITLE I OF ERISA, (II)
A PLAN DESCRIBED IN SECTION 4975(e)(1) OF THE INTERNAL
REVENUE CODE OF 1986, AS AMENDED (THE "CODE") THAT IS
SUBJECT TO SECTION 4975 OF THE CODE, (III) A
GOVERNMENTAL PLAN, AS DEFINED IN SECTION 3(32) OF
ERISA, SUBJECT TO ANY FEDERAL, STATE OR LOCAL LAW WHICH
IS, TO A MATERIAL EXTENT, SIMILAR TO THE PROVISIONS OF
SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE, (IV)
AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE "PLAN ASSETS"
(AS DEFINED IN 29 C.F.R. SECTION 2510.3-101 OR
OTHERWISE UNDER ERISA) BY REASON OF A PLAN'S INVESTMENT
IN THE ENTITY OR (V) A PERSON INVESTING "PLAN ASSETS"
OF ANY SUCH PLAN (INCLUDING WITHOUT LIMITATION, FOR
PURPOSES OF CLAUSE (IV) AND THIS CLAUSE (V), AS
APPLICABLE, AN INSURANCE COMPANY GENERAL ACCOUNT, BUT
EXCLUDING ANY ENTITY REGISTERED UNDER THE INVESTMENT
COMPANY ACT OF 1940, AS AMENDED).
No. ___ $__________
CUSIP NO. 31786YAK6
FINGERHUT MASTER TRUST
FLOATING RATE ASSET BACKED
COLLATERALIZED TRUST OBLIGATION, SERIES 1998-2
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 consumer credit card accounts and closed-end
installment sale or closed-end loan contracts transferred or to
be transferred by certain subsidiaries of Fingerhut Receivables,
Inc. (the "Transferor") and other assets and interests
constituting the Trust under the Agreement described below.
(Not an interest in or a recourse obligation of
Fingerhut Receivables, Inc., Fingerhut Companies, Inc., Fingerhut
National Bank or any affiliate of any of them.)
This certifies that ___________________ (the
"Securityholder") is the registered owner of a fractional
undivided interest in the Fingerhut Master Trust (the "Trust")
issued pursuant to the Amended and Restated Pooling and
Servicing Agreement, dated as of March 18, 1998 (the "Pooling and
Servicing Agreement"; such term to include any amendment thereto)
by and between the Transferor, Fingerhut National Bank as the
Servicer (the "Servicer"), and The Bank of New York (Delaware),
as Trustee (the "Trustee"), and the Series 1998-2 Supplement,
dated as of April 28, 1998 (the "Series 1998-2 Supplement"),
among the Transferor, the Servicer and the Trustee. The Pooling
and Servicing Agreement, as supplemented by the Series 1998-2
Supplement, is herein referred to as the "Agreement." The corpus
of the Trust consists of all of the Transferor's right, title and
interest in, to and under the Trust Property (as defined in the
Agreement).
This Security does not purport to summarize the
Agreement and reference is made to that Agreement for information
with respect to the interests, rights, benefits, obligations,
proceeds, and duties evidenced hereby and the rights, duties and
obligations of the Trustee. To the extent not defined herein,
the capitalized terms used herein have the meanings ascribed to
them in the Agreement. This Security is one of a series of
Securities entitled "Fingerhut Master Trust Floating Rate Asset
Backed Securities, Series 1998-2, Collateralized Trust
Obligations (the "Collateralized Trust Obligations"), each of
which represents a fractional undivided interest in the Trust,
and is issued under and is subject to the terms, provisions and
conditions of the Agreement, to which Agreement, as amended from
time to time, the CTO Securityholder by virtue of the acceptance
hereof assents and by which the CTO Securityholder is bound.
The Transferor has structured the Agreement, the
Collateralized Trust Obligations, the Fingerhut Master Trust
6.23% Asset Backed Securities, Series 1998-2, Class A (the
"Class A Securities") and the Fingerhut Master Trust 6.51% Asset
Backed Securities, Series 1998-2, Class B (the "Class B
Securities") with the intention that the Class A Securities,
Class B Securities and Collateralized Trust Obligations will
qualify under applicable tax law as indebtedness, and both the
Transferor and each holder of a Collateralized Trust Obligation
(a "CTO Securityholder") or any interest therein by acceptance of
its Collateralized Trust Obligation or any interest therein,
agrees to treat the Collateralized Trust Obligations for purposes
of federal, state and local income or franchise taxes and any
other tax imposed on or measured by income, as indebtedness.
No principal will be payable to the CTO Securityholders
until the earlier of the Class C Expected Final Payment Date and,
upon the occurrence of a Pay Out Event, the Distribution Date
following the Monthly Period in which the Pay Out Event occurs
but in no event earlier than the Distribution Date either on or
following the Distribution Date on which the Class A Invested
Amount and the Class B Invested Amount have been paid in full.
No principal payments will be payable to the CTO Securityholders
until the Distribution Date either on or following the
Distribution Date on which the Class A Invested Amount and Class
B Invested Amount have been paid in full.
Interest on the Collateralized Trust Obligations will
be payable on June 15, 1998 and on each Distribution Date
thereafter, in an amount equal to the product of (i) a per annum
rate .95% in excess of LIBOR (the "CTO Interest Rate"), (ii) a
fraction the numerator of which is the actual number of days in
the related Interest Accrual Period and the denominator of which
is 360 and (iii) the CTO Invested Amount as of the close of
business on the first day of such Interest Accrual Period (or in
the case of the initial Distribution Date, an amount equal to the
sum of (I) the product of (u) the initial CTO Invested Amount,
(v) 48 divided by 360, and (w) the CTO Interest Rate.
Subject to the prior payment of interest on the Class A
Securities and Class B Securities, interest payments on the
Class C Securities on each Distribution Date will be funded from
the portion of Available Series 1998-2 Finance Charge Collections
with respect to the preceding Monthly Period and from certain
other funds allocated as set forth in the Pooling and Servicing
Agreement to the Collateralized Trust Obligations and deposited
on each business day during such Monthly Period in the Interest
Funding Account.
"CTO Invested Amount" shall mean with respect to any
Business Day, an amount equal to (a) the CTO Initial Invested
Amount minus (b) the aggregate amount of principal payments made
to CTO Securityholders through and including such Business Day,
minus (c) the aggregate amount of CTO Charge-Offs for all prior
Distribution Dates, minus (d) the aggregate amount of Redirected
CTO Principal Collections and Redirected Class B Principal
Collections through and including such Business Day for which the
Class D Invested Amount has not been reduced pursuant to
subsection 4.14(d) of the Agreement, plus (e) the aggregate
amount reimbursed with respect to reductions of the CTO Invested
Amount through and including such Business Day pursuant to
subsection 4.9(a)(xi) of the Agreement plus, with respect to such
subsection, amounts applied thereto pursuant to subsections
4.10(a) and (b) and 4.14(a) of the Agreement, for the purpose of
reimbursing amounts deducted pursuant to the foregoing clauses
(c) and (d); provided, however, that the CTO Invested Amount may
not be reduced below zero.
Subject to the Agreement, payments of principal are
limited to the unpaid CTO Invested Amount of the Collateralized
Trust Obligations, which may be less than the unpaid balance of
the Collateralized Trust Obligations pursuant to the terms of the
Agreement. All principal on the Collateralized Trust Obligations
is due and payable no later than the February 2007 Distribution
Date (or if such day is not a Business Day, the next succeeding
Business Day) (the "Scheduled Series 1998-2 Termination Date").
After the earlier to occur of (i) the Scheduled Series 1998-2
Termination Date and (ii) the day after the Distribution Date on
which the Series 1998-2 Securities are paid in full (the "Series
1998-2 Termination Date") neither the Trust nor the Transferor
will have any further obligation to distribute principal or
interest on the Collateralized Trust Obligations. In the event
that the CTO 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 interests in the Receivables
or certain of the Receivables up to 110% of the Class A Invested
Amount, the Class B Invested Amount, the CTO Invested Amount and
the Class D Invested Amount at the close of business on such date
(but not more than the total amount of Receivables allocable to
the Series 1998-2 Securities), and shall pay the proceeds to the
Class A Securityholders pro rata in final payment of the Class A
Securities, then to the Class B Securityholders pro rata in final
payment of the Class B Securities, then to the CTO
Securityholders pro rata in final payment of the Collateralized
Trust Obligations and finally to the Class D Securityholders pro
rata in final payment of the Class D Securities.
Unless the certificate of authentication hereon has
been executed by or on behalf of the Trustee, by manual
signature, this Security shall not be entitled to any benefit
under the Agreement, or be valid for any purpose.
IN WITNESS WHEREOF, the Transferor has caused this
Security to be duly executed.
FINGERHUT RECEIVABLES, INC.
By:
Name:
Title:
Dated:
CERTIFICATE OF AUTHENTICATION
This is one of the Collateralized Trust Obligations
referred to in the within-mentioned Pooling and Servicing
Agreement.
THE BANK OF NEW YORK (DELAWARE)
By:
Name:
Title:
Exhibit A-4
FORM OF CLASS D INVESTOR SECURITY
THIS SECURITY WAS ORIGINALLY ISSUED IN A TRANSACTION
EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"). THIS SECURITY HAS NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OR ANY APPLICABLE
STATE SECURITIES LAW OF ANY STATE AND MAY NOT BE OFFERED,
SOLD, PLEDGED OR OTHERWISE TRANSFERRED UNLESS REGISTERED
PURSUANT TO OR EXEMPT FROM REGISTRATION UNDER THE SECURITIES
ACT AND ANY OTHER APPLICABLE SECURITIES LAW. TRANSFERS OF
THIS SECURITY SHALL BE SUBJECT TO THE RESTRICTIONS SET FORTH
IN THE POOLING AND SERVICING AGREEMENT.
EACH PURCHASER REPRESENTS AND WARRANTS FOR THE BENEFIT
OF FINGERHUT RECEIVABLES, INC. AND THE TRUSTEE THAT SUCH
PURCHASER IS NOT (I) AN EMPLOYEE BENEFIT PLAN (AS DEFINED IN
SECTION 3(3) OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT
OF 1974, AS AMENDED ("ERISA")) THAT IS SUBJECT TO THE
PROVISIONS OF TITLE I OF ERISA, (II) A PLAN DESCRIBED IN
SECTION 4975(e)(1) OF THE INTERNAL REVENUE CODE OF 1986, AS
AMENDED (THE "CODE") THAT IS SUBJECT TO SECTION 4975 OF THE
CODE, (III) A GOVERNMENTAL PLAN, AS DEFINED IN SECTION 3(32)
OF ERISA, SUBJECT TO ANY FEDERAL, STATE OR LOCAL LAW WHICH
IS, TO A MATERIAL EXTENT, SIMILAR TO THE PROVISIONS OF
SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE, (IV) AN
ENTITY WHOSE UNDERLYING ASSETS INCLUDE PLAN ASSETS (AS
DEFINED IN 29 C.F.R. SECTION 2510.3-101 OR OTHERWISE UNDER
ERISA) BY REASON OF A PLAN'S INVESTMENT IN THE ENTITY OR (V)
A PERSON INVESTING PLAN ASSETS OF ANY SUCH PLAN (INCLUDING
WITHOUT LIMITATION, FOR PURPOSES OF CLAUSE (IV) AND THIS
CLAUSE (V), AS APPLICABLE, AN INSURANCE COMPANY GENERAL
ACCOUNT, BUT EXCLUDING ANY ENTITY REGISTERED UNDER THE
INVESTMENT COMPANY ACT OF 1940, AS AMENDED).
No. ___ $_________
FINGERHUT MASTER TRUST
0% ASSET BACKED
SECURITY, SERIES 1998-2, CLASS D
Evidencing an undivided interest in a trust, the corpus
of which consists of receivables generated from time to time in
the ordinary course of business from a portfolio of consumer
revolving consumer credit card accounts and closed-end
installment sale or loan contracts transferred or to be
transferred by Fingerhut Receivables, Inc. (the "Transferor") and
other assets and interests constituting the Trust under the
Agreement described below.
(Not an interest in or a recourse obligation of
Fingerhut Receivables, Inc., Fingerhut Companies, Inc., Fingerhut
National Bank or any affiliate of any of them.)
This certifies that ______________ (the
"Securityholder") is the registered owner of a fractional
undivided interest in the Fingerhut Master Trust (the "Trust")
issued pursuant to the Amended and Restated Pooling and Servicing
Agreement, dated as of March 18, 1998 (the "Pooling and Servicing
Agreement"; such term to include any amendment or Supplement
thereto) by and between the Transferor, Fingerhut National Bank
as the Servicer (the "Servicer"), and The Bank of New York
(Delaware), as Trustee (the "Trustee"), and the Series 1998-2
Supplement, dated as of April 28, 1998 (the "Series 1998-2
Supplement"), among the Transferor, the Servicer and the Trustee.
The Pooling and Servicing Agreement, as supplemented by the
Series 1998-2 Supplement, is herein referred to as the
"Agreement." The corpus of the Trust consists of all of the
Transferor's right, title and interest in, to and under the Trust
Property (as defined in the Agreement).
This Security does not purport to summarize the
Agreement and reference is made to that Agreement for information
with respect to the interests, rights, benefits, obligations,
proceeds, and duties evidenced hereby and the rights, duties and
obligations of the Trustee. To the extent not defined herein,
the capitalized terms used herein have the meanings ascribed to
them in the Agreement. This Security is one of a series of
Securities entitled "Fingerhut Master Trust 0% Asset Backed
Securities, Series 1998-2, Class D" (the "Class D Securities"),
each of which represents a fractional undivided interest in the
Trust, and is issued under and is subject to the terms,
provisions and conditions of the Agreement, to which Agreement,
as amended from time to time, the Securityholder by virtue of the
acceptance hereof assents and by which the Securityholder is
bound.
Fingerhut Receivables, Inc. shall be prohibited from
transferring any interest in or portion of the Class D Security.
No principal will be payable to the Class D
Securityholders (other than with respect to Class D Excess
Amounts) until the earlier of the Expected Final Payment Date
and, upon the occurrence of a Pay Out Event, the Distribution
Date following the Monthly Period in which the Pay Out Event
occurs but in no event earlier than the Distribution Date either
on or following the Distribution Date on which Class A Invested
Amount, Class B Invested Amount and the CTO Invested Amount have
been paid in full. No principal will be payable to the Class D
Securityholders until all principal payments have first been made
to the Class A Securityholders, Class B Securityholders and CTO
Securityholders.
"Class D Invested Amount" shall mean with respect to
any Business Day, an amount equal to (a) the Class D Initial
Invested Amount, minus (b) the aggregate amount of principal
payments made to Class D Securityholders through and including
such Business Day and reductions of the Class D Invested Amount
pursuant to subsection 4.12(d), minus (c) the aggregate amount of
Class D Charge-Offs for all prior Distribution Dates, minus (d)
the aggregate amount of Redirected Principal Collections through
and including such Business Day for which the Class D Invested
Amount has been reduced pursuant to subsection 4.14(d) of the
Agreement, plus (e) the aggregate amount reimbursed with respect
to reductions of the Class D Invested Amount through and
including such Business Day pursuant to subsection 4.9(a)(xii) of
the Agreement plus, with respect to such subsection, amounts
applied thereto pursuant to subsections 4.10(a) and (b) of the
Agreement, for the purpose of reimbursing amounts deducted
pursuant to the foregoing clauses (c) and (d); provided, however,
that the Class D Invested Amount may not be reduced below zero.
Subject to the Agreement, payments of principal are
limited to the unpaid Class D Invested Amount of the Class D
Securities, which may be less than the unpaid balance of the
Class D Securities pursuant to the terms of the Agreement. All
principal on the Class D Securities is due and payable no later
than the February 2007 Distribution Date (or if such day is not a
Business Day, the next succeeding Business Day) (the "Scheduled
Series 1998-2 Termination Date"). After the earlier to occur of
(i) the Scheduled Series 1998-2 Termination Date or (ii) the day
after the Distribution Date on which the Series 1998-2 Securities
are paid in full (the "Series 1998-2 Termination Date") neither
the Trust nor the Transferor will have any further obligation to
distribute principal or interest on the Class D Securities. In
the event that the Class D 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 interests in the
Receivables or certain of the Receivables up to 110% of the Class
A Invested Amount, the Class B Invested Amount, the CTO Invested
Amount and the Class D Invested Amount at the close of business
on such date (but not more than the total amount of Receivables
allocable to the Investors Securities), and shall pay the
proceeds to the Class A Securityholders pro rata in final payment
of the Class A Securities, then to the Class B Securityholders
pro rata in final payment of the Class B Securities, then to the
CTO Securityholders pro rata in final payment of the
Collateralized Trust Obligations and finally to the Class D
Securityholders pro rata in final payment of the Class D
Securities.
Unless the certificate of authentication hereon has
been executed by or on behalf of the Trustee, by manual
signature, this Security shall not be entitled to any benefit
under the Agreement, or be valid for any purpose.
IN WITNESS WHEREOF, the Transferor has caused this
Security to be duly executed.
FINGERHUT RECEIVABLES, INC.
By:
Name:
Title:
Dated:
CERTIFICATE OF AUTHENTICATION
This is one of the Class D Securities referred to in
the within-mentioned Pooling and Servicing Agreement.
THE BANK OF NEW YORK (DELAWARE)
By:
Name:
Title:
EXHIBIT B
[Form of Monthly Securityholders' Statement]
EXHIBIT C
FORM OF CLEARING SYSTEM CERTIFICATE
Fingerhut Receivables, Inc.
4400 Baker Road, Suite F470
Minnetonka, Minnesota 55343
The Bank of New York (Delaware)
White Clay Center
Route 273
Newark, Delaware 19711
Re: Fingerhut Master Trust Series 1998-2
Ladies and Gentlemen:
Reference is hereby made to the Amended and Restated
Pooling and Servicing Agreement dated as of March 18, 1998, as
supplemented by the Series 1998-2 Supplement thereto, dated April
28, 1998 (collectively, the "Pooling and Servicing Agreement"),
each by and among Fingerhut Receivables, Inc., as Transferor,
Fingerhut National Bank, as Servicer and The Bank of New York
(Delaware), as Trustee. Capitalized terms used but not defined
herein shall have the meanings given to them in the Pooling and
Servicing Agreement.
This is to certify that, based solely on certifications
we have received in writing, by telex or by electronic
transmission from member organizations appearing in our records
as Persons being entitled to a portion of the principal amount
set forth below (our "Member Organizations"), as of the date
hereof, $ principal amount of the Fingerhut Master
Trust, Series 1998-2, Collateralized Trust Obligations (the
"CTOs") (i) is beneficially owned by persons that are not U.S.
persons or (ii) is owned by U.S. persons who purchased the CTOs
in transactions that did not require registration under the
United States Securities Act of 1933, as amended (the "Securities
Act"). As used in this paragraph, the term "U.S. person" has the
meaning given to it by Regulation S under the Securities Act.
We further certify (i) that we are not making available
herewith for exchange (or, if relevant, for the payment of
interest on) any portion of the Temporary Regulation S Global
Security excepted in such Member Organization certifications and
(ii) that as of the date hereof we have not received any
notification from any of our Member Organizations to the effect
that the statements made by such Member Organizations with
respect to any portion of the part submitted herewith for
exchange (or, if relevant, for the payment of interest on) are no
longer true and cannot be relied upon at the date hereof.
We understand that this certification is required in
connection with certain tax laws of the United States. In
connection therewith, if administrative and legal proceedings are
commenced or threatened in connection with which this
certification is or would be relevant, we irrevocably authorize
you to produce this certification to any interested party in such
proceedings.
Date: ___ *.
Yours faithfully,
[MORGAN GUARANTY TRUST COMPANY OF NEW
YORK, Brussels office, as operator of
the Euroclear System
or
CEDEL BANK, SOCIETE ANONYME]**
By:_______________________________
EXHIBIT D
FORM OF MEMBER ORGANIZATION CERTIFICATE
Fingerhut Receivables, Inc.
4400 Baker Road, Suite F470
Minnetonka, Minnesota 55343
The Bank of New York (Delaware)
White Clay Center
Route 273
Newark, Delaware 19711
Re: Fingerhut Master Trust Series 1998-2
Ladies and Gentlemen:
Reference is hereby made to the Amended and Restated
Pooling and Servicing Agreement dated as of March 18, 1998, as
supplemented by the Series 1998-2 Supplement thereto, dated April
28, 1998 (collectively, the "Pooling and Servicing Agreement"),
each by and among Fingerhut Receivables, Inc., as Transferor,
Fingerhut National Bank, as Servicer and The Bank of New York
(Delaware) as Trustee. Capitalized terms used but not defined
herein shall have the meanings given to them in the Pooling and
Servicing Agreement.
This is to certify that, as of the date hereof and
except as set forth below, the Fingerhut Master Trust, Series
1998-2, Collateralized Trust Obligations (the "CTOs") held by you
for our account (i) are beneficially owned by persons that are
not U.S. persons or (ii) are owned by U.S. persons who purchased
the CTOs in transactions that did not require registration under
the United States Securities Act of 1933, as amended (the
"Securities Act"). As used in this paragraph, the term "U.S.
person" has the meaning given to it by Regulation S under the
Securities Act.
We undertake to advise you promptly by tested telex on
or prior to the date on which you intend to submit your
certification relating to the CTOs held by you for our account in
accordance with your documented procedures if any applicable
statement herein is not correct on such date, and in the absence
of any such notification it may be assumed that this certificate
applies as of such date.
This certificate excepts and does not relate to U.S.
$_______ in principal amount of CTOs held by you for our account,
in respect of which we are not able to certify beneficial
ownership. We understand that exchange and delivery of
beneficial interests in the Regulation S Global Security or Rule
144A Global Security cannot be made until we do so certify.
We understand that this certificate is required in
connection with certain securities and tax laws of the United
States of America. If administrative or legal proceedings are
commenced or threatened in connection with which this certificate
is or would be relevant, we irrevocably authorize you to produce
this certificate or a copy thereof to any interested party in
such proceedings. As used herein, "United States" means the
United States of America (including the States and the District
of Columbia), its territories, its possessions (including Puerto
Rico, the U.S. Virgin Islands, Guam, American Samoa, Wake Island,
and Northern Mariana Islands) and other areas subject to its
jurisdiction.
Dated: , 199_*
Yours faithfully,
[Name of Person giving
the certificate]
By:
EXHIBIT E
FORM OF REGULATION S TRANSFER CERTIFICATE
Fingerhut Receivables Inc.
4400 Baker Road, Suite F470
Minnetonka, Minnesota 55343
The Bank of New York (Delaware)
White Clay Center
Route 273
Newark, Delaware 19711
Attention: Corporate Trust Division
Re: Fingerhut Master Trust Series 1998-2
Ladies and Gentlemen:
Reference is hereby made to the Amended and Restated
Pooling and Servicing Agreement dated as of March 18, 1998, as
supplemented by the Series
1998-2 Supplement thereto, dated April 28, 1998 (collectively,
the "Pooling and Servicing Agreement") each by and among
Fingerhut Receivables, Inc. as Transferor, and Fingerhut National
Bank, as Servicer and The Bank of New York (Delaware), as
Trustee. Capitalized terms used but not defined herein shall
have the meanings given to them in the Pooling and Servicing
Agreement.
[NOTE: INSERT [A] FOR A TRANSFER PRIOR TO THE EXCHANGE DATE OF AN
INTEREST IN A RULE 144A GLOBAL SECURITY TO A TRANSFEREE THAT
TAKES DELIVERY IN THE FORM OF AN INTEREST IN A TEMPORARY
REGULATION S GLOBAL SECURITY. INSERT [B] FOR A TRANSFER ON OR
AFTER THE EXCHANGE DATE OF AN INTEREST IN A RULE 144A GLOBAL
SECURITY TO A TRANSFEREE THAT TAKES DELIVERY IN THE FORM OF AN
INTEREST IN A REGULATION S GLOBAL SECURITY.]
[A] This letter relates to U.S. $______ in principal
amount of Fingerhut Master Trust, Series 1998-2, Collateralized
Trust Obligations (the "CTOs") which are held as a beneficial
interest in the CTO Rule 144A Global Security (CUSIP No. ______)
with DTC in the name of [insert name of transferor] (the
"Transferor"). The Transferor has requested an exchange or
transfer of such beneficial interest for an interest in a CTO
Temporary Regulation S Global Security (CUSIP No. ______) to be
held with [the Euroclear System] [Cedel Bank, Societe Anonyme]
through DTC.
[B] This letter relates to U.S. $_________ in principal
amount of Fingerhut Master Trust, Series 1998-2, Collateralized
Trust Obligations (the "CTOs"), which are held as a beneficial
interest in the CTO Rule 144A Global Security (CUSIP No. ______)
with DTC in the name of [insert name of transferor] (the
"Transferor"). The Transferor has requested an exchange or
transfer of such beneficial interest for an interest in a CTO
Regulation S Global Security (CUSIP No. ______) to be held with
[the Euroclear System][Cedel Bank, Societe Anonyme] through DTC.
[NOTE: INSERT [C] IN ALL CASES UNLESS [D] IS INSERTED IN
ACCORDANCE WITH THE NEXT SENTENCE. AT THE OPTION OF THE
TRANSFEROR, [C] MAY BE INSERTED IN PLACE OF [D] ON AND AFTER THE
CTO EXCHANGE DATE IN CASES OF A TRANSFER INTO A CTO REGULATION S
GLOBAL SECURITY.]
[C] In connection with such request and in respect of
such CTOs, the Transferor does hereby certify that such exchange
or transfer has been effected in accordance with the transfer
restrictions set forth in the Pooling and Servicing Agreement and
such CTOs and pursuant to and in accordance with Regulation S
under the Securities Act of 1933, as amended (the "Securities
Act"), and accordingly the Transferor does hereby certify that:
(i) the offer of the CTOs was not made to a Person in the
United States,
(i) [ at the time the buy order was originated, the
transferee was outside the United States, or the Transferor and
any Person acting on its behalf reasonably believed that the
transferee was outside the United States,]**
[(2) the transaction was executed in, on or through the
facilities of a designated offshore securities market and
neither the Transferor nor any Person acting on its behalf
knows that the transaction was pre-arranged with a buyer in
the United States,]*
(i) no directed selling efforts have been made in
contravention of the requirements of Rule 903(b) or 904(b) of
Regulation S, as applicable, and
(i) the transaction is not part of a plan or scheme to
evade the registration requirements of the Securities Act.
[D] In connection with such request and in respect of
such CTOs, the Transferor does hereby certify that such transfer
has been effected in accordance with the transfer restrictions
set forth in the Pooling and Servicing Agreement and the CTOs,
and that the CTOs are being transferred in a transaction
permitted by Rule 144A under the Securities Act.
This certificate and the statements contained herein
are made for the benefit of the Trustee and the benefit of the
Transferor and the initial purchaser.
[Insert Name of Transferor]
By:___________________
Name:
Title:
Dated: _________________
EXHIBIT F
FORM OF RULE 144A TRANSFER CERTIFICATE
Fingerhut Receivables
4400 Baker Road, Suite F470
Minnetonka, Minnesota 55343
The Bank of New York (Delaware)
White Clay Center
Route 273
Newark, Delaware 19711
Re: Fingerhut Master Trust
Series 1998-2
Ladies and Gentlemen:
Reference is hereby made to the Amended and Restated
Pooling and Servicing Agreement, dated as of March 18, 1998, as
supplemented by the Series 1998-2 Supplement thereto, dated April
28, 1998 (collectively, the "Pooling and Servicing Agreement"),
each by and among Fingerhut Receivables, Inc., as Transferor,
Fingerhut National Bank, as Servicer and The Bank of New York
(Delaware), as Trustee. Capitalized terms used but not defined
herein shall have the meanings given to them in the Pooling and
Servicing Agreement.
[NOTE: INSERT [A] FOR A TRANSFER PRIOR TO THE EXCHANGE DATE OF AN
INTEREST IN A TEMPORARY REGULATION S GLOBAL SECURITY TO A
TRANSFEREE THAT TAKES DELIVERY IN THE FORM OF AN INTEREST IN A
RULE 144A GLOBAL SECURITY. INSERT [B] FOR A TRANSFER AFTER THE
EXCHANGE DATE OF AN INTEREST IN A REGULATION S GLOBAL SECURITY TO
A TRANSFEREE THAT TAKES DELIVERY IN THE FORM OF AN INTEREST IN A
RULE 144A GLOBAL SECURITY.]
[A] This letter relates to U.S. $_______ in principal
amount of Fingerhut Master Trust, Series 1998-2, Collateralized
Trust Obligations (the "CTOs") which are held in the form of a
beneficial interest in the CTO Temporary Regulation S Global
Security (CUSIP No. _________) with [The Euroclear System] [Cedel
Bank, Societe Anonyme] (Common Code No. _______) through DTC in
the name of [insert name of transferor] (the "Transferor"). The
Transferor has requested a transfer of such beneficial interest
in the CTOs for a beneficial interest in the CTO Rule 144A Global
Security (CUSIP No. _________) to be held with DTC in the name of
[insert name of transferee].
[B] This letter relates to U.S. $_______ in principal
amount of Fingerhut Master Trust, Series 1998-2, Collateralized
Trust Obligations (the "CTOs") which are held in the form of a
beneficial interest in the CTO Regulation S Global Security
(CUSIP No. _________) with [The Euroclear System] [Cedel Bank,
Societe anonyme] (Common Code No. _______) through the DTC in the
name of [insert name of transferor] (the "Transferor"). The
Transferor has requested a transfer of such beneficial interest
in the CTOs for a beneficial interest in the CTO Rule 144A Global
Security (CUSIP No. _________) to be held with the DTC in the
name of [insert name of transferee].
In connection with such request, and in respect of such
CTOs, the Transferor does hereby certify that such CTOs are being
transferred in accordance with (i) the transfer restrictions set
forth in the Pooling and Servicing Agreement and the CTOs and
(ii) Rule 144A under the Securities Act to a transferee that the
Transferor reasonably believes is purchasing the CTOs for its own
account or an account with respect to which the transferee
exercises sole investment discretion and the transferee and any
such account is a "qualified institutional buyer" within the
meaning of Rule 144A, and such transferee is aware that the sale
to it is being made in reliance upon Rule 144A, in each case in a
transaction meeting the requirements of Rule 144A and in
accordance with any applicable securities laws of any state of
the United States or any other jurisdiction.
This certificate and the statements contained herein
are made for the benefit of the Trustee, the benefit of the
Transferor and the initial purchaser.
[Insert Name of Transferor]
By:
Name:
Title:
Dated: ,
_______________________________
* This certificate is to be dated on the CTO Exchange Date or,
if applicable, the subsequent date on which the CTO
Regulation S Global Security is delivered to the undersigned
in definitive form.
** Delete the inappropriate reference.
* This certificate must be dated no earlier than 15 days prior
to the CTO Exchange Date.
** Insert one of these two provisions, which come from the
definition of "offshore transaction" in Regulation S.
FINGERHUT RECEIVABLES, INC.
Transferor
FINGERHUT NATIONAL BANK
Servicer
and
THE BANK OF NEW YORK (DELAWARE)
Trustee
on behalf of the Series 1998-3 Securityholders
SERIES 1998-3 SUPPLEMENT
Dated as of July 30, 1998
to
AMENDED AND RESTATED POOLING AND SERVICING AGREEMENT
Dated as of March 18, 1998
____________________________________
FINGERHUT MASTER TRUST
Variable Funding Asset Backed Securities,
Series 1998-3, Class A
Variable Funding Asset Backed Securities,
Series 1998-3, Class B
Variable Funding Asset Backed Securities,
Series 1998-3, Class C
0% Variable Funding Asset Backed Securities,
Series 1998-3, Class D
_________________________________________________________
TABLE OF CONTENTS
Page
SECTION 1. Designation 1
SECTION 2. Definitions 1
SECTION 3. Reassignment Terms 35
SECTION 3A Conveyance of Interest in Interest Rate Cap;
Cap Proceeds Account 36
SECTION 4. Delivery and Payment for the Series 1998-3
Securities 40
SECTION 5. Form of Delivery of Series 1998-3 Securities;
Denominations; Depositary 40
SECTION 6. Article IV of Agreement 40
ARTICLE IV
RIGHTS OF SECURITYHOLDERS AND
ALLOCATION AND APPLICATION OF COLLECTIONS
SECTION 4.4 Rights of Securityholders 40
SECTION 4.5 Collections and Allocation; Payments on
Exchangeable Transferor Security 41
SECTION 4.6 Determination of Interest for the Series
1998-3 Securities 42
SECTION 4.7 Determination of Principal Amounts 44
SECTION 4.8 Shared Principal Collections 48
SECTION 4.9 Application of Funds on Deposit in the
Collection Account for the Securities 48
SECTION 4.10 Coverage of Required Amount for the Series
1998-3 Securities 56
SECTION 4.11 Payment of Interest 57
SECTION 4.12 Payment of Principal 59
SECTION 4.13 Series Charge-Offs 62
SECTION 4.14 Redirected Principal Collections for the
Series 1998-3 Securities 63
SECTION 4.15 Class C Trigger Event 65
SECTION 4.16 Class C Reserve Account 65
SECTION 4.17 Payment Reserve Account 67
SECTION 4.18 Revolving Receivables Reserve Account 68
SECTION 4.19 Principal Funding Account 70
SECTION 4.20 Constituent Class D Securities 71
SECTION 4.21 Determination of LIBOR 72
SECTION 7. Article V of the Agreement 72
ARTICLE V
DISTRIBUTIONS AND REPORTS TO INVESTOR
SECURITYHOLDERS
SECTION 5.1 Distributions 73
SECTION 5.2 Securityholders' Statement 74
SECTION 7A. Article VI of the Agreement 76
ARTICLE VI
THE SECURITIES
SECTION 6.1 Additional Invested Amounts 77
SECTION 6.2 Additional Class D Invested Amounts 81
SECTION 6.3 Extension 82
SECTION 8. Series Pay Out Events 84
SECTION 9. Series 1998-3 Termination 85
SECTION 9A Pre-Payment 86
SECTION 10. Legends; Transfer and Exchange; Restrictions
on Transfer of Series 1998-3 Securities;
Tax Treatment 86
SECTION 11.Ratification of Agreement 94
SECTION 12.Counterparts 95
SECTION 13.FCI Note 95
SECTION 14.Governing Law 95
SECTION 15. Instructions in Writing 95
EXHIBITS
Exhibit A-1 Form of Class A Investor Security
Exhibit A-2 Form of Class B Investor Security
Exhibit A-3 Form of Class C Investor SEcurity
Exhibit A-4 Form of Class D Investor Security
Exhibit B [Reserved]
Exhibit C Form of Monthly Securityholders' Statement
Exhibit D Form of Securityholder Investor Letter
Exhibit E Form of Extension
Exhibit F Form of Investor Securityholder Election Notice
SERIES 1998-3 SUPPLEMENT, dated as of July 30, 1998 (this
"Series Supplement") by and among FINGERHUT RECEIVABLES, INC., a
corporation organized and existing under the laws of the State of
Delaware, as Transferor (the "Transferor"), FINGERHUT NATIONAL
BANK, a national banking association organized under the laws of
the United States, as Servicer (the "Servicer"), and THE BANK OF
NEW YORK (DELAWARE), a Delaware banking corporation organized and
existing under the laws of the State of Delaware, as trustee
(together with its successors in trust thereunder as provided in
the Agreement referred to below, the "Trustee") under the Amended
and Restated Pooling and Servicing Agreement dated as of March
18, 1998 as amended, supplemented or otherwise modified from time
to time (the "Agreement") among the Transferor, the Servicer and
the Trustee.
Section 6.9 of the Agreement provides, among other things,
that the Transferor and the Trustee may at any time and from time
to time enter into a supplement to the Agreement for the purpose
of authorizing the issuance by the Trustee to the Transferor, for
execution and redelivery to the Trustee for authentication, of
one or more Series of Securities.
Pursuant to this Series Supplement, the Transferor and the
Trustee shall create a new Series of Investor Securities and
shall specify the Principal Terms thereof.
SECTION 1 Designation. There is hereby created a
Series of Investor Securities to be issued pursuant to the
Agreement and this Series Supplement to be known generally as the
"Series 1998-3 Securities." The Series 1998-3 Securities shall
be issued in four Classes, which shall be designated generally as
the Variable Funding Asset Backed Securities, Series 1998-3,
Class A (the "Class A Securities"), the Variable Funding Asset
Backed Securities, Series 1998-3, Class B (the "Class B
Securities"), the Variable Funding Asset Backed Securities,
Series 1998-3, Class C (the "Class C Securities") and the 0%
Variable Funding Asset Backed Securities, Series 1998-3, Class D
(the "Class D Securities").
SECTION 2 Definitions. In the event that any term or
provision contained herein shall conflict with or be inconsistent
with any provision contained in the Agreement, the terms and
provisions of this Series Supplement shall govern with respect to
the Series 1998-3 Securities. All Article, Section or subsection
references herein shall mean Article, Section or subsections of
the Agreement, as amended or supplemented by this Series
Supplement, except as otherwise provided herein. All capitalized
terms not otherwise defined herein are defined in the Agreement.
Each capitalized term defined herein shall relate only to the
Series 1998-3 Securities and no other Series of Securities issued
by the Trust.
"ABC Invested Amount" shall mean, with respect to any
Business Day, the sum of the Class A Invested Amount, the Class B
Invested Amount and the Class C Invested Amount after giving
effect to all adjustments of such amounts on such Business Day.
"Additional Class A Invested Amounts" shall have the
meaning specified in Section 6.15 of the Agreement.
"Additional Class B Invested Amounts" shall have the
meaning specified in Section 6.15 of the Agreement.
"Additional Class C Invested Amounts" shall have the
meaning specified in Section 6.15 of the Agreement.
"Additional Class D Invested Amounts" shall have the
meaning specified in Section 6.16 of the Agreement.
"Additional Invested Amounts" shall have the meaning
specified in Section 6.15 of the Agreement.
"Adjusted Invested Amount" shall mean as of any
Business Day the Invested Amount minus the sum of the Principal
Funding Account Balance and the Series 1998-3 Percentage of the
amount then on deposit in the Excess Funding Account.
"Administrative Agent" shall mean NationsBank, N.A. and
any successor thereto under the Security Purchase Agreement.
"Aggregate ABC Principal Amount" shall mean with
respect to any date of determination an amount equal to the sum
of the Class A Outstanding Principal Amount, the Class B
Outstanding Principal Amount and the Class C Outstanding
Principal Amount, each as of such date of determination.
"Aggregate Interest Component" shall mean the aggregate
sum of the Interest Components of all issued and outstanding
Commercial Paper.
"Aggregate Interest Rate Caps Notional Amount" shall
mean with respect to any date of determination an amount equal to
the sum of the notional amounts or equivalent amounts of all
outstanding Cap Agreements, Replacement Interest Rate Caps and
Qualified Substitute Arrangements, each as of such date of
determination.
"Alternate Purchasers" shall have the meaning set forth
in the Security Purchase Agreement.
"Amortization Period" shall mean the period beginning
on the day following the last day of the Revolving Period and
ending on the Series 1998-3 Termination Date.
"Amortization Period Commencement Date" shall mean (i)
the earlier of the first day of the August 2001 Monthly Period
and the Pay Out Commencement Date or (ii) if there is any
Extension, the earlier of the date specified as such in the most
recent Extension Notice and the Pay Out Commencement Date.
"Available Series 1998-3 Finance Charge Collections"
shall have the meaning specified in subsection 4.9(a) of the
Agreement.
"Available Series 1998-3 Principal Collections" shall
mean, with respect to any Business Day in the Amortization
Period, an amount equal to the sum of (i) an amount equal to the
Fixed/Floating Percentage on such Business Day of all Principal
Collections (less the amount of Redirected Principal Collections)
received on such Business Day, (ii) any amount on deposit in the
Excess Funding Account allocated to the Series 1998-3 Securities
pursuant to subsection 4.3(f) of the Agreement with respect to
such Business Day, (iii) an amount equal to the sum of the
aggregate Series Default Amount with respect to such Business Day
and the Series 1998-3 Percentage of any unpaid Adjustment
Payments to be treated as Available Series 1998-3 Principal
Collections pursuant to subsections 4.9(a)(v) and 4.9(a)(vi) of
the Agreement with respect to such Business Day and any
reimbursements of unreimbursed Series Charge-Offs to be treated
as Available Series 1998-3 Principal Collections pursuant to
subsections 4.9(a)(vii), (viii), (ix) and (x) of the Agreement
with respect to such Business Day plus in each case, amounts
applied with respect thereto pursuant to subsections 4.10(a) and
(b), 4.14(a), (b) and (c) and 4.16(b) of the Agreement, (iv)
amounts specified in the last sentence of Section 3A(h) of this
Series Supplement and (v) the aggregate Shared Principal
Collections allocated to the Series 1998-3 Securities pursuant to
Section 4.8 of the Agreement with respect to such Business Day.
"Bank Rate" shall mean, for any Funding Period, an
interest rate per annum equal to the sum of (a) LIBOR and (b)
0.45% per annum, provided, however, that:
(i) if any Purchaser or Liquidity Provider determines
that (A) it would be contrary to law or to the directive of any
central bank or other governmental authority to obtain United
Stated dollars in the London interbank market to fund its
investment in a Senior Security for such Funding Period, or (B)
it is unable, by reason of circumstances affecting the London
interbank market generally, to obtain United States dollars in
such market to fund its investment in such Senior Security for
such Funding Period, then the Bank Rate for such Funding Period
shall be the Federal Funds Effective Rate plus 0.45%; and
(ii) following the occurrence and during the
continuance of a Pay Out Event, the Bank Rate shall be an
interest rate per annum equal to the sum of (A) the Prime Rate
and (B) two percent (2%) per annum.
"Base Rate" shall mean, as of any Business Day, the sum
of (i) the weighted average of (A) the Class A Interest Rate, (B)
the Class B Interest Rate, (C) the Class C Interest Rate and (D)
if an interest rate is assigned to the Class D Securities
pursuant to Section 4.20 of the Agreement, the Class D Interest
Rate, each as of such Business Day, plus (ii) the product of 2%
per annum and the percentage equivalent of a fraction the
numerator of which is the Adjusted Invested Amount and the
denominator of which is the Invested Amount.
"Benefit Plan" shall mean (i) an employee benefit plan
(as defined in Section 3(3) of ERISA that is subject to the
provisions of Title I of ERISA, (ii) a plan described in Section
4975(e)(1) of the Code or (iii) any entity whose underlying
assets include plan assets by reason of a plan's investment in
the entity.
"Cap Agreements" shall mean the interest rate cap
agreements, between the Transferor and a Cap Provider, as amended
from time to time, and any additional interest rate protection
agreement or agreements, entered into between the Transferor and
a Cap Provider, as the same may from time to time be amended,
restated, modified and in effect.
"Cap Proceeds Account" shall have the meaning specified
in subsection 3A(b) of this Series Supplement.
"Cap Provider" shall mean a third party cap provider
having a senior unsecured debt rating of at least "Aa2" by
Moody's.
"Cap Receipt Amount" shall mean, with respect to any
Business Day the amount on deposit in the Cap Proceeds Account.
"Cap Settlement Date" shall have the meaning specified
in subsection 3A(b) of this Series Supplement.
"Capped Interest Rate" shall mean LIBOR plus 0.45%.
"Capped Class A Interest" shall mean, with respect to a
Business Day, an amount equal to the product of (i) the Capped
Interest Rate and (ii) a fraction the numerator of which is the
actual number of days from and including the immediately
preceding Business Day to but excluding such Business Day and the
denominator of which is 365 or 366, as the case may be, and (iii)
the Class A Outstanding Principal Amount.
"Capped Class A Interest Shortfall" shall mean, with
respect to a Business Day, the amount equal to the excess, if
any, of (x) the Capped Class A Interest for such Business Day
plus the Capped Class A Interest Shortfall for the preceding
Business Day over (y) the amount available to be paid to the
Class A Securityholders in respect thereof on such Business Day.
The Capped Class A Interest Shortfall shall initially be zero.
"Capped Class B Interest" shall mean, with respect to a
Business Day, an amount equal to the product of (i) the Capped
Interest Rate and (ii) a fraction the numerator of which is the
actual number of days from and including the immediately
preceding Business Day to but excluding such Business Day and the
denominator of which is 365 or 366, as the case may be, and (iii)
the Class B Outstanding Principal Amount.
"Capped Class B Interest Shortfall" shall mean, with
respect to a Business Day, the amount equal to the excess, if
any, of (x) the Capped Class B Interest for such Business Day
plus the Capped Class B Interest Shortfall for the preceding
Business Day over (y) the amount available to be paid to the
Class B Securityholders in respect thereof on such Business Day.
The Capped Class B Interest Shortfall shall initially be zero.
"Capped Class C Interest" shall mean, with respect to a
Business Day, an amount equal to the product of (i) the Capped
Interest Rate and (ii) a fraction the numerator of which is the
actual number of days from and including the immediately
preceding Business Day to but excluding such Business Day and the
denominator of which is 365 or 366, as the case may be, and (iii)
the Class C Outstanding Principal Amount.
"Capped Class C Interest Shortfall" shall mean, with
respect to a Business Day, the amount equal to the excess, if
any, of (x) the Capped Class C Interest for such Business Day
plus the Capped Class C Interest Shortfall for the preceding
Business Day over (y) the amount available to be paid to the
Class C Securityholders in respect thereof on such Business Day.
The Capped Class C Interest Shortfall shall initially be zero.
"Class A Adjusted Invested Amount" shall mean, with
respect to any date of determination, an amount equal to the
Class A Invested Amount minus the product of (a) the Class A
Percentage and (b) the Principal Funding Account Balance on such
date of determination.
"Class A Charge-Offs" shall have the meaning specified
in subsection 4.13(d) of the Agreement.
"Class A Enhancement Interest" shall mean, for any
Business Day, an amount equal to the interest accrued from and
including the preceding Business Day to but excluding such
Business Day on any conduit program enhancement disbursement
related to an amount equal to the excess of (i) the aggregate
amount of draws on the conduit program enhancement facility
supporting each Conduit Purchaser's Commercial Paper over (ii)
the sum of the Class B Outstanding Principal Amount and the Class
C Outstanding Principal Amount.
"Class A Facility Usage 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 360, (ii) .125% and
(iii) the Class A Invested Amount on the preceding Business Day.
"Class A Floating Percentage" shall mean, with respect
to any Business Day, the percentage equivalent of a fraction, the
numerator of which is the Class A Adjusted Invested Amount as of
the beginning of such Business Day after taking into account all
adjustments of the Class A Adjusted Invested Amount on such day
and the denominator of which is the greater of (a) the sum of the
aggregate amount of Principal Receivables as of the beginning of
such Business Day and the amounts on deposit in the Excess
Funding Account as of the beginning of such Business Day after
giving effect to any deposits or withdrawals to be made to the
Excess Funding Account on such Business Day and (b) the sum of
the numerators used to calculate the applicable floating or
fixed/floating percentages with respect to all Participations and
all Classes of all Series then outstanding.
"Class A Funding Interest" shall mean, with respect to
any day, the sum of (i) the Interest Component accrued for such
day with respect to Commercial Paper issued to fund any Class A
Funding Shortfall and (ii) the interest accrued for such day
under a Liquidity Provider Agreement on amounts drawn to fund any
Class A Funding Shortfall.
"Class A Funding Shortfall" shall mean, with respect to
any Business Day, an amount equal to the excess, if any, of (x)
the portion of Class A Interest accrued with respect to Funding
Periods ending on such Business Day plus Class A Funding Interest
for such Business Day plus the Class A Funding Shortfall for the
preceding Business Day over (y) the amount paid to the
Administrative Agent, for the benefit of the Class A
Securityholders, in respect thereof on such Business Day. The
Class A Funding Shortfall shall initially be zero.
"Class A Initial Invested Amount" shall mean
$76,522,727.27.
"Class A Interest" shall have the meaning specified in
subsection 4.6(a) of the Agreement.
"Class A Interest Rate" shall mean with respect to any
Business Day, a per annum interest rate equal to the rate which
if multiplied by the Class A Outstanding Principal Amount as of
the close of business on the preceding Business Day, would
produce, on the basis of a 365- or 366-day year, as the case may
be, an amount equal to the sum of (i) the product of (a) the
Class A Percentage and (b) the Cost of Funds for the period from
and including the immediately preceding Business Day to but
excluding such Business Day, (ii) if the Bank Rate is not used to
determine the Daily Accrued Interest for such Business Day, the
Class A Program Fee for such Business Day, (iii) the Class A
Facility Usage Fee for such Business Day and (iv) the Class A
Enhancement Interest for such Business Day.
"Class A Interest Shortfall" shall have the meaning
specified in subsection 4.6(a) of the Agreement.
"Class A Invested Amount" shall mean, when used with
respect to any Business Day, an amount equal to (a) the Class A
Initial Invested Amount minus (b) the aggregate amount of
principal payments made to Class A Securityholders through and
including such Business Day, minus (c) the aggregate amount of
Class A Charge-Offs for all prior Distribution Dates, plus (d)
the sum of the aggregate amount applied through and including
such Business Day pursuant to subsection 4.9(a)(vii) of the
Agreement (including, with respect to such subsection, amounts
applied thereto pursuant to Sections 4.10 and 4.14 of the
Agreement), for the purpose of reinstating amounts reduced
pursuant to the foregoing clause (c) and plus (e) the aggregate
principal amount of any Additional Class A Invested Amounts
purchased pursuant to Section 6.15 of the Agreement; provided,
however, that the Class A Invested Amount shall in no event be
reduced below zero or greater than the Class A Maximum Invested
Amount.
"Class A Maximum Invested Amount" shall mean
$336,363,636 or such lesser amount as is specified in writing by
the Transferor from time to time upon 30 days prior written
notice to the Trustee and the Senior Securityholders.
"Class A Outstanding Principal 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 Additional Class A Invested Amounts purchased by
the Class A Securityholders on or prior to such Business Day
pursuant to Section 6.15 of the Agreement minus (c) the aggregate
amount of principal payments made to the Class A Securityholders
on or prior to such Business Day.
"Class A Percentage" shall mean a fraction the
numerator of which is the Class A Invested Amount and the
denominator of which is the sum of the Class A Invested Amount,
the Class B Invested Amount and the Class C Invested Amount.
"Class A Principal" shall mean the principal
distributable in respect of the Class A Securities as calculated
in accordance with subsection 4.7(a) of the Agreement.
"Class A Program 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 360, (ii) .075% and (iii) the Class A
Invested Amount on the preceding Business Day.
"Class A Required Amount" shall mean the amount
determined by the Servicer on each Business Day equal to the
excess, if any, of (x) the sum of (i) the amount described in
subsection 4.9(a)(i)(y) for such Business Day, (ii) the Class A
Percentage of the Daily Portion of the Servicing Fee for the then
current Monthly Period, (iii) the Class A Percentage of the
Series Default Amount, if any, for such Business Day and, to the
extent not previously paid, for any previous Business Day in such
Monthly Period and (iv) on each Transfer Date the Class A
Percentage of the Series 1998-3 Percentage of the Adjustment
Payment required to be made by the Transferor but not made on
such Transfer Date, over (y) the Available Series 1998-3 Finance
Charge Collections plus any Excess Finance Charge Collections
from other Series and any Transferor Finance Charge Collections
allocated with respect to the amounts described in clauses (x)(i)
through (iv).
"Class A Securities" shall mean the variable funding
securities executed by the Transferor and authenticated by or on
behalf of the Trustee, substantially in the form of Exhibit A-1
hereto.
"Class A Securityholders" shall mean each Person in
whose name a Class A Security is registered in the Security
Register.
"Class A Securityholders' Interest" shall mean the
portion of the Series 1998-3 Securityholders' Interest evidenced
by the Class A Securities.
"Class B Adjusted Invested Amount" shall mean, with
respect to any date of determination, an amount equal to the
Class B Invested Amount minus the product of (a) the Class B
Percentage and (b) the Principal Funding Account Balance on such
date of determination.
"Class B Charge-Offs" shall have the meaning specified
in subsection 4.13(c) of the Agreement.
"Class B Enhancement Interest" shall mean, for any
Business Day, an amount equal to the interest accrued from and
including the preceding Business Day to but excluding such
Business Day on any conduit program enhancement disbursement
related to an amount equal to the excess of (i) the aggregate
amount of draws on the conduit program enhancement facility
supporting each Conduit Purchaser's Commercial Paper over (ii)
the Class C Outstanding Principal Amount (such excess not to
exceed an amount equal to the Class B Outstanding Principal
Amount).
"Class B Facility Usage 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 360, (ii) .1875% and
(iii) the Class B Invested Amount on the preceding Business Day.
"Class B Fixed/Floating Percentage" shall mean for any
Business Day on or after the Amortization Period Commencement
Date, the percentage equivalent of a fraction, the numerator of
which is the Class B Adjusted Invested Amount at the end of the
last day of the Revolving Period and the denominator of which is
the greater of (a) the sum of the aggregate amount of Principal
Receivables as of the beginning of such Business Day and the
amount on deposit in the Excess Funding Account as of the
beginning of such Business Day after giving effect to any
deposits or withdrawals to be made to the Excess Funding Account
on such Business Day and (b) the sum of the numerators used to
calculate the applicable floating or fixed/floating percentages
with respect to all Participations and all Classes of all Series
then outstanding.
"Class B Floating Percentage" shall mean, with respect
to any Business Day, the percentage equivalent of a fraction, the
numerator of which is the Class B Adjusted Invested Amount as of
the beginning of such Business Day after taking into account all
adjustments of the Class B Adjusted Invested Amount on such day
and the denominator of which is the greater of (a) the sum of the
aggregate amount of Principal Receivables as of the beginning of
such Business Day and the amount on deposit in the Excess Funding
Account as of the beginning of such Business Day after giving
effect to any deposits or withdrawals to be made to the Excess
Funding on such Business Day and (b) the sum of the numerators
used to calculate the applicable floating or fixed/floating
percentages with respect to all Participations and all Classes of
all Series then outstanding.
"Class B Funding Interest" shall mean, with respect to
any day, the sum of (i) the Interest Component accrued for such
day with respect to Commercial Paper issued to fund any Class B
Funding Shortfall and (ii) the interest accrued for such day
under a Liquidity Provider Agreement on amounts drawn to fund any
Class B Funding Shortfall.
"Class B Funding Shortfall" shall mean, with respect to
any Business Day, an amount equal to the excess, if any, of (x)
the portion of Class B Interest accrued with respect to Funding
Periods ending on such Business Day plus Class B Funding Interest
for such Business Day plus the Class B Funding Shortfall for the
preceding Business Day over (y) the amount paid to the
Administrative Agent, for the benefit of the Class B
Securityholders, in respect thereof on such Business Day. The
Class B Funding Shortfall shall initially be zero.
"Class B Initial Invested Amount" shall mean
$2,068,181.82.
"Class B Interest" shall have the meaning specified in
subsection 4.6(b) of the Agreement.
"Class B Interest Rate" shall mean with respect to any
Business Day, a per annum interest rate equal to the rate which
if multiplied by the Class B Outstanding Principal Amount as of
the close of business on the preceding Business Day, would
produce, on the basis of a 365- or 366-day year, as the case may
be, an amount equal to the sum of (i) the product of (a) the
Class B Percentage and (b) the Cost of Funds for the period from
and including the immediately preceding Business Day to but
excluding such Business Day, (ii) if the Bank Rate is not used to
determine the Daily Accrued Interest for such Business Day, the
Class B Program Fee for such Business Day, (iii) the Class B
Facility Usage Fee for such Business Day and (iv) the Class B
Enhancement Interest for such Business Day.
"Class B Interest Shortfall" shall have the meaning
specified in subsection 4.6(b) of the Agreement.
"Class B Invested Amount" shall mean, when used with
respect to any Business Day, an amount equal to (a) the Class B
Initial Invested Amount, minus (b) the aggregate amount of
principal payments made to Class B Securityholders through and
including such Business Day, minus (c) the aggregate amount of
Class B Charge-Offs for all prior Distribution Dates, minus (d)
the aggregate amount of Redirected Class B Principal Collections
for which neither the Class D Invested Amount nor the Class C
Invested Amount has been reduced on all prior Distribution Dates
pursuant to Section 4.14(d) of the Agreement, plus (e) the sum of
the aggregate amount applied through and including such Business
Day pursuant to subsection 4.9(a)(viii) of the Agreement
(including with respect to such subsection, amounts applied
thereto pursuant to Sections 4.10 and 4.14 of the Agreement), for
the purpose of reinstating amounts reduced pursuant to the
foregoing clauses (c) and (d), and plus (f) the aggregate
principal amount of any Additional Class B Invested Amounts
purchased pursuant to Section 6.15 of the Agreement; provided,
however, that the Class B Invested Amount shall in no event be
reduced below zero or greater than the Class B Maximum Invested
Amount.
"Class B Maximum Invested Amount" shall mean $9,090,909
or such lesser amount as is specified in writing by the
Transferor from time to time upon 30 days prior written notice to
the Trustee and the Senior Securityholders.
"Class B Outstanding Principal Amount" shall mean, when
used with respect to any Business Day, an amount equal to (a) the
Class B Initial Invested Amount, plus (b) the aggregate principal
amount of any Additional Class B Invested Amounts purchased by
the Class B Securityholders on or prior to such Business Day
pursuant to Section 6.15 of the Agreement minus (c) the aggregate
amount of principal payments made to Class B Securityholders on
or prior to such Business Day.
"Class B Percentage" shall mean a fraction the
numerator of which is the Class B Invested Amount and the
denominator of which is the sum of the Class A Invested Amount,
the Class B Invested Amount and the Class C Invested Amount.
"Class B Principal" shall mean the principal
distributable in respect of the Class B Securities as calculated
in accordance with subsection 4.7(b) of the Agreement.
"Class B Principal Payment Commencement Date" shall
mean the earlier of (a) the first Business Day in the
Amortization Period on which the Class A Invested Amount is paid
in full or, if there are no Principal Collections allocable to
the Series 1998-3 Securities remaining after payments have been
made to the Class A Securities 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 Business Day following a sale
or repurchase of the Receivables as set forth in Section 2.4(e),
9.2, 10.2, 12.1 or 12.2 of the Agreement or Section 3 of this
Series Supplement.
"Class B Program 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 360, (ii) .250% and (iii) the Class B
Invested Amount on the preceding Business Day.
"Class B Required Amount" shall mean the amount
determined by the Servicer on each Business Day equal to the
excess, if any, of (x) the sum of (i) the amount described in
subsection 4.9(a)(ii)(y) for such Business Day, (ii) the Class B
Percentage of the Daily Portion of the Servicing Fee for the then
current Monthly Period, (iii) the Class B Percentage of the
Series Default Amount, if any, for such Business Day and, to the
extent not previously paid, for any previous Business Day in such
Monthly Period and (iv) the Class B Percentage of the Series 1998-
3 Percentage of the Adjustment Payment required to be made by the
Transferor but not made on the related Transfer Date, over (y)
the Available Series 1998-3 Finance Charge Collections plus any
Excess Finance Charge Collections from other Series and any
Transferor Finance Charge Collections allocated with respect to
the amounts described in clauses (x)(i) through (iv).
"Class B Securities" shall mean the variable funding
securities executed by the Transferor and authenticated by or on
behalf of the Trustee, substantially in the form of Exhibit A-2
hereto.
"Class B Securityholders" shall mean each Person in
whose name a Class B Security is registered in the Security
Register.
"Class B Securityholders' Interest" shall mean the
portion of the Series 1998-3 Securityholders' Interest evidenced
by the Class B Securities.
"Class C Adjusted Invested Amount" shall mean, with
respect to any date of determination, an amount equal to the
Class C Invested Amount minus the product of (a) the Class C
Percentage and (b) the Principal Funding Account Balance on such
date of determination.
"Class C Charge-Offs" shall have the meaning specified
in subsection 4.13(b) of the Agreement.
"Class C Enhancement Interest" shall mean, for any
Business Day, an amount equal to the interest accrued from and
including the preceding Business Day to but excluding such
Business Day on any conduit program enhancement disbursement
related to an amount equal to the lesser of (i) the aggregate
amount of draws on the conduit program enhancement facility
supporting each Conduit Purchaser's Commercial Paper and (ii) the
Class C Outstanding Principal Amount.
"Class C Facility Usage 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 360, (ii) .1875% and
(iii) the Class C Invested Amount on the preceding Business Day.
"Class C Fixed/Floating Percentage" shall mean for any
Business Day on or after the Amortization Period Commencement
Date the percentage equivalent of a fraction, the numerator of
which is the Class C Adjusted Invested Amount at the end of the
last day of the Revolving Period and the denominator of which is
the greater of (a) the sum of the aggregate amount of Principal
Receivables as of the beginning of such Business Day and the
amount on deposit in the Excess Funding Account as of the
beginning of such Business Day after giving effect to any
deposits or withdrawals to be made to the Excess Funding Account
on such Business Day and (b) the sum of the numerators used to
calculate the floating or fixed/floating percentages with respect
to all Participations and all Classes of all Series then
outstanding.
"Class C Floating Percentage" shall mean, with respect
to any Business Day, the percentage equivalent of a fraction, the
numerator of which is the Class C Adjusted Invested Amount as of
the beginning of such Business Day after taking into account all
adjustments of the Class C Adjusted Invested Amount on such day
and the denominator of which is the greater of (a) the sum of the
aggregate amount of Principal Receivables as of the beginning of
such Business Day and the amount on deposit in the Excess Funding
Account as of the beginning of such Business Day after giving
effect to any deposits or withdrawals to be made to the Excess
Funding Account on such Business Day and (b) the sum of the
numerators used to calculate the applicable floating or
fixed/floating percentages with respect to all Participations and
all Classes of all Series then outstanding.
"Class C Funding Interest" shall mean, with respect to
any day, (i) the Interest Component accrued for such day with
respect to Commercial Paper issued to fund any Class C Funding
Shortfall and (ii) the interest accrued for such day under a
Liquidity Provider Agreement on amounts drawn to fund any Class A
Funding Shortfall.
"Class C Funding Shortfall" shall mean, with respect to
any Business Day, an amount equal to the excess, if any, of (x)
the portion of Class C Interest accrued with respect to Funding
Periods ending on such Business Day plus Class C Funding Interest
for such Business Day plus the Class C Funding Shortfall for the
preceding Business Day over (y) the amount paid to the
Administrative Agent, for the benefit of the Class C
Securityholders, in respect thereof on such Business Day. The
Class C Funding Shortfall shall initially be zero.
"Class C Initial Invested Amount" shall mean
$12,409,090.91.
"Class C Interest" shall have the meaning specified in
subsection 4.6(c) of the Agreement.
"Class C Interest Rate" shall mean with respect to any
Business Day, a per annum interest rate equal to the rate which
if multiplied by the Class C Outstanding Principal Amount as of
the close of business on the preceding Business Day, would
produce, on the basis of a 365- or 366 -day year, as the case may
be, an amount equal to the sum of (i) the product of (a) the
Class C Percentage and (b) the Cost of Funds for the period from
and including the immediately preceding Business Day to but
excluding such Business Day, (ii) if the Bank Rate is not used to
determine the Daily Accrued Interest for such Business Day, the
Class C Program Fee for such Business Day, (iii) the Class C
Facility Usage Fee for such Business Day and (iv) the Class C
Enhancement Interest for such Business Day.
"Class C Interest Shortfall" shall have the meaning
specified in subsection 4.6(c) of the Agreement.
"Class C Invested Amount" shall mean, when used with
respect to any Business Day, an amount equal to (a) the Class C
Initial Invested Amount, minus (b) the aggregate amount of
principal payments made to Class C Securityholders through and
including such Business Day, minus (c) the aggregate amount of
Class C Charge-Offs for all prior Distribution Dates, minus (d)
the aggregate amount of Redirected Class B Principal Collections
and Redirected Class C Principal Collections for which the Class
D Invested Amount has not been reduced on all prior Distribution
Dates pursuant to Section 4.14(d) of the Agreement, plus (e) the
sum of the aggregate amount applied through and including such
Business Day pursuant to subsections 4.9(a)(ix) of the Agreement
(including, with respect to such subsection, amounts applied
thereto pursuant to subsections 4.10(a) and (b), 4.16(b) and
Section 4.14 of the Agreement), for the purpose of reinstating
amounts reduced pursuant to the foregoing clauses (c) and (d),
and plus (f) the aggregate principal amount of any Additional
Class C Invested Amounts purchased pursuant to Section 6.15 of
the Agreement; provided, however, that the Class C Invested
Amount shall in no event be reduced below zero or greater than
the Class C Maximum Invested Amount.
"Class C Maximum Invested Amount" shall mean
$54,545,455 or such lesser amount as is specified in writing by
the Transferor from time to time upon 30 days prior written
notice to the Trustee and the Senior Securityholders.
"Class C Outstanding Principal Amount" shall mean, when
used with respect to any Business Day, an amount equal to (a) the
Class C Initial Invested Amount, plus (b) the aggregate principal
amount of any Additional Class C Invested Amounts purchased by
the Class C Securityholders on or prior to such Business Day
pursuant to Section 6.15 of the Agreement, minus (c) the
aggregate amount of principal payments made to Class C
Securityholders on or prior to such Business Day.
"Class C Percentage" shall mean a fraction the
numerator of which is the Class C Invested Amount and the
denominator of which is the sum of the Class A Invested Amount,
the Class B Invested Amount and the Class C Invested Amount.
"Class C Principal" shall mean the principal
distributable in respect of the Class C Securities as calculated
in accordance with subsection 4.7(c) of the Agreement.
"Class C Principal Payment Commencement Date" shall
mean the earlier of (a) the first Business Day in the
Amortization Period on which the Class B Invested Amount is paid
in full or, if there are no Principal Collections allocable to
the Series 1998-3 Securities remaining after payments have been
made to the Class B Securities on such Business Day, the Business
Day following the Business Day on which the Class B Invested
Amount is paid in full, and (b) the Business Day following a sale
or repurchase of the Receivables as set forth in Sections 2.4(e),
9.2, 10.2, 12.1 or 12.2 of the Agreement and Section 3 of this
Series Supplement.
"Class C Program 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 360, (ii) .450% and (iii) the Class C
Invested Amount on the preceding Business Day.
"Class C Required Amount" shall mean the amount
determined by the Servicer on each Business Day equal to the
excess, if any, of (x) the sum of (i), the amount described in
subsection 4.9(a)(iii)(y) for such Business Day, (ii) the Class C
Percentage of the Daily Portion of the Servicing Fee for the then
current Monthly Period, (iii) the Class C Percentage of the
Series Default Amount, if any, for such Business Day and, to the
extent not previously paid, for any previous Business Day in such
Monthly Period and (iv) the Class C Percentage of the Series 1998-
3 Percentage of the Adjustment Payment required to be made by the
Transferor but not made on the related Transfer Date, over (y)
the Available Series 1998-3 Finance Charge Collections plus any
Excess Finance Charge Collections from other Series and any
Transferor Finance Charge Collections allocated with respect to
the amounts described in clauses (x)(i) through (iv).
"Class C Reserve Account" shall have the meaning
specified in subsection 4.16(a) of the Agreement.
"Class C Securityholders" shall mean each Person in
whose name a Class C Security is registered in the Security
Register.
"Class C Securityholders' Interest" shall mean the
portion of the Series 1998-3 Securityholders' Interest evidenced
by the Class C Securities.
"Class C Securities" shall mean the variable funding
securities executed by the Transferor and authenticated by or on
behalf of the Trustee, substantially in the form of Exhibit A-3
hereto.
"Class C Trigger Event" shall have the meaning
specified in Section 4.15 of the Agreement.
"Class D Charge-Offs" shall have the meaning specified
in subsection 4.13(a) of the Agreement.
"Class D Excess Amount" shall mean, with respect to any
Business Day, the excess of the Class D Invested Amount over the
Stated Class D Amount on such Business Day after taking into
account all adjustments of the Invested Amount on such day.
"Class D Fixed/Floating Percentage" shall mean for any
Business Day on or after the Amortization Period Commencement
Date the percentage equivalent of a fraction, the numerator of
which is the Class D Invested Amount at the end of the last day
of the Revolving Period and the denominator of which is the
greater of (a) the sum of the aggregate amount of Principal
Receivables as of the beginning of such Business Day and the
amount on deposit in the Excess Funding Account as of the
beginning of such Business Day after giving effect to any
deposits or withdrawals to be made to the Excess Funding Account
on such Business Day and (b) the sum of the numerators used to
calculate the applicable floating or fixed/floating percentages
with respect to all Participations and all Classes of all Series
then outstanding.
"Class D Floating Percentage" shall mean with respect
to any Business Day the percentage equivalent of a fraction, the
numerator of which is the Class D Invested Amount as of the
beginning of such Business Day after taking into account all
adjustments of the Class D Invested Amount on such day and the
denominator of which is the greater of (a) the sum of the
aggregate amount of Principal Receivables as of the beginning of
such Business Day and the amount on deposit in the Excess Funding
Account as of the beginning of such Business Day after giving
effect to any deposits or withdrawals to be made to the Excess
Funding Account on such Business Day and (b) the sum of the
numerators used to calculate the applicable floating or
fixed/floating percentages with respect to all Participations and
all Classes of all Series then outstanding.
"Class D Initial Invested Amount" shall mean
$12,409,090.91.
"Class D Interest Rate" shall have the meaning
specified in subsection 4.20 of the Agreement.
"Class D Invested Amount" shall mean, when used with
respect to any Business Day, an amount equal to (a) the Class D
Initial Invested Amount, plus (b) the aggregate principal amount
of any Additional Class D Invested Amounts pursuant to Section
6.16 of the Agreement, minus (c) the aggregate amount of
principal payments made to Class D Securityholders and reductions
of the Class D Invested Amount pursuant to subsection 4.7(d) of
the Agreement through and including such Business Day, minus (d)
the aggregate amount of Class D Charge-Offs for all prior
Distribution Dates, minus (e) the aggregate amount of Redirected
Principal Collections for which the Class D Invested Amount has
been reduced on all prior Distribution Dates, and plus (f) the
sum of the aggregate amount applied through and including such
Business Day pursuant to subsections 4.9(a)(x) of the Agreement
(including, with respect to such subsection, amounts applied
thereto pursuant to subsections 4.10(a) and (b) of the
Agreement), for the purpose of reinstating amounts reduced
pursuant to the foregoing clauses (d) and (e); provided, however,
that the Class D Invested Amount shall in no event be reduced
below zero.
"Class D Maximum Invested Amount" shall mean
$54,545,455 or such lesser amount as is specified in writing by
the Transferor from time to time upon 30 days prior written
notice to the Trustee and the Securityholders.
"Class D Outstanding Principal Amount" shall mean, when
used with respect to any Business Day, an amount equal to (a) the
Class D Initial Invested Amount, plus (b) the aggregate principal
amount of any Additional Class D Invested Amounts pursuant to
Section 6.16 of the Agreement, minus (c) the aggregate amount of
principal payments made to Class D Securityholders and reductions
of the Class D Invested Amount pursuant to subsection 4.7(d) of
the Agreement through and including such Business Day.
"Class D Principal" shall mean the principal
distributable in respect of the Class D Securities as specified
in subsection 4.7(d) of the Agreement.
"Class D Principal Payment Commencement Date" shall
mean the earlier of (a) the first Business Day in the
Amortization Period on which the Class C Invested Amount is paid
in full or, if there are no Principal Collections allocable to
the Series 1998-3 Securities remaining after payments have been
made to the Class C Securities on such Business Day, the Business
Day following the Business Day on which the Class C Invested
Amount is paid in full, and (b) the Business Day following a sale
or repurchase of the Receivables as set forth in Sections 2.4(e),
9.2, 10.2, 12.1 and 12.2 of the Agreement and Section 3 of this
Series Supplement.
"Class D Securityholders" shall mean each Person in
whose name a Class D Security is registered in the Security
Register.
"Class D Securityholders' Interest" shall mean the
portion of the Series 1998-3 Securityholders' Interest evidenced
by the Class D Securities.
"Class D Securities" shall mean the Securities executed
by the Transferor and authenticated by or on behalf of the
Trustee, substantially in the form of Exhibit A-4 hereto.
"Closing Date" shall mean the date of initial issuance
of Securities of Series 1998-3.
"Commercial Paper" shall mean the promissory notes
issued by the Conduit Purchasers in the commercial paper market
pursuant to the related facility documentation.
"Conduit Purchasers" shall have the meaning given to
such term in the Security Purchase Agreement.
"Cost of Funds" shall mean, with respect to any day
during each Monthly Period, the greater of (a) the sum of the
Daily Accrued Interest for each Purchaser Group on such day and
(b) the Servicer's most recent estimate, delivered to the Trustee
from time to time, of the average daily amount of the Daily
Accrued Interest for each Purchaser Group during such Monthly
Period.
"Daily Accrued Interest" shall mean, for each Purchaser
Group with respect to any day, the sum of (a) the Interest
Component accrued with respect to such day of outstanding
Commercial Paper which has been issued by the Conduit
Purchaser(s) in such Purchaser Group to fund all or a portion of
such Purchaser Group's Percentage of the ABC Invested Amount, (b)
the interest accrued at the Bank Rate with respect to such day on
amounts borrowed by the Conduit Purchaser(s) in such Purchaser
Group under a Liquidity Provider Agreement to fund all or a
portion of the ABC Invested Amount and (c) the interest accrued
at the Bank Rate with respect to such day on amounts funded by
Alternate Purchasers in such Purchaser Group with respect to all
or a portion of such Purchaser Group's Percentage of the ABC
Invested Amount.
"Daily Portion" shall mean, with respect to any amount
determined pursuant hereto, the product of such amount and a
fraction the numerator of which shall be the number of days from
and including the preceding Business Day to but excluding such
Business Day and the denominator of which shall be the number of
days in the then current Monthly Period.
"Distribution Date" shall mean September 15, 1998, and
the fifteenth day of each month thereafter, or if such day is not
a Business Day, the next succeeding Business Day; provided,
however, that the final Distribution Date with respect to the
payment of principal and interest shall be the Scheduled Series
1998-3 Termination Date.
"Early Amortization Period" shall mean the period
beginning on the day on which a Pay Out Event occurs or is deemed
to have occurred and ending on the earlier of (i) the date on
which the Class A Invested Amount, the Class B Invested Amount,
the Class C Invested Amount and the Class D Invested Amount have
been paid in full and (ii) the Series 1998-3 Termination Date.
"Election Date" shall have the meaning specified in
subsection 6.17(a) of the Agreement.
"Election Notice" shall have the meaning specified in
subsection 6.17(a) of the Agreement.
"Enhancement" shall mean, with respect to the Class A
Securities, the subordination of the Class B Invested Amount, the
Class C Invested Amount, and the Class D Invested Amount, with
respect to the Class B Securities, the subordination of the Class
C Invested Amount and the Class D Invested Amount, and with
respect to the Class C Securities, the subordination of the Class
D Invested Amount.
"Excess Finance Charge Collections" shall mean, with
respect to any Business Day, as the context requires, either (x)
the amount described in subsection 4.9(a)(xx) of the Agreement
allocated to the Series 1998-3 Securities but available to cover
shortfalls in amounts paid from Finance Charge Collections for
other Series, if any, or (y) the aggregate amount of Finance
Charge Collections allocable to other Series in excess of the
amounts necessary to make required payments with respect to such
Series, if any, and available to cover shortfalls with respect to
the Series 1998-3 Securities.
"Extension" shall mean the procedure by which the
Series 1998-3 Securityholders consent to the extension of the
Revolving Period to the new Amortization Period Commencement Date
set forth in the Extension Notice, pursuant to Section 6.17 of
the Agreement.
"Extension Date" shall mean the first day of the August
2001 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 6.17(a) of the Agreement.
"Extension Opinion" shall have the meaning specified in
subsection 6.17(a) of the Agreement.
"Extension Tax Opinion" shall have the meaning
specified in subsection 6.17(a) of the Agreement.
"Facility Limit" shall mean $400,000,000; provided,
that such amount may not at any time exceed the aggregate of the
Class A Commitment Amounts, the Class B Commitment Amounts and
the Class C Commitment Amounts (as each is defined in the
Security Purchase Agreement) at any time in effect; provided,
further, that from and after the Increase Termination Date the
Facility Limit shall at all times equal the Aggregate ABC
Principal Amount plus the Aggregate Interest Component; provided,
further, that the Transferor may, from time to time upon at least
thirty (30) days prior written notice to each Managing Agent,
elect to reduce the Facility Limit to an amount no less than the
outstanding Invested Amount after giving effect to any Additional
Invested Amounts requested on such date.
"Facility Unused Fee" shall mean, for any Business Day,
an amount equal to the sum of (A) 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) 0.125% and
(iii) the excess of (a) the Class A Maximum Invested Amount minus
the Class A Invested Amount as of the preceding Business Day and
(B) 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) .1875% and (iii) the excess of (x)the sum of
the Class B Maximum Invested Amount and the Class C Maximum
Invested Amount over (y) the sum of the Class B Invested Amount
and the Class C Invested Amount, each as of the preceding
Business Day.
"FCI Note" shall have the meaning specified in Section
13 of this Series Supplement.
"FCI Note Required Amount" shall have the meaning
specified in Section 13 of this Series Supplement.
"Federal Funds Effective Rate" shall mean, for any day,
the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged
by Federal funds brokers, as published on the next succeeding
Business Day by the Federal Reserve Bank of New York, or, if such
rate is not so published for any day which is a Business Day, the
average of the quotations for the day of such transactions
received by the Administrative Agent from three Federal funds
brokers of recognized standing selected by it.
"Fixed/Floating Percentage" shall mean for any Business
Day the percentage equivalent of a fraction, the numerator of
which is the sum of the Class A Adjusted Invested Amount, the
Class B Adjusted Invested Amount, the Class C Adjusted Invested
Amount and the Class D Invested Amount, in each case at the end
of the last day of the Revolving Period and the denominator of
which is the greater of (a) the sum of the aggregate amount of
Principal Receivables and the amount on deposit in the Excess
Funding Account as of the end of the preceding Business Day and
(b) the sum of the numerators used to calculate the applicable
floating or fixed/floating percentages with respect to all
Participations and all Classes of all Series then outstanding.
"Floating Percentage" shall mean for any Business Day
the sum of the applicable Class A Floating Percentage, Class B
Floating Percentage, Class C Floating Percentage, and Class D
Floating Percentage for such Business Day.
"Funding Period" shall have the meaning specified in
the Security Purchase Agreement.
"Increased Costs" shall have the meaning specified in
the Security Purchase Agreement.
"Increase Termination Date" shall mean the earliest to
occur of (i) the Amortization Period Commencement Date, (ii) that
Business Day which the Transferor designates as the "Increase
Termination Date" by written notice to the Administrative Agent
at least 30 days prior to such date or (iii) the Specified
Termination Date.
"Interest Accrual Period" shall mean a Monthly Period
and, with respect to a Distribution Date, the preceding Monthly
Period; provided, however, that the initial Interest Accrual
Period shall be the period from the Closing Date to and including
the last day of the Monthly Period preceding the initial
Distribution Date.
"Interest Component" shall mean, with respect to any
Commercial Paper (i) issued on a discount basis, the portion of
the face amount of such Commercial Paper representing the
discount incurred in respect thereof and (ii) issued on an
interest-bearing basis, the interest payable on such Commercial
Paper (in each case including the related Commercial Paper dealer
fees payable in connection with the issuance of such Commercial
Paper).
"Interest Rate Caps" shall mean the interest rate caps
provided pursuant to Cap Agreements by one or more Cap Providers
to the Transferor and assigned to the Trustee on behalf of any of
the Securityholders which shall entitle the Trust to receive
monthly payments equal to the product of (i) the positive
difference, if any, between LIBOR in effect for each applicable
Interest Period and 6.05%, (ii) the notional amount of such
interest rate cap and (iii) the actual number of days in the
Interest Period divided by 360.
"Invested Amount" shall mean, when used with respect to
any Business Day, an amount equal to the sum of (a) the Class A
Invested Amount as of such Business Day, (b) the Class B Invested
Amount as of such Business Day, (c) the Class C Invested Amount
as of such Business Day and (d) the Class D Invested Amount as of
such Business Day; provided, however, that for purposes of
determining the Servicing Fee and the Aggregate Invested Amount,
the Invested Amount shall mean an amount equal to the sum of (a)
the Class A Adjusted Invested Amount as of such Business Day, (b)
the Class B Adjusted Invested Amount as of such Business Day, (c)
the Class C Adjusted Invested Amount as of such Business Day and
(d) the Class D Invested Amount as of such Business Day.
"LIBOR" shall mean, for any Interest Accrual Period,
the London interbank offered quotations for one-month Dollar
deposits determined by the Trustee for each Interest Accrual
Period in accordance with the provisions of Section 4.21 of the
Agreement.
"LIBOR Determination Date" shall mean the second
Business Day prior to the commencement of each Interest Accrual
Period; provided, however, that with respect to the initial
Interest Accrual Period for the Series 1998-3 Securities, LIBOR
Determination Date shall mean a date selected by the Transferor
which shall not be in excess of two Business Days prior to the
date of initial issuance of Securities of the applicable Class.
For purposes of this definition, a Business Day is any day on
which banks in London and New York are open for the transaction
of international business.
"Liquidity Provider" shall have the meaning given to
such term in the Security Purchase Agreement.
"Liquidity Provider Agreement" shall have the meaning
given to such term in the Security Purchase Agreement.
"Managing Agent" shall have the meaning given to such
term in the Security Purchase Agreement.
"Minimum Transferor Percentage" shall mean 0%;
provided, however, that in certain circumstances such percentage
may be increased.
"Monthly Period" shall have the meaning specified in
the Agreement, except that the first Monthly Period with respect
to the Series 1998-3 Securities shall begin on and include the
Closing Date and shall end on and include the last day of the
then current fiscal month of the Transferor.
"Moody's" shall mean Moody's Investors Service, Inc.
and any successor thereto.
"NationsBank" shall mean NationsBank, N.A., a national
banking association.
"Negative Carry Amount" shall have the meaning
specified in subsection 4.10(a) of the Agreement.
"Net Revolving Principal Collections" shall have the
meaning specified in Section 4.9(b) of the Agreement.
"Paying Agent" shall mean, for the Series 1998-3
Securities, The Bank of New York.
"Payment Reserve Account" shall have the meaning
specified in Section 4.17 of the Agreement.
"Pay Out Commencement Date" shall mean the date on
which a Trust Pay Out Event is deemed to occur pursuant to
Section 9.1 of the Agreement or a Series Pay Out Event is deemed
to occur pursuant to Section 8 of this Series Supplement.
"Portfolio Yield" shall mean for the Series 1998-3
Securities, with respect to any Monthly Period, the annualized
percentage equivalent of a fraction, the numerator of which is an
amount equal to the aggregate amount of Available Series 1998-3
Finance Charge Collections for such Monthly Period (not including
(a) the amounts withdrawn from the Payment Reserve Account, (b)
Adjustment Payments made by the Transferor with respect to
Adjustment Payments required to be made but not made in prior
Monthly Periods, if any, and (c) the amount of any Finance Charge
Collections received with respect to the final payment of any
Closed End Receivable that is refinanced with a receivable
arising under a revolving credit card account), calculated on a
cash basis, after subtracting the aggregate Series Default Amount
for such Monthly Period and the Series 1998-3 Percentage of any
Adjustment Payments which the Transferor is required but fails to
make pursuant to the Agreement for such Monthly Period, and the
denominator of which is the average daily Invested Amount for
such Monthly Period; provided, however, that Excess Finance
Charge Collections applied for the benefit of the Series 1998-3
Securityholders may be added to the numerator if (i) the
Transferor shall have provided ten Business Days prior written
notice of such action to each Rating Agency and the Senior
Securityholders and (ii) the Required Senior Securityholders
shall have given their written consent to such action.
"Prime Rate" shall mean, a rate per annum equal to the
greater of (i) the prime rate of interest announced by
NationsBank from time to time, changing when and as said prime
rate changes (such rate not necessarily being the lowest or best
rate charged by NationsBank) and (ii) the sum of (a)0.50% and (b)
the rate equal to the weighted average of the rates on overnight
Federal funds transactions with members of the Federal Reserve
System arranged by Federal funds brokers, as published for such
day (or, if such day is not a Business Day, for the immediately
preceding Business Day) by the Federal Reserve Bank of New York,
or, if such rate is not so published for any day that is a
Business Day, the average of the quotations for such day for such
transactions received by NationsBank from three Federal funds
brokers of recognized standing selected by it.
"Principal Funding Account" shall have the meaning
specified in Section 4.19 of the Agreement.
"Principal Funding Account Balance" shall mean, with
respect to any date of determination, the principal amount, if
any, on deposit in the Principal Funding Account on such date of
determination.
"Principal Shortfalls" shall mean on any Business Day
(i) prior to the Amortization Period Commencement Date, zero, and
(ii) after the Amortization Period Commencement Date, the
Invested Amount after the application of Principal Collections on
such Business Day.
"Prior Tax Year" shall have the meaning specified in
Section 10(k) of this Series Supplement.
"Program Support Provider Agreement" has the meaning
given to such term in the Security Purchase Agreement.
"Program Support Provider" has the meaning given to
such term in the Security Purchase Agreement.
"Purchaser" shall mean a Conduit Purchaser or an
Alternate Purchaser, as the context requires.
"Purchaser Group" shall have the meaning given to such
term in the Security Purchase Agreement.
"Purchaser Group Percentage" shall mean (a) 37.5% with
respect to Kitty Hawk Funding Corporation and the related
Purchaser Group, (b) 37.5% with respect to Falcon Asset
Securitization Corporation and the related Purchaser Group and
(c) 25% with respect to Four Winds Funding Corporation and the
related Purchaser Group.
"Qualified Substitute Arrangement" shall have the
meaning specified in Section 3A(d) of this Series Supplement.
"Rating Agency" shall mean Moody's.
"Redirected Class B Principal Collections" shall have
the meaning specified in subsection 4.14(c) of the Agreement.
"Redirected Class C Principal Collections" shall have
the meaning specified in subsection 4.14(b) of the Agreement.
"Redirected Class D Principal Collections" shall have
the meaning specified in subsection 4.14(a) of the Agreement.
"Redirected Principal Collections" shall mean the sum
of Redirected Class B Principal Collections, Redirected Class C
Principal Collections and Redirected Class D Principal
Collections.
"Replacement Interest Rate Cap" shall mean one or more
Interest Rate Caps, which in combination with all other Interest
Rate Caps then in effect, after giving effect to any planned
cancellations of any presently outstanding Interest Rate Caps,
satisfies the Transferor's covenant contained in Section 3A of
this Series Supplement to maintain Interest Rate Caps.
"Required Amount" shall have the meaning specified in
Section 4.10 of the Agreement.
"Required Senior Securityholders" shall mean the
Holders of Senior Securities evidencing undivided interests
aggregating more than 50% of the sum of the Class A Invested
Amount, the Class B Invested Amount and the Class C Invested
Amount.
"Revolving Period" shall mean the period from and
including the Closing Date to, but not including, the
Amortization Period Commencement Date.
"Revolving Receivables Reserve Account" shall have the
meaning specified in Section 4.18 of the Agreement.
"Scheduled Series 1998-3 Termination Date" shall mean
the first day of the February 2006 Monthly Period unless a
different date shall be set forth in any Extension Notice.
"Security Purchase Agreement" shall mean the Security
Purchase Agreement, dated as of July 30, 1998, by and among the
Transferor, the Conduit Purchasers, the financial institutions
from time to time parties thereto as Alternate Purchasers, the
Managing Agents and the Administrative Agent, as the same may
from time to time be amended, restated, modified and in effect.
"Senior Security" shall mean a Class A Security, Class
B Security or Class C Security.
"Senior Securityholder" means the holder of record of
any Class A Security, Class B Security or Class C Security.
"Series Default Amount" shall mean, with respect to
each Business Day, an amount equal to the product of the Default
Amount identified since the prior reporting date and the Floating
Percentage applicable for such Business Day.
"Series 1998-3" shall mean the Series of the Fingerhut
Master Trust represented by the Series 1998-3 Securities.
"Series 1998-3 Percentage" shall mean, on any date of
determination, the percentage equivalent of a fraction the
numerator of which is the Invested Amount and the denominator of
which is the sum of the Invested Amounts relating to all Series
then outstanding.
"Series 1998-3 Securities" shall mean the Class A
Securities, the Class B Securities, the Class C Securities and
the Class D Securities.
"Series 1998-3 Securityholder" shall mean the holder of
record of any Series 1998-3 Security.
"Series 1998-3 Securityholders' Interest" shall have
the meaning specified in Section 4.4 of the Agreement.
"Series 1998-3 Termination Date" shall mean the earlier
to occur of (i) the day after the Distribution Date on which the
Series 1998-3 Securities are paid in full or (ii) the Scheduled
Series 1998-3 Termination Date.
"Series Pay Out Event" shall have the meaning specified
in Section 8 of this Series Supplement.
"Series Servicing Fee Percentage" shall mean 2.00% per
annum.
"Servicing Fee" shall mean, for any Business Day, an
amount equal to the product of (i) a fraction the numerator of
which is the actual number of days from but excluding the next
preceding Business Day to and including such Business Day and the
denominator of which is 365 or 366, as the case may be, (ii) the
applicable Series Servicing Fee Percentage and (iii) the Adjusted
Invested Amount on such Business Day after giving effect to all
transactions on such Business Day.
"Shared Principal Collections" shall mean, as the
context requires, either (A) the sum of (x) the amount of
Principal Collections for any Business Day allocated to the
Series 1998-3 Securities which, in accordance with subsections
4.9(b) and 4.12(g) of the Agreement, may be applied in accordance
with Section 4.3(e) of the Agreement, and (y) the amounts treated
as Shared Principal Collections pursuant to subsections
4.9(a)(v), (vi), (vii), (viii), (ix) and (x) of the Agreement,
(B) the amounts allocated to the Investor Securities of other
Series which the applicable Series Supplements for such Series
specify are to be treated as "Shared Principal Collections" or
(C) the amounts specified in any Participation Supplement to be
treated as "Shared Principal Collections" and which may be
applied to cover Principal Shortfalls with respect to the Series
1998-3 Securities.
"Specified Class C Reserve Amount" shall mean zero
prior to the occurrence of a Class C Trigger Event and thereafter
the amount, if any, which if added to the numerator of the Target
Percentage would cause such percentage to be equal to 5%.
"Specified Revolving Receivables Reserve Amount" shall
mean, on any date of determination, an amount equal to the
product of (x) the Floating Percentage on such date and (y) 1% of
the aggregate amount of Principal Receivables which are Revolving
Receivables on such date; provided, however, that such percentage
may be reduced at the option of the Transferor at any time if the
Rating Agency Condition shall have been satisfied with respect
thereto.
"Specified Termination Date" shall mean July 29, 1999,
or such later date to which the Specified Termination Date may be
extended pursuant to Section 2.05 of the Security Purchase
Agreement.
"Stated Class B Amount" shall mean on any date of
determination the greater of (i) zero and (ii) a number rounded
to the nearest dollar obtained by multiplying the Class A
Invested Amount by a fraction the numerator of which is 2 and the
denominator of which is 74; provided, however, that in no event
shall the Stated Class B Amount exceed the Class B Maximum
Invested Amount.
"Stated Class C Amount" shall mean on any date of
determination the greater of (i) zero and (ii) a number rounded
to the nearest dollar obtained by multiplying the sum of the
Class A Invested Amount and the Class B Invested Amount by a
fraction the numerator of which is 12 and the denominator of
which is 76; provided, however, that in no event shall the Stated
Class C Amount exceed the Class C Maximum Invested Amount.
"Stated Class D Amount" shall mean on any date of
determination the greater of (i) zero and (ii) a number rounded
to the nearest dollar obtained by multiplying the sum of the
Class A Invested Amount, the Class B Invested Amount and the
Class C Invested Amount by a fraction the numerator of which is
12 and the denominator of which is 88; provided, however, that in
no event shall the Stated Class D Amount exceed the Class D
Maximum Invested Amount; and provided further that during any
Early Amortization Period the Stated Class D Amount shall be
equal to the Stated Class D Amount immediately preceding the
commencement of the Early Amortization Period; and provided
further, that on and after the Amortization Period Commencement
Date, the Stated Class D Amount shall not be less than 3% (or
such lesser percentage specified by Transferor which shall not be
less than zero if the Trustee shall have received written
confirmation from Moody's that the reduction of such percentage
shall not cause Moody's to lower or withdraw its then current
rating of the Class A Securities, the Class B Securities or the
Class C Securities) of the Invested Amount on the last day of the
Revolving Period.
"Target Percentage" shall have the meaning specified in
Section 4.15 of the Agreement.
"Targeted Holder" shall mean (i) each holder of a right
to receive interest or principal with respect to investor
securities (or other interests in the Trust), including the
Senior Securities and any Participations, other than securities
(or other such interests) with respect to which an opinion is
rendered that such securities (or other such interests) will be
treated as debt for Federal income tax purposes and (ii) any
holder of a right to receive any amount in respect of the
Transferor Interest; provided, that any person holding more than
one interest each of which would cause such person to be a
Targeted Holder shall be treated as a single Targeted Holder.
"Transfer" shall have the meaning specified in Section
10(i) of this Series Supplement.
"Transferor Cap Proceeds Percentage" shall mean on any
Business Day a fraction equal to one minus a fraction, the
numerator of which is the weighted average ABC Invested Amount
for the preceding Monthly Period based on the ABC Invested Amount
outstanding on each Business Day during such Monthly Period and
the denominator of which is the weighted average Aggregate
Interest Rate Caps Notional Amount for the preceding Monthly
Period based on the Aggregate Interest Rate Caps Notional Amount
outstanding on each Business Day during such Monthly Period.
"Transferor Finance Charge Collections" shall mean on
any Business Day the product of (a) the Finance Charge
Collections for such Business Day, (b) the Transferor Percentage
and (c) the Series 1998-3 Percentage.
"Transferor Retained Securities" shall mean Investor
Securities of any Series, including the Class D Securities, which
the Transferor retains, but only to the extent that and for so
long as the Transferor is the Holder of such Securities.
"Withholding Event" shall have the meaning specified in
Section 10(k) of this Series Supplement.
"Withholding Tax" shall have the meaning specified in
Section 10(k) of this Series Supplement.
SECTION 3 Reassignment Terms. The Series 1998-3
Securities 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 Business Day on or after the
Business Day on which the sum of the Class A Invested Amount, the
Class B Invested Amount and the Class C Invested Amount is
reduced to an amount less than or equal to 10% of the sum of the
highest Class A Invested Amount, the highest Class B Invested
Amount and the highest Class C Invested Amount during the
Revolving Period. The deposit required in connection with any
such termination and final distribution shall be equal to the sum
of the unpaid Class A Invested Amount, the unpaid Class B
Invested Amount and the unpaid Class C Invested Amount plus
accrued and unpaid interest on the Series 1998-3 Securities
through the day prior to the Business Day on which the final
distribution occurs, in each case after giving effect to any
payments on such date.
SECTION 3A. Conveyance of Interest in Interest Rate
Cap; Cap Proceeds Account. (a) The Transferor hereby covenants
and agrees that, on or prior to the issuance of any of the Series
1998-3 Securities, it shall obtain, and at all times prior to the
close of business on the Series 1998-3 Termination Date maintain,
one or more Interest Rate Caps whose notional amounts singly or
taken as a group equal or exceed the Aggregate ABC Principal
Amount. The Transferor hereby assigns, sets-over, conveys,
pledges and grants a security interest and lien (free and clear
of all other Liens) to the Trustee for the benefit of the Series
1998-3 Securityholders, in all of the Transferor's right, title
and interest now existing or hereafter arising in and to the Cap
Agreements and the Interest Rate Caps arising thereunder,
together with the Cap Proceeds Account and all other proceeds
thereof, as collateral security for the benefit of the Series
1998-3 Securityholders. The Transferor hereby further agrees to
execute all such instruments, documents and financing statements
and take all such further action requested by the Trustee to
evidence and perfect the assignment of the Cap Agreements and the
Interest Rate Caps pursuant to this Section 3A. The Transferor
agrees that each Interest Rate Cap shall provide for payments to
the Trustee and that the Trust's interest in respect of such
payments shall be deposited into the Cap Proceeds Account.
(b) The Trustee, for the benefit of the Series 1998-3
Securityholders, shall establish and maintain with a Qualified
Institution, which may be the Trustee, in the name of the
Trustee, on behalf of the Securityholders, a certain segregated
trust account (the "Cap Proceeds Account"). The amounts paid to
the Trustee pursuant to the Interest Rate Caps or any Qualified
Substitute Arrangement on any settlement date set forth therein
(a "Cap Settlement Date") shall be deposited by the Trustee in
the Cap Proceeds Account, and the Transferor Cap Proceeds
Percentage of such amounts, on such Cap Settlement Date or
promptly thereafter, shall be paid from the Cap Proceeds Account
to the Transferor. Any amounts paid pursuant to the Interest
Rate Caps or any Qualified Substitute Arrangement on the first
Business Day of any Monthly Period shall be treated for all
purposes herein, including application in accordance with Section
4.9 of the Agreement, as if they had been received on the last
Business Day of the preceding Monthly Period. Funds in the Cap
Proceeds Account shall be invested at the direction of the
Servicer, in Cash Equivalents with maturities not later than the
next succeeding Business Day. Any earnings on such invested
funds shall be deposited and held in the Cap Proceeds Account and
applied in the same manner and priority as payments pursuant to
the Interest Rate Caps.
(c) In the event that the Cap Provider defaults in its
obligation to make a payment to the Trustee under one or more Cap
Agreements on any Cap Settlement Date, the Trustee shall make a
demand on such Cap Provider, or any guarantor, if applicable,
demanding payment by 12:30 p.m., New York time, on such date.
The Trustee shall give notice to the Securityholders upon the
continuing failure by any Cap Provider to perform its obligation
during the two Business Days following a demand made by the
Trustee on such Cap Provider, and shall take such action with
respect to such continuing failure directed to be taken by the
Securityholders.
(d) In the event that the senior unsecured debt rating
of a Cap Provider is withdrawn or reduced below Aa2 by Moody's,
then within 30 days after receiving notice of such decline in the
creditworthiness of the Cap Provider as determined by the Rating
Agency, either (x) the Cap Provider, with the prior written
confirmation of the Rating Agency that such arrangement will not
result in the reduction or withdrawal of the rating of the Class
A Securities, the Class B Securities or the Class C Securities,
will enter into an arrangement the purpose of which shall be to
assure performance by the Cap Provider of its obligations under
the Interest Rate Cap; or (y) the Servicer shall at its option
either (i) with the prior written confirmation of the Rating
Agency that such action will not result in a reduction or
withdrawal of the rating of the Class A Securities, the Class B
Securities or the Class C Securities, cause the Cap Provider to
pledge securities in the manner provided by applicable law, which
shall be held by the Trustee or its agent free and clear of the
Lien of any third party, in a manner conferring on the Trustee a
perfected first Lien in such securities securing the Cap
Provider's performance of its obligations under the applicable
Interest Rate Cap, or (ii) provided that a Replacement Interest
Rate Cap or Qualified Substitute Arrangement meeting the
requirements of Section 3A(e) has been obtained, direct the
Trustee (A) to provide written notice to the Cap Provider of its
intention to terminate the applicable Interest Rate Cap within
such 30-day period and (B) to terminate the applicable Interest
Rate Cap within such 30-day period, to request the payment to the
Trustee of all amounts due to the Trust under the applicable
Interest Rate Cap through the termination date and resulting from
the termination of such Interest Rate Cap and to deposit any such
amounts so received, on the day of receipt, to the Cap Proceeds
Account to be used first to obtain a Replacement Interest Rate
Cap or Qualified Substitute Arrangement meeting the requirements
of subsection 3A(e)(ii) and then as Available Series 1998-3
Finance Charge Collections, or (iii) establish any other
arrangement (including an arrangement or arrangements in addition
to or in substitution for any prior arrangement made in
accordance with the provisions of this Section 3A(d))
satisfactory to the Rating Agency such that the Rating Agency
will not reduce or withdraw the rating of the Class A Securities,
the Class B Securities or the Class C Securities (a "Qualified
Substitute Arrangement"); provided, however, that in the event at
any time any alternative arrangement established pursuant to
clause (x) or (y)(i) or (y)(iii) above shall cease to be
satisfactory to the Rating Agency then the provisions of this
Section 3A(d) shall again be applied and in connection therewith
the 30-day period referred to above shall commence on the date
the Servicer receives notice of such cessation or termination, as
the case may be.
(e) Unless an alternative arrangement pursuant to
clause (x) or (y)(i) of Section 3A(d) is being established, the
Servicer shall use its best efforts to obtain a Replacement
Interest Rate Cap or Qualified Substitute Arrangement meeting the
requirements of this subsection 3A(e) during the 30-day period
referred to in subsection 3A(d) from the funds received from the
termination of the applicable Interest Rate Cap referred to in
subsection 3A(d); provided, that the Servicer shall not be
required to use its own funds to obtain a Replacement Interest
Rate Cap or Qualified Substitute Arrangement. The Trustee shall
not terminate the Interest Rate Cap unless, prior to the
expiration of the 30-day period referred to in said Section
3A(d), the Servicer delivers to the Trustee (i) a Replacement
Interest Rate Cap or Qualified Substitute Arrangement and (ii) a
letter from the Rating Agency confirming that the termination of
the Interest Rate Cap and its replacement with such Replacement
Interest Rate Cap or Qualified Substitute Arrangement will not
adversely affect its rating of the Class A Securities, the Class
B Securities or the Class C Securities.
(f) The Servicer shall notify the Trustee, the Rating
Agency and each Managing Agent within five Business Days after
obtaining knowledge that the senior unsecured debt rating of the
Cap Provider has been withdrawn or reduced by Moody's.
(g) Notwithstanding the foregoing, the Servicer may at
any time obtain a Replacement Interest Rate Cap, provided that
the Servicer delivers to the Trustee a letter from the Rating
Agency confirming that the termination of the then current
Interest Rate Cap and its replacement with such Replacement
Interest Rate Cap will not adversely affect its rating of the
Class A Securities, the Class B Securities or the Class C
Securities.
(h) The Trustee, on behalf of the Securityholders,
upon notification from the Servicer, shall sell all or a portion
of the Interest Rate Caps subject to the following conditions
having been met:
(x) the Aggregate Interest Rate Caps Notional
Amount after giving effect to such sale shall equal or exceed the
Aggregate ABC Principal Amount as of the date of such sale after
giving effect to all payments and allocations made pursuant to
this Agreement;
(y) such sale will not result in a downgrading or
withdrawal of the then current rating on any Class of the
Securities by the Rating Agencies; and
(z) the minimum notional amount denomination of
any Interest Rate Cap to be sold is $500,000.
The Servicer shall have the duty of obtaining a fair
market value price for the sale of the Trust's rights under any
Interest Rate Cap, notifying the Trustee of prospective
purchasers and bids, and selecting the purchaser of such Interest
Rate Cap. The Trustee upon receipt of the purchase price in the
Collection Account shall execute all documentation necessary to
effect the transfer of the Trust's rights under the Interest Rate
Cap and to release the Lien of the Trustee on the Interest Rate
Cap and proceeds thereof.
Funds deposited in the Collection Account in respect of
the sale of all or a portion of an Interest Rate Cap shall be
applied as Principal Collections allocable to Series 1998-3 and
shall be applied on the next Distribution Date in accordance with
subsections 4.7(a), (b) and (c) and 4.9(b) and (c).
SECTION 4 Delivery and Payment for the Series 1998-3
Securities. The Transferor shall execute and deliver the Series
1998-3 Securities to the Trustee for authentication in accordance
with Section 6.1 of the Agreement. The Trustee shall deliver the
Series 1998-3 Securities to or upon the order of the Transferor
when authenticated in accordance with Section 6.2 of the
Agreement.
SECTION 5 Form of Delivery of Series 1998-3 Securities.
The Class A Securities, the Class B Securities, the Class C
Securities and the Class D Securities shall be delivered as
Registered Securities as provided in Section 6.1 of the
Agreement.
SECTION 6 Article IV of Agreement. Sections 4.1, 4.2
and 4.3 of the Agreement shall read in their entirety as provided
in the Agreement. Article IV of the Agreement (except for
Sections 4.1, 4.2 and 4.3 thereof) shall read in its entirety as
follows and shall be applicable only to the Series 1998-3
Securities:
ARTICLE IV
RIGHTS OF SECURITYHOLDERS AND
ALLOCATION AND APPLICATION OF COLLECTIONS
Section 4.4 Rights of Securityholders. The Series
1998-3 Securities shall represent undivided interests in the
Trust, including the right to receive, to the extent necessary to
make the required payments with respect to such Series 1998-3
Securities at the times and in the amounts specified in this
Agreement, (a) the Floating Percentage and the Fixed/Floating
Percentage (as applicable from time to time) of Collections
available in the Collection Account, (b) funds allocable to the
Series 1998-3 Securities on deposit in the Excess Funding Account
and (c) funds on deposit in the Interest Funding Account, the
Principal Account, the Distribution Account, the Cap Proceeds
Account, the Payment Reserve Account, the Class C Reserve
Account, the Revolving Receivables Reserve Account, and the
Principal Funding Account (for such Series, the "Series 1998-3
Securityholders' Interest"). The Class B Invested Amount, the
Class C Invested Amount and the Class D Invested Amount shall be
subordinated to the Class A Securities; the Class C Invested
Amount and the Class D Invested Amount shall be subordinated to
the Class B Securities; and the Class D Invested Amount shall be
subordinated to the Class C Securities, in each case to the
extent specified in this Article IV.
Section 4.5 Collections and Allocation;Payments on
Exchangeable Transferor Security.
Collections and Allocations. The Servicer will
apply or will instruct the Trustee to apply all funds on deposit
in the Collection Account and the Excess Funding Account
allocable to the Series 1998-3 Securities, and all funds on
deposit in the Interest Funding Account, the Principal Account,
the Cap Proceeds Account, the Distribution Account, the Payment
Reserve Account, the Class C Reserve Account, the Revolving
Receivables Reserve Account and the Principal Funding Account
maintained for this Series, as described in this Article IV. On
each Business Day, (i) the amount of Finance Charge Collections
available in the Collection Account allocable to the Series 1998-
3 Securities shall be determined by multiplying the aggregate
amount of such Finance Charge Collections by (x) prior to the Pay
Out Commencement Date, the Floating Percentage and (y) on and
after the Pay Out Commencement Date, the Fixed/Floating
Percentage, (ii) the amount of Principal Collections available in
the Collection Account allocable to the Series 1998-3 Securities
shall be determined by multiplying the aggregate amount of such
Principal Collections by (x) during the Revolving Period, the
Floating Percentage and (y) during any Amortization Period, the
Fixed/Floating Percentage, and (iii) the Default Amount on such
Business Day allocable to the Series 1998-3 Securities shall be
determined by multiplying the Default Amount by the Floating
Percentage.
Payments to the Holder of the Exchangeable
Transferor Security. On each Business Day, the Servicer shall
allocate and pay Collections in accordance with the Daily Report
to the Holder of the Exchangeable Transferor Security in
accordance with subsection 4.3(b) of the Agreement; provided,
however, that such amounts shall be applied in accordance with
Section 4.10 hereof to the extent specified therein.
Notwithstanding the foregoing and any other
provisions of this Series Supplement, amounts payable to the
Transferor shall instead be deposited in the Excess Funding
Account to the extent necessary to prevent the Transferor
Interest from being less than the Minimum Transferor Interest.
(c) Investment Earnings. Notwithstanding Section
4.2(e) of the Agreement, amounts on deposit in the Interest
Funding Account and the Principal Account shall be invested by
the Trustee at the direction of the Servicer in Cash Equivalents
that will mature so that such funds will be available for
withdrawal on or prior to the next Business Day. The interest
and other investment income (net of investment expenses and
losses) earned on such investments will be applied on each
Business Day as Available Series 1998-3 Finance Charge
Collections.
Section 4.6 Determination of Interest for the Series
1998-3 Securities. The amount of interest (the "Class A
Interest") allocable to the Class A Securities with respect to
any Business Day shall be an amount equal to the product of (i)
the Class A Interest Rate and (ii) a fraction the numerator of
which is the actual number of days from and including the
immediately preceding Business Day to but excluding such Business
Day and the denominator of which is 365 or 366, as the case may
be, and (iii) the Class A Outstanding Principal Amount on such
Business Day after giving effect to all transactions on such
Business Day.
On each Business Day, the Servicer shall determine an
amount (the "Class A Interest Shortfall") equal to the excess, if
any, of (x) the Class A Interest for such Business Day plus the
Class A Interest Shortfall for the preceding Business Day over
(y) the amount available to be paid to the Class A
Securityholders in respect thereof on such Business Day. The
Class A Interest Shortfall shall initially be zero.
The amount of interest (the "Class B Interest")
allocable to the Class B Securities with respect to any Business
Day shall be an amount equal to the product of (i) the Class B
Interest Rate, (ii) a fraction the numerator of which is the
actual number of days from and including the immediately
preceding Business Day to but excluding such Business Day and the
denominator of which is 365 or 366, as the case may be, and (iii)
the Class B Outstanding Principal Amount on such Business Day
after giving effect to all transactions on such Business Day.
On each Business Day, the Servicer shall determine an
amount (the "Class B Interest Shortfall") equal to the excess, if
any, of (x) the Class B Interest for such Business Day plus the
Class B Interest Shortfall for the preceding Business Day over
(y) the amount available to be paid to the Class B
Securityholders in respect thereof on such Business Day. The
Class B Interest Shortfall shall initially be zero.
The amount of interest (the "Class C Interest")
allocable to the Class C Securities with respect to any Business
Day shall be an amount equal to the product of (i) the Class C
Interest Rate and (ii) a fraction the numerator of which is the
actual number of days from and including the immediately
preceding Business Day to but excluding such Business Day and the
denominator of which is 365 or 366, as the case may be, and
(iii) the Class C Outstanding Principal Amount on such Business
Day after giving effect to all transactions on such Business Day.
On each Business Day, the Servicer shall determine an
amount (the "Class C Interest Shortfall") equal to the excess, if
any, of (x) the Class C Interest for such Business Day plus the
Class C Interest Shortfall for the preceding Business Day over
(y) the amount available to be paid to the Class C
Securityholders in respect thereof on such Business Day. The
Class C Interest Shortfall shall initially be zero.
Section 4.7 Determination of Principal Amounts.
The amount of principal (the "Class A Principal") distributable
from the Distribution Account with respect to the Class A
Securities shall be the following:
On each Business Day with respect to the Revolving
Period an amount equal to the Class A Percentage of the amounts
deposited into the Principal Account from the Principal Funding
Account pursuant to Section 9A of this Series Supplement;
On each Business Day designated by the Transferor
during the Amortization Period an amount equal to the amount
designated by the Transferor pursuant to subsection 4.12(f) of
the Agreement; and
With respect to each Distribution Date during the
Amortization Period an amount equal to (i) the Available Series
1998-3 Principal Collections on deposit in the Principal Account
pursuant to subsection 4.9(c) of the Agreement with respect to
each Business Day in the related Monthly Period less (ii) the
aggregate amount withdrawn from the Principal Account for payment
to the Class A Securityholders pursuant to subsection 4.12(f) of
the Agreement with respect to funds deposited in the Principal
Account pursuant to subsection 4.9(c) of the Agreement during the
related Monthly Period;
provided, however, that with respect to any Business
Day, Class A Principal may not exceed the Class A Invested
Amount; provided, further, that with respect to the Scheduled
Series 1998-3 Termination Date, the Class A Principal shall be an
amount equal to the Class A Invested Amount.
The amount of principal (the "Class B Principal")
distributable from the Distribution Account with respect to the
Class B Securities shall be the following:
On each Business Day with respect to the Revolving
Period an amount equal the lesser of (i) the excess of the Class
B Invested Amount over the Stated Class B Amount on such Business
Day after taking into account all distributions with respect to
the Class A Invested Amount on such Business Day and (ii) the
Class B Percentage of the amounts deposited into the Principal
Account from the Principal Funding Account pursuant to Section 9A
of this Series Supplement, to be distributed only after any such
distributions with respect to the Class A Invested Amount;
On each Business Day designated by the Transferor on
and after the Class B Principal Payment Commencement Date an
amount equal to the amount designated by the Transferor pursuant
to subsection 4.12(f) of the Agreement after application thereof
to Class A Principal; and
With respect to each Distribution Date beginning with
the Class B Principal Payment Commencement Date, an amount equal
to (i) the Available Series 1998-3 Principal Collections
remaining on deposit in the Principal Account pursuant to
subsection 4.9(c) of the Agreement with respect to each Business
Day in the related Monthly Period after application thereof to
Class A Principal less (ii) the aggregate amount withdrawn from
the Principal Account for payment to the Class B Securityholders
pursuant to subsection 4.12(f) of the Agreement with respect to
funds deposited in the Principal Account pursuant to subsection
4.9(c) of the Agreement during the related Monthly Period;
provided, however, that with respect to any
Distribution Date, Class B Principal may not exceed the Class B
Invested Amount; provided, further, that with respect to the
Scheduled Series 1998-3 Termination Date, the Class B Principal
shall be an amount equal to the Class B Invested Amount.
The amount of principal (the "Class C Principal")
distributable from the Distribution Account with respect to the
Class C Securities shall be the following:
On each Business Day with respect to the Revolving
Period an amount equal the lesser of (i) the excess of the Class
C Invested Amount over the Stated Class C Amount on such Business
Day after taking into account all distributions with respect to
the Class A Invested Amount and the Class B Invested Amount on
such Business Day and (ii) the Class C Percentage of the amounts
deposited into the Principal Account from the Principal Funding
Account pursuant to Section 9A of this Series Supplement, to be
distributed only after any such distributions with respect to the
Class A Invested Amount and the Class B Invested Amount;
On each Business Day designated by the Transferor on
and after the Class C Principal Payment Commencement Date an
amount equal to the amount designated by the Transferor pursuant
to subsection 4.12(f) of the Agreement after application thereof
to Class A Principal and Class B Principal; and
With respect to each Distribution Date, beginning with
the Class C Principal Payment Commencement Date, an amount equal
to (i) the Available Series 1998-3 Principal Collections
remaining on deposit in the Principal Account pursuant to
subsection 4.9(c) of the Agreement with respect to each Business
Day in the related Monthly Period after application thereof to
Class A Principal and Class B Principal less (ii) the aggregate
amount withdrawn from the Principal Account for payment to the
Class C Securityholders pursuant to subsection 4.12(f) of the
Agreement with respect to funds deposited in the Principal
Account pursuant to subsection 4.9(c) of the Agreement during the
related Monthly Period;
provided, however, that with respect to any
Distribution Date, Class C Principal may not exceed the Class C
Invested Amount; provided, further, that with respect to the
Scheduled Series 1998-3 Termination Date, the Class C Principal
shall be an amount equal to the Class C Invested Amount.
The amount of principal (the "Class D Principal")
distributable from the Distribution Account with respect to the
Class D Securities shall be the following:
On each Business Day during the Revolving Period an
amount equal the lesser of (i) the excess of the Class D Invested
Amount over the Stated Class D Amount on such Business Day after
taking into account all distributions with respect to the Class A
Invested Amount, the Class B Invested Amount and the Class C
Invested Amount on such Business Day and (ii) the amounts
deposited into the Principal Account from the Principal Funding
Account after any such distributions in respect of the Class A
Invested Amount, the Class B Invested Amount and the Class C
Invested Amount;
On each Business Day designated by the Transferor on
and after the Class D Principal Payment Commencement Date an
amount equal to the amount designated by the Transferor pursuant
to subsection 4.12(f) of the Agreement after application thereof
to Class A Principal, Class B Principal and Class C Principal;
and
With respect to each Distribution Date beginning with
the Class D Principal Payment Commencement Date, on each Business
Day, an amount equal to (i) the Available Series 1998-3 Principal
Collections remaining on deposit in the Principal Account
pursuant to subsection 4.9(c) of the Agreement with respect to
each Business Day in the related Monthly Period after application
thereof to Class A Principal, Class B Principal and Class C
Principal less (ii) the aggregate amount withdrawn from the
Principal Account for payment to the Class D Securityholders
pursuant to subsection 4.12(f) of the Agreement with respect to
funds deposited in the Principal Account pursuant to subsection
4.9(c) of the Agreement with respect to the related Monthly
Period;
provided, however, that with respect to the Scheduled
Series 1998-3 Termination Date, the Class D Principal shall be an
amount equal to the Class D Invested Amount; provided further,
that on any Business Day during any period other than an Early
Amortization Period, the Transferor may designate that an amount
up to the excess of the Class D Invested Amount over the Stated
Class D Amount on such day after taking into account all
adjustments of the Class A Invested Amount, Class B Invested
Amount and Class C Invested Amount on such day shall be
subtracted from the Class D Invested Amount and added to the
Transferor Interest.
Section 4.8 Shared Principal Collections. Shared
Principal Collections allocated to Available Series 1998-3
Principal Collections for the Series 1998-3 Securities on any
Business Day and to be treated as Available Series 1998-3
Principal Collections or applied pursuant to subsections 4.9(b)
and 4.12(g) for any Business Day shall mean the amount specified
in subsection 4.3(e) of the Agreement, including the amount
designated, at the option of the Transferor, to be applied as
Shared principal Collections for the benefit of the Series 1998-3
Securities.
Section 4.9 Application of Funds on Deposit in the
Collection Account for the Securities. On each Business Day,
the Servicer shall deliver to the Trustee a Daily Report in which
it shall instruct the Trustee to withdraw, and the Trustee,
acting in accordance with such instructions, shall withdraw from
the appropriate accounts, to the extent of the sum of (s) the
amount of Finance Charge Collections allocated to the Series 1998-
3 Securities pursuant to subsection 4.5(a) of the Agreement, (t)
the investment earnings on amounts on deposit in the Class C
Reserve Account pursuant to subsection 4.16(c), (u) the
investment earnings on amounts on deposit in the Payment Reserve
Account pursuant to subsection 4.17(d), (v) the investment
earnings on amounts on deposit in the Revolving Receivables
Reserve Account pursuant to subsection 4.18(d), (w) the
investment earnings on amounts on deposit in the Principal
Funding Account pursuant to subsection 4.19(c), (x) the
investment earnings on amounts on deposit in the Interest Funding
Account and the Principal Account pursuant to subsection 4.5(c),
(y) amounts on deposit in the Payment Reserve Account, if any, if
and to the extent so designated by the Transferor and (z) the Cap
Receipt Amount, if any, for such Business Day (collectively, the
"Available Series 1998-3 Finance Charge Collections"); provided,
that with respect to any Business Day, amounts applied pursuant
to Sections 4.10 and 4.14 and subsection 4.16(b) of the Agreement
shall be applied as if such amounts were Available Series 1998-3
Finance Charge Collections. The Trustee shall apply Available
Series 1998-3 Finance Charge Collections and, with respect to
clause (ix) below, amounts on deposit in the Class C Reserve
Account to the extent of the aggregate amount of Class C Charge-
Offs resulting from unpaid Adjustment Payments, if any, in the
priority set forth below:
Class A Interest. On each Business Day during a
Monthly Period, the Trustee, acting in accordance with
instructions from the Servicer, shall deposit into the Interest
Funding Account, an amount equal to the lesser of (x) the
Available Series 1998-3 Finance Charge Collections and (y) the
sum of (A) the Class A Interest for such Business Day, (B) the
Class A Interest Shortfall for such Business Day and (C) accrued
and unpaid Class A Funding Interest as of such Business Day;
provided, however, that in the event a Pay-Out Event has occurred
and is continuing, the amount deposited in the Interest Funding
Account pursuant to this subsection 4.9(a)(i) shall not exceed
the sum of (a) the Capped Class A Interest for such Business Day
and (b) the Capped Class A Interest Shortfall for such Business
Day.
Class B Interest. On each Business Day during a
Monthly Period, the Trustee, acting in accordance with
instructions from the Servicer, shall deposit into the Interest
Funding Account, an amount equal to the lesser of (x) any
Available Series 1998-3 Finance Charge Collections remaining
after giving effect to the application pursuant to subsection
4.9(a)(i) and (y) the sum of (A) the Class B Interest for such
Business Day, (B) the Class B Interest Shortfall for such
Business Day and (C) accrued and unpaid Class B Funding Interest
as of such Business Day; provided, however, that in the event a
Pay-Out Event has occurred and is continuing, the amount
deposited in the Interest Funding Account pursuant to this
subsection 4.9(a)(ii) shall not exceed the sum of (a) the Capped
Class B Interest for such Business Day and (b) the Capped Class B
Interest Shortfall for such Business Day.
Class C Interest. On each Business Day during a
Monthly Period, the Trustee, acting in accordance with
instructions from the Servicer, shall deposit into the Interest
Funding Account, an amount equal to the lesser of (x) any
Available Series 1998-3 Finance Charge Collections remaining
after giving effect to the application pursuant to subsections
4.9(a)(i) and (ii) and (y) the sum of (A) the Class C Interest
for such Business Day, (B) the Class C Interest Shortfall for
such Business Day and (C) accrued and unpaid Class C Funding
Interest as of such Business Day; provided, however, that in the
event a Pay-Out Event has occurred and is continuing, the amount
deposited in the Interest Funding Account pursuant to this
subsection 4.9(a)(iii) shall not exceed the sum of (a) the Capped
Class C Interest for such Business Day and (b) the Capped Class C
Interest Shortfall for such Business Day.
Servicing Fee. On each Business Day, the Trustee,
acting in accordance with instructions from the Servicer, shall
distribute to the Servicer, an amount equal to the lesser of (x)
any Available Series 1998-3 Finance Charge Collections remaining
after giving effect to the applications pursuant to subsections
4.9(a)(i) through (iii) and (y) the Servicing Fee for such
Business Day plus any Servicing Fees due with respect to any
prior Business Day but not distributed to the Servicer.
Series Default Amount. On each Business Day, the
Trustee, acting in accordance with instructions from the
Servicer, shall apply, an amount equal to the lesser of (x) any
Available Series 1998-3 Finance Charge Collections remaining
after giving effect to the applications pursuant to subsections
4.9(a)(i) through (iv) and (y) the sum of (1) the aggregate
Series Default Amount for such Business Day plus (2) the unpaid
Series Default Amount for each previous Business Day during such
Monthly Period, such amount to be (A) treated as Shared Principal
Collections during the Revolving Period and (B) treated as
Available Series 1998-3 Principal Collections during the
Amortization Period.
Adjustment Payment Shortfalls. On each Business Day,
the Trustee, acting in accordance with instructions from the
Servicer, shall apply, an amount equal to the lesser of (x) any
Available Series 1998-3 Finance Charge Collections remaining
after giving effect to the applications pursuant to subsections
4.9(a)(i) through (v) and (y) an amount equal to the Series 1998-
3 Percentage of any Adjustment Payment which the Transferor is
required but fails to make pursuant to subsection 3.8(a) of the
Agreement, such amount, (A) to be treated as Shared Principal
Collections during the Revolving Period and (B) to be treated as
Available Series 1998-3 Principal Collections during the
Amortization Period.
Reimbursement of Class A Charge-Offs. On each
Business Day, the Trustee, acting in accordance with instructions
from the Servicer, shall apply, an amount equal to the lesser of
(x) any Available Series 1998-3 Finance Charge Collections
remaining after giving effect to the applications pursuant to
subsections 4.9(a)(i) through (vi) and (y) the unreimbursed Class
A Charge-Offs, if any; such amount will be applied to reimburse
Class A Charge-Offs, and will be treated as Shared Principal
Collections during the Revolving Period, and will be treated as
Available Series 1998-3 Principal Collections during the
Amortization Period.
Reimbursement of Class B Charge-Offs. On each
Business Day, the Trustee, acting in accordance with instructions
from the Servicer, shall apply, an amount equal to the lesser of
(x) any Available Series 1998-3 Finance Charge Collections
remaining after giving effect to the applications pursuant to
subsections 4.9(a)(i) through (vii) and (y) the unreimbursed
amount by which the Class B Invested Amount has been reduced on
prior Business Days pursuant to clauses (c) and (d) of the
definition of Class B Invested Amount, if any, such amount, (i)
to be treated as Shared Principal Collections during the
Revolving Period, and (ii) to be treated as Available Series 1998-
3 Principal Collections during the Amortization Period.
Reimbursement of Class C Charge-Offs. On each
Business Day, the Trustee, acting in accordance with instructions
from the Servicer, shall apply, an amount equal to the lesser of
(x) the sum of (A) any Available Series 1998-3 Finance Charge
Collections remaining after giving effect to the applications
pursuant to subsections 4.9(a)(i) through (viii) and (B) any
amounts on deposit in the Class C Reserve Account to the extent
of the aggregate amount of Class C Charge-Offs resulting from
unpaid Adjustment Payments, if any, and (y) the unreimbursed
amount by which the Class C Invested Amount has been reduced on
prior Business Days pursuant to clauses (c) and (d) of the
definition of Class C Invested Amount, if any, such amount,
(i) to be treated as Shared Principal Collections during the
Revolving Period, and (ii) to be treated as Available Series 1998-
3 Principal Collections during the Amortization Period.
Reimbursement of Class D Charge-Offs. On each
Business Day, the Trustee, acting in accordance with instructions
from the Servicer, shall apply an amount equal to the lesser of
(x) any Available Series 1998-3 Finance Charge Collections
remaining after giving effect to the applications pursuant to
subsections 4.9(a)(i) through (ix) and (y) the unreimbursed
amount by which the Class D Invested Amount has been reduced on
prior Business Days pursuant to clauses (d) and (e) of the
definition of Class D Invested Amount, if any, such amount (A) to
be treated as Shared Principal Collections during the Revolving
Period and (B) to be treated as Available Series 1998-3 Principal
Collections during the Amortization Period.
Class C Reserve Account. On each Business Day
following the occurrence of a Class C Trigger Event, the Trustee
acting in accordance with instructions from the Servicer, shall
deposit in the Class C Reserve Account an amount equal to the
lesser of (x) any Available Series 1998-3 Finance Charge
Collections remaining after giving effect to the applications
pursuant to subsections 4.9(a)(i) through (x) and (y) the amount
by which the Specified Class C Reserve Amount exceeds the amount
on deposit in the Class C Reserve Account and deposit such
amount, if any, into the Class C Reserve Account.
Facility Unused Fees. On each Business Day, the
Trustee, acting in accordance with instructions from the
Servicer, shall deposit into the Interest Funding Account for
distribution on the next Distribution Date to the Administrative
Agent for the benefit of the Senior Securityholders, an amount
equal to the lesser of (x) any Available Series 1998-3 Finance
Charge Collections remaining after giving effect to the
applications pursuant to subsections 4.9(a)(i) through (xi) and
(y) the sum of (A) the Facility Unused Fee for such Business Day
and (B) the Facility Unused Fee accrued but not deposited into
the Interest Funding Account with respect to any prior Business
Day.
Excess Class A Interest. In the event a Pay-Out
Event has occurred and is continuing, on each Business Day during
a Monthly Period, the Trustee, acting in accordance with
instructions from the Servicer, shall deposit into the Interest
Funding Account an amount equal to the lesser of (x) the
Available Series 1998-3 Finance Charge Collections remaining
after giving effect to the applications pursuant to subsections
4.9(a)(i) through (xii) and (y) the excess of (A) the sum of the
Class A Interest for such Business Day and the Class A Interest
Shortfall for such Business Day over (B) the amount applied
pursuant to subsection 4.9(a)(i) hereof for such Business Day.
Excess Class B Interest. In the event a Pay-Out
Event has occurred and is continuing, on each Business Day during
a Monthly Period, the Trustee, acting in accordance with
instructions from the Servicer, shall deposit into the Interest
Funding Account an amount equal to the lesser of (x) the
Available Series 1998-3 Finance Charge Collections remaining
after giving effect to the applications pursuant to subsections
4.9(a)(i) through (xiii) and (y) the excess of (A) the sum of the
Class B Interest for such Business Day and the Class B Interest
Shortfall for such Business Day over (B) the amount applied
pursuant to subsection 4.9(a)(ii) for such Business Day.
Excess Class C Interest. In the event a Pay-Out
Event has occurred and is continuing, on each Business Day during
a Monthly Period, the Trustee, acting in accordance with
instructions from the Servicer, shall deposit into the Interest
Funding Account an amount equal to the lesser of (x) the
Available Series 1998-3 Finance Charge Collections remaining
after giving effect to the applications pursuant to subsections
4.9(a)(i) through (xiv) and (y) the excess of (A) the sum of the
Class C Interest for such Business Day and the Class C Interest
Shortfall for such Business Day over (B) the amount applied
pursuant to subsection 4.9(a)(iii) for such Business Day.
Increased Costs. On each Business Day, the Trustee
acting in accordance with instructions from the Servicer, shall
deposit into the Interest Funding Account for distribution to the
Administrative Agent for the benefit of the Senior
Securityholders, an amount equal to the lesser of (x) any
Available Series 1998-3 Finance Charge Collections remaining
after giving effect to the applications pursuant to subsections
4.9(a)(i) through (xv) and (y) the amount of Increased Costs for
such Business Day and the Increased Costs accrued but not
distributed to the Administrative Agent with respect to any prior
Business Day.
Class D Interest. On each Business Day during a
Monthly Period, the Trustee, acting in accordance with the
instructions from the Servicer, shall deposit in the Interest
Funding Account for distribution to the Class D Securityholders
on the next Distribution Date, an amount equal to the lesser of
(x) any Available Series 1998-3 Finance Charge Collections
remaining after giving effect to the applications pursuant to
subsections 4.9(a)(i) through (xvi) and (y) the sum of (1) the
amount of interest which has accrued with respect to the Class D
Securities on the Class D Outstanding Principal Amount at the
applicable Class D Interest Rate but which has not been deposited
into the Interest Funding Account on any prior Business Day or
paid to the Class D Securityholders and (2) any additional
interest (to the extent permitted by applicable law) at the Class
D Interest Rate on interest that was payable during a prior
Monthly Period pursuant to this subsection but was not deposited
in the Interest Funding Account or paid to the Class D
Securityholders.
Revolving Receivables Reserve Account. On each
Business Day, the Trustee acting in accordance with instructions
from the Servicer, shall deposit into the Revolving Receivables
Reserve Account, an amount equal to the lesser of (x) any
Available Series 1998-3 Finance Charge Collections remaining
after giving effect to the applications pursuant to subsections
4.9(a)(i) through (xvii) and (y) an amount equal to the excess,
if any, of the Specified Revolving Receivables Reserve Amount on
such date over the amount then on deposit in the Revolving
Receivable Reserve Account.
Payment Reserve Account. On each Business Day, the
Trustee acting in accordance with instructions from the Servicer,
shall deposit in the Payment Reserve Account, an amount equal to
the lesser of (x) any Available Series 1998-3 Finance Charge
Collections remaining after giving effect to the applications
pursuant to subsections 4.9(a)(i) through (xviii) and (y) the
amount designated by the Transferor in writing (which include
facsimile transmission) in its instructions to the Trustee on
such Business Day.
Excess Finance Charge Collections. Any Available
Series 1998-3 Finance Charge Collections remaining after giving
effect to the applications pursuant to subsection 4.9(a)(i)
through (xix), shall be treated as Excess Finance Charge
Collections, and the Servicer shall direct the Trustee in writing
on each Business Day to first make such amounts available to pay
to Securityholders of other Series to the extent of shortfalls,
if any, in amounts payable to such Securityholders 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 to reserve for (or pay when
due) any taxes and related expenses anticipated by the Servicer
to be payable by the Trust with respect to the related Monthly
Period or prior Monthly Period and then on each Business Day to
pay any remaining Excess Finance Charge Collections to the
Transferor.
For each Business Day with respect to the Revolving
Period, the funds on deposit in the Collection Account to the
extent of the lesser of (A) the sum of the Class A Invested
Amount, the Class B Invested Amount and the Class C Invested
Amount and (B) the sum of (x) product of (i) the Floating
Percentage and (ii) the amount of Principal Collections on such
Business Day (less the amount of Redirected Principal Collections
on such Business Day) (such product, the "Net Revolving Principal
Collections"), (y) the amount then on deposit in the Collection
Account pursuant to subsection 3A(h) of this Series Supplement
and (z) the amount of Shared Principal Collections allocated to
the Series 1998-3 Securities in accordance with Section 4.8 on
such Business Day may, at the option of the Transferor or shall,
(I) if the Specified Class C Reserve Amount exceeds the amount on
deposit in the Class C Reserve Account on such Business Day or
(II) if the Aggregate ABC Principal Amount exceeds the Aggregate
Interest Rate Caps Notional Amount on such Business Day, pursuant
to instructions delivered to the Servicer and the Trustee by
facsimile or other similar means of documented communication, be
deposited into the Principal Funding Account and applied as
provided in subsection 9A(b) of this Series Supplement. During
the Revolving Period, an amount equal to the Net Revolving
Principal Collections less any amount deposited to the Principal
Funding Account pursuant to the immediately preceding sentence
shall be treated as Shared Principal Collections and applied
pursuant to the written direction of the Servicer in the Daily
Report for such Business Day, as provided in Section 4.3(e) of
the Agreement.
For each Business Day on and after the Amortization
Period Commencement Date, pursuant to the written direction of
the Servicer in the Daily Report for such Business Day, an amount
(not in excess of the Invested Amount) equal to the Available
Series 1998-3 Principal Collections for such Business Day will be
deposited into the Principal Account.
Section 4.10 Coverage of Required Amount for the
Series 1998-3 Securities. Coverage of Negative Carry Amount.
To the extent that any amounts are on deposit in the Excess
Funding Account on any Business Day, the Servicer shall apply, in
the manner specified for application of Available Series 1998-3
Finance Charge Collections in subsections 4.9(a)(i) through
(xvii), Transferor Finance Charge Collections in an amount (the
"Negative Carry Amount") equal to the excess of (x) the product
of (a) the Base Rate, (b) the amounts on deposit in the Excess
Funding Account and (c) the number of days elapsed since the
previous Business Day divided by the actual number of days in
such year over (y) the aggregate amount of all earnings since the
previous Business Day available from the Cash Equivalents in
which funds on deposit in the Excess Funding Account are
invested.
Required Amounts from Other Series Excess Finance
Charge Collections. To the extent that on any Business Day
payments are being made pursuant to any of subsections 4.9(a)(i)
through (xvii), respectively, and the full amount to be paid
pursuant to any such subsection receiving payments on such
Business Day is not paid in full on such Business Day, the
Servicer shall apply, in the manner specified for application of
Available Series 1998-3 Finance Charge Collections in subsections
4.9(a)(i) through (xvii), all or a portion of the Excess Finance
Charge Collections from other Series with respect to such
Business Day allocable to the Series 1998-3 Securities in an
amount equal to the excess of the full amount to be allocated or
paid pursuant to the applicable subsection over the amount
applied with respect thereto from Available Series 1998-3 Finance
Charge Collections and Transferor Finance Charge Collections on
such Business Day (the "Required Amount"). Excess Finance Charge
Collections allocated to the Series 1998-3 Securities for any
Business Day shall mean an amount equal to the product of (x)
Excess Finance Charge Collections available from all other Series
for such Business Day and (y) a fraction, the numerator of which
is the Required Amount for such Business Day and the denominator
of which is the aggregate amount of shortfalls in required
amounts or other amounts to be paid from Finance Charge
Collections for all Series for such Business Day.
Section 4.11 Payment of Interest. On each day
specified below, the Trustee, acting in accordance with
instructions from the Servicer set forth in the Daily Report for
such day, shall withdraw the amount on deposit in the Interest
Funding Account allocable to the Series 1998-3 Securities and
deposit such amount in the Distribution Account. The Paying
Agent shall pay in accordance with Section 5.1 of the Agreement
to the Administrative Agent for the benefit of the Senior
Securityholders from the Distribution Account the amount
deposited into the Interest Funding Account pursuant to
subsection 4.9(a) (including, with respect to such subsection,
amounts applied thereto pursuant to subsections 4.10(a) and (b),
4.16(b) and Section 4.14 of the Agreement) in the manner set
forth below.
(a) Interest Payments and Other Payments Between
Distribution Dates. Pursuant to instructions from the Servicer
set forth in the Daily Report for such day, on any Business Day
the Trustee shall withdraw an amount on deposit in the Interest
Funding Account and distribute such amount as follows:
(i) pay to the Administrative Agent for the
benefit of the Class A Securityholders first the Class A Funding
Shortfall, if any, for the previous Business Day, and then the
portion of Class A Interest accrued with respect to Funding
Periods ending on such Business Day;
(ii) pay to the Administrative Agent for the
benefit of the Class B Securityholders first the Class B Funding
Shortfall, if any, for the previous Business Day, and then the
portion of Class B Interest accrued with respect to Funding
Periods ending on such Business Day;
(iii) pay to the Administrative Agent for the
benefit of the Class C Securityholders first the Class C Funding
Shortfall, if any, for the previous Business Day, and then the
portion of Class C Interest accrued with respect to Funding
Periods ending on such Business Day; and
(iv) at the option of the Transferor, pay to the
Administrative Agent for the benefit of the Senior
Securityholders, an amount equal to the portion of Increased
Costs accrued and unpaid on such Business Day.
(b) Interest Payments and Other Payments on
Distribution Dates. On each Transfer Date, the Trustee, acting
in accordance with instructions from the Servicer set forth in
the Daily Report for such day, shall withdraw the amount on
deposit in the Interest Funding Account with respect to the
previous Monthly Period remaining after the applications pursuant
to subsection 4.11(a) and deposit such amount in the Distribution
Account. On each Distribution Date, the Paying Agent shall make
the following payments in accordance with Section 5.1 of the
Agreement to the extent of such deposit into the Distribution
Account:
(i) first, to the Administrative Agent for the
benefit of the Class A Securityholders, an amount equal to the
lesser of (A) the amounts on deposit in the Interest Funding
Account remaining after giving effect to the payment pursuant to
subsection 4.11(a) and (B) the excess of (x) the Class A Interest
accrued with respect to the preceding Monthly Period and any
Class A Interest Shortfalls with respect to the preceding Monthly
Period over (y) the aggregate interest payments made with respect
thereto pursuant to subsection 4.11(a) prior to such Distribution
Date;
(ii) second, to the Administrative Agent for the
benefit of the Class B Securityholders, an amount equal to the
lesser of (A) the amounts on deposit in the Interest Funding
Account remaining after giving effect to the payment pursuant to
subsections 4.11(a) and 4.11(b)(i) and (B) the excess of (x) the
Class B Interest accrued with respect to the preceding Monthly
Period and any Class B Interest Shortfalls with respect to the
preceding Monthly Period over (y) the aggregate interest payments
made with respect thereto pursuant to subsection 4.11(a) prior to
such Distribution Date;
(iii) third, to the Administrative Agent for the
benefit of the Class C Securityholders, an amount equal to the
lesser of (A) the amounts on deposit in the Interest Funding
Account remaining after giving effect to the payment pursuant to
subsections 4.11(a) and 4.11(b)(i) and (ii) and (B) the excess of
(x) the Class C Interest accrued with respect to the preceding
Monthly Period and any Class C Interest Shortfalls with respect
to the preceding Monthly Period over (y) the aggregate interest
payments made with respect thereto pursuant to subsection 4.11(a)
prior to such Distribution Date;
(iv) fourth, to the Administrative Agent for the
benefit of the Senior Securityholders, an amount equal to the
Facility Unused Fees accrued with respect to the preceding
Monthly Period;
(v) fifth, to the extent not paid pursuant to
subsection 4.11(a)(iv) above, to the Administrative Agent for the
benefit of the Senior Securityholders, an amount equal to the
Increased Costs, if any, accrued with respect to the preceding
Monthly Period; and
(vi) sixth, to the Class D Securityholder, an
amount equal to the Class D Interest, if any, accrued with
respect to the preceding Monthly Period.
Section 4.12 Payment of Principal.
On each Business Day during the Revolving Period, the
Trustee, acting in accordance with instructions from the Servicer
set forth in the Daily Report for such day, shall withdraw from
the Principal Account the amount deposited therein pursuant to
subsection 9A(b) of the Agreement and pay such amount to the
Administrative Agent pursuant to Section 5.1 of the Agreement on
the next Business Day. If so designated in writing by the
Transferor with respect to such Business Day, after giving effect
to the payments described in the preceding sentence, the Class D
Excess Amount, if any, may be subtracted from the Class D
Invested Amount and added to the Transferor Interest.
On the Transfer Date preceding each Distribution Date
during the Amortization Period, the Trustee, acting in accordance
with instructions from the Servicer set forth in the Daily Report
for such day, shall withdraw from the Principal Account, to the
extent of funds available, an amount equal to the Class A
Principal for such Distribution Date and deposit such amount in
the Distribution Account. On each Distribution Date with respect
to the Amortization Period until the Class A Invested Amount is
paid in full, the Paying Agent shall pay in accordance with
Section 5.1 of the Agreement to the Administrative Agent from the
Distribution Account such amounts deposited with respect to Class
A Principal into the Distribution Account on the related Transfer
Date.
On the Transfer Date preceding the Class B Principal
Payment Commencement Date and each Transfer Date thereafter, the
Trustee, acting in accordance with instructions from the Servicer
set forth in the Daily Report for such day, shall withdraw from
the Principal Account, to the extent of funds available, an
amount equal to the Class B Principal for such Distribution Date
and deposit such amount in the Distribution Account. On and
after the Class B Principal Payment Commencement Date, on each
Distribution Date until the Class B Invested Amount is paid in
full, the Paying Agent shall pay in accordance with Section 5.1
of the Agreement to the Administrative Agent from the
Distribution Account such amounts deposited with respect to Class
B Principal into the Distribution Account on the related Transfer
Date.
On the Transfer Date preceding the Class C Principal
Payment Commencement Date and each Transfer Date thereafter, the
Trustee, acting in accordance with instructions from the Servicer
set forth in the Daily Report for such day, shall withdraw from
the Principal Account, to the extent of funds available, an
amount equal to the Class C Principal for such Distribution Date
and deposit such amount in the Distribution Account. On and
after the Class C Principal Payment Commencement Date, on each
Distribution Date until the Class C Invested Amount is paid in
full, the Paying Agent shall pay in accordance with Section 5.1
of the Agreement to the Administrative Agent from the
Distribution Account such amounts deposited with respect to Class
C Principal into the Distribution Account on the related Transfer
Date.
On the Transfer Date preceding the Class D Principal
Payment Commencement Date and each Transfer Date thereafter, the
Trustee, acting in accordance with instructions from the Servicer
set forth in the Daily Report for such day, shall withdraw from
the Principal Account and deposit in the Distribution Account, to
the extent of funds available, an amount equal to the Class D
Principal for the related Distribution Date. On the Class D
Principal Payment Commencement Date after the payment of any
principal amounts to the Class A Securities, the Class B
Securities and the Class C Securities on such day, and on each
Distribution Date thereafter until the Class D Invested Amount is
paid in full, the Paying Agent shall pay in accordance with
Section 5.1 of the Agreement to the Class D Securityholder from
the Distribution Account such amounts deposited with respect to
Class D Principal into the Distribution Account on the related
Transfer Date. Notwithstanding the foregoing, if so designated
in writing by the Transferor with respect to any such Transfer
Date, any such payment of Class D Principal shall not be made to
the Class D Securityholder but such amount shall nonetheless be
subtracted from the Class D Invested Amount and added to the
Transferor Interest and on each Transfer Date Class D Excess
Amounts may be subtracted from the Class D Invested Amount and
added to the Transferor Interest whether or not such amount has
been deposited into the Distribution Account.
(f) On any Business Day during the Amortization
Period, upon the direction of the Transferor any amounts on
deposit in the Principal Account pursuant to subsection 4.9(c) of
the Agreement may be withdrawn from the Principal Account and
deposited in the Distribution Account, to the extent of funds
available, for distribution on the next Business Day, pursuant to
Section 5.1 of the Agreement, to be applied to the payment of
Class A Principal until the Class A Invested Amount is paid in
full, then to the payment of Class B Principal until the Class B
Invested Amount is paid in full, then to the payment of Class C
Principal until the Class C Invested Amount is paid in full, and
then to the payment of Class D Principal until the Class D
Invested Amount is paid in full.
(g) Any amounts remaining in the Principal Account and
allocable to the Series 1998-3 Securities, after the Class D
Invested Amount has been paid in full, will be treated as Shared
Principal Collections and applied in accordance with Section
4.3(e) of the Agreement.
Section 4.13 Series Charge-Offs. If, on any
Determination Date, the sum of the aggregate Series Default
Amount and the Series 1998-3 Percentage of unpaid Adjustment
Payments, if any, for all Business Days in the preceding Monthly
Period exceeded the sum of (x) the aggregate Available Series
1998-3 Finance Charge Collections applied to the payment thereof
pursuant to subsections 4.9(a)(v) and (vi) of the Agreement, (y)
the aggregate amount of Transferor Finance Charge Collections and
Excess Finance Charge Collections allocated thereto pursuant to
Section 4.10 of the Agreement, and (z) the aggregate amount of
Redirected Principal Collections applied with respect thereto
pursuant to Section 4.14 of the Agreement, the Class D Invested
Amount will be reduced by the amount of such excess (a "Class D
Charge-Off").
In the event that any such reduction of the Class D
Invested Amount would cause the Class D Invested Amount to be a
negative number, the Class D Invested Amount will be reduced to
zero, and, the Class C Invested Amount will be reduced by the
amount by which the Class D Invested Amount would have been
reduced below zero, but not more than the aggregate Series
Default Amount and Series 1998-3 Percentage of unpaid Adjustment
Payments for such Monthly Period (a "Class C Charge-Off").
In the event that any such reduction of the Class C
Invested Amount would cause the Class C Invested Amount to be a
negative number, the Class C Invested Amount will be reduced to
zero, and, the Class B Invested Amount will be reduced by the
amount by which the Class C Invested Amount would have been
reduced below zero, but not more than the remaining aggregate
Series Default Amount and Series 1998-3 Percentage of unpaid
Adjustment Payments for such Monthly Period (a "Class B Charge-
Off").
In the event that any such reduction of the Class B
Invested Amount would cause the Class B Invested Amount to be a
negative number, the Class B Invested Amount will be reduced to
zero, and the Class A Invested Amount will be reduced by the
amount by which the Class B Invested Amount would have been
reduced below zero, but not more than the remaining aggregate
Series Default Amount and Series 1998-3 Percentage of unpaid
Adjustment Payments for such Monthly Period (a "Class A Charge-
Off").
Section 4.14 Redirected Principal Collections for the
Series 1998-3 Securities. On each Business Day, the Servicer
will determine an amount equal to the least of (i) the Class D
Invested Amount, (ii) the product of (x)(I) during the Revolving
Period, the Class D Floating Percentage or (II) during an
Amortization Period, the Class D Fixed/Floating Percentage and
(y) the amount of Principal Collections with respect to such
Business Day and (iii) an amount equal to the sum of (a) the
Class A Required Amount for such Business Day, (b) the Class B
Required Amount for such Business Day and (c) the Class C
Required Amount for such Business Day (such amount called
"Redirected Class D Principal Collections") and shall apply
Principal Collections allocable to the Series 1998-3 Securities
in an amount equal to such amount in accordance with subsection
4.9(a) as if such amounts were Available Series 1998-3 Finance
Charge Collections.
On each Business Day, the Servicer will determine an
amount equal to the least of (i) the Class C Invested Amount,
(ii) the product of (x)(I) during the Revolving Period, the Class
C Floating Percentage or (II) during an Amortization Period, the
Class C Fixed/Floating Percentage and (y) the amount of Principal
Collections for such Business Day and (iii) an amount equal to
the sum of (a) the excess, if any, of the Class A Required Amount
for such Business Day over the amount of Redirected Class D
Principal Collections applied with respect thereto for such
Business Day and (b) the excess, if any, of the Class B Required
Amount for such Business Day over the amount of Redirected Class
D Principal Collections applied with respect thereto for such
Business Day (such amount called "Redirected Class C Principal
Collections") and shall apply Principal Collections allocable to
the Series 1998-3 Securities in an amount equal to such amount in
accordance with subsection 4.9(a) as if such amounts were
Available Series 1998-3 Finance Charge Collections.
On each Business Day, the Servicer will determine an
amount equal to the least of (i) the Class B Invested Amount,
(ii) the product of (x)(I) during the Revolving Period, the Class
B Floating Percentage or (II) during an Amortization Period, the
Class B Fixed/Floating Percentage and (y) the amount of Principal
Collections for such Business Day and (iii) an amount equal to
the excess, if any, of the Class A Required Amount for such
Business Day over the sum of the amount of Redirected Class D
Principal Collections and Redirected Class C Principal
Collections applied with respect thereto for such Business Day
(such amount called "Redirected Class B Principal Collections")
and shall apply Principal Collections allocable to the Series
1998-3 Securities in an amount equal to such amount in accordance
with subsection 4.9(a) as if such amounts were Available Series
1998-3 Finance Charge Collections.
(d) On each Distribution Date, the Class D Invested
Amount will be reduced by the aggregate amount of unreimbursed
Redirected Principal Collections for the related Monthly Period.
In the event that such reduction would cause the Class D Invested
Amount to be a negative number, the Class D Invested Amount will
be reduced to zero and the Class C Invested Amount will be
reduced by the amount by which the Class D Invested Amount would
have been reduced below zero. In the event that the amount of
unreimbursed Redirected Principal Collections for such
Distribution Date would cause the Class C Invested Amount to be a
negative number, the Class C Invested Amount will be reduced to
zero and the Class B Invested Amount will be reduced by the
amount by which the Class C Invested Amount would have been
reduced below zero. In the event that the amount of unreimbursed
Redirected Principal Collections would cause the Class B Invested
Amount to be a negative number on any Distribution Date, the
amount of Class B Redirected Principal Collections on such
Distribution Date will be an amount not to exceed the amount
which would cause the Class B Invested Amount to be reduced to
zero.
Section 4.15 Class C Trigger Event. If (i) the
rating from Moody's of Fingerhut Companies, Inc.'s most senior
notes and, if rated, the rating of Fingerhut Companies, Inc.'s
corporate revolving lines of credit facility are reduced below
Baa2 (a "Class C Trigger Event"), and (ii) with respect to any
Business Day, the percentage equivalent of a fraction the
numerator of which is the Series 1998-3 Percentage of the
Transferor Interest and the denominator of which is the sum of
the Invested Amount and the Series 1998-3 Percentage of the
Transferor Interest (the "Target Percentage") is less than 5%,
(a) the Transferor shall, in connection with increases in the
aggregate amount of Principal Receivables in the Trust, the
scheduled paydown of other Series or, with respect to any Series
of Variable Funding Securities, an optional payment of principal,
allow the Transferor Interest to increase such that the Target
Percentage shall be equal to or in excess of 5% or (b) the
Servicer shall cause amounts available pursuant to subsection
4.9(a)(xi) of the Agreement to be deposited in the Class C
Reserve Account until the amount on deposit therein is equal to
the Specified Class C Reserve Amount. The Servicer shall provide
to Moody's and the Trustee prompt written notice of any
downgrading of the rating of Fingerhut Companies, Inc.'s most
senior rated notes. The Transferor may allow the Transferor
Interest to decrease on any Business Day, to the extent that it
exceeds the Minimum Transferor Interest and the amount on deposit
in the Class C Reserve Account following any such decrease and
after giving effect to any deposit therein on such Business Day
is at least equal to the Specified Class C Reserve Amount.
Section 4.16 Class C Reserve Account.
Establishment of the Class C Reserve Account. The
Servicer, for the benefit of the Class C Securityholders, shall,
upon the occurrence of a Class C Trigger Event, establish and
maintain or cause to be established and maintained with a
Qualified Institution, which may be the Trustee, in the name of
the Trustee, on behalf of the Class C Securityholders, the "Class
C Reserve Account," which shall be a segregated trust account
with the corporate trust department of such Qualified
Institution, bearing a designation clearly indicating that the
funds deposited therein are held for the benefit of the Class C
Securityholders. The Trustee shall possess all right, title and
interest in all funds on deposit from time to time in the Class C
Reserve Account and in all proceeds thereof. The Class C Reserve
Account shall be under the sole dominion and control of the
Trustee for the benefit of the Class C Securityholders. If, at
any time, the institution holding the Class C Reserve Account
ceases to be a Qualified Institution, the Trustee shall within 10
Business Days establish a new Class C Reserve Account meeting the
conditions specified above with a Qualified Institution, and
shall transfer any cash or any investments to such new Class C
Reserve Account. From the date such new Class C Reserve Account
is established, it shall be the "Class C Reserve Account."
Administration of the Class C Reserve Account. On
each Business Day following the occurrence of a Class C Trigger
Event, the Servicer shall deposit in the Class C Reserve Account
an amount equal to the excess of the Specified Class C Reserve
Amount over the amount on deposit in the Class C Reserve Account
to the extent of funds available therefor pursuant to subsection
4.9(a)(xi). Funds on deposit in the Class C Reserve Account
shall be withdrawn by the Servicer and applied in accordance with
subsection 4.9(a)(ix) to the extent of the aggregate amount of
Class C Charge-Offs resulting from unpaid Adjustment Payments, if
any. Amounts on deposit in the Class C Reserve Account may be
subsequently released therefrom to the extent that the amount on
deposit in the Class C Reserve Account exceeds the Specified
Class C Reserve Amount and paid to the Transferor. The amount on
deposit in the Class C Reserve Account may also be released
therefrom and paid to the Transferor, and the Target Percentage
of the Transferor Interest may equal zero, if the rating of
Fingerhut Companies, Inc.'s most senior rated notes or, if rated,
the rating of Fingerhut Companies, Inc.'s corporate revolving
lines of credit facility, is subsequently increased to Baa2 or
higher by Moody's or the Class C Invested Amount has been paid in
full.
Investment of Funds in the Class C Reserve Account.
Funds on deposit in the Class C Reserve Account shall be
invested, by the Trustee (or, at the direction of the Trustee, by
the Servicer on behalf of the Trustee) at the direction of the
Servicer, in Cash Equivalents that will mature so that such funds
will be available for withdrawal on or prior to the following
Business Day. The interest and other investment income (net of
investment expenses and losses) earned on such investments will
be retained in the Class C Reserve Account (to the extent that
the amount on deposit in the Class C Reserve Account is less than
the Specified Class C Reserve Amount)or applied on each Business
Day as Available Series 1998-3 Finance Charge Collections.
Termination of the Class C Reserve Account. The Class
C Reserve Account shall be terminated following the earliest to
occur of (a) the termination of the Trust pursuant to the
Agreement and (b) the date on which the Class C Invested Amount
is paid in full. Upon the termination of the Class C Reserve
Account, all amounts on deposit therein (after giving effect to
any withdrawal from the Class C Reserve Account on such date as
described above) shall be released therefrom and paid to the
Transferor.
Section 4.17 Payment Reserve Account.
Establishment of the Payment Reserve Account. The
Servicer shall establish and maintain or cause to be established
and maintained with a Qualified Institution, which may be the
Trustee, in the name of the Trustee, on behalf of the
Securityholders, the "Payment Reserve Account," which shall be a
segregated trust account with the corporate trust department of
such Qualified Institution, bearing a designation clearly
indicating that the funds deposited therein are held for the
benefit of the Securityholders. The Trustee shall possess all
right, title and interest in all funds on deposit from time to
time in the Payment Reserve Account and in all proceeds thereof.
The Payment Reserve Account shall be under the sole dominion and
control of the Trustee for the benefit of the Securityholders.
If, at any time, the institution holding the Payment Reserve
Account ceases to be a Qualified Institution, the Trustee shall
within 20 Business Days establish a new Payment Reserve Account
meeting the conditions specified above with a Qualified
Institution, and shall transfer any cash or any investments to
such new Payment Reserve Account. From the date such new Payment
Reserve Account is established, it shall be the "Payment Reserve
Account."
Administration of the Payment Reserve Account. The
Transferor, at its discretion, may withdraw on any Determination
Date a part or all of any amounts remaining in the Payment
Reserve Account after giving effect to any withdrawals required
to be made under Section 4.9(a) above.
Investment of Funds on Deposit in the Payment Reserve
Account. Funds on deposit in the Payment Reserve Account shall
be invested, by the Trustee (or, at the direction of the Trustee,
by the Servicer on behalf of the Trustee) at the direction of the
Servicer, in Cash Equivalents that will mature so that such funds
will be available for withdrawal on or prior to the following
Business Day. The interest and other investment income (net of
investment expenses and losses) earned on such investments will
be applied on each Business Day as Available Series 1998-3
Finance Charge Collections.
Termination of Payment Reserve Account. The Payment
Reserve Account shall be terminated following the earliest to
occur of (a) the termination of the Trust pursuant to the
Agreement and (b) the date on which the Invested Amount is paid
in full. Upon the termination of the Payment Reserve Account,
all amounts on deposit therein (after giving effect to any
withdrawal from the Payment Reserve Account on such date as
described above) shall be applied as if they were Available
Series 1998-3 Finance Charge Collections available to be applied
pursuant to subsection 4.9(a) on the last Business Day of the
preceding Monthly Period.
Section 4.18 Revolving Receivables Reserve Account.
Establishment of the Revolving Receivables Reserve
Account. The Servicer shall establish and maintain or cause to
be established and maintained with a Qualified Institution, which
may be the Trustee, in the name of the Trustee, on behalf of the
Series 1998-3 Securityholders, the "Revolving Receivables Reserve
Account," which shall be a segregated trust account with the
corporate trust department of such Qualified Institution, bearing
a designation clearly indicating that the funds deposited therein
are held for the benefit of the Series 1998-3 Securityholders.
The Trustee shall possess all right, title and interest in all
funds on deposit from time to time in the Revolving Receivables
Reserve Account and in all proceeds thereof. The Revolving
Receivables Reserve Account shall be under the sole dominion and
control of the Trustee for the benefit of the Series 1998-3
Securityholders. If at any time, the institution holding the
Revolving Receivables Reserve Account ceases to be a Qualified
Institution, the Trustee shall within 10 Business Days establish
a new Revolving Receivables Reserve Account meeting the
conditions specified above with a Qualified Institution, and
shall transfer any cash or any investments to such new Revolving
Receivables Reserve Account. From the date such new Revolving
Receivables Reserve Account is established, it shall be the
"Revolving Receivables Reserve Account."
Deposits. On the Closing Date, the Transferor shall
make an initial deposit of $100,000 to the Revolving Receivables
Reserve Account. Amounts shall be deposited in the Revolving
Receivables Reserve Account on each Business Day to the extent
specified pursuant to subsection 4.9(a)(xviii) of the Agreement.
Withdrawals. Funds on deposit in the Revolving
Receivables Reserve Account shall be withdrawn by the Servicer on
each Transfer Date to the extent of any shortfalls in amounts to
be paid or deposited pursuant to subsections 4.9(a)(i) through
(xvii) of the Agreement as of the end of the day on the last
Business Day of the preceding Monthly Period and shall be applied
in accordance with subsections 4.9(a)(i) through (xvii) of the
Agreement as Available Series 1998-3 Finance Charge Collections
as if such amounts were available on the last Business Day of the
preceding Monthly Period. To the extent that the amount on
deposit in the Revolving Receivables Reserve Account is greater
than the Specified Revolving Receivables Reserve Amount such
amount may be released to the Transferor.
Investment of Funds in Revolving Receivables Reserve
Account. Funds on deposit in the Revolving Receivables Reserve
Account shall be invested by the Trustee at the direction of the
Servicer in Cash Equivalents maturing no later than the following
Transfer Date. The interest and other investment income (net of
investment expenses and losses) earned on such investments will
be, (i) to the extent the amount on deposit therein is less than
the Specified Revolving Receivables Reserve Amount, retained in
the Revolving Receivables Reserve Account and, (ii) to the extent
the amount on deposit therein is greater than the Specified
Revolving Receivables Reserve Amount, the aggregate proceeds of
any such investment shall be applied on each Transfer Date as
Investment Earnings for application as Available Series 1998-3
Finance Charge Collections as if such amounts were available to
be applied pursuant to subsection 4.9(a) of the Agreement on the
last Business Day of the preceding Monthly Period.
Termination of Revolving Receivables Reserve Account.
The Revolving Receivables Reserve Account shall be terminated
following the earliest to occur of (a) the termination of the
Trust pursuant to the Agreement and (b) the date on which the
Invested Amount is paid in full. Upon the termination of the
Revolving Receivables Reserve Account, all amounts on deposit
therein (after giving effect to any withdrawal from the Revolving
Receivables Reserve Account on such date as described above)
shall be applied as Available Series 1998-3 Finance Charge
Collections as if such amounts were available to be applied
pursuant to subsection 4.9(a) of the Agreement on the last
Business Day of the preceding Monthly Period.
Section 4.19 Principal Funding Account.
Establishment of the Principal Funding Account. The
Servicer shall establish and maintain or cause to be established
and maintained with a Qualified Institution, which may be the
Trustee, in the name of the Trustee, on behalf of the Series 1998-
3 Securityholders, the "Principal Funding Account," which shall
be a segregated trust account with the corporate trust department
of such Qualified Institution, bearing a designation clearly
indicating that the funds deposited therein are held for the
benefit of the Series 1998-3 Securityholders. The Trustee shall
possess all right, title and interest in all funds on deposit
from time to time in the Principal Funding Account and in all
proceeds thereof. The Principal Funding Account shall be under
the sole dominion and control of the Trustee for the benefit of
the Series 1998-3 Securityholders. If at any time, the
institution holding the Principal Funding Account ceases to be a
Qualified Institution, the Trustee shall within 10 Business Days
establish a new Principal Funding Account meeting the conditions
specified above with a Qualified Institution, and shall transfer
any cash or any investments to such new Principal Funding
Account. From the date such new Principal Funding Account is
established, it shall be the "Principal Funding Account."
Investment of Funds in the Principal Funding Account.
Funds on deposit in the Principal Funding Account shall be
invested by the Trustee at the direction of the Servicer in Cash
Equivalents maturing no later than the next Business Day. The
interest and other investment income (net of investment expenses
and losses) earned on such investments will be applied on each
Business Day as Available Series 1998-3 Finance Charge
Collections.
Termination of the Principal Funding Account. The
Principal Funding Account shall be terminated following the
earliest to occur of (a) the termination of the Trust pursuant to
the Agreement and (b) the date on which the Invested Amount is
paid in full. Upon the termination of the Principal Funding
Account, all amounts on deposit therein (after giving effect to
any withdrawal from the Principal Funding Account on such date as
described above) shall be applied as Available Series 1998-3
Finance Charge Collections as if such amounts were available to
be applied pursuant to subsection 4.9(a) of the Agreement on the
last Business Day of the preceding Monthly Period.
Section 4.20 Constituent Class D Securities. The
Transferor as holder of the Class D Securities may at any time
(i) subdivide the Class D Securities into two or more subsidiary
Securities, or (ii) redirect all or any portion of the amounts
distributable to the Class D Securityholders (pursuant to the
application of collections allocable to the Class D
Securityholders) to any other Securityholder. In connection with
such subdivision, the Transferor may assign an interest rate to
the Class D Securities, the "Class D Interest Rate," or a portion
thereof and make payments of interest with respect to such
Securities from amounts initially allocated to the Series 1998-3
Securities and available pursuant to subsection 4.9(a)(xiv).
Before any Class D Securities can be subdivided or transferred,
the following conditions must be met: (i) the Trustee and the
Transferor shall have received an Opinion of Counsel that such
transfer does not adversely affect the conclusions reached in any
of the federal or state income tax opinions issued in connection
with the original issuance of the Series 1998-3 Securities, (ii)
the Transferor shall deliver to the Trustee an officers'
certificate stating that in the reasonable belief of the
Transferor, such subdivision would not cause a Trust Pay Out
Event or a Series Pay Out Event to occur, or an event which, with
notice or lapse of time or both, would constitute a Trust Pay Out
Event or a Series Pay Out Event, and (ii) the Rating Agency
Condition shall have been satisfied.
Section 4.21 Determination of LIBOR.
"LIBOR" shall mean, for a specific Interest Accrual
Period, the rate for deposits in United States dollars for one
month (commencing on the first day of the relevant Interest
Accrual Period) which appears on the Dow Jones Telerate Page 3750
(or a similar replacement page) as of 11:00 A.M., London time, on
the LIBOR Determination Date for such Interest Accrual Period.
If such rate does not appear on the Dow Jones Telerate Page 3750
(or a similar replacement page), the rate for such Interest
Accrual Period will be determined on the basis of the rates at
which deposits in the United States dollars are offered by four
major banks in the London interbank market selected by the
Trustee at approximately 11:00 a.m., London time, on such LIBOR
Determination Date to prime banks in the London interbank market
for a period equal to one month (commencing on the first day of
Interest Accrual Period). The Trustee will request the principal
London office of each such bank to provide a quotation of its
rate. If at least two such quotations are provided, the rate for
such Interest Accrual Period will be the arithmetic mean of the
quotations. If fewer than two quotations are provided as
requested, the rate for such Interest Accrual Period will be the
arithmetic mean of the rates quoted by four major banks in New
York City, selected by the Trustee, at approximately 11:00 a.m.,
New York City time, on the LIBOR Determination Date for loans in
United States dollars to leading European banks for a period
equal to one month (commencing on the first day of such Interest
Accrual Period).
SECTION 7. Article V of the Agreement. Article V of
the Agreement shall read in its entirety as follows and shall be
applicable only to the Series 1998-3 Securities:
ARTICLE V
DISTRIBUTIONS AND REPORTS TO INVESTORSECURITYHOLDERS
Section 5.1 Distributions. On each Business Day,
the Paying Agent shall distribute (in accordance with the
Settlement Statement delivered by the Servicer to the Trustee and
the Paying Agent pursuant to subsection 3.4(c)) to the
Administrative Agent amounts on deposit in the Distribution
Account as are payable to the Class A Securityholders pursuant to
Sections 4.11 and 4.12 of the Agreement by wire transfer to an
account or accounts designated by the Administrative Agent by
written notice given to the Paying Agent not less than five days
prior to such Business Day; provided, however, that the final
payment in retirement of the Class A Securities will be made only
upon presentation and surrender of the Class A Securities at the
office or offices specified in the notice of such final
distribution delivered by the Trustee pursuant to Section 12.3.
On each Business Day, the Paying Agent shall
distribute (in accordance with the Settlement Statement delivered
by the Servicer to the Trustee and the Paying Agent pursuant to
subsection 3.4(c)) to the Administrative Agent amounts on deposit
in the Distribution Account as are payable to the Class B
Securityholders pursuant to Sections 4.11 and 4.12 of the
Agreement by wire transfer to an account or accounts designated
by the Administrative Agent by written notice given to the Paying
Agent not less than five days prior to the related Distributed
Date; provided, however, that the final payment in retirement of
the Class B Securities will be made only upon presentation and
surrender of the Class B Securities at the office or offices
specified in the notice of such final distribution delivered by
the Trustee pursuant to Section 12.3.
On each Business Day, the Paying Agent shall
distribute (in accordance with the Settlement Statement delivered
by the Servicer to the Trustee and the Paying Agent pursuant to
subsection 3.4(c)) to the Administrative Agent amounts on deposit
in the Distribution Account as are payable to the Class C
Securityholders pursuant to Sections 4.11 and 4.12 of the
Agreement by wire transfer to an account or accounts designated
by the Administrative Agent by written notice given to the Paying
Agent not less than five days prior to the related Distribution
Date; provided, however, that the final payment in retirement of
the Class C Securities will be made only upon presentation and
surrender of the Class C Securities at the office or offices
specified in the notice of such final distribution delivered by
the Trustee pursuant to Section 12.3.
On each Business Day on which payments are made
pursuant to Section 4.11 or Section 4.12 of the Agreement, the
Paying Agent shall distribute (in accordance with the Settlement
Statement delivered by the Servicer to the Trustee and the Paying
Agent pursuant to subsection 3.4(c)) to each Class D
Securityholder of record on the preceding Record Date (other than
as provided in subsection 2.4(e) or in Section 12.3 respecting a
final distribution) such Securityholder's pro rata share (based
on the aggregate undivided interests represented by Class D
Securities held by such Securityholder) of amounts on deposit in
the Distribution Account as are payable to the Class D
Securityholders pursuant to Section 4.11 or 4.12 of the Agreement
by wire transfer to each Class D Securityholder to an account or
accounts designated by such Class D Securityholder by written
notice given to the Paying Agent not less than five days prior to
the related Distribution Date; provided, however, that the final
payment in retirement of the Class D Securities will be made only
upon presentation and surrender of the Class D Securities at the
office or offices specified in the notice of such final
distribution delivered by the Trustee pursuant to Section 12.3.
Section 5.2 Securityholders' Statement. On the
15th day of each calendar month (or if such day is not a Business
Day the next succeeding Business Day), the Paying Agent shall
forward to each Securityholder and the Rating Agencies a
statement substantially in the form of Exhibit C prepared by the
Servicer and delivered to the Trustee and the Paying Agent on the
preceding Determination Date setting forth the following
information:
the total amount distributed;
the amount of such distribution allocable to the
payment of principal on the Series 1998-3 Securities;
the amount of such distribution allocable to the
payment of interest on the Series 1998-3 Securities;
the amount of Principal Collections processed in the
Collection Account during the preceding Monthly Period and
allocated in respect of the Class A Securities, the Class B
Securities, the Class C Securities and the Class D Securities,
respectively;
the amount of Finance Charge Collections processed
during the preceding Monthly Period and allocated in respect of
the Class A Securities, the Class B Securities, the Class C
Securities and the Class D Securities, respectively;
the aggregate amount of Principal Receivables, the
Invested Amount, the Class A Invested Amount, the Class B
Invested Amount, the Class C Invested Amount, the Class D
Invested Amount, the Floating Percentage and, during the
Amortization Period, the Fixed/Floating Percentage as applicable,
as of the end of the day on the last day of the related Monthly
Period;
the aggregate outstanding balance of Receivables
which are current, 0-29, 30-59, 60-89, and 90 days and over
delinquent as of the end of the day on the last day of the
related Monthly Period;
the aggregate Series Default Amount for the preceding
Monthly Period;
the aggregate amount of Class A Charge-Offs, Class B
Charge-Offs, Class C Charge-Offs and Class D Charge-Offs for the
preceding Monthly Period;
the amount of the Servicing Fee for the preceding
Monthly Period;
the amount of unreimbursed Redirected Class B
Principal Collections, Redirected Class C Principal Collections
and Redirected Class D Principal Collections for the related
Monthly Period;
the aggregate amount of funds in the Excess Funding
Account and the Revolving Receivables Reserve Account as of the
last day of the Monthly Period immediately preceding the
Distribution Date;
the Specified Revolving Receivables Reserve Amount as
of such date;
whether a Class C Trigger Event has occurred and if
so the Specified Class C Reserve Amount and the amount then on
deposit in the Class C Reserve Account; and
the Aggregate Interest Rate Caps Notional Amount and
the amount deposited in the Cap Proceeds Account during the
related Monthly Period.
Annual Securityholders' Tax Statement. On or
before January 31 of each calendar year, beginning with calendar
year 1999, the Paying Agent shall distribute to each Person who
at any time during the preceding calendar year was a Series 1998-
3 Securityholder, a statement prepared by the Servicer containing
the information required to be contained in the regular report to
Series 1998-3 Securityholders, as set forth in subclauses (i),
(ii) and (iii) above, aggregated for such calendar year or the
applicable portion thereof during which such Person was a Series
1998-3 Securityholder, together with, on or before January 31 of
each year, beginning in 1999, such other customary information
(consistent with the treatment of the Securities as debt) as the
Trustee or the Servicer deems necessary or desirable to enable
the Series 1998-3 Securityholders to prepare their tax returns.
Such obligations of the Trustee shall be deemed to have been
satisfied to the extent that substantially comparable information
shall be provided by the Trustee pursuant to any requirements of
the Internal Revenue Code as from time to time in effect.
SECTION 7A. Article VI of the Agreement. Article VI
(except for Sections 6.01 through 6.14 thereof) shall read in its
entirety as follows and shall be applicable only to the Series
1998-3:
ARTICLE VI
THE SECURITIES
Section 6.15 Additional Invested Amounts. (a) Each
Senior Securityholder agrees, by acceptance of a Senior Security,
that the Transferor may from time to time, prior to an Increase
Termination Date, upon one Business Day's prior written notice,
request that such Senior Securityholder acquire on any Business
Day, and such Senior Securityholder may (if it is a Conduit
Purchaser) and shall (if it is an Alternate Purchaser and the
related Conduit Purchaser determines not to so purchase) acquire
additional Series 1998-3 Securities of the same Class previously
held by such Senior Securityholder in an amount, subject to
Section 6.15(b) hereof, equal to its Purchaser Group Percentage
of the total amount of such Class of such Senior Securities that
the Transferor requests be purchased by Senior Securityholders
(such acquired amounts, the "Additional Class A Invested Amounts"
with respect to the Class A Securities, the "Additional Class B
Invested Amounts" with respect to the Class B Securities and the
"Additional Class C Invested Amounts" with respect to the Class C
Securities, and collectively, the "Additional Invested
Amounts")subject to the following restrictions:
no Servicer Default, or event which, with the giving
of notice or lapse of time, or both, would constitute a Servicer
Default, with respect to the Servicer shall have occurred and be
continuing (unless such Servicer Default or event, as applicable,
has been waived in writing by the Senior Securityholders);
the Agreement, the Senior Securities and the Security
Purchase Agreement shall be in full force and effect;
each of the Transferor's and the Servicer's
representations and warranties in the Agreement and the Security
Purchase Agreement shall be true and correct in all material
respects as of the dates they were so made (unless they
specifically refer to another date in which case they shall be
true and correct as of such earlier date), each of the
Transferor's representations and warranties in clauses (a), (c),
(e) and (g) of Section 4.01 of the Security Purchase Agreement
shall be true and correct in all material respects as of the date
of the proposed increase in the Invested Amount and each of the
Transferor and the Servicer shall have complied with all the
agreements and satisfied all of the conditions under the
Agreement and the Security Purchase Agreement, in all material
respects, on its part to be performed or satisfied at or prior to
the date hereof or such Business Day, as applicable;
no action, proceeding or investigation shall have
been instituted or threatened, nor shall any order, judgment or
decree have ben issued or proposed to be issued by any court,
agency or authority to set aside, restrain, enjoin or prevent the
consummation of any transaction contemplated hereby or seeking
material damages against the Trust, the Trustee, the Managing
Agents, the Administrative Agent or the Conduit Purchasers in
connection with the transactions contemplated in the Agreement
and the Security Purchase Agreement;
the Class A Securities, the Class B Securities and
the Class C Securities shall be rated at least "Aa2," "A2" and
"Baa2," respectively, by Moody's;
except as provided in subsection 6.15(b) hereof, any
such request by the Transferor for any Senior Securityholder to
acquire Series 1998-3 Securities of any Class shall be made
concurrently with requests for all Senior Securityholders of such
Class of Securities to acquire additional amounts of such Class
of Series 1998-3 Securities;
except as provided in subsection 6.15(b) hereof, any
such request by the Transferor for Senior Securityholders to
acquire Series 1998-3 Securities of any Class shall be made
concurrently with requests for Senior Securityholders and,
pursuant to subsection 6.16, the Class D Securityholder to
acquire proportional amounts of each Class of Series 1998-3
Securities;
if such an increase in the Class A Invested Amount,
Class B Invested Amount or Class C Invested Amount would cause a
Trust Pay Out Event or a Series Pay Out Event to occur, then the
amount of the increase in the Class A Invested Amount, the Class
B Invested Amount and the Class C Invested Amount, shall be
limited on such Business Day to the maximum increase in the Class
A Invested Amount, the Class B Invested Amount and the Class C
Invested Amount that may be obtained without causing a Pay Out
Event to occur;
in no case shall the Class A Invested Amount, Class B
Invested Amount or Class C Invested Amount be increased above the
Class A Maximum Invested Amount, Class B Maximum Invested Amount
or Class C Maximum Invested Amount, respectively;
in no case shall the sum of the Aggregate ABC
Principal Amount and the Aggregate Interest Component exceed the
Facility Limit;
in no case shall the Additional Invested Amounts on any
Business Day exceed an amount equal to the excess of the
aggregate amount of Principal Receivables over the greater of (x)
the sum of (i) the aggregate invested amount of each Series then
outstanding as of such day including the Class A Securities,
Class B Securities and Class C Securities (prior to the addition
of such Additional Invested Amounts) minus amounts on deposit in
the Principal Account or Principal Funding Account for any
Series, if any, and (ii) the Minimum Transferor Interest as of
such day or (y) the Minimum Aggregate Principal Receivables;
the Class B Invested Amount, the Class C Invested
Amount and the Class D Invested Amount following the acquisition
of such Additional Invested Amounts shall be at least equal to
the Stated Class B Amount, the Stated Class C Amount and the
Stated Class D Amount (including increases to the Class D
Invested Amount pursuant to Section 6.16 of the Agreement),
respectively;
the notional amount of the Interest Rate Caps shall
be at least equal to the Aggregate ABC Principal Amount after
giving effect to the proposed increase in the Class A Invested
Amount, Class B Invested Amount and Class C Invested Amount; and
after giving effect to the proposed increase in the
Invested Amounts no Series Pay Out Event shall occur as a result
of such increase.
If the Securityholders acquire such Additional Invested
Amounts, such Securityholders shall pay an amount equal to the
Additional Invested Amounts to the Transferor and, in
consideration of such Securityholders' payment of the Additional
Invested Amounts, the Servicer shall appropriately note such
Additional Invested Amount (and the increased Class A Invested
Amount, Class B Invested Amount and Class C Invested Amount) on
the next succeeding Servicer's report and the Invested Amount of
the Class A Securities, Class B Securities and Class C Securities
will be equal to the Invested Amount of such Series 1998-3
Securities stated in such Servicer's report.
The outstanding amounts of any Additional Invested
Amounts acquired by a Series 1998-3 Securityholder shall be
evidenced by the Series 1998-3 Securities to be issued on the
Closing Date. The Series 1998-3 Securityholders shall be and are
hereby authorized to record on the grid attached to their
respective Series 1998-3 Securities (or at such Series 1998-3
Securityholder's option, in its internal books and records) the
date and amount of any Additional Invested Amount acquired by it,
and each repayment thereof; provided that failure to make any
such recordation on such grid or any error in such grid shall not
adversely affect the Series 1998-3 Securityholder's rights with
respect to its Class A Invested Amount, Class B Invested Amount
or Class C Invested Amount, as appropriate, and its right to
receive interest payments in respect of the Class A Invested
Amount, Class B Invested Amount or Class C Invested Amount, as
appropriate, held by the Series 1998-3 Securityholder.
Notwithstanding anything in Section 6.15(a) hereof to
the contrary, any acquisition of Additional Invested Amounts
pursuant to Section 6.15(a) hereof (x) less than an aggregate
Additional Invested Amount of $4,000,000 or (y) greater than
$4,000,000 in other than an integral multiple of $2,000,000, in
each case may be allocated other than pursuant to the Purchaser
Group Percentages; provided, however, that no Series 1998-3
Securityholder may be allocated more than $5,000,000 dollars in
excess of its Purchaser Group Percentage of the sum of the Class
A Invested Amount, the Class B Invested Amount and the Class C
Invested Amount; provided, further, that in the case of clause
(y) above, any Additional Invested Amount in an integral multiple
of $2,000,000 shall be allocated pursuant to the Purchaser Group
Percentages; provided, further, that no Series 1998-3
Securityholder shall be allocated more than the Purchaser Group
Percentage of the Facility Limit; provided, further, that the
Invested Amounts of each Class of Series 1998-3 Securities are
increased proportionately.
The purchase of any Additional Invested Amount shall be
in an aggregate principal amount that is not less than $1,000,000
or integral multiples of $250,000 in excess thereof.
Section 6.16 Additional Class D Invested Amounts.
On any Business Day while any Series 1998-3
Securities are outstanding, the Transferor may elect to increase
the Class D Invested Amount (such additional amounts, "Additional
Class D Invested Amounts") by written notice to the Trustee on
such date which notice shall specify the effective date and the
amount of such increase in the Class D Invested Amount; provided,
however, that if such an increase in the Class D Invested Amount
would cause a Trust Pay Out Event or a Series Pay Out Event to
occur, then the amount of the increase in the Class D Invested
Amount shall be limited on such Business Day to the maximum
increase in the Class D Invested Amount that may be obtained
without causing either a Trust Pay Out Event or a Series Pay Out
Event to occur; and provided further, that in no case shall the
Class D Invested Amount be increased above the Class D Maximum
Invested Amount; provided further that no such increase in the
Class D Invested Amount shall be permitted under this Section
6.16 unless: (i) after giving effect to the proposed increase in
Class D Invested Amount the Transferor Interest shall equal or
exceed the Minimum Transferor Interest, (ii) no Series Pay Out
Event will occur as a result of such increase in the Class D
Invested Amount and (iii) such increase in the Class D Invested
Amount shall be made concurrently with a proportional increase in
the Class A Invested Amount, Class B Invested Amount and Class C
Invested Amount pursuant to Section 6.15 of the Agreement.
Section 6.17 Extension. 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 substantially in the form of Exhibit E (the
"Extension Notice") to this Series Supplement. The Trustee shall
deliver a copy of the Extension Notice and all documents annexed
thereto to the Series 1998-3 Securityholders of record on the
date of receipt thereof. The Transferor shall state in the
Extension Notice that it intends to extend the Revolving Period
until the later Amortization Period Commencement Date set forth
in the Extension Notice. The Extension Notice shall also set
forth the next Extension Date. The following documents shall be
annexed to the Extension Notice: (i) a form of the Opinion of
Counsel addressed to the Transferor and the Trustee to the effect
that despite the extension the Trust will not be treated as an
association taxable as a corporation (the "Extension Tax
Opinion"); (ii) a form of the Opinion of Counsel addressed to the
Transferor and the Trustee (the "Extension Opinion") to the
effect that (A) the Transferor has the corporate power and
authority to effect the Extension, (B) the extension has been
duly authorized by the Transferor, and (C) all conditions
precedent to the Extension required by this Section 6.17 have
been fulfilled; (iii) a form of Series 1998-3 Securityholder
Election Notice substantially in the form of Exhibit F (the
"Election Notice") to this Series Supplement; and (iv) a schedule
setting forth the Aggregate Interest Rate Caps Notional Amount
for the period or periods as indicated from the Extension Date
through the new Scheduled Series 1998-3 Termination Date, each as
specified in the related Extension Notice. In addition, the
Extension Notice shall state that any Series 1998-3
Securityholder 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 a Series 1998-3 Securityholder 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").
No extension shall occur unless each of the following
conditions have been satisfied prior to the close of business on
the Election Date:
no Pay Out Event shall have occurred and be continuing;
there shall have been delivered to the Trustee (A) the
Extension Tax Opinion and the Extension Opinion, each addressed
to the Trustee and (B) written confirmation from the Rating
Agency that the Extension will not cause such Rating Agency to
lower or withdraw its then current rating of such Series 1998-3
Securities; and
each of the holders of the Class A Securities, the
Class B Securities, and the Class C Securities shall have elected
to approve the Extension by returning to the Trustee on or before
the Election Date the executed Election Notice annexed to the
Extension Notice delivered to the Securityholders pursuant to
subsection 6.17(a) of the Agreement.
If, by the close of business on the Election Date, all
of the conditions stated in this subsection 6.17(b) of the
Agreement have not been satisfied and all such documents
delivered to the Trustee pursuant to this subsection 6.17(b) of
the Agreement are not in form satisfactory to it, or if the
Transferor has notified the Trustee, prior to the Election Date,
that the Transferor has exercised its right to withdraw its
election of an Extension, no Extension shall occur.
The execution by the Series 1998-3 Securityholders of
the applicable Election Notice and return thereof to the Trustee
by the required Date and time, the continued election by the
Transferor to extend the Revolving Period at the Election Date,
and the compliance with all of the provisions of this Section
6.17, shall evidence an extension or renewal of the obligations
represented by the Series 1998-3 Securities, and not a novation
or extinguishment of such obligations or a substitution with
respect thereto.
To the extent required by applicable laws and
regulations, as evidenced by an Opinion of Counsel delivered by
the Transferor to the Trustee, the provisions of this Section
6.17 shall or may be modified to comply with all applicable laws
and regulations in effect at the time of the Extension.
SECTION 8. Series Pay Out Events. If any one of the
following events shall occur with respect to the Series 1998-3
Securities:
failure on the part of the Transferor (i) to make
any payment or deposit required to be made by the Transferor by
the terms of the Agreement or this Series Supplement, on or
before the date occurring five Business Days after the date such
payment or deposit is required to be made therein or herein, (ii)
to perform in all material respects the Transferor's covenant not
to sell, pledge, assign, or transfer to any person, or grant any
unpermitted lien on, any Receivable; or (iii) duly to observe or
perform in any material respect any covenants or agreements of
the Transferor set forth in the Agreement or this Series
Supplement, which failure has a material adverse effect on the
Series 1998-3 Securityholders 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 Required Senior Securityholders, and continues
to affect materially and adversely the interests of the Series
1998-3 Securityholders for such period;
any representation or warranty made by the
Transferor in the Agreement or this Series Supplement, (i) shall
prove to have been incorrect in any material respect when made,
which continues to be incorrect in any material respect for a
period of 60 days after the date on which written notice of such
failure, requiring the same to be remedied, shall have been given
to the Transferor by the Trustee, or to the Transferor and the
Trustee by the Required Senior Securityholders, and (ii) as a
result of which the interests of the Series 1998-3
Securityholders are materially and adversely affected and
continue to be materially and adversely affected for such period;
provided, however, that a Series Pay Out Event pursuant to this
subsection 8(b) shall not be deemed to have occurred hereunder if
the Transferor has accepted reassignment of the related
Receivable, or all of such Receivables, if applicable, during
such period (or such longer period as the Trustee may specify) in
accordance with the provisions of the Agreement;
the average of the Portfolio Yields for any three
consecutive Monthly Periods is reduced to a rate which is less
than the weighted average of the weighted average Base Rates for
such three consecutive Monthly Periods;
(i) the Transferor Interest shall be less than the
Minimum Transferor Interest, (ii) the Series 1998-3 Percentage of
the sum of the total amount of Principal Receivables plus amounts
on deposit in the Excess Funding Account shall be less than the
Minimum Aggregate Principal Receivables or (iii) the Retained
Percentage shall be equal to or less than 2%, in each case as of
any Determination Date and, in each case, shall not exceed the
required amount on or prior to the tenth Business Day following
such Determination Date; or
any Servicer Default shall occur which would have
a material adverse effect on the Series 1998-3 Securityholders;
then, in the case of any event described in subparagraph (a), (b)
or (e), after the applicable grace period, if any, set forth in
such subparagraphs, the Required Senior Securityholders by notice
then given in writing to the Trustee, the Transferor, the Cap
Provider and the Servicer may declare that a pay out event (a
"Series Pay Out Event") has occurred as of the date of such
notice, and in the case of any event described in subparagraphs
(c) or (d), a Series Pay Out Event shall occur without any notice
or other action on the part of the Trustee or the Series 1998-3
Securityholders immediately upon the occurrence of such event.
SECTION 9. Series 1998-3 Termination. The right of
the Series 1998-3 Securityholders to receive payments from the
Trust will terminate on the first Business Day following the
Series 1998-3 Termination Date unless such Series is an Affected
Series as specified in Section 12.1(c) of the Agreement and the
sale contemplated therein has not occurred by such date, in which
event the Series 1998-3 Securityholders shall remain entitled to
receive proceeds of such sale when such sale occurs.
SECTION 9A. Pre-Payment. During the Revolving
Period, the Holder of the Exchangeable Transferor Security may
specify upon an Exchange, pursuant to Section 6.9 of the
Agreement, that the purchaser of a newly issued Series deposit
payment therefor, in full or in part, in the Principal Funding
Account in an amount not to exceed the sum of the Class A
Invested Amount, Class B Invested Amount and Class C Invested
Amount on such date. In addition, during the Revolving Period
amounts may be deposited in the Principal Funding Account at the
direction of the Transferor pursuant to subsection 4.9(b) of the
Agreement.
During the Revolving Period, upon the direction of
the Transferor any amounts on deposit in the Principal Funding
Account, up to the sum of the Class A Invested Amount, Class B
Invested Amount and Class C Invested Amount, may, or upon the
occurrence of a Pay Out Event shall, be deposited in the
Principal Account for distribution to be applied to the payment,
on a pro rata basis, of Class A Principal, Class B Principal and
Class C Principal. Such amounts shall be applied and paid in
accordance with Section 5.1 of the Agreement. Subsequent to any
reduction of the Class A Invested Amount, Class B Invested Amount
and Class C Invested Amount as a result of payments pursuant to
this Section 9A, the Class A Invested Amount, Class B Invested
Amount and Class C Invested Amount may be increased pursuant to
the terms and conditions set forth in Section 6.15 of the
Agreement.
(c) Notwithstanding anything else in the
Agreement to the contrary, during the Revolving Period no amounts
may be applied to the payment of Class A Principal, Class B
Principal or Class C Principal pursuant to this Section 9A if
such payment would reduce the ABC Invested Amount to below
$4,000,000 unless such payment shall be made on the Business Day
immediately preceding to the Series 1998-3 Termination Date.
SECTION 10. Legends; Transfer and Exchange;
Restrictions on Transfer of Series 1998-3 Securities; Tax
Treatment.
Each Class A Security, Class B Security and
Class C Security will bear a legend substantially in the
following form:
THIS SECURITY HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY
STATE SECURITIES LAW. THE HOLDER HEREOF, BY PURCHASING THIS
SECURITY, AGREES THAT THIS SECURITY MAY BE REOFFERED, RESOLD,
PLEDGED OR OTHERWISE TRANSFERRED ONLY IN COMPLIANCE WITH THE
SECURITIES ACT AND OTHER APPLICABLE LAWS AND ONLY PURSUANT TO
RULE 144A UNDER THE SECURITIES ACT TO AN INSTITUTIONAL INVESTOR
THAT THE HOLDER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL
BUYER WITHIN THE MEANING OF RULE 144A ("QIB") PURCHASING FOR ITS
OWN ACCOUNT OR A QIB PURCHASING FOR THE ACCOUNT OF A QIB, WHOM
THE HOLDER HAS INFORMED, IN EACH CASE, THAT THE REOFFER, RESALE,
PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A,
OR TO THE TRANSFEROR. EACH SECURITY OWNER BY ACCEPTING A
BENEFICIAL INTEREST IN THIS SECURITY IS DEEMED TO REPRESENT AND
WARRANT THAT IT IS A QIB PURCHASING FOR ITS OWN ACCOUNT OR A QIB
PURCHASING FOR THE ACCOUNT OF ANOTHER QIB. THE TRANSFER OF THIS
SECURITY IS SUBJECT TO CERTAIN CONDITIONS SET FORTH IN THE
POOLING AND SERVICING AGREEMENT REFERRED TO HEREIN. EACH CLASS
[A] [B] [C] SECURITY OWNER BY ACCEPTING A BENEFICIAL INTEREST IN
THIS SECURITY FURTHER REPRESENTS AND WARRANTS FOR THE BENEFIT OF
FINGERHUT RECEIVABLES, INC. THAT SUCH PURCHASER IS NOT AND WILL
NOT BECOME A PARTNERSHIP, SUBCHAPTER S CORPORATION OR GRANTOR
TRUST FOR UNITED STATES FEDERAL INCOME TAX PURPOSES FOR SO LONG
AS SUCH PURCHASER HOLDS A BENEFICIAL INTEREST IN THIS SECURITY.
THIS SECURITY MAY NOT BE ACQUIRED BY OR SOLD, TRADED OR
TRANSFERRED TO A PERSON WHO IS NOT EITHER (A)(I) A CITIZEN OR
RESIDENT OF THE UNITED STATES, (II) A CORPORATION, PARTNERSHIP OR
OTHER ENTITY ORGANIZED IN OR UNDER THE LAWS OF THE UNITED STATES
OR ANY POLITICAL SUBDIVISION THEREOF OR (III) A PERSON NOT
DESCRIBED IN (I) OR (II) WHOSE OWNERSHIP OF THE CLASS [A] [B] [C]
SECURITIES IS EFFECTIVELY CONNECTED WITH SUCH PERSON'S CONDUCT OF
A TRADE OR BUSINESS WITHIN THE UNITED STATES (WITHIN THE MEANING
OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"))
AND ITS OWNERSHIP OF ANY INTEREST IN A CLASS [A] [B] [C] SECURITY
WILL NOT RESULT IN ANY WITHHOLDING OBLIGATION WITH RESPECT TO ANY
PAYMENTS WITH RESPECT TO THE CLASS [A] [B] [C] SECURITIES BY ANY
PERSON (OTHER THAN WITHHOLDING, IF ANY, UNDER SECTION 1446 OF THE
CODE) OR (B) AN ESTATE THE INCOME OF WHICH IS INCLUDIBLE IN GROSS
INCOME FOR UNITED STATES FEDERAL INCOME TAX PURPOSES OR ANY TRUST
IF A COURT WITHIN THE UNITED STATES IS ABLE TO EXERCISE PRIMARY
SUPERVISION OVER THE ADMINISTRATION OF THE TRUST AND ONE OR MORE
UNITED STATES FIDUCIARIES HAVE THE AUTHORITY TO CONTROL ALL
SUBSTANTIAL DECISIONS OF THE TRUST.
NO SALE, ASSIGNMENT, PARTICIPATION, PLEDGE, HYPOTHECATION,
TRANSFER OR OTHER DISPOSITION OF THIS SECURITY (OR ANY INTEREST
THEREIN) SHALL BE MADE UNLESS THE TRANSFEROR SHALL HAVE GRANTED
ITS PRIOR CONSENT THERETO, WHICH CONSENT MAY NOT BE UNREASONABLY
WITHHELD. THIS SECURITY MAY NOT BE ACQUIRED, SOLD, TRADED OR
TRANSFERRED, NOR MAY AN INTEREST IN THIS SECURITY BE MARKETED, ON
OR THROUGH (I) AN "ESTABLISHED SECURITIES MARKET" WITHIN THE
MEANING OF SECTION 7704(b)(1) OF THE CODE AND ANY PROPOSED,
TEMPORARY OR FINAL TREASURY REGULATION THEREUNDER, INCLUDING,
WITHOUT LIMITATION, AN OVER-THE-COUNTER-MARKET OR AN INTERDEALER
QUOTATION SYSTEM THAT REGULARLY DISSEMINATES FIRM BUY OR SELL
QUOTATIONS OR (II) A "SECONDARY MARKET" WITHIN THE MEANING OF
SECTION 7704(b)(2) OF THE CODE AND ANY PROPOSED, TEMPORARY OR
FINAL TREASURY REGULATION THEREUNDER, INCLUDING A MARKET WHEREIN
INTERESTS IN THE CLASS [A] [B] [C] SECURITIES ARE REGULARLY
QUOTED BY ANY PERSON MAKING A MARKET IN SUCH INTERESTS AND A
MARKET WHEREIN ANY PERSON REGULARLY MAKES AVAILABLE BID OR OFFER
QUOTES WITH RESPECT TO INTERESTS IN THE CLASS [A] [B] [C]
SECURITIES AND STANDS READY TO EFFECT BUY OR SELL TRANSACTIONS AT
THE QUOTED PRICES FOR ITSELF OR ON BEHALF OF OTHERS.
Each Class A Security, Class B Security and Class
C Security will bear a legend substantially in the following
form:
EACH PURCHASER REPRESENTS AND WARRANTS FOR THE BENEFIT OF
FINGERHUT RECEIVABLES, INC. THAT SUCH PURCHASER IS NOT (I) AN
EMPLOYEE BENEFIT PLAN (AS DEFINED IN SECTION 3(3) OF ERISA) THAT
IS SUBJECT TO THE PROVISIONS OF TITLE I OF ERISA, (II) A PLAN
DESCRIBED IN SECTION 4975(e)(1) OF THE CODE, (III) A GOVERNMENTAL
PLAN, AS DEFINED IN SECTION 3(32) OF ERISA, SUBJECT TO ANY
FEDERAL, STATE, OR LOCAL LAW WHICH IS, TO A MATERIAL EXTENT,
SIMILAR TO THE PROVISIONS OF SECTION 406 OF ERISA OR SECTION 4975
OF THE CODE, (IV) AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE PLAN
ASSETS (AS DEFINED IN 29 C.F.R. SECTION 2510.3-101 OR OTHERWISE
UNDER ERISA) BY REASON OF A PLAN'S INVESTMENT IN THE ENTITY OR
(V) A PERSON INVESTING PLAN ASSETS OF ANY SUCH PLAN (INCLUDING
FOR PURPOSES OF CLAUSES (IV) AND (V), ANY INSURANCE COMPANY
GENERAL ACCOUNT, BUT EXCLUDING ANY ENTITY REGISTERED UNDER THE
INVESTMENT COMPANY ACT OF 1940, AS AMENDED).
Each Class D Security will bear a legend
substantially in the following form:
THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"). THIS SECURITY HAS NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OR ANY APPLICABLE STATE
SECURITIES LAW OF ANY STATE AND MAY NOT BE OFFERED, SOLD, PLEDGED
OR OTHERWISE TRANSFERRED UNLESS REGISTERED PURSUANT TO OR EXEMPT
FROM REGISTRATION UNDER THE SECURITIES ACT AND ANY OTHER
APPLICABLE SECURITIES LAW. FINGERHUT RECEIVABLES, INC. SHALL BE
PROHIBITED FROM TRANSFERRING ANY INTEREST IN OR PORTION OF THIS
SECURITY UNLESS, PRIOR TO SUCH TRANSFER, IT SHALL HAVE DELIVERED
TO THE TRUSTEE AN OPINION OF COUNSEL TO THE EFFECT THAT SUCH
PROPOSED TRANSFER WILL NOT ADVERSELY AFFECT THE FEDERAL INCOME
TAX CHARACTERIZATION OF ANY OUTSTANDING SERIES OF INVESTOR
SECURITIES. THE TRANSFER OF THIS SECURITY IS SUBJECT TO CERTAIN
CONDITIONS SET FORTH IN THE POOLING AND SERVICING AGREEMENT
REFERRED TO HEREIN.
NO SALE, ASSIGNMENT, PARTICIPATION, PLEDGE, HYPOTHECATION,
TRANSFER OR OTHER DISPOSITION OF THIS SECURITY (OR ANY INTEREST
THEREIN) SHALL BE MADE UNLESS THE TRANSFEROR SHALL HAVE GRANTED
ITS PRIOR CONSENT THERETO, WHICH CONSENT MAY NOT BE UNREASONABLY
WITHHELD. NOR MAY AN INTEREST IN THIS SECURITY BE MARKETED, ON
OR THROUGH (I) AN "ESTABLISHED SECURITIES MARKET" WITHIN THE
MEANING OF SECTION 7704(b)(1) OF THE INTERNAL REVENUE CODE OF
1986, AS AMENDED (THE "CODE") AND ANY PROPOSED, TEMPORARY OR
FINAL TREASURY REGULATION THEREUNDER, INCLUDING, WITHOUT
LIMITATION, AN OVER-THE-COUNTER-MARKET OR AN INTERDEALER
QUOTATION SYSTEM THAT REGULARLY DISSEMINATES FIRM BUY OR SELL
QUOTATIONS OR (II) A "SECONDARY MARKET" WITHIN THE MEANING OF
SECTION 7704(b)(2) OF THE CODE AND ANY PROPOSED, TEMPORARY OR
FINAL TREASURY REGULATION THEREUNDER, INCLUDING A MARKET WHEREIN
INTERESTS IN THE CLASS D SECURITIES ARE REGULARLY QUOTED BY ANY
PERSON MAKING A MARKET IN SUCH INTERESTS AND A MARKET WHEREIN ANY
PERSON REGULARLY MAKES AVAILABLE BID OR OFFER QUOTES WITH RESPECT
TO INTERESTS IN THE CLASS D SECURITIES AND STANDS READY TO EFFECT
BUY OR SELL TRANSACTIONS AT THE QUOTED PRICES FOR ITSELF OR ON
BEHALF OF OTHERS.
Fingerhut Receivables, Inc. shall be prohibited
from transferring any interest in or portion of the Class D
Securities unless, prior to such Transfer, it shall have
delivered to the Trustee an Opinion of Counsel to the effect that
such proposed Transfer will not adversely affect the Federal,
Minnesota or Delaware income tax characterization of any
outstanding Series of Investor Securities or the taxability (or
tax characterization) of the Trust under Federal, Minnesota or
Delaware income tax laws. In no event shall any interest in or
portion of the Class D Securities be transferred to Fingerhut.
As a condition to transfer of an interest in or portion of the
Class D Securities the transferee shall be required to agree not
to institute against, or join any other Person in instituting
against, the Trust 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 Securities are paid in full. The
Transferor shall provide prompt written notice to the Rating
Agencies of any such transfer.
Transfers and exchanges of Class A Securities,
Class B Securities and Class C Securities shall be subject to the
restrictions set forth in this Section 10, to such restrictions
as shall be set forth in the text of the Class A Securities,
Class B Securities and Class C Securities, and, such reasonable
regulations as may be prescribed by the Transferor. Upon
surrender for registration of transfer of a Class A Security,
Class B Security or Class C Security at the office of the
Transfer Agent and Registrar, accompanied by a certification by
the potential purchaser substantially in the form attached as
Exhibit D executed by such purchaser or by such purchaser's
attorney thereunto duly authorized in writing, such Class A
Security, Class B Security or Class C Security shall be
transferred upon the register, and the Transferor shall execute,
and the Trustee shall authenticate and deliver, in the name of
the designated transferees one or more new registered Class A
Securities, Class B Securities or Class C Securities of any
authorized denominations and of a like aggregate principal amount
and tenor. Successive registrations and registrations of
transfers as aforesaid may be made from time to time as desired,
and each such registration shall be noted on the register.
No transfer of a Class A Security, Class B
Security or Class C Security will be permitted to be made to a
Benefit Plan. Each person acquiring a Class A Security, Class B
Security or Class C Security or the beneficial ownership of a
Class A Security, Class B Security or Class C Security will be
deemed to represent to the Trustee, the Transferor and the
Servicer that it is not (i) an employee benefit plan (as defined
in Section 3(3) of ERISA) that is subject to the provisions of
Title I of ERISA, (ii) a plan described in Section 4975(e)(1) of
the Internal Revenue Code, (iii) a governmental plan, as defined
in Section 3(32) of ERISA, subject to any federal, state or local
law which is, to a material extent, similar to the provisions of
Section 406 of ERISA or Section 4975 of the Internal Revenue
Code, (iv) an entity whose underlying assets include plan assets
(as defined in 29 C.F.R. Section 2510.3-101 or otherwise under
ERISA) by reason of a plan's investment in the entity or (v) a
person investing plan assets of any such plan (including for
purposes of clauses (iv) and (v), insurance company general
account, but excluding any entity registered under the Investment
Company Act of 1940, as amended).
The Class A Securityholders, Class B
Securityholders or Class C Securityholders shall comply with
their obligations under Section 3.7 of the Agreement with respect
to the tax treatment of the Class A Securities, Class B
Securities or Class C Securities, except to the extent that a
relevant taxing authority has disallowed such treatment.
In accordance with Section 6.2 of the Agreement,
no sale, assignment, participation, pledge, hypothecation,
transfer or other disposition (a "Transfer") of a Class A
Security, Class B Security or Class C Security (or any interest
therein) shall be made unless the Transferor shall have granted
its prior consent thereto, which consent may not be unreasonably
withheld; provided, however, that for purposes of this sentence,
it shall in all cases be reasonable for the Transferor to
withhold consent to such proposed sale, assignment,
participation, pledge, hypothecation, transfer or other
disposition of all or any part of a Class A Security, Class B
Security or Class C Security (or any interest therein) if the
transaction would, if effected, give rise to any adverse tax
consequence or if such Transfer would create more than an
insubstantial risk that the Trust would be classified for federal
or any applicable state tax purposes as an association or
publicly traded partnership taxable as a corporation, each as
determined in the sole and absolute discretion of the Transferor;
provided, further, that any attempted Transfer that would cause
the number of Targeted Holders (as defined herein) to exceed one-
hundred shall be void.
Each purchaser of an interest in a Class A
Security, Class B Security or Class C Security shall certify that
it is a Person who is either (A)(i) a citizen or resident of the
United States, (ii) a corporation or other entity organized in or
under the laws of the United States or any political subdivision
thereof or (iii) a Person not described in (i) or (ii) whose
ownership of the Class A Securities, Class B Securities or Class
C Securities is effectively connected with such person's conduct
of a trade or business within the United States (within the
meaning of the Internal Revenue Code) and whose ownership of any
interest in a Class A Security, Class B Security or Class C
Security will not result in any withholding obligation with
respect to any payments with respect to the Class A Securities,
Class B Securities or Class C Securities, as applicable, by any
Person or (B) an estate the income of which is includible in
gross income for United States federal income tax purposes or any
trust if a court within the United States is able to exercise
primary supervision over the administration of the trust and one
or more United States fiduciaries have the authority to control
all substantial decisions of the trust. Each such purchaser
shall agree that if they are a Person described in clause
(A)(iii) above, they will furnish to the Person from whom they
are acquiring a Class A Security, Class B Security or Class C
Security, the Servicer and the Trustee, a properly executed U.S.
Internal Revenue Service Form 4224 and a new Form 4224, or any
successor applicable form, upon the expiration or obsolescence of
any previously delivered form (and such other certifications,
representations or opinions of counsel as may be requested by the
Transferor, the Servicer or the Trustee).
Each purchaser of an interest in a Class A
Security, Class B Security or Class C Security shall certify that
if it is not created or organized under the laws of the United
States or any State thereof (including the District of Columbia)
it will, upon written notice by the Transferor that the
Transferor intends, pursuant to Section 1446 or other applicable
section of the Internal Revenue Code, to withhold U.S. tax (a
"Withholding Tax") from amounts paid or accruing hereunder to
such purchaser (such determination being a "Withholding Event"),
for tax years for which the purchaser has already filed U.S.
federal income tax returns (each a "Prior Tax Year") prior to
proper notice of such Withholding Event, provide (A) a signed
officer's certificate of such purchaser stating that amounts paid
or accruing hereunder have been included in such purchaser's U.S.
federal income tax returns for each such Prior Tax Year, which
certificate may be relied on by the Transferor in asserting to
the Internal Revenue Service the applicability of Section 1463 of
the Internal Revenue Code with respect to any Withholding Tax for
each such Prior Tax Year and (B) provide information to the
Transferor or, at the option of such purchaser, to the Internal
Revenue Service in support of the application of Section 1463 of
the Internal Revenue Code for each such Prior Tax Year.
Each purchaser of an interest in a Class A
Security, Class B Security or Class C Security shall certify that
it is not and will not become a partnership, subchapter S
corporation or grantor trust for United States federal income tax
purposes for so long as such purchaser holds a beneficial
interest in such Class A Security, Class B Security or Class C
Security, respectively.
Each purchaser of an interest in a Class A
Security, Class B Security or Class C Security shall certify that
it has neither acquired nor will it Transfer the Class A
Security, Class B Security or Class C Security (or any interest
therein) or cause the Class A Security, Class B Security or Class
C Security (or any interest therein) to be marketed on or through
an "established securities market" within the meaning of Section
7704(b)(1) of the Internal Revenue Code, and any treasury
regulation thereunder, including, without limitation, an over-the-
counter market or an interdealer quotation system that regularly
disseminates firm buy or sell quotations. Such purchaser shall
acknowledge that it is aware that the opinion of special tax
counsel to the Transferor regarding the Trust's status is
dependent in part on the accuracy of the preceding sentence.
Each of the Transferor and the Servicer hereby
agrees and consents to the assignment by each Conduit Purchaser
from time to time of all or any part of its rights under,
interest in and title to this Agreement and the Senior Securities
of its Purchaser Group to any Liquidity Provider or Program
Support Provider for such Conduit Purchaser. In addition, each
of the Transferor and the Servicer hereby consents to the
assignment by each Conduit Purchaser of all of its rights under,
interest in and title to its Purchaser Group Percentage of the
Class A Invested Amount, the Class B Invested Amount and/or the
Class C Invested Amount, as applicable, to the related Alternate
Purchaser in the event such Conduit Purchaser determines not to
fund any Additional Invested Amount hereunder. Notwithstanding
anything to the contrary in this subsection 10(n), the Transferor
and the Servicer do not consent to the assignment by each Conduit
Purchaser of all or any part of its rights under, interest in and
title to (i) the Senior Securities of its Purchaser Group or (ii)
its Purchaser Group Percentage of the Class A Invested Amount,
the Class B Invested Amount and/or the Class C Invested Amount,
as applicable, in each case if (A) such attempted assignment will
cause the number of Persons in any Purchaser Group holding any
interests described above to exceed five (5) or (B) such
attempted transfer would cause the number of Targeted Holders to
exceed one-hundred.
SECTION 11. Ratification of Agreement. As
supplemented by this Series Supplement, the Agreement is in all
respects ratified and confirmed and the Agreement as so
supplemented by this Series Supplement shall be read, taken, and
construed as one and the same instrument.
SECTION 12. Counterparts. This Series Supplement may
be executed in any number of counterparts, each of which so
executed shall be deemed to be an original, but all of such
counterparts shall together constitute but one and the same
instrument.
SECTION 13. FCI Note. The Transferor has received a
note from Fingerhut Companies Inc. in the amount of $18,000,000
(such note, together with any additional notes of Fingerhut
Companies Inc. held by the Transferor at any time, the "FCI
Note"). The Transferor hereby agrees that at no time shall the
aggregate principal amount of the FCI Note be less than
$1,000,000 (the "FCI Note Required Amount"). The FCI Note may
not be sold, transferred, assigned, pledged, hypothecated,
participated or otherwise conveyed or encumbered, nor may the
Transferor grant any security interest in the FCI Note.
SECTION 14. GOVERNING LAW. THIS SERIES SUPPLEMENT
SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
DELAWARE WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND
THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER
SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
SECTION 15. Instructions in Writing. All instructions
or other communications given by the Servicer or any other person
to the Trustee pursuant to this Series Supplement shall be in
writing, and, with respect to the Servicer, may be included in a
Daily Report or Settlement Statement.
IN WITNESS WHEREOF, the Transferor, the Servicer and
the Trustee have caused this Series Supplement to be duly
executed by their respective officers as of the day and year
first above written.
FINGERHUT RECEIVABLES, INC.
Transferor
By: /s/ James M. Wehmann
Name: James M. Wehmann
Title: President and Treasurer
FINGERHUT NATIONAL BANK
Servicer
By: /s/ James M. Wehman
Name: James M. Wehmann
Title: Treasurer
THE BANK OF NEW YORK (DELAWARE)
Trustee
By: /s/ Cheryl L. Laser
Name: Cheryl L. Laser
Title: Assistant Vice President
EXHIBIT A-1
[FORM OF VARIABLE FUNDING ASSET BACKED SECURITY, CLASS A]
FINGERHUT MASTER TRUST
VARIABLE FUNDING TRUST SECURITY
SERIES 1998-3, CLASS A
THIS SECURITY HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR ANY STATE SECURITIES LAW. THE HOLDER HEREOF, BY
PURCHASING THIS SECURITY, AGREES THAT THIS SECURITY MAY BE
REOFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY IN
COMPLIANCE WITH THE SECURITIES ACT AND OTHER APPLICABLE LAWS
AND ONLY PURSUANT TO RULE 144A UNDER THE SECURITIES ACT TO
AN INSTITUTIONAL INVESTOR THAT THE HOLDER REASONABLY
BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE
MEANING OF RULE 144A ("QIB") PURCHASING FOR ITS OWN ACCOUNT
OR A QIB PURCHASING FOR THE ACCOUNT OF A QIB, WHOM THE
HOLDER HAS INFORMED, IN EACH CASE, THAT THE REOFFER, RESALE,
PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE
144A, OR TO THE TRANSFEROR. EACH SECURITY OWNER BY
ACCEPTING A BENEFICIAL INTEREST IN THIS SECURITY IS DEEMED
TO REPRESENT AND WARRANT THAT IT IS A QIB PURCHASING FOR ITS
OWN ACCOUNT OR A QIB PURCHASING FOR THE ACCOUNT OF ANOTHER
QIB. THE TRANSFER OF THIS SECURITY IS SUBJECT TO CERTAIN
CONDITIONS SET FORTH IN THE POOLING AND SERVICING AGREEMENT
REFERRED TO HEREIN. EACH CLASS A SECURITY OWNER BY
ACCEPTING A BENEFICIAL INTEREST IN THIS SECURITY FURTHER
REPRESENTS AND WARRANTS FOR THE BENEFIT OF FINGERHUT
RECEIVABLES, INC. THAT SUCH PURCHASER IS NOT AND WILL NOT
BECOME A PARTNERSHIP, SUBCHAPTER S CORPORATION OR GRANTOR
TRUST FOR UNITED STATES FEDERAL INCOME TAX PURPOSES FOR SO
LONG AS SUCH PURCHASER HOLDS A BENEFICIAL INTEREST IN THIS
SECURITY.
THIS SECURITY MAY NOT BE ACQUIRED BY OR SOLD, TRADED OR
TRANSFERRED TO A PERSON WHO IS NOT EITHER (A)(I) A CITIZEN OR
RESIDENT OF THE UNITED STATES, (II) A CORPORATION, PARTNERSHIP OR
OTHER ENTITY ORGANIZED IN OR UNDER THE LAWS OF THE UNITED STATES
OR ANY POLITICAL SUBDIVISION THEREOF OR (III) A PERSON NOT
DESCRIBED IN (I) OR (II) WHOSE OWNERSHIP OF THE CLASS A
SECURITIES IS EFFECTIVELY CONNECTED WITH SUCH PERSON'S CONDUCT OF
A TRADE OR BUSINESS WITHIN THE UNITED STATES (WITHIN THE MEANING
OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"))
AND ITS OWNERSHIP OF ANY INTEREST IN A CLASS A SECURITY WILL NOT
RESULT IN ANY WITHHOLDING OBLIGATION WITH RESPECT TO ANY PAYMENTS
WITH RESPECT TO THE CLASS A SECURITIES BY ANY PERSON (OTHER THAN
WITHHOLDING, IF ANY, UNDER SECTION 1446 OF THE CODE) OR (B) AN
ESTATE THE INCOME OF WHICH IS INCLUDIBLE IN GROSS INCOME FOR
UNITED STATES FEDERAL INCOME TAX PURPOSES OR ANY TRUST IF A COURT
WITHIN THE UNITED STATES IS ABLE TO EXERCISE PRIMARY SUPERVISION
OVER THE ADMINISTRATION OF THE TRUST AND ONE OR MORE UNITED
STATES FIDUCIARIES HAVE THE AUTHORITY TO CONTROL ALL SUBSTANTIAL
DECISIONS OF THE TRUST.
NO SALE, ASSIGNMENT, PARTICIPATION, PLEDGE, HYPOTHECATION,
TRANSFER OR OTHER DISPOSITION OF THIS SECURITY (OR ANY INTEREST
THEREIN) SHALL BE MADE UNLESS THE TRANSFEROR SHALL HAVE GRANTED
ITS PRIOR CONSENT THERETO, WHICH CONSENT MAY NOT BE UNREASONABLY
WITHHELD. THIS SECURITY MAY NOT BE ACQUIRED, SOLD, TRADED OR
TRANSFERRED, NOR MAY AN INTEREST IN THIS SECURITY BE MARKETED, ON
OR THROUGH (I) AN "ESTABLISHED SECURITIES MARKET" WITHIN THE
MEANING OF SECTION 7704(b)(1) OF THE CODE AND ANY PROPOSED,
TEMPORARY OR FINAL TREASURY REGULATION THEREUNDER, INCLUDING,
WITHOUT LIMITATION, AN OVER-THE-COUNTER-MARKET OR AN INTERDEALER
QUOTATION SYSTEM THAT REGULARLY DISSEMINATES FIRM BUY OR SELL
QUOTATIONS OR (II) A "SECONDARY MARKET" WITHIN THE MEANING OF
SECTION 7704(b)(2) OF THE CODE AND ANY PROPOSED, TEMPORARY OR
FINAL TREASURY REGULATION THEREUNDER, INCLUDING A MARKET WHEREIN
INTERESTS IN THE CLASS A SECURITIES ARE REGULARLY QUOTED BY ANY
PERSON MAKING A MARKET IN SUCH INTERESTS AND A MARKET WHEREIN ANY
PERSON REGULARLY MAKES AVAILABLE BID OR OFFER QUOTES WITH RESPECT
TO INTERESTS IN THE CLASS A SECURITIES AND STANDS READY TO EFFECT
BUY OR SELL TRANSACTIONS AT THE QUOTED PRICES FOR ITSELF OR ON
BEHALF OF OTHERS.
EACH PURCHASER REPRESENTS AND WARRANTS FOR THE BENEFIT OF
FINGERHUT RECEIVABLES, INC. THAT SUCH PURCHASER IS NOT (I) AN
EMPLOYEE BENEFIT PLAN (AS DEFINED IN SECTION 3(3) OF ERISA) THAT
IS SUBJECT TO THE PROVISIONS OF TITLE I OF ERISA, (II) A PLAN
DESCRIBED IN SECTION 4975(e)(1) OF THE CODE, (III) A GOVERNMENTAL
PLAN, AS DEFINED IN SECTION 3(32) OF ERISA, SUBJECT TO ANY
FEDERAL, STATE, OR LOCAL LAW WHICH IS, TO A MATERIAL EXTENT,
SIMILAR TO THE PROVISIONS OF SECTION 406 OF ERISA OR SECTION 4975
OF THE CODE, (IV) AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE PLAN
ASSETS (AS DEFINED IN 29 C.F.R. SECTION 2510.3-101 OR OTHERWISE
UNDER ERISA) BY REASON OF A PLAN'S INVESTMENT IN THE ENTITY OR
(V) A PERSON INVESTING PLAN ASSETS OF ANY SUCH PLAN (INCLUDING
FOR PURPOSES OF CLAUSES (IV) AND (V), ANY INSURANCE COMPANY
GENERAL ACCOUNT, BUT EXCLUDING ANY ENTITY REGISTERED UNDER THE
INVESTMENT COMPANY ACT OF 1940, AS AMENDED).
No. Percentage Interest: ___%
FINGERHUT MASTER TRUST
VARIABLE FUNDING TRUST SECURITY
SERIES 1998-3, CLASS A
Evidencing an undivided interest in a trust, the corpus of which
consists of receivables generated from time to time in the
ordinary course of business from a portfolio of consumer
revolving credit card accounts and closed-end installment sale or
closed-end loan contracts transferred or to be transferred by
Fingerhut Receivables, Inc. (the "Transferor") and other assets
and interests constituting the Trust under the Agreement
described below.
(Not an interest in or a recourse obligation
of Fingerhut Receivables, Inc., Fingerhut Companies, Inc.,
Fingerhut National Bank or any affiliate of any of them.)
This certifies that _________ (the "Securityholder") is the
registered owner of a fractional undivided interest in the
Fingerhut Master Trust (the "Trust") issued pursuant to the
Pooling and Servicing Agreement, dated as of March 18, 1998 (the
"Pooling and Servicing Agreement"; such term to include any
amendment thereto) by and between Fingerhut Receivables, Inc., as
Transferor (the "Transferor"), Fingerhut National Bank, as the
Servicer (the "Servicer"), and The Bank of New York (Delaware),
as Trustee (the "Trustee"), and the Series 1998-3 Supplement,
dated as of July 30, 1998 (the "Series 1998-3 Supplement"), among
the Transferor, the Servicer and the Trustee (the Pooling and
Servicing Agreement, as supplemented by the Series 1998-3
Supplement, is herein referred to as the "Agreement"). The
corpus of the Trust consists of all of the Transferor's right,
title and interest in, to and under (i) the Trust Property (as
defined in the Agreement) and (ii) the property described in
Section 3A of the Series 1998-3 Supplement and Section 4.5 of the
Agreement.
This Security does not purport to summarize the Agreement and
reference is made to the Agreement for information with respect
to the interests, rights, benefits, obligations, proceeds, and
duties evidenced hereby and the rights, duties and obligations of
the Trustee. To the extent not defined herein, the capitalized
terms used herein have the meanings ascribed to them in the
Agreement. This Security is one of a series of securities
entitled the "Fingerhut Master Trust Variable Funding Asset
Backed Security, Series 1998-3, Class A" (the "Class A
Securities"), and represents a fractional undivided interest in
the Trust, and is issued under and is subject to the terms,
provisions and conditions of the Agreement, to which Agreement,
as amended from time to time, the Securityholder by virtue of the
acceptance hereof assents and by which the Securityholder is
bound. In the case of any conflict between terms specified in
this Security and terms specified in the Agreement, the terms of
the Agreement shall govern.
The Transferor has structured the Agreement, the Class A
Securities, the Fingerhut Master Trust Variable Funding Asset
Backed Securities, Series 1998-3, Class B (the "Class B
Securities") and the Fingerhut Master Trust Variable Funding
Asset Backed Securities, Series 1998-3, Class C (the "Class C
Securities") with the intention that the Class A Securities, the
Class B Securities and the Class C Securities will qualify under
applicable tax law as indebtedness, and both the Transferor and
each holder of a Class A Security (a "Class A Securityholder") or
any interest therein by acceptance of its Security or any
interest therein, agrees to treat the Class A Security for
purposes of federal, state and local income or franchise taxes
and any other tax imposed on or measured by income, as
indebtedness.
Upon issuance, the Class A Security represents the right to
receive, on each Business Day, an amount equal to the lesser of
(x) the Available Series 1998-3 Finance Charge Collections for
such Business Day and (y) the sum of (A) an amount equal to the
product of (i) the Class A Interest Rate and (ii) a fraction the
numerator of which is the actual number of days from and
including the immediately preceding Business Day to but excluding
such Business Day and the denominator of which is 365 or 366, as
the case may be, and (iii) the Class A Outstanding Principal
Amount on such Business Day after giving effect to all
transactions on such Business Day plus (B) the excess, if any, of
the amount payable to the Class A Securityholders pursuant to
clause (A) on each prior Business Day over the amount which has
been paid to the Class A Securityholders with respect thereto on
each prior Business Day. Such amounts shall be payable on the
15th day of each month commencing September 15, 1998, or if such
day is not a business day, on the next succeeding business day
(each, a "Distribution Date") or on such other, more frequent,
dates as described in Section 4.11 of the Agreement.
Unless there is any Extension, on the earlier of the first day of
the August 2001 Monthly Period and the Pay Out Commencement Date,
interest and principal will be distributed to the Class A
Securityholders on each Business Day prior to the Series 1998-3
Termination Date. If in accordance with Section 6.17 of the
Agreement, the Transferor elects to issue an Extension Notice and
the conditions precedent for Extension specified therein have
been satisfied, no principal will be payable with respect to the
Class A Securities until the date specified in such Extension
Notice or in the last of any subsequent Extension Notices.
Interest for any Business Day due but not paid on any Business
Day will be due on the next succeeding Business Day.
On any Business Day during the Revolving Period, the Transferor
may specify an amount, to be deposited into the Principal Funding
Account. Any amounts so deposited, shall be paid, on a pro rata
basis, to the Class A Securityholders, the Class B
Securityholders and the Class C Securityholders in accordance
with Section 9A of the Agreement and upon payment shall reduce
the Class A Invested Amount, the Class B Invested Amount and the
Class C Invested Amount by amounts equal to any such payments.
In addition the Transferor may specify, upon the issuance of a
new Series pursuant to an Exchange made at any time during the
Revolving Period, that the proceeds of such issuance be deposited
into the Principal Funding Account for payment to the Senior
Securityholders pursuant to Section 9A of the Agreement. The
Class A Invested Amount will be reduced by an amount equal to the
amount of any such payments made to the Class A Securityholder.
During the Amortization Period, no principal will be payable to
the Class B Securityholders, or Class C Securityholders until all
principal payments have been made to the Class A Securityholders.
In addition, pursuant to Section 6.15 of the Agreement, the
holders of this Security may from time to time be required, prior
to the Increase Termination Date, to purchase Additional Class A
Invested Amounts on the terms and conditions specified therein.
The holder of this Security is authorized to record on the grid
attached to its Class A Security (or at such Securityholder's
option, in its internal books and records) the date and amount of
any Additional Invested Amount purchased by it, and each
repayment thereof; provided that failure to make any such
recordation on such grid or any error in such grid shall not
adversely affect such Securityholder's rights with respect to its
Class A Invested Amount and its right to receive interest
payments in respect of the Class A Invested Amount held by such
Securityholder.
"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 minus (b) the aggregate amount of principal
payments made to Class A Securityholders through and including
such Business Day, minus (c) the aggregate amount of Class A
Charge-Offs for all prior Distribution Dates, plus (d) the sum of
the aggregate amount applied through and including such Business
Day pursuant to subsection 4.9(a)(vii) of the Agreement
(including, with respect to such subsection, amounts applied
thereto pursuant to subsections 4.10(a) and (b) and Section 4.14
of the Agreement), for the purpose of reinstating amounts reduced
pursuant to the foregoing clause (c) and plus (e) the aggregate
principal amount of any Additional Class A Invested Amounts
purchased pursuant to Section 6.15 of the Agreement; provided,
however, that the Class A Invested Amount shall in no event be
reduced below zero or greater than the Class A Maximum Invested
Amount.
Subject to the Agreement, payments of principal are limited to
the unpaid Class A Invested Amount of the Class A Securities,
which may be less than the unpaid balance of the Class A
Securities pursuant to the terms of the Agreement. All principal
of and interest on the Class A Securities are due and payable no
later than the earlier to occur of (i) the day after the
Distribution Date on which the Series 1998-3 Securities are paid
in full or (ii) the first day of the February 2006 Monthly Period
or such earlier date set forth in an Extension Notice, if any
(the "Series 1998-3 Termination Date"). After the Series 1998-3
Termination Date neither the Trust nor the Transferor will have
any further obligation to distribute principal or interest on the
Class A Securities. 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 interests in the Receivables or certain of the
Receivables up to 110% of the Class A Invested Amount, the Class
B Invested Amount, the Class C Invested Amount and the Class D
Invested Amount at the close of business on such date (but not
more than the total amount of Receivables allocable to the Series
1998-3 Securities), and shall pay the proceeds to the Class A
Securityholders pro rata in final payment of the Class A
Securities, then to the Class B Securityholders pro rata in final
payment of the Class B Securities, then to the Class C
Securityholders pro rata in final payment of the Class C
Securities and finally to the Class D Securityholders pro rata in
final payment of the Class D Securities.
Unless the certificate of authentication hereon has been executed
by or on behalf of the Trustee, by manual signature, this
Security shall not be entitled to any benefit under the
Agreement, or be valid for any purpose.
IN WITNESS WHEREOF, the Transferor has caused this Security to be
duly executed under its official seal.
FINGERHUT RECEIVABLES, INC.
By:____________________________
Name:
Title:
Dated:
CERTIFICATE OF AUTHENTICATION
This is the Class A Security referred to in the within-
mentioned Pooling and Servicing Agreement.
THE BANK OF NEW YORK
By:___________________________
Name:
Title:
Date Beginning Additions Payments Ending
Principal Principal
Balance Balance
Exhibit A-2
[FORM OF VARIABLE FUNDING ASSET BACKED SECURITY, CLASS B]
FINGERHUT MASTER TRUST
VARIABLE FUNDING ASSET BACKED SECURITY
SERIES 1998-3, CLASS B
THIS
SECURITY HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR ANY STATE SECURITIES LAW. THE HOLDER HEREOF,
BY PURCHASING THIS SECURITY, AGREES THAT THIS SECURITY
MAY BE REOFFERED, RESOLD, PLEDGED OR OTHERWISE
TRANSFERRED ONLY IN COMPLIANCE WITH THE SECURITIES ACT
AND OTHER APPLICABLE LAWS AND ONLY PURSUANT TO RULE
144A UNDER THE SECURITIES ACT TO AN INSTITUTIONAL
INVESTOR THAT THE HOLDER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF
RULE 144A ("QIB") PURCHASING FOR ITS OWN ACCOUNT OR A
QIB PURCHASING FOR THE ACCOUNT OF A QIB, WHOM THE
HOLDER HAS INFORMED, IN EACH CASE, THAT THE REOFFER,
RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN
RELIANCE ON RULE 144A, OR TO THE TRANSFEROR. EACH
SECURITY OWNER BY ACCEPTING A BENEFICIAL INTEREST IN
THIS SECURITY IS DEEMED TO REPRESENT AND WARRANT THAT
IT IS A QIB PURCHASING FOR ITS OWN ACCOUNT OR A QIB
PURCHASING FOR THE ACCOUNT OF ANOTHER QIB. THE
TRANSFER OF THIS SECURITY IS SUBJECT TO CERTAIN
CONDITIONS SET FORTH IN THE POOLING AND SERVICING
AGREEMENT REFERRED TO HEREIN. EACH CLASS B SECURITY
OWNER BY ACCEPTING A BENEFICIAL INTEREST IN THIS
SECURITY FURTHER REPRESENTS AND WARRANTS FOR THE
BENEFIT OF FINGERHUT RECEIVABLES, INC. THAT SUCH
PURCHASER IS NOT AND WILL NOT BECOME A PARTNERSHIP,
SUBCHAPTER S CORPORATION OR GRANTOR TRUST FOR UNITED
STATES FEDERAL INCOME TAX PURPOSES FOR SO LONG AS SUCH
PURCHASER HOLDS A BENEFICIAL INTEREST IN THIS SECURITY.
THIS SECURITY MAY NOT BE ACQUIRED BY OR SOLD, TRADED OR
TRANSFERRED TO A PERSON WHO IS NOT EITHER (A)(I) A CITIZEN
OR RESIDENT OF THE UNITED STATES, (II) A CORPORATION,
PARTNERSHIP OR OTHER ENTITY ORGANIZED IN OR UNDER THE LAWS
OF THE UNITED STATES OR ANY POLITICAL SUBDIVISION THEREOF OR
(III) A PERSON NOT DESCRIBED IN (I) OR (II) WHOSE OWNERSHIP
OF THE CLASS B SECURITIES IS EFFECTIVELY CONNECTED WITH SUCH
PERSON'S CONDUCT OF A TRADE OR BUSINESS WITHIN THE UNITED
STATES (WITHIN THE MEANING OF THE INTERNAL REVENUE CODE OF
1986, AS AMENDED (THE "CODE")) AND ITS OWNERSHIP OF ANY
INTEREST IN A CLASS B SECURITY WILL NOT RESULT IN ANY
WITHHOLDING OBLIGATION WITH RESPECT TO ANY PAYMENTS WITH
RESPECT TO THE CLASS B SECURITIES BY ANY PERSON (OTHER THAN
WITHHOLDING, IF ANY, UNDER SECTION 1446 OF THE CODE) OR (B)
AN ESTATE THE INCOME OF WHICH IS INCLUDIBLE IN GROSS INCOME
FOR UNITED STATES FEDERAL INCOME TAX PURPOSES OR ANY TRUST
IF A COURT WITHIN THE UNITED STATES IS ABLE TO EXERCISE
PRIMARY SUPERVISION OVER THE ADMINISTRATION OF THE TRUST AND
ONE OR MORE UNITED STATES FIDUCIARIES HAVE THE AUTHORITY TO
CONTROL ALL SUBSTANTIAL DECISIONS OF THE TRUST.
NO SALE, ASSIGNMENT, PARTICIPATION, PLEDGE,
HYPOTHECATION, TRANSFER OR OTHER DISPOSITION OF THIS
SECURITY (OR ANY INTEREST THEREIN) SHALL BE MADE UNLESS THE
TRANSFEROR SHALL HAVE GRANTED ITS PRIOR CONSENT THERETO,
WHICH CONSENT MAY NOT BE UNREASONABLY WITHHELD. THIS
SECURITY MAY NOT BE ACQUIRED, SOLD, TRADED OR TRANSFERRED,
NOR MAY AN INTEREST IN THIS SECURITY BE MARKETED, ON OR
THROUGH (I) AN "ESTABLISHED SECURITIES MARKET" WITHIN THE
MEANING OF SECTION 7704(b)(1) OF THE CODE AND ANY PROPOSED,
TEMPORARY OR FINAL TREASURY REGULATION THEREUNDER,
INCLUDING, WITHOUT LIMITATION, AN OVER-THE-COUNTER-MARKET OR
AN INTERDEALER QUOTATION SYSTEM THAT REGULARLY DISSEMINATES
FIRM BUY OR SELL QUOTATIONS OR (II) A "SECONDARY MARKET"
WITHIN THE MEANING OF SECTION 7704(b)(2) OF THE CODE AND ANY
PROPOSED, TEMPORARY OR FINAL TREASURY REGULATION THEREUNDER,
INCLUDING A MARKET WHEREIN INTERESTS IN THE CLASS B
SECURITIES ARE REGULARLY QUOTED BY ANY PERSON MAKING A
MARKET IN SUCH INTERESTS AND A MARKET WHEREIN ANY PERSON
REGULARLY MAKES AVAILABLE BID OR OFFER QUOTES WITH RESPECT
TO INTERESTS IN THE CLASS B SECURITIES AND STANDS READY TO
EFFECT BUY OR SELL TRANSACTIONS AT THE QUOTED PRICES FOR
ITSELF OR ON BEHALF OF OTHERS.
EACH PURCHASER REPRESENTS AND WARRANTS FOR THE BENEFIT OF
FINGERHUT RECEIVABLES, INC. THAT SUCH PURCHASER IS NOT (I)
AN EMPLOYEE BENEFIT PLAN (AS DEFINED IN SECTION 3(3) OF
ERISA) THAT IS SUBJECT TO THE PROVISIONS OF TITLE I OF
ERISA, (II) A PLAN DESCRIBED IN SECTION 4975(e)(1) OF THE
CODE, (III) A GOVERNMENTAL PLAN, AS DEFINED IN SECTION 3(32)
OF ERISA, SUBJECT TO ANY FEDERAL, STATE, OR LOCAL LAW WHICH
IS, TO A MATERIAL EXTENT, SIMILAR TO THE PROVISIONS OF
SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE, (IV) AN
ENTITY WHOSE UNDERLYING ASSETS INCLUDE PLAN ASSETS (AS
DEFINED IN 29 C.F.R. SECTION 2510.3-101 OR OTHERWISE UNDER
ERISA) BY REASON OF A PLAN'S INVESTMENT IN THE ENTITY OR (V)
A PERSON INVESTING PLAN ASSETS OF ANY SUCH PLAN (INCLUDING
FOR PURPOSES OF CLAUSES (IV) AND (V), ANY INSURANCE COMPANY
GENERAL ACCOUNT, BUT EXCLUDING ANY ENTITY REGISTERED UNDER
THE INVESTMENT COMPANY ACT OF 1940, AS AMENDED).
No. Percentage Interest: ___%
FINGERHUT MASTER TRUST
VARIABLE FUNDING ASSET BACKED SECURITY
SERIES 1998-3, CLASS B
Evidencing an undivided interest in a trust, the corpus
of which consists of receivables generated from time to time in
the ordinary course of business from a portfolio of consumer
revolving credit card accounts and closed-end installment sale or
closed-end loan contracts transferred or to be transferred by
Fingerhut Receivables, Inc. (the "Transferor") and other assets
and interests constituting the Trust under the Agreement
described below.
(Not an interest in or a recourse obligation of
Fingerhut Receivables, Inc., Fingerhut Companies, Inc., Fingerhut
National Bank or any affiliate of any of them.)
This certifies that _________ (the "Securityholder") is
the registered owner of a fractional undivided interest in the
Fingerhut Master Trust (the "Trust") issued pursuant to the
Pooling and Servicing Agreement, dated as of March 18, 1998 (the
"Pooling and Servicing Agreement"; such term to include any
amendment thereto) by and between Fingerhut Receivables, Inc., as
Transferor (the "Transferor"), Fingerhut National Bank, as
Servicer (the "Servicer"), and The Bank of New York (Delaware),
as Trustee (the "Trustee"), and the Series 1998-3 Supplement,
dated as of July 30, 1998 (the "Series 1998-3 Supplement"), among
the Transferor, the Servicer and the Trustee (the Pooling and
Servicing Agreement, as supplemented by the Series 1998-3
Supplement, is herein referred to as the "Agreement"). The
corpus of the Trust consists of all of the Transferor's right,
title and interest in, to and under (i) the Trust Property (as
defined in the Agreement) and (ii) the property described in
Section 3A of the Series 1998-3 Supplement and Section 4.5 of the
Agreement.
This Security does not purport to summarize the
Agreement and reference is made to the Agreement for information
with respect to the interests, rights, benefits, obligations,
proceeds, and duties evidenced hereby and the rights, duties and
obligations of the Trustee. To the extent not defined herein,
the capitalized terms used herein have the meanings ascribed to
them in the Agreement. This Security is one of a series of
Securities entitled "Fingerhut Master Trust Variable Funding
Asset Backed Securities, Series 1998-3, Class B" (the "Class B
Securities"), each of which represents a fractional undivided
interest in the Trust, and is issued under and is subject to the
terms, provisions and conditions of the Agreement, to which
Agreement, as amended from time to time, the Securityholder by
virtue of the acceptance hereof assents and by which the
Securityholder is bound. In the case of any conflict between
terms specified in this Security and terms specified in the
Agreement, the terms of the Agreement shall govern.
The Transferor has structured the Agreement, the Class
B Securities, the Fingerhut Master Trust Variable Funding Asset
Backed Securities, Series 1998-3, Class A (the "Class A
Securities") and the Fingerhut Master Trust Variable Funding
Asset Backed Securities, Series 1998-3, Class C (the "Class C
Securities") with the intention that the Class A Securities, the
Class B Securities and the Class C Securities will qualify under
applicable tax law as indebtedness, and both the Transferor and
each holder of a Class B Security (a "Class B Securityholder") or
any interest therein by acceptance of its Security or any
interest therein, agrees to treat the Class B Security for
purposes of federal, state and local income or franchise taxes
and any other tax imposed on or measured by income, as
indebtedness.
Upon issuance, the Class B Security represents the
right to receive, on each Business Day, an amount equal to the
lesser of (x) the Available Series 1998-3 Finance Charge
Collections for such Business Day and (y) the sum of (A) an
amount equal to the product of (i) the Class B Interest Rate and
(ii) a fraction the numerator of which is the actual number of
days from and including the immediately preceding Business Day to
but excluding such Business Day and the denominator of which is
365 or 366, as the case may be, and (iii) the Class B Outstanding
Principal Amount on such Business Day after giving effect to all
transactions on such Business Day plus (B) the excess, if any, of
the amount payable to the Class A Securityholders pursuant to
clause (A) on each prior Business Day over the amount which has
been paid to the Class B Securityholders with respect thereto on
each prior Business Day. Such amounts shall be payable on the
15th day of each month commencing September 15, 1998, or if such
day is not a business day, on the next succeeding business day
(each, a "Distribution Date") or on such other, more frequent,
dates as described in Section 4.11 of the Agreement.
On the Class B Principal Payment Commencement Date
interest and principal will be distributed to the Class B
Securityholders on each Business Day prior to the Series 1998-3
Termination Date. Interest for any Business Day due but not paid
on any Business Day will be due on the next succeeding Business
Day.
On any Business Day during the Revolving Period, the
Transferor may specify an amount, to be deposited into the
Principal Funding Account. Any amounts so deposited, shall be
paid, on a pro rata basis, to the Class A Securityholders, the
Class B Securityholders and the Class C Securityholders in
accordance with Section 9A of the Agreement and upon payment
shall reduce the Class A Invested Amount, the Class B Invested
Amount and the Class C Invested Amount by amounts equal to any
such payments. In addition the Transferor may specify, upon the
issuance of a new Series pursuant to an Exchange made at any time
during the Revolving Period, that the proceeds of such issuance
be deposited into the Principal Funding Account for payment to
the Senior Securityholders pursuant to Section 9A of the
Agreement. The Class B Invested Amount will be reduced by an
amount equal to the amount of any such payments made to the Class
B Securityholder.
After the Amortization Period Commencement Date no
principal will be payable to the Class B Securityholders until
the Class B Principal Payment Commencement Date, which is the
Business Day either on or following the Distribution Date, on
which the Class A Invested Amount had been paid in full. During
the Amortization Period, no principal will be payable to the
Class B Securityholders until all principal payments have been
made to the Class A Securityholders and no principal payments
will be made to the Class C Securityholder until the Business Day
either on or following the Business Day on which the Class B
Invested Amount has been paid in full.
In addition, pursuant to Section 6.15 of the Agreement,
the holders of this Security may from time to time be required,
prior to the Increase Termination Date, to purchase Additional
Class B Invested Amounts on the terms and conditions specified
therein. The holder of this Security is authorized to record on
the grid attached to its Class B Security (or at such
Securityholder's option, in its internal books and records) the
date and amount of any Additional Invested Amount purchased by
it, and each repayment thereof; provided that failure to make any
such recordation on such grid or any error in such grid shall not
adversely affect such Securityholder's rights with respect to its
Class B Invested Amount and its right to receive interest
payments in respect of the Class B Invested Amount held by such
Securityholder.
"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, minus (b) the aggregate amount of
principal payments made to Class B Securityholders through and
including such Business Day, minus (c) the aggregate amount of
Class B Charge-Offs for all prior Distribution Dates, minus (d)
the aggregate amount of Redirected Class B Principal Collections
for which neither the Class D Invested Amount nor the Class C
Invested Amount has been reduced on all prior Distribution Dates
pursuant to Section 4.14(d) of the Agreement, plus (e) the sum of
the aggregate amount applied through and including such Business
Day pursuant to subsection 4.9(a)(viii) of the Agreement
(including with respect to such subsection, amounts applied
thereto pursuant to subsections 4.10(a) and (b) and Section 4.14
of the Agreement), for the purpose of reinstating amounts reduced
pursuant to the foregoing clauses (c) and (d), and plus (f) the
aggregate principal amount of any Additional Class B Invested
Amounts purchased pursuant to Section 6.15 of the Agreement;
provided, however, that the Class B Invested Amount shall in no
event be reduced below zero or greater than the Class B Maximum
Invested Amount.
Subject to the Agreement, payments of principal are
limited to the unpaid Class B Invested Amount of the Class B
Securities, which may be less than the unpaid balance of the
Class B Securities pursuant to the terms of the Agreement. All
principal of and interest on the Class B Securities are due and
payable no later than the earlier to occur of (i) the day after
the Business Day on which the Series 1998-3 Securities are paid
in full or (ii) the first day of the February 2006 Monthly Period
or such earlier date set forth in an Extension Notice, if any
(the "Series 1998-3 Termination Date"). After the Series 1998-3
Termination Date neither the Trust nor the Transferor will have
any further obligation to distribute principal or interest on the
Class B Securities. In the event that the Class B Invested
Amount is greater than zero on the Series 1998-3 Termination
Date, the Trustee will sell or cause to be sold, to the extent
necessary, an amount of interests in the Receivables or certain
of the Receivables up to 110% of the Class A Invested Amount, the
Class B Invested Amount, the Class C Invested Amount and the
Class D Invested Amount at the close of business on such date
(but not more than the total amount of Receivables allocable to
the Investor Securities), and shall pay the proceeds to the Class
A Securityholders pro rata in final payment of the Class A
Securities, then to the Class B Securityholders pro rata in final
payment of the Class B Securities, then to the Class C
Securityholders pro rata in final payment of the Class C
Securities and finally to the Class D Securityholders pro rata in
final payment of the Class D Securities.
Unless the certificate of authentication hereon has
been executed by or on behalf of the Trustee, by manual
signature, this Security shall not be entitled to any benefit
under the Agreement, or be valid for any purpose.
IN WITNESS WHEREOF, the Transferor has caused this
Security to be duly executed under its official seal.
FINGERHUT RECEIVABLES, INC.
By:____________________________
Name:
Title:
Dated:
CERTIFICATE OF AUTHENTICATION
This is one of the Class B Securities referred to
in the within-mentioned Pooling and Servicing Agreement.
THE BANK OF NEW YORK
By: _______________________
Name:
Title:
Date Beginning Additions Payments Ending
Principal Principal
Balance Balance
Exhibit A-3
[FORM OF VARIABLE FUNDING ASSET BACKED SECURITY, CLASS C]
FINGERHUT MASTER TRUST
VARIABLE FUNDING TRUST SECURITY
SERIES 1998-3, CLASS C
THIS SECURITY HAS NOT BEEN AND WILL NOT BE REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY STATE SECURITIES LAW. THE HOLDER
HEREOF, BY PURCHASING THIS SECURITY, AGREES THAT THIS
SECURITY MAY BE REOFFERED, RESOLD, PLEDGED OR OTHERWISE
TRANSFERRED ONLY IN COMPLIANCE WITH THE SECURITIES ACT AND
OTHER APPLICABLE LAWS AND ONLY PURSUANT TO RULE 144A UNDER
THE SECURITIES ACT TO AN INSTITUTIONAL INVESTOR THAT THE
HOLDER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL
BUYER WITHIN THE MEANING OF RULE 144A ("QIB") PURCHASING FOR
ITS OWN ACCOUNT OR A QIB PURCHASING FOR THE ACCOUNT OF A
QIB, WHOM THE HOLDER HAS INFORMED, IN EACH CASE, THAT THE
REOFFER, RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN
RELIANCE ON RULE 144A, OR TO THE TRANSFEROR. EACH SECURITY
OWNER BY ACCEPTING A BENEFICIAL INTEREST IN THIS SECURITY IS
DEEMED TO REPRESENT AND WARRANT THAT IT IS A QIB PURCHASING
FOR ITS OWN ACCOUNT OR A QIB PURCHASING FOR THE ACCOUNT OF
ANOTHER QIB. THE TRANSFER OF THIS SECURITY IS SUBJECT TO
CERTAIN CONDITIONS SET FORTH IN THE POOLING AND SERVICING
AGREEMENT REFERRED TO HEREIN. EACH CLASS C SECURITY OWNER
BY ACCEPTING A BENEFICIAL INTEREST IN THIS SECURITY FURTHER
REPRESENTS AND WARRANTS FOR THE BENEFIT OF FINGERHUT
RECEIVABLES, INC. THAT SUCH PURCHASER IS NOT AND WILL NOT
BECOME A PARTNERSHIP, SUBCHAPTER S CORPORATION OR GRANTOR
TRUST FOR UNITED STATES FEDERAL INCOME TAX PURPOSES FOR SO
LONG AS SUCH PURCHASER HOLDS A BENEFICIAL INTEREST IN THIS
SECURITY.
THIS SECURITY MAY NOT BE ACQUIRED BY OR SOLD, TRADED OR
TRANSFERRED TO A PERSON WHO IS NOT EITHER (A)(I) A CITIZEN
OR RESIDENT OF THE UNITED STATES, (II) A CORPORATION,
PARTNERSHIP OR OTHER ENTITY ORGANIZED IN OR UNDER THE LAWS
OF THE UNITED STATES OR ANY POLITICAL SUBDIVISION THEREOF OR
(III) A PERSON NOT DESCRIBED IN (I) OR (II) WHOSE OWNERSHIP
OF THE CLASS C SECURITIES IS EFFECTIVELY CONNECTED WITH SUCH
PERSON'S CONDUCT OF A TRADE OR BUSINESS WITHIN THE UNITED
STATES (WITHIN THE MEANING OF THE INTERNAL REVENUE CODE OF
1986, AS AMENDED (THE "CODE")) AND ITS OWNERSHIP OF ANY
INTEREST IN A CLASS C SECURITY WILL NOT RESULT IN ANY
WITHHOLDING OBLIGATION WITH RESPECT TO ANY PAYMENTS WITH
RESPECT TO THE CLASS C SECURITIES BY ANY PERSON (OTHER THAN
WITHHOLDING, IF ANY, UNDER SECTION 1446 OF THE CODE) OR (B)
AN ESTATE THE INCOME OF WHICH IS INCLUDIBLE IN GROSS INCOME
FOR UNITED STATES FEDERAL INCOME TAX PURPOSES OR ANY TRUST
IF A COURT WITHIN THE UNITED STATES IS ABLE TO EXERCISE
PRIMARY SUPERVISION OVER THE ADMINISTRATION OF THE TRUST AND
ONE OR MORE UNITED STATES FIDUCIARIES HAVE THE AUTHORITY TO
CONTROL ALL SUBSTANTIAL DECISIONS OF THE TRUST.
NO SALE, ASSIGNMENT, PARTICIPATION, PLEDGE,
HYPOTHECATION, TRANSFER OR OTHER DISPOSITION OF THIS
SECURITY (OR ANY INTEREST THEREIN) SHALL BE MADE UNLESS THE
TRANSFEROR SHALL HAVE GRANTED ITS PRIOR CONSENT THERETO,
WHICH CONSENT MAY NOT BE UNREASONABLY WITHHELD. THIS
SECURITY MAY NOT BE ACQUIRED, SOLD, TRADED OR TRANSFERRED,
NOR MAY AN INTEREST IN THIS SECURITY BE MARKETED, ON OR
THROUGH (I) AN "ESTABLISHED SECURITIES MARKET" WITHIN THE
MEANING OF SECTION 7704(b)(1) OF THE CODE AND ANY PROPOSED,
TEMPORARY OR FINAL TREASURY REGULATION THEREUNDER,
INCLUDING, WITHOUT LIMITATION, AN OVER-THE-COUNTER-MARKET OR
AN INTERDEALER QUOTATION SYSTEM THAT REGULARLY DISSEMINATES
FIRM BUY OR SELL QUOTATIONS OR (II) A "SECONDARY MARKET"
WITHIN THE MEANING OF SECTION 7704(b)(2) OF THE CODE AND ANY
PROPOSED, TEMPORARY OR FINAL TREASURY REGULATION THEREUNDER,
INCLUDING A MARKET WHEREIN INTERESTS IN THE CLASS C
SECURITIES ARE REGULARLY QUOTED BY ANY PERSON MAKING A
MARKET IN SUCH INTERESTS AND A MARKET WHEREIN ANY PERSON
REGULARLY MAKES AVAILABLE BID OR OFFER QUOTES WITH RESPECT
TO INTERESTS IN THE CLASS C SECURITIES AND STANDS READY TO
EFFECT BUY OR SELL TRANSACTIONS AT THE QUOTED PRICES FOR
ITSELF OR ON BEHALF OF OTHERS.
EACH PURCHASER REPRESENTS AND WARRANTS FOR THE BENEFIT
OF FINGERHUT RECEIVABLES, INC. THAT SUCH PURCHASER IS NOT
(I) AN EMPLOYEE BENEFIT PLAN (AS DEFINED IN SECTION 3(3) OF
ERISA) THAT IS SUBJECT TO THE PROVISIONS OF TITLE I OF
ERISA, (II) A PLAN DESCRIBED IN SECTION 4975(e)(1) OF THE
CODE, (III) A GOVERNMENTAL PLAN, AS DEFINED IN SECTION 3(32)
OF ERISA, SUBJECT TO ANY FEDERAL, STATE, OR LOCAL LAW WHICH
IS, TO A MATERIAL EXTENT, SIMILAR TO THE PROVISIONS OF
SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE, (IV) AN
ENTITY WHOSE UNDERLYING ASSETS INCLUDE PLAN ASSETS (AS
DEFINED IN 29 C.F.R. SECTION 2510.3-101 OR OTHERWISE UNDER
ERISA) BY REASON OF A PLAN'S INVESTMENT IN THE ENTITY OR (V)
A PERSON INVESTING PLAN ASSETS OF ANY SUCH PLAN (INCLUDING
FOR PURPOSES OF CLAUSES (IV) AND (V), ANY INSURANCE COMPANY
GENERAL ACCOUNT, BUT EXCLUDING ANY ENTITY REGISTERED UNDER
THE INVESTMENT COMPANY ACT OF 1940, AS AMENDED).
No. Percentage Interest: ___%
FINGERHUT MASTER TRUST
VARIABLE FUNDING TRUST SECURITY
SERIES 1998-3, CLASS C
Evidencing an undivided interest in a trust, the corpus
of which consists of receivables generated from time to time in
the ordinary course of business from a portfolio of consumer
revolving credit card accounts and closed-end installment sale or
closed-end loan contracts transferred or to be transferred by
Fingerhut Receivables, Inc. (the "Transferor") and other assets
and interests constituting the Trust under the Agreement
described below.
(Not an interest in or a recourse obligation of
Fingerhut Receivables, Inc., Fingerhut Companies, Inc., Fingerhut
National Bank or any affiliate of any of them.)
This certifies that _________ (the "Securityholder") is
the registered owner of a fractional undivided interest in the
Fingerhut Master Trust (the "Trust") issued pursuant to the
Pooling and Servicing Agreement, dated as of March 18, 1998 (the
"Pooling and Servicing Agreement"; such term to include any
amendment thereto) by and between Fingerhut Receivables, Inc., as
Transferor (the "Transferor"), Fingerhut National Bank, as the
Servicer (the "Servicer"), and The Bank of New York (Delaware),
as Trustee (the "Trustee"), and the Series 1998-3 Supplement,
dated as of July 30, 1998 (the "Series 1998-3 Supplement"), among
the Transferor, the Servicer and the Trustee (the Pooling and
Servicing Agreement, as supplemented by the Series 1998-3
Supplement, is herein referred to as the "Agreement"). The
corpus of the Trust consists of all of the Transferor's right,
title and interest in, to and under (i) the Trust Property (as
defined in the Agreement) and (ii) the property described in
Section 3A of the Series 1998-3 Supplement and Section 4.5 of the
Agreement.
This Security does not purport to summarize the
Agreement and reference is made to the Agreement for information
with respect to the interests, rights, benefits, obligations,
proceeds, and duties evidenced hereby and the rights, duties and
obligations of the Trustee. To the extent not defined herein,
the capitalized terms used herein have the meanings ascribed to
them in the Agreement. This Security is one of a series of
Securities entitled "Fingerhut Master Trust Variable Funding
Asset Backed Securities, Series 1998-3, Class C" (the "Class C
Securities"), each of which represents a fractional undivided
interest in the Trust, and is issued under and is subject to the
terms, provisions and conditions of the Agreement, to which
Agreement, as amended from time to time, the Securityholder by
virtue of the acceptance hereof assents and by which the
Securityholder is bound. In the case of any conflict between
terms specified in this Security and terms specified in the
Agreement, the terms of the Agreement shall govern.
The Transferor has structured the Agreement, the Class
C Securities, the Fingerhut Master Trust Variable Funding Asset
Backed Securities, Series 1998-3, Class A (the "Class A
Securities") and the Fingerhut Master Trust Variable Funding
Asset Backed Securities, Series 1998-3, Class B (the "Class B
Securities") with the intention that the Class A Securities, the
Class B Securities and the Class C Securities will qualify under
applicable tax law as indebtedness, and both the Transferor and
each holder of a Class C Security (a "Class C Securityholder") or
any interest therein by acceptance of its Security or any
interest therein, agrees to treat the Class C Security for
purposes of federal, state and local income or franchise taxes
and any other tax imposed on or measured by income, as
indebtedness.
Upon issuance, the Class C Security represents the
right to receive, on each Business Day, an amount equal to the
lesser of (x) the Available Series 1998-3 Finance Charge
Collections for such Business Day and (y) the sum of (A) an
amount equal to the product of (i) the Class C Interest Rate and
(ii) a fraction the numerator of which is the actual number of
days from and including the immediately preceding Business Day to
but excluding such Business Day and the denominator of which is
365 or 366, as the case may be, and (iii) the Class C Outstanding
Principal Amount on such Business Day after giving effect to all
transactions on such Business Day plus (B) the excess, if any, of
the amount payable to the Class A Securityholders pursuant to
clause (A) on each prior Business Day over the amount which has
been paid to the Class C Securityholders with respect thereto on
each prior Business Day. Such amounts shall be payable on the
15th day of each month commencing September 15, 1998, or if such
day is not a business day, on the next succeeding business day
(each, a "Distribution Date") or on such other, more frequent,
dates as described in Section 4.11 of the Agreement.
On the Class C Principal Payment Commencement Date
interest and principal will be distributed to the Class C
Securityholders on each Business Day prior to the Series 1998-3
Termination Date. Interest for any Business Day due but not paid
on any Business Day will be due on the next succeeding Business
Day.
On any Business Day during the Revolving Period, the
Transferor may specify an amount, to be deposited into the
Principal Funding Account. Any amounts so deposited, shall be
paid, on a pro rata basis, to the Class A Securityholders, the
Class B Securityholders and the Class C Securityholders in
accordance with Section 9A of the Agreement and upon payment
shall reduce the Class A Invested Amount, the Class B Invested
Amount and the Class C Invested Amount by amounts equal to any
such payments. In addition the Transferor may specify, upon the
issuance of a new Series pursuant to an Exchange made at any time
during the Revolving Period, that the proceeds of such issuance
be deposited into the Principal Funding Account for payment to
the Senior Securityholders pursuant to Section 9A of the
Agreement. The Class C Invested Amount will be reduced by an
amount equal to the amount of any such payments made to the Class
C Securityholder.
After the Amortization Period Commencement Date no
principal will be payable to the Class C Securityholders until
the Class C Principal Payment Commencement Date, which is the
Business Day either on or following the Business Day, on which
the Class B Invested Amount had been paid in full. During the
Amortization Period, no principal will be payable to the Class C
Securityholders until all principal payments have been made to
the Class B Securityholders.
In addition, pursuant to Section 6.15 of the Agreement,
the holders of this Security may from time to time be required,
prior to the Increase Termination Date, to purchase Additional
Class C Invested Amounts on the terms and conditions specified
therein. The holder of this Security is authorized to record on
the grid attached to its Class C Security (or at such
Securityholder's option, in its internal books and records) the
date and amount of any Additional Invested Amount purchased by
it, and each repayment thereof; provided that failure to make any
such recordation on such grid or any error in such grid shall not
adversely affect such Securityholder's rights with respect to its
Class C Invested Amount and its right to receive interest
payments in respect of the Class C Invested Amount held by such
Securityholder.
"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, minus (b) the aggregate amount of
principal payments made to Class C Securityholders through and
including such Business Day, minus (c) the aggregate amount of
Class C Charge-Offs for all prior Distribution Dates, minus (d)
the aggregate amount of Redirected Class B Principal Collections
and Redirected Class C Principal Collections for which the Class
D Invested Amount has not been reduced on all prior Distribution
Dates pursuant to Section 4.14(d) of the Agreement, plus (e) the
sum of the aggregate amount applied through and including such
Business Day pursuant to subsections 4.9(a)(ix) of the Agreement
(including, with respect to such subsection, amounts applied
thereto pursuant to subsections 4.10(a) and (b), 4.16(b) and
Section 4.14 of the Agreement), for the purpose of reinstating
amounts reduced pursuant to the foregoing clauses (c) and (d),
and plus (f) the aggregate principal amount of any Additional
Class C Invested Amounts purchased pursuant to Section 6.15 of
the Agreement; provided, however, that the Class C Invested
Amount shall in no event be reduced below zero or greater than
the Class C Maximum Invested Amount.
Subject to the Agreement, payments of principal are
limited to the unpaid Class C Invested Amount of the Class C
Securities, which may be less than the unpaid balance of the
Class C Securities pursuant to the terms of the Agreement. All
principal of and interest on the Class C Securities are due and
payable no later than the earlier to occur of (i) the day after
the Business Day on which the Series 1998-3 Securities are paid
in full or (ii) the first day of the February 2006 Monthly Period
or such earlier date set forth in an Extension Notice, if any
(the "Series 1998-3 Termination Date"). After the Series 1998-3
Termination Date neither the Trust nor the Transferor will have
any further obligation to distribute principal or interest on the
Class C Securities. In the event that the Class C Invested
Amount is greater than zero on the Series 1998-3 Termination
Date, the Trustee will sell or cause to be sold, to the extent
necessary, an amount of interests in the Receivables or certain
of the Receivables up to 110% of the Class A Invested Amount, the
Class B Invested Amount, the Class C Invested Amount and the
Class D Invested Amount at the close of business on such date
(but not more than the total amount of Receivables allocable to
the Investor Securities), and shall pay the proceeds to the Class
A Securityholders pro rata in final payment of the Class A
Securities, then to the Class B Securityholders pro rata in final
payment of the Class B Securities, then to the Class C
Securityholders pro rata in final payment of the Class C
Securities and finally to the Class D Securityholders pro rata in
final payment of the Class D Securities.
Unless the certificate of authentication hereon has
been executed by or on behalf of the Trustee, by manual
signature, this Security shall not be entitled to any benefit
under the Agreement, or be valid for any purpose.
IN WITNESS WHEREOF, the Transferor has caused this
Security to be duly executed under its official seal.
FINGERHUT RECEIVABLES, INC.
By:_____________________________
Name:
Title:
Dated:
CERTIFICATE OF AUTHENTICATION
This is one of the Class C Securities referred to
in the within-mentioned Pooling and Servicing Agreement.
THE BANK OF NEW YORK
By: _______________________
Name:
Title:
Date Beginning Additions Payments Ending
Principal Principal
Balance Balance
Exhibit A-4
[FORM OF VARIABLE FUNDING ASSET BACKED SECURITY, CLASS D]
FINGERHUT MASTER TRUST
VARIABLE FUNDING ASSET BACKED SECURITY
SERIES 1998-3, CLASS D
THIS SECURITY (OR ITS PREDECESSOR) WAS
ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"). THIS SECURITY HAS NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OR ANY
APPLICABLE STATE SECURITIES LAW OF ANY STATE AND MAY
NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED
UNLESS REGISTERED PURSUANT TO OR EXEMPT FROM
REGISTRATION UNDER THE SECURITIES ACT AND ANY OTHER
APPLICABLE SECURITIES LAW. FINGERHUT RECEIVABLES, INC.
SHALL BE PROHIBITED FROM TRANSFERRING ANY INTEREST IN
OR PORTION OF THIS SECURITY UNLESS, PRIOR TO SUCH
TRANSFER, IT SHALL HAVE DELIVERED TO THE TRUSTEE AN
OPINION OF COUNSEL TO THE EFFECT THAT SUCH PROPOSED
TRANSFER WILL NOT ADVERSELY AFFECT THE FEDERAL INCOME
TAX CHARACTERIZATION OF ANY OUTSTANDING SERIES OF
INVESTOR SECURITIES. THE TRANSFER OF THIS SECURITY IS
SUBJECT TO CERTAIN CONDITIONS SET FORTH IN THE POOLING
AND SERVICING AGREEMENT REFERRED TO HEREIN.
NO SALE, ASSIGNMENT, PARTICIPATION, PLEDGE,
HYPOTHECATION, TRANSFER OR OTHER DISPOSITION OF THIS
SECURITY (OR ANY INTEREST THEREIN) SHALL BE MADE UNLESS THE
TRANSFEROR SHALL HAVE GRANTED ITS PRIOR CONSENT THERETO,
WHICH CONSENT MAY NOT BE UNREASONABLY WITHHELD. NOR MAY AN
INTEREST IN THIS SECURITY BE MARKETED, ON OR THROUGH (I) AN
"ESTABLISHED SECURITIES MARKET" WITHIN THE MEANING OF
SECTION 7704(b)(1) OF THE INTERNAL REVENUE CODE OF 1986, AS
AMENDED (THE "CODE") AND ANY PROPOSED, TEMPORARY OR FINAL
TREASURY REGULATION THEREUNDER, INCLUDING, WITHOUT
LIMITATION, AN OVER-THE-COUNTER-MARKET OR AN INTERDEALER
QUOTATION SYSTEM THAT REGULARLY DISSEMINATES FIRM BUY OR
SELL QUOTATIONS OR (II) A "SECONDARY MARKET" WITHIN THE
MEANING OF SECTION 7704(b)(2) OF THE CODE AND ANY PROPOSED,
TEMPORARY OR FINAL TREASURY REGULATION THEREUNDER, INCLUDING
A MARKET WHEREIN INTERESTS IN THE CLASS D SECURITIES ARE
REGULARLY QUOTED BY ANY PERSON MAKING A MARKET IN SUCH
INTERESTS AND A MARKET WHEREIN ANY PERSON REGULARLY MAKES
AVAILABLE BID OR OFFER QUOTES WITH RESPECT TO INTERESTS IN
THE CLASS D SECURITIES AND STANDS READY TO EFFECT BUY OR
SELL TRANSACTIONS AT THE QUOTED PRICES FOR ITSELF OR ON
BEHALF OF OTHERS.
No. ___ $_________
FINGERHUT MASTER TRUST
VARIABLE FUNDING ASSET BACKED SECURITY
SERIES 1998-3, CLASS D
Evidencing an undivided interest in a trust, the corpus
of which consists of receivables generated from time to time in
the ordinary course of business from a portfolio of consumer
revolving credit card accounts and closed-end installment sale or
closed-end loan contracts transferred or to be transferred by
Fingerhut Receivable, Inc. (the "Transferor") and other assets
and interests constituting the Trust under the Agreement
described below.
(Not an interest in or a recourse obligation of
Fingerhut Receivables, Inc., Fingerhut Companies, Inc., Fingerhut
National Bank or any affiliate of any of them.)
This certifies that FINGERHUT RECEIVABLES, INC. (the
"Securityholder") is the registered owner of a fractional
undivided interest in the Fingerhut Master Trust (the "Trust")
issued pursuant to the Pooling and Servicing Agreement, dated as
of March 18, 1998(the "Pooling and Servicing Agreement"; such
term to include any amendment or Series Supplement thereto) by
and between Fingerhut Receivables, Inc., as Transferor (the
"Transferor"), Fingerhut National Bank as Servicer (the
"Servicer"), and The Bank of New York (Delaware), as Trustee (the
"Trustee"), and the Series 1998-3 Supplement, dated as of July
30, 1998 (the "Series 1998-3 Supplement"), among the Transferor,
the Servicer and the Trustee (the Pooling and Servicing
Agreement, as supplemented by the Series 1998-3 Supplement, is
herein referred to as the "Agreement"). The corpus of the Trust
consists of all of the Transferor's right, title and interest in,
to and under (i) the Trust Property (as defined in the Agreement)
and (ii) the property described in Section 3A of the Series 1998-
3 Supplement and Section 4.5 of the Agreement.
This Security does not purport to summarize the
Agreement and reference is made to the Agreement for information
with respect to the interests, rights, benefits, obligations,
proceeds, and duties evidenced hereby and the rights, duties and
obligations of the Trustee. To the extent not defined herein,
the capitalized terms used herein have the meanings ascribed to
them in the Agreement. This Security is one of a series of
Securities entitled "Fingerhut Master Trust Variable Funding
Asset Backed Securities, Series 1998-3, Class D" (the "Class D
Security"), each of which represents a fractional undivided
interest in the Trust, and is issued under and is subject to the
terms, provisions and conditions of the Agreement, to which
Agreement, as amended from time to time, the Securityholder by
virtue of the acceptance hereof assents and by which the
Securityholder is bound.
Fingerhut Receivables, Inc. shall be prohibited from
Transferring any interest in or portion of the Class D Security
unless, prior to such Transfer, it shall have delivered to the
Trustee an Opinion of Counsel to the effect that such proposed
Transfer will not adversely affect the Federal, Minnesota or
Delaware income tax characterization of any outstanding Series of
Investor Security or the taxability (or tax characterization) of
the Trust under Federal, Minnesota or Delaware income tax laws.
Interest will not accrue on the unpaid principal amount
of the Class D Security.
Pursuant to Section 6.16 of the Agreement, the holders
of this Security may from time to time be required, prior to the
Increase Termination Date, to purchase Additional Class D
Invested Amounts on the terms and conditions specified therein.
The holder of this Security is authorized to record on the grid
attached to its Class D Security (or at such Securityholder's
option, in its internal books and records) the date and amount of
any Additional Invested Amount purchased by it, and each
repayment thereof; provided that failure to make any such
recordation on such grid or any error in such grid shall not
adversely affect such Securityholder's rights with respect to its
Class D Invested Amount and its right to receive interest
payments in respect of the Class D Invested Amount held by such
Securityholder.
"Class D Invested Amount" shall mean, when used with
respect to any Business Day, an amount equal to (a) the Class D
Initial Invested Amount, plus (b) the aggregate principal amount
of any Additional Class D Invested Amounts pursuant to Section
6.16 of the Agreement, minus (c) the aggregate amount of
principal payments made to Class D Securityholders and reductions
of the Class D Invested Amount pursuant to subsection 4.7(d) of
the Agreement through and including such Business Day, minus (d)
the aggregate amount of Class D Charge-Offs for all prior
Distribution Dates, minus (e) the aggregate amount of Redirected
Principal Collections for which the Class D Invested Amount has
been reduced on all prior Distribution Dates, and plus (f) the
sum of the aggregate amount applied through and including such
Business Day pursuant to subsections 4.9(a)(x) of the Agreement
(including, with respect to such subsection, amounts applied
thereto pursuant to subsections 4.10(a) and (b) of the
Agreement), for the purpose of reinstating amounts reduced
pursuant to the foregoing clauses (d) and (e); provided, however,
that the Class D Invested Amount shall in no event be reduced
below zero.
Subject to the Agreement, payments of principal are
limited to the unpaid Class D Invested Amount of the Class D
Security, which may be less than the unpaid balance of the Class
D Security pursuant to the terms of the Agreement. All principal
of and interest on the Class D Security is due and payable no
later than the earlier to occur of (i) the day after the Business
Day on which the Series 1998-3 Securities are paid in full or
(ii) the first day of the February 2006 Monthly Period or such
earlier date set forth in an Extension Notice, if any (the
"Series 1998-3 Termination Date"). After the Series 1998-3
Termination Date neither the Trust nor the Transferor will have
any further obligation to distribute principal or interest on the
Class D Securities. In the event that the Class D Invested
Amount is greater than zero on the Series 1998-3 Termination
Date, the Trustee will sell or cause to be sold, to the extent
necessary, an amount of interests in the Receivables or certain
of the Receivables up to 110% of the Class A Invested Amount, the
Class B Invested Amount, the Class C Invested Amount and the
Class D Invested Amount at the close of business on such date
(but not more than the total amount of Receivables allocable to
the Investor Securities), and shall pay the proceeds to the Class
A Securityholders pro rata in final payment of the Class A
Securities, then to the Class B Securityholders pro rata in final
payment of the Class B Securities, then to the Class C
Securityholders pro rata in final payment of the Class C
Securities and finally to the Class D Securityholders pro rata in
final payment of the Class D Security.
Unless the certificate of authentication hereon has
been executed by or on behalf of the Trustee, by manual
signature, this Security shall not be entitled to any benefit
under the Agreement, or be valid for any purpose.
IN WITNESS WHEREOF, the Transferor has caused this
Security to be duly executed under its official seal.
FINGERHUT RECEIVABLES, INC.
By:________________________
Name:
Title:
Dated:
CERTIFICATE OF AUTHENTICATION
This is one of the Class D Securities referred to in
the within-mentioned Pooling and Servicing Agreement.
THE BANK OF NEW YORK
By:________________________
Name:
Title:
Date Beginning Additions Payments Ending
Principal Principal
Balance Balance
EXHIBIT B
[RESERVED]
EXHIBIT C
[Form of Monthly Securityholders' Statement]
Exhibit D
____________, ____
Fingerhut Receivables, Inc.
4400 Baker Road
Suite F480
Minnetonka, MN 55343
The Bank of New York (Delaware)
White Clay Center
Route 273
Newark, Delaware 19711
Re: Fingerhut Master Trust, Class [A] [B] [C]
Securities, Series 1998-3
Ladies and Gentlemen:
In connection with our proposed purchase of Fingerhut Master
Trust, Variable Funding Asset Backed Securities, Series 1998-3,
Class [A] [B] [C] (the "Class [A] [B] [C] Securities"), we
confirm that:
1. We have received such information and documentation as
we deem necessary in order to make our investment decision. We
understand that such information and documentation speaks only as
of its date and that such information and documentation may not
be correct or complete as of any time subsequent to such date.
2.
3. We agree to be bound by the restrictions and conditions
set forth in the Amended and Restated Pooling and Servicing Agree
ment, dated as of March 18, 1998, as supplemented by the Series
1998-3 Supplement dated as of July 30, 1998 (the "Series 1998-3
Supplement" and together with the Pooling and Servicing
Agreement, each as amended from time to time, the "Pooling and
Servicing Agreement"), each by and among Fingerhut Receivables,
Inc., as Transferor, Fingerhut National Bank, as Servicer, and
The Bank of New York (Delaware), as Trustee, relating to the
Class [A] [B] [C] Securities, including the obligation to pur
chase Additional Class A Invested Amounts, Additional Class B
Invested Amounts and Additional Class C Invested Amounts as speci
fied in Section 6.15 of the Pooling and Servicing Agreement, and
agree to be bound by, and not reoffer, resell, pledge or other
wise transfer (any such act, a "Transfer") the Class [A] [B]
Securities except in compliance with, such restrictions and condi
tions including but not limited to those in Section 10 of the
Series 1998-3 Supplement.
4.
5. We understand that the Class [A] [B] [C] Securities
have not been and will not be registered under the Securities Act
of 1933, as amended (the "Securities Act") or any state securi
ties law and agree that the Class [A] [B] [C] Securities may be
reoffered, resold, pledged or otherwise transferred only in
compliance with the Securities Act and other applicable laws and
only (i) to the Transferor or (ii) pursuant to Rule 144A under
the Securities Act to an institutional investor that we reason
ably believe is a qualified institutional buyer within the
meaning of Rule 144A ("QIB") purchasing for its own account or a
QIB purchasing for the account of a QIB, whom we have informed,
in each case, that the reoffer, resale, pledge or other transfer
is being made in reliance on Rule 144A.
6.
7. We have neither acquired nor will we Transfer any
Class [A] [B] [C] Securities we acquire (or any interest therein)
or cause any Class [A] [B] [C] Security (or any interest therein)
to be marketed on or through (i) an "established securities mar
ket" within the meaning of Section 7704(b)(1) of the Internal
Revenue Code of 1986, as amended (the "Code") and any proposed,
temporary or final treasury regulation thereunder, including,
without limitation, an over-the-counter-market or an interdealer
quotation system that regularly disseminates firm buy or sell
quotations or (ii) a "secondary market" within the meaning of Sec
tion 7704(b)(2) of the Code and any treasury regulation there
under, including a market wherein the Class [A] [B] [C]
Securities (or any interest therein) are regularly quoted by any
person making a market in such interests and a market wherein any
person regularly makes available bid or offer quotes with respect
to the Class [A] [B] [C] Securities (or any interest therein) and
stands ready to effect buy or sell transactions at the quoted
prices for itself or on behalf of others. We acknowledge that we
are aware that the opinion of special tax counsel to the
Transferor regarding the Trust's status is dependent in part on
the accuracy of the preceding sentence.
8.
9. We are not and will not become, for so long as we hold
any interest in the Class [A] [B] [C] Securities, a partnership,
Subchapter S corporation or grantor trust for United States feder
al income tax purposes.
10.
11. We are a person who is either (A)(i) a citizen or resi
dent of the United States, (ii) a corporation or other entity
organized in or under the laws of the United States or any politi
cal subdivision thereof or (iii) a person not described in (i) or
(ii) whose ownership of the Class [A] [B] [C] Securities is effec
tively connected with a such person's conduct of a trade or busi
ness within the United States (within the meaning of the Code)
and our ownership of any interest in a Class [A] [B] [C] Security
will not result in any withholding obligation with respect to any
payments with respect to the Class [A] [B] [C] Securities by any
person or (B) an estate the income of which is includible in
gross income for United States federal income tax purposes or any
trust if a court within the United States is able to exercise
primary supervision over the administration of the trust and one
or more United States fiduciaries have the authority to control
all substantial decisions of the trust. We agree that if we are
a person described in clause (A)(iii) above, we will furnish to
the person from whom we are acquiring a Class [A] [B] [C]
Security, the Servicer and the Trustee, a properly executed U.S.
Internal Revenue Service Form 4224 and a new Form 4224, or any
successor applicable form, upon the expiration or obsolescence of
any previously delivered form (and such other certifications,
representations or opinions of counsel as may be requested by the
Transferor, the Servicer or the Trustee). We recognize that if
we are a tax-exempt entity, payments with respect to the Class
[A] [B] [C] Securities may constitute unrelated business taxable
income.
12.
13. We understand that if we are not created or orga
nized under the laws of the United States or any State thereof
(including the District of Columbia) we will, upon written notice
by the Transferor that the Transferor intends, pursuant to
Section 1446 or other applicable section of the Internal Revenue
Code, to withhold U.S. tax (a "Withholding Tax") from amounts
paid or accruing hereunder to us (such determination being a
"Withholding Event"), for tax years for which we have already
filed U.S. federal income tax returns (each a "Prior Tax Year")
prior to proper notice of such Withholding Event, provide (A) a
signed officer's certificate stating that amounts paid or
accruing under the Securities have been included in such
purchaser's U.S. federal income tax returns for each such Prior
Tax Year, which certificate may be relied on by the Transferor in
asserting to the Internal Revenue Service the applicability of
Section 1463 of the Internal Revenue Code with respect to any
Withholding Tax for each such Prior Tax Year and (B) provide
information to the Transferor or, at our option, to the Internal
Revenue Service in support of the application of Section 1463 of
the Internal Revenue Code for each such Prior Tax Year.
14.
15. We understand that no subsequent Transfer of a Class
[A] [B] [C] Security is permitted unless the Transferor consents
in writing to the proposed Transfer; provided, that any attempted
Transfer that would cause the number of Targeted Holders to
exceed one-hundred shall be void.
16.
17. We are a "qualified institutional buyer" (as defined
in Rule 144A under the Securities Act) purchasing for our own
account or for the account of a "qualified institutional buyer"
and we understand that the sale to us is being made in reliance
on Rule 144A under the Securities Act.
18.
19. We are acquiring each of the Class [A] [B] [C]
Securities purchased by us for our own account or for a single
account (each of which is a "qualified institutional buyer") as
to which we exercise sole investment discretion.
20.
21. We are not (i) an employee benefit plan (as defined in
Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA")) that is subject to the provisions of
Title I of ERISA, (ii) a plan described in Section 4975(e)(1) of
the Code, (iii) a governmental plan, as defined in Section 3(32)
of ERISA, subject to any federal, state or local law which is, to
a material extent, similar to the provisions of Section 406 of
ERISA or Section 4975 of the Code, (iv) an entity whose
underlying assets include plan assets (as defined in 29 C.F.R.
Section 2510.3-101 or otherwise under ERISA) by reason of a
plan's investment in the entity, or (v) a person investing plan
assets of any such plan (including for purposes of clauses (iv)
and (v) any insurance company general account, but excluding any
entity registered under the Investment Company Act of 1940, as
amended).
22.
23. We understand that any purported Transfer of any Class
[A] [B] [c] Security in contravention of the restrictions and
conditions in paragraphs 1 through 11 above shall be null and
void and the purported transferee shall not be recognized by the
Trust or any other person as a holder of Class [A] [B] [C]
Securities for any purpose.
24.
25. We further understand that, promptly following any pro
posed resale, pledge or transfer of any Class [A] [B] [C]
Securities, we will be required to furnish to the Trustee and the
Registrar, such certification and other information as the
Trustee or the Registrar may reasonably require to confirm that
the proposed sale complies with the foregoing restrictions and
with the restrictions and conditions of the Class [A] [B] [C]
Securities and the Pooling and Servicing Agreement pursuant to
which the Class [A] [B] [C] Securities were issued and we agree
that if we determine to Transfer any Class [A] [B] [C] Security,
we will cause our proposed transferee to provide the Transferor,
the Servicer and the Trustee with a letter substantially in the
form of this letter. We further understand that Class [A] [B]
[C] Securities purchased by us will bear a legend to the forego
ing effect.
26.
27. The person signing this letter on behalf of the
ultimate beneficial purchaser of the Class [A] [B] [C] Securities
has been duly authorized by such beneficial purchaser of the
Class [A] [B] [C] Securities to do so.
28.
29. 15. The Class [A] [B] [C] Securities purchased by us
should be registered in the name and issued in the denominations
set forth on Schedule 1 hereto. All payments on the Class [A]
[B] [C] Securities held by us should be wired to us in accordance
with the instructions set forth on Schedule 1 hereto unless we
otherwise notify the Transferor, the Servicer and the Trustee in
writing.
30.
You are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to
any interested party in any administrative or legal proceeding or
official inquiry with respect to the matters covered hereby.
1.
2.
Very truly yours
[NAME OF PURCHASER]
By:
Name:
Title:
Schedule 1
Registration and Payment Instructions
Registration Instructions:
Full Legal Name of Purchaser:__________________________
Number of Securities:________________
Payment Instructions:
Name of Bank: ____________________
Address of Bank:____________________
Account Name: ___________________
Account Number:___________________
ABA Number: ___________________
Reference: ___________________
Exhibit E
FORM OF EXTENSION NOTICE
FINGERHUT MASTER TRUST, SERIES 1998-3
The undersigned, a duly authorized representative of
Fingerhut Receivables, Inc., a Delaware corporation (the
"Transferor"), as Transferor pursuant to the Amended and Restated
Pooling and Servicing Agreement dated as of March 18, 1998 (the
"Pooling and Servicing Agreement"), by and between the
Transferor, as transferor, Fingerhut National Bank, as servicer
(the "Servicer"), and The of New York (Delaware), as trustee
(the "Trustee"), as supplemented by the Series 1998-3 Supplement,
dated July 30, 1998 (the "Series 1998-3 Supplement"), by and
between the Transferor, the Servicer and the Trustee (the Pooling
and Servicing Agreement, as supplemented by the Series 1998-3
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 Securityholders:
A. Capitalized terms used but not
defined in this Security 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.
C. The undersigned is a [Vice President] or more senior
officer of the Transferor who is duly authorized to execute and
deliver this Security on behalf of the Transferor.
D.
E. This Security is being delivered pursuant to Section
6.17(a) of the Agreement.
F.
G. The Transferor is the Transferor under the Agreement.
H.
I. No Pay Out Event has occurred that has not been
remedied pursuant to the provisions of the Agreement.
J.
K. The Security is being delivered to the Trustee on or
before the date specified in subsection 6.17(a) for delivery.
L.
M. NOTIFICATION OF EXTENSION
N. Pursuant to subsection 6.17(a) and in respect of
[ , ] (the "Current Extension Date"), the Transferor
hereby notifies the Trustee and the Investor Securityholders of
the Transferor's intention to extend the Revolving Period in
respect of Series 1998-3 on the Current Extension Date pursuant
to the provisions of Section 6.17, until the date set forth below
(such extension, the "Extension").
O.
P. REQUIREMENTS TO COMPLETE EXTENSION
Q.
(1) Annexed hereto is an election
notice (an "Election Notice") to be returned by any Investor
Securityholder electing to approve the Extension. No Extension
shall occur unless Investor Securityholders holding at least more
than fifty percent of each of the aggregate principal amount of
Class A Securities, Class B Securities, Class C Securities and
Class D Securities, respectively, shall return properly executed
Election Notices approving the Extension by the Election Date (as
defined below). Any Investor Securityholder electing to approve
the Extension must deliver a properly executed Election Notice at
the office of the Trustee, [ ] on or
before 3:00 p.m., [ ] time, on [
, ] (the "Election Date"). Any Investor Securityholder 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)
(3) 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 SECURITYHOLDERS HOLDING THE REQUIRED
AGGREGATE PRINCIPAL AMOUNT OF CLASS A SECURITIES, CLASS B
SECURITIES, CLASS C SECURITIES AND CLASS D SECURITIES, THAT NO
PAY OUT EVENT SHALL HAVE OCCURRED AND BE CONTINUING, AND THAT
CERTAIN LEGAL OPINIONS AND RATING AGENCY CONFIRMATIONS SHALL HAVE
BEEN DELIVERED TO THE TRANSFEROR AND THE TRUSTEE PURSUANT TO
SECTION 6.17(b). THE TRANSFEROR MAY IN ITS SOLE DISCRETION
WITHDRAW THIS EXTENSION NOTICE AT ANY TIME ON OR PRIOR TO THE
ELECTION DATE BY DELIVERING NOTICE OF SUCH WITHDRAWAL IN WRITING
TO THE TRUSTEE. IF ANY SUCH NOTICE OF WITHDRAWAL SHALL BE SO
DELIVERED, NO EXTENSION SHALL OCCUR.
(4)
R. NEW PROVISIONS TO BECOME
EFFECTIVE ON THE EXTENSION DATE
S.
(1) The new Amortization Period
Commencement Date shall be the earlier of (a) [ , ] or
(b) the Pay Out Commencement Date.
(2)
(3) The new Extension Date shall be [ , ].
(4)
(5) [ The new Scheduled Series 1998-3 Termination Date
shall be [ , ].]
(6)
(7) The new Class A Expected Payment Date is ______.
(8)
(9) The new Class B Expected Payment Date is ______.
(10)
(11) The new Class C Expected Payment Date is ______.
(12)
(13) [ The following are additional provisions that will
apply to the Investor Securities on and after the Extension Date:
(14)
(15) INSERT PROVISIONS]
(16)
T. Annexed hereto are the following:
U.
(1) the form of Extension Tax
Opinion.
(2)
(3) the form of Extension Opinion.
(4)
(5) the Election Notice.
(6)
(1) IN WITNESS WHEREOF, the undersigned has duly executed this
certificate this [ ] day of [ , ].
(2)
(3)
(4) FINGERHUT RECEIVABLES, INC.
(5)
By:________________________
Name:
Title:
EXHIBIT F
FORM OF INVESTOR SECURITYHOLDER ELECTION NOTICE
[INSERT NAME
AND ADDRESS OF TRUSTEE]
Re: Fingerhut Master Trust:
Election Notice to Extend Series 1998-3
Ladies and Gentlemen:
The undersigned hereby elects to approve the extension of
the Revolving Period for Series 1998-3 until the Amortization
Period Commencement Date set forth in the Extension Notice dated
[ , ] (the "Extension Notice") and
delivered to the undersigned pursuant Section 6.17(a) of the
Amended and Restated Pooling and Servicing Agreement, dated as of
March 18, 1998, including the Series 1998-3 Supplement thereto,
dated as of July 30, 1998, each by and among Fingerhut
Receivables, Inc., as transferor, Fingerhut National Bank, as
servicer, and The Bank of New York (Delaware), 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):__________________
FINGERHUT RECEIVABLES, INC.
Transferor
FINGERHUT NATIONAL BANK
Servicer
and
THE BANK OF NEW YORK (DELAWARE)
Trustee
on behalf of Series 1998-1 Securityholders
of the Fingerhut Master Trust
FIRST AMENDMENT
Dated as of March 17, 1999
to
SERIES 1998-1 SUPPLEMENT
Dated as of April 28, 1998
to
AMENDED AND RESTATED POOLING AND SERVICING AGREEMENT
Dated as of March 18, 1998
FIRST AMENDMENT dated as of March 17, 1999 ("First
Amendment") to SERIES 1998-1 SUPPLEMENT, by and among Fingerhut
Receivables, Inc., as Transferor (the "Transferor"), Fingerhut
National Bank, as Servicer (the "Servicer") and The Bank of New
York (Delaware), as Trustee (the "Trustee"). Capitalized terms
used but not defined herein shall have the meanings assigned to
them in the Pooling and Servicing Agreement.
WHEREAS, the Transferor, the Servicer and the Trustee
have heretofore executed and delivered the Amended and Restated
Pooling and Servicing Agreement dated as of March 18, 1998, by
and among the Transferor, the Servicer and the Trustee (the
"Pooling and Servicing Agreement"), and the Series 1998-1
Supplement (the "Series Supplement") dated as of April 28, 1998
to the Pooling and Servicing Agreement; and
WHEREAS, the second paragraph of Section 13.1(a) of the
Pooling and Servicing Agreement provides that the Transferor, the
Servicer and the Trustee may amend the Pooling and Servicing
Agreement (including any Supplement), without the consent of any
of the Securityholders, 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 Holders of Securities, provided,
however, that (i) the Servicer shall have provided an Officer's
Certificate to the Trustee to the effect that such amendment will
not materially and adversely affect the interests of the
Securityholders or of any holder of a Participation, (ii) the
Transferor shall have provided a Tax Opinion and an Opinion of
Counsel to the effect that such amendment shall not materially
adversely affect the Applicable Tax State income tax
characterization of any outstanding Series of Investor Securities
or the taxability of the Trust under Applicable Tax State income
tax law and (iii) the Servicer shall have provided at least ten
Business Days prior written notice to each Rating Agency of such
amendment and shall have received written confirmation from each
Rating Agency to the effect that the rating of any Series or any
class of any Series will not be reduced or withdrawn as a result
of such amendment;
NOW, THEREFORE, the Transferor, the Servicer and the
Trustee hereby amend the Series Supplement as follows:
SECTION 1.1 CTO Trigger Event. Clause (i) of the
first sentence of Section 4.20 of the Series Supplement shall be
amended in its entirety to read as follows:
"(i) the rating of Federated Department Stores,
Inc.'s senior debt and, if rated, the rating of
Federated Department Stores, Inc.'s corporate
revolving credit facilities is reduced below
BBB from Standard & Poor's and below Baa2 from
Moody's (a "CTO Trigger Event")"
SECTION 1.2 Administration of CTO Reserve Account.
The last sentence of subsection (b) of Section 4.21 of the Series
Supplement shall be amended in its entirety to read as follows:
"All amounts on deposit in the CTO Reserve
Account shall be released therefrom and paid to
the Transferor, if the rating of Federated
Department Stores, Inc.'s senior debt or, if
rated, the rating of Federated Department
Stores, Inc.'s corporate revolving credit
facilities is subsequently increased to BBB or
higher by Standard & Poor's and Baa2 or higher
by Moody's or the CTO Invested Amount has been
paid in full."
SECTION 2. Ratification of Agreement. As amended by
this First Amendment, the Series Supplement is in all respects
ratified and confirmed, and the Series Supplement as so amended
by this First Amendment shall be read, taken and construed as one
and the same instrument.
SECTION 3. No Waiver. The execution and delivery of
this First Amendment shall not constitute a waiver of a past
default under the Agreement or impair any right consequent
thereon.
SECTION 4. Counterparts. The First Amendment may be
executed in two or more counterparts including telecopy
transmission thereof (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 5. GOVERNING LAW. THIS FIRST AMENDMENT SHALL
BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
DELAWARE, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS,
AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER
SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
SECTION 6. Effective Date. This First Amendment shall
automatically become effective as of the date upon which (i) all
requirements of the second paragraph of Section 13.1(a) have been
satisfied and (ii) Federated Department Stores, Inc. acquires,
directly or indirectly, shares of the common stock of Fingerhut
Companies, Inc. pursuant to the Offer To Purchase dated
February 18, 1999.
SIGNATURE PAGE TO FOLLOW
IN WITNESS WHEREOF, the Transferor, the Servicer and
the Trustee have caused this First Amendment to be duly executed
by their respective officers, thereunto duly authorized, as of
the day and year first above written.
FINGERHUT RECEIVABLES, INC.
as Transferor
By /s/ Brian M. Szames
Name: Brian M. Szames
Title: President
FINGERHUT NATIONAL BANK
as Servicer
By /s/ Brian M. Szames
Name: Brian M. Szames
Title: Treasurer
THE BANK OF NEW YORK (Delaware)
By /s/Cheryl L. Laser
Name: Cheryl L. Laser
Title: Assistant Vice President
FINGERHUT RECEIVABLES, INC.
Transferor
FINGERHUT NATIONAL BANK
Servicer
and
THE BANK OF NEW YORK (DELAWARE)
Trustee
on behalf of Series 1998-2 Securityholders
of the Fingerhut Master Trust
FIRST AMENDMENT
Dated as of March 17, 1999
to
SERIES 1998-2 SUPPLEMENT
Dated as of April 28, 1998
to
AMENDED AND RESTATED POOLING AND SERVICING AGREEMENT
Dated as of March 18, 1998
FIRST AMENDMENT dated as of March 17, 1999 ("First
Amendment") to SERIES 1998-2 SUPPLEMENT, by and among Fingerhut
Receivables, Inc., as Transferor (the "Transferor"), Fingerhut
National Bank, as Servicer (the "Servicer") and The Bank of New
York (Delaware), as Trustee (the "Trustee"). Capitalized terms
used but not defined herein shall have the meanings assigned to
them in the Pooling and Servicing Agreement.
WHEREAS, the Transferor, the Servicer and the Trustee
have heretofore executed and delivered the Amended and Restated
Pooling and Servicing Agreement dated as of March 18, 1998, by
and among the Transferor, the Servicer and the Trustee (the
"Pooling and Servicing Agreement"), and the Series 1998-2
Supplement (the "Series Supplement") dated as of April 28, 1998
to the Pooling and Servicing Agreement; and
WHEREAS, the second paragraph of Section 13.1(a) of the
Pooling and Servicing Agreement provides that the Transferor, the
Servicer and the Trustee may amend the Pooling and Servicing
Agreement (including any Supplement), without the consent of any
of the Securityholders, 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 Holders of Securities, provided,
however, that (i) the Servicer shall have provided an Officer's
Certificate to the Trustee to the effect that such amendment will
not materially and adversely affect the interests of the
Securityholders or of any holder of a Participation, (ii) the
Transferor shall have provided a Tax Opinion and an Opinion of
Counsel to the effect that such amendment shall not materially
adversely affect the Applicable Tax State income tax
characterization of any outstanding Series of Investor Securities
or the taxability of the Trust under Applicable Tax State income
tax law and (iii) the Servicer shall have provided at least ten
Business Days prior written notice to each Rating Agency of such
amendment and shall have received written confirmation from each
Rating Agency to the effect that the rating of any Series or any
class of any Series will not be reduced or withdrawn as a result
of such amendment;
NOW, THEREFORE, the Transferor, the Servicer and the
Trustee hereby amend the Series Supplement as follows:
SECTION 1.1 CTO Trigger Event. Clause (i) of the
first sentence of Section 4.20 of the Series Supplement shall be
amended in its entirety to read as follows:
"(i) the rating of Federated Department Stores,
Inc.'s senior debt and, if rated, the rating of
Federated Department Stores, Inc.'s corporate
revolving credit facilities is reduced below
BBB from Standard & Poor's and below Baa2 from
Moody's (a "CTO Trigger Event")"
SECTION 1.2 Administration of CTO Reserve Account.
The last sentence of subsection (b) of Section 4.21 of the Series
Supplement shall be amended in its entirety to read as follows:
"All amounts on deposit in the CTO Reserve
Account shall be released therefrom and paid to
the Transferor, if the rating of Federated
Department Stores, Inc.'s senior debt or, if
rated, the rating of Federated Department
Stores, Inc.'s corporate revolving credit
facilities is subsequently increased to BBB or
higher by Standard & Poor's and Baa2 or higher
by Moody's or the CTO Invested Amount has been
paid in full."
SECTION 2. Ratification of Agreement. As amended by
this First Amendment, the Series Supplement is in all respects
ratified and confirmed, and the Series Supplement as so amended
by this First Amendment shall be read, taken and construed as one
and the same instrument.
SECTION 3. No Waiver. The execution and delivery of
this First Amendment shall not constitute a waiver of a past
default under the Agreement or impair any right consequent
thereon.
SECTION 4. Counterparts. The First Amendment may be
executed in two or more counterparts including telecopy
transmission thereof (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 5. GOVERNING LAW. THIS FIRST AMENDMENT SHALL
BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
DELAWARE, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS,
AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER
SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
SECTION 6. Effective Date. This First Amendment shall
automatically become effective as of the date upon which (i) all
requirements of the second paragraph of Section 13.1(a) have been
satisfied and (ii) Federated Department Stores, Inc. acquires,
directly or indirectly, shares of the common stock of Fingerhut
Companies, Inc. pursuant to the Offer To Purchase dated
February 18, 1999.
SIGNATURE PAGE TO FOLLOW
IN WITNESS WHEREOF, the Transferor, the Servicer and
the Trustee have caused this First Amendment to be duly executed
by their respective officers, thereunto duly authorized, as of
the day and year first above written.
FINGERHUT RECEIVABLES, INC.
as Transferor
By /s/ Brian M. Szames
Name: Brian M. Szames
Title: President
FINGERHUT NATIONAL BANK
as Servicer
By /s/ Brian M. Szames
Name: Brian M. Szames
Title: Treasurer
THE BANK OF NEW YORK (Delaware)
By /s/ Cheryl L. Laser
Name: Cheryl L. Laser
Title: Assistant Vice President
FINGERHUT RECEIVABLES, INC.
Transferor
FINGERHUT NATIONAL BANK
Servicer
and
THE BANK OF NEW YORK (DELAWARE)
Trustee
on behalf of Series 1998-3 Securityholders
of the Fingerhut Master Trust
FIRST AMENDMENT
Dated as of March 17, 1999
to
SERIES 1998-3 SUPPLEMENT
Dated as of July 30, 1998
to
AMENDED AND RESTATED POOLING AND SERVICING AGREEMENT
Dated as of March 18, 1998
FIRST AMENDMENT dated as of March 17, 1999 ("First
Amendment") to SERIES 1998-3 SUPPLEMENT, by and among Fingerhut
Receivables, Inc., as Transferor (the "Transferor"), Fingerhut
National Bank, as Servicer (the "Servicer") and The Bank of New
York (Delaware), as Trustee (the "Trustee"). Capitalized terms
used but not defined herein shall have the meanings assigned to
them in the Pooling and Servicing Agreement.
WHEREAS, the Transferor, the Servicer and the Trustee
have heretofore executed and delivered the Amended and Restated
Pooling and Servicing Agreement dated as of March 18, 1998, by
and among the Transferor, the Servicer and the Trustee (the
"Pooling and Servicing Agreement"), and the Series 1998-3
Supplement (the "Series Supplement") dated as of July 30, 1998 to
the Pooling and Servicing Agreement; and
WHEREAS, the second paragraph of Section 13.1(a) of the
Pooling and Servicing Agreement provides that the Transferor, the
Servicer and the Trustee may amend the Pooling and Servicing
Agreement (including any Supplement), without the consent of any
of the Securityholders, 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 Holders of Securities, provided,
however, that (i) the Servicer shall have provided an Officer's
Certificate to the Trustee to the effect that such amendment will
not materially and adversely affect the interests of the
Securityholders or of any holder of a Participation, (ii) the
Transferor shall have provided a Tax Opinion and an Opinion of
Counsel to the effect that such amendment shall not materially
adversely affect the Applicable Tax State income tax
characterization of any outstanding Series of Investor Securities
or the taxability of the Trust under Applicable Tax State income
tax law and (iii) the Servicer shall have provided at least ten
Business Days prior written notice to each Rating Agency of such
amendment and shall have received written confirmation from each
Rating Agency to the effect that the rating of any Series or any
class of any Series will not be reduced or withdrawn as a result
of such amendment;
NOW, THEREFORE, the Transferor, the Servicer and the
Trustee hereby amend the Series Supplement as follows:
SECTION 1.1 Class C Trigger Event. (a) Clause (i)
of the first sentence of Section 4.15 of the Series Supplement
shall be amended in its entirety to read as follows:
"(i) the rating from Moody's of Federated
Department Stores, Inc.'s senior debt and, if
rated, the rating of Federated Department
Stores, Inc.'s corporate revolving credit
facilities are reduced below Baa2 (a "Class C
Trigger Event")"
(b) The penultimate sentence of Section 4.15 of the
Series Supplement shall be amended in its entirety to read as
follows:
"The Servicer shall provide to Moody's and the
Trustee prompt written notice of any
downgrading of the rating of Federated
Department Stores, Inc.'s senior debt."
SECTION 1.2 Administration of Class C Reserve Account.
The last sentence of subsection (b) of Section 4.16 of the Series
Supplement shall be amended in its entirety to read as follows:
"The amount on deposit in the Class C Reserve
Account may also be released therefrom and paid
to the Transferor, and the Target Percentage of
the Transferor Interest may equal zero, if the
rating of Federated Department Stores, Inc.'s
senior debt or, if rated, the rating of
Federated Department Stores, Inc.'s corporate
revolving credit facilities is subsequently
increased to Baa2 or higher by Moody's or the
Class C Invested Amount has been paid in full."
SECTION 2. Ratification of Agreement. As amended by
this First Amendment, the Series Supplement is in all respects
ratified and confirmed, and the Series Supplement as so amended
by this First Amendment shall be read, taken and construed as one
and the same instrument.
SECTION 3. No Waiver. The execution and delivery of
this First Amendment shall not constitute a waiver of a past
default under the Agreement or impair any right consequent
thereon.
SECTION 4. Counterparts. The First Amendment may be
executed in two or more counterparts including telecopy
transmission thereof (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 5. GOVERNING LAW. THIS FIRST AMENDMENT SHALL
BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
DELAWARE, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS,
AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER
SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
SECTION 6. Effective Date. This First Amendment shall
automatically become effective as of the date upon which (i) all
requirements of the second paragraph of Section 13.1(a) have been
satisfied and (ii) Federated Department Stores, Inc. acquires,
directly or indirectly, shares of the common stock of Fingerhut
Companies, Inc. pursuant to the Offer To Purchase dated
February 18, 1999.
SIGNATURE PAGE TO FOLLOW
IN WITNESS WHEREOF, the Transferor, the Servicer and
the Trustee have caused this First Amendment to be duly executed
by their respective officers, thereunto duly authorized, as of
the day and year first above written.
FINGERHUT RECEIVABLES, INC.
as Transferor
By /s/ Brian M. Szames
Name: Brian M. Szames
Title: President
FINGERHUT NATIONAL BANK
as Servicer
By /s/ Brian M. Szames
Name: Brian M. Szames
Title: Treasurer
THE BANK OF NEW YORK (Delaware)
By /s/ Cheryl L. Laser
Name: Cheryl L. Laser
Title: Cheryl L. Laser
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-29-2000
<PERIOD-END> MAY-01-1999
<CASH> 239
<SECURITIES> 0
<RECEIVABLES> 2,165
<ALLOWANCES> 0
<INVENTORY> 3,599
<CURRENT-ASSETS> 6,345<F1>
<PP&E> 6,624
<DEPRECIATION> 0
<TOTAL-ASSETS> 15,430<F2>
<CURRENT-LIABILITIES> 3,999
<BONDS> 3,806
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 15,430<F3>
<SALES> 3,707
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 2,266
<OTHER-EXPENSES> 1,216
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 78
<INCOME-PRETAX> 150<F4>
<INCOME-TAX> 63
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 87
<EPS-BASIC> .42
<EPS-DILUTED> .40
<FN>
<F1>Includes the following:
Supplies and prepaid expenses 200
Deferred income tax assets 142
<F2>Includes the following:
Intangible assets - net 1,889
Other assets 572
<F3>Includes the following:
Deferred income taxes 1,236
Other liabilities 576
Shareholders' Equity 5,813
<F4>Includes the following:
Interest Income 3
</FN>
</TABLE>
