AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 25, 1997
REGISTRATION NO. [ ]
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
PRIME RECEIVABLES CORPORATION
(ORIGINATOR OF THE TRUST DESCRIBED HEREIN)
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
PRIME CREDIT CARD MASTER TRUST
DELAWARE 5311 31-1359594
-------- ---- ----------
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
JURISDICTION OF CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
INCORPORATION OR
ORGANIZATION)
9111 DUKE BOULEVARD
MASON, OHIO 45040-8999
(513) 573-2037
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
DENNIS J. BRODERICK, ESQ.
SENIOR VICE PRESIDENT AND GENERAL COUNSEL
FEDERATED DEPARTMENT STORES, INC.
7 WEST SEVENTH STREET
CINCINNATI, OHIO 45202
(513) 579-7000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
Copies to:
MARK E. BETZEN, ESQ. ANDREW M. FAULKNER, ESQ.
JONES, DAY, REAVIS & POGUE SKADDEN, ARPS, SLATE, MEAGHER &
2300 TRAMMELL CROW CENTER FLOM LLP
2001 ROSS AVENUE 919 THIRD AVENUE
DALLAS, TEXAS 75201-2958 NEW YORK, NEW YORK 10022-3897
(214) 220-3939 (212) 735-2853
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration
Statement becomes effective.
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933 check the following box. |_|
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act of 1933, please
check the following box and list the Securities Act of 1933 registration
statement number of the earlier effective registration statement for the
same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act of 1933, check the following box and list
the Securities Act of 1933 registration statement number of the earlier
effective registration statement for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to
Rule 434 under the Securities Act of 1933, please check the following
box. |_|
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
TITLE OF EACH CLASS PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
OF SECURITIES AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING REGISTRATION
TO BE REGISTERED REGISTERED(1) CERTIFICATE(1) PRICE(1) FEE
- ------------------- ------------- ------------------ ------------------ ------------
<S> <C> <C> <C> <C>
Class A Asset Backed
Certificates, Series 1997-1 $500,000 100% 100% $151.52
Class B Asset Backed
Certificates, Series 1997-1 $500,000 100% 100% $151.52
---------- ---- ---- -------
Total $1,000,000 100% 100% $303.04
========== ==== ==== =======
</TABLE>
(1) Estimated solely for the purposes of calculating the registration
fee.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH
DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE
REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT
THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN
ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE
REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE
SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
CROSS REFERENCE SHEET
NAME AND CAPTION IN FORM S-1 CAPTION IN PROSPECTUS
- ---------------------------- ---------------------
1. Forepart of the Registration
Statement and Outside Front
Cover Page of Prospectus Front Cover Page of Registration
Statement; Outside Front Cover
Page of Prospectus
2. Inside Front and Outside Back
Cover Pages of Prospectus Inside Front Cover Page and
Outside Back Cover Page of
Prospectus
3. Summary Information, Risk
Factors and Ratio of Earnings
to Fixed Charges Prospectus Summary; Risk Factors
4. Use of Proceeds Use of Proceeds
5. Determination of Offering Price *
6. Dilution *
7. Selling Security Holders *
8. Plan of Distribution Underwriting
9. Description of Securities to Be
Registered Prospectus Summary; The
Accounts; Maturity Assumptions;
Description of the Offered
Certificates; Certain Legal
Aspects of the Receivables;
Certain Federal Income Tax
Consequences
10. Interests of Named Experts and
Counsel Legal Matters
11. Information with Respect to the
Registrant Federated's Credit Card
Business; The Accounts;
Federated, The Transferor, and
FDS; Description of the Offered
Certificates
12. Disclosure of Commission Position
on Indemnification for Securities
Act Liabilities *
* Not applicable
[FLAG]
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with
the Securities and Exchange Commission. These securities may not be sold
nor may offers to buy be accepted prior to the time the registration
statement becomes effective. This prospectus shall not constitute an
offer to sell or the solicitation of an offer to buy nor shall there be
any sale of these securities in any State in which such offer,
solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of any such State.
SUBJECT TO COMPLETION, DATED AUGUST 25, 1997
$[ ]
PRIME CREDIT CARD MASTER TRUST
$[ ] [ ]% CLASS A ASSET BACKED CERTIFICATES, SERIES 1997-1
$[ ] [ ]% CLASS B ASSET BACKED CERTIFICATES, SERIES 1997-1
PRIME RECEIVABLES CORPORATION
TRANSFEROR
FDS NATIONAL BANK
SERVICER
---------------
Each of the [ ]% Class A Asset Backed Certificates, Series 1997-1
(the "Class A Certificates"), and each of the [ ]% Class B Asset Backed
Certificates, Series 1997-1 (the "Class B Certificates," and, together
with the Class A Certificates, the "Offered Certificates"), will
represent an undivided interest in the Prime Credit Card Master Trust
(the "Trust") created pursuant to a Pooling and Servicing Agreement among
Prime Receivables Corporation, as transferor (the "Transferor"), FDS
National Bank ("FDS"), as servicer (the "Servicer"), and The Chase
Manhattan Bank, as trustee. The fractional undivided interests in the
Trust represented by the Class B Certificates will be subordinated to
fund certain payments with respect to the Class A Certificates as
described in "Description of the Offered Certificates--Allocation
Percentages," "--Reallocated Principal Collections," "--Application of
Collections," and "--Investor Charge-Offs." The property of the Trust
includes receivables (the "Receivables") generated from time to time in a
portfolio of revolving consumer credit card accounts, and all monies due
or to become due in payment of the Receivables.
(Continued on next page)
POTENTIAL INVESTORS SHOULD CONSIDER, AMONG OTHER THINGS, THE
INFORMATION SET FORTH IN "RISK FACTORS" ON PAGES 23 THROUGH 28 HEREOF.
THE OFFERED CERTIFICATES REPRESENT INTERESTS IN THE TRUST ONLY AND
DO NOT REPRESENT INTERESTS IN OR RECOURSE OBLIGATIONS OF PRIME
RECEIVABLES CORPORATION, FDS NATIONAL BANK, FEDERATED DEPARTMENT STORES,
INC., OR ANY OF THEIR AFFILIATES. NEITHER THE OFFERED CERTIFICATES NOR
THE UNDERLYING ACCOUNTS OR RECEIVABLES ARE INSURED OR GUARANTEED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Underwriting Proceeds
Price to Discounts and to the
Public Commissions Transferor (1)
Per Class A Certificate....... [ ]% [ ]% [ ]%
Per Class B Certificate....... [ ]% [ ]% [ ]%
Total......................... $[ ] $[ ] $[ ]
(1) Before deduction of expenses estimated to be [$ ].
The Offered Certificates are offered by the Underwriters, subject
to prior sale, when, as and if issued to and accepted by the
Underwriters. The Underwriters reserve the right to reject orders in
whole or in part. It is expected that the Offered Certificates will be
offered globally and delivered in book-entry form on or about [ ],
through the facilities of The Depository Trust Company, Cedel Bank,
societe anonyme, and the Euroclear System.
Underwriters of the Class A Certificates
Credit Suisse First Boston
Underwriter of the Class B Certificates
Credit Suisse First Boston
The date of this Prospectus is [ ]
(Continued from previous page)
Concurrently with the issuance of the Offered Certificates, the
Trust will issue the Class C Asset Backed Certificates, Series 1997-1
(the "Class C Certificates," and, together with the Offered Certificates,
the "Certificates"), to the Transferor. The Offered Certificates and the
Class C Certificates constitute "Series 1997-1." The fractional undivided
interests in the Trust represented by the Class C Certificates will be
subordinated to fund certain payments with respect to the Offered
Certificates as described in "Description of the Offered
Certificates--Allocation Percentages," "--Reallocated Principal
Collections," "--Application of Collections," and "--Investor
Charge-Offs." On and after the Class B Principal Payment Commencement
Date, a portion of the fractional undivided interests in the Trust
represented by the Exchangeable Transferor Certificate (as defined
herein) will be subordinated to fund certain payments with respect to the
Class B Certificates as described in "Description of the Offered
Certificates--Reallocation of Cash Flows," "--Coverage of Interest
Shortfalls," and "--Investor Charge-Offs."
The Class C Certificates, which may be held by the Transferor or
transferred in whole or in part to other persons, are not being offered
hereby. The Transferor will own the remaining undivided interest in the
Trust not represented by the Certificates and any other investor
certificates issued by the Trust, which retained interest will be
represented by the Exchangeable Transferor Certificate. The Transferor
from time to time may cause other series of certificates that evidence
undivided interests in certain assets of the Trust to be issued by
exchanging a portion of its interest in the Trust therefor.
Interest will accrue on the Class A Certificates at the rate of [
]% per annum (the "Class A Certificate Rate"). Interest will accrue on
the Class B Certificates at the rate of [ ]% per annum (the "Class B
Certificate Rate"). Interest with respect to the Certificates will be
paid on [ ] and on the 15th day of each month thereafter (or, if any such
15th day is not a business day, the next succeeding business day) (each a
"Distribution Date"). Principal on the Class A Certificates is expected
to be paid on the [ ] Distribution Date (the "Class A Expected Final
Payment Date") but may be paid earlier or later under certain limited
circumstances described in "Maturity Assumptions" and "Description of the
Offered Certificates--Pay Out Events." Principal on the Class B
Certificates is expected to be paid on the [ ] Distribution Date (the
"Class B Expected Final Payment Date") but may be paid earlier or later
under certain limited circumstances. See "Maturity Assumptions" and
"Description of the Offered Certificates--Pay Out Events."
The Offered Certificates initially will be represented by
certificates which will be registered in the name of Cede & Co., the
nominee of The Depository Trust Company. The interests of holders of
beneficial interests in the Offered Certificates (the "Offered
Certificate Owners") will be represented by book entries on the records
of The Depository Trust Company and participating members thereof.
Definitive Certificates will be available to Offered Certificate Owners
only under the limited circumstances described in "Description of the
Offered Certificates--Definitive Certificates."
There currently is no secondary market for the Offered
Certificates, and there is no assurance that one will develop or, if one
does develop, that it will continue until the Offered Certificates are
paid in full.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN
TRANSACTIONS THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF
THE SECURITIES OFFERED HEREBY, INCLUDING OVER-ALLOTMENT, STABILIZING
TRANSACTIONS, SYNDICATE SHORT COVERING TRANSACTIONS, AND PENALTY BIDS.
FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
REPORTS TO CERTIFICATEHOLDERS
Unless and until Definitive Certificates (as defined herein) are
issued, monthly and annual reports, containing information concerning the
Trust and prepared by the Servicer, will be sent on behalf of the Trust
to Cede & Co. ("Cede"), as nominee of The Depository Trust Company
("DTC") and registered holder of the Offered Certificates, pursuant to
the Pooling and Servicing Agreement (as defined herein). See "Description
of the Offered Certificates--Book-Entry Registration," "--Definitive
Certificates," "--Reports to Certificateholders," and "--Evidence as to
Compliance." Such reports will not constitute financial statements
prepared in accordance with generally accepted accounting principles and
will not be sent by the Servicer or the Trustee to the Offered
Certificate Owners. The Transferor does not intend to send any of its
financial reports to Certificateholders or to the Offered Certificate
Owners. The Transferor, as originator of the Trust, will cause to be
filed with the Securities and Exchange Commission (the "Commission")
certain periodic reports with respect to the Trust under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and
regulations of the Commission thereunder.
AVAILABLE INFORMATION
The Transferor, as originator of the Trust, has filed a
Registration Statement under the Securities Act of 1933, as amended (the
"Securities Act"), with the Commission on behalf of the Trust with
respect to the Certificates offered pursuant to this Prospectus. This
Prospectus does not contain all the information set forth in the
Registration Statement, certain parts of which are omitted in accordance
with the rules and regulations of the Commission, to which reference is
hereby made. The Registration Statement and amendments thereof and
exhibits thereto are available for inspection without charge at the
public reference facilities maintained by the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549; 7 World Trade Center, Suite 1300,
New York, New York 10048; and Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. Copies of the Registration Statement
and amendments thereof and exhibits thereto may be obtained from the
Public Reference Section of the Commission, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. Such material may also be
obtained from the World Wide Web site maintained by the Commission
(http://www.sec.gov).
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to
the detailed information appearing elsewhere in this Prospectus. Certain
capitalized terms used herein are defined in the "Glossary of Terms"
commencing on page [ ] hereof or elsewhere in this Prospectus. Unless the
context requires otherwise, certain capitalized terms, when used in this
Prospectus, relate only to the Certificates.
Offered Certificates................. $[ ] Class A Certificates and
$[ ] Class B Certificates.
The Offered Certificates will be
available for purchase in
minimum denominations of $1,000
and in integral multiples
thereof. The Offered
Certificates initially will be
represented by one or more
certificates registered in the
name of Cede, as the nominee of
DTC. No Offered Certificate
Owner will be entitled to
receive a definitive certificate
representing such person's
interest, except in the event
that Definitive Certificates are
issued under the limited
circumstances described in
"Description of the Offered
Certificates--Definitive
Certificates."
The Offered Certificates represent
interests in the Trust only and
do not represent interests in or
recourse obligations of the
Transferor, FDS, Federated, or
any of their affiliates.
Neither the Offered Certificates
nor the underlying accounts or
receivables are insured or
guaranteed by the Federal
Deposit Insurance Corporation or
any other governmental agency.
The Class B Certificates will be
subordinated to fund certain
payments with respect to the
Class A Certificates as
described herein, and therefore
will bear more directly the
credit and other risks
associated with an investment in
the Trust.
Other Certificates................... $[ ] aggregate principal amount of
Class C Certificates. The Class
C Certificates are not being
offered hereby.
Other Series......................... The Trust has previously issued
five other Series. See "Annex I:
Other Series" for a summary of
certain terms of these other
Series. Additional Series may be
issued from time to time by the
Trust. See "Description of the
Offered Certificates--Exchanges."
Transferor........................... Prime Receivables Corporation, a
Delaware corporation, is the
Transferor. The principal
executive offices of the
Transferor are located at 9111
Duke Boulevard, Mason, Ohio
45040-8999, telephone number
(513) 573-2037.
Servicer............................. FDS National Bank ("FDS"), a
federally chartered credit card
bank, is the Servicer. The
principal executive offices of
the Servicer are located at 9111
Duke Boulevard, Mason, Ohio
45040-8999, telephone number
(513) 573-2265.
Trustee.............................. The Chase Manhattan Bank, a New
York banking corporation, is the
Trustee.
Trust................................ The Trust was formed on December
15, 1992 (the "Initial Closing
Date") pursuant to the Pooling
and Servicing Agreement, which
has been supplemented by the
Supplements thereto relating to
previously issued Series and
which will be supplemented by
the Series 1997-1 Supplement
relating to the Certificates and
the Supplements applicable to
any other Series that may be
issued in the future.
As more fully described below and
elsewhere herein, the Trust's
assets include the Receivables
and the proceeds thereof.
Collections on the Receivables
are deposited into the
Collection Account which is
maintained in the name of the
Trust and allocated on each
business day between Finance
Charge Collections and Principal
Collections. Finance Charge
Collections and Principal
Collections are allocated on
each business day among the
Transferor Interest and the
respective interests of the
certificateholders of each
Series issued and outstanding
from time to time in accordance
with the Pooling and Servicing
Agreement and applicable
Supplements. In general, in
accordance with such allocations
and the provisions of the
Pooling and Servicing Agreement
and the applicable Supplements,
(i) Finance Charge Collections
and certain other amounts are
applied on each business day to
fund interest on the
certificates of any Series then
outstanding (including through
deposits made to the Interest
Funding Account), to pay certain
fees and expenses, to cover
investor default amounts, to
reimburse investor charge-offs,
and to make required payments to
the Transferor, and (ii)
Principal Collections and
certain other amounts are
applied on each business day to
fund principal on the
certificates of any Series then
outstanding (including through
deposits made to the Principal
Funding Account or the Principal
Account) and to make required
payments to the Transferor,
except that (x) during any
revolving period applicable to a
Series, except as described
below, Principal Collections
otherwise allocable to the
certificateholders of such
Series are paid to the holder of
the Exchangeable Transferor
Certificate or to the
certificateholders of any other
Series then outstanding and (y)
Principal Collections allocated
to the Class B Certificates and
Class C Certificates are subject
to being reallocated on each
Distribution Date to cover
shortfalls in amounts payable
from Finance Charge Collections.
Trust Assets......................... The Trust assets include (i) all
Receivables existing from time
to time in the Accounts, (ii)
all funds collected from
cardholders in respect of the
Receivables, (iii) all right,
title, and interest of the
Transferor in, to, and under the
Purchase Agreement, and (iv)
proceeds of the foregoing. The
Class C Certificates will be
subordinated to fund payments of
principal and interest on the
Class A Certificates and the
Class B Certificates, and the
Class B Certificates will be
subordinated to fund payments of
principal and interest on the
Class A Certificates, in each
case as described in
"Description of the Offered
Certificates--Allocation
Percentages," "-- Reallocated
Principal Collections,"
"--Application of Collections,"
and "--Investor Charge-Offs." On
and after the Class B Principal
Payment Commencement Date, a
portion of the fractional
undivided interests in the Trust
represented by the Exchangeable
Transferor Certificate will be
subordinated to fund payments of
principal and interest on the
Class B Certificates as
described in "Description of the
Offered Certificates--
Reallocation of Cash Flows,"
"--Coverage of Interest
Shortfalls," and "--Investor
Charge-Offs."
In September 1993, FDS was
organized as a federally
chartered credit card bank,
replaced Federated as the
Servicer under the Pooling and
Servicing Agreement, and became
an Originator under the Purchase
Agreement. Pursuant to the
Purchase Agreement, the
Transferor purchases all of the
Receivables arising from time to
time in the Accounts (including
Automatic Additional Accounts
and any Supplemental Accounts).
Substantially all of the
Accounts are owned by FDS.
However, certain Accounts are
owned by the other Originators.
See "Federated's Credit Card
Business" and "Description of
the Receivables Purchase
Agreement--Purchases of
Receivables."
Pursuant to the Pooling and
Servicing Agreement, the
Transferor automatically
transfers to the Trust all of
its right, title, and interest
in and to the Receivables
purchased by it pursuant to the
Purchase Agreement. See "Risk
Factors--Transfer of the
Receivables; Insolvency Risk
Considerations" for a discussion
of certain legal considerations
relating to such transfer.
Pursuant to the Pooling and
Servicing Agreement, the
Transferor has the right under
certain circumstances to cause
the Receivables in any Removed
Accounts to no longer be
transferred to the Trust and to
accept the transfer from the
Trust of all of the Receivables
in any Removed Accounts, whether
such Receivables are then
existing or thereafter created.
Receivables.......................... The Receivables consist of amounts
charged to the Accounts by
holders of Federated Cards for
goods and services, and all
related monthly finance charges,
late charges, returned check
fees, proceeds allocable to
finance charges, recoveries (net
of collection expenses) on
Receivables which were
previously charged off as
uncollectible, and all other
fees billed to cardholders on
the Accounts for a Monthly
Period. All new Receivables
arising in the Accounts are
purchased by the Transferor
pursuant to the Purchase
Agreement and thereafter are
automatically transferred to the
Trust. Accordingly, the amount
of Receivables fluctuates from
day to day as new Receivables
are generated and as existing
Receivables are collected,
written off as uncollectible, or
otherwise adjusted. See "Risk
Factors -- Effects of Certain
Transactions," "Federated's
Credit Card Business," and "The
Accounts."
The Receivables in the Trust are
divided into two components:
Principal Receivables and
Finance Charge Receivables. At
any time, Finance Charge
Receivables will equal the
product of the Finance Charge
Receivable Factor and the
aggregate amount of Eligible
Receivables as of the date of
determination and Principal
Receivables will equal the
remainder of such Eligible
Receivables.
Collections.......................... The Servicer deposits all
collections of Receivables in
the Collection Account. All
amounts deposited in the
Collection Account are allocated
by the Servicer in the manner
provided in the Pooling and
Servicing Agreement between
Principal Collections and
Finance Charge Receivable
Collections in accordance with
the definitions thereof. All
such amounts are then allocated
in accordance with the
respective interests of the
Certificateholders, the
certificateholders of each other
Series, and the holder of the
Exchangeable Transferor
Certificate in the Principal
Receivables and in the Finance
Charge Receivables in the Trust.
See "Description of the Offered
Certificates--Allocation
Percentages."
Allocation of Trust Assets........... The Trust's assets will be
allocated among the Class A
Certificateholders' Interest,
the Class B Certificateholders'
Interest, the Class C
Certificateholders' Interest,
the interest of the
certificateholders of each other
Series, and the Transferor
Interest. The interest of the
certificateholders of any class
of any Series in the assets of
the Trust will be limited to the
certificateholders' interest for
such class and Series, and such
certificateholders will not have
any recourse against any assets
of the Trust other than those
allocated to such
certificateholders' interest
pursuant to the Pooling and
Servicing Agreement and any
applicable Supplement. The
principal amount of the
Transferor Interest fluctuates
as the amount of Receivables in
the Trust and the amount on
deposit in the Excess Funding
Account changes from time to
time. The Transferor Interest
represents the right to the
assets of the Trust not
allocated to the
Certificateholders' Interest or
the interest of the
certificateholders of any other
Series.
The Class A Certificates will
evidence undivided interests in
the assets of the Trust
allocated to the Class A
Certificateholders' Interest and
will represent the right to
receive from such assets funds
up to (but not in excess of) the
amounts required to make
payments of interest on the
Class A Certificates at the
Class A Certificate Rate and the
payment of principal to the
extent of the Class A Invested
Amount (which may be less than
the aggregate unpaid principal
amount of the Class A
Certificates, in certain
circumstances, if the Investor
Default Amount exceeds funds
allocable thereto and the Class
B Invested Amount and the Class
C Invested Amount are reduced to
zero) and the amounts on deposit
in the Pre-Funding Account
allocated to the Class A
Certificates, if any, at the end
of the Funding Period. See
"Description of the Offered
Certificates--Subordination of
the Class B Certificates,"
"--Allocation Percentages," and
"--Investor Charge-Offs."
The Class B Certificates will
evidence undivided interests in
the assets of the Trust
allocated to the Class B
Certificateholders' Interest and
will represent the right to
receive from such assets funds
up to (but not in excess of) the
amounts required to make
payments of interest on the
Class B Certificates at the
Class B Certificate Rate and the
payment of principal to the
extent of the Class B Invested
Amount (which may be less than
the aggregate unpaid principal
amount of the Class B
Certificates, in certain
circumstances, if the Investor
Default Amount exceeds funds
allocable thereto and the Class
C Invested Amount and, on and
after the Class B Principal
Payment Commencement Date, the
Transferor Subordination Amount
are reduced to zero) and the
amounts on deposit in the
Pre-Funding Account allocated to
the Class B Certificates, if
any, at the end of the Funding
Period. See "Description of the
Offered Certificates--Subordination
of the Class B Certificates,"
"--Allocation Percentages," and
"-- Investor Charge-Offs."
The Class C Certificates will
evidence undivided interests in
the assets of the Trust
allocated to the Class C
Certificateholders' Interest and
will represent the right to
receive from such assets funds
up to (but not in excess of) the
amounts required to make the
payment of principal to the
extent of the Class C Invested
Amount (which may be less than
the aggregate unpaid principal
amount of the Class C
Certificates, in certain
circumstances, if the Investor
Default Amount exceeds funds
allocable thereto and, on and
after the Class B Principal
Payment Commencement Date, the
Transferor Subordination Amount
is reduced to zero). See
"Description of the Offered
Certificates--Allocation
Percentages," and "--Investor
Charge-Offs." The Class C
Certificates will not accrue
interest and are not being
offered hereby.
The Invested Amount on the Closing
Date will be $__________. The
Invested Amount will, except as
otherwise described herein,
increase up to a maximum amount
of $__________ (the "Full
Invested Amount") during the
Funding Period, remain fixed at
the Full Invested Amount during
the Revolving Period, and
decline thereafter during any
Amortization Period or Early
Amortization Period as principal
is paid on the Certificates. The
Invested Amount is subject to
increase during the Funding
Period to the extent amounts are
withdrawn from the Pre-Funding
Account and paid to the
Transferor. The aggregate
principal amount of the
Certificates will, except as
otherwise described herein,
remain fixed at the initial
amount thereof during the period
beginning on the Closing Date
and ending with the commencement
of the Accumulation Period or
Early Amortization Period.
Except for pro rata
distributions of any amounts on
deposit on the first day of the
__________ Monthly Period in the
Pre-Funding Account as described
below in "Funding Period," no
payment of principal with
respect to the Class B
Certificates may be made until
the final principal payment of
the Class A Invested Amount with
respect to the Class A
Certificates has been made. No
payment of principal with
respect to the Class C
Certificates may be made until
the final principal payment of
the Class A Invested Amount with
respect to the Class A
Certificates and the final
principal payment of the Class B
Invested Amount with respect to
the Class B Certificates have
been made. See "Description of
the Offered
Certificates--Principal
Payments."
The Class A Certificateholders'
Interest, the Class B
Certificateholders' Interest,
and the Class C
Certificateholders' Interest
will each include the right to
receive (but only to the extent
needed to make required payments
under the Pooling and Servicing
Agreement) varying percentages
of Total Finance Charge
Collections and Net Principal
Collections during each Monthly
Period. Finance Charge
Collections prior to the
occurrence of a Pay Out Event,
and the amount of Receivables in
Defaulted Accounts at all times,
will be allocated on each
business day to the Class A
Certificateholders' Interest,
the Class B Certificateholders'
Interest, and the Class C
Certificateholders' Interest
based on the Class A Floating
Allocation Percentage, the Class
B Floating Allocation
Percentage, and the Class C
Floating Allocation Percentage,
respectively. On and after the
occurrence of a Pay Out Event,
Finance Charge Collections will
generally be allocated on each
business day to the
Certificateholders' Interest
based on the Fixed/Floating
Allocation Percentage. During
the Revolving Period, except as
described below under
"--Reallocation of Principal
Collections," all Net Principal
Collections that would otherwise
be allocated to the
Certificateholders will be
allocated on each business day
and paid to the holder of the
Exchangeable Transferor
Certificate (except for Shared
Principal Collections used to
make payments to other Series).
All Principal Collections
allocated to the
Certificateholders will
generally be allocated on each
business day on and prior to the
Class B Principal Payment
Commencement Date to the Class A
Certificateholders' Interest
based on the Fixed/Floating
Allocation Percentage; provided,
however, that during the
Accumulation Period only, if the
amount on deposit in the
Principal Funding Account
exceeds the Controlled
Distribution Amount for the
related Distribution Date, such
excess will be treated as Shared
Principal Collections. On and
after the Class B Principal
Payment Commencement Date, all
Principal Collections allocated
to the Certificateholders will
generally be allocated on each
business day to the Class B
Certificateholders' Interest
based on the Fixed/Floating
Allocation Percentage. See
"Description of the Offered
Certificates--Allocation
Percentages."
Exchanges............................ The Pooling and Servicing
Agreement provides that the
Trustee may issue two types of
certificates: (i) investor
certificates in one or more
Series, each of which may have
multiple classes of
certificates, of which one or
more of such classes may be
transferable, and (ii) the
Exchangeable Transferor
Certificate. The Exchangeable
Transferor Certificate will
evidence the Transferor
Interest, will be held by the
Transferor and will be
transferable only as provided in
the Pooling and Servicing
Agreement. The Pooling and
Servicing Agreement also
provides that, pursuant to any
one or more Supplements, the
holder of the Exchangeable
Transferor Certificate may
tender the Exchangeable
Transferor Certificate or, if
provided in the relevant
Supplement, certificates
comprising any Series and the
Exchangeable Transferor
Certificate, to the Trustee in
exchange for certificates
comprising one or more new
Series and a reissued
Exchangeable Transferor
Certificate. However, at all
times, the interest in the
Principal Receivables in the
Trust and amounts on deposit in
the Excess Funding Account
represented by the Transferor
Interest must equal or exceed
the Minimum Transferor Interest.
Under the Pooling and Servicing
Agreement, the Transferor may
define, with respect to any
Series, the Principal Terms of
the Series. See "Description of
the Offered Certificates--
Exchanges." The Transferor may
offer any Series, or any class
of any Series, for sale in
transactions either registered
under the Securities Act or
exempt from registration
thereunder, directly or through
the Underwriters or one or more
other underwriters or placement
agents, in fixed-price offerings
or in negotiated transactions or
otherwise. The Trust has
previously issued five Series:
Series 1992-1; Series 1992-2;
Series 1992-3; Series 1995-1;
and 1996-1. The Transferor may
from time to time cause the
Trust to issue additional
Series.
Under the Pooling and Servicing
Agreement, an Exchange of the
Exchangeable Transferor
Certificate for certificates
comprising one or more Series
and a reissued Exchangeable
Transferor Certificate may occur
only upon delivery to the
Trustee of the following: (i) a
Supplement specifying the
Principal Terms of each Series
to be issued in connection
therewith, (ii) an opinion of
counsel to the effect that the
certificates of such Series will
be characterized as indebtedness
or as partnership interests for
federal income tax purposes
under existing law, and that the
issuance of such Series will not
have a material adverse effect
on the federal income tax
characterization of any
outstanding Series, (iii) if
required by such Supplement, the
form of Enhancement and an
appropriate Enhancement
agreement with respect thereto,
(iv) written confirmation from
each Rating Agency that the
Exchange will not result in such
Rating Agency reducing or
withdrawing its rating on any
then outstanding Series rated by
it, (v) an officer's certificate
of the Transferor stating that,
after giving effect to such
Exchange, the Transferor
Interest would be at least equal
to the Minimum Transferor
Interest, and (vi) the existing
Exchangeable Transferor
Certificate and, if applicable,
the certificates representing
the Series to be exchanged. See
"Description of the Offered
Certificates--Exchanges."
Interest............................. Interest on the Offered
Certificates will be payable on
[ ] and on each Distribution
Date thereafter, in an amount
equal to (i) with respect to the
Class A Certificates,
one-twelfth of the product of
the Class A Certificate Rate and
the outstanding principal
balance of the Class A
Certificates as of the preceding
Record Date (or in the case of
the first Distribution Date, the
initial principal amount of the
Class A Certificates) and (ii)
with respect to the Class B
Certificates, one-twelfth of the
product of the Class B
Certificate Rate and the
outstanding principal balance of
the Class B Certificates as of
the preceding Record Date (or in
the case of the first
Distribution Date, the initial
principal amount of the Class B
Certificates). Interest for the
first Distribution Date will
include accrued interest at the
applicable Certificate Rate from
the Closing Date through [ ]
(calculated as though there were
only 30 days in [ ]). Interest
will be calculated on the basis
of a 360-day year of twelve
30-day months.
Interest payments on the Class A
Certificates on each
Distribution Date will be funded
from the portion of Total
Finance Charge Collections
during the preceding Monthly
Period and from certain other
funds allocated as set forth in
the Pooling and Servicing
Agreement to the respective
classes of the Certificates and
deposited on each business day
during such Monthly Period in
the Interest Funding Account.
See "Description of the Offered
Certificates--Interest
Payments."
Subject to the prior payment of
interest on the Class A
Certificates (and, as to a
portion thereof, to the prior
payment of certain other
amounts), interest payments on
the Class B Certificates on each
Distribution Date will be funded
from the portion of Total
Finance Charge Collections
during the preceding Monthly
Period and from certain other
funds allocated as set forth in
the Pooling and Servicing
Agreement to the respective
classes of the Certificates and
deposited on each business day
during such Monthly Period in
the Interest Funding Account.
See "Description of the Offered
Certificates--Interest Payments"
and "--Application of
Collections."
Expected Principal Payment Date...... Principal is scheduled to be paid
in full on the [ ] Distribution
Date (the "Class A Expected
Final Payment Date") for the
Class A Certificates, and on the
[ ] Distribution Date (the
"Class B Expected Final Payment
Date") for the Class B
Certificates, but may be paid
earlier in certain circumstances
described in "Description of the
Offered Certificates--Pay Out
Events." However, no payment of
principal to the Class B
Certificateholders will be made
until the Class A Invested
Amount has been paid in full.
Unpaid principal, together with
interest, will be payable
monthly to Class A
Certificateholders following the
Class A Expected Final Payment
Date to the extent principal has
not been paid in full on the
Class A Expected Final Payment
Date, and unpaid principal,
together with interest, will be
payable monthly to Class B
Certificateholders following the
Class B Expected Final Payment
Date to the extent principal has
not been paid in full on the
Class B Expected Final Payment
Date. However, no payments of
principal or interest will be
made on the Certificates after
the Series 1997-1 Termination
Date, regardless of whether
principal and interest have been
paid in full with respect
thereto. See "Description of the
Offered Certificates--Final
Payment of Principal;
Termination."
Revolving Period..................... During the Revolving Period,
collections of Principal
Receivables otherwise allocable
to the Certificateholders'
Interest (other than any Shared
Principal Collections allocated
to the certificateholders'
interests of other Series) will,
subject to certain limitations,
be paid from the Trust to the
holder of the Exchangeable
Transferor Certificate. See
"Description of the Offered
Certificates--Pay Out Events"
for a discussion of the events
which might lead to the
termination of the Revolving
Period for the Series 1997-1
Certificates prior to the end of
the [ ] Monthly Period. The
Accumulation Period is scheduled
to begin with the [ ] Monthly
Period. Subject to the
conditions set forth herein
under "Description of the
Offered
Certificates--Postponement of
Accumulation Period," the day on
which the Revolving Period ends
and the Accumulation Period
begins may be delayed to no
later than the close of business
on the last day of the [ ]
Monthly Period.
Principal Payments;
Accumulation Period................ Unless a Pay Out Event shall have
occurred with respect to the
Series 1997-1 Certificates, on
each business day during the
Accumulation Period an amount
equal to the lesser of (i) Net
Principal Collections allocable
to the Class A
Certificateholders' Interest
plus Shared Principal
Collections, if any, from other
Series allocable to the Class A
Certificates, plus certain other
amounts comprising Class A
Monthly Principal, and (ii) the
Controlled Amortization Amount
for such Monthly Period plus any
Accumulation Shortfall arising
from prior Monthly Periods, will
be deposited in the Principal
Funding Account. On any business
day when the amount on deposit
in the Principal Funding Account
equals or exceeds the Class A
Controlled Distribution Amount
for the related Distribution
Date, the balance of all such
funds remaining on deposit in
the Collection Account will be
treated as Shared Principal
Collections and may be used to
make payments on other Series or
classes of such Series which may
be accumulating or amortizing.
The funds then on deposit in the
Principal Funding Account will
be paid to the Class A
Certificate holders on the Class
A Expected Final Payment Date.
If the funds available for
distribution to the Class A
Certificateholders on the Class
A Expected Final Payment Date
are insufficient to pay the
Class A Invested Amount in full,
all such funds will be
distributed to the Class A
Certificateholders at such time.
Thereafter, until the Class A
Invested Amount has been paid in
full or the Series 1997-1
Termination Date has occurred,
principal and interest will be
payable to Class A
Certificateholders monthly on
each Special Payment Date.
Upon the payment in full of the
Class A Invested Amount and on
each business day thereafter, an
amount equal to the lesser of
(i) Net Principal Collections
allocable to the Class B
Certificateholders' Interest
plus Shared Principal
Collections, if any, from other
Series allocable to the Class B
Certificates, plus certain other
amounts comprising Class B
Monthly Principal, and (ii) the
Class B Invested Amount, will be
deposited in the Principal
Account. On any business day
when the amount on deposit in
the Principal Account equals or
exceeds the Class B Invested
Amount, the balance of all such
funds remaining on deposit in
the Collection Account will be
treated as Shared Principal
Collections and may be used to
make payments on other Series or
classes of such Series which may
be accumulating or amortizing.
The funds then on deposit in the
Principal Account will be paid
to the Class B
Certificateholders on the Class
B Expected Final Payment Date.
If the funds available for
distribution to the Class B
Certificateholders on the Class
B Expected Final Payment Date
are insufficient to pay the
Class B Invested Amount in full,
all such funds will be
distributed to the Class B
Certificateholders at such time.
Thereafter, until the Class B
Invested Amount has been paid in
full or the Series 1997-1
Termination Date has occurred,
principal and interest will be
payable to Class B
Certificateholders monthly on
each Special Payment Date.
Principal will be distributable to
the Class B Certificateholders
only after the Class A Invested
Amount has been paid in full,
and principal will be
distributed to the Class C
Certificateholders only after
the Class A Invested Amount and
the Class B Invested Amount have
been paid in full. See
"Description of the Offered
Certificates--Application of
Collections--Payments of
Principal."
[ ] of the [ ] other Series
previously issued by the Trust
have accumulation or
amortization periods that are
scheduled to begin prior to the
date on which the Accumulation
Period is scheduled to begin,
and all [ ] of such other Series
are subject to early
amortization periods similar to
the Early Amortization Period.
Other Series which may be
offered by the Trust in the
future may or may not have
amortization periods like the
Accumulation Period or the Early
Amortization Period, and such
periods may have different
lengths and begin on different
dates than the Accumulation
Period or the Early Amortization
Period. Thus, certain Series may
be in their revolving periods,
while others are in periods
during which collections of
Principal Receivables are
distributed to such other
Series. In addition, other
Series may allocate Principal
Receivables based upon different
investor percentages. See
"Description of the Offered
Certificates--Exchanges" for a
discussion of the potential
terms of other Series and "Annex
I: Other Series" for a summary
of certain terms of each
previously issued Series.
Early Amortization Period............ During any Early Amortization
Period, Net Principal
Collections allocable to the
Certificateholders' Interest and
certain other amounts (including
Shared Principal Collections
from any other Series) will no
longer be reinvested in the
Trust or otherwise used to
maintain the Certificateholders'
Interest, but instead will be
distributed monthly on each
Distribution Date beginning with
the first Special Payment Date
(which will be the first
Distribution Date following the
Monthly Period in which a Pay
Out Event occurs or is deemed to
have occurred) as principal
payments to the Class A
Certificateholders in respect of
the Class A Invested Amount and,
following the payment in full of
the Class A Invested Amount, to
the Class B Certificateholders
in respect of the Class B
Invested Amount and, following
the payment in full of the Class
B Invested Amount, to the Class
C Certificateholders in respect
of the Class C Invested Amount
until the Class C Invested
Amount is paid in full. See
"Description of the Offered
Certificates--Pay Out Events."
Paired Series........................ During the Funding Period, Series
1997-1 will be paired with
Series 1992-1. For a description
of the principal terms of Series
1992-1, see "Annex I--Other
Series." Series 1997-1 will be
prefunded from the proceeds of
the sale of the Offered
Certificates with an initial
deposit to the Pre-Funding
Account in an amount up to the
excess of the outstanding
principal balance of the Series
1997-1 Certificates over the
amount on deposit in the
principal funding account for
the benefit of Series 1992-1 on
the Closing Date. It is
estimated that the excess of the
outstanding principal balance of
the Series 1997-1 Certificates
over the amount on deposit in
the principal funding account
for the benefit of Series 1992-1
will be approximately $____
million on the Closing Date. As
principal is paid or deposited
in the principal funding account
established for the benefit of
the Series 1992-1 Certificates
(the "Series 1992-1 Principal
Funding Account") an equal
amount of funds on deposit in
the Pre-Funding Account will be
released (which funds will be
distributed to the Transferor)
and the Invested Amount of
Series 1997-1 will increase by a
corresponding amount. The
expected final payment date for
Series 1992-1 is February 17,
1998. If a Pay Out Event occurs
with respect to Series 1992-1 or
Series 1997-1 during the Funding
Period for Series 1997-1, the
numerators used in the
Fixed/Floating Allocation
Percentage for each of Series
1997-1 and Series 1992-1 will be
reset to be equal to the
respective invested amounts of
each such Series at the end of
the last day prior to the
occurrence of such Pay Out Event
resulting in a possible
reduction of the percentage of
Principal Collections allocated
to Series 1992-1 if such event
allowed the payment of principal
at such time to Series 1997-1
and required reliance by Series
1992-1 on clause (b) of the
denominator of the
Fixed/Floating Allocation
Percentage for Series 1992-1.
See "Risk Factors--Master Trust
Considerations" and "Description
of the Offered
Certificates--Paired Series."
Funding Period....................... During the period (the "Funding
Period") from and including the
Closing Date to and including
the earliest of (i) the first
day on which the amount on
deposit in the Pre-Funding
Account is reduced to zero as a
result of increases in the
aggregate amount of Principal
Receivables in the Trust; (ii)
the day immediately preceding
the day on which a Pay Out Event
is deemed to occur; and (iii)
the first day of the _______
Monthly Period, the Pre-Funded
Amount will be maintained in a
trust account to be established
with the Trustee (the
"Pre-Funding Account"). The
"Pre-Funded Amount" will equal
the amount of the initial
deposit to the Pre-Funding
Account, less the amounts of any
increases in the Invested Amount
pursuant to the Series 1997-1
Supplement as principal is paid
on or deposited in the principal
funding account for the benefit
of the Series 1992-1
Certificates. (See "--Paired
Series" above.) Funds on deposit
in the Pre-Funding Account will
be invested by the Trustee at
the direction of the Servicer in
Eligible Investments that by
their terms convert into cash
within a finite period of time.
Investment earnings on such
funds will not be treated as
amounts on deposit in the
Pre-Funding Account for purposes
of the distributions described
below. For a discussion of the
treatment of investment earnings
on such funds, see "Description
of the Offered Certificates--
Application of Collections--
Payment of Fees, Interest, and
Other Items."
During the Funding Period, funds
on deposit in the Pre-Funding
Account will be withdrawn and
paid to the Transferor to the
extent of any increases in the
Invested Amount. Although no
assurance can be given with
respect thereto, the Transferor
expects that the funds on
deposit in the Pre-Funding
Account will be fully invested
in Receivables by the
___________ Monthly Period.
Following the occurrence of an
Early Amortization Event during
the Funding Period, the amounts
remaining on deposit in the
Pre-Funding Account will be
payable as principal first to
the Class A Certificateholders
until the sum of the Class A
Invested Amount and the Class A
Percentage of the Pre-Funded
Amount on the date of the
occurrence of the Pay Out Event
(the "Class A Pre-Funded
Amount") is paid in full and
then to the Class B
Certificateholders. In the
absence of a Pay Out Event, any
amount in the Pre-Funding
Account at the end of the
Funding Period will be withdrawn
and distributed on the next
succeeding Distribution Date to
the Class A Certificateholders
and the Class B
Certificateholders pro rata
based on the Class A Invested
Amount and the Class B Invested
Amount. [In certain
circumstances, a Prepayment
Premium will also be payable in
connection with the distribution
of any Pre-Funded Amount to the
Class A Certificateholders and
the Class B Certificateholders.
See "Description of the Offered
Certificates--Pre-Funding
Account."]
Shared Principal Collections......... To the extent that Principal
Collections and other amounts
that are allocated to the
certificateholders' interest of
any class of any Series are not
needed to make payments to the
certificateholders of such class
or required to be deposited in
the principal funding account
for a Series, they may be
applied to cover principal
payments due to or for the
benefit of certificateholders of
another Series, including
principal payments which the
Transferor elects to make with
respect to the Variable Funding
Certificate. Any such
reallocation will not result in
a reduction in the
certificateholders' interest of
the Series to which such
Principal Collections were
initially allocated. See
"Description of the Offered
Certificates--Application of
Collections."
Excess Funding Account............... At any time during which no Series
is in an accumulation or
amortization period (including
any early amortization period),
or the principal funding account
for a Series is fully funded for
an applicable period, and the
Transferor Interest is less than
the Minimum Transferor Interest,
funds (to the extent available
therefor as described herein)
otherwise payable to the
Transferor will be deposited in
the Excess Funding Account on
each business day until the
Transferor Interest is equal to
the Minimum Transferor Interest.
Funds on deposit in the Excess
Funding Account will be
withdrawn and paid to the
Transferor to the extent that on
any day the Transferor Interest
exceeds the Minimum Transferor
Interest as a result of the
addition of new Receivables to
the Trust or allocated to one or
more Series when they are in
accumulation or amortization
periods (including any early
amortization period). The
Transferor may, at its option on
any business day, deposit funds
in the Excess Funding Account to
the extent necessary to maintain
the Minimum Transferor Interest
or the Minimum Aggregate
Principal Receivables or to
permit the designation of
Removed Accounts.
Any funds on deposit in the Excess
Funding Account at the beginning
of the Accumulation Period will
be deposited in the Principal
Funding Account to the extent of
Class A Monthly Principal, Class
B Monthly Principal, or Class C
Monthly Principal, as
applicable, with respect to any
Distribution Date. No funds will
be deposited in the Excess
Funding Account during any
accumulation period,
amortization period, or early
amortization period for any
Series until the principal
funding account for such Series
has been fully funded with
respect to any Distribution Date
or the investor certificates of
such Series have been paid in
full. See "Description of the
Offered Certificates--Excess
Funding Account."
Distribution of Finance Charge
Collections Allocable to
Certificateholders................. Available Series Finance Charge
Collections allocable to the
Certificateholders' Interest on
each business day will be
applied in the following order
of priority: (i) an amount equal
to the amount of Class A Monthly
Interest and any overdue Class A
Monthly Interest not previously
deposited in the Interest
Funding Account for such Monthly
Period, together with interest
on any overdue interest amounts,
will be deposited in the
Interest Funding Account for
distribution to the Class A
Certificateholders; (ii) an
amount equal to the amount of
Class B Monthly Interest and any
overdue Class B Monthly Interest
not previously deposited in the
Interest Funding Account for
such Monthly Period, together
with interest on any overdue
interest amounts, will be
deposited in the Interest
Funding Account for distribution
to the Class B
Certificateholders; (iii) an
amount equal to the Monthly
Servicing Fee plus any Monthly
Servicing Fee that was due but
not paid on any prior business
day will be paid to the
Servicer; (iv) an amount equal
to the Investor Default Amount
on such business day and, to the
extent not previously paid, the
Investor Default Amount for each
prior business day in such
Monthly Period, will be (a)
during the Revolving Period,
treated as Shared Principal
Collections, (b) during the
Amortization Period, on or prior
to the Class B Principal Payment
Commencement Date, deposited for
distribution to the Class A
Certificateholders, (c) during
the Amortization Period, on and
after the Class B Principal
Payment Commencement Date,
deposited for distribution to
the Class B Certificateholders,
or (d) during the Amortization
Period, on and after the Class C
Principal Payment Commencement
Date, deposited for distribution
to the Class C
Certificateholders; (v) an
amount equal to unreimbursed
Class A Investor Charge-Offs on
such business day will be (a)
treated as Shared Principal
Collections during the Revolving
Period, (b) deposited for
distribution to Class A
Certificateholders to the extent
included in Class A Monthly
Principal during the
Accumulation Period, (c)
deposited for distribution to
the Class A Certificateholders
during any Early Amortization
Period, or (d) deposited for
distribution to the Class B
Certificateholders on and after
the Class B Principal Payment
Commencement Date; (vi) an
amount equal to the accrued and
unpaid interest on the
outstanding aggregate principal
amount of the Class B
Certificates not previously
deposited in the Interest
Funding Account for such Monthly
Period will be deposited in the
Interest Funding Account for
distribution to the Class B
Certificateholders; (vii) an
amount equal to unreimbursed
Class B Investor Charge-Offs on
such business day and any
reductions of the Class B
Invested Amount due to
Reallocated Class B Principal
Collections will be (a) during
the Revolving Period, treated as
Shared Principal Collections,
(b) during the Amortization
Period, on or prior to the Class
B Principal Payment Commencement
Date, deposited for distribution
to Class A Certificateholders,
or (c) during the Amortization
Period, on and after the Class B
Principal Payment Commencement
Date, deposited for distribution
to Class B Certificateholders;
(viii) an amount equal to
unreimbursed Class C Investor
Charge-Offs on such business day
and any reductions of the Class
C Invested Amount due to
Reallocated Class C Principal
Collections will be (a) during
the Revolving Period, treated as
Shared Principal Collections,
(b) during the Amortization
Period, on or prior to the Class
B Principal Payment Commencement
Date, deposited for distribution
to Class A Certificateholders,
(c) during the Amortization
Period, on and after the Class B
Principal Payment Commencement
Date and on or prior to the
Class C Principal Payment
Commencement Date, deposited for
distribution to Class B
Certificateholders, or (d)
during the Amortization Period,
on and after the Class C
Principal Payment Commencement
Date, deposited for distribution
to the Class C
Certificateholders; and (ix) the
remainder will be treated as
Excess Finance Charge
Collections. See "Description of
the Offered
Certificates--Application of
Collections--Payment of Fees,
Interest, and Other Items."
Coverage of Interest Shortfalls
From Transferor Finance Charge
Collections........................ To the extent of any shortfall in
the amount of Total Finance
Charge Collections allocable to
the Certificateholders' Interest
due to the accumulation of
principal in the Principal
Funding Account or cash in the
Excess Funding Account, on each
business day the Servicer will
apply Transferor Finance Charge
Collections in an amount equal
to the excess of (i) the product
of (a) the Base Rate and (b) the
product of (x) the sum of the
amounts on deposit in the Excess
Funding Account and the
Principal Funding Account and
(y) the number of days elapsed
since the previous business day
divided by the actual number of
days in such year over (ii) 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 and the Principal
Funding Account are invested in
the manner specified for
application of Total Finance
Charge Collections.
Sharing of Excess
Finance Charge Collections......... Total Finance Charge Collections
allocable to any Series on any
business day in excess of the
amounts necessary to make
required payments with respect
to such Series on such business
day will be applied to cover any
shortfalls with respect to
amounts payable from Finance
Charge Collections allocable to
any other Series then
outstanding, pro rata based upon
the amount of the shortfall, if
any, with respect to such other
Series. Any Excess Finance
Charge Collections remaining
after covering shortfalls with
respect to all outstanding
Series will be paid to the
holder of the Exchangeable
Transferor Certificate;
provided, however, that on any
business day during any early
amortization period relating to
any Series, the Trustee will
deposit any such remaining
Excess Finance Charge
Collections from such Series
into the Collection Account and
will add such funds to the
amounts allocated to Finance
Charge Collections for such
Series on each subsequent
business day in such Monthly
Period until the last business
day of the related Monthly
Period, when the aggregate
amount of such remaining Finance
Charge Collections will be
distributed as Excess Finance
Charge Collections.
Reallocation of
Principal Collections.............. On each Determination Date, to the
extent that (i) the aggregate
amount to be paid for the
related Monthly Period in
respect of interest on the Class
A Certificates, reimbursements
of Class A Investor Charge-Offs,
and certain other items, or (ii)
the aggregate amount to be paid
in respect of interest on the
Class B Certificates,
reimbursements of Class B
Investor Charge-Offs and
reductions in the Class B
Invested Amount due to
Reallocated Class B Principal
Collections, and certain other
items, exceeds the amount of
Available Series Finance Charge
Collections applied with respect
thereto, Principal Collections
otherwise allocable to the Class
C Certificateholders' Interest
with respect to the related
Monthly Period and, if
necessary, Principal Collections
otherwise allocable to the Class
B Certificateholders' Interest
with respect to the related
Monthly Period will be applied
to the payment of such items in
accordance with the priorities
set forth in the Pooling and
Servicing Agreement. The Class C
Invested Amount will be reduced
(but not below zero) by the
amount of such Reallocated
Principal Collections. If the
Class C Invested Amount is
reduced to zero, the Class B
Invested Amount will be reduced
(but not below zero) by the
amount by which such Reallocated
Principal Collections exceeded
the Class C Invested Amount. See
"Description of the Offered
Certificates--Reallocated
Principal Collections." The
Class B Invested Amount and the
Class C Invested Amount will
thereafter be increased (but not
in excess of the respective
unpaid principal balances
thereof) on any business day by
the amount of Available Series
Finance Charge Collections
allocated and available for such
purposes as described in clauses
(vii) and (ix), respectively, of
"--Distribution of Finance
Charge Collections Allocable to
Certificateholders."
Transferor Subordination
Amount............................. On and after the Class B Principal
Payment Commencement Date, to
the extent of any shortfall in
the amount available to make
required payments of interest
accrued with respect to the
outstanding aggregate principal
amount of the Class B
Certificates or to cover the
Investor Default Amount or any
Class B Investor Charge-Offs
which remain unpaid after the
application of Transferor
Finance Charge Collections and
Excess Finance Charge
Collections, Principal
Collections and any remaining
Finance Charge Collections
allocated to the holder of the
Exchangeable Transferor
Certificate in an amount not to
exceed the least of the
Transferor Subordination Amount,
the Transferor Interest on such
day, and the amount of such
shortfall, will be treated as
Finance Charge Collections
allocable to the payment of such
shortfall on the Class B
Certificates.
Investor Default Amount;
Investor Charge-Offs............... If on any Determination Date the
aggregate Investor Default
Amount, if any, for each
business day in the preceding
Monthly Period exceeded the sum
of (i) the aggregate amount of
Available Series Finance Charge
Collections applied to the
payment thereof as described in
clause (iv) of "--Distribution
of Finance Charge Collections
Allocable to
Certificateholders," (ii) the
aggregate amount of Transferor
Finance Charge Collections,
Excess Finance Charge
Collections, and on and after
the Class B Principal Payment
Commencement Date, collections
allocated to the holder of the
Exchangeable Transferor
Certificate to the extent of the
Transferor Subordination Amount,
in each case to the extent
applied to the payment thereof
as described in "--Coverage of
Interest Shortfalls from
Transferor Finance Charge
Collections," "--Sharing of
Excess Finance Charge
Collections," and "--Transferor
Subordination Amount,"
respectively, and (iii) any
Reallocated Principal
Collections applied with respect
thereto, then a portion of the
Class C Invested Amount equal to
such insufficiency (but not in
excess of the aggregate Investor
Default Amount for such Monthly
Period) will be deducted from
the Class C Invested Amount to
avoid a charge-off with respect
to the Class A Certificates and
the Class B Certificates. The
Class C Invested Amount will
thereafter be increased (but not
in excess of the unpaid
principal balance of the Class C
Certificates) on any business
day by the amount of Available
Series Finance Charge
Collections allocated and
available for such purpose as
described in clause (ix) of
"--Distribution of Finance
Charge Collections Allocable to
Certificateholders."
If the Class C Invested Amount is
reduced to zero, prior to the
Class B Principal Payment
Commencement Date, a portion of
the Class B Invested Amount
equal to the remaining
insufficiency (but not in excess
of the aggregate Investor
Default Amount for such Monthly
Period) will be deducted from
the Class B Invested Amount to
avoid a charge-off with respect
to the Class A Certificates. The
Class B Invested Amount will
thereafter be increased (but not
in excess of the unpaid
principal balance of the Class B
Certificates) on any business
day by the amount of Available
Series Finance Charge
Collections allocated and
available for that purpose as
described in clause (vii) of
"--Distribution of Finance
Charge Collections Allocable to
Certificateholders."
On and after the Class B Principal
Payment Commencement Date, if
the Class C Invested Amount is
reduced to zero, a portion of
the Transferor Subordination
Amount equal to the remaining
insufficiency (but not in excess
of the aggregate Investor
Default Amount for such Series
for such Monthly Period) will be
deducted from the Transferor
Subordination Amount to avoid a
charge-off with respect to the
Class B Certificates. If the
Class B Invested Amount is
reduced to zero prior to the
Class B Principal Payment
Commencement Date, a portion of
the Class A Invested Amount
equal to the remaining
insufficiency (but not in excess
of the aggregate Investor
Default Amount for such Monthly
Period) will be deducted from
the Class A Invested Amount. The
Class A Invested Amount will
thereafter be increased (but not
in excess of the unpaid
principal balance of the Class A
Certificates) on any business
day by the amount of Available
Series Finance Charge
Collections allocated and
available for that purpose as
described in clause (v) of
"--Distribution of Finance
Charge Collections Allocable to
Certificateholders." See
"Description of the Offered
Certificates--Investor
Charge-Offs."
Subordination of the Class B
Certificates and the Class C
Certificates....................... The Class B Certificates will be
subordinated to fund payments of
principal and interest on the
Class A Certificates. The Class
C Certificates will be
subordinated to fund payments of
principal and interest on the
Class A Certificates and the
Class B Certificates. To the
extent the Class B Invested
Amount or the Class C Invested
Amount is reduced, the
percentage of collections of
Finance Charge Receivables
allocated to the Class B
Certificateholders or the Class
C Certificateholders, as
applicable, in subsequent
Monthly Periods will be reduced.
Moreover, to the extent the
amount of such reduction in the
Class B Invested Amount or the
Class C Invested Amount is not
reimbursed, the amount of
principal distributable to the
Class B Certificateholders or
the Class C Certificateholders,
as applicable, will be reduced.
Principal payments with respect
to the Class B Certificates will
not be made until the final
payment of the Class A Invested
Amount has been made to the
Class A Certificateholders.
Principal payments with respect
to the Class C Certificates will
not be made until the final
payment of the Class A Invested
Amount has been made to the
Class A Certificateholders and
the final payment of the Class B
Invested Amount has been made to
the Class B Certificateholders.
See "Description of the Offered
Certificates--Subordination of
the Class B Certificates,"
"--Allocation Percentages,"
"--Reallocated Principal
Collections," "--Application of
Collections," and "--Investor
Charge-Offs."
Optional Repurchase.................. The Class A Certificates, the
Class B Certificates, and the
Class C Certificates will be
subject to optional repurchase
by the Transferor on any
Distribution Date after the
Invested Amount is reduced to an
amount less than or equal to 20%
of the highest Invested Amount
outstanding at any time, if
certain conditions set forth in
the Pooling and Servicing
Agreement are met. The
Certificates are also subject to
optional repurchase by the
Transferor on the second
Distribution Date following the
Class A Expected Final Payment
Date. The repurchase price will
be equal to the Invested Amount
plus accrued and unpaid interest
on the Class A Certificates and
the Class B Certificates through
the day preceding the
Distribution Date on which the
repurchase occurs.
Tax Status........................... In the opinion of Tax Counsel, the
Class A Certificates and the
Class B Certificates will be
characterized as debt of the
Transferor for federal income
tax purposes. Under the Pooling
and Servicing Agreement, the
Transferor, the Servicer, the
Class A Certificateholders, and
the Class B Certificateholders
will agree to treat the Class A
Certificates and the Class B
Certificates as debt of the
Transferor for federal, state,
and other tax purposes. See
"Certain Federal Income Tax
Consequences" for additional
information concerning the
application of federal income
tax laws.
ERISA Considerations................. Under regulations issued by the
Department of Labor, if the
Trust's assets were deemed to be
"plan assets" of an employee
benefit plan, there is
uncertainty as to whether
existing exemptions from the
"prohibited transaction" rules
of ERISA and the Code would
apply to all transactions
involving the Trust's assets.
The Trust's assets would not be
deemed "plan assets" of an
employee benefit plan holding
interests in the Class A
Certificates if certain
conditions are met, including
that interests in the Class A
Certificates be held by at least
100 persons independent of the
Transferor and each other. The
Class A Underwriters expect,
although no assurance can be
given, that the Class A
Certificates will be held by at
least 100 such persons, and the
Transferor anticipates that the
other conditions of the
"publicly offered security"
exemption contained in the
regulations will be met.
However, no monitoring or other
measures will be taken to ensure
that any such conditions will be
met. Accordingly, employee
benefit plans contemplating
purchasing the Class A
Certificates should consult
their counsel before making a
purchase. See "Employee Benefit
Plan Considerations."
The Class B Certificates may not
be acquired directly or
indirectly by any employee
benefit plan subject to ERISA,
by any individual retirement
account, or by certain other
employee benefit accounts. The
Pooling and Servicing Agreement
and each Class B Certificate
will provide that by accepting
and holding a Class B
Certificate, each Class B
Certificateholder will be deemed
to have represented and
warranted that it is not (i) an
employee benefit plan (as
defined in Section 3(3) of
ERISA) that is subject to the
provisions of Title I of ERISA,
(ii) a plan described in Section
4975(e)(1) of the Code, or (iii)
an entity whose underlying
assets include plan assets by
reason of a plan's investment in
the entity.
Offered Certificate Rating........... It is a condition to the issuance
of the Class A Certificates that
they have an initial rating of
"AAA" or its equivalent from the
Rating Agencies.
It is a condition to the issuance
of the Class B Certificates that
they have an initial rating of
at least "A" or its equivalent
from the Rating Agencies. See
"Risk Factors--Certificate
Rating."
Risk Factors......................... See "Risk Factors" commencing on
page 23 hereof for a description
of certain factors that should
be considered carefully in
evaluating any investment in the
Certificates offered hereby.
RISK FACTORS
LIMITED LIQUIDITY
There is currently no market for the Offered Certificates. The
Underwriters intend to make a market in each class of the Offered
Certificates purchased by them from the Transferor, but are not obligated
to do so. There is no assurance that a secondary market will develop or,
if it does develop, that it will provide Offered Certificate Owners with
liquidity of investment or that it will continue until the Offered
Certificates are paid in full.
TRANSFER OF THE RECEIVABLES; INSOLVENCY RISK CONSIDERATIONS
The Purchase Agreement provides that the Originators transfer all
of their respective right, title, and interest in and to the Receivables
owned by each of them from time to time to the Transferor. However, a
court could treat such transactions as an assignment of collateral as
security for the benefit of the Transferor. Accordingly, each of the
Originators has granted a security interest in the Receivables to the
Transferor pursuant to the Purchase Agreement and has taken certain
actions required to perfect the Transferor's security interest in the
Receivables. In addition, each of the Originators has warranted that if
the transfer to the Transferor is deemed to be a grant of a security
interest in the Receivables, the Transferor will have a perfected
security interest therein, subject only to Permitted Liens. If the
transfer of the Receivables to the Transferor is deemed to create a
security interest therein under the UCC, a tax or government lien on the
property of any of the Originators arising before the subject Receivables
came into existence may have priority over the Transferor's interest in
the Receivables. In the event of the insolvency of any of the
Originators, certain administrative expenses may also have priority over
the Transferor's interest in such Receivables.
Although the Transferor has transferred and will transfer interests
in the Receivables to the Trust, a court could treat such transactions as
an assignment of collateral as security for the benefit of holders of
certificates issued by the Trust. It is possible that the risk of such
treatment may be increased by the retention by the Transferor of the
Exchangeable Transferor Certificate and any class of certificates of any
Series that the Transferor may hold from time to time. The Transferor has
represented and warranted in the Pooling and Servicing Agreement that the
transfer of the Receivables to the Trust is either a valid transfer and
assignment of the Receivables to the Trust or the grant to the Trust of a
security interest in the Receivables. The Transferor has taken certain
actions required to perfect the Trust's security interest in the
Receivables, and has warranted that if the transfer to the Trust is
deemed to be a grant to the Trust of a security interest in the
Receivables, the Trustee will have a perfected security interest therein,
subject only to Permitted Liens. If the transfer of the Receivables to
the Trust is deemed to create a security interest therein under the UCC,
a tax or government lien on property of the Transferor arising before
Receivables come into existence may have priority over the Trust's
interest in such Receivables. In the event of the insolvency of the
Transferor, certain administrative expenses may also have priority over
the Trust's interest in such Receivables. See "Certain Legal Aspects of
the Receivables--Transfer of Receivables."
To the extent that the Originators and the Transferor have granted
security interests in the Receivables to the Transferor and the Trust,
respectively, and such security interests were validly perfected before
any bankruptcy, insolvency, receivership, or conservatorship of the
Originators or the Transferor and were not granted or taken in
contemplation of bankruptcy, insolvency, receivership, or conservatorship
or with the intent to hinder, delay, or defraud the Originators or the
Transferor or their respective creditors, such security interests should
not be subject to avoidance in the event of bankruptcy, insolvency,
receivership, or conservatorship of the Originators or the Transferor,
and payments to the Trust with respect to the Receivables should not be
subject to recovery by a bankruptcy trustee, conservator, or receiver for
the Transferor. If, however, such a bankruptcy trustee, conservator, or
receiver were to assert a contrary position (or, in the case of a
conservator or receiver for FDS, were to require the Trustee to establish
its right to those payments by submitting to and completing the
administrative claims procedure established under the Financial
Institutions Reform, Recovery and Enforcement Act of 1989 ("FIRREA"), or
were to request a stay of proceedings with respect to FDS as provided
under FIRREA), delays in payments on the Offered Certificates and
possible reductions in the amount of those payments could occur.
In Octagon Gas System, Inc. v. Rimmer, 995 F.2d 948 (10th Cir.),
cert. denied, 114 S. Ct. 554 (1993), the court determined that the
interest acquired by a purchaser of "accounts," which as defined under
the UCC would likely include the Receivables, is treated as a security
interest under the UCC. As described above, the treatment of the
transfers of the Receivables to the Transferor or the Trust as grants of
security interests could have consequences to the Offered Certificate
Owners that would be less advantageous than the treatment of such
transfers as outright sales. The circumstances under which the Octagon
ruling would apply are not fully known and the extent to which the
Octagon decision will be followed in other courts or outside of the Tenth
Circuit is not certain. Although most of the Originators' and the
Transferor's respective business activities are conducted outside the
geographic area subject to the jurisdiction of the Tenth Circuit, a
portion of such business activities are conducted within such geographic
area. See "Certain Legal Aspects of the Receivables--Certain Matters
Relating to Bankruptcy or Insolvency."
If a conservator or receiver were appointed for the Servicer, and
no Servicer Default other than such receivership or insolvency of the
Servicer exists, the conservator or receiver may have the power to
prevent either the Trustee or the majority of the Certificateholders from
effecting a transfer of servicing to a successor Servicer. If a
bankruptcy trustee or receiver were appointed for the Transferor, causing
a Pay Out Event with respect to all Series then outstanding, new
Principal Receivables would not be transferred to the Trust pursuant to
the Pooling and Servicing Agreement and the Trustee would sell the
portion of the Receivables allocable in accordance with the Pooling and
Servicing Agreement to each Series (unless holders of more than 50% of
the principal amount of each class of each Series instruct otherwise),
thereby causing early termination of the Trust and a loss to the
Certificateholders if the net proceeds allocable to the
Certificateholders from such sale, if any, were insufficient to pay the
Certificateholders in full. The net proceeds of any such sale of the
portion of the Receivables allocated in accordance with the Pooling and
Servicing Agreement to each Series will first be used to pay amounts due
to the Class A Certificateholders, will thereafter be used to pay amounts
due to the Class B Certificateholders, and will thereafter be used to pay
amounts due to the Class C Certificateholders. If the only Pay Out Event
to occur is either the insolvency of the Transferor or the appointment of
a bankruptcy trustee or receiver for the Transferor, the bankruptcy
trustee or receiver may have the power to continue to require the
Transferor to transfer new Receivables to the Trust and to prevent the
early sale, liquidation, or disposition of the Receivables and the
commencement of the Early Amortization Period. In addition, a bankruptcy
trustee or receiver for the Transferor may have the power to cause early
payment of the Certificates. See "Certain Legal Aspects of the
Receivables--Certain Matters Relating to Bankruptcy or Insolvency."
EFFECTS OF CERTAIN TRANSACTIONS
Subsequent to its acquisition of Broadway Stores, Inc. ("Broadway")
in October 1995, Federated integrated Broadway's businesses with the
businesses of Federated's other subsidiaries, converting most of the
department stores operated by Broadway at the time of such acquisition
under the names "Broadway," "Emporium," and "Weinstocks" into
Bloomingdale's and Macy's stores, operating several such stores as
clearance centers, and selling or attempting to sell or otherwise dispose
of the remaining stores. Consequently, as described in "The Accounts," in
February 1996, FDS began establishing and continues to establish new
credit card accounts (the "FDS/Broadway Accounts") for qualified
applicants who were or become customers of the department stores operated
by Broadway following the conversion of such stores to Federated
nameplates, and all of the credit card accounts owned by Broadway (the
"Broadway Accounts"), which historically had its own proprietary credit
card program, have been closed to further purchasing activity. In May
1996, the receivables then outstanding under the FDS/Broadway Accounts
and the Broadway Accounts were transferred to the Transferor for
inclusion in the Trust. As a result of the foregoing matters and various
other factors, the historical performance of the Federated Portfolio may
not be comparable to or indicative of the current or future performance
of the Federated Portfolio.
Subsequent to its acquisition of R.H. Macy & Co., Inc. ("Macy's")
in December 1994, Federated consolidated its Abraham & Straus/Jordan
Marsh division with its Macy's East division. Consequently, as described
in "The Accounts," accounts bearing the "Abraham & Straus" and "Jordan
Marsh" tradenames have been closed or converted into accounts bearing the
"Macy's" tradename. As a result of the foregoing matters and various
other factors, the historical performance of the Federated Portfolio may
not be comparable to or indicative of the current or future performance
of the Federated Portfolio.
DEPENDENCE ON CERTAIN AFFILIATES OF THE TRANSFEROR
The Federated Cards currently can be used to purchase merchandise
and services only from department stores and a mail-order catalog
business operated by the Federated Subsidiaries. The Federated
Subsidiaries, including Broadway, currently operate such stores and
catalog business under the names "Bloomingdale's," "Bloomingdale's By
Mail," "Burdines," "Goldsmith's," "Lazarus," "Rich's," "Stern's," "The
Bon Marche," and, in the case of certain stores formerly operated under
other nameplates, "Macy's." See "Federated's Credit Card Business" and
"The Accounts." Accordingly, although cards issued by FDS under the
"Macy's" name are accepted by all Macy's stores (including Macy's stores
that are not Federated Stores), the Trust is almost entirely dependent
upon the Federated Stores and Bloomingdale's By Mail for the generation
of Receivables. The retailing industry, in general, and the department
store business, in particular, are and will continue to be intensely
competitive. The Federated Stores and Bloomingdale's By Mail will face
increasing competition not only with other department stores in the
geographic areas in which they operate, but also with numerous other
types of retail formats, including specialty stores, general merchandise
stores, off-price and discount stores, new and established forms of home
shopping (including mail order catalogs, television, and computer
services), and manufacturer outlets. Moreover, the Pooling and Servicing
Agreement does not prohibit Federated from transferring all or any
portion of the business or assets of the Federated Subsidiaries.
Accordingly, there can be no assurance that the Federated Subsidiaries
will continue to generate Receivables at the same rate as in prior years.
The competitors of the Federated Stores and Bloomingdale's By Mail
include department stores operated by subsidiaries of Federated under the
name "Macy's" and specialty stores operated by subsidiaries of Federated
under the names "Aeropostale" and "Charter Club." Pursuant to a
proprietary credit card program established prior to Federated's
acquisition of Macy's in December 1994, a third-party financial
institution owns and establishes most of the revolving credit card
accounts of customers of such stores. To the extent that Federated may
from time to time deem it desirable to cause the stores or businesses
included in or conducted through the Federated Stores and Bloomingdale's
By Mail to be operated under such other names, the receivables generated
in the revolving credit card accounts of the customers of such stores or
businesses may no longer be available for purchase by the Transferor and
transfer to the Trust. Similar consequences could result from such stores
or businesses being sold to third parties. The Transferor has been
advised by Federated that decisions with respect to the foregoing and
other aspects of Federated's business operations will be based upon the
best interests of Federated and its stockholders from time to time, which
interests may differ from those of the Offered Certificate Owners.
USE OF OTHER CREDIT CARDS
The Federated Stores and Bloomingdale's By Mail accept, in addition
to the Federated Cards, other cards, including American Express charge
cards, MasterCard and Visa credit cards, and, in the case of former
Broadway, Emporium, Weinstocks, Abraham & Straus, and Jordan Marsh stores
currently operated under the "Macy's" nameplate, Macy's cards issued by a
third-party financial institution. Accordingly, not all credit sales of
merchandise and services by the Federated Stores and Bloomingdale's By
Mail generate Receivables. See "Federated's Credit Card
Business--Creation of Account Balances" and "The Accounts." There can be
no assurance that the Federated Cards will continue to maintain their
historic percentage of retail sales against competition from such other
credit and charge cards.
SOCIAL, LEGAL, AND ECONOMIC FACTORS
Changes in card use and payment patterns by cardholders may result
from a variety of social, legal, and economic factors. The Transferor,
however, is unable to determine and has no basis to predict whether, or
to what extent, social, legal, or economic factors will affect future
card use or repayment patterns.
POSSIBLE CHANGES TO THE TERMS OF THE RECEIVABLES
Pursuant to the Purchase Agreement, the Originators do not transfer
the Accounts to the Transferor, but only the Receivables arising in the
Accounts. Pursuant to the Pooling and Servicing Agreement, the Transferor
does not transfer the Accounts to the Trust, but only such Receivables.
The Originators have the right to determine the monthly periodic finance
charges and other fees that will be applicable from time to time to the
Accounts, to alter the minimum monthly payment required on the Accounts,
and to change various other terms with respect to the Accounts. Among
other factors, competitive conditions in the retailing and consumer
credit card industries could cause the Originators to consider from time
to time reducing periodic finance charges and other fees or changing
other terms with respect to the Accounts. A decrease in the monthly
periodic finance charge and other fees would decrease the effective yield
on the Accounts and could result in the occurrence of a Pay Out Event and
the commencement of the Early Amortization Period. Under the Purchase
Agreement, any Originator may change the terms of the contracts relating
to the Accounts or its policies and procedures with respect to the
servicing thereof (including without limitation the reduction of the
required minimum monthly payment and the calculation of the amount or the
timing of finance charges, fees and charge-offs), if such change would
not, in the reasonable belief of such Originator, cause a Pay Out Event
to occur and (i) if such Originator owns a comparable segment of credit
card accounts, such change is made applicable to the comparable segment
of the revolving credit card accounts owned by such Originator, if any,
which have characteristics the same as, or substantially similar to, the
Accounts that are the subject of such change and (ii) if such Originator
does not own such a comparable segment, it will not make any such change
with the intent to materially benefit such Originator over the
Certificateholders, except as otherwise restricted by an endorsement,
sponsorship, or other agreement between such Originator and an unrelated
third party or by the terms of the Charge Account Agreements. There can
be no assurance that changes in applicable law, changes in the
marketplace, or prudent business practice might not result in a
determination by any Originator to take actions which would change the
terms of the Accounts.
CHANGES IN DISCOUNT FACTOR
During the continuance of a Discount Trigger Event (which will not
occur without the consent of the Rating Agencies) with respect to Series
1997-1, certain collections allocable to Series 1997-1 which would
otherwise have been treated as Principal Collections will be subtracted
from Principal Collections to determine Net Principal Collections and
will be added to Finance Charge Collections to determine Total Finance
Charge Collections. Any increase in the Discount Factor would result in
the allocation to Series 1997-1 of a higher yield on the Receivables
originated under the Accounts and a slower payment rate of Net Principal
Collections than otherwise would occur. Conversely, any decrease in the
Discount Factor would result in the allocation to Series 1997-1 of a
lower yield on such Receivables and a faster payment rate of Net
Principal Collections than otherwise would occur. The Discount Factor
will change from month to month as a result of changes in the Base Rate
for any Series, the Net Finance Charge Portfolio Yield for any Series, or
the Annual Portfolio Turnover Rate.
CONSUMER AND DEBTOR PROTECTION LAWS
The Accounts and the Receivables are subject to numerous federal
and state consumer protection laws which impose requirements on the
making and collection of consumer loans. Such laws, as well as any new
laws or rulings which may be adopted, may adversely affect the Servicer's
ability to collect on the Receivables or maintain previous levels of
finance charges, late fees, and other fees. Any failure by the Servicer
to comply with such legal requirements also could adversely affect the
Servicer's ability to collect on the Receivables. Although the Transferor
has made certain representations and warranties relating to the validity
and enforceability of the Accounts and the Receivables, the Trustee has
not made and will not make any examination of the Receivables or the
records relating thereto for the purpose of establishing the presence or
absence of defects or compliance with such representations and
warranties, or for any other purpose. In the event of a breach of certain
representations and warranties, the Transferor may be obligated to accept
the reassignment and transfer of all Receivables in the Accounts. See
"Description of the Offered Certificates--Representations and Warranties"
and "Certain Legal Aspects of the Receivables--Consumer and Debtor
Protection Laws."
Application of federal and state bankruptcy and debtor relief laws
to the obligations represented by the Receivables could adversely affect
the interests of the Class A Certificateholders and Class B
Certificateholders in the Receivables, if such laws result in any
Receivables being written off as uncollectible. See "Description of the
Offered Certificates--Defaulted Receivables; Rebates and Fraudulent
Charges."
Congress and state legislatures from time to time consider
legislation that would limit the finance charges and fees that may be
charged on credit card accounts or that would otherwise further regulate
the credit card industry. The potential effect of any legislation which
limits the amount of finance charges or fees that may be charged on
credit card balances could be to reduce the Portfolio Yield on the
Accounts. If the Portfolio Yield were reduced, a Pay Out Event with
respect to a Series could occur. See "Description of the Offered
Certificates -- Pay Out Events." There can be no assurance as to whether
any federal or state legislation will be enacted that would impose
additional limitations on the monthly periodic finance charges or fees
relating to the Accounts.
REINVESTMENT RISK; PAYMENTS AND MATURITY
The Receivables may be paid at any time and there is no assurance
that there will be additional Receivables created in the Accounts (or
that new Accounts will be created) or that any particular pattern of
cardholder repayments will occur. The commencement and continuation of
the Accumulation Period and the collection of the Controlled Amortization
Amount with respect to the Class A Certificates, and the occurrence of
the Class B Principal Payment Commencement Date, will be dependent upon
the continued generation of new Receivables to be conveyed to the Trust.
A significant decline in the amount of Receivables generated could result
in the occurrence of a Pay Out Event and the commencement of the Early
Amortization Period. In addition, changes in periodic finance charges can
alter cardholder monthly payment rates. A significant decrease in the
cardholder monthly payment rate could slow the return of principal during
the Early Amortization Period, the collection of the Controlled
Amortization Amount with respect to the Class A Certificates during the
Accumulation Period, or the occurrence of the Class B Principal Payment
Commencement Date. See "Maturity Assumptions." See "Description of the
Offered Certificates--Pay Out Events" for a discussion of other Pay Out
Events. If a Pay Out Event occurs, the Early Amortization Period will
commence and the average life and maturity of the Offered Certificates
may be significantly reduced. There can be no assurance in that event
that the Class A Certificateholders and the Class B Certificateholders
would be able to reinvest any accelerated distributions on account of
such Offered Certificates in other suitable investments having a
comparable yield.
EFFECT OF SUBORDINATION OF CLASS B CERTIFICATES; PRINCIPAL PAYMENTS
The Class B Certificates will be subordinated in right of payment
of principal to the Class A Certificates. Payments of principal in
respect of the Class B Certificates will not commence until after the
final principal payment with respect to the Class A Certificates has been
made and the Class A Invested Amount has been paid in full. Moreover, the
Class B Invested Amount is subject to reduction on any Determination Date
if (i) the Class A Required Amount or the Class B Required Amount, if
any, cannot be fully funded through Reallocated Principal Collections
assessed solely against the Class C Invested Amount or (ii) the aggregate
Investor Default Amount, if any, for each business day in the preceding
Monthly Period exceeds the aggregate Available Series Finance Charge
Collections applied to the payment thereof and is not funded from Excess
Finance Charge Collections, Transferor Finance Charge Collections, or
Reallocated Principal Collections and is not assessed solely against the
Class C Invested Amount or, on and after the Class B Principal Payment
Commencement Date, the Transferor Interest to the extent of the
Transferor Subordination Amount. If the Class B Invested Amount suffers
such a reduction, collections of Finance Charge Receivables allocable to
the Class B Certificateholders' Interest in future Monthly Periods will
be reduced. Moreover, to the extent the amount of such reduction in the
Class B Invested Amount is not reimbursed, the amount of principal
distributable to the Class B Certificateholders will be reduced. See
"Description of the Offered Certificates--Subordination of the Class B
Certificates," "--Allocation Percentages," "--Reallocated Principal
Collections," "--Application of Collections," and "--Investor
Charge-Offs."
CONTROL
Subject to certain exceptions, the investor certificateholders of
each Series may take certain actions, or direct certain actions to be
taken, under the Pooling and Servicing Agreement or the related
Supplement. In determining whether the required percentage of
certificateholders have given their approval or consent, except as
otherwise specified, the Class A Certificateholders and the Class B
Certificateholders will be treated as a single Series. So long as the
Class C Certificates are retained by the Transferor or an affiliate of
the Transferor, the interest represented by the Class C Certificates will
be disregarded in the giving of any request, demand, authorization,
direction, notice, consent, or waiver under the Pooling and Servicing
Agreement. As a result of the greater aggregate principal amount of the
Class A Certificates, the Class A Certificateholders will have the power
to determine whether any such action is taken without regard to the
position or interests of the Class B Certificateholders relating to such
action. The Class B Certificateholders will not have similar power. In
order to make such determinations, the Class B Certificateholders will
need the approval or consent of Class A Certificateholders owning a
substantial portion of the Class A Certificateholders' Interest. However,
under certain circumstances the consent or approval of a specified
percentage of the aggregate invested amount of all Series outstanding or
of the invested amount of each class of each Series will be required to
direct certain actions, including requiring the appointment of a
successor Servicer following a Servicer Default, amending the Pooling and
Servicing Agreement in certain circumstances, and directing a repurchase
of all outstanding Series upon the breach of certain representations and
warranties by the Transferor.
MASTER TRUST CONSIDERATIONS
The Trust, as a master trust, in addition to Series 1997-1, has
issued other Series (see "Annex I: Other Series") and may issue
additional Series from time to time in the future. While the Principal
Terms of any additional Series will be specified in a Supplement, the
provisions of such Supplement and, therefore, the terms of any additional
Series, are not subject to the prior review or consent of holders of the
certificates of any previously issued Series. Such Principal Terms may
include methods for determining applicable investor percentages and
allocating collections, whether such new Series will be paired with an
existing Series, provisions creating security or Enhancements, different
classes of certificates (including subordinated classes of certificates),
provisions subordinating such Series to another Series (if the Supplement
relating to such Series so permits) or another Series to such Series (if
the Supplement for such other Series so permits), and any other amendment
or supplement to the Pooling and Servicing Agreement which is made
applicable only to such Series. See "Description of the Offered
Certificates--Exchanges" and "--Paired Series." In addition, the
provisions of any Supplement may give the holders of the certificates
issued pursuant thereto consent, approval, or other rights that could
result in such holders having the power to cause the Transferor, the
Servicer, or the Trustee to take or refrain from taking certain actions,
including without limitation actions with respect to the exercise of
certain rights and remedies under the Pooling and Servicing Agreement,
without regard to the position or interest of the certificateholders of
any other Series. Similar rights may also be given to the provider of any
Enhancement for any Series. It is a condition precedent to issuance of
any additional Series that each Rating Agency that has rated any
outstanding Series deliver written confirmation to the Trustee that the
Exchange will not result in such Rating Agency reducing or withdrawing
its rating on any outstanding Series. There can be no assurance, however,
that the Principal Terms of any other Series, including any Series
previously issued or issued from time to time hereafter, might not have
an adverse impact on the timing and amount of payments received by a
Certificateholder or the value of Certificates even if there is no change
in the rating of any outstanding Series. See "Description of the Offered
Certificates--Exchanges" and "Annex I: Other Series."
CERTIFICATE RATING
It is a condition to the issuance of the Class A Certificates that
they have an initial rating of "AAA" or its equivalent from each Rating
Agency. It is a condition to the issuance of the Class B Certificates
that they have an initial rating of "A" or its equivalent from each
Rating Agency. The Rating Agencies do not evaluate, and the ratings of
the Offered Certificates do not address, the likelihood that the
principal of the Class A Certificates will be paid by the Class A
Expected Final Payment Date or that the principal of the Class B
Certificates will be paid by the Class B Expected Final Payment Date. The
Class C Certificates initially will not be rated. The ratings are not a
recommendation to purchase, hold, or sell the Class A Certificates or the
Class B Certificates, inasmuch as such ratings do not comment as to the
market price or suitability for a particular investor. There can be no
assurance that the ratings will remain in effect for any given period of
time or that either rating will not be lowered or withdrawn by either
Rating Agency if in its judgment circumstances so warrant.
BOOK-ENTRY REGISTRATION
The Offered Certificates initially will be represented by one or
more Certificates registered in the name of Cede, the nominee for DTC,
and will not be registered in the names of the Class A Certificate Owners
or the Class B Certificate Owners or their nominees. Unless and until
Definitive Certificates are issued, Class A Certificate Owners and Class
B Certificate Owners will not be recognized by the Trustee as
Certificateholders, as that term is used in the Pooling and Servicing
Agreement. Hence, until such time, Class A Certificate Owners and Class B
Certificate Owners will be able to exercise the rights of
Certificateholders only indirectly through DTC and its participating
organizations. In addition, the holders of beneficial interests in the
Class A Certificates and the Class B Certificates may experience delays
between distributions of interest and principal to the record holder of
such Certificates and the redistribution of such amounts to the holders
of such beneficial interests. See "Description of the Offered
Certificates--Book-Entry Registration" and "--Definitive Certificates."
REPORTS TO CERTIFICATEHOLDERS
Unless and until Definitive Certificates are issued, monthly and
annual reports, containing information concerning the Trust and prepared
by the Servicer, will be sent on behalf of the Trust to Cede, as nominee
for DTC and the registered holder of the Offered Certificates. Such
reports will not constitute financial statements prepared in accordance
with generally accepted accounting principles and will not be sent by the
Servicer or the Trustee to the Class A Certificate Owners and Class B
Certificate Owners. See "Description of the Offered
Certificates--Book-Entry Registration," "--Definitive Certificates," and
"--Reports to Certificateholders."
PRE-FUNDING ACCOUNT AND THE FUNDING PERIOD
During the Funding Period, Series 1997-1 will be paired with Series
1992-1. As principal is paid or deposited in the Series 1992-1 Principal
Funding Account, an equal amount of funds on deposit in the Pre-Funding
Account will be released (which funds will be distributed to the
Transferor) and the Invested Amount of Series 1997-1 will increase by a
corresponding amount. It is anticipated that principal of the Series
1992-1 Certificates will be accumulated commencing with the September
1997 Monthly Period in an amount sufficient to increase the Invested
Amount of Series 1997-1 to the Full Invested Amount prior to the end of
December 1997 Monthly Period; however, there can be no assurance that a
sufficient amount of Principal Collections will be available for such
purpose. Should a Pay Out Event occur during the Funding Period, the
amounts remaining on deposit in the Pre-Funding Account will be payable
as principal first to the Class A Certificateholders until the sum of the
Class A Invested Amount and the Class A Pre-Funded Amount is paid in full
and then to the Class B Certificateholders until the sum of the Class B
Invested Amount and the Class B Pre-Funded Amount is paid in full. In the
absence of a Pay Out Event, the amount remaining on deposit in the
Pre-Funding Account at the end of the Funding Period will be withdrawn
and distributed on the next succeeding Distribution Date to the Class A
Certificateholders and the Class B Certificateholders pro rata based on
the Class A Invested Amount and the Class B Invested Amount. See
"Description of the Offered Certificates--Paired Series" and
"--Pre-Funding Account."
THE TRUST
The Trust was formed, in accordance with the laws of the State of
New York, pursuant to the Pooling and Servicing Agreement. The Trust was
formed for the transactions relating to the issuance of Series 1992-1,
Series 1992-2, Series 1992-3, Series 1995-1, Series 1996-1, the
transaction described herein, and similar transactions, as contemplated
by the Pooling and Servicing Agreement, and prior to formation had no
assets or obligations. See "Annex I: Other Series." The Trust will not
engage in any business activity, other than as described herein, but
rather will only acquire and hold the Receivables, issue (or cause to be
issued) the Certificates, the Exchangeable Transferor Certificate, and
certificates representing additional Series and related activities
(including, with respect to any Series, entering into any Enhancement and
Enhancement agreement relating thereto) and make payments thereon. As a
consequence, the Trust is not expected to have any need for additional
capital resources.
FEDERATED'S CREDIT CARD BUSINESS
GENERAL
FDS is a federally chartered credit card bank and an indirect
wholly owned subsidiary of Federated. Following its formation in
September 1993, FDS was added as a party to the Purchase Agreement and
Federated caused substantially all of the then-existing Accounts (other
than the Broadway Accounts) to be transferred from the other Federated
Subsidiaries to FDS. Although substantially all of the Accounts (other
than the Broadway Accounts) established subsequent to such transfer have
been established by FDS, the other Federated Subsidiaries remain parties
to the Purchase Agreement and may from time to time establish Accounts
and sell Receivables to the Transferor pursuant thereto. In February
1996, FDS began establishing and continues to establish the FDS/Broadway
Accounts for qualified applicants who were or become customers of the
department stores operated by Broadway following the conversion of such
stores to other Federated nameplates. In May 1996, Broadway was added as
a party to the Purchase Agreement and, concurrently therewith, the
receivables then outstanding under the Broadway Accounts and the
FDS/Broadway Accounts were transferred to the Transferor for inclusion in
the Trust. Substantially all of the Broadway Accounts were transferred to
FDS during fiscal 1996 and, following such transfer, the terms thereof
were conformed to the terms of the Accounts established by FDS. See "Risk
Factors--Effects of Certain Transactions."
Pursuant to the Purchase Agreement, the Originators sell
Receivables to the Transferor; those Receivables are, upon purchase by
the Transferor, automatically transferred to the Trust pursuant to the
Pooling and Servicing Agreement. The Accounts under which the Receivables
arise are created by the respective Originators (currently FDS in
substantially all cases except in respect of the Broadway Accounts) and
enable the holders of the credit cards issued by the Originators under
department store tradenames (the "Federated Cards") to purchase virtually
all of the various types of merchandise and services offered by the
Federated Stores. Cards bearing the Bloomingdale's tradename may be used
to purchase merchandise from Bloomingdale's By Mail, Federated's
nationwide catalog business, and cards bearing the Goldsmith's or Rich's
tradename may be used to purchase merchandise at both Goldsmith's and
Rich's stores. Although subject to change, all other Federated Cards may
be used only to make purchases at stores bearing the same nameplate as
the tradename on the card.
Financial and Credit Services Group ("FACS"), a subsidiary of
Federated located in Mason, Ohio, Tampa, Florida, and Tempe, Arizona,
monitors credit policies and provides credit services for FDS pursuant to
a servicing agreement. These services currently include credit
authorizations, new account development and processing, customer service,
collections, statement processing and mailing, and remittance processing.
FACS may from time to time subcontract with other parties for the
performance of such functions by such other parties.
In addition to the Federated Stores (which include a limited number
of Macy's stores which were formerly operated under other nameplates) and
Bloomingdale's By Mail, subsidiaries of Federated currently operate other
department stores under the name "Macy's" and specialty stores under the
names "Aeropostale" and "Charter Club." Pursuant to a proprietary credit
card program (the "Macy's Credit Card Program") established by Macy's
prior to Federated's acquisition of Macy's in December 1994, a
third-party financial institution owns and establishes most of the
revolving credit card accounts of customers of such other stores. Such
third-party financial institution also owns the revolving credit card
accounts of customers of certain former Broadway, Emporium, Weinstocks,
Abraham & Straus, and Jordan Marsh stores that also held credit cards
bearing the "Macy's" tradename prior to the conversion of such stores to
Macy's stores. See "The Accounts." The initial term of the Macy's Credit
Card Program expires in 2006, and is subject to automatic one-year
renewal periods and certain termination rights. The receivables arising
in accounts subject to the Macy's Credit Card Program are not (and,
absent modifications to such program, will not be) purchased by the
Transferor or transferred to the Trust.
NEW ACCOUNT UNDERWRITING
New accounts have been, and are anticipated to be, generated both
by account applications made at the stores currently operated by the
Originators under the names "Bloomingdale's," "Burdines," "Goldsmith's,"
"Lazarus," "Rich's," "Stern's," "The Bon Marche," and, in the case of
certain stores formerly operated under other nameplates, "Macy's"
(collectively, the "Federated Stores"), and as a result of direct mail
solicitations on a preapproved credit basis to a prescreened group of
individuals based on information obtained from credit services and other
entities in the business of selling customer lists. See "The Accounts."
At the present time, FDS does not use non-prescreened or "blind" mailings
to solicit new accounts. Before an account is opened in response to an
unsolicited application, the prospective cardholder's application is
reviewed for completeness and creditworthiness. A credit report issued by
an independent credit reporting agency is generally obtained. In the case
of prescreened mailings, consumer credit records are reviewed by the
credit reporting agency maintaining such records to identify the
individuals that meet the standards for receiving a preapproved account
solicitation.
Prospective cardholders, whether unsolicited or preapproved,
generally are evaluated through the use of computerized credit scoring
systems. These systems assign point values to the credit bureau
information of potential preapproved solicitation recipients or the
application information and credit bureau records of unsolicited
applicants. Point values, in turn, are based on statistical analyses of
empirical data concerning the performance of sample populations of
applicants in various geographic regions served by the Originators. The
total of the values obtained for a prospective cardholder determines both
the decision whether to offer or open an account and the initial credit
guideline. FDS has also found that it can open accounts for applicants
for whom no credit service information is available at a level of risk
deemed acceptable by FDS by independently verifying the information
contained in the application and establishing low initial credit
guidelines. FDS may change its credit evaluation policies or screening
methods at any time.
Each cardholder is subject to an agreement governing the terms and
conditions of such cardholder's account. Pursuant to each such agreement,
FDS reserves the right, subject to applicable law, to change or terminate
any terms, conditions, services, or features of the related account
(including increasing or decreasing finance charges, other charges, or
minimum payments). Credit guidelines are maintained by FDS and are
revised upward or downward based on changes in credit scoring formulas
and on cardholders' purchase and payment histories. Each charge to an
account is entered and approved at the time the charge is made through
direct communication with the central processing system maintained by
FACS for the purpose of monitoring credit guidelines and possible
fraudulent activity.
CREATION OF ACCOUNT BALANCES
Account balances are created through the use of the Federated Cards
to charge purchases of merchandise and services from the Federated Stores
and Bloomingdale's By Mail, and ancillary services such as credit life
insurance and travel services. Consequently, the Trust will depend on the
continued ability of the Federated Stores and Bloomingdale's By Mail to
generate credit sales. See "Risk Factors--Dependence on Certain
Affiliates of the Transferor." In addition, because the Federated Stores
and Bloomingdale's By Mail accept, in addition to the Federated Cards,
other cards, including American Express charge cards and MasterCard and
Visa credit cards (and, in the case of Federated Stores operated under
the "Macy's" nameplate, Macy's cards issued by a third-party financial
institution), the Trust also will depend upon decisions of customers
purchasing merchandise and services to use the Federated Cards rather
than such other cards or cash. See "Risk Factors--Use of Other Credit
Cards."
Federated Cards may be used to make both major purchase plan
charges and regular plan charges. Major purchase plan charges are charges
of certain categories of merchandise, including furniture and fine
jewelry, generally over $100 per purchase. Regular plan charges consist
of all other charges except for charges to a small number of accounts
opened under a discontinued credit program under which the entire
outstanding balance is due monthly.
The regular plan payment schedule is the greater of $5.00 or 5% of
the new balance rounded up to the next whole dollar amount, not to exceed
the entire new balance.
The following payments schedule is typical for major purchase plan
charges under the Accounts:
MAJOR PURCHASE PLAN CHARGES
HIGHEST NEW BALANCE MINIMUM PAYMENT
------------------- ---------------
$ 0.01 - $ 4.99 New Balance
$ 5.00 - $ 200.00 $ 5.00
$ 200.01 - $ 320.00 $ 5.00 plus $0.50 for each $20.00 increment
or portion thereof over $200.01
$ 320.01 - $ 360.00 $ 9.00
$ 360.01 - $ 400.00 $10.00
$ 400.01 - $ 440.00 $11.00
$ 440.01 - $ 480.00 $12.00
$ 480.01 - $ 520.00 $13.00
$ 520.01 - $ 560.00 $14.00
$ 560.01 - $ 600.00 $15.00
$ 600.01 and over $16.00 plus $2.50 for each $100.00 increment
or portion thereof over $600.01
From time to time, FDS offers promotional incentives to solicit new
accounts and to encourage the use of previously issued Federated Cards,
including the waiver of finance charges for a specified initial period
(typically ranging from three to twelve months) on major purchase plan
charges made during the course of the promotion.
Balances due with respect to both regular plan charges and major
purchase plan charges are and will be included in the Receivables.
Federated may change the terms applicable to, or may eliminate, either
category of charges at any time.
REVENUE AND YIELD EXPERIENCE
The following table shows average receivables outstanding, finance
charges and other fees billed, and the yield therefrom for the portfolio
of accounts owned by the Originators, including Broadway (the "Federated
Portfolio"), for each of the periods shown. The fiscal year of the
current Federated Subsidiaries ends on the Saturday nearest January 31.
REVENUE AND YIELD EXPERIENCE FOR THE FEDERATED PORTFOLIO
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
26 WEEKS FISCAL YEAR ENDED
--------------------------- --------------------------------------------
ENDED AUGUST ENDED AUGUST FEBRUARY 3, JANUARY 28,
2, 1997 3, 1996 FEBRUARY 1, 1997 1996 1995
------------ ------------ ---------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Average Receivables
Outstanding(1)........... $2,473,816 $2,650,114 $2,381,081
Finance Charges and
Fees Billed(2)........... 593,205 587,869 521,884
Yield from Finance
Charges and Fees(3)...... 23.98% 22.18% 21.92%
</TABLE>
- ----------------------
(1) Average Receivables Outstanding is the arithmetic average of
receivables outstanding at the beginning of each fiscal month
during the period indicated.
(2) Finance Charges and Fees Billed are based on beginning of the
month balances.
(3) Yield from Finance Charges and Fees is the result of dividing
Finance Charges and Fees Billed by Average Receivables Outstanding.
Revenue figures are calculated on an as-billed basis and represent
amounts billed to obligors before deductions for charge-offs, reductions
due to fraud, returned goods, consumer disputes, or other expenses. The
revenue figures in the foregoing table are presented on a sum of cycles
basis pursuant to which each billing cycle is included once in each
fiscal month, regardless of the length of the fiscal month.
At its inception, and upon acquiring substantially all of the
Accounts from the other Originators, FDS established terms for its
various credit card programs which differed from those of the other
Originators and which had a significant effect on the yield of the
Federated Portfolio. The principal differences included (i) the
assessment of late fees of up to $15.00 per month on past due accounts
and (ii) a reduction in the amount of minimum required payments. As a
result of these factors and others, the revenue and yield information set
forth above is not necessarily comparable from period to period. The
terms of the Broadway Accounts were conformed to the terms established by
FDS following the transfer thereof to FDS during fiscal 1996. Although
such changes to the terms of the Broadway Accounts have resulted in an
increase in the fees billed in respect of the Broadway Accounts, they
also have had the effect of increasing charge-offs in respect of such
fees. See "Risk Factors--Effects of Certain Transactions."
Cash collections on the Receivables may not reflect the historical
experience shown in the table. See "Risk Factors--Effects of Certain
Transactions." During periods of increasing delinquencies, billings of
monthly finance charges and fees may exceed cash receipts as amounts
collected on credit card receivables lag behind amounts billed to
obligors. Conversely, as delinquencies decrease, cash receipts may exceed
billings of monthly finance charges and fees as amounts collected in a
current period may include amounts billed during prior periods. However,
the Transferor believes that during the periods shown, revenues on an
as-billed basis closely approximated revenues on a cash basis. Revenues
from monthly finance charges and fees on both an as-billed and a cash
basis will be affected by numerous factors, including the monthly finance
charges and fees on principal receivables, the fluctuation of the
principal receivables portfolio, the amount of other fees paid by
obligors, the percentage of obligors who pay off their balances in full
each month and do not incur monthly finance charges on purchases,
promotional programs at the Federated Stores and Bloomingdale's By Mail,
and changes in the delinquency rate on the Receivables. Revenue from
monthly finance charges and fees also varies somewhat within a fiscal
year due to the seasonal nature of the Federated Subsidiaries'
businesses.
LOSS AND DELINQUENCY EXPERIENCE
All of the Receivables in a particular Account are considered to
become delinquent immediately upon the failure of any payment due thereon
to be made in full on or prior to the date due. Efforts to collect
delinquent credit card receivables are made by FACS personnel and
collection agencies and attorneys retained by FACS. Under current
procedures, FACS automatically prints a statement message on all customer
statements after a scheduled payment has been missed. If payment has not
been made 14 days after the billing date, a reminder letter is sent to
the cardholder. If payment still has not been received by the next
billing date, the account is eligible for assignment to a FACS collector,
who may send additional letters and initiate telephone contact with the
cardholder in an effort to make payment arrangements. The current policy
of the Originators is generally to recognize losses no later than the
eighth month of delinquency (or, in the case of certain major purchase
plan accounts, no later than the ninth month of delinquency), although
charge-offs may be made earlier in certain circumstances. The charge-off
policies and collection practices with respect to the Broadway Accounts
were conformed to those of the other Originators in February 1996. The
Originators may change their charge-off policies and collection practices
at any time in accordance with their business judgment and applicable
law. Under the terms of the Pooling and Servicing Agreement, any
Recoveries received in respect of Receivables in charged-off Accounts,
net of the estimated expenses of collection, will be paid to the Trust.
The following table sets forth the loss experience with respect to
payments by cardholders for each of the periods shown for the Federated
Portfolio. Because losses are affected by a number of factors, including
competitive and general economic conditions and consumer debt levels,
there can be no assurance that the loss experience for the Receivables in
the future will be similar to the historical experience set forth below.
See "Risk Factors--Effects of Certain Transactions."
LOSS EXPERIENCE FOR THE FEDERATED PORTFOLIO
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
26 WEEKS ENDED FISCAL YEAR ENDED
---------------------- ----------------------------------------------
AUGUST 2, AUGUST 3, FEBRUARY 3, JANUARY 28,
1997 1996 FEBRUARY 1, 1997 1996 1995
--------- --------- ---------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Average Receivables
Outstanding(1)............ $2,473,816 $2,650,114 $2,381,081
Net Charge-offs(2).......... 200,033 152,538 95,916
Net Charge-offs as a
Percentage of Average
Receivables Outstanding... 8.09% 5.76% 4.03%
</TABLE>
(1) Average Receivables Outstanding is the arithmetic average of
receivables outstanding as of the beginning of each fiscal month
during the period indicated.
(2) Net Charge-offs are the sum of merchandise, finance charge, and
late fee charge-offs minus recoveries, and do not include the
amount of any reductions in Average Receivables Outstanding due to
fraud or customer disputes.
The following table sets forth the delinquency experience with
respect to payments by cardholders that were more than 29 days past due
for each of the periods shown for the Federated Portfolio. Because
delinquencies are affected by a number of factors, including competitive
and general economic conditions and consumer debt levels, there can be no
assurance that the delinquency experience for the Receivables in the
future will be similar to the historical experience set forth below. See
"Risk Factors--Effects of Certain Transactions."
AVERAGE DELINQUENCIES FOR THE FEDERATED PORTFOLIO
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
AVERAGE OF 26
WEEKS ENDED AVERAGE OF FISCAL YEAR ENDED
-------------------- ------------------------------------------------------------------------
AUGUST 2 AUGUST 3 FEBRUARY 1, 1997 FEBRUARY 3, 1996 JANUARY 28, 1995
1997 1996 ---------------- ---------------- ----------------
-------- -------- AMOUNT PERCENTAGE(1) AMOUNT PERCENTAGE(1) AMOUNT PERCENTAGE(1)
------ ------------- ------ ------------- ------ -------------
<S> <C> <C> <C> <C> <C> <C>
Retail Age 2
(30-59 days
past due)......... $86,394 3.55% $98,648 3.55% $80,225 2.95%
Retail Age 3
(60-89 days
past due)......... 40,854 1.68 38,760 1.39 28,498 1.05
Retail Age 4
and higher
(90 days or more
past due)......... 85,045 3.49 80,872 2.91 47,573 1.75
------ ---- ------ ---- ------ ----
Total....... $212,293 8.72% $218,280 7.85% $156,296 5.75%
======== ===== ======== ===== ======== =====
</TABLE>
(1) The percentages are the quotients obtained by dividing the
delinquent Amount by Average Receivables Outstanding as of the
billing date for each billing cycle during the applicable period.
For purposes of this table, the Average Receivables Outstanding
balance includes closed accounts.
THE ACCOUNTS
The Accounts consist of substantially all of the Federated Card
accounts existing at the close of business on the Initial Cut-Off Date,
plus Federated Card accounts thereafter originated in accordance with the
Originators' credit and collection policies or acquired in connection
with certain business acquisitions. Because the Accounts include
substantially all of the Federated Card accounts, some of the accounts
are recently solicited, unseasoned accounts and the Receivables include
delinquent Receivables and may include obligations of cardholders who are
or are about to become bankrupt or insolvent, as well as Accounts already
charged off (although the Receivables in such charged-off Accounts are
considered to have a zero balance). Additional accounts originated in the
normal operation of the credit card business of the Originators are
generally added on a daily basis as Automatic Additional Accounts. In
addition, subject to the provisions of the Pooling and Servicing
Agreement, certain accounts relating to acquired businesses have been and
may in the future be added as Automatic Additional Accounts. See "Risk
Factors--Effects of Certain Transactions" and "Description of the Offered
Certificates--Automatic Addition of Accounts."
Federated acquired Broadway in October 1995 and has integrated
Broadway's businesses with the businesses of Federated's other
subsidiaries. Of the 82 department stores operated by Broadway at the
time of such acquisition under the names "Broadway," "Emporium," and
"Weinstocks," five have been converted to Bloomingdale's stores,
approximately 50 have been converted to Macy's stores, several are being
operated as clearance centers, and the remaining stores have been or are
expected to be sold or otherwise disposed of. Consequently, in February
1996, FDS began establishing and continues to establish the FDS/Broadway
Accounts for qualified applicants who were or become customers of the
department stores operated by Broadway following the conversion of such
stores to other Federated nameplates, and all of the Broadway Accounts
have been closed to further purchasing activity. In May 1996, Broadway
was added as a party to the Purchase Agreement and, concurrently
therewith, the receivables then outstanding under the FDS/Broadway
Accounts and the Broadway Accounts were transferred to the Transferor for
inclusion in the Trust. Substantially all of the Broadway Accounts were
transferred to FDS during fiscal 1996. In connection with the conversion
of certain Broadway, Emporium, and Weinstocks stores to Macy's stores,
the issuance by FDS of cards bearing the Macy's tradename to customers of
such stores and the closure of certain Broadway Accounts have been
effected on the same basis as described below with respect to the
conversion of A&S stores to Macy's stores.
In April 1995, the operations of Federated's Abraham & Straus
("A&S") and Jordan Marsh subsidiaries were consolidated with those of
Federated's Macy's East subsidiary, with nine A&S stores being converted
to Macy's stores, six A&S stores being converted to Stern's stores, and
the remaining A&S store being converted to a Bloomingdale's store. In
connection with such conversions, FDS issued cards bearing the "Macy's"
tradename to holders of Accounts in good standing bearing the "A&S"
tradename who did not already hold a Macy's card. All other Accounts
bearing the "A&S" tradename were closed to further purchasing activity.
Pursuant to an agreement with the third-party financial institution that
owns the Macy's Credit Card Program (the "Macy's Program Owner"), FDS
establishes new accounts for qualified applicants who are customers of
the former A&S stores that were converted to Macy's stores and issues
cards bearing the "Macy's" tradename to the holders of such new accounts.
Under certain circumstances, the Macy's Program Owner may become entitled
to establish such new accounts or, conversely, FDS may become entitled to
establish new accounts at other Macy's stores. During the first quarter
of 1996, all 16 Jordan Marsh stores were converted to Macy's stores. The
issuance by FDS of cards bearing the "Macy's" tradename to the holders of
certain Accounts, the closure by FDS of other Accounts, and the
establishment by FDS of new accounts for customers of the Jordan Marsh
stores so converted was effected on the same basis as described above
with respect to the conversion of A&S stores to Macy's stores (although a
substantially smaller percentage of Accounts were closed in connection
with the conversion of the Jordan Marsh stores due to the substantially
smaller percentage of Jordan Marsh customers who already held Macy's
cards). Further realignment of the operations, corporate structure,
and/or assets of Federated's subsidiaries may be effected from time to
time, and the names under which the stores or businesses included in or
conducted through the Federated Stores and Bloomingdale's By Mail are
operated may be changed from time to time. See "Risk Factors--Dependence
on Certain Affiliates of the Transferor." See "Federated, the Transferor,
and FDS--Federated" for additional information regarding the current
business operations of Federated and its subsidiaries.
The Receivables arising from the Accounts as of the Cut-Off Date
totaled $[ ]. As of the Cut-Off Date, the Accounts had an average credit
guideline of $[ ], and the percentage of the aggregate total Receivable
balance to the aggregate total credit guideline was approximately [ ]%.
As of the Cut-Off Date, approximately [ ]% of the Accounts had been
opened prior to _____________. Billing addresses for the Accounts include
50 states and the District of Columbia.
The following tables summarize the Federated Portfolio by various
criteria as of the Cut-Off Date. Because the composition of the Federated
Portfolio changes from time to time, these tables are not necessarily
indicative of the character of the Trust at any time after the Cut-Off
Date. See "Risk Factors--Effects of Certain Transactions," "The
Accounts," and "Description of the Offered Certificates--Automatic
Addition of Accounts" and "--Removal of Accounts."
COMPOSITION OF ACCOUNTS BY ACCOUNT BALANCE
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE
OF TOTAL OF TOTAL
NUMBER OF NUMBER OF RECEIVABLES RECEIVABLES
ACCOUNTS(1)(2) ACCOUNTS OUTSTANDING(2) OUTSTANDING
<S> <C> <C> <C> <C>
Credit Balance(3).........
No Balance(4).............
$ 0.01 to $ 500.00....
$ 500.01 to $1,000.00....
$1,000.01 to $2,000.00....
$2,000.01 to $3,000.00....
$3,000.01 to $4,000.00....
More than $4,000.00.......
Total...............
</TABLE>
(1) Inactive revolving accounts are purged after five years (two if
never used), and inactive installment accounts are purged after
three years (one if never used). Purging began in 1994.
(2) The figures for Number of Accounts and Receivables Outstanding are
compiled from data as of the last cycle billing date of each
Federated Subsidiary preceding the Cut-Off Date.
(3) Credit balances are a result of cardholder payments and credit
adjustments applied in excess of an Account's unpaid balance.
Accounts currently having a credit balance are included, as
Receivables may be generated with respect thereto in the future.
(4) Accounts currently having no balance are included, as Receivables
may be generated with respect thereto in the future.
COMPOSITION OF ACCOUNTS BY CREDIT GUIDELINE
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE
OF TOTAL OF TOTAL
NUMBER OF NUMBER OF RECEIVABLES RECEIVABLES
ACCOUNTS(1)(2) ACCOUNTS OUTSTANDING(2) OUTSTANDING
<S> <C> <C> <C> <C>
Under $500.00.............
$ 500.00 to $1,000.00....
$1,000.01 to $2,000.00....
$2,000.01 to $3,000.00....
$3,000.01 to $4,000.00....
$4,000.01 to $5,000.00....
$5,000.01 to $6,000.00....
More than $6,000.00.......
Total...............
</TABLE>
(1) Inactive revolving accounts are purged after five years (two if
never used), and inactive installment accounts are purged after
three years (one if never used). Purging began in 1994.
(2) The figures for Number of Accounts and Receivables Outstanding are
compiled from data as of the last cycle billing date of each
Federated Subsidiary preceding the Cut-Off Date.
COMPOSITION OF ACCOUNTS BY PAYMENT STATUS
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE
OF TOTAL OF TOTAL
NUMBER OF NUMBER OF RECEIVABLES RECEIVABLES
ACCOUNTS(1)(2) ACCOUNTS OUTSTANDING(2) OUTSTANDING
<S> <C> <C> <C> <C>
Current and Retail
Age 1(3)..................
Retail Age 2
(30-59 days past due)......
Retail Age 3
(60-89 days past due)......
Retail Age 4
(90-119 days past due).....
Retail Age 5
(120-149 days past due)....
Retail Age 6
(150-179 days past due)....
Retail Age 7 and higher
(180 or more days
past due).................
Total...............
</TABLE>
(1) Inactive revolving accounts are purged after five years (two if
never used), and inactive installment accounts are purged after
three years (one if never used). Purging began in 1994.
(2) The figures for Number of Accounts and Receivables Outstanding are
compiled from data as of each cycle billing date during the month
of March 1996 and exclude accounts with zero or credit balances.
(3) Includes both current accounts and accounts that are less than 30
days past due. Accounts that were 1-29 days past due constituted
____% of the Total Number of Accounts and the receivables therein
constituted ____% of the Total Receivables Outstanding.
COMPOSITION OF ACCOUNTS BY AGE
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE
OF TOTAL OF TOTAL
NUMBER OF NUMBER OF RECEIVABLES RECEIVABLES
ACCOUNTS(1)(2) ACCOUNTS OUTSTANDING(2) OUTSTANDING
<S> <C> <C> <C> <C>
Under 6 months............
6 months to 1 year........
1-2 years.................
2-3 years.................
3-4 years.................
4 years and older.........
Total...............
</TABLE>
(1) Inactive revolving accounts are purged after five years (two if
never used), and inactive installment accounts are purged after
three years (one if never used). Purging began in 1994.
(2) The figures for Number of Accounts and Receivables Outstanding are
compiled from data as of the last cycle billing date of each
Federated Subsidiary preceding the Cut-Off Date.
COMPOSITION OF ACCOUNTS BY GEOGRAPHIC DISTRIBUTION
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE
OF TOTAL CURRENT OF TOTAL
NUMBER OF NUMBER OF RECEIVABLES RECEIVABLES
ACCOUNTS(1) ACCOUNTS OUTSTANDING(2) OUTSTANDING
<S> <C> <C> <C> <C>
California................
Florida...................
New York..................
Washington................
Georgia...................
Ohio......................
Massachusetts.............
New Jersey................
Tennessee.................
Pennsylvania..............
Indiana...................
Kentucky..................
Alabama...................
Arizona...................
Idaho.....................
South Carolina............
Oregon....................
Rhode Island..............
Connecticut...............
New Mexico................
Texas.....................
Subtotal..................
Other.....................
Total..................
</TABLE>
(1) Inactive revolving accounts are purged after five years (two if
never used), and inactive installment accounts are purged after
three years (one if never used). Purging began in 1994.
BILLING AND PAYMENTS
The accounts are grouped into billing cycles for purposes of
administrative convenience for each Federated Subsidiary. Each billing
cycle has a separate monthly billing date (which may vary slightly from
month to month) at which time the activity in the related accounts during
the month ending on such billing date is processed and billed to
cardholders. New accounts are assigned to billing cycles in a manner
which is intended, for purposes of administrative convenience, to
equalize the number of accounts in the billing cycles.
Monthly billing statements are sent to holders of the Federated
Cards who have positive or negative balances. The billing statements
present the total amount due and show the allocation between principal,
current fees, current finance charges, and the minimum payment due.
Subject to applicable law, late fees and returned check fees are also
added to a cardholder's outstanding balance. No issuance, annual, over
credit limit, or transaction fees are currently charged to obligors on
the Accounts. FDS may change its billing practices, including the minimum
monthly payment amounts, at any time. See "Description of the Offered
Certificates--Collection and Other Servicing Procedures."
A monthly finance charge is assessed on the Accounts. The charge is
based on the average daily balance outstanding on an Account during a
monthly billing period and is calculated by multiplying the average daily
balance by the applicable finance charge rate. Current purchase
transactions are included in the average daily balance where permitted by
applicable law. Finance charges are assessed from date of purchase,
although a grace period is available to avoid the finance charge if the
account is paid in full. Payments by obligors generally are applied in
the following order (pursuant to applicable law): (i) to finance charges,
(ii) to other charges or fees, and (iii) to the unpaid principal balance
of purchases allocated first to the longest outstanding receivable. The
annual finance charge rate is 21.6% per annum, generally subject (where
permitted) to a minimum monthly charge of $0.50, except where a lower
rate is established by law and in those states in which a lower rate is
chosen by FDS in consultation with the applicable Federated Subsidiary
for competitive reasons. Under the terms of the account agreements
governing the Accounts, FDS may change its finance charge rates at any
time. There can be no assurance that finance charges, fees, and other
charges will remain at current levels in the future. See "Risk Factors--
Possible Changes to the Terms of the Receivables" and "Description of the
Offered Certificates--Collection and Other Servicing Procedures."
FEDERATED, THE TRANSFEROR, AND FDS
FEDERATED
General. Federated is one of the leading operators of full-line
department stores in the United States, with 411 department stores in 33
states as of February 1, 1997. As of February 1, 1997, Federated also
operated more than 150 specialty stores under the names "Aeropostale" and
"Charter Club," and a mail order catalog business under the name
"Bloomingdale's By Mail."
The following table sets forth certain information with respect to
each of Federated's retail operating divisions as of February 1, 1997:
<TABLE>
<CAPTION>
FISCAL GROSS
1996 SQUARE
NUMBER OF SALES FEET(1)
STORES (IN MILLIONS) (IN THOUSANDS)
--------- ------------- --------------
<S> <C> <C> <C>
Bloomingdale's........................ 21 $1,595.0(2) 5,578
The Bon Marche........................ 42 892.4 5,038
Burdines.............................. 48 1,333.4 7,942
Macy's East........................... 90 4,541.0 23,673
Macy's West/Bullock's................. 109 3,714.2 21,093
Rich's/Lazarus/Goldsmith's............ 76 2,105.5 14,780
Stern's............................... 25 880.7 4,915
Macy's Specialty...................... 153 166.8 561
--- ---------- -------
Total................................. 564 $15,229.0 83,580
=== ========= ======
</TABLE>
(1) Reflects total square footage of store locations, including office,
storage, service and other support space that is not dedicated to
direct merchandise sales, but excluding warehouses and distribution
terminals not located at store sites.
(2) Includes $136.7 million of sales of Federated's Bloomingdale's By
Mail subsidiary.
In general, each of Federated's retail operating divisions is a
separate subsidiary of Federated. However, (i) the Macy's West division
comprises three separate subsidiaries of Federated and (ii) the
consolidated Rich's/Lazarus division comprises three separate
subsidiaries of Federated. Further realignment of the operations,
corporate structure, and/or assets of Federated's subsidiaries may be
effected from time to time, and the names under which the stores or
businesses included in or conducted through the Federated Stores and
Bloomingdale's By Mail are operated may be changed from time to time. See
"Risk Factors--Dependence on Certain Affiliates of the Transferor."
Federated has advised the Transferor that Federated believes the
department store business will continue to consolidate, and that it
intends from time to time to consider the possible acquisition of
department store assets and companies. In the event any such acquisitions
are consummated, subject to compliance with the applicable provisions of
the Pooling and Servicing Agreement, the Transferor may (but will not be
obligated to) designate such accounts as Automatic Additional Accounts
and cause the receivables therein to be transferred to the Trust. See
"Description of the Offered Certificates--Automatic Addition of
Accounts."
THE TRANSFEROR
The Transferor was incorporated in Delaware on September 23, 1992,
and is an indirect wholly owned subsidiary of Federated. The Transferor
was organized for the limited purpose of purchasing the Receivables in
the Accounts and any Automatic Additional Accounts or Supplemental
Accounts from the Originators, forming trusts such as the Trust, and
transferring the Receivables to such trusts, causing such trusts to issue
securities from time to time of the type comprising the Series 1997-1
Certificates and certificates of other Series. The principal executive
offices of the Transferor are located at 9111 Duke Boulevard, Mason, Ohio
45040-8999. Its telephone number is (513) 573-2037.
FDS
FDS received its charter on September 8, 1993, and is an indirect
wholly owned subsidiary of Federated. Pursuant to an Assumption Agreement
dated September 15, 1993, FDS replaced Federated as Servicer under the
Pooling and Servicing Agreement. In addition, in September 1993 FDS was
added as a party to the Purchase Agreement and substantially all of the
then-existing Accounts (other than the Broadway Accounts) were
transferred from the other Federated Subsidiaries to FDS. Substantially
all of the Broadway Accounts were transferred to FDS during fiscal 1996.
FDS issues cards bearing the various tradenames of the Federated Stores
and maintains separate credit card programs for each of them. Because the
credit and collection policies of FDS with respect to its various
programs are substantially similar, FDS is able to achieve significant
economies of scale in credit servicing. At the present time, FDS is the
owner of substantially all of the Accounts, although the other
Originators may from time to time establish Accounts and sell the
Receivables arising therein to the Transferor for transfer to the Trust
pursuant to the Pooling and Servicing Agreement. The principal executive
offices of FDS are located at 9111 Duke Boulevard, Mason, Ohio
45040-8999. The telephone number is (513) 573-2265.
MATURITY ASSUMPTIONS
The Class A Invested Amount is payable to the Class A
Certificateholders, to the extent funds are available therefor in the
Principal Funding Account, on the Class A Expected Final Payment Date,
which is the [ ] Distribution Date (the "Class A Expected Final Payment
Date"), or earlier in the event of a Pay Out Event which results in the
commencement of the Early Amortization Period. The Class A
Certificateholders will receive payments of principal on each
Distribution Date following the Monthly Period in which a Pay Out Event
occurs (each such Distribution Date being a "Special Payment Date") until
the Class A Invested Amount has been paid in full or the Series 1997-1
Termination Date has occurred. The Class B Certificateholders will
receive payments of principal on the Class B Expected Final Payment Date,
which is the [ ] Distribution Date (the "Class B Expected Final Payment
Date"), or earlier or later in certain circumstances, and each
Distribution Date thereafter until the Class B Invested Amount is paid in
full or the Series 1997-1 Termination Date has occurred.
During the Accumulation Period, monthly collections of principal
with respect to the Class A Certificates will be deposited in the
Principal Funding Account until the amount deposited in the Principal
Funding Account is equal to the Class A Invested Amount. The Class A
Certificateholders will receive the amount on deposit in the Principal
Funding Account on the Class A Expected Final Payment Date.
During the Accumulation Period or any Early Amortization Period, as
the case may be, the Class A Certificateholders will have deposited in
the Principal Funding Account or will receive, as the case may be, on
each Distribution Date, an amount equal to the lesser of (a) the product
of the Fixed/Floating Allocation Percentage and the aggregate amount of
Principal Collections collected during the related Monthly Period and (b)
the aggregate amount of Net Principal Collections for such Monthly
Period. During the Accumulation Period, the monthly amount deposited in
the Principal Funding Account for payment on the Class A Expected Final
Payment Date to the Class A Certificateholders will be equal to the
lesser of (a) the sum of (i) the lesser of (x) the product of the
Fixed/Floating Allocation Percentage and the aggregate amount of
Principal Collections received during the related Monthly Period and (y)
the Net Principal Collections and (ii) Shared Principal Collections
allocable to the Class A Certificates, if any, and (b) the Controlled
Deposit Amount, which is equal to the sum of the applicable Controlled
Amortization Amount and any existing Accumulation Shortfall. Although it
is anticipated that Principal Collections will be sufficient in each
Monthly Period to fund the deposit of the Controlled Amortization Amount
in the Principal Funding Account for payment to the Class A
Certificateholders on the Class A Expected Final Payment Date, no
assurance can be given in that regard. The Transferor cannot predict, and
no assurance can be given, as to the cardholder monthly payment rates
that will actually occur in any future period, as to whether any of the
above assumptions will prove to have been correct, or as to whether the
actual rate of payment of principal of the Class A Certificates or the
Class B Certificates will be as anticipated.
Should a Pay Out Event occur and the Early Amortization Period
commence, the Class A Certificateholders will be entitled to receive on
each Distribution Date payments of principal equal to the lesser of (i)
the product of the Fixed/Floating Allocation Percentage and the aggregate
amount of Principal Collections received during the related Monthly
Period and (ii) the aggregate amount of Net Principal Collections for
such Monthly Period, until the Class A Invested Amount is paid in full or
until the Series 1997-1 Termination Date. Thereafter, on and after the
Class B Principal Payment Commencement Date, the Class B
Certificateholders will be entitled to receive on each Distribution Date
payments of principal equal to the lesser of (i) the product of the
applicable Fixed/Floating Allocation Percentage and Principal Collections
received during the related Monthly Period and (ii) the aggregate amount
of Net Principal Collections for such Monthly Period, until the Class B
Invested Amount is paid in full or until the Series 1997-1 Termination
Date. In addition, following the occurrence of a Pay Out Event during the
Funding Period, the amounts remaining on deposit in the Pre-Funding
Account will be payable as principal first to the Class A
Certificateholders until the sum of the Class A Invested Amount and the
Class A Pre-Funded Amount is paid in full and then to the Class B
Certificateholders. A "Pay Out Event" would occur, either automatically
or after specified notice, upon (a) the failure of the Transferor to make
certain payments or transfers of funds for the benefit of the
Certificateholders within the time periods stated in the Pooling and
Servicing Agreement, (b) material breaches of certain representations,
warranties or covenants of the Transferor, (c) certain insolvency events
relating to the Transferor, FDS, or Federated, (d) the occurrence of a
Servicer Default that would have a material adverse effect on the
Certificateholders, (e) (x) the Transferor Interest being less than the
Minimum Transferor Interest or (y) the total amount of Principal
Receivables and the amount on deposit in the Excess Funding Account being
less than the Minimum Aggregate Principal Receivables, in each case for
15 consecutive days, (f) the Trust becoming an "investment company"
within the meaning of the Investment Company Act, or (g) a reduction in
the average of the Portfolio Yields for any three consecutive Monthly
Periods to a rate which is less than the Base Rate. See "Description of
the Offered Certificates--Pay Out Events."
In the absence of a Pay Out Event, the amount remaining in the
Pre-Funding Account at the end of the Funding Period will be withdrawn
and distributed on the next succeeding Distribution Date to the Class A
Certificateholders and the Class B Certificateholders pro rata based on
the Class A Invested Amount and the Class B Invested Amount.
The following table sets forth the highest and lowest cardholder
monthly payment rates for the Federated Portfolio during any month in the
period shown and the average cardholder monthly payment rates for all
months during the periods shown, in each case calculated as a percentage
of total opening monthly account balances during the periods shown.
Payment rates shown in the table are based on amounts which would be
deemed payments of Principal Receivables and Finance Charge Receivables
with respect to the Accounts.
CARDHOLDER MONTHLY PAYMENT RATES
FEDERATED PORTFOLIO
<TABLE>
<CAPTION>
26 WEEKS ENDED FISCAL YEAR ENDED
--------------------- -------------------------------------
AUGUST 2, AUGUST 3, FEBRUARY FEBRUARY 3, JANUARY
1997 1996 1, 1997 1996 28, 1995
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C>
Lowest Month............... 15.37% 15.99% 17.38%
Highest Month.............. 21.85% 18.04% 20.29%
Monthly Average............ 16.75% 17.32% 18.72%
</TABLE>
The amount of collections of Receivables may vary from month to
month due to seasonal variations, general economic conditions, payment
habits of individual cardholders, and other factors. There can be no
assurance that collections of Principal Receivables with respect to the
Federated Portfolio, and thus the rate at which the Principal Funding
Account could be funded during the Accumulation Period or the rate at
which Certificateholders could expect to receive payments of principal on
their Certificates during an Early Amortization Period, will be similar
to the historical experience set forth above. If a Pay Out Event occurs,
the average life and maturity of the Offered Certificates could be
significantly reduced. See "Risk Factors--Reinvestment Risks; Payments
and Maturity."
POOL FACTOR AND RELATED INFORMATION
The "Class A Pool Factor" and the "Class B Pool Factor" are each a
seven-digit decimal, which the Servicer will compute monthly, expressing
as of each Record Date the Class A Invested Amount as a proportion of the
Class A Invested Amount as of the date of initial issuance of the Offered
Certificates (the "Closing Date") and the Class B Invested Amount as a
proportion of the Class B Invested Amount as of the Closing Date,
respectively (in each case together with the Class A Percentage or the
Class B Percentage, as applicable, of the Pre-Funded Amount). On the
Closing Date, the Class A Pool Factor and the Class B Pool Factor will be
1.0000000 and will remain unchanged during the Revolving Period, except
in certain limited circumstances. Thereafter, on and after the Class A
Expected Final Payment Date or the beginning of the Early Amortization
Period, the Class A Pool Factor will decline to reflect reductions in the
Class A Invested Amount and on and after the Class B Principal Payment
Commencement Date, the Class B Pool Factor will decline to reflect
reductions in the Class B Invested Amount. A Certificateholder's pro rata
interest in the Principal Receivables in the Trust for a given month can
be determined by multiplying the denomination of the holder's Certificate
by the applicable Pool Factor for that month.
Pursuant to the Pooling and Servicing Agreement, monthly reports
concerning, among other things, the Class A Invested Amount and the Class
A Pool Factor and the Class B Invested Amount and the Class B Pool Factor
will be made available to the Class A Certificateholders and the Class B
Certificateholders, respectively. In addition, on or before January 31 of
each year, information for tax reporting purposes will be made available
to the Class A Certificateholders and the Class B Certificateholders,
respectively. See "Description of the Offered Certificates--Book-Entry
Registration" and "--Reports to Certificateholders."
USE OF PROCEEDS
The Trustee, on behalf of the Trust, will receive the Exchangeable
Transferor Certificate from the Transferor and, in exchange therefor,
will issue the Class A Certificates, the Class B Certificates, and the
Class C Certificates, together with a new Exchangeable Transferor
Certificate, to or upon the order of the Transferor. The Transferor will
apply the entire net proceeds (i.e., the price to the public, as set
forth on the cover page of this Prospectus, less underwriting discounts
and commissions and offering expenses) received from the sale of the
Offered Certificates to pay the purchase price of Receivables purchased
from the Originators, to fund the Pre-Funding Account to the extent of
the Pre-Funded Amount, and to make certain payments to Federated and its
subsidiaries. Federated has informed the Transferor that Federated and
its subsidiaries will use such proceeds for general corporate purposes.
DESCRIPTION OF THE OFFERED CERTIFICATES
The Offered Certificates will be issued pursuant to the Pooling and
Servicing Agreement and the Series 1997-1 Supplement. Pursuant to the
Pooling and Servicing Agreement, the Transferor and the Trustee may from
time to time execute additional Supplements in order to issue additional
Series.
GENERAL
The Offered Certificates will represent undivided interests in
certain assets of the Trust, including the right to the investor
allocation percentage of all cardholder payments on the Receivables in
the Trust. Each Class A Certificate and Class B Certificate will
represent the right to receive payments of interest at the Class A
Certificate Rate or the Class B Certificate Rate, as the case may be,
funded from collections of Finance Charge Receivables and payments of
principal on and after the earlier of the Class A Expected Final Payment
Date and the Distribution Date in the Monthly Period following the
commencement of the Early Amortization Period, with respect to the Class
A Certificates, and on and after the Class B Principal Payment
Commencement Date, with respect to the Class B Certificates, in each case
funded from collections of Principal Receivables allocated to the Class A
Certificateholders' Interest or the Class B Certificateholders' Interest,
as the case may be.
The Transferor will own the Exchangeable Transferor Certificate and
may from time to time own certificates of any Series or class, including
without limitation the Class C Certificates. The Exchangeable Transferor
Certificate will represent an undivided interest in the Trust, including
the right to a percentage (the "Transferor Percentage") of all cardholder
payments on the Receivables in the Trust equal to 100% minus the sum of
the applicable investor allocation percentages for all Series of
certificates then outstanding. The Exchangeable Transferor Certificate
may be transferred in part, subject to certain limitations and conditions
set forth in the Pooling and Servicing Agreement. See "--Certain Matters
Regarding the Transferor and the Servicer."
The Invested Amount on the Closing Date is subject to increase, up
to the Full Invested Amount, during the Funding Period to the extent that
amounts are withdrawn from the Pre-Funding Account and paid to the
Transferor as principal is paid or deposited in the Series 1992-1
Principal Funding Account. During the Revolving Period, the amount of the
Invested Amount in the Trust will otherwise remain constant except under
certain limited circumstances. See "--Allocation Percentages,"
"--Reallocated Principal Collections," "--Application of Collections,"
"--Coverage of Interest Shortfalls," "--Investor Charge-Offs," and
"--Defaulted Receivables; Rebates and Fraudulent Charges." The amount of
Principal Receivables in the Trust, however, will vary each day as new
Principal Receivables are created and others are paid. Following the
conclusion of the Funding Period, the amount of the Transferor Interest
(or the amount in the Excess Funding Account) will fluctuate each day to
reflect the changes in the amount of the Principal Receivables in the
Trust. During the Accumulation Period or any Early Amortization Period,
and on and after the Class B Principal Payment Commencement Date, the
Invested Amount in the Trust will decline as cardholder payments of
Principal Receivables are collected and accumulated for distribution or
distributed to the Certificateholders. As a result, unless additional
Series are issued or the invested amount of the Variable Funding
Certificates previously issued is increased, the Transferor Interest
during any Accumulation Period or Early Amortization Period, and on and
after the Class B Principal Payment Commencement Date, will generally
increase each month to reflect the reductions in the Invested Amount of
such Series and will also change to reflect the variations in the amount
of the Principal Receivables in the Trust. The Transferor Interest may be
reduced as the result of an Exchange. See "--Exchanges."
Each class of Offered Certificates initially will be represented by
certificates registered in the name of the nominee of DTC (together with
any successor depository selected by the Transferor, the "Depository"),
except as set forth below. Beneficial interests in each class of Offered
Certificates will be available for purchase in minimum denominations of
$1,000 and integral multiples thereof in book-entry form only. The
Transferor has been informed by DTC that DTC's nominee will be Cede.
Accordingly, Cede is expected to be the holder of record of the Offered
Certificates. No Offered Certificate Owner acquiring an interest in the
Offered Certificates will be entitled to receive a certificate
representing such Offered Certificate Owner's interest in such
Certificates. Unless and until Definitive Certificates are issued under
the limited circumstances described herein, all references herein to
actions by Certificateholders of any class of Offered Certificates will
refer to actions taken by the Depository upon instructions from its
participating organizations ("Participants"), and all references herein
to distributions, notices, reports, and statements to Certificateholders
of any class of Offered Certificates will refer to distributions,
notices, reports, and statements to the Depository or its nominee, as the
registered holder of the Offered Certificates of such class, for
distribution to Offered Certificate Owners of such class in accordance
with the Depository's procedures. See "--Book-Entry Registration" and
"--Definitive Certificates."
BOOK-ENTRY REGISTRATION
Holders of the Offered Certificates may hold their Certificates
through DTC (in the United States) or Cedel or Euroclear (in Europe),
which in turn hold through DTC, if they are participants of such systems,
or indirectly through organizations that are participants in such
systems.
Cede, as nominee for DTC, will hold the global Certificates. Cedel
and Euroclear will hold omnibus positions on behalf of the Cedel
Participants and the Euroclear Participants, respectively, through
customers' securities accounts in Cedel's and Euroclear's names on the
books of their respective depositaries (collectively, the "Depositaries")
which in turn will hold such positions in customers' securities accounts
in the Depositaries' names on the books of DTC. For additional
information regarding clearance and settlement procedures for the Offered
Certificates, see Annex II hereto.
DTC is a limited-purpose trust company organized under the New York
Banking Law, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York UCC, and a "clearing
agency" registered pursuant to the provisions of Section 17A of the
Exchange Act. DTC was created to hold securities for Participants and
facilitate the clearance and settlement of securities transactions
between Participants through electronic book-entry changes in accounts of
its Participants, thereby eliminating the need for physical movement of
certificates. Participants include securities brokers and dealers
(including the Underwriters), banks, trust companies, and clearing
corporations and may include certain other organizations. Indirect access
to the DTC system also is available to others such as banks, brokers,
dealers, and trust companies that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly (the
"Indirect Participants").
Class A Certificate Owners and Class B Certificate Owners that are
not Participants or Indirect Participants but desire to purchase, sell,
or otherwise transfer ownership of, or other interest in, Certificates
may do so only through Participants and Indirect Participants. In
addition, Class A Certificate Owners and Class B Certificate Owners will
receive all distributions of principal of and interest on the Class A
Certificates and Class B Certificates, respectively, through the
Participants who in turn will receive them from the Depository. Under a
book-entry format, Class A Certificate Owners and Class B Certificate
Owners may experience some delay in their receipt of payments, since such
payments will be forwarded by the Trustee to the Depository or its
nominee. The Depository will forward such payments to its Participants
which thereafter will forward them to Indirect Participants, or Class A
Certificate Owners or Class B Certificate Owners, as the case may be. It
is anticipated that the only "Class A Certificateholder" and "Class B
Certificateholder" will be Cede, as nominee of DTC. Class A Certificate
Owners and Class B Certificate Owners will not be recognized by the
Trustee as Certificateholders, as such term is used in the Pooling and
Servicing Agreement, and Class A Certificate Owners and Class B
Certificate Owners will be permitted to exercise the rights of
Certificateholders only indirectly through the Participants, who in turn
will exercise the rights of Certificateholders through the Depository.
Under the rules, regulations, and procedures creating and affecting
DTC and its operations, DTC is required to make book-entry transfers
among Participants on whose behalf it acts with respect to the Offered
Certificates and is required to receive and transmit distributions of
principal and interest on the Offered Certificates. Participants and
Indirect Participants with which Class A Certificate Owners and Class B
Certificate Owners have accounts with respect to the Class A Certificates
and the Class B Certificates, respectively, similarly are required to
make book-entry transfers and receive and transmit such payments on
behalf of their respective Class A Certificate Owners and Class B
Certificate Owners. Accordingly, although Class A Certificate Owners and
Class B Certificate Owners will not possess Class A Certificates and
Class B Certificates, respectively, Class A Certificate Owners and Class
B Certificate Owners will receive payments and will be able to transfer
their respective interests.
Because DTC can act only on behalf of Participants, who in turn act
on behalf of Indirect Participants and certain banks, the ability of a
Class A Certificate Owner or a Class B Certificate Owner to pledge
Offered Certificates to persons or entities that do not participate in
the DTC system, or otherwise take actions in respect of such Offered
Certificates, may be limited due to the lack of a physical certificate
for such Offered Certificates.
DTC has advised the Transferor that it will take any action
permitted to be taken by a Class A Certificateholder or a Class B
Certificateholder under the Pooling and Servicing Agreement only at the
direction of one or more Participants to whose account with DTC the
Offered Certificates are credited. Additionally, DTC has advised the
Transferor that it will take such actions with respect to specified
percentages of the Invested Amount only at the direction of and on behalf
of Participants whose holdings include undivided interests that satisfy
such specified percentages. DTC may take conflicting actions with respect
to other undivided interests to the extent that such actions are taken on
behalf of Participants whose holdings include such undivided interests.
Transfers between DTC Participants will occur in accordance with
DTC rules. Transfers between Cedel Participants and Euroclear
Participants will occur in the ordinary way in accordance with their
applicable rules and operating procedures.
Cross-market transfers between persons holding directly or
indirectly through DTC in the United States, on the one hand, and
directly or indirectly through Cedel Participants or Euroclear
Participants, on the other, will be effected in DTC in accordance with
DTC rules on behalf of the relevant European international clearing
system by its Depositary; however, such cross-market transactions will
require delivery of instructions to the relevant European international
clearing system by the counterparty in such system in accordance with its
rules and procedures and within its established deadlines (European
time). The relevant European international clearing system will, if the
transaction meets its settlement requirements, deliver instructions to
its Depositary to take action to effect final settlement on its behalf by
delivering or receiving securities in DTC, and making or receiving
payment in accordance with normal procedures for same-day funds
settlement applicable to DTC. Cedel Participants and Euroclear
Participants may not deliver instructions directly to the Depositaries.
Because of time-zone differences, credits or securities in Cedel or
Euroclear as a result of a transaction with a DTC Participant will be
made during the subsequent securities settlement processing, dated the
business day following the DTC settlement date, and such credits or any
transactions in such securities settled during such processing will be
reported to the relevant Cedel Participant or Euroclear Participant on
such business day. Cash received in Cedel or Euroclear as a result of
sales of securities by or through a Cedel Participant or a Euroclear
Participant to a DTC Participant will be received with value on the DTC
settlement date but will be available in the relevant Cedel or Euroclear
cash account only as of the business day following settlement in DTC.
Cedel Bank, societe anonyme ("Cedel") is incorporated under the
laws of Luxembourg as a professional depository. Cedel holds securities
for its participating organizations ("Cedel Participants") and
facilitates the clearance and settlement of securities transactions
between Cedel Participants through electronic book-entry changes in
accounts of Cedel Participants, thereby eliminating the need for physical
movement of certificates. Transactions may be settled by Cedel in any of
28 currencies, including United States dollars. Cedel provides to its
Cedel Participants, among other things, services for safekeeping,
administration, clearance, and settlement of internationally traded
securities, and securities lending and borrowing. Cedel interfaces with
domestic markets in several countries. As a professional depository,
Cedel is subject to regulations by the Luxembourg Monetary Institute.
Cedel Participants are recognized financial institutions around the
world, including underwriters, securities brokers and dealers, banks,
trust companies, clearing corporations, and certain other organizations
and may include the Underwriters of the Offered Certificates. Indirect
access to Cedel is also available to others, such as banks, brokers,
dealers, and trust companies that clear through or maintain a custodial
relationship with a Cedel Participant, either directly or indirectly.
The Euroclear System (the "Euroclear System") was created in 1968
to hold securities for participants of the Euroclear System ("Euroclear
Participants") and to clear and settle transactions between Euroclear
Participants through simultaneous electronic book-entry delivery against
payment, thereby eliminating the need for physical movement of
certificates and any risk from lack of simultaneous transfers of
securities and cash. Transactions may now be settled in any of 27
currencies, including United States dollars. The Euroclear System
includes various other services, including securities lending and
borrowing and interfaces with domestic markets in several countries
generally similar to the arrangements for cross-market transfers with DTC
described above. The Euroclear System is operated by Morgan Guaranty
Trust Company of New York, Brussels, Belgium office (the "Euroclear
Operator" or "Euroclear"), under contract with Euroclear Clearance
System, S.C., a Belgian cooperative corporation (the "Cooperative"). All
operations are conducted by the Euroclear Operator, and all Euroclear
securities clearance accounts and Euroclear cash accounts are accounts
with the Euroclear Operator, not the Cooperative. The Cooperative
establishes policy for the Euroclear system on behalf of Euroclear
Participants. Euroclear Participants include banks (including central
banks), securities brokers and dealers, and other professional financial
intermediaries and may include the underwriters of the Offered
Certificates. Indirect access to the Euroclear System is also available
to other firms that clear through or maintain a custodial relationship
with a Euroclear Participant, either directly or indirectly.
The Euroclear Operator is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. As
such, it is regulated and examined by the Board of Governors of the
Federal Reserve System and the New York State Banking Department, as well
as the Belgian Banking Commission.
Securities clearance accounts and cash accounts with the Euroclear
Operator are governed by the Terms and Conditions governing use of
Euroclear and the related Operating Procedures of the Euroclear System
and applicable Belgian law (collectively, the "Terms and Conditions").
The Terms and Conditions govern transfers of securities and cash within
the Euroclear System, withdrawal of securities and cash from the
Euroclear System, and receipts of payments with respect to securities in
the Euroclear System. All securities in the Euroclear System are held on
a fungible basis without attribution of specific certificates to specific
securities clearance accounts. The Euroclear Operator acts under the
Terms and Conditions only on behalf of Euroclear Participants and has no
record of or relationship with persons holding through Euroclear
Participants.
Distributions with respect to Offered Certificates held through
Cedel or Euroclear will be credited to the cash accounts of Cedel
Participants or Euroclear Participants in accordance with the relevant
system's rules and procedures, to the extent received by its Depositary.
Such distributions will be subject to tax reporting in accordance with
relevant United States tax laws and regulations. Cedel or the Euroclear
Operator, as the case may be, will take any other action permitted to be
taken by a holder of an Offered Certificate under the Pooling and
Servicing Agreement on behalf of a Cedel Participant or a Euroclear
Participant only in accordance with its relevant rules and procedures and
subject to its Depositary's ability to effect such actions on its behalf
through DTC.
Although DTC, Cedel, and Euroclear have agreed to the foregoing
procedures in order to facilitate transfers of Offered Certificates among
Participants of DTC, Cedel, and Euroclear, they are under no obligation
to perform or continue to perform such procedures and such procedures may
be discontinued at any time.
DEFINITIVE CERTIFICATES
The Offered Certificates of each Class will be issued in fully
registered, certificated form to the Offered Certificate Owners of such
Class or their nominees ("Definitive Certificates"), rather than to the
Depository or its nominee, only if (i) the Transferor advises the Trustee
in writing that the Depository is no longer willing or able to discharge
properly its responsibilities as Depository with respect to the
Certificates of such Class, and the Trustee or the Transferor is unable
to locate a qualified successor, (ii) the Transferor, at its option,
advises the Trustee in writing that it elects to terminate the book-entry
system through the Depository, or (iii) after the occurrence of a
Servicer Default, Offered Certificate Owners representing not less than
50% of such Class advise the Trustee and the Depository through
Participants in writing that the continuation of a book-entry system
through the Depository is no longer in the best interest of the Offered
Certificate Owners of such Class.
Upon the occurrence of any of the events described in the
immediately preceding paragraph, the Depository is required to notify all
Participants of the availability through the Depository of Definitive
Certificates. Upon surrender by the Depository of the definitive
certificate representing the Certificates of the affected Class and
instructions for registration, the Trustee will issue the Certificates of
such Class as Definitive Certificates, and thereafter the Trustee will
recognize the holders of such Definitive Certificates as holders under
the Pooling and Servicing Agreement ("Holders").
Distribution of principal and interest on the Offered Certificates
will be made by the Trustee directly to Holders of Definitive
Certificates in accordance with the procedures set forth herein and in
the Pooling and Servicing Agreement. Interest payments and any principal
payments on each Distribution Date will be made to Holders in whose names
the Definitive Certificates were registered at the close of business on
the related Record Date. Distributions will be made by check mailed to
the address of such Holder as it appears on the register maintained by
the Trustee. The final payment on any Offered Certificate, however, will
be made only upon presentation and surrender of such Certificate at the
office or agency specified in the notice of final distribution to
Certificateholders. The Trustee will provide such notice to registered
Holders mailed not later than the fifth day of the month of such final
distributions.
Definitive Certificates will be transferable and exchangeable at
the offices of the Transfer Agent and Registrar, which initially will be
the Trustee. No service charge will be imposed for any registration of
transfer or exchange, but the Transfer Agent and Registrar may require
payment of a sum sufficient to cover any tax or other governmental charge
imposed in connection therewith. The Transfer Agent and Registrar will
not be required to register the transfer or exchange of Definitive
Certificates for a period of fifteen days preceding the due date for any
payment with respect to such Definitive Certificates.
INTEREST PAYMENTS
Interest will accrue on the outstanding principal balance of the
Class A Certificates at the Class A Certificate Rate and on the
outstanding principal balance of the Class B Certificates at the Class B
Certificate Rate, in each case from the Closing Date. Interest will be
distributed on [ ], and on each Distribution Date thereafter to
Certificateholders of each Class in an amount equal to one-twelfth of the
product of the applicable Certificate Rate and the applicable outstanding
principal balance as of the preceding Record Date, except that interest
for the first Distribution Date will include accrued interest at the
applicable Certificate Rate from the Closing Date through [ ] (calculated
as though there were only 30 days in [ ]). Interest will be calculated on
the basis of a 360-day year of twelve 30-day months. Interest payments on
the Class A Certificates on any Distribution Date will be funded from
Available Series Finance Charge Collections allocated to the
Certificateholders' Interest during the preceding Monthly Period. Subject
to the prior payment of interest on the Class A Certificates (and, as to
a portion thereof, to the prior payment of certain other amounts),
interest payments on the Class B Certificates on any Distribution Date
will be funded from Available Series Finance Charge Collections allocated
to the Certificateholders' Interest during the preceding Monthly Period,
and, on and after the Class B Principal Payment Commencement Date, from
the Transferor Interest to the extent of the Transferor Subordination
Amount.
PRINCIPAL PAYMENTS
During the Revolving Period (which begins on the Closing Date and
ends on the day before either the Accumulation Period or the Early
Amortization Period begins), no principal payments will be made to the
Certificateholders (except to the extent described in "--Pre-Funding
Account" should the Pre-Funding Amount be greater than zero on the first
day of the __________ Monthly Period). On each business day during the
Accumulation Period, principal will be deposited in the Principal Funding
Account for distribution to Class A Certificateholders on the Class A
Expected Final Payment Date. During any Early Amortization Period,
principal will be paid monthly on each Distribution Date starting on the
next Distribution Date following the Monthly Period in which the
applicable Pay Out Event occurred, first to the Class A
Certificateholders until the Class A Invested Amount is paid in full,
then to the Class B Certificateholders monthly on each Distribution Date
until the Class B Invested Amount is paid in full, and then to the Class
C Certificateholders monthly on each Distribution Date until the Class C
Invested Amount is paid in full. If a Pay Out Event occurs during the
Accumulation Period, the amount in the Principal Funding Account will be
paid to the Class A Certificateholders on the first Special Payment Date.
If a Pay Out Event occurs during the Funding Period, the amounts
remaining on deposit in the Pre-Funding Account will be payable as
principal first to the Class A Certificateholders until the sum of the
Class A Invested Amount and the Class A Pre-Funded Amount is paid in full
and then to the Class B Certificateholders. See "--Pay Out Events" for a
discussion of events which might lead to the commencement of an Early
Amortization Period. See "--Application of Collections" for a discussion
of the method by which collections of Principal Receivables are allocated
during either an Accumulation Period or an Early Amortization Period.
Net Principal Collections for any Monthly Period allocated to the
Class A Invested Amount will first be used to cover, with respect to any
Monthly Period during either the Accumulation Period or any Early
Amortization Period, required deposits into the Principal Funding Account
for the benefit of the Class A Certificateholders, or required payments
of principal to the Class A Certificateholders, as the case may be. On
and after the Class B Principal Payment Commencement Date, Net Principal
Collections for any Monthly Period allocated to the Class B Invested
Amount will first be used to cover required deposits into the Principal
Account for the benefit of the Class B Certificateholders. On and after
the Class C Principal Payment Commencement Date, Principal Collections
for any Monthly Period allocated to the Class C Invested Amount will
first be used to cover required deposits into the Principal Account for
the benefit of the Class C Certificateholders. The Servicer will
determine the amount of collections of Principal Receivables for any
business day allocated to the Invested Amount for Series 1997-1 remaining
after covering required deposits or payments of principal to the
Certificateholders and any similar amount remaining for any other Series
("Shared Principal Collections"). The Servicer will allocate the Shared
Principal Collections to cover any scheduled or permitted principal
distributions to Certificateholders (including principal distributions
which the Transferor may elect to make to the holders of the Variable
Funding Certificates) and deposits to principal funding accounts, if any,
for any Series that have not been covered out of the collections of
Principal Receivables allocable to such Series and certain other amounts
for such Series ("Principal Shortfalls"). Shared Principal Collections
will not be used to cover investor charge-offs for any Series. If
Principal Shortfalls exceed Shared Principal Collections on any business
day, Shared Principal Collections will be allocated pro rata among the
applicable Series based on the relative amounts of Principal Shortfalls.
To the extent that Shared Principal Collections exceed Principal
Shortfalls, the balance will, subject to certain limitations, be paid to
the holder of the Exchangeable Transferor Certificate.
POSTPONEMENT OF ACCUMULATION PERIOD
Upon written notice to the Trustee, and subject to certain
conditions, the Servicer may elect to postpone the commencement of the
Accumulation Period, thereby extending the length of the Revolving
Period. The Servicer may make such election only if the Accumulation
Period Length (determined as described below) is less than eight months.
On each Determination Date on and after the [ ] Determination Date but
prior to the commencement of the Accumulation Period, the Servicer will
determine the "Accumulation Period Length," which is the number of months
expected to be required to fully fund the Principal Funding Account in an
amount sufficient to pay the entire Class A Invested Amount no later than
the Class A Expected Final Payment Date, based on the assumptions that
(a) the payment rate with respect to Principal Collections remains
constant at the lowest level of such payment rate during the twelve
preceding Monthly Periods (or such lower payment rate as the Servicer may
select), (b) the total amount of Principal Receivables in the Trust (and
the principal amount on deposit in the Excess Funding Account, if any)
remains constant at the level on such date of determination, (c) no Pay
Out Event with respect to any Series will subsequently occur, and (d) no
additional Series (other than any Series being issued on such date of
determination) will be subsequently issued. If the Accumulation Period
Length is less than eight months, the Servicer may, at its option,
postpone the commencement of the Accumulation Period such that the number
of months included in the Accumulation Period will equal or exceed the
Accumulation Period Length. The effect of the foregoing calculation is to
permit the reduction of the length of the Accumulation Period based on
the certificateholders' interest of certain other Series, if any, which
are scheduled to be in their revolving periods during the Accumulation
Period and on increases in the principal payment rate, if any, occurring
after the Closing Date. The length of the Accumulation Period will not be
less than one month and any election to shorten the Accumulation Period
will be subject to subsequent lengthening of the Accumulation Period on
any subsequent Determination Date. If the commencement of the
Accumulation Period is postponed, and if a Pay Out Event occurs after the
date originally scheduled as the commencement of the Accumulation Period,
it is probable that holders of Certificates would receive some of their
principal later than if the Accumulation Period had not been postponed.
SUBORDINATION OF THE CLASS B CERTIFICATES
The Class B Certificates will be subordinated to the extent
necessary to fund certain payments with respect to the Class A
Certificates. To the extent the Class B Invested Amount is reduced, the
percentage of Total Finance Charge Collections allocated to the Class B
Certificateholders in subsequent Monthly Periods will be reduced.
Moreover, to the extent the amount of such reduction in the Class B
Invested Amount is not reimbursed, the amount of principal distributable
to the Class B Certificateholders will be reduced.
The Class C Certificates will be subordinated to the extent
necessary to fund certain payments with respect to the Class A
Certificates and the Class B Certificates. To the extent the Class C
Invested Amount is reduced, the percentage of Total Finance Charge
Collections allocated to the Class C Certificateholders in subsequent
Monthly Periods will be reduced. Moreover, to the extent the amount of
such reduction in the Class C Invested Amount is not reimbursed, the
amount of principal distributable to the Class C Certificateholders will
be reduced.
If, on any Determination Date, the aggregate Investor Default
Amount, if any, for each business day in the preceding Monthly Period
exceeded the sum of (w) the aggregate amount of Available Series Finance
Charge Collections applied with respect thereto as described in clause
(iv) of "Payment of Fees, Interest, and Other Items," (x) the amount of
Transferor Finance Charge Collections and Excess Finance Charge
Collections allocated thereto as described in "--Reallocation of Cash
Flows," (y) the amount of Reallocated Principal Collections allocated
with respect thereto as described in "--Reallocated Principal
Collections," and (z) on and after the Class B Principal Payment
Commencement Date, the remaining amount of collections allocable to the
holder of the Exchangeable Transferor Certificate to the extent of the
Transferor Subordination Amount, the Class C Invested Amount will be
reduced by the amount by which such aggregate Investor Default Amount
exceeds the amount applied with respect thereto during the preceding
Monthly Period.
In the event that the Class C Invested Amount is reduced to zero
prior to the Class B Principal Payment Commencement Date, the Class B
Invested Amount will be reduced by the amount of the remaining shortfall,
but not more than the aggregate Investor Default Amount for such Monthly
Period. If the Class C Invested Amount is reduced to zero, on or after
the Class B Principal Payment Commencement Date, a portion of the
Transferor Subordination Amount equal to such insufficiency (but not in
excess of the aggregate Investor Default Amount for such Monthly Period)
will be deducted from the Transferor Interest and allocated to avoid a
charge-off with respect to the Class B Certificates. If the Transferor
Subordination Amount is reduced to zero, the Class B Invested Amount will
be reduced by the amount by which the Transferor Subordination Amount
would have been reduced below zero, but not more than the aggregate
Investor Default Amount for such Monthly Period. Such reductions of the
Class B Invested Amount will thereafter be reimbursed and the Class B
Invested Amount increased on each Distribution Date by the amount, if
any, of Total Finance Charge Collections, Excess Finance Charge
Collections, and Transferor Finance Charge Collections for such
Distribution Date allocated and available for that purpose. See
"--Reallocation of Cash Flows," "--Reallocated Principal Collections,"
and "--Investor Charge-Offs."
TRANSFER AND ASSIGNMENT OF RECEIVABLES
The Transferor has transferred and assigned to the Trust all of its
right, title, and interest in and to the Receivables in the Accounts and
all Receivables existing on the Initial Closing Date and thereafter
created in the Accounts and purchased by the Transferor.
In connection with the transfer of the Receivables to the Trust,
the Transferor has indicated in its computer files that the Receivables
have been conveyed to the Trust. In addition, the Transferor has provided
to the Trustee or its bailee computer files or microfiche lists
containing a true and complete list showing each Account, identified by
account number and by total outstanding balance on the Initial Cut-Off
Date. The Transferor has not delivered to the Trustee any other records
or agreements relating to the Accounts or the Receivables, except in
connection with additions or removals of Accounts. Except as stated
above, the records and agreements relating to the Accounts and the
Receivables maintained by the Transferor or the Servicer are not
segregated by the Transferor or the Servicer from other documents and
agreements relating to other credit card accounts and receivables and are
not stamped or marked to reflect the transfer of the Receivables to the
Trust, but the computer records of the Transferor are required to be
marked to evidence such transfer. The Transferor has filed a UCC
financing statement with respect to the Receivables meeting the
requirements of applicable state law. See "Risk Factors--Transfer of the
Receivables; Insolvency Risk Considerations" and "Certain Legal Aspects
of the Receivables."
EXCHANGES
The Pooling and Servicing Agreement provides that the Trustee may
issue two types of certificates: (i) one or more Series of certificates,
each of which may have multiple classes, of which one or more of such
classes may be transferable, and (ii) the Exchangeable Transferor
Certificate. The Exchangeable Transferor Certificate which evidences the
Transferor Interest, is currently held by the Transferor and is
transferable only as provided in the Pooling and Servicing Agreement. The
Pooling and Servicing Agreement also provides that, pursuant to any one
or more Supplements, the holder of the Exchangeable Transferor
Certificate may tender the Exchangeable Transferor Certificate and the
certificates evidencing any Series of certificates, to the Trustee in
exchange for one or more new Series and a reissued Exchangeable
Transferor Certificate. Pursuant to the Pooling and Servicing Agreement,
the holder of the Exchangeable Transferor Certificate may define, with
respect to any newly issued Series, certain terms including: (i) its name
or designation; (ii) its initial invested amount (or method for
calculating such amount); (iii) its certificate rate (or the method of
allocating interest payments or other cash flows to such Series); (iv)
the closing date; (v) the rating agency or agencies, if any, rating the
Series; (vi) the interest payment date or dates and the date or dates
from which interest shall accrue; (vii) the name of the clearing agency,
if any; (viii) the method for allocating collections to
certificateholders of such Series with respect to Principal Receivables,
Finance Charge Receivables, and Receivables in Defaulted Accounts and the
method by which the principal amount of such Series will amortize or
accrete; (ix) the names of any accounts to be used by such Series and the
terms governing the operation of any such accounts; (x) the percentage
used to calculate monthly servicing fees; (xi) the Minimum Transferor
Interest; (xii) the Enhancement provider, if applicable, and the terms of
any Enhancement with respect to such Series; (xiii) the base rate
applicable to such Series; (xiv) the terms on which the certificates of
such Series may be repurchased or remarketed to other investors; (xv) the
termination date of such Series; (xvi) any deposit into any account
provided for such Series; (xvii) the number of classes of such Series
and, if more than one class, the rights and priorities of each such
class; (xviii) the fees, if any, to be included in funds available to
certificateholders in such Series; (xix) the subordination, if any, of
such Series with respect to any other Series; (xx) the rights, if any, of
the holder of the Exchangeable Transferor Certificate that have been
transferred to the holders of such Series; (xxi) the pool factor
(consisting of a seven-digit decimal expressing the ratio of the invested
amount to the initial invested amount for such Series); (xxii) the
Minimum Aggregate Principal Receivables for such Series; (xxiii) whether
such Series will be part of a group or subject to being paired with any
other Series; (xxiv) whether such Series will be prefunded or paired with
any other Series; and (xxv) any other relevant terms, including whether
or not such Series will be pledged as collateral for an issuance of any
other securities, including commercial paper (all such terms, the
"Principal Terms" of such Series). None of the Transferor, the Servicer,
the Trustee, or the Trust is required or intends to obtain the consent of
any Certificateholder to issue any additional Series or in connection
with the determination of the Principal Terms thereof. However, as a
condition of an Exchange, the holder of the Exchangeable Transferor
Certificate will deliver to the Trustee written confirmation that the
Exchange will not result in either Rating Agency reducing or withdrawing
its rating of any outstanding Series, including the Certificates. The
Transferor may offer any Series to the public or other investors in
transactions either registered under the Securities Act or exempt from
registration thereunder, directly, through the Underwriters or one or
more other underwriters or placement agents, in fixed-price offerings, in
negotiated transactions, or otherwise. Any such Series may be issued in
fully registered or book-entry form in minimum denominations determined
by the Transferor.
The Pooling and Servicing Agreement provides that the holder of the
Exchangeable Transferor Certificate may perform Exchanges and define the
Principal Terms of each Series, including the period during which
amortization of the principal amount thereof is intended to occur, which
period may have a different length and begin on a different date than
such period for any other Series. Accordingly, one or more Series may be
in their amortization periods while other Series are not. Thus, certain
Series may not be amortizing while other Series are amortizing. Moreover,
any Series may have the benefit of an Enhancement that is available only
to such Series. Under the Pooling and Servicing Agreement, the Trustee
will hold any such form of Enhancement only on behalf of the Series with
respect to which it relates. Likewise, with respect to each such form of
Enhancement, the holder of the Exchangeable Transferor Certificate may
deliver a different form of Enhancement agreement. The Pooling and
Servicing Agreement also provides that the holder of the Exchangeable
Transferor Certificate may specify different coupon rates and monthly
servicing fees with respect to each Series (or a particular class within
such Series). Collections allocated to Finance Charge Receivables not
used to pay interest on the certificates, the monthly servicing fee, the
investor default amount, or investor charge-offs with respect to any
Series will be allocated as provided in such Enhancement agreement, if
applicable. The holder of the Exchangeable Transferor Certificate also
has the option under the Pooling and Servicing Agreement to vary between
Series the terms upon which a Series (or a particular class within such
Series) may be repurchased by the Transferor or remarketed to other
investors. Additionally, certain Series may be subordinated to other
Series, and classes within a Series may have different priorities. The
Series 1997-1 Supplement does not permit the subordination of the
Certificates to any other Series that may be issued by the Trust (except
to the limited extent described herein with respect to Shared Principal
Collections and Excess Finance Charge Collections). There is no limit to
the number of Exchanges that may be performed under the Pooling and
Servicing Agreement. The Trust will terminate only as provided in the
Pooling and Servicing Agreement.
Under the Pooling and Servicing Agreement and pursuant to a
Supplement, an Exchange may occur only upon the satisfaction of certain
conditions provided in the Pooling and Servicing Agreement. Under the
Pooling and Servicing Agreement, the holder of the Exchangeable
Transferor Certificate may perform an Exchange by notifying the Trustee
at least five business days in advance of the date upon which the
Exchange is to occur. Under the Pooling and Servicing Agreement, the
notice will state the designation of any Series to be issued on the date
of the Exchange and, with respect to each such Series: (i) its initial
principal amount (or method for calculating such amount), (ii) its
certificate rate (or the method of allocating interest payments or other
cash flows to such Series), and (iii) the provider of the Enhancement, if
any, which is expected to provide credit support with respect to it. The
Pooling and Servicing Agreement provides that on the date of the Exchange
the Trustee will authenticate any such Series only upon delivery to the
Trustee of the following: (i) a Supplement specifying the Principal Terms
of such Series, (ii) an opinion of counsel to the effect that the
certificates of such Series will be characterized as indebtedness or as
partnership interests under existing law for federal income tax purposes
and that the issuance of such Series will not adversely affect the
federal income tax characterization of any outstanding Series, (iii) if
required by such Supplement, the form of Enhancement and an appropriate
Enhancement agreement with respect thereto executed by the Transferor and
the issuer of the Enhancement, (iv) written confirmation from each Rating
Agency that the Exchange will not result in such Rating Agency's reducing
or withdrawing its rating on any then-outstanding Series rated by it, (v)
the existing Exchangeable Transferor Certificate and, if applicable, the
certificates representing the Series to be exchanged, and (vi) an
officer's certificate of the Transferor stating that, after giving effect
to such Exchange, the Transferor Interest would be at least equal to the
Minimum Transferor Interest. Upon satisfaction of such conditions, the
Trustee will cancel the existing Exchangeable Transferor Certificate and
the certificates of the exchanged Series, if applicable, and authenticate
the new Series and a new Exchangeable Transferor Certificate.
PAIRED SERIES
During the Funding Period, Series 1997-1 will be paired with Series
1992-1. For a description of the principal terms of Series 1992-1, see
"Annex I--Other Series." Series 1997-1 will be prefunded from the
proceeds of the sale of the Offered Certificates with an initial deposit
to the Pre-Funding Account in an amount up to the excess of the
outstanding principal balance of the Series 1997-1 Certificates over the
amount on deposit in the principal funding account for the benefit of
Series 1992-1 on the Closing Date. It is estimated that the excess of the
outstanding principal balance of the Series 1997-1 Certificates over the
amount on deposit in the principal funding account for the benefit of
Series 1992-1 will be approximately $_____ million on the Closing Date.
As principal is paid or deposited in the Series 1992-1 Principal Funding
Account an equal amount of funds on deposit in the Pre-Funding Account
will be released (which funds will be distributed to the Transferor) and
the Invested Amount of Series 1997-1 will increase by a corresponding
amount. The expected final payment date for Series 1992-1 is February 17,
1998. If a Pay Out Event occurs with respect to Series 1992-1 or Series
1997-1 during the Funding Period for Series 1997-1, the numerators used
in the Fixed/Floating Allocation Percentage for each of Series 1997-1 and
Series 1992-1 will be reset to be equal to the respective invested
amounts of each such Series at the end of the last day prior to the
occurrence of such Pay Out Event resulting in a possible reduction of the
percentage of Principal Collections allocated to Series 1992-1 if such
event allowed the payment of principal at such time to Series 1997-1 and
required reliance by Series 1992-1 on clause (b) of the denominator of
the Fixed/Floating Allocation Percentage for Series 1992-1. See "Risk
Factors--Master Trust Considerations" and "Description of the Offered
Certificates--Allocation Percentages."
Series 1997-1 is subject to being paired with another Series. The
Series with which Series 1997-1 may be paired either will be prefunded
with an initial deposit to a prefunding account in an amount up to the
initial principal balance of such Paired Series and primarily from the
proceeds of the sale of such Paired Series or will have a variable
principal amount. Any such prefunding account will be held for the
benefit of such Paired Series and not for the benefit of Series 1997-1
Certificateholders. As principal is paid or deposited in the Principal
Funding Account with respect to the Series 1997-1 Certificates, either
(i) in the case of a prefunded Paired Series, an equal amount of funds on
deposit in any prefunding account for such prefunded 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 1997-1 Certificates, 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
portion of the Series 1997-1 Invested Amount paid to the Series 1997-1
Certificateholders since the issuance of such Paired Series. The issuance
of a Paired Series will be subject to the conditions described under "--
Exchanges." There can be no assurance, however, that the terms of any
Paired Series might not have an impact on the timing or amount of
payments received by a Series 1997-1 Certificateholder. If a Pay Out
Event occurs with respect to Series 1997-1, if paired, or any related
Paired Series during the Accumulation Period for Series 1997-1, either
(i) the numerator used in the Fixed/Floating Allocation Percentage for
Series 1997-1 and such related Paired Series will be reset to be equal to
the respective invested amount of each such Series at the end of the last
day prior to the occurrence of such Pay Out Event or (ii) the denominator
of the Fixed/Floating Allocation Percentage for Series 1997-1 may be
increased upon the occurrence of a Pay Out Event with respect to a Paired
Series, in either case resulting in a possible reduction of the
percentage of Principal Collections allocated to Series 1997-1 if such
event allowed the payment of principal at such time to the Paired Series
and required reliance by Series 1997-1 on clause (b) of the denominator
of the Fixed/Floating Allocation Percentage for Series 1997-1. See "Risk
Factors--Master Trust Considerations" and "Description of the Offered
Certificates--Allocation Percentages."
REPRESENTATIONS AND WARRANTIES
Pursuant to the Pooling and Servicing Agreement, the Transferor
represents and warrants that, among other things, subject to specified
exceptions and limitations (i) the Transferor is duly organized, validly
existing, and in good standing under the laws of the state of Delaware
and has the corporate power and authority to execute, deliver, and
perform its obligations under the Pooling and Servicing Agreement, any
Supplement, and the Purchase Agreement, (ii) the execution and delivery
of the Pooling and Servicing Agreement, any Supplement, and the Purchase
Agreement, and the consummation of the transactions provided for therein,
have been duly authorized by the Transferor by all necessary corporate
action on its part, (iii) each of the Pooling and Servicing Agreement,
any Supplement, and the Purchase Agreement constitutes a legal, valid,
and binding obligation of the Transferor, and (iv) the transfer of
Receivables by it to the Trust under the Pooling and Servicing Agreement
constitutes either a valid transfer and assignment to the Trust of all
right, title, and interest of the Transferor in and to the Receivables
and the proceeds thereof (including amounts in any of the accounts
established for the benefit of certificateholders) or the grant of a
first priority security interest (except for Permitted Liens) in such
Receivables and the proceeds thereof (including amounts in any of the
accounts established for the benefit of certificateholders). In the event
of a breach of any of the representations and warranties described in
this paragraph with respect to any Series, either the Trustee or the
holders of certificates evidencing undivided interests in the Trust
aggregating more than 50% of the invested amount of such Series, by
written notice to the Transferor (and to the Trustee and the Servicer if
given by the certificateholders of such Series), may direct the
Transferor to accept reassignment of an amount of Principal Receivables
equal to the invested amount to be repurchased (as described below)
within 60 days of such notice, or within such longer period specified in
such notice. The Transferor will thereupon be obligated to accept
reassignment of such Receivables on a Distribution Date occurring within
such applicable period. Such reassignment will not be required to be
made, however, if at any time during such applicable period, or such
longer period, the representations and warranties shall then be true and
correct in all material respects or such reassignment would cause either
a Pay Out Event to occur or either Rating Agency to reduce or withdraw
its then-current rating on the certificates of any class of any Series.
The amount to be deposited by the Transferor for distribution to
certificateholders in connection with such reassignment will be equal to
the invested amount for all Series of certificates other than the
Variable Funding Certificates required to be repurchased on the last day
of the Monthly Period preceding the Distribution Date on which the
reassignment is scheduled to be made, and, with respect to the Variable
Funding Certificates, the invested amount as of the Distribution Date on
which the reassignment is scheduled to be made, less the amount, if any,
previously allocated for payment of principal to such certificateholders
on such Distribution Date, plus an amount equal to all interest accrued
but unpaid on such certificates at the applicable certificate rate
through such last day of such Monthly Period, less the amount transferred
to the Distribution Account from the Interest Funding Account in respect
of interest on such certificates for the month ending on such last day of
the Monthly Period. The payment of the reassignment deposit amount and
the transfer of all other amounts deposited for the preceding month in
the Distribution Account will be considered a payment in full of the
investor interest for all Series of certificates required to be
repurchased and will be distributed upon presentation and surrender of
the certificates for each such Series. If the Trustee or
certificateholders give a notice as provided above, the obligation of the
Transferor to make any such deposit will constitute the sole remedy
available to the Trustee and the certificateholders with respect to any
breach of the Transferor's representations and warranties.
Pursuant to the Pooling and Servicing Agreement, the Transferor
also represents and warrants that, among other things, subject to
specified exceptions and limitations, (i) the execution and delivery of
the Pooling and Servicing Agreement, any Supplement, and the Purchase
Agreement, and the performance of the transactions contemplated thereby,
do not contravene the Transferor's charter or by-laws, violate any
provision of law applicable to it or require any filing (except for
filing under the UCC), registration, consent, or approval under any such
law except for such filings, registrations, consents, or approvals as
have already been obtained and are in full force and effect, (ii) the
Transferor has filed all tax returns required to be filed and has paid or
made adequate provision for the payment of all taxes, assessments, and
other governmental charges due from the Transferor, (iii) there are no
proceedings or investigations pending or, to the best knowledge of the
Transferor, threatened against the Transferor, before any court,
regulatory body, administrative agency, or other tribunal or governmental
instrumentality asserting the invalidity of the Pooling and Servicing
Agreement, any Supplement, and the Purchase Agreement, seeking to prevent
the consummation of any of the transactions contemplated thereby, seeking
any determination or ruling that would materially and adversely affect
the performance by the Transferor of its obligations thereunder, or
seeking any determination or ruling that would materially and adversely
affect the validity or enforceability thereof or of the tax attributes of
the Trust, (iv) each Receivable is or will be an account receivable
arising out of the Transferor's performance in accordance with the terms
of the Charge Account Agreement giving rise to such Receivable, the
Transferor has no knowledge of any fact which should have led it to
expect at the time of the classification of any Receivable as an Eligible
Receivable that such Eligible Receivable would not be paid in full when
due, and each Receivable classified as an "Eligible Receivable" by the
Transferor in any document or report delivered under the Pooling and
Servicing Agreement satisfies the requirements of eligibility contained
in the definition of Eligible Receivable set forth on the Pooling and
Servicing Agreement, and (v) the Transferor is not an "investment
company" within the meaning of the Investment Company Act. If any
representation or warranty made by the Transferor in the Pooling and
Servicing Agreement or the Supplement proves to have been incorrect in
any material respect when made, and continues to be incorrect for 60 days
after notice to the Transferor by the Trustee or to the Transferor and
the Trustee by more than 50% of the certificateholders' interest and as a
result the interest of the certificateholders are materially adversely
affected, and continue to be materially adversely affected during such
period, then the Trustee or 50% of the certificateholders' interest of
any class may give notice to the Transferor (and to the Trustee in the
latter instance) declaring that a Pay Out Event has occurred, thereby
commencing the Early Amortization Period; provided, however, that a Pay
Out Event will not be deemed to have occurred as aforesaid if the
Transferor has accepted a reassignment of the affected Receivables during
such period in accordance with the Pooling and Servicing Agreement. See
"--Pay Out Events."
The Trustee has not made, and it is not anticipated that the
Trustee will make, any general examination of the Receivables or any
records relating to the Receivables for the purpose of establishing the
presence or absence of defects or compliance with the Transferor's
representations and warranties or for any other purpose. The Servicer,
however, is required to deliver to the Trustee on or before March 31 of
each year an opinion of counsel with respect to the validity of the
security interest of the Trust in and to the Receivables and certain
other components of the Trust.
CERTAIN COVENANTS
Pursuant to the Pooling and Servicing Agreement, the Transferor
covenants that, among other things, subject to specified exceptions and
limitations, (i) it will take no action to cause any Receivable to be
evidenced by any instruments or to be anything other than an account,
general intangible, or chattel paper, (ii) except for the conveyances
under the Pooling and Servicing Agreement, it will not sell any
Receivable or grant a lien (other than a Permitted Lien) on any
Receivable, (iii) it will comply with and perform its obligations under,
and will cause each Originator to comply with and perform its obligations
under, any Charge Account Agreement to which it is a party and its credit
and collection policies and it will not change the terms of such
agreements or policies except as provided in the Pooling and Servicing
Agreement, (iv) in the event it is unable for any reason to transfer
Receivables to the Trust, it will nevertheless continue to allocate and
pay all collections from all Receivables to the Trust, (v) in the event
it receives a collection on any Receivables, it will pay such collection
to the Servicer as soon as practicable, (vi) it will notify the Trust
promptly after becoming aware of any lien on any Receivable other than
Permitted Liens, (vii) it will engage in no other business other than the
business contemplated under the Pooling and Servicing Agreement and the
Purchase Agreement, (viii) it will take all actions necessary to enforce
its rights and claims under the Purchase Agreement, (ix) other than with
respect to In-Store Payments, it will not commingle its assets with those
of Federated or any affiliate of Federated, and (x) it will not acquire
receivables from any person other than an Originator.
ELIGIBLE ACCOUNTS; ELIGIBLE RECEIVABLES
An "Eligible Account" means, as of the Closing Date (or, with
respect to Automatic Additional Accounts and Supplemental Accounts, as of
the date the Receivables arising in such Accounts are designated for
inclusion in the Trust), each Account owned by an Originator (a) which is
payable in United States dollars, (b) which has not been identified by
such Originator in its computer files as an account as to which such
Originator or the Servicer has any confirmed record of any fraud-related
activity by the Obligor on such account, (c) which has not been sold or
pledged to any other party and which does not have Receivables which have
been sold or pledged to any other party, (d) which was created in
accordance with the credit and collection policies of such Originator at
the time of creation of such account or the Receivables of which each
Rating Agency permits to be added automatically to the Trust, (e) the
Receivables in which such Originator has not charged off in its customary
and usual manner for charging off Receivables in such Accounts as of the
Closing Date (or, with respect to Supplemental Accounts and Automatic
Additional Accounts, as of the date the Receivables of such Accounts are
designated for inclusion in the Trust unless such Account is subsequently
reinstated), and (f) is not an Automatic Additional Account designated by
the Transferor to be included as an Account after the occurrence of
certain events or in excess of certain limitations specified below
(unless the Rating Agencies shall have consented to the inclusion of such
Automatic Additional Account as an Eligible Account). The limitations
referred to in the immediately preceding sentence are designed, in
general, to limit the number of Automatic Additional Accounts to be added
as Eligible Accounts on any day without Rating Agency consent to a number
that does not exceed the lesser of (i) 20% of the sum of (a) the number
of Active Accounts as of the later of the Closing Date and the last day
of the twelfth preceding Monthly Period, (b) the number of Automatic
Additional Accounts that were thereafter added with Rating Agency
consent, and (c) the number of Supplemental Accounts that were thereafter
added, minus the number of Removed Accounts that were thereafter removed,
and (ii) 15% of the sum of (a) the number of Active Accounts as of the
later of the Closing Date and the last day of the third preceding Monthly
Period, (b) the number of Automatic Additional Accounts that were
thereafter added with Rating Agency consent, and (c) the number of
Supplemental Accounts that were thereafter added, minus the number of
Removed Accounts that were thereafter removed. The term "Active Account"
means, as of any particular day, any Account in which there has been
either purchase or merchandise return activity during the preceding 12
Monthly Periods.
An "Eligible Receivable" means each Receivable that satisfies the
following criteria: (a) it arises under an Eligible Account, (b) it
constitutes an "account," a "general intangible," or "chattel paper" as
defined in Article 9 of the UCC as then in effect in the Relevant UCC
State, (c) it is the legal, valid, and binding obligation of a person who
(i) is living, (ii) is not a minor under the laws of his/her state of
residence, and (iii) is competent to enter into a contract and incur
debt, (d) it and the underlying Charge Account Agreement do not
contravene in any material respect any laws, rules, or regulations
applicable thereto (including, without limitation, rules and regulations
relating to truth in lending, fair credit billing, fair credit reporting,
equal credit opportunity, fair debt collection practices, and privacy)
that could reasonably be expected to have an adverse impact on the amount
of collections thereunder, and the Originator of such Receivable is not
in violation of any such laws, rules, or regulations in any respect
material to such Charge Account Agreement, (e) all material consents,
licenses, or authorizations of, or registrations with, any governmental
authority required to be obtained or given in connection with the
creation of such Receivable or the execution, delivery, creation, and
performance of the underlying Charge Account Agreement have been duly
obtained or given and are in full force and effect as of the date of the
creation of such Receivables, (f) at the time of its transfer to the
Trust, the Transferor or the Trust will have good and marketable title
free and clear of all liens and security interests arising under or
through the Transferor (other than Permitted Liens), (g) it is not, at
the time of its transfer to the Trust, a Receivable in a Defaulted
Account, and (h) it arises under a Charge Account Agreement that has been
duly authorized and which, together with such Receivable, is in full
force and effect and constitutes the legal, valid, and binding obligation
of the Obligor of such Receivable enforceable against such Obligor in
accordance with its terms and is not subject to any dispute, offset,
counterclaim, or defense whatsoever (except the discharge in bankruptcy
of such Obligor).
AUTOMATIC ADDITION OF ACCOUNTS
All Accounts created by the Originators that meet the definition of
"Automatic Additional Accounts" will be included as Accounts from and
after the date upon which such Automatic Additional Accounts are created
and all Receivables in such Automatic Additional Accounts, whether such
Receivables are then existing or thereafter created will be transferred
automatically to the Trust upon purchase by the Transferor. An "Automatic
Additional Account" is a consumer revolving credit card account (i) which
is originated by an Originator during the normal operation of such
Originator's credit card business and is not acquired by the Transferor
or such Originator from another credit card issuer, (ii) which was in
existence and owned by such Originator and the Receivable of which had
been transferred to the Transferor pursuant to the Receivables Purchase
Agreement on the date on which Receivables generated in such account are
to be added to the Trust and is in existence at the close of business on
the date that Receivables generated therein are designated for inclusion
in the Trust, (iii) which is payable in United States dollars, and (iv)
the Receivables in which have not been charged off prior to the date of
their designation for inclusion in the Trust. Automatic Additional
Accounts will also consist of any other consumer credit card accounts,
the Receivables from which each Rating Agency permits to be added
automatically to the Trust. The Transferor may also designate from time
to time additional accounts purchased by the Originators or generated by
persons that have become additional Originators in accordance with the
terms of the Pooling and Servicing Agreement to be included as Automatic
Additional Accounts if the Transferor has notified the Rating Agencies of
such proposed designation and has received confirmation that such
designation will not result in a downgrading of the then current rating
of any outstanding Series. The Transferor, at its option, may terminate
or suspend the inclusion of Automatic Additional Accounts at any time. If
the Transferor has terminated or suspended the inclusion of Automatic
Additional Accounts, the Transferor may, and in certain circumstances
will be required to, add additional accounts ("Supplemental Accounts")
the Receivables of which will be designated for transfer to the Trust.
For all purposes of the Pooling and Servicing Agreement, all Receivables
arising under such Automatic Additional Accounts will be treated as
Receivables upon their creation. In connection with the sale of any such
Receivables to the Transferor, the Originator will satisfy all applicable
requirements of the Purchase Agreement.
REMOVAL OF ACCOUNTS
Subject to the conditions set forth in the next sentence, on each
Determination Date on which the Transferor Interest exceeds 17% of
aggregate Principal Receivables with respect to such Determination Date,
the Transferor may, but will not be obligated to, (i) cause the
Receivables in certain Accounts designated by the Transferor to no longer
be transferred to the Trust and (ii) accept the transfer from the Trust
of all Receivables and proceeds thereof from certain Accounts (the
"Removed Accounts"), without notice to the Certificateholders, subject in
each case to the maintenance of at least the amount of aggregate
Principal Receivables required to be maintained pursuant to the Pooling
and Servicing Agreement and any Supplement. There may be no more than one
such removal with respect to any Monthly Period.
The Transferor is permitted to designate and require reassignment
to it of the Receivables from Removed Accounts only upon satisfaction of
the following conditions: (i) the Trustee shall have executed and
delivered to the Transferor a written reassignment and the Transferor
shall have delivered a computer file or microfiche list containing a true
and complete list of all Accounts the Receivables under which will
continue to be transferred to the Trust after such removal, such Accounts
to be identified by, among other things, account number and aggregate
amount of Principal Receivables, (ii) the Transferor shall represent and
warrant that no selection procedure used by the Transferor which is
adverse to the interests of the Certificateholders was utilized in
selecting the Removed Accounts, (iii) the removal of any Receivables of
any Removed Accounts shall not, in the reasonable belief of the
Transferor, cause a Pay Out Event to occur, (iv) the Transferor shall
have delivered twenty days' prior written notice of the removal to each
Rating Agency which has rated any outstanding Series and, prior to the
date on which such Receivables are to be removed, shall have received
confirmation from any Rating Agency of its intention not to reduce or
withdraw the rating of any Series of certificates as a result of such
removal, and (v) the Transferor shall have delivered to the Trustee an
officer's certificate confirming the items set forth in clauses (i)
through (iv) above. Notwithstanding the foregoing, the Transferor will be
permitted to designate Removed Accounts in connection with the sale by
Federated or any affiliate of Federated of all or substantially all of
the capital stock or assets of any Originator if the conditions in
clauses (i), (iii), and (iv) above shall have been met and the Transferor
shall have delivered to the Trustee an officer's certificate confirming
such items. Under these circumstances, subject to the terms and
conditions of the Pooling and Servicing Agreement, the Transferor will
have the option either to accept the transfer from the Trust of all
Receivables and proceeds thereof in such Removed Accounts or to leave
such Receivables and the proceeds thereof in the Trust. In addition, the
Transferor will be permitted to deposit funds in the Excess Funding
Account in connection with any such designation of Removed Accounts to
the extent necessary to permit such designation.
COLLECTION AND OTHER SERVICING PROCEDURES
Pursuant to the Pooling and Servicing Agreement, the Servicer will
be responsible for servicing, enforcing, and administering the
Receivables and collecting payment due thereunder in accordance with its
usual and customary servicing procedures and credit and collection
policies. Servicing functions to be performed by the Servicer with
respect to the Receivables include statement processing and mailing,
collecting and recording payments, investigating payment delinquencies,
and communicating with cardholders. Managerial functions to be performed
by the Servicer on behalf of the Trust include maintaining books and
records with respect to the foregoing and other matters pertinent to the
Receivables, assisting the Trustee with any inspections of such books and
records by the Trustee pursuant to the Pooling and Servicing Agreement,
preparing and delivering the monthly and annual statements described in
"--Reports to Certificateholders," and causing a firm of independent
public accountants to prepare and deliver the annual reports described in
"--Evidence as to Compliance."
TRUST ACCOUNTS
The Servicer maintains, in the name of the Trust for the benefit of
certificateholders of all Series, a "Collection Account," which is a
non-interest bearing segregated account established and maintained with
the Servicer or with a "Qualified Institution." The Trustee maintains,
for the benefit of the Certificateholders, an "Interest Funding Account,"
a "Principal Account," a "Principal Funding Account" and a "Pre-Funding
Account," each of which is a segregated trust account with the Trustee.
The Trustee also maintains, for the benefit of the Certificateholders, a
"Distribution Account," which is a non-interest bearing segregated demand
deposit account established with a Qualified Institution. A Qualified
Institution is a depository institution, which may include the Trustee,
which is acceptable to the Rating Agencies. Funds in the Principal
Account, Principal Funding Account, and the Interest Funding Account will
be invested, at the direction of the Servicer, in (i) obligations fully
guaranteed by the United States of America, (ii) time deposits,
promissory notes, or certificates of deposit of depository institutions
or trust companies, the certificates of deposit of which are rated P-1 by
Moody's and A-1+ by Standard & Poor's, (iii) commercial paper having, at
the time of the Trust's investment, a rating of P-1 by Moody's and A-1+
by Standard & Poor's, (iv) bankers acceptances issued by any depository
institution or trust company described in clause (ii) above, (v) money
market funds rated P-1 by Moody's and AAA-m or AAA-mg by Standard &
Poor's or otherwise approved in writing by each Rating Agency, (vi)
certain open end diversified investment companies which the Rating Agency
designates in writing will not result in a withdrawal or downgrading of
its then current rating of any Series then rated by it, (vii) Eurodollar
time deposits that have been rated P-1 by Moody's and A-1+ by Standard &
Poor's, and (viii) any other investment that the Rating Agencies confirm
in writing will not adversely affect their respective then current
ratings of any outstanding Series of certificates (such investments,
"Cash Equivalents"). Any earnings (net of losses and investment expenses)
on funds in the Interest Funding Account or the Principal Account will be
paid to the Servicer. Investment earnings relating to amounts and
deposits in the Principal Funding Account will be treated as Available
Series Finance Charge Collections. The Servicer has the revocable power
to withdraw funds from the Collection Account, and to instruct the
Trustee to make withdrawals and payments from the Interest Funding
Account and the Principal Account, in each case for the purpose of making
deposits and distributions required under the Pooling and Servicing
Agreement, including the deposits and distributions described in
"--Application of Collections." The paying agent appointed pursuant to
the Pooling and Servicing Agreement (the "Paying Agent") has the
revocable power to withdraw funds from the Distribution Account for the
purpose of making distributions to Certificateholders. The Paying Agent
initially will be the Trustee.
EXCESS FUNDING ACCOUNT
At any time during which no Series is in an accumulation or
amortization period (including any early amortization period), or for a
Series in amortization, the principal funding account, if any, is fully
funded for an applicable period, and the Transferor Interest does not
exceed the Minimum Transferor Interest, funds (to the extent available
therefor as described herein) otherwise payable to the Transferor will be
deposited in the Excess Funding Account on any business day until the
Transferor Interest is at least equal to the Minimum Transferor Interest.
Funds on deposit in the Excess Funding Account will be withdrawn and paid
to the Transferor to the extent that on any day the Transferor Interest
exceeds the Minimum Transferor Interest as a result of an increase in the
aggregate amount of Principal Receivables in the Trust or allocated to
one or more Series when they are in accumulation or amortization periods
(including any early amortization period). Such deposits in and
withdrawals from the Excess Funding Account may be made on a daily basis.
In addition to the foregoing, the Transferor may, at its option on any
business day, deposit funds in the Excess Funding Account to the extent
necessary to maintain the Minimum Transferor Interest or the Minimum
Aggregate Principal Receivables or to permit the designation of Removed
Accounts as described in "--Removal of Accounts."
Any funds on deposit in the Excess Funding Account at the beginning
of the Accumulation Period will be deposited in the Principal Funding
Account to the extent of Class A Monthly Principal, Class B Monthly
Principal, or Class C Monthly Principal, as applicable, for any
Distribution Date. In addition, no funds will be deposited in the Excess
Funding Account during any accumulation period, amortization period, or
early amortization period for any Series until the Principal Funding
Account for such Series for such Distribution Date has been fully funded
or the investor certificates of such Series have been paid in full.
Funds on deposit in the Excess Funding Account will be invested by
the Trustee at the direction of the Transferor in Cash Equivalents
maturing on the next business day. On each Distribution Date, all net
investment income earned on amounts in the Excess Funding Account since
the preceding Distribution Date will be withdrawn from the Excess Funding
Account and applied as described herein.
PRE-FUNDING ACCOUNT
The Servicer will establish and maintain the Pre-Funding Account
with the trust department of The Chase Manhattan Bank in the name of the
Trustee, on behalf of the Trust. Funds on deposit in the Pre-Funding
Account will be withdrawn and paid to the Transferor in accordance with
Series 1997-1 Supplement to the extent of any increases in the Invested
Amount during the Funding Period as a result of principal payments to or
deposits for the benefit of the Series 1992-1 Certificates. Following the
occurrence of a Pay Out Event, any amounts remaining on deposit in the
Pre-Funding Account will be payable as principal first to the Class A
Certificateholders until the sum of the Class A Invested Amount and the
Class A Pre-Funded Amount is paid in full, then to the Class B
Certificateholders until the sum of the Class B Invested Amount and the
Class B Pre-Funded Amount is paid in full. In the absence of a Pay Out
Event, any amount in the Pre-Funding Account at the end of the Funding
Period will be withdrawn and distributed on the next succeeding
Distribution Date to the Class A Certificateholders and the Class B
Certificateholders pro rata based on the Class A Invested Amount and the
Class B Invested Amount.
[If the Pre-Funded Amount is greater than zero on the first day of
the __________ Monthly Period and no Pay Out Event shall have occurred, a
prepayment premium (the "Class A Prepayment Premium") will be payable to
the Class A Certificateholders in connection with the distribution of any
Pre-Funded Amount to the Class A Certificateholders in an amount equal to
the excess, if any, discounted as described below, of (i) the amount of
interest that would accrue on an amount equal to the Class A Percentage
of the remaining Pre-Funded Amount (the "Class A Prepayment Amount") at
the interest rate borne by the Class A Certificates during the period
commencing on and including the Distribution Date on which such Class A
Prepayment Amount is required to be distributed to Class A
Certificateholders to but excluding the __________ Distribution Date,
over (ii) the amount of interest that would have accrued on such Class A
Prepayment Amount over the same period at a per annum rate of interest
equal to the yield to maturity on the Determination Date preceding such
Distribution Date on the ___% United States Treasury Notes due
__________. Such excess shall be discounted to present value to such
Distribution Date at the yield described in clause (ii) above.]
[If the Pre-Funded Amount is greater than zero on the first day of
the __________ Monthly Period and no Pay On Event shall have occurred, a
prepayment premium (the "Class B Prepayment Premium") will be payable to
the Class B Certificateholders in connection with the distribution of any
Pre-Funded Amount to the Class B Certificateholders, in an amount equal
to the excess, if any, discounted as described below, of (i) the amount
of interest that would accrue on an amount equal to the Class B
Percentage of the remaining Pre-Funded Amount (the "Class B Prepayment
Amount") at the interest rate borne by the Class B Certificates during
the period commencing on and including the Distribution Date on which
such Class B Prepayment Amount is required to be distributed to Class B
Certificateholders to but excluding the __________ Distribution Date over
(ii) the amount of interest that would have accrued on such Class B
Prepayment Amount over the same period at a per annum rate of interest
equal to the yield to maturity on the Determination Date preceding such
Distribution Date on the ___% United States Treasury Notes due
__________. Such excess shall be discounted to present value to such
Distribution Date at the yield described in clause (ii) above.]
[The Trust's obligation to pay the Class A Prepayment Premium and
the Class B Prepayment Premium will be limited to the amount of Available
Series Finance Charge Collections, Transferor Finance Charge Collections,
and Excess Finance Charge Collections available for such purpose. See
"--Application of Collections--Payment of Fees, Interest, and Other
Items" and "--Reallocation of Cash Flows." No other assets of the Trust
will be available for the purpose of making such payments.]
All amounts on deposit in the Pre-Funding Account will be invested
by the Trustee at the direction of the Servicer in Cash Equivalents. On
each Distribution Date with respect to the Funding Period, all investment
income earned on amounts in the Pre-Funding Account since the preceding
Distribution Date will be withdrawn from the Pre-Funding Account and
deposited into the Collection Account for application as Available Series
Finance Charge Collections.
ALLOCATION OF COLLECTIONS
The Receivables in the Trust are divided into two components:
Principal Receivables and Finance Charge Receivables. At any time,
Finance Charge Receivables will be equal to the product of the Finance
Charge Receivable Factor and the aggregate amount of Eligible Receivables
as of the date of determination and Principal Receivables will be equal
to the remainder of such Eligible Receivables.
The Servicer will allocate collections on the Receivables on each
business day between Finance Charge Collections and Principal Collections
in the manner described in the definitions thereof.
ALLOCATION PERCENTAGES
Pursuant to the Pooling and Servicing Agreement, during each
Monthly Period the Servicer will allocate among the Class A
Certificateholders' Interest, the Class B Certificateholders' Interest,
the Class C Certificateholders' Interest, the Transferor Interest, and
interests of the holders of the other Series issued and outstanding from
time to time pursuant to the Pooling and Servicing Agreement and
applicable Supplements all collections on Finance Charge Receivables and
all collections on Principal Receivables and the amount of all
Receivables in Defaulted Accounts. Collections on Finance Charge
Receivables prior to the date on which a Pay Out Event is deemed to have
occurred, Collections of Principal Receivables prior to the Amortization
Period Commencement Date, and the amount of Receivables in Defaulted
Accounts at all times, will be allocated to the Class A
Certificateholders' Interest, the Class B Certificateholders' Interest,
and the Class C Certificateholders' Interest based on the percentage
equivalent of the ratio that the amount of the Class A Adjusted Invested
Amount, the Class B Invested Amount, or the Class C Invested Amount,
respectively, as of the end of the preceding business day bears to the
greater of (a) the total amount of Principal Receivables and amounts on
deposit in the Excess Funding Account as of the end of the preceding
business day and (b) the sum of the numerators used to calculate the
applicable allocation percentages for all classes of all Series then
outstanding (the "Class A Floating Allocation Percentage," the "Class B
Floating Allocation Percentage," and the "Class C Floating Allocation
Percentage," respectively; the sum of such percentages being the
"Floating Allocation Percentage"). On any business day during the initial
Monthly Period, each of the Class A Floating Allocation Percentage, the
Class B Floating Allocation Percentage, and the Class C Floating
Allocation Percentage will be equal to the percentage equivalent of the
ratio which each of the initial Class A Invested Amount, the initial
Class B Invested Amount, and the initial Class C Invested Amount,
respectively, bears to the total amount of Principal Receivables as of
the end of the preceding business day. During the Revolving Period, all
Net Principal Collections allocable to the Certificates will be allocated
and paid to the Transferor (except for Shared Principal Collections paid
to the holders of certificates of other Series, if any). On any business
day the "Fixed/Floating Allocation Percentage" shall mean: (i) with
respect to Principal Collections on and after the Amortization Period
Commencement Date, the percentage equivalent of the ratio which the
Invested Amount at the end of the last day of the Revolving Period bears
to 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 allocation percentages with respect to Principal
Receivables for all classes of all Series outstanding on such business
day; provided, however, that, because the Certificates are subject to
being paired with a future prefunded Series, if a Pay Out Event occurs
with respect to the Certificates during the Accumulation Period, and if
at such time the Certificates are paired with a prefunded Series, the
numerator will be reset to be equal to the Invested Amount at the end of
the last day prior to the occurrence of such Pay Out Event; or (ii) with
respect to Finance Charge Collections on and after the occurrence of a
Pay Out Event, the percentage equivalent of a fraction, the numerator of
which is the Invested Amount at the end of the business day preceding the
occurrence of the Pay Out Event and the denominator of which is the
greater of (a) the sum of the aggregate amount of Principal Receivables
in the Trust and the amount on deposit in the Excess Funding Account as
of the end of the preceding business day and (b) the sum of the
numerators used to calculate the allocation percentages with respect to
Finance Charge Collections with respect to all classes of all Series then
outstanding on such business day.
As used herein: (i) the term "Class A Invested Amount" for any day
means an amount (not less than zero) equal to (a) the initial principal
balance of the Class A Certificates less the Class A Percentage on the
Closing Date of the initial deposit to the Pre-Funding Account, plus the
Class A Percentage of any withdrawals from the Pre-Funding Account during
the Funding Period, minus (b) the aggregate amount of principal payments
made to Class A Certificateholders prior to such date, and minus (c) the
excess, if any, of the aggregate amount of Class A Investor Charge-Offs
for all business days preceding such date over the aggregate amount of
any reimbursements of Class A Investor Charge-Offs for all business days
preceding such date; (ii) the term "Class A Adjusted Invested Amount" for
any date means an amount (not less than zero) equal to the Class A
Invested Amount minus the aggregate principal amount on deposit in the
Principal Funding Account; (iii) the term "Class B Invested Amount" for
any date means an amount (not less than zero) equal to (a) the initial
principal balance of the Class B Certificates, less the Class B
Percentage on the Closing Date of the initial deposit to the Pre-Funding
Account, plus the Class B Percentage of any withdrawals from the
Pre-Funding Account during the Funding Period, minus (b) the aggregate
amount of principal payments made to Class B Certificateholders prior to
such date, minus (c) the aggregate amount of Class B Investor Charge-Offs
for all prior business days, including the amount by which the Class B
Invested Amount has been reduced to fund the Investor Default Amount on
all prior business days as described under "--Investor Charge-Offs,"
minus (d) the aggregate amount of Reallocated Class B Principal
Collections for which the Class C Invested Amount has not been reduced
for all prior Distribution Dates, and plus (e) the aggregate amount of
Available Series Finance Charge Collections, Transferor Finance Charge
Collections, Excess Finance Charge Collections, and Transferor
Subordination Amount applied on all prior business days for the purpose
of reimbursing amounts deducted pursuant to the foregoing clauses (c) and
(d); (iv) the term "Class C Invested Amount" means an amount (not less
than zero) equal to (a) the initial principal balance of the Class C
Certificates, minus (b) the aggregate amount of principal payments made
to Class C Certificateholders prior to such date, minus (c) the aggregate
amount of Class C Investor Charge-Offs for all prior business days, equal
to the amount by which the Class C Invested Amount has been reduced to
fund the Investor Default Amount on all prior Distribution Dates as
described under "--Investor Charge-Offs," minus (d) the aggregate amount
of Reallocated Principal Collections for all prior Distribution Dates,
and plus (e) the aggregate amount of Available Series Finance Charge
Collections, Transferor Finance Charge Collections, and Excess Finance
Charge Collections applied on all prior business days for the purpose of
reimbursing amounts deducted pursuant to the foregoing clauses (c) and
(d); (v) the term "Invested Amount" means the sum of the Class A Adjusted
Invested Amount, the Class B Invested Amount, and the Class C Invested
Amount; and (vi) the term "Transferor Percentage" means (a) when used
with respect to Principal Collections during the Revolving Period and
Finance Charge Collections and the amount of Receivables in Defaulted
Accounts at all times, 100% minus the sum of the Floating Allocation
Percentage and the floating allocation percentages for all other Series
and (b) when used with respect to Principal Collections during the
Accumulation Period or any Early Amortization Period, 100% minus the sum
of the Fixed/Floating Allocation Percentage and the allocation
percentages used with respect to Principal Collections for all other
Series.
As a result of the Floating Allocation Percentage, Finance Charge
Collections and the portion of Defaulted Receivables allocated to the
Certificateholders will change each business day based on the
relationship of the Class A Adjusted Invested Amount, the Class B
Invested Amount, and the Class C Invested Amount to the total amount of
Principal Receivables on the preceding business day. The numerator of the
percentages of Principal Collections allocable to the Certificateholders,
however, will remain fixed during the Amortization Period. Principal
Collections allocable to the Class B Certificates and the Class C
Certificates are subject to possible reallocation for the benefit of the
Class A Certificateholders as described under "--Reallocated Principal
Collections."
REALLOCATION OF CASH FLOWS
On each business day the Servicer will determine the Required
Amount, if any. To the extent that any amounts are on deposit in the
Principal Funding Account or the Excess Funding Account on any business
day, the Servicer will determine the amount, if any, equal to the excess
of (x) the product of (a) the Base Rate and (b) the product of (i) the
aggregate amounts on deposit in the Excess Funding Account and the
Principal Funding Account and (ii) the number of days elapsed since the
previous business day divided by the actual number of days in such year
over (y) the aggregate amount of all earnings since the previous business
day available from the Cash Equivalents in which funds on deposit in the
Excess Funding Account and the Principal Funding Account are invested
(the "Negative Carry Amount"). The Servicer will apply an amount of
Finance Charge Collections otherwise allocable to the Exchangeable
Transferor Certificate equal to the least of (i) the Required Amount,
(ii) the product of the Transferor Percentage, the Finance Charge
Collections, and the Series Allocation Percentage ("Transferor Finance
Charge Collections") on such business day, and (iii) the Negative Carry
Amount for such business day in the manner specified for application of
Finance Charge Collections.
To the extent of any remaining Required Amount, the Servicer will
apply all or a portion of the Excess Finance Charge Collections of other
Series with respect to such business day allocable to the Certificates in
an amount equal to the Required Amount. Excess Finance Charge Collections
allocated to the Certificates for any business day will be 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 (as reduced by amount
applied pursuant to the preceding paragraph) 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.
On and after the Class B Principal Payment Commencement Date, to
the extent of any shortfall in the amount available to make required
payments of interest accrued with respect to the outstanding aggregate
principal amount of the Class B Certificates and to cover the Investor
Default Amount or any Class B Investor Charge-Offs which remain unpaid
after the application of Transferor Finance Charge Collections and Excess
Finance Charge Collections, Principal Collections and any remaining
Finance Charge Collections allocated to the holder of the Exchangeable
Transferor Certificate in an amount not to exceed the least of (i) the
Transferor Subordination Amount, (ii) the Transferor Interest on such
day, and (iii) the amount of such shortfall will be treated as Finance
Charge Collections allocable to the payment of such shortfall on the
Class B Certificates.
To the extent of the lesser of (i) any remaining Required Amount
and (ii) the Negative Carry Amount minus the amount applied with respect
thereto from Finance Charge Collections allocable to the Exchangeable
Transferor Certificate, the Transferor may, at its option, contribute to
the Trust such amount to be applied in the manner specified for
application of Finance Charge Collections.
REALLOCATED PRINCIPAL COLLECTIONS
On each Distribution Date the Servicer will apply or cause the
Trustee to apply an amount, not to exceed the Class C Invested Amount,
equal to the product of (a)(i) during the Revolving Period, the Class C
Floating Allocation Percentage or (ii) during an Amortization Period, the
Class C Fixed/Floating Allocation Percentage, and (b) the amount of
Principal Collections with respect to the related Monthly Period in the
following priority (the collections applied in accordance with clause (a)
below being "Reallocated Class C Principal Collections"):
(a) an amount equal to the sum of (i) the Class A Required
Amount with respect to the related Monthly Period and (ii) the
Class B Required Amount with respect to the related Monthly Period
will be applied first to the components of the Class A Required
Amount and then to the components of the Class B Required Amount in
the same priority as such components are applied from Available
Series Finance Charge Collections as described in "--Application
of Collections--Payment of Fees, Interest, and Other Items;" and
(b) any remaining amount will, on each Distribution Date with
respect to the Revolving Period, be applied as Shared Principal
Collections, and on each Distribution Date with respect to an
Amortization Period, be included in the funds available to make
principal payments to the Class A Certificateholders until the
Class A Invested Amount is paid in full and then to the Class B
Certificateholders until the Class B Invested Amount is paid in
full and then to the Class C Certificateholders until the Class C
Invested Amount is paid in full.
On each Distribution Date, the Servicer will apply or cause the
Trustee to apply an amount, not to exceed the Class B Invested Amount,
equal to the product of (a)(i) during the Revolving Period, the Class B
Floating Allocation Percentage or (ii) during an Amortization Period, the
Class B Fixed/Floating Allocation Percentage, and (b) the amount of
Principal Collections with respect to the related Monthly Period in the
following priority (the collections applied in accordance with clause (a)
below being "Reallocated Class B Principal Collections" and the sum of
Reallocated Class C Principal Collections and Reallocated Class B
Principal Collections being "Reallocated Principal Collections"):
(a) an amount equal to the excess, if any, of the Class A
Required Amount with respect to the related Monthly Period over the
amount of Reallocated Class C Principal Collections applied with
respect thereto for the related Monthly Period will be applied
first to the remaining components of the Class A Required Amount in
the same priority as such components are applied from Available
Series Finance Charge Collections as described in "--Application
of Collections--Payment of Fees, Interest, and Other Items;" and
(b) any remaining amount not applied in the foregoing manner
will, on each Distribution Date with respect to the Revolving
Period, be applied as Shared Principal Collections, and on each
Distribution Date with respect to an Amortization Period, be
included in the funds available to make principal payments to the
Class A Certificateholders until the Class A Invested Amount is
paid in full and then to the Class B Certificateholders until the
Class B Invested Amount is paid in full.
On each Transfer Date the Class C Invested Amount will be reduced
by the amount of Reallocated Principal Collections for the related
Monthly Period. In the event that such reduction 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 reallocation of Principal Collections would
cause the Class B Invested Amount to be a negative number on any business
day, the amount of Class B Reallocated Principal Collections on such
business day will be an amount not to exceed the amount which would cause
the Class B Invested Amount to be reduced to zero.
APPLICATION OF COLLECTIONS
Allocations. Obligors make payments on the Receivables (i) to
Lock-Box Accounts maintained by Lock-Box Banks pursuant to Lock-Box
Agreements, (ii) to the Servicer, who deposits all such payments in
Lock-Box Accounts no later than the second business day following
receipt, or (iii) as In-Store Payments. All collections on Receivables of
amounts due and owing to the Trustee represented by the Receivables
deposited in the Lock-Box Accounts will, pending remittance to the
Collection Account, be held for the benefit of the Trust and will be
deposited into the Collection Account as promptly as possible after the
date of processing of such collections. In-Store Payments will be
deposited in the Collection Account as promptly as possible after the
date of processing of such collections, but in no event later than the
second business day following such date of processing. On the same day as
any such deposit to the Collection Account is made, the Servicer makes
the deposits and payments to the accounts and parties as indicated below;
provided, however, that for as long as FDS or any affiliate of FDS
remains the Servicer under the Pooling and Servicing Agreement, and
(a)(i) the Servicer provides to the Trustee a letter of credit or other
form of Enhancement covering the risk of collection of the Servicer
acceptable to the Rating Agency and (ii) the Transferor shall not have
received a notice from the Rating Agency that such letter of credit or
other form of Enhancement would result in the lowering of such Rating
Agency's then-existing rating of any Series of certificates then
outstanding, (b) the Servicer has and maintains a short-term credit
rating of at least P-1 by Moody's and of at least A-1 by Standard &
Poor's, or (c) each Rating Agency confirms that such action will not
result in a downgrading or withdrawal of the then current rating of any
outstanding Series, then (x) the Servicer may make such deposits and
payments on the business day immediately prior to the Distribution Date
(the "Transfer Date") in an aggregate amount equal to the net amount of
such deposits and payments which would have been made had the conditions
of this proviso not applied and (y) certain payments and allocations
described herein may be made on a monthly, rather than a daily, basis.
If any of the criteria set forth in the proviso to the immediately
preceding paragraph are satisfied, payments on the Receivables collected
by the Servicer will not be segregated from the assets of the Servicer.
Until such payments on the Receivables collected by the Servicer are
deposited into the Collection Account, such funds may be used by the
Servicer for its own benefit, and the proceeds of any short-term
investment of such funds will accrue to the Servicer. During such times
as the Servicer holds funds representing payments on the Receivables
collected by the Servicer and is permitted to use such funds for its own
benefit, the Certificateholders are subject to risk of loss, including
risk resulting from the bankruptcy or insolvency of the Servicer. The
Servicer will pay no fee to the Trust or any Certificateholder for any
use by the Servicer of funds representing collections on the Receivables.
The Servicer will withdraw the following amounts from the
Collection Account for application on each business day as indicated:
(a) an amount equal to the Transferor Percentage of the
aggregate amount of Principal Collections will be paid to the
holder of the Exchangeable Transferor Certificate to the extent
such funds are not allocated to any Series pursuant to a
Supplement;
(b) an amount equal to the Transferor Percentage of the
aggregate amount of Finance Charge Collections will be paid to the
holder of the Exchangeable Transferor Certificate to the extent
such funds are not allocated to any Series pursuant to a
Supplement;
(c) an amount equal to the Floating Allocation Percentage of
the aggregate amount of Finance Charge Collections, Transferor
Finance Charge Collections, investment earnings on amounts on
deposit in the Pre-Funding Account and the Principal Funding
Account to the extent on deposit in the Collection Account on such
business day, and Excess Finance Charge Collections of other Series
allocable to Series 1997-1, and, during the continuance of a
Discount Trigger Event, certain Principal Collections allocable to
Series 1997-1 will be allocated and paid as described below in
"--Payment of Fees, Interest, and Other Items;"
(d) during the Revolving Period, an amount equal to the
Floating Allocation Percentage of Principal Collections (less the
amount thereof which may be applied as Reallocated Class B
Principal Collections or Reallocated Class C Principal Collections)
will be applied as Shared Principal Collections; provided, however,
that during the continuance of a Discount Trigger Event, certain
Principal Collections are subject to reallocation as Finance Charge
Collections;
(e) during the Accumulation Period, an amount equal to the
Fixed/Floating Allocation Percentage of Principal Collections (less
the amount thereof which may be applied as Reallocated Principal
Collections), any amount on deposit in the Excess Funding Account
allocated to Certificateholders, any amounts to be paid in respect
of Investor Default Amount, Class A Investor Charge-Offs, Class B
Investor Charge-Offs, and Class C Investor Charge-Offs, and any
amount of Shared Principal Collections on such business day will be
deposited in the Principal Funding Account; provided, however, that
during the continuance of a Discount Trigger Event, certain
Principal Collections are subject to reallocation as Finance Charge
Collections. On any business day on which the amount on deposit in
the Principal Funding Account exceeds the sum of the Controlled
Amortization Amount and any existing Accumulation Shortfall (such
sum, the "Controlled Distribution Amount"), such excess will be
treated as Shared Principal Collections and applied as such;
(f) during any Early Amortization Period or on or after the
Class B Principal Payment Commencement Date, an amount equal to the
Fixed/Floating Allocation Percentage of such Principal Collections
(less the amount thereof which is applied as Reallocated Principal
Collections), any amount on deposit in the Excess Funding Account
allocated to Certificateholders, any amounts to be paid in respect
of the Investor Default Amount, Class A Investor Charge-Offs, Class
B Investor Charge-Offs, and Class C Investor Charge-Offs, and any
amount of Shared Principal Collections on such business day, up to
the amount of the Invested Amount, will be deposited into the
Principal Account; provided, however, that during the continuance
of a Discount Trigger Event, certain Principal Collections are
subject to reallocation as Finance Charge Collections;
(g) Shared Principal Collections will be allocated to each
outstanding Series pro rata based on the investor allocation
percentage for Principal Receivables applicable to any Series,
first to be applied to any shortfalls with respect to the
controlled distribution amount for each such Series, and then to
accelerate principal payments with respect to any Series which is
in its amortization period but not subject to a controlled
distribution amount, and then, at the option of the Transferor, to
make payments of principal with respect to the Variable Funding
Certificates. The Servicer will pay any remaining Shared Principal
Collections on such business day to the holder of the Exchangeable
Transferor Certificate; and
(h) Excess Finance Charge Collections will be allocated as
set forth below in clause (x) of "--Payment of Fees, Interest, and
Other Items."
Any Shared Principal Collections and other amounts not paid to the
Transferor because the Transferor Interest on any date, after giving
effect to the inclusion in the Trust of all Receivables on or prior to
such date and the application of all prior payments to the Transferor,
does not exceed the Minimum Transferor Interest, together with any
adjustment payments, as described below, will be deposited into and held
in the Excess Funding Account, and on the Amortization Period
Commencement Date with respect to any Series, such amounts will be
deposited in the principal account or principal funding account of such
Series to the extent specified in the related Supplement until the
principal funding account of such Series has been funded in full or the
holders of certificates of such Series have been paid in full.
Payment of Fees, Interest, and Other Items. On each business day
during a Monthly Period, the Servicer will apply an amount equal to the
sum of the Total Finance Charge Collections on deposit in the Collection
Account and any investment earnings relating to amounts on deposit in the
Principal Funding Account and the Pre-Funding Account deposited in the
Collection Account (collectively, the "Available Series Finance Charge
Collections") in the following priority:
(i) an amount equal to the lesser of (A) the Available Series
Finance Charge Collections and (B) the excess of (a) the sum of (1)
the Class A Monthly Interest, (2) any Class A Monthly Interest with
respect to any Interest Accrual Period beginning in a prior Monthly
Period which has not previously been deposited in the Interest
Funding Account or paid on any previous Distribution Date, and (3)
any additional interest at the Class A Certificate Rate plus 2%
with respect to interest amounts that were due but not paid in a
prior Monthly Period over (b) the amount which has already been
deposited in the Interest Funding Account with respect thereto in
the current Monthly Period, will be deposited in the Interest
Funding Account for distribution on the next succeeding
Distribution Date to the Class A Certificateholders;
(ii) an amount equal to the lesser of (A) any Available
Series Finance Charge Collections remaining after application of
such collections in clause (i) above and (B) the excess of (a) the
sum of (1) the Class B Monthly Interest, (2) any Class B Monthly
Interest with respect to any Interest Accrual Period beginning in a
prior Monthly Period which has not previously been deposited in the
Interest Funding Account or paid on any previous Distribution Date,
and (3) any additional interest at the Class B Certificate Rate
plus 2% with respect to interest amounts that were due but not paid
in a prior Monthly Period over (b) the amount which has already
been deposited in the Interest Funding Account with respect thereto
in the current Monthly Period, will be deposited in the Interest
Funding Account for distribution on the next succeeding
Distribution Date to the Class B Certificateholders;
(iii) an amount equal to the lesser of (A) any Available
Series Finance Charge Collections remaining after application of
such collections in clauses (i) and (ii) above and (B) the portion
of the Monthly Servicing Fee for the current month that has not
been previously paid to the Servicer plus any prior Monthly
Servicing Fee allocated to such Series that was due but not
previously paid to the Servicer will be distributed to the
Servicer;
(iv) an amount equal to the lesser of (A) any Available
Series Finance Charge Collections remaining after application of
such collections in clauses (i) through (iii) above and (B) the sum
of (1) the aggregate Investor Default Amount for such business day
and (2) the unpaid Investor Default Amount for any prior business
day during the then-current Monthly Period, will (v) during the
Revolving Period, be treated as Shared Principal Collections, (w)
on and prior to the Class B Principal Payment Commencement Date,
during the Accumulation Period, be deposited in the Principal
Funding Account to the extent included in Class A Monthly Principal
or during any Early Amortization Period be deposited in the
Principal Account for payment to the Class A Certificateholders,
(x) during any Amortization Period on and after the Class B
Principal Payment Commencement Date, be deposited in the Principal
Account for payment to the Class B Certificateholders, and (y)
during any Amortization Period on and after the Class C Principal
Payment Commencement Date, be deposited in the Principal Account
for payment to the Class C Certificateholders;
(v) an amount equal to the lesser of (A) any Available Series
Finance Charge Collections remaining after application of such
collections in clauses (i) through (iv) above and (B) unreimbursed
Class A Investor Charge-Offs, if any, will be treated as Shared
Principal Collections during the Revolving Period, and will be
deposited in the Principal Funding Account to the extent included
in Class A Monthly Principal during the Accumulation Period or
deposited in the Principal Account for payment to the Class A
Certificateholders during any Early Amortization Period and, on and
after the Class B Principal Payment Commencement Date, deposited in
the Principal Account for payment to the Class B
Certificateholders;
(vi) an amount equal to the lesser of (A) any Available
Series Finance Charge Collections remaining after application of
such collections in clauses (i) through (v) above and (B) the sum
of (1) the amount of interest which has accrued with respect to the
outstanding aggregate principal amount of the Class B Certificates
at the Class B Certificate Rate but has not been deposited in the
Interest Funding Account or paid to the Class B Certificateholders
either on such business day or on a prior business day, and (2) any
additional interest at the Class B Certificate Rate plus 2% with
respect to such interest amounts that were due but not paid to
Class B Certificateholders in any previous Monthly Period, will be
deposited in the Interest Funding Account for distribution on the
next succeeding Distribution Date to the Class B
Certificateholders;
(vii) an amount equal to the lesser of (A) any Available
Series Finance Charge Collections remaining after application of
such collections in clauses (i) through (vi) above and (B)
unreimbursed Class B Investor Charge-Offs and reductions of the
Class B Invested Amount due to Reallocated Class B Principal
Collections, if any, will be treated as Shared Principal
Collections during the Revolving Period, and first will be
deposited in the Principal Funding Account during the Accumulation
Period or deposited in the Principal Account for payments to the
Class A Certificateholders during any Early Amortization Period and
then, on and after the Class B Principal Payment Commencement Date,
deposited in the Principal Account for payment to the Class B
Certificateholders;
(viii) an amount equal to the lesser of (A) any Available
Series Finance Charge Collections remaining after application of
such collections in clauses (i) through (viii) above and (B)
unreimbursed Class C Investor Charge-Offs and reductions of the
Class C Invested Amount due to Reallocated Principal Collections,
if any, will (w) during the Revolving Period, be treated as Shared
Principal Collections, (x) during the Amortization Period but on or
prior to the Class B Principal Payment Commencement Date, be
deposited in the Principal Funding Account for payment to the Class
A Certificateholders, (y) on and after the Class B Principal
Payment Commencement Date, be deposited in the Principal Account
for payment to the Class B Certificateholders, and (z) on and after
the Class C Principal Payment Commencement Date, be deposited in
the Principal Account for payment to the Class C
Certificateholders;
[(ix) an amount equal to the lesser of (A) any Available
Series Finance Charge Collections remaining after application of
such collections in clauses (i) through (ix) above and (B) the
excess of (a) any unpaid Class A Prepayment Premium over (b) the
amount which has already been deposited in the Interest Funding
Account with respect thereto in the current Monthly Period, will be
deposited in the Interest Funding Account for distribution on the
next succeeding Distribution Date to the Class A
Certificateholders;
(x) an amount equal to the lesser of (A) any Available Series
Finance Charge Collections remaining after application of such
collections in clauses (i) through (x) above and (B) the excess of
(a) any unpaid Class B Prepayment Premium over (b) the amount which
has already been deposited in the Interest Funding Account with
respect thereto in the current Monthly Period, will be deposited in
the Interest Funding Account for distribution on the next
succeeding Distribution Date to the Class B Certificateholders;
and]
(xi) any Available Series Finance Charge Collections
remaining after making the above described distributions will be
treated as Excess Finance Charge Collections which will be
available to cover shortfalls, if any, in amounts payable from
Finance Charge Collections to certificateholders of other Series
and then to pay any unpaid commercially reasonable costs and
expenses of a successor Servicer, if any. Excess Finance Charge
Collections which are not so used will be paid to the Transferor;
provided, however, that on any business day during any Early
Amortization Period, the Trustee will deposit any such Excess
Finance Charge Collections into the Interest Funding Account and
will add such funds to the Available Series Finance Charge
Collections on each subsequent business day in such Monthly Period
until the last business day of the related Monthly Period, when the
aggregate amount of such remaining Available Series Finance Charge
Collections will be distributed as Excess Finance Charge
Collections as set forth in this clause (x).
"Class A Monthly Interest" on any Distribution Date will equal
one-twelfth of the product of (i) the Class A Certificate Rate and (ii)
the outstanding principal balance of the Class A Certificates as of the
close of business on the last day of the preceding Monthly Period (after
subtracting therefrom the aggregate amount of any Class A Monthly
Principal distributed to holders of Class A Certificates during any Early
Amortization Period), except that interest for the first Distribution
Date will include accrued interest at the Class A Certificate Rate from
the Closing Date through [ ] (calculated as though there were only 30
days in [ ]).
"Class B Monthly Interest" on any Distribution Date will equal
one-twelfth of the product of (i) the Class B Certificate Rate and (ii)
the Class B Invested Amount as of the close of business on the last day
of the preceding Monthly Period, except that interest for the first
Distribution Date will include accrued interest at the Class B
Certificate Rate from the Closing Date through [ ] (calculated as though
there were only 30 days in [ ]).
"Required Amount" means on any business day the amount, if any, by
which the aggregate amount to be paid pursuant to clauses (i)-(x) above
exceeds the portion of the Finance Charge Collections and Transferor
Finance Charge Collections on any business day applied to the payment of
the amounts described in such clauses.
Payments of Principal. On each business day during the Revolving
Period, the Trustee, acting in accordance with instructions from the
Servicer, will withdraw all amounts on deposit in the Principal Account
and treat such amounts as Shared Principal Collections as described in
clause (g) of "--Allocations." On each business day during the
Accumulation Period, principal will be deposited in the Principal Funding
Account for distribution to the Class A Certificateholders on the Class A
Expected Final Payment Date and, following the payment in full of the
Class A Invested Amount, paid to the Class B Certificateholders on the
Class B Expected Final Payment Date and, following the payment in full of
the Class B Invested Amount, paid to the Class C Certificateholders on
each Distribution Date thereafter until the Class C Invested Amount is
paid in full. On the Transfer Date occurring in the month following the
month in which any Early Amortization Period begins, and on each Transfer
Date thereafter until the Series 1997-1 Termination Date or until the
Class A Invested Amount is paid in full, the Trustee, acting in
accordance with instructions from the Servicer, will withdraw all amounts
on deposit in the Principal Account or the Principal Funding Account and,
to the extent of Class A Monthly Principal, deposit such amounts in the
Distribution Account for distribution to the Class A Certificateholders
on the next succeeding Distribution Date.
In the event that a Pay Out Event occurs prior to the end of the
Funding Period, or amounts remain on deposit in the Pre-Funding Account
at the end of the Funding Period, amounts on deposit in the Pre-Funding
Account will be distributed to the Class A Certificateholders and the
Class B Certificateholders in the manner and priorities described in
"--Pre-Funding Account."
The Class A Certificateholders will be entitled to receive
principal payments to the extent of Class A Monthly Principal until the
Class A Invested Amount is paid in full. Except for pro rata
distributions of any amounts remaining in the Pre-Funding Account at the
end of the Funding Period as described in "--Pre-Funding Account," the
Class B Certificateholders will be entitled to receive principal payments
only after the Class A Invested Amount has been paid in full. The Class C
Certificateholders will be entitled to receive principal payments only
after the Class A Invested Amount has been paid in full and the Class B
Invested Amount has been paid in full.
On the Transfer Date preceding the Class B Principal Payment
Commencement Date (which is expected to be the Class B Expected Final
Payment Date), and, if the Class B Invested Amount is not paid in full on
such date, on each Transfer Date thereafter until the Series 1997-1
Termination Date or until the Class B Invested Amount is paid in full,
the Trustee, acting in accordance with instructions from the Servicer,
will withdraw amounts deposited into the Principal Account in respect of
collections processed during the related Monthly Period and any amounts
then on deposit in the Excess Funding Account and in each case allocable
to such Class B Certificates and deposit such amounts in the Distribution
Account for distribution to the Class B Certificateholders on the next
succeeding Distribution Date. The Class B Certificateholders will be
entitled to receive principal payments to the extent of Class B Monthly
Principal until the Class B Invested Amount is paid in full.
On the Transfer Date preceding the Class C Principal Payment
Commencement Date, and on each Transfer Date thereafter until the Series
1997-1 Termination Date or until the Class C Invested Amount is paid in
full, the Trustee, acting in accordance with instructions from the
Servicer, will withdraw amounts deposited into the Principal Account in
respect of collections processed during the related Monthly Period and
any amounts then on deposit in the Excess Funding Account and in each
case allocable to such Class C Certificates and deposit such amounts in
the Distribution Account for distribution to the Class C
Certificateholders on the next succeeding Distribution Date. The Class C
Certificateholders will be entitled to receive principal payments to the
extent of Class C Monthly Principal until the Class C Invested Amount is
paid in full.
At the end of each month, all interest and earnings (net of losses
and investment expenses) on funds on deposit in the Principal Account and
the Interest Funding Account shall be deposited by the Trustee in a
separate deposit account with a Qualified Institution in the name of the
Servicer, or a person designated in writing by the Servicer, which shall
not constitute part of the Trust, or shall otherwise be turned over by
the Trustee to the Servicer not less frequently than monthly. Any
investment earnings with respect to amounts on deposit in the Excess
Funding Account shall be deposited in the Collection Account and shall be
treated as Finance Charge Collections. On each Distribution Date with
respect to the Accumulation Period and any Special Payment Date, the
Servicer shall withdraw from the Principal Funding Account and deposit in
the Collection Account all interest and other investment income (net of
losses and investment expenses) on funds then on deposit in the Principal
Funding Account, and such funds shall not be considered to be principal
amounts on deposit in the Principal Funding Account. Because funds are
withdrawn from the Collection Account on each business day, amounts on
deposit in the Collection Account are not invested.
"Class A Monthly Principal" with respect to any Distribution Date
relating to the Accumulation Period or any Early Amortization Period will
equal the sum of (i) an amount equal to the aggregate Net Principal
Collections received during the Monthly Period immediately preceding such
Distribution Date, minus the aggregate amount of Reallocated Principal
Collections for such Monthly Period, (ii) any amount on deposit in the
Excess Funding Account allocated to the Certificates on such Distribution
Date, and (iii) the amount allocated to the Class A Certificates with
respect to such Distribution Date on account of the Investor Default
Amount and any reimbursements of unreimbursed Class A Investor
Charge-Offs, Class B Investor Charge-Offs, and Class C Investor
Charge-Offs; provided, however, that for each Distribution Date with
respect to the Accumulation Period (unless and until a Pay Out Event
shall have occurred), Class A Monthly Principal may not exceed the
Controlled Distribution Amount for such Distribution Date; provided
further, that with respect to any Distribution Date, Class A Monthly
Principal will not exceed the Class A Adjusted Invested Amount; provided,
further, that with respect to the Series 1997-1 Termination Date, Class A
Monthly Principal will be an amount equal to the Class A Invested Amount.
"Class B Monthly Principal" with respect to any Distribution Date
on or after the Class B Principal Payment Commencement Date will equal
the sum of (i) an amount equal to the aggregate Net Principal Collections
received during the Monthly Period immediately preceding such
Distribution Date (less any payments to be made to Class A
Certificateholders to the extent of any remaining Class A Invested Amount
on such Distribution Date), minus the aggregate amount of Reallocated
Principal Collections for such Monthly Period, (ii) any amount on deposit
in the Excess Funding Account allocated to the Class B Certificates on
such Distribution Date, and (iii) the amount allocated to the Class B
Certificates with respect to such Distribution Date on account of the
Investor Default Amount and any reimbursements of unreimbursed Class B
Investor Charge-Offs and Class C Investor Charge-Offs; provided, however,
that with respect to the Series 1997-1 Termination Date, Class B Monthly
Principal will be an amount equal to the Class B Invested Amount.
"Class C Monthly Principal" with respect to any Distribution Date
on or after the Class C Principal Payment Commencement Date will equal
the sum of (i) an amount equal to the aggregate Net Principal Collections
received during the Monthly Period immediately preceding such
Distribution Date (less any payments to be made to Class B
Certificateholders to the extent of any remaining Class B Invested Amount
on such Distribution Date), minus the aggregate amount of Reallocated
Principal Collections for such Monthly Period, (ii) any amount on deposit
in the Excess Funding Account allocated to the Class C Certificates on
such Distribution Date, and (iii) the amount allocated to the Class C
Certificates with respect to such Distribution Date on account of the
Investor Default Amount and any reimbursements of unreimbursed Class C
Investor Charge-Offs; provided, however, that with respect to the Series
1997-1 Termination Date, Class C Monthly Principal will be an amount
equal to the Class C Invested Amount.
COVERAGE OF INTEREST SHORTFALLS
To the extent of any shortfall in the amount of Available Series
Finance Charge Collections due to the accumulation of principal in the
Principal Funding Account or the Excess Funding Account, a portion of the
Finance Charge Collections allocable to the Exchangeable Transferor
Certificate will be made available as described in "--Reallocation of
Cash Flows" to cover the Negative Carry Amount. Thereafter, the
Transferor may, at its option, contribute to the Trust an amount not in
excess of the lesser of any remaining shortfall or remaining Negative
Carry Amount for such purpose.
Available Series Finance Charge Collections allocable to the
Certificates in excess of the amounts necessary to make required payments
with respect to the Certificates described above in "--Payment of Fees,
Interest, and Other Items" ("Excess Finance Charge Collections") will be
applied to cover any shortfalls with respect to amounts payable from
Finance Charge Collections allocable to any other Series, pro rata based
upon the amount of the shortfall, if any, with respect to such other
Series. Any Excess Finance Charge Collections remaining after covering
shortfalls with respect to all outstanding Series during a Monthly Period
will be paid to the Servicer to cover certain costs and expenses and then
to the holder of the Exchangeable Transferor Certificate.
On and after the Class B Principal Payment Commencement Date, to
the extent of any shortfall in the amount available to make required
payments of interest accrued with respect to the outstanding aggregate
principal amount of the Class B Certificates and to cover the Investor
Default Amount or any Class B Investor Charge-Offs which remain unpaid
after the application of Transferor Finance Charge Collections and Excess
Finance Charge Collections, Principal Collections, and any remaining
Finance Charge Collections allocated to the holder of the Exchangeable
Transferor Certificate in an amount not to exceed the least of the
Transferor Subordination Amount, the Transferor Interest on such day, and
the amount of such shortfall, will be treated as Finance Charge
Collections allocable to the payment of such shortfall on the Class B
Certificates.
DEFAULTED RECEIVABLES; REBATES AND FRAUDULENT CHARGES
On each business day, the Servicer will calculate the Investor
Default Amount for such business day. Receivables in any Account will be
charged off as uncollectible in accordance with the Servicer's customary
and usual policies and credit and collection policies, which, in general,
currently provide that Receivables in any Account will be charged off
when the Account becomes Retail Age 8 (210 days past due) or, in the case
of certain major purchase plan accounts, when the Account becomes Retail
Age 9 (240 days past due), unless the cardholder cures such default by
making payments which qualify under the standards customarily applied by
the Servicer. The Investor Default Amount will be allocated to the
Certificateholders on each business day in an amount generally equal to
the product of the Floating Allocation Percentage applicable on such
business day and the amount of Principal Receivables in Defaulted
Accounts for such business day.
If on any business day the Servicer adjusts the amount of any
Principal Receivable because of transactions occurring in respect of a
rebate or refund to a cardholder, or because such Principal Receivable
was created in respect of merchandise which was refused or returned by a
cardholder, then the amount of the Transferor Interest in the Trust will
be reduced, on a net basis, by the amount of the adjustment on such
business day. In addition, the Transferor Interest in the Trust will be
reduced, on a net basis, as a result of transactions in respect of any
Principal Receivable which was discovered as having been created through
a fraudulent or counterfeit charge. In the event the Transferor Interest
would be reduced below the Minimum Transferor Interest as a result of any
of the foregoing, the Transferor will be required to pay to the Trust the
amount of such reduction (an "Adjustment Payment") out of its own funds.
INVESTOR CHARGE-OFFS
If on the second business day preceding each Distribution Date (the
"Determination Date") the aggregate Investor Default Amount, if any, for
each business day in the preceding Monthly Period exceeded the aggregate
amount of Total Finance Charge Collections applied to the payment thereof
and the amount of Transferor Finance Charge Collections, Excess Finance
Charge Collections, and, on and after the Class B Principal Payment
Commencement Date, collections allocated to the holder of the
Exchangeable Transferor Certificate to the extent of the Transferor
Subordination Amount applied to the payment thereof during the preceding
Monthly Period, then a portion of the Class C Invested Amount equal to
such insufficiency, but not more than the aggregate Investor Default
Amount for such Monthly Period (a "Class C Investor Charge-Off"), will be
deducted from the Class C Invested Amount to avoid a charge-off with
respect to the Class A Certificates. The Class C Invested Amount
thereafter will be increased (but not in excess of the unpaid principal
balance of the Class C Certificates of such Series) on any business day
by the amount of Total Finance Charge Collections allocated and available
for that purpose as described under clause (ix) of "--Application of
Collections--Payment of Fees, Interest, and Other Items."
In the event that prior to the Class B Principal Payment
Commencement Date 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 aggregate amount of such excess, but not more than
the aggregate Investor Default Amount for such Monthly Period (a "Class B
Investor Charge-Off"), which will have the effect of slowing or reducing
the return of principal to the Class B Certificateholders. The Class B
Invested Amount will thereafter be increased (but not in excess of the
unpaid principal balance of the Class B Certificates) on any Monthly
Period by the amount of Finance Charge Collections allocated and
available for that purpose as described under clause (vii) of
"--Application of Collections--Payment of Fees, Interest, and Other
Items."
In the event that, on or after the Class B Principal Payment
Commencement Date, 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 Transferor
Subordination Amount will be reduced by the aggregate amount of such
excess, but not by more than the aggregate Investor Default Amount for
such Monthly Period. If the Transferor Subordination Amount is reduced to
zero, the Class B Invested Amount will be reduced by the amount by which
the Transferor Subordination Amount would have been reduced below zero,
but not more than the aggregate Investor Default Amount for such Monthly
Period.
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 aggregate
Investor Default Amount for such Monthly Period (a "Class A Investor
Charge-Off"), which will have the effect of slowing or reducing the
return of principal to the Class A Certificateholders. If the Class A
Invested Amount has been reduced by the amount of any Class A Investor
Charge-Offs, it will be increased on any business day (but not by an
amount in excess of the aggregate Class A Investor Charge-Offs) by the
amount of Available Series Finance Charge Collections allocated and
available for such purpose as described under clause (v) of
"--Application of Collections--Payment of Fees, Interest, and Other
Items."
FINAL PAYMENT OF PRINCIPAL; TERMINATION
The Class A Certificates, the Class B Certificates, and the Class C
Certificates will be subject to optional repurchase by the Transferor on
any Distribution Date after the Invested Amount is reduced to an amount
less than or equal to 20% of the highest Invested Amount outstanding at
any time, if certain conditions set forth in the Pooling and Servicing
Agreement are satisfied. The Certificates are also subject to optional
repurchase by the Transferor on the second Distribution Date following
the Class A Expected Final Payment Date. The repurchase price will be
equal to (i) the Class A Invested Amount plus accrued and unpaid interest
on the Class A Certificates, (ii) the Class B Invested Amount plus
accrued and unpaid interest on the Class B Certificates, and (iii) the
Class C Invested Amount. In each case interest will accrue through the
day preceding the Distribution Date on which the repurchase occurs.
The Certificates will be retired on the day following the
Distribution Date on which the final payment of principal is scheduled to
be made to the Certificateholders, whether as a result of optional
reassignment to the Transferor or otherwise. Subject to prior termination
as provided above, the Pooling and Servicing Agreement provides that the
final distribution of principal and interest on the Offered Certificates
will be made on the [ ] Distribution Date (the "Series 1997-1 Termination
Date"). In the event that the Invested Amount is greater than zero on the
Series 1996-1 Termination Date, the Trustee will sell or cause to be sold
(and apply the proceeds first to the Class A Certificates until paid in
full, then to the Class B Certificates, and finally to the Class C
Certificates to the extent necessary to pay such remaining amounts to all
Certificateholders pro rata within each class as final payment of the
Certificates) interests in the Receivables or certain Receivables, as
specified in the Pooling and Servicing Agreement and the Series 1997-1
Supplement, in an amount equal to up to 110% of the Invested Amount at
the close of business on such date (but not more than the total amount of
Receivables allocable to the Certificates). The net proceeds of such sale
and any collections on the Receivables, up to an amount equal to the
Invested Amount plus accrued interest due on the Certificates, will be
paid on the Series 1997-1 Termination Date, first to the Class A
Certificateholders until the Class A Invested Amount is paid in full,
then to the Class B Certificateholders until the Class B Invested Amount
is paid in full, and then to the Class C Certificateholders until the
Class C Invested Amount is paid in full.
Unless the Servicer and the holder of the Exchangeable Transferor
Certificate instruct the Trustee otherwise, the Trust will terminate on
the earlier of (a) the day after the Distribution Date following the date
on which funds shall have been deposited in the Distribution Account for
the payment to certificateholders in an aggregate amount sufficient to
pay in full the aggregate investor interest of all Series outstanding
plus interest thereon at the applicable certificate rates to the next
Distribution Date and (b) a date which shall not be later than the
expiration of 21 years from the death of the last survivor of the
descendants of a specified person living on the date of the Pooling and
Servicing Agreement. Upon the termination of the Trust and the surrender
of the Exchangeable Transferor Certificate, the Trustee will convey to
the holder of the Exchangeable Transferor Certificate all right, title,
and interest of the Trust in and to the Receivables and other funds of
the Trust (other than funds on deposit in the Distribution Account and
other similar bank accounts of the Trust with respect to any Series).
PAY OUT EVENTS
As described above, the Revolving Period will continue until the
commencement of the Accumulation Period, unless a Pay Out Event occurs
prior to such date. A "Pay Out Event" refers to any of the following
events:
(i) failure on the part of the Transferor (a) to make any
payment or deposit on the date required under the Pooling and
Servicing Agreement (or within the applicable grace period which
will not exceed five business days); (b) 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 (c) to observe or perform in any material respect
any other covenants or agreements of the Transferor set forth in
the Pooling and Servicing Agreement, the Purchase Agreement, or the
Series 1997-1 Supplement, which failure has a material adverse
effect on the Certificateholders and which continues unremedied for
a period of 60 days after 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
50% of the Invested Amount and continues to materially and
adversely affect the interests of the Certificateholders for such
period;
(ii) any representation or warranty made by the Transferor in
the Pooling and Servicing Agreement or any information required to
be given by the Transferor to the Trustee to identify the Accounts
proves to have been incorrect in any material respect when made and
which continues to be incorrect in any material respect for a
period of 60 days after written notice to the Transferor from the
Trustee, or to the Transferor and the Trustee by certificateholders
representing more than 50% of the invested amount of any class of
any Series outstanding, and as a result of which the interests of
the Certificateholders are materially and adversely affected and
continue to be materially and adversely affected for such period;
provided, however, that a Pay Out Event pursuant to this
subparagraph (ii) will not be deemed to occur thereunder if the
Transferor has accepted reassignment of the related Receivable or
all such Receivables, if applicable, during such period (or such
longer period as the Trustee may specify) in accordance with the
provisions thereof;
(iii) certain events of insolvency or receivership relating
to the Transferor, Federated, or FDS;
(iv) any reduction of the average of the Portfolio Yields for
any three consecutive Monthly Periods to a rate which is less than
the Base Rate;
(v) the Trust becomes an "investment company" within the
meaning of the Investment Company Act;
(vi) (a) the Transferor Interest shall be less than the
Minimum Transferor Interest or (b) 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, in
each case for 15 consecutive days; or
(vii) any Servicer Default (as defined below) which would
have a material adverse effect on the Certificateholders occurs.
In the case of any event described in clause (i), (ii), or (vii)
above, a Pay Out Event will be deemed to have occurred with respect to
the Certificates only if, after any applicable grace period, either the
Trustee or Certificateholders evidencing undivided interests aggregating
more than 50% of the Invested Amount, by written notice to the Transferor
and the Servicer (and to the Trustee if given by the Certificateholders)
declare that a Pay Out Event has occurred with respect to the
Certificates as of the date of such notice. In the case of any event
described in clause (iii) or (v) above, a Pay Out Event with respect to
all Series then outstanding, and in the case of any event described in
clause (iv) or (vi), a Pay Out Event with respect only to the
Certificates, will be deemed to have occurred without any notice or other
action on the part of the Trustee or the Certificateholders or all
certificateholders, as appropriate, immediately upon the occurrence of
such event. On the date on which a Pay Out Event is deemed to have
occurred, the Early Amortization Period will commence. In such event,
distributions of principal to the Certificateholders will begin on the
first Distribution Date following the month in which such Pay Out Event
occurred. If, because of the occurrence of a Pay Out Event, the Early
Amortization Period begins, Certificateholders will begin receiving
distributions of principal earlier than they otherwise would have, which
may shorten the average life of the Certificates.
In addition to the consequences of a Pay Out Event discussed above,
if, pursuant to certain provisions of federal law, the Transferor
voluntarily enters liquidation or a receiver is appointed for the
Transferor, on the day of such event the Transferor will immediately
cease to transfer Principal Receivables to the Trust and promptly give
notice to the Trustee of such event. Within 15 days, the Trustee will
publish a notice of the liquidation or the appointment stating that the
Trustee intends to sell, dispose of, or otherwise liquidate the
Receivables in a commercially reasonable manner. Unless otherwise
instructed within a specified period by certificateholders representing
undivided interests aggregating more than 50% of the invested amount of
each Series outstanding at such time (or, if any such Series has more
than one class, of each class of such Series), the Trustee will sell,
dispose of, or otherwise liquidate the portion of the Receivables
allocable to the Series that did not vote to continue the Trust in
accordance with the Pooling and Servicing Agreement in a commercially
reasonable manner and on commercially reasonable terms. The proceeds from
the sale, disposition, or liquidation of the Receivables will be treated
as collections of the Receivables and applied as provided above in
"--Application of Collections."
If the only Pay Out Event to occur is either the bankruptcy or
insolvency of the Transferor or the appointment of a bankruptcy trustee
or receiver for the Transferor, the bankruptcy trustee or receiver may
have the power to prevent the early sale, liquidation, or disposition of
the Receivables and the commencement of the Early Amortization Period. In
addition, a bankruptcy trustee or receiver may have the power to cause
the early sale of the Receivables and the early retirement of the
Certificates.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
The Servicer's compensation for its servicing activities and
reimbursement for its expenses will take the form of the payment to it of
a monthly servicing fee in an amount equal to the sum of, with respect to
all Series, one-twelfth of the product of the applicable servicing fee
percentages with respect to each Series and the allocable portion of the
Transferor Interest and the average amount of the Principal Receivables
during each month. The monthly servicing fee will be allocated between
the Transferor Interest, the Certificateholders' Interest and the
investor interest for all other Series. The portion of the servicing fee
allocable to the Certificateholders' Interest during each Monthly Period
(the "Monthly Servicing Fee") will be equal to the product of 2.00% per
annum and the sum of the Class A Adjusted Invested Amount, the Class B
Invested Amount, and the Class C Invested Amount on the preceding Record
Date or, in the case of the first Distribution Date, the initial
principal amount of the Certificates. The Monthly Servicing Fee will be
funded from collections of Finance Charge Receivables allocated to the
Certificateholders' Interest, and will be paid each month from the amount
so allocated and on deposit in the Collection Account. See "--Application
of Collections--Payment of Fees, Interest, and Other Items" above. The
remainder of the servicing fee will be allocable to the Transferor
Interest and the investor interests of other Series. Neither the Trust
nor the Certificateholders will have any obligation to pay such portion
of the servicing fee.
The Servicer will pay from its servicing compensation certain
expenses incurred in connection with servicing the Receivables, including
without limitation payment of the fees and disbursements of the Trustee
and independent certified public accountants and other fees which are not
expressly stated in the Pooling and Servicing Agreement to be payable by
the Trust or the Certificateholders other than federal, state, and local
income and franchise taxes, if any, of the Trust.
CERTAIN MATTERS REGARDING THE TRANSFEROR AND THE SERVICER
The Servicer may not resign from its obligations and duties under
the Pooling and Servicing Agreement, except upon determination that
performance of its duties is no longer permissible under applicable law.
No such resignation will become effective until the Trustee or a
successor to the Servicer has assumed the Servicer's responsibilities and
obligations under the Pooling and Servicing Agreement. FDS, as Servicer,
has delegated or will delegate some of its servicing duties to one or
more of its affiliates or other persons; however, such delegation will
not relieve it of its obligation to perform such duties in accordance
with the Pooling and Servicing Agreement. In addition, any affiliate of
FDS may be substituted in all respects for FDS as Servicer, provided that
such affiliate expressly assumes the performance of every covenant and
obligation of the Servicer under the Pooling and Servicing Agreement.
The Pooling and Servicing Agreement provides that, subject to the
limitations on the Servicer's liability described below, the Servicer
will indemnify the Transferor and the Trust from and against any loss,
liability, reasonable expense, damage, or injury suffered or sustained by
reason of any acts or omissions or alleged acts or omissions of the
Servicer with respect to the activities of the Trust or the Trustee for
which the Servicer is responsible pursuant to the Pooling and Servicing
Agreement; provided, however, that the Servicer will not indemnify (a)
the Transferor or the Trust if such acts, omissions, or alleged acts or
omissions constitute or are caused by fraud, negligence, or willful
misconduct by the Transferor, the Trustee (or any of its officers,
directors, employees, or agents), or the Certificateholders, (b) the
Trust, the Certificateholders, or the Offered Certificate Owners for
losses, liabilities, expenses, damages, or injuries arising from actions
taken by the Trustee at the request of Certificateholders, (c) the Trust,
the Certificateholders, or the Offered Certificate Owners for any losses,
liabilities, expenses, damages, or injuries incurred by any of them in
their capacities as investors, including without limitation losses
incurred as a result of defaulted Receivables or Receivables which are
written off as uncollectible, or (d) the Transferor, the Trust, the
Certificateholders, or the Offered Certificate Owners for any losses,
liabilities, expenses, damages, or injuries suffered or sustained by the
Trust, the Certificateholders, or the Offered Certificate Owners arising
under any tax law, including without limitation any federal, state,
local, or foreign income or franchise tax or any other tax imposed on or
measured by income (or any interest or penalties with respect thereto or
arising from a failure to comply therewith) required to be paid by the
Trust, the Certificateholders, or the Offered Certificate Owners in
connection with the Pooling and Servicing Agreement to any taxing
authority. The Pooling and Servicing Agreement also provides that the
Servicer will indemnify the Trustee and its officers, directors,
employees, or agents from and against any loss, liability, reasonable
expense, damage, or injury suffered or sustained by reason of the
acceptance of the Trust by the Trustee, the issuance by the Trust of
certificates, or any of the other matters contemplated in the Pooling and
Servicing Agreement; provided, however, that the Servicer will not
indemnify the Trustee or its officers, directors, employees, or agents
for any loss, liability, expense, damage, or injury caused by the fraud,
negligence, or willful misconduct of any of them.
In addition, the Pooling and Servicing Agreement provides that,
subject to certain exceptions, the Transferor will indemnify the Trust
and the Trustee from and against any reasonable loss, liability, expense,
damage, or injury (other than to the extent that any of the foregoing
relate to any tax law or any failure to comply therewith) suffered or
sustained by reason of any acts or omissions or alleged acts or omissions
arising out of or based upon the arrangement created by the Pooling and
Servicing Agreement as though the Pooling and Servicing Agreement created
a partnership under the Delaware Uniform Partnership Law in which the
Transferor is a general partner.
The Pooling and Servicing Agreement provides that, except for
obligations specifically undertaken by the Transferor and the Servicer
pursuant to the Pooling and Servicing Agreement, neither the Transferor
nor the Servicer nor any of their respective directors, officers,
employees, or agents will be under any liability to the Trust, the
Trustee, its officers, directors, employees, or agents, the
Certificateholders, or any other person for any action taken, or for
refraining from taking any action pursuant to the Pooling and Servicing
Agreement provided that neither the Transferor nor the Servicer nor any
of their respective directors, officers, employees, or agents will be
protected against any liability which would otherwise be imposed by
reason of willful misfeasance, bad faith, or gross negligence of the
Transferor, the Servicer, or any such person in the performance of its
duties thereunder or by reason of reckless disregard of obligations and
duties thereunder. In addition, the Pooling and Servicing Agreement
provides that the Servicer is not under any obligation to appear in,
prosecute, or defend any legal action which is not incidental to its
servicing responsibilities under the Pooling and Servicing Agreement and
which in its opinion may expose it to any expense or liability.
The Pooling and Servicing Agreement provides that, in addition to
Exchanges, the Transferor may transfer its interest in all or a portion
of the Exchangeable Transferor Certificate, provided that prior to any
such transfer (a) the Trustee receives written notification from each
Rating Agency that such transfer will not result in a lowering of its
then-existing rating of the certificates of each outstanding Series then
rated by it and (b) the Trustee receives a written opinion of counsel
confirming that such transfer would not adversely affect the federal
income tax treatment of the certificates of any outstanding Series or
result in a taxable event to the certificateholders of any such Series.
Any person into which, in accordance with the Pooling and Servicing
Agreement, the Transferor or the Servicer may be merged or consolidated
or any person resulting from any merger or consolidation to which the
Transferor or the Servicer is a party, or any person succeeding to the
business of the Transferor or the Servicer, upon execution of a
Supplement and delivery of an opinion of counsel with respect to the
compliance of the transaction with the applicable provisions of the
Pooling and Servicing Agreement, will be the successor to the Transferor
or the Servicer, as the case may be, under the Pooling and Servicing
Agreement.
SERVICER DEFAULT
In the event of any Servicer Default (as defined below), either the
Trustee or certificateholders representing undivided interests
aggregating more than 50% of the aggregate investor interests for all
outstanding Series, by written notice to the Servicer (and to the Trustee
if given by the certificateholders), may terminate all of the rights and
obligations of the Servicer as servicer under the Pooling and Servicing
Agreement and in and to the Receivables and the proceeds thereof and the
Trustee may appoint a new Servicer (a "Service Transfer"). The rights and
interest of the Transferor under the Pooling and Servicing Agreement and
in the Transferor Interest will not be affected by such termination. Upon
such termination, the Trustee will as promptly as possible appoint a
successor Servicer. If no such Servicer has been appointed and has
accepted such appointment by the time the Servicer ceases to act as
Servicer, all authority, power, and obligations of the Servicer under the
Pooling and Servicing Agreement will pass to and be vested in the
Trustee. If the Trustee is unable to obtain any bids from eligible
servicers and the Servicer delivers an officer's certificate to the
effect that it cannot in good faith cure the applicable Servicer Default,
and if the Trustee is legally unable to act as a successor Servicer, then
the Trustee will give the Transferor the right of first refusal to
purchase the Receivables on terms equivalent to the best purchase offer
as determined by the Trustee.
A "Servicer Default" refers to any of the following events:
(i) failure by the Servicer to make any payment, transfer, or
deposit, or to give instructions to the Trustee to make certain
payments, transfers, or deposits within five business days after
the date the Servicer is required to do so under the Pooling and
Servicing Agreement or any Supplement;
(ii) failure on the part of the Servicer duly to observe or
perform in any respect any other covenants or agreements of the
Servicer which has a material adverse effect on the
certificateholders of any Series then outstanding and which
continues unremedied for a period of 60 days after written notice
of such failure, requiring the same to be remedied, shall have been
given to the Servicer by the Trustee, or to the Servicer and the
Trustee by holders of certificates evidencing undivided interests
aggregating not less than 50% of the invested amount of any Series
materially adversely affected thereby and continues to have a
material adverse effect on the certificateholders of any Series
then outstanding for such period; or the delegation by the Servicer
of its duties under the Pooling and Servicing Agreement, except as
specifically permitted thereunder;
(iii) any representation, warranty, or certification made by
the Servicer in the Pooling and Servicing Agreement, or in any
certificate delivered pursuant to the Pooling and Servicing
Agreement, proves to have been incorrect when made which has a
material adverse effect on the certificateholders of any Series
then outstanding, and which continues to be incorrect in any
material respect for a period of 60 days after written notice of
such failure, requiring the same to be remedied, shall have been
given to the Servicer by the Trustee, or to the Servicer and
Trustee by the holders of certificates evidencing undivided
interests aggregating not less than 50% of the invested amount of
any Series materially adversely affected thereby and continues to
have a material adverse effect on such certificateholders for such
period; or
(iv) the occurrence of certain events of bankruptcy,
insolvency, or receivership of the Servicer.
Notwithstanding the foregoing, a delay in or failure of performance
referred to in clause (i) above for a period of five business days, or
referred to under clause (ii) or (iii) for a period of 60 business days,
will not constitute a Servicer Default if such delay or failure could not
be prevented by the exercise of reasonable diligence by the Servicer and
such delay or failure was caused by an act of God or other similar
occurrence. Upon the occurrence of any such event, the Servicer will not
be relieved from using its best efforts to perform its obligations in a
timely manner in accordance with the terms of the Pooling and Servicing
Agreement, and the Servicer will provide the Trustee, any provider of
Enhancement, the Transferor, and the holders of certificates of all
Series outstanding prompt notice of such failure or delay by it, together
with a description of the cause of such failure or delay and its efforts
to perform its obligations.
In the event of a Servicer Default, if a bankruptcy trustee or
receiver were appointed for the Servicer and no Servicer Default other
than such bankruptcy or receivership or the insolvency of the Servicer
exists, the bankruptcy trustee or receiver may have the power to prevent
either the Trustee or the majority of the certificateholders from
effecting a Service Transfer.
REPORTS TO CERTIFICATEHOLDERS
On each Distribution Date, the Paying Agent will forward to each
Certificateholder of record a statement prepared by the Servicer setting
forth with respect to such Series: (a) the total amount distributed, (b)
the amount of the distribution allocable to principal on the Class A
Certificates, the Class B Certificates, and the Class C Certificates, (c)
the amount of such distribution allocable to interest on the Class A
Certificates, the Class B Certificates, and the Class C Certificates, (d)
the amount of collections of Principal Receivables processed during the
related Monthly Period and allocated in respect of the Class A
Certificates, the Class B Certificates, and the Class C Certificates,
respectively, (e) the amount of collections of Finance Charge Receivables
processed during the related Monthly Period and allocated in respect of
the Class A Certificates, the Class B Certificates, and the Class C
Certificates, respectively, (f) the aggregate amount of Principal
Receivables, the Invested Amount, the Class A Invested Amount, the Class
B Invested Amount, the Class C Invested Amount, the Floating Allocation
Percentage, and during the Amortization Period, the Fixed/Floating
Allocation Percentage with respect to the Principal Receivables in the
Trust as of the close of business on the Record Date, (g) the aggregate
outstanding balance of Accounts which are 30, 60, 90, 120, 150, and 180
days delinquent as of the end of the day on the Record Date, (h) the
Aggregate Investor Default Amount for the related Monthly Period, (i) the
aggregate amount of Class A Investor Charge-Offs, Class B Investor
Charge-Offs, and Class C Investor Charge-Offs for the related Monthly
Period, (j) the aggregate amount of the Investor Servicing Fee for the
related Monthly Period, and (k) the Class A Pool Factor, the Class B Pool
Factor, and the Class C Pool Factor as of the end of the last day of the
related Monthly Period.
On or before January 31 of each calendar year, beginning with 1997,
the Paying Agent will furnish to each person who at any time during the
preceding calendar year was a Certificateholder of record a statement
prepared by the Servicer containing the information required to be
contained in the regular monthly report to Certificateholders, as set
forth in clauses (a), (b), and (c) above aggregated for such calendar
year or the applicable portion thereof during which such person was a
Certificateholder, together with such other customary information
(consistent with the treatment of the Certificates as debt) as the
Trustee or the Servicer deems necessary or desirable to enable the
Certificateholders to prepare their United States tax returns.
EVIDENCE AS TO COMPLIANCE
The Pooling and Servicing Agreement provides that the Servicer will
cause a firm of independent public accountants to furnish to the Trustee
on an annual basis a report to the effect that such firm has compared the
mathematical calculations set forth in the monthly statements described
in the first paragraph under "--Reports to Certificateholders" for the
Monthly Periods covered by such report with the Transferor's computer
reports regarding the Receivables and that such reports are in agreement,
except for such exceptions as such firm shall believe to be immaterial
and such other exceptions as shall be set forth in such report. A copy of
such report will be sent to each Certificateholder.
The Pooling and Servicing Agreement provides that the Servicer will
cause a firm of independent public accountants to furnish to the Trustee
on an annual basis a report to the effect that such firm has made a study
and evaluation in accordance with generally accepted auditing standards
of the Servicer's internal accounting controls relative to the servicing
of the Accounts and that, on the basis of such examination, such firm is
of the opinion (assuming the accuracy of reports by the Servicer's third
party agents) that the system of internal controls in effect at the end
of the reporting period relating to servicing procedures performed by the
Servicer, taken as a whole, provided reasonable assurance that the
internal control system was sufficient for the prevention and detection
of errors and irregularities and that such servicing was conducted in
compliance with such provisions of the Pooling and Servicing Agreement
with which such accountants can reasonably be expected to possess
adequate knowledge of the subject matter, which are susceptible of
positive assurance by such accountants, and for which their professional
competence is relevant, except for such exceptions as such firm shall
believe to be immaterial and such other exceptions as shall be set forth
in such report. A copy of such report will be sent to each
Certificateholder.
The Pooling and Servicing Agreement also provides for delivery to
the Trustee, on or before a certain date each year, of a certificate
signed by an officer of the Servicer stating that the Servicer has
fulfilled its obligations under the Pooling and Servicing Agreement
throughout the preceding twelve months or, if there has been a default in
the fulfillment of any such obligations, describing each such default. A
copy of such certificate may be obtained by any Certificateholder upon
the submission of a written request therefor addressed to the Trustee.
AMENDMENTS
The Pooling and Servicing Agreement and any Supplement may be
amended by the Transferor, the Servicer, and the Trustee, without the
consent of certificateholders, for the purpose of adding any provisions
to or changing in any manner or eliminating any of the provisions of such
Pooling and Servicing Agreement and Supplements or of modifying in any
manner the rights of such certificateholders; provided, however, that (i)
the Servicer shall have provided an officer's certificate to the effect
that such action will not adversely affect in any material respect the
interests of such certificateholders, (ii) except in the case of any
amendment for the sole purpose of curing any ambiguity or correcting or
supplementing any inconsistent provision of the Pooling and Servicing
Agreement or revising any schedule thereto (other than the list of
Receivables), each Rating Agency initially contracted to rate the Class A
Certificates, the Class B Certificates, and, if applicable, the Class C
Certificates shall have been notified of such amendment and shall have
provided notice to the Trustee or the Servicer that such action would not
result in a reduction or withdrawal of its rating of the Class A
Certificates, the Class B Certificates, or the Class C Certificates, and
(iii) such action will not, in the opinion of counsel satisfactory to the
Trustee, result in certain adverse tax consequences. In addition, the
Pooling and Servicing Agreement and any Supplement may be amended from
time to time by the Transferor, the Servicer, and the Trustee, without
the consent of certificateholders, to add to or change any of the
provisions of the Pooling and Servicing Agreement to provide that bearer
certificates issued with respect to any other Series may be registrable
as to principal, to change or eliminate any restrictions on the payment
of principal of or any interest on such bearer certificates, to permit
such bearer certificates to be issued in exchange for registered
certificates or bearer certificates of other authorized denominations or
to permit the issuance of uncertificated certificates. Moreover, any
Supplement and any amendments regarding the addition or removal of
Receivables from the Trust will not be considered amendments requiring
the consent of certificateholders under the provisions of the Pooling and
Servicing Agreement or any Supplement.
The Pooling and Servicing Agreement and the Supplement may be
amended by the Transferor, the Servicer, and the Trustee with the consent
of the holders of certificates evidencing undivided interests aggregating
not less than 66 2/3% of the investor interests of each and every Series
adversely affected (and with respect to Series 1997-1, the holders of not
less than 66 2/3% of each class of Certificates), for the purpose of
adding any provisions to, changing in any manner or eliminating any of
the provisions of the Pooling and Servicing Agreement, or any Supplement
or of modifying in any manner the rights of certificateholders of any
then outstanding Series. No such amendment, however, may (a) reduce in
any manner the amount of, or delay the timing of, distributions required
to be made on any such Series, (b) change the definition of or the manner
of calculating the interest of any certificateholder of such Series, or
(c) reduce the aforesaid percentage of undivided interests the holders of
which are required to consent to any such amendment, in each case without
the consent of all certificateholders of all Series adversely affected.
Promptly following the execution of any amendment to the Pooling and
Servicing Agreement, the Trustee will furnish written notice of the
substance of such amendment to each certificateholder. Any Supplement and
any amendments regarding the addition or removal of Receivables from the
Trust will not be considered an amendment requiring certificateholder
consent under the provisions of the Pooling and Servicing Agreement and
any Supplement.
LIST OF CERTIFICATEHOLDERS
Upon written request of certificateholders of record representing
undivided interests in the Trust aggregating not less than 10% of the
Invested Amount, the Trustee after having been adequately indemnified by
such certificateholders for its costs and expenses, and having given the
Servicer notice that such request has been made, will afford such
certificateholders access during business hours to the current list of
certificateholders of the Trust for purposes of communicating with other
certificateholders with respect to their rights under the Pooling and
Servicing Agreement. See "--Book-Entry Registration" and "--Definitive
Certificates" above.
THE TRUSTEE
The Chase Manhattan Bank is the Trustee under the Pooling and
Servicing Agreement. The Transferor, the Servicer, and their respective
affiliates may from time to time enter into normal banking and trustee
relationships with the Trustee and its affiliates. The Trustee, the
Transferor, the Servicer, and any of their respective affiliates may hold
Certificates in their own names. In addition, for purposes of meeting the
legal requirements of certain local jurisdictions, the Trustee will have
the power to appoint a co-trustee or separate trustees of all or any part
of the Trust. In the event of such appointment, all rights, powers,
duties, and obligations conferred or imposed upon the Trustee by the
Pooling and Servicing Agreement will be conferred or imposed upon the
Trustee and such separate trustee or co-trustee jointly, or, in any
jurisdiction in which the Trustee shall be incompetent or unqualified to
perform certain acts, singly upon such separate trustee or co-trustee who
will exercise and perform such rights, powers, duties, and obligations
solely at the direction of the Trustee.
The Trustee may resign at any time. The Transferor may also remove
the Trustee if the Trustee ceases to be eligible to continue as such
under the Pooling and Servicing Agreement or if the Trustee becomes
insolvent. In such circumstances, the Transferor will be obligated to
appoint a successor Trustee. Any resignation or removal of the Trustee
and appointment of a successor Trustee does not become effective until
acceptance of the appointment by the successor Trustee.
DESCRIPTION OF THE RECEIVABLES PURCHASE AGREEMENT
PURCHASES OF RECEIVABLES
The Receivables transferred to the Trust pursuant to the Pooling
and Servicing Agreement are purchased by the Transferor pursuant to a
Receivables Purchase Agreement (the "Purchase Agreement") among the
Transferor, as purchaser of such Receivables, and the Originators, as
sellers of such Receivables. Pursuant to the Purchase Agreement, the
Transferor purchases from the Originators Receivables arising in the
Accounts from time to time until the Purchase Termination Date (as
defined below in "--Purchase Termination Date") applicable to such
Originator. On each business day prior to the Purchase Termination Date
applicable to such Originator, each Originator is required to deliver all
of its Receivables to the Transferor. The purchase price of such
Receivables is equal to the outstanding balance of such Receivables, as
adjusted pursuant to the Purchase Agreement, and is payable by the
Transferor in cash, by a promissory note, or by any combination thereof,
at the Originator's option. Pursuant to the Pooling and Servicing
Agreement, such Receivables are thereafter transferred immediately by the
Transferor to the Trust. Pursuant to the Pooling and Servicing Agreement,
the Transferor assigned its rights in, to, and under the Purchase
Agreement with respect to such Receivables to the Trust.
In September 1993, the Purchase Agreement was supplemented to add
FDS as an Originator and substantially all of the then-existing Accounts
were transferred from the other Originators (other than Broadway) to FDS.
Substantially all of the Accounts (other than the Broadway Accounts)
established subsequent to such transfer have been established by FDS.
However, the other Originators remain parties to the Purchase Agreement
and may from time to time establish Accounts and sell Receivables to the
Transferor pursuant thereto. In February 1996, FDS began establishing and
continues to establish the FDS/Broadway Accounts for qualified applicants
who were or become customers of the department stores operated by
Broadway following the conversion of such stores to other Federated
nameplates. In May 1996, Broadway was added as a party to the Purchase
Agreement and, concurrently therewith, the receivables then outstanding
under the Broadway Accounts and the FDS/Broadway Accounts were
transferred to the Transferor for inclusion in the Trust. Substantially
all of the Broadway Accounts were transferred to FDS during fiscal 1996.
See "Risk Factors--Effects of Certain Transactions."
REPRESENTATIONS AND WARRANTIES
Pursuant to the Purchase Agreement, each of the Originators
represents and warrants to the Transferor that, among other things, as of
the Initial Closing Date (or, in the case of certain Originators, the
date upon which they first became Originators) and subject to specified
exceptions and limitations, such Originator is duly organized, validly
existing, and in good standing under the laws of its jurisdiction of
incorporation, such Originator is duly qualified to do business and in
good standing (or is exempt from such requirement) in any state required
in order to conduct its business and has obtained all necessary licenses
and approvals required under applicable law, and such Originator has the
requisite corporate power and authority to conduct its business and to
perform its obligations under the Purchase Agreement.
Pursuant to the Purchase Agreement, each of the Originators
additionally represents and warrants to the Transferor that, among other
things, as of the Initial Closing Date (or, in the case of certain
Originators, the date upon which they first became Originators), and, as
to matters involving Supplemental Accounts or Automatic Additional
Accounts, as of the date that the Receivables therein are designated for
inclusion in the Trust) and subject to specified exceptions and
limitations, (i) the execution and delivery of the Purchase Agreement and
the consummation of the transactions provided for in the Purchase
Agreement have been duly authorized by such Originator by all necessary
corporate action on its part, (ii) the execution, delivery, and
performance of the Purchase Agreement and the performance of the
transactions contemplated thereby do not contravene such Originator's
charter or by-laws, violate any provision of law applicable to it,
require any filing (except for filings under the UCC), registration,
consent, or approval under any such law except for such filings,
registrations, consents, or approvals as have already been obtained and
are in full force and effect, (iii) such Originator has filed all tax
returns required to be filed and has paid or made adequate provision for
the payment of all taxes, assessments, and other governmental charges due
from such Originator, (iv) there are no proceedings or investigations
pending or, to the best knowledge of such Originator, threatened against
such Originator before any court, regulatory body, administrative agency,
or other tribunal or governmental instrumentality asserting the
invalidity of the Purchase Agreement or seeking to prevent the
consummation of any of the transactions contemplated by the Purchase
Agreement, (v) each Receivable of such Originator is or will be an
account receivable arising out of such Originator's performance in
accordance with the terms of the Charge Account Agreement giving rise to
such Receivable, (vi) such Originator has no knowledge of any fact which
should have led it to expect at the time of the classification of such
Receivable as an Eligible Receivable that such Eligible Receivable would
not be paid in full when due, and each Receivable classified as an
"Eligible Receivable" by such Originator in any document or report
delivered under the Purchase Agreement satisfies the requirements of
eligibility contained in the definition of Eligible Receivable set forth
in the Purchase Agreement, (vii) the Purchase Agreement constitutes the
legal, valid, and binding obligation of such Originator, enforceable
against such Originator in accordance with its terms, (viii) such
Originator is not insolvent, (ix) such Originator is the legal and
beneficial owner of all right, title, and interest in and to each
Receivable conveyed to the Transferor by such Originator pursuant to the
Purchase Agreement, and each such Receivable has been or will be
transferred to the Transferor free and clear of any lien other than
Permitted Liens, (x) the Purchase Agreement constitutes a valid transfer,
assignment, and conveyance to the Transferor of all of such Originator's
right, title, and interest in and to the Receivables conveyed to the
Transferor pursuant thereto, (xi) all material information with respect
to the Accounts and the Receivables provided to the Transferor by such
Originator was true and correct as of the Closing Date or as of the day
Receivables arising under each such Account are created, and (xii) each
of such Originator's Receivables has been conveyed to the Transferor free
and clear of any lien of any person claiming through or under such
Originator or any of its affiliates (other than Permitted Liens) and in
compliance in all material respects with all requirements of law
applicable to such Originator.
Pursuant to the Purchase Agreement, each of the Originators
additionally represents and warrants that, among other things, (i) each
such Receivable of such Originator is an account receivable arising out
of such Originator's performance in accordance with the terms of the
Charge Account Agreement giving rise to such Receivable, (ii) such
Originator has no knowledge of any fact which should have led it to
expect at the time of the classification of such Receivable as an
Eligible Receivable that such Eligible Receivable would not be paid in
full when due, and each such Receivable classified as an "Eligible
Receivable" by such Originator in any document or report under the
Purchase Agreement satisfies the requirements of eligibility contained in
the definition of Eligible Receivable set forth in the Purchase
Agreement, (iii) each such Receivable of such Originator has been
conveyed to the Transferor free and clear of any lien of any person
claiming through or under such Originator or any of its affiliates (other
than Permitted Liens), (iv) all consents, licenses, approvals or
authorizations of or any declarations with any governmental authority
required to be obtained by such Originator in connection with the
transfer of such Receivable to the Transferor have been duly obtained and
remain in full force and effect, and (v) all material information with
respect to such Receivable provided to the Transferor by such Originator
is true and correct as of the Initial Closing Date.
If any of the representations or warranties of any Originator as to
matters described in the three immediately preceding paragraphs are not
true with respect to such Originator or any Receivable, as applicable, at
the time such representation or warranty was made and as a result thereof
(i) the Transferor is required to repurchase any Receivable from the
Trust pursuant to the Pooling and Servicing Agreement or (ii) any
Receivable is designated an "Ineligible Receivable" pursuant to the
Pooling and Servicing Agreement, then such Originator will be obligated
to pay to the Transferor immediately upon the Transferor's demand
therefor an amount equal to the amount of all losses, damages, and
liabilities of the Transferor that result from such breach, including but
not limited to the cost of any of the Transferor's repurchase obligations
pursuant to the Pooling and Servicing Agreement.
In addition, upon any exercise by the Transferor of its right to
designate Removed Accounts in connection with the sale by Federated or
any affiliate of Federated of all or substantially all of the capital
stock or assets of any Originator and to remove Receivables arising in
such Removed Account from the Trust, the Originator of the removed
Receivables is required to immediately repurchase each Receivables from
the Transferor by tendering to the Transferor an amount in immediately
available funds equal to the amount the Transferor remitted to the Trust
in consideration of the transfer of the removed Receivables from the
Trust to the Transferor.
CERTAIN COVENANTS
Pursuant to the Purchase Agreement, each Originator covenants that,
among other things, subject to specified exceptions and limitations, (i)
it will take no action to cause any Receivable to be anything other than
an account, general intangible, or chattel paper, (ii) except for the
conveyances under the Purchase Agreement, it will not sell any Receivable
or grant a lien (other than a Permitted Lien) on any Receivable, (iii) it
will comply with and perform its obligations under any Charge Account
Agreement to which it is a party and its credit and collection policies
and that it will not change the terms of such agreements or policies
except as provided in the Purchase Agreement, (iv) in the event it
receives a collection on any Receivable, it will pay such collection to
the Servicer as soon as practicable, (v) it will not convey or transfer
any Accounts, except for transfers to FDS and as otherwise provided in
the Purchase Agreement, (vi) it will comply with all laws, rules, and
regulations applicable to the Receivables, (vii) it will maintain in all
material respects its corporate existence and corporate franchises,
(viii) it will permit the Transferor or its agents to examine the records
relating to the Receivables, (ix) it will maintain and implement any
administrative or operating procedure reasonably necessary for the
collection of Receivables, (x) if the Transferor purchases a Receivable
that does not satisfy the eligibility requirements set forth in the
Purchase Agreement, such Originator will give prompt notice thereof to
the Transferor, and will furnish to the Transferor such information,
documents, records, or reports as the Transferor may reasonably request,
(xi) it will take all actions reasonably necessary to maintain its rights
under all Charge Account Agreements to which it is a party, (xii) it will
record each sale of a Receivable as a sale on its books and records,
reflect each sale in its financial statements and tax returns as a sale,
and recognize gain or loss on such sale, (xiii) it will maintain the
Transferor's valid and properly perfected title to each Receivable and
will execute and deliver such other documents or take all such further
action to protect the Transferor's rights in the Receivables and enable
the Transferor to exercise such rights, including without limitation, by
filing UCC financing statements in each relevant jurisdiction, (xiv) it
will cause any Receivable that constitutes chattel paper to bear a legend
stating that such Receivable has been conveyed to the Trust, and (xv) it
will not effect any change in the nature of its business that could
reasonably be expected to have a material adverse effect on the value or
collectibility of the Receivables.
PURCHASE TERMINATION DATE
If any of the Originators becomes insolvent, the Transferor's
obligations under the Purchase Agreement to such Originator will
automatically be terminated. In addition, if a Pay Out Event occurs as to
all Series of certificates, the Transferor's obligations under the
Purchase Agreement as to all of the Originators will automatically be
terminated. The date of any such termination will be the "Purchase
Termination Date" as to each Originator affected thereby.
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES
TRANSFER OF RECEIVABLES
The Purchase Agreement provides that the Originators transfer all
of their respective right, title, and interest in and to the Receivables
owned by each of them from time to time to the Transferor. However, a
court could treat such transactions as an assignment of collateral as
security for the benefit of the Transferor. Accordingly, each of the
Originators has granted a security interest in the Receivables to the
Transferor pursuant to the Purchase Agreement, and has taken certain
actions required to perfect the Transferor's security interest in the
Receivables. In addition, each of the Originators has warranted that if
the transfer to the Transferor is deemed to be a grant of a security
interest in the Receivables, the Transferor will have a perfected
security interest therein, subject only to Permitted Liens.
The Transferor has represented and warranted in the Pooling and
Servicing Agreement that the transfer of Receivables by it to the Trust
constitutes either a valid transfer and assignment to the Trust of all
right, title, and interest of the Transferor in and to the Receivables,
except for the interest of the Transferor as holder of the Exchangeable
Transferor Certificate and any investor certificate of any Series then
held by it, or the grant to the Trust of a security interest in the
Receivables. The Transferor has taken certain actions required to perfect
the Trust's security interest in the Receivables, and has warranted that
if the transfer to the Trust is deemed to be a grant to the Trust of a
security interest in the Receivables, the Trustee will have a perfected
security interest therein, subject only to Permitted Liens. For a
discussion of the Trust's rights arising from a breach of these
warranties, see "Description of the Offered Certificates--Representations
and Warranties."
Each of the Originators and the Transferor has covenanted that it
will take no action to cause any Receivable to be anything other than an
"account," "general intangible," or "chattel paper" for purposes of the
UCC. Both the transfer and assignment of accounts, general intangibles,
and chattel paper and the transfer of accounts, general intangibles, and
chattel paper as security for an obligation are treated under Article 9
of the UCC as creating a security interest therein and are subject to its
provisions, and the filing of an appropriate financing statement will
perfect a security interest therein. In order to protect the interests of
the Trust in the Receivables, financing statements covering the
Receivables have been and will be filed with the appropriate governmental
authorities and the charge slips pursuant to which Receivables that
constitute "chattel paper" for purposes of the UCC were generated will
generally be marked with legends stating that such Receivables have been
conveyed to the Trust.
There are certain limited circumstances under the UCC in which a
prior or subsequent transferee of Receivables coming into existence after
the Initial Closing Date could have an interest in such Receivables with
priority over the respective interests of the Transferor and the Trust
therein. However, each of the Originators and the Transferor has
represented and warranted that it transferred the Receivables free and
clear of the lien of any third party. In addition, each of the
Originators and the Transferor has covenanted that it will not sell,
pledge, assign, transfer, or grant any lien on any Receivable (or any
interest therein) other than to the Transferor and the Trust,
respectively. A tax or other government lien on property of an Originator
or the Transferor arising prior to the time a Receivable comes into
existence may also have priority over the respective interests of the
Transferor and the Trust in such Receivable. See "Risk Factors--Transfer
of the Receivables; Insolvency Risk Considerations."
CERTAIN MATTERS RELATING TO BANKRUPTCY OR INSOLVENCY
The ability of the Trustee timely and fully to make the payments to
which Certificateholders are entitled could potentially be affected by
the bankruptcy or insolvency of one or more of the Originators or the
Transferor. Under the United States Bankruptcy Code and similar state law
applicable to the Originators other than FDS, and, in the case of FDS,
under FIRREA (which became effective August 9, 1989 and sets forth
certain powers that the FDIC could exercise if it were appointed as
receiver for FDS), to the extent that the Originators or the Transferor
have granted security interests in the Receivables to the Transferor or
the Trust, respectively, and such security interests were validly
perfected before any insolvency of the Originators or the Transferor and
were not granted or taken in contemplation of insolvency or with the
intent to hinder, delay, or defraud the Originators or the Transferor or
their respective creditors, such security interests should not be subject
to avoidance in the event of bankruptcy, insolvency, or receivership of
the Originators of the Transferor, and payments to the Trust with respect
to the Receivables should not be subject to recovery by a bankruptcy
trustee, conservator, or receiver for the Originators or the Transferor.
If, however, such a bankruptcy trustee, conservator, or receiver were to
assert a contrary position (or, in the case of a conservator or receiver
for FDS, were to require the Trustee to establish its right to those
payments by submitting to and completing the administrative claims
procedure established under FIRREA, or were to request a stay of
proceedings with respect to FDS as provided under FIRREA), delays in
payments on the Offered Certificates and possible reductions in the
amount of those payments could occur. In addition, certain administrative
expenses may also have priority over the Transferor's or the Trust's
interest in such Receivables.
In Octagon Gas System, Inc. v. Rimmer, 995 F.2d 948 (10th Cir.),
cert. denied, 114 S. Ct. 554 (1993), the court determined that the
interest acquired by a purchaser of "accounts," which as defined under
the UCC would likely include the Receivables, is treated as a security
interest under the UCC. As described above, the treatment of the
transfers of the Receivables to the Transferor or the Trust as grants of
security interests could have consequences to the Offered Certificate
Owners that would be less advantageous than the treatment of such
transfers as outright sales. The circumstances under which the Octagon
ruling would apply are not fully known and the extent to which the
Octagon decision will be followed in other courts or outside of the Tenth
Circuit is not certain. Although most of the Originators' and the
Transferor's respective business activities are conducted outside the
geographic area subject to the jurisdiction of the Tenth Circuit, a
portion of such business activities are conducted within such geographic
area.
The Transferor has not engaged in any activities except purchasing
accounts receivable from the Originators, forming trusts, transferring
such accounts receivable to such trusts and engaging in activities
incident to, or necessary or convenient to accomplish, the foregoing. The
Transferor has no intention of filing a voluntary petition under the
United States Bankruptcy Code or any similar applicable state law so long
as the Transferor is solvent and does not reasonably foresee becoming
insolvent. However, if one or more of the Originators were to become
subject to bankruptcy, insolvency, or receivership or similar proceedings
and a bankruptcy trustee, conservator, receiver, or other party in
interest were to request a court to order that the Transferor should be
substantively consolidated with such Originator or Originators, delays in
payments on the Offered Certificates and, if such request were granted,
possible reductions in the amount of those payments, could occur.
The Pooling and Servicing Agreement provides that, upon the
bankruptcy or appointment of a receiver for the Transferor, the
Transferor will promptly give notice thereof to the Trustee, and a Pay
Out Event with respect to all Series will occur. Under the Pooling and
Servicing Agreement, no new Principal Receivables will be transferred to
the Trust and, unless otherwise instructed within a specified period by
the certificateholders representing undivided interests aggregating more
than 50% of the aggregate invested amount of each Series (and, with
respect to Series 1997-1, the holders of more than 50% of each of the
Class A, Class B, and Class C Certificates), the Trustee will proceed to
sell, dispose of, or otherwise liquidate the Receivables in a
commercially reasonable manner and on commercially reasonable terms. The
proceeds from the sale of the Receivables would then be treated by the
Trustee as collections on the Receivables. If the only Pay Out Event to
occur is either the insolvency of the Transferor or the appointment of a
bankruptcy trustee or receiver for the Transferor, the receiver or
bankruptcy trustee for the Transferor may have the power to continue to
require the Transferor to transfer new Principal Receivables to the Trust
and to prevent the early sale, liquidation, or disposition of the
Receivables and the commencement of the Early Amortization Period. See
"Description of the Offered Certificates--Pay Out Events."
The occurrence of certain events of insolvency, conservatorship, or
receivership with respect to the Servicer would result in a Servicer
Default. If a conservator or receiver were appointed for the Servicer,
and no Servicer Default other than such insolvency, conservatorship, or
receivership of the Servicer exists, the conservator or receiver may have
the power to prevent either the Trustee or the majority of the
Certificateholders from effecting a transfer of servicing to a successor
Servicer.
CONSUMER AND DEBTOR PROTECTION LAWS
The relationship of the cardholder and credit card issuer is
extensively regulated by federal and state consumer protection laws. With
respect to credit cards issued by the Originators, the most significant
of these laws include the federal Truth-in-Lending Act, Equal Credit
Opportunity Act, Fair Credit Reporting Act, and Fair Debt Collection
Practices Act, as well as comparable statutes in the states in which
cardholders reside. These statutes impose disclosure requirements when a
credit card account is advertised, when it is opened, at the end of
monthly billing cycles, upon account renewal for accounts on which annual
fees are assessed, and at year end. In addition, these statutes limit
cardholder liability for unauthorized use, prohibit certain
discriminatory practices in extending credit, impose certain limitations
on the type of account-related charges that may be assessed, and regulate
collection practices. Federal legislation requires credit card issuers to
disclose to consumers the interest rates, annual cardholder fees, grace
periods, and balance calculation methods associated with their credit
card accounts. Cardholders are entitled under current law to have
payments and credits applied to the credit card account promptly, to
receive prescribed notices, and to have billing errors resolved promptly.
Congress and the states may from time to time enact new laws and
amendments to existing laws to further regulate the extension and
collection of consumer credit loans or to reduce the finance charges or
other charges or fees that may be assessed in connection therewith.
The Trust may be liable for certain violations of consumer
protection laws that apply to the Receivables, either as assignee of the
Transferor with respect to obligations arising before transfer of the
Receivables to the Trust or as a party directly responsible for
obligations arising after such transfer. In addition, a cardholder may be
entitled to assert such violations by way of set-off against his
obligation to pay the amount of Receivables owing. The Transferor
covenants in the Pooling and Servicing Agreement to accept the transfer
of all Receivables in an Account if any Receivable in such Account has
not been created in compliance with the requirements of such laws. The
Transferor has also agreed in the Pooling and Servicing Agreement to
indemnify the Trust for, among other things, any liability arising from
such violations. See "Description of the Offered
Certificates--Representations and Warranties."
Application of federal and state bankruptcy and debtor relief laws
to the obligations represented by the Receivables could adversely affect
the interests of the Certificateholders if such laws result in any
Receivables being written off as uncollectible "Description of the
Offered Certificates--Defaulted Receivables; Rebates and Fraudulent
Charges."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
General. Set forth below is a discussion of the material
anticipated federal income tax consequences to Offered Certificate Owners
who are original owners of the Offered Certificates and hold the Offered
Certificates as capital assets under the Code. This discussion does not
purport to be complete or to deal with all aspects of federal income
taxation that may be relevant to Offered Certificate Owners in light of
their particular circumstances, nor to certain types of Offered
Certificate Owners subject to special treatment under the federal income
tax laws (for example, banks and life insurance companies). This
discussion is based upon present provisions of the Code, the regulations
promulgated thereunder, and judicial and ruling authorities, all of which
are subject to change, which change may be retroactive. PROSPECTIVE
INVESTORS ARE ADVISED TO CONSULT THEIR OWN TAX ADVISORS WITH REGARD TO
THE FEDERAL TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP, OR DISPOSITION
OF INTERESTS IN THE OFFERED CERTIFICATES, AS WELL AS THE TAX CONSEQUENCES
ARISING UNDER THE LAWS OF ANY STATE, FOREIGN COUNTRY, OR OTHER TAXING
JURISDICTION.
Characterization of the Certificates as Indebtedness. Pursuant to
the Pooling and Servicing Agreement, the Transferor, the Trustee, the
Offered Certificateholder, and each Offered Certificate Owner express
their intent that, for tax purposes, the Offered Certificates will be
indebtedness of the Transferor secured by the Receivables. The
Transferor, the Offered Certificateholder, and each Offered Certificate
Owner, by acquiring an interest in a Certificate, agree to treat the
Offered Certificates as indebtedness of the Transferor for federal,
state, and local tax purposes.
Based upon the application of existing law to the facts of the
transaction as set forth in the Pooling and Servicing Agreement and other
relevant documents, Tax Counsel has advised the Transferor that, in the
opinion of Tax Counsel, the Offered Certificates will be treated for
federal income tax purposes as indebtedness of the Transferor. However,
opinions of counsel are not binding on the IRS, and there can be no
assurance that the IRS could not successfully challenge this conclusion.
In general, the characterization of a transaction for federal
income tax purposes is based upon economic substance, and the substance
of the transaction in which the Offered Certificates are issued is
consistent with the treatment of the Offered Certificates as debt of the
Transferor for federal income tax purposes. Although there are certain
judicial precedents holding that under the appropriate circumstances a
taxpayer should be required to treat a transaction in accordance with the
form chosen by the taxpayer, regardless of the transaction's substance,
the operative provisions of the transaction and the Pooling and Servicing
Agreement are not inconsistent with treating the Offered Certificates as
debt and accordingly, these authorities would not be applied to require
characterization of the transaction as a sale of the Receivables to the
Trust or the Offered Certificate Owners. Based on the foregoing, Tax
Counsel has concluded that the characterization of the Offered
Certificates, for federal income tax purposes, would be governed by the
substance of the transaction, which is the issuance of debt.
Other Characterizations of Offered Certificates. If the Pooling and
Servicing Agreement does not create a debt obligation for federal income
tax purposes, the arrangement among the Transferor, the Offered
Certificateholder, and the Offered Certificate Owners could be
classified, for federal income tax purposes, alternatively as a
partnership, a publicly traded partnership taxable as a corporation, or
as an association taxable as a corporation. Because, in the opinion of
Tax Counsel, the Offered Certificates will be characterized as debt for
federal income tax purposes, no attempt will be made to comply with any
reporting or tax payment requirements which might be applicable if the
arrangement between the Transferor and the Offered Certificate Owners
were treated as creating a partnership or a corporation. No IRS ruling on
the federal income tax characterization of the Offered Certificates or
the arrangement among the Transferor, the Offered Certificateholder, and
Offered Certificate Owners will be sought.
If the arrangement created by the Pooling and Servicing Agreement
were characterized as a partnership among the Transferor, the Offered
Certificateholder, and the Offered Certificate Owners, such a partnership
would not be subject to federal income tax, but each item of income,
gain, loss, deduction, and credit generated through the ownership of the
Receivables by such a partnership would generally be passed through to
the Transferor and the Offered Certificate Owners as partners in such a
partnership according to their respective interests therein. The amount,
timing, and character of income reportable by the Offered Certificate
Owners as partners could differ materially from the income reportable by
the Offered Certificate Owners if the Offered Certificates are
characterized as debt. In addition, if the Pooling and Servicing
Agreement were to create a partnership, the partnership might be required
to withhold federal income tax at a rate of up to 39.6% on the income
allocable to Foreign Investors. See "--Federal Income Tax Consequences to
Foreign Investors."
If the arrangement were treated as a publicly traded partnership
taxable as an association or as an association taxable as a corporation,
it would be subject to federal income tax at corporate tax rates on its
taxable income generated by ownership of the Receivables. Such a tax
could result in reduced distributions to Offered Certificate Owners.
Distributions to the Transferor and, unless the Offered Certificates were
treated as debt of such corporation, to the Offered Certificate Owners,
would not be deductible in computing the taxable income of the
corporation. In addition, if the Offered Certificates were not treated as
debt of the corporation, all or a portion of any such distributions
would, to the extent of the current and accumulated earnings and profits
of such corporation, be treated as dividend income to the Offered
Certificate Owners, and in the case of Offered Certificate Owners that
are non-United States persons, would be subject to withholding tax.
In addition, if the arrangement were treated as a publicly traded
partnership, any income allocated to an Offered Certificate Owner that is
a tax-exempt entity will constitute "unrelated business taxable income,"
at least where the publicly traded partnership is taxed as a partnership.
TAXATION OF INTEREST AND DISCOUNT INCOME OF OFFERED CERTIFICATE OWNERS
Assuming that the Offered Certificate Owners are owners of debt
obligations for federal income tax purposes, interest generally will be
taxable as ordinary income for federal income tax purposes when received
by Offered Certificate Owners utilizing the cash method of accounting and
when accrued by Offered Certificate Owners utilizing the accrual method
of accounting. Interest received on the Offered Certificates may also
constitute "investment income" for purposes of certain limitations of the
Code concerning the deductibility of investment interest expense.
While it is not anticipated that the Offered Certificates will be
issued at a greater than de minimis discount, under current treasury
regulations (the "Regulations"), it is possible that the Offered
Certificates could nevertheless be deemed to have been issued with OID.
This could be the case, for example, if interest payments were not deemed
to be "qualified stated interest payments" because, for example, the
initial interest period was longer than subsequent interest periods and a
proper adjustment was not made to the value of the rate on which the
initial interest payment was based. If the Regulations were to apply, in
general, all of the taxable income to be recognized with respect to the
Offered Certificates would be includible in income of Offered Certificate
Owners as OID, but would not be includible again when the interest is
actually received. If the Offered Certificates are in fact issued at a
greater than de minimis discount or are treated as having been issued
with OID under the Regulations, the following general rules will apply.
The excess of the "stated redemption price at maturity" of the
Offered Certificates (generally equal to their principal amount as of the
date of original issuance plus all interest other than "qualified stated
interest payments" payable prior to or at maturity) over their original
issue price (in this case, the initial offering price at which a
substantial amount of the Offered Certificates are sold to the public)
will constitute OID. An Offered Certificate Owner must include OID in
income over the term of the Offered Certificate under a constant yield
method. In general, OID must be included in income in advance of the
receipt of cash representing that income. In the case of debt instruments
as to which the repayment of principal may be accelerated as a result of
the prepayment of other obligations securing the debt instrument, the
periodic accrual of OID is determined by taking into account both the
prepayment assumptions used in pricing the debt instrument and the
prepayment experience. If this provision applies to the Offered
Certificates, the amount of OID which will accrue in any given "accrual
period" may either increase or decrease depending upon the accrual
prepayment rate.
Offered Certificate Owners should be aware that the resale of a
Certificate may be affected by the market discount rules of the Code.
These rules generally provide that, subject to a de minimis exception, if
a holder of an Offered Certificate acquires it at market discount (i.e.,
at a price below its stated redemption price at maturity or its "revised
issue price" if it was issued with OID) and thereafter recognizes gain
upon a disposition of the Offered Certificate, the lesser of such gain or
the portion of the market discount that accrued while the Offered
Certificate was held by such holder will be treated as ordinary interest
income realized at the time of the disposition.
Each Offered Certificate Owner should consult his own tax advisor
regarding the impact of the original issue discount rules.
SALES OF CERTIFICATES
In general, an Offered Certificate Owner will recognize gain or
loss upon the sale, exchange, redemption, or other taxable disposition of
an Offered Certificate measured by the difference between (i) the amount
of cash and the fair market value of any property received (other than
amounts attributable to, and taxable as, accrued stated interest) and
(ii) the owner's tax basis in the Offered Certificate (as increased by
any OID or market discount previously included in income by the holder
and decreased by any deductions previously allowed for amortizable bond
premium and by any payments reflecting principal or OID received with
respect to such Offered Certificate). Subject to the market discount
rules discussed above and to the one-year holding requirement for
long-term capital gain treatment, any such gain or loss generally will
receive long-term capital gain treatment. The federal income tax rates
applicable to capital gains for taxpayers other than individuals,
estates, and trusts are currently the same as those applicable to
ordinary income; however, the maximum ordinary income rate for
individuals, estates, and trusts generally is 39.6%, whereas the maximum
long-term capital gains rate for such taxpayers is 28%. Moreover, capital
losses generally may be used only to offset capital gains.
FEDERAL INCOME TAX CONSEQUENCES TO FOREIGN INVESTORS
In general, interest (including OID) paid on an Offered Certificate
to a nonresident alien individual, foreign corporation or other
non-United States person (other than a 10% shareholder of the Transferor)
is not subject to federal income tax, provided that such interest is not
effectively connected with a trade or business of the recipient in the
United States and the Offered Certificateholder provides the required
foreign person information certification.
If the interests of the Offered Certificateholders were deemed to
be partnership interests, such recharacterization could cause a foreign
person to be treated as engaged in a trade or business in the United
States. In such event the Offered Certificateholder would be required to
file a federal income tax return and, in general, would be subject to
federal income tax on its net income from the partnership. Furthermore,
the partnership would be required, on a quarterly basis, to pay
withholding tax equal to the sum, for each foreign partner, of such
foreign partner's distributive share of "effectively connected" income of
the partnership multiplied by the highest rate of tax applicable to that
foreign partner. The tax withheld from each foreign partner would be
credited against such foreign partner's U.S. income tax liability. Gain
on any sale or other disposition of a partnership interest by a foreign
partner would also be subject to U.S. income tax.
If the Trust were taxable as a corporation, distributions to
foreign persons, to the extent treated as dividends, would generally be
subject to withholding at the rate of 30%, unless such rate were reduced
by an applicable income tax treaty.
BACKUP WITHHOLDING
An Offered Certificate Owner may be subject to backup withholding
at the rate of 31% with respect to interest paid on the Offered
Certificates if the Offered Certificate Owner, upon issuance, fails to
supply the Trustee or his broker with his taxpayer identification number,
fails to report interest, dividends, or other "reportable payments" (as
defined in the Code) properly, or under certain circumstances, fails to
provide the Trustee or his broker with a certified statement, under
penalty of perjury, that he is not subject to backup withholding.
Information returns will be sent annually to the IRS and to each Offered
Certificateholder setting forth the amount of interest paid on Offered
Certificates and the amount of tax withheld thereon.
STATE, LOCAL, AND FOREIGN TAXATION
The discussion above does not address the tax treatment of the
Trust, the Offered Certificates, or the Offered Certificate Owners under
state and local tax laws or foreign tax laws. Issues as to the
appropriate characterization of the arrangement created by the Pooling
and Servicing Agreement may arise under the laws of various states and
other jurisdictions. Such issues and the consequences of such
characterization on the tax treatment of the Trust, the Offered
Certificates, or the Offered Certificate Owners may be similar or
dissimilar to those described above with respect to potential federal
income tax consequences. According, prospective investors are urged to
consult their own tax advisors regarding the state and local tax
treatment of the Trust and the Offered Certificates, and the consequences
of purchase, ownership, or disposition of the Offered Certificates under
any state or local tax law or any foreign tax law, if applicable.
EMPLOYEE BENEFIT PLAN CONSIDERATIONS
Section 406 of ERISA and Section 4975 of the Code prohibit a
pension, profit sharing, or other employee benefit plan that is subject
to such provisions from engaging in certain transactions involving "plan
assets" with persons that are "parties in interest" under ERISA or
"disqualified persons" under the Code with respect to the plan. ERISA
also imposes certain duties on persons who are fiduciaries of plans
subject to ERISA and prohibits certain transactions between a plan and
parties in interest with respect to such plans. Under ERISA, any person
who exercises any authority or control with respect to the management or
disposition of the assets of a plan is considered to be a fiduciary with
respect to such plan (subject to certain exceptions not here relevant),
and any person who provides services to a plan (as well as any
corporation 50% or more of which is owned by such a service provider) is
a "party in interest" under ERISA and a "disqualified person" under the
Code with respect to the plan. A violation of these "prohibited
transaction" rules may generate excise tax and other liabilities under
ERISA and the Code for such persons.
Plan fiduciaries should determine whether the acquisition and
holding of the Class A Certificates and the operations of the Trust would
result in direct or indirect prohibited transactions under ERISA and the
Code. The operations of the Trust could result in prohibited transactions
if Benefit Plans that purchase the Class A Certificates are deemed to own
an interest in the underlying assets of the Trust. There may also be an
improper delegation of the responsibility to manage Benefit Plan assets
if Benefit Plans that purchase the Class A Certificates are deemed to own
an interest in the underlying assets of the Trust.
Pursuant to a final regulation (the "Final Regulation") issued by
the DOL concerning the definition of what constitutes the "plan assets"
of an employee benefit plan subject to Title I of ERISA or Section 4975
of the Code, or an individual retirement account ("IRA") (collectively
referred to as "Benefit Plans"), the assets and properties of certain
entities in which a Benefit Plan makes an equity investment could be
deemed to be assets of the Benefit Plan in certain circumstances.
Accordingly, if Benefit Plans purchase Class A Certificates, the Trust
could be deemed to hold plan assets unless one of the exceptions under
the Final Regulation is applicable to the Trust.
The Final Regulation applies only to the purchase by a Benefit Plan
of an "equity interest" in an entity. The Final Regulation defines
"equity interest" as any interest in an entity other than an instrument
that is treated as indebtedness under applicable local law and has no
substantial equity features. The Final Regulation further provides that
an undivided ownership interest in property or a beneficial interest in a
trust is an equity interest. Assuming that interests in Class A
Certificates are equity interests, the Final Regulation contains two
exceptions under which the issuer of an equity interest to Benefit Plans
would not be deemed to hold plan assets. First, the Final Regulation
contains an exception that provides that if a Benefit Plan acquires a
"publicly-offered security," the issuer of the security is not deemed to
hold plan assets. A publicly-offered security is a security that is (i)
freely transferable, (ii) part of a class of securities that is owned by
100 or more investors independent of the issuer and of one another, and
(iii) either is (A) part of a class of securities registered under
Section 12(b) or 12(g) of the Exchange Act or (B) sold to the plan as
part of an offering of securities to the public pursuant to an effective
registration under the Securities Act and the class of securities of
which such security is a part is registered under the Exchange Act within
120 days (or such later time as may be allowed by the Commission) after
the end of the fiscal year of the issuer during which the offering of
such securities to the public occurred. Second, the Final Regulation
provides that if at all times less than 25% of the value of all classes
of equity interests in an entity are held by benefit plan investors
(which is defined as including plans subject to ERISA, government plans,
and IRAs), the investing plan's assets will not be deemed to include any
of the underlying assets of the entity.
It is anticipated that interests in the Class A Certificates will
meet the criteria of publicly-offered securities as set forth above. The
Class A Underwriters expect, although no assurance can be given, that
interests in the Class A Certificates of each Series will be held by at
least 100 independent investors at the conclusion of the offering; there
are no restrictions imposed on the transfer of interests in the Class A
Certificates; and interests in the Class A Certificates will be sold as
part of an offering pursuant to an effective registration statement under
the Securities Act and then will be timely registered under the Exchange
Act.
If the Trust's assets are deemed under the Final Regulation to
include assets of Benefit Plans that are Class A Certificateholders,
transactions involving the Trust and "parties in interest" or
"disqualified persons" with respect to such plans might be prohibited
under Section 406 of ERISA and Section 4975 of the Code unless an
exemption is applicable. In addition, the Servicer, the Transferor, and
any Underwriter may be considered to be a party in interest, disqualified
person, or fiduciary with respect to an investing Benefit Plan.
Accordingly, an investment by a Benefit Plan in Class A Certificates may
be a prohibited transaction under ERISA and the Code unless such
investment is subject to a statutory or administrative exemption.
Further, annual reporting obligations under ERISA with respect to the
Trust and assets thereof, including a required accountant's report, would
apply. Thus, for example, if a participant in any Benefit Plan is a
cardholder under one of the Accounts, under DOL interpretations the
purchase of interests in Class A Certificates by such plan could
constitute a prohibited transaction. There are at least four class
exemptions issued by the DOL that might apply, depending in part on who
decided to acquire the Class A Certificates for the Benefit Plan: DOL
Prohibited Transaction Exemption ("PTE") 84-14 (Class Exemption for Plan
Asset Transactions Determined by Independent Qualified Professional Asset
Managers), PTE 91-38 (Class Exemption for Certain Transactions Involving
Bank Collective Investment Funds), PTE 90-1 (Class Exemption for Certain
Transactions Involving Insurance Company Pooled Separate Accounts), and
PTE 95-60 (Class Exemption for Certain Transactions Involving Insurance
Company General Accounts). There can be no assurance that these
exemptions, even if all of the conditions specified therein are
satisfied, or any other exemption will apply to all transactions
involving the Trust's assets.
In light of the foregoing, fiduciaries of a Benefit Plan
considering the purchase of interests in Class A Certificates should
consult their own counsel as to whether the assets of the Trust which are
represented by such interests would be considered plan assets, and
whether, under the general fiduciary standards of investment prudence and
diversification, an investment in Class A Certificates is appropriate for
the Benefit Plan taking into account the overall investment policy of the
Benefit Plan and the composition of the Benefit Plan's investment
portfolio. In addition, fiduciaries should consider the consequences that
would result if the Trust's assets were considered plan assets, the
applicability of exemptive relief from the prohibited transaction rules,
and whether all conditions for such exemptive relief would be satisfied.
In particular, insurance companies considering the purchase of
Class A Certificates should consult their own benefits or other
appropriate counsel with respect to the United States Supreme Court's
decision in John Hancock Mutual Life Insurance Co. v. Harris Trust &
Savings Bank, 114 S. Ct. 517 (1993) ("John Hancock"), and the
applicability of PTE 95-60. In John Hancock, the Supreme Court held that
assets held in an insurance company general account may be deemed to be
"plan assets" under certain circumstances; however, PTE 95-60 may exempt
some or all of the transactions that could occur as the result of the
acquisition and holding of the Class A Certificates by an insurance
company general account from the penalties normally associated with
prohibited transactions. Accordingly, investors should analyze whether
John Hancock and PTE 95-60 or any other exemption may have an impact with
respect to an investment in Class A Certificates.
The Class B Certificates may not be acquired directly or indirectly
by any employee benefit plan subject to ERISA, by any IRA or by certain
other employee benefit accounts.
The Pooling and Servicing Agreement and each Class B Certificate
will provide that by accepting and holding a Class B Certificate, each
Class B Certificateholder will be deemed to have represented and
warranted that it is not (i) an employee benefit plan (as defined in
Section 3(3) of ERISA) that is subject to the provisions of Title I of
ERISA, (ii) a plan described in Section 4975(e)(1) of the Code, or (iii)
any entity whose underlying assets include plan assets by reason of a
plan's investment in the entity.
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting
Agreement (the "Underwriting Agreement") between the Transferor and the
Underwriters named below (the "Underwriters"), the Transferor has agreed
to sell to the Underwriters of the Class A Certificates (the "Class A
Underwriters") and the Underwriter of the Class B Certificates (the
"Class B Underwriter"), and each of the Underwriters has severally agreed
to purchase, the principal amount of the Class A Certificates and the
Class B Certificates, as applicable, set forth opposite its name:
PRINCIPAL AMOUNT OF
CLASS A UNDERWRITERS CLASS A CERTIFICATES
- -------------------- --------------------
Credit Suisse First Boston Corporation............ $
[ ]........................ _____________
Total....................................... $
=============
PRINCIPAL AMOUNT OF
CLASS B UNDERWRITERS CLASS B CERTIFICATES
- -------------------- --------------------
Credit Suisse First Boston Corporation........... $
In the Underwriting Agreement, the Underwriters have agreed,
subject to the terms and conditions set forth therein, to purchase all of
the Certificates offered hereby if any of the Certificates are purchased.
The Class A Underwriters propose initially to offer the Class A
Certificates to the public at the price set forth on the cover page
hereof and to certain dealers at such price less concessions not in
excess of [ ]% of the principal amount of the Class A Certificates. The
Class A Underwriters may allow, and such dealers may reallow, concessions
not in excess of [ ]% of the principal amount of the Class A Certificates
to certain brokers and dealers. After the initial public offering, the
public offering price and other selling terms may be changed by the Class
A Underwriters.
The Class B Underwriter proposes initially to offer the Class B
Certificates to the public at the price set forth on the cover page
hereof and to certain dealers at such price less concessions not in
excess of [ ]% of the principal amount of the Class B Certificates. The
Class B Underwriter may allow, and such dealers may reallow, concessions
not in excess of [ ]% of the principal amount of the Class B Certificates
to certain brokers and dealers. After the initial public offering, the
public offering price and other selling terms may be changed by the Class
B Underwriter.
Underwriters may engage in over-allotment, stabilizing
transactions, syndicate covering transactions and penalty bids in
accordance with Regulation M under the Exchange Act. Overallotment
involves syndicate sales in excess of the offering size, which creates a
syndicate short position. Stabilizing transactions permit bids to
purchase the underlying security so long as the stabilizing bids do not
exceed a specified maximum. Syndicate covering transactions involve
purchases of the securities in the open market after the distribution has
been completed in order to cover syndicate short positions. Penalty bids
permit the Underwriters to reclaim a selling concession from a syndicate
member when the securities originally sold by such syndicate member are
purchased in a syndicate covering transaction to cover syndicate short
positions. Such stabilizing transactions, syndicate covering transactions
and penalty bids may cause the price of the securities to be higher than
it would otherwise be in the absence of such transactions.
The Transferor will indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, or
contribute to payments the Underwriters may be required to make in
respect thereof.
LEGAL MATTERS
Certain legal matters relating to the issuance of the Offered
Certificates will be passed upon for the Transferor by Jones, Day, Reavis
& Pogue, New York, New York. Certain legal matters relating to the
issuance of the Offered Certificates will be passed upon for the
Underwriters by Skadden, Arps, Slate, Meagher & Flom LLP, New York, New
York.
GLOSSARY OF TERMS
The following terms, which are used in this Prospectus, have the
meanings indicated:
"A&S" is defined at page 34 in "The Accounts."
"Accounts" means all of the consumer revolving credit card accounts
owned by the Originators on the Cut-Off Date, each Automatic Additional
Account, and each Supplemental Account.
"Accumulation Period" means the period scheduled to begin with the
[ ] Monthly Period, but which may be postponed in the manner described in
"Description of the Offered Certificates--Postponement of Accumulation
Period," and ending on the earliest of (1) the day immediately preceding
the first day of the Early Amortization Period and (2) the date of the
termination of the Trust.
"Accumulation Period Length" is defined at page 46 in "Description
of the Offered Certificates--Postponement of Accumulation Period."
"Accumulation Shortfall" initially means zero and with respect to
any Distribution Date thereafter shall mean the excess, if any, of the
Controlled Deposit Amount for such Distribution Date over the Net
Principal Collections received during the related Monthly Period,
together with the aggregate amount of Shared Principal Collections
received during the related Monthly Period and allocable to the Class A
Certificates, each to the extent available to be distributed to Class A
Certificateholders on such Distribution Date.
"Active Account" is defined at page 51 in "Description of the
Offered Certificates--Eligible Accounts; Eligible Receivables."
"Adjustment Payment" is defined at page 62 in "Description of the
Offered Certificates--Defaulted Receivables; Rebates and Fraudulent
Charges."
"Amortization Period" means any Early Amortization Period or
Accumulation Period.
"Amortization Period Commencement Date" means the earlier of the
date on which the Accumulation Period begins and the date on which a Pay
Out Event occurs or is deemed to have occurred.
"Annual Portfolio Turnover Rate" means with respect to any business
day during a Monthly Period, the aggregate amount of credit sales arising
under Accounts during each of the twelve Monthly Periods ending on the
last day of the second preceding Monthly Period divided by the average of
the Outstanding Balances of Receivables as of the last day of each such
Monthly Period.
"Automatic Additional Account" is defined at page 51 in
"Description of the Offered Certificates--Automatic Addition of
Accounts."
"Available Series Finance Charge Collections" is defined at page 58
in "Description of the Offered Certificates--Application of
Collections--Payment of Fees, Interest, and Other Items."
"Base Rate" means the sum of the weighted average of the Class A
Certificate Rate, the Class B Certificate Rate, and the Class C
Certificate Rate plus [ ]%.
"Benefit Plans" is defined at page 75 in "Employee Benefit Plan
Considerations."
"Billed Finance Charges" means with respect to any Monthly Period,
the amount of finance charges, late fees, and other fees and charges
billed to Obligors on the Receivables.
"Broadway" means Broadway Stores, Inc.
"Broadway Accounts" is defined at page 24 in "Risk Factors--Effects
of Certain Transactions."
"Broadway Receivables, Inc." means Broadway Receivables, Inc., a
wholly owned subsidiary of Broadway.
"Carryover Discount Amount" means for any Series for any business
day the excess, if any, of the sum of the product of the Discount
Allocation Percentage and the Discount Amount and the Carryover Discount
Amount for such Series for the preceding business day over the amount of
Principal Collections added to Total Finance Charge Collections for such
Series on such preceding business day.
"Cash Equivalents" is defined at page 52 in "Description of the
Offered Certificates--Trust Accounts."
"Cede" means Cede & Co.
"Cedel" is defined at page 44 in "Description of the Offered
Certificates--Book-Entry Registration."
"Cedel Participant" is defined at page 44 in "Description of the
Offered Certificates--Book-Entry Registration."
"Certificateholders" means the record holders of the Certificates.
"Certificateholders' Interest" means the interest in the assets of
the Trust allocated to the Certificateholders.
"Certificates" means, collectively, the Class A Certificates, the
Class B Certificates, and the Class C Certificates.
"Charge Account Agreement" means the agreement, which may consist
of more than one document, pursuant to which a person is obligated to pay
for purchased merchandise or services under a credit plan that permits
such person to purchase merchandise and services on credit, together with
any finance charges and other charges related thereto, as such agreement
may be amended, modified, or supplemented from time to time; provided,
however, that only agreements between such person and (i) an Originator
or (ii) a creditor approved by each of the Rating Agencies will be
considered a Charge Account Agreement.
"Class A Adjusted Invested Amount" is defined at page 55 in
"Description of the Offered Certificates--Allocation Percentages."
"Class A Certificate Owners" means the owners of beneficial
interests in the Class A Certificates.
"Class A Certificate Rate" means [ ]% per annum.
"Class A Certificateholders" means the record holders of the Class
A Certificates.
"Class A Certificateholders' Interest" means the interest in the
assets of the Trust allocated to the Class A Certificateholders.
"Class A Certificates" means the [ ]% Class A Asset Backed
Certificates, Series 1997-1.
"Class A Expected Final Payment Date" means the [ ] Distribution
Date.
"Class A Floating Allocation Percentage" means, with respect to any
business day, the percentage equivalent of the ratio that the amount of
the Class A Adjusted Invested Amount as of the end of the preceding
business day bears to the greater of (i) the total amount of Principal
Receivables and amounts on deposit in the Excess Funding Account as of
the end of the preceding business day and (ii) the sum of the numerators
used to calculate the allocation percentages for all classes of all
Series then outstanding.
"Class A Initial Invested Amount" means an amount equal to the
initial principal balance of the Class A Certificates less the Class A
Percentage on the Closing Date of the initial deposit to the Pre-Funding
Account, plus the Class A Percentage of any withdrawals from the
Pre-Funding Account during the Funding Period in connection with
increases in the aggregate amount of Principal Receivables in the Trust.
"Class A Invested Amount" is defined at page 54 in "Description of
the Offered Certificates--Allocation Percentages."
"Class A Investor Charge-Off" is defined at page 62 in "Description
of the Offered Certificates--Investor Charge-Offs."
"Class A Monthly Interest" is defined at page 59 in "Description of
the Offered Certificates--Application of Collections--Class A Monthly
Interest."
"Class A Monthly Principal" is defined at page 60 in "Description
of the Offered Certificates--Application of Collections--Class A Monthly
Principal."
"Class A Percentage" means 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 and the Class B Invested Amount.
"Class A Prepayment Amount" is defined at page 53 in "Description
of the Offered Certificate--Pre-Funding Account."
"Class A Prepayment Premium" is defined at page 53 in "Description
of the Offered Certificate--Pre-Funding Account."
"Class A Required Amount" means, on any Determination Date, the
amount, if any, by which the aggregate amount to be paid on each business
day during the related Monthly Period pursuant to clauses (i) and (v),
and the Class A Required Amount Percentage of the amounts described in
clause (B) of clauses (iii) and (iv), in each case as described in
"Description of the Offered Certificates--Application of
Collections--Payment of Fees, Interest, and Other Items," exceeds the
portion of the Available Series Finance Charge Collections, Transferor
Finance Charge Collections, and Excess Finance Charge Collections on each
business day during the related Monthly Period applied to the payment of
the amounts described in such clauses.
"Class A Required Amount Percentage" means, with respect to any
Distribution Date, the percentage equivalent of a fraction the numerator
of which is the weighted average Class A Invested Amount for each day in
the preceding Monthly Period and the denominator of which is the weighted
average Invested Amount for each day in the preceding Monthly Period.
"Class A Underwriters" is defined at page 76 in "Underwriting."
"Class B Certificate Owners" means the owners of beneficial
interests in the Class B Certificates.
"Class B Certificate Rate" means [ ]% per annum.
"Class B Certificateholders" means the record holders of the Class
B Certificates.
"Class B Certificateholders' Interest" means the interest in the
assets of the Trust allocated to the Class B Certificateholders.
"Class B Certificates" means the [ ]% Class B Asset Backed
Certificates, Series 1997-1.
"Class B Expected Final Payment Date" means the [ ] Distribution
Date.
"Class B Fixed/Floating Allocation Percentage" means the percentage
equivalent of the ratio which the Class B Invested Amount at the end of
the last day of the Revolving Period bears to 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
allocation percentages with respect to Principal Receivables for all
classes of all Series outstanding on such business day; provided,
however, that, because the Certificates are subject to being paired with
a future prefunded Series, if a Pay Out Event occurs with respect to the
Certificates during the Accumulation Period, and if at such time the
Certificates are paired with a prefunded Series, the numerator will be
reset to be equal to the Class B Invested Amount at the end of the last
day prior to the occurrence of such Pay Out Event.
"Class B Floating Allocation Percentage" means, with respect to any
business day, the percentage equivalent of the ratio that the amount of
the Class B Invested Amount as of the end of the preceding business day
bears to the greater of (i) the total amount of Principal Receivables and
amounts on deposit in the Excess Funding Account as of the end of the
preceding business day and (ii) the sum of the numerators used to
calculate the allocation percentages for all classes of all Series then
outstanding.
"Class B Initial Invested Amount" means an amount equal to the
initial principal balance of the Class B Certificates less the Class B
Percentage on the Closing Date of the initial deposit to the Pre-Funding
Account, plus the Class B Percentage of any withdrawals from the
Pre-Funding Account during the Funding Period in connection with
increases in the aggregate amount of Principal Receivables in the Trust.
"Class B Invested Amount" is defined at page 55 in "Description of
the Offered Certificates--Allocation Percentages."
"Class B Investor Charge-Off" is defined at page 62 in "Description
of the Offered Certificates--Investor Charge-Offs."
"Class B Monthly Interest" is defined at page 59 in "Description of
the Offered Certificates--Application of Collections--Class B Monthly
Interest."
"Class B Monthly Principal" is defined at page 61 in "Description
of the Offered Certificates--Application of Collections--Payments of
Principal."
"Class B Percentage" means 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 and the Class B Invested Amount.
"Class B Prepayment Amount" is defined at page 53 in "Description
of the Offered Certificates--Pre-Funding Account."
"Class B Prepayment Premium" is defined at page 53 in "Description
of the Offered Certificates--Pre-Funding Account."
"Class B Principal Payment Commencement Date" means the earlier of
(a) (i) during the Accumulation Period, the Class B Expected Final
Payment Date or (ii) during the Early Amortization Period, the
Distribution Date on which the Class A Invested Amount is paid in full
or, if there are no Principal Collections remaining after payments have
been made to the Class A Certificates on such Distribution Date, the next
succeeding Distribution Date and (b) the Distribution Date following a
mandatory sale or repurchase of the Receivables pursuant to the Pooling
and Servicing Agreement.
"Class B Required Amount" means, on any Determination Date, the
amount, if any, by which the aggregate amount to be paid on each business
day during the related Monthly Period pursuant to clauses (ii), (vi), and
(vii), and the Class B Required Amount Percentage of the amounts
described in clause (B) of clauses (iii) and (iv), in each case as
described in "Description of the Offered Certificates--Application of
Collections--Payment of Fees, Interest, and Other Items," exceeds the
portion of the Finance Charge Collections, Transferor Finance Charge
Collections, Excess Finance Charge Collections, and the Transferor
Subordination Amount on each business day during the related Monthly
Period applied to the payment of the amounts described in such clauses.
"Class B Required Amount Percentage" means, with respect to any
Distribution Date, the percentage equivalent of a fraction the numerator
of which is the weighted average Class B Invested Amount for each day in
the preceding Monthly Period and the denominator of which is the weighted
average Invested Amount for each day in the preceding Monthly Period.
"Class B Underwriter" is defined at page 76 in "Underwriting."
"Class C Certificateholders" means the record holders of the Class
C Certificates.
"Class C Certificateholders' Interest" means the interest in the
assets of the Trust allocated to the Class C Certificateholders.
"Class C Certificates" means the Class C Certificates, Series
1997-1.
"Class C Fixed/Floating Allocation Percentage" means the percentage
equivalent of the ratio which the Class C Invested Amount at the end of
the last day of the Revolving Period bears to 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
allocation percentages with respect to Principal Receivables for all
classes of all Series outstanding on such business day; provided,
however, that, because the Certificates are subject to being paired with
a future prefunded Series, if a Pay Out Event occurs with respect to the
Certificates during the Accumulation Period, and if at such time the
Certificates are paired with a prefunded Series, the numerator will be
reset to be equal to the Class C Invested Amount at the end of the last
day prior to the occurrence of such Pay Out Event.
"Class C Floating Allocation Percentage" means, with respect to any
business day, the percentage equivalent of the ratio that the amount of
the Class C Invested Amount as of the end of the preceding business day
bears to the greater of (i) the total amount of Principal Receivables and
amounts on deposit in the Excess Funding Account as of the end of the
preceding business day and (ii) the sum of the numerators used to
calculate the allocation percentages for all classes of all Series then
outstanding.
"Class C Invested Amount" is defined at page 55 in "Description of
the Offered Certificates--Allocation Percentages."
"Class C Investor Charge-Off" is defined at page 62 in "Description
of the Offered Certificates--Investor Charge-Offs."
"Class C Monthly Principal" is defined at page 61 in "Description
of the Offered Certificates--Application of Collections--Payments of
Principal."
"Class C Principal Payment Commencement Date" means the earlier of
(a) the Distribution Date on which the Class B Invested Amount is paid in
full or, if there are no Principal Collections remaining after payments
have been made to the Class B Certificates on such Distribution Date, the
next succeeding Distribution Date and (b) the Distribution Date following
a mandatory sale or repurchase of the Receivables pursuant to the Pooling
and Servicing Agreement.
"clearing agency" is defined at page 43 in "Description of the
Offered Certificates--Book-Entry Registration."
"clearing corporation" is defined at page 43 in "Description of the
Offered Certificates--Book-Entry Registration."
"Closing Date" means the date of the initial issuance of the
Offered Certificates.
"Code" means the Internal Revenue Code of 1986, as amended.
"Collection Account" means an account established by the Servicer
for the purpose of depositing all collections of Receivables.
"Commission" means the Securities and Exchange Commission.
"Controlled Amortization Amount" means $[ ]; provided, however,
that if the commencement of the Accumulation Period is postponed in the
manner described in "Description of the Offered
Certificates--Postponement of Accumulation Period," (i) the Controlled
Amortization Amount may be greater than the amount stated above and will
be determined by the Servicer in accordance with the Pooling and
Servicing Agreement and (ii) the sum of the Controlled Amortization
Amounts for all Distribution Dates with respect to such modified
Accumulation Period shall not be less than the Class A Invested Amount.
"Controlled Deposit Amount" means, for any Distribution Date with
respect to the Accumulation Period, the sum of the Controlled
Amortization Amount and any Accumulation Shortfall for the preceding
Distribution Date.
"Controlled Distribution Amount" is defined at page 57 in
"Description of the Offered Certificates--Application of Collections."
"Cooperative" is defined at page 44 in "Description of the Offered
Certificates--Book-Entry Registration."
"Cut-Off Date" means for Receivables in Accounts owned by each
Originator, the date on which the last cycle of such Originator was
billed in the [ ] fiscal month.
"Date of Determination" means with respect to the Yield Factor or
the Finance Charge Receivable Factor, respectively, the date on which
such factor is determined, which will in no event be later than the tenth
business day after the end of the preceding Monthly Period.
"Default Amount" means, on any business day, the product of (i) the
aggregate Outstanding Balances of Receivables in Defaulted Accounts on
such business day minus the Ineligible Default Amount and (ii) one minus
the Finance Charge Receivable Factor.
"Defaulted Account" means each account with respect to which, in
accordance with the Servicer's customary and usual servicing procedures,
the Servicer has charged off the Receivables in such account as
uncollectible.
"Definitive Certificates" is defined at page 45 in "Description of
the Offered Certificates--Definitive Certificates."
"Delinquency Percentage" means with respect to any business day the
percentage equivalent of an amount determined on the preceding Date of
Determination (or on such business day with respect to each Date of
Determination) equal to (x) the product of (i) 0.5 and (ii) the aggregate
Outstanding Balance of all Receivables Retail Age 2 or greater (30 or
more days past due) divided by (y) the aggregate Outstanding Balance of
all Receivables on such Date of Determination.
"Depositaries" is defined at page 43 in "Description of the Offered
Certificates--Book-Entry Registration."
"Depository" is defined at page 42 in "Description of the Offered
Certificates--General."
"Determination Date" is defined at page 62 in "Description of the
Offered Certificates--Investor Charge-Offs."
"Discount Allocation Percentage" means with respect to any Series
and any business day the percentage equivalent of a fraction the
numerator of which is the Series Discount Factor for such Series and the
denominator of which is the Discount Factor on such business day.
"Discount Amount" means for any business day the Discount Factor
multiplied by the Outstanding Balance of Receivables transferred to the
Trust on such business day.
"Discount Factor" means for any business day an amount equal to the
sum of each Series Discount Factor for all Series outstanding.
"Discount Trigger Event" means for any business day the Discount
Factor for the second preceding Monthly Period being in excess of zero
and the Rating Agencies having consented to the discounting of purchases
of Receivables prior to such business day and having not revoked such
consent.
"Distribution Account" is defined at page 52 in "Description of the
Offered Certificates--Trust Accounts."
"Distribution Date" means ______________, and the 15th day of each
month thereafter or, if such day is not a business day, on the next
succeeding business day.
"DOL" means the U.S. Department of Labor.
"DTC" means The Depository Trust Company.
"Early Amortization Period" means the period beginning on the
earlier of (a) the day on which a Pay Out Event occurs or is deemed to
have occurred and (b) the Class A Expected Final Payment Date if the
Class A Invested Amount has not been paid in full on such date, or the
Class B Expected Final Payment Date if the Class B Invested Amount has
not been paid in full on such date, and ending on the earlier of (i) the
date of the termination of the Trust and (ii) the Series 1997-1
Termination Date.
"Eligible Account" is defined at page 50 in "Description of the
Offered Certificates--Eligible Accounts; Eligible Receivables."
"Eligible Receivable" is defined at page 51 in "Description of the
Offered Certificates--Eligible Accounts; Eligible Receivables."
"Enhancement" means, with respect to any Series, any letter of
credit, cash collateral account, guaranty, guaranteed rate agreement,
maturity guaranty facility, tax protection agreement, interest rate swap,
or other contract or agreement for the benefit of certificateholders or
any class of certificateholders of such Series.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
"Euroclear" is defined at page 44 in "Description of the Offered
Certificates--Book-Entry Registration."
"Euroclear Operator" is defined at page 44 in "Description of the
Offered Certificates--Book-Entry Registration."
"Euroclear Participants" is defined at page 44 in "Description of
the Offered Certificates--Book-Entry Registration."
"Euroclear System" is defined at page 44 in "Description of the
Offered Certificates--Book-Entry Registration."
"Excess Finance Charge Collections" means any finance charge
collections allocable to any Series in excess of the amounts necessary to
make required payments therefrom with respect to such Series.
"Excess Funding Account" means the account referred to as such at
page 53 in "Description of the Offered Certificates--Excess Funding
Account."
"Exchange" means any tender by the Transferor to the Trustee of the
Exchangeable Transferor Certificate, pursuant to any one or more
Supplements or, if provided in the relevant Supplement, certificates
representing any Series and the Exchangeable Transferor Certificate, in
exchange for one or more new Series and a reissued Exchangeable
Transferor Certificate.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exchangeable Transferor Certificate" means the certificate which
evidences the Transferor Interest.
"FACS" is defined at page 29 in "Federated's Credit Card
Business--Federated's Credit Card Business."
"FDIC" means Federal Deposit Insurance Corporation.
"FDS" means FDS National Bank, a national banking association.
"FDS/Broadway Accounts" is defined at page 24 in "Risk
Factors--Effects of Certain Transactions."
"Federated" means Federated Department Stores, Inc.
"Federated Cards" is defined at page 29 in "Federated's Credit Card
Business--Federated's Credit Card Business."
"Federated Portfolio" is defined at page 31 in "Federated's Credit
Card Business--Revenue and Yield Experience."
"Federated Stores" is defined at page 30 in "Federated's Credit
Card Business--New Account Underwriting."
"Federated Subsidiaries" means Bloomingdale's, Inc.; Bloomingdale's
By Mail, Ltd.; Broadway; Burdines, Inc.; FDS; Lazarus, Inc.; Lazarus PA,
Inc.; Macy's East, Inc.; Rich's Department Stores, Inc.; Stern's
Department Stores, Inc.; and The Bon, Inc.
"Final Regulation" is defined at page 75 in "Employee Benefit Plan
Considerations."
"Finance Charge Collections" means with respect to any Series for
any business day (a) the product of (i) collections received with respect
to the Receivables minus Recoveries and (ii) the Yield Factor plus (b)
any investment earnings on amounts on deposit in the Excess Funding
Account plus (c) Recoveries.
"Finance Charge Receivable Factor" means with respect to any Date
of Determination, the aggregate amount of finance charges, late fees, and
other fees and charges outstanding on the last day of the second
preceding Monthly Period divided by the aggregate Outstanding Balances of
the Eligible Receivables on the last day of such second preceding Monthly
Period (determined on the basis of a calculation performed by the
Servicer).
"Finance Charge Receivables" means for any business day the product
of the Finance Charge Receivable Factor determined on the preceding Date
of Determination (or on such business day with respect to each Date of
Determination) and the aggregate amount of Eligible Receivables as of
such business day (determined on the basis of a calculation performed by
the Servicer).
"Fixed/Floating Allocation Percentage" is defined at page 54 in
"Description of the Offered Certificates--Allocation Percentages."
"FIRREA" is defined at page 23 in "Risk Factors--Transfer of the
Receivables; Insolvency Risk Considerations."
"Floating Allocation Percentage" means the sum of the Class A
Floating Allocation Percentage, the Class B Floating Allocation
Percentage, and the Class C Floating Allocation Percentage.
"Full Invested Amount" is defined at page 9 in "Prospectus
Summary--Allocation of Trust Assets".
"Funding Period' is defined at page 14 in "Prospectus
Summary--Funding Period."
"Holders" is defined at page 45 in "Description of the Offered
Certificates--Definitive Certificates."
"Indirect Participants" is defined at page 43 in "Description of
the Offered Certificates--Book-Entry Registration."
"Ineligible Default Amount" means, as of any business day, the
aggregate Outstanding Balance of Receivables in Accounts which are
identified on the Servicer's computer records as not being Eligible
Accounts and which are reported in the Servicer's computer records on
such business day as becoming Defaulted Accounts.
"Ineligible Receivable" is defined at page 69 in "Description of
the Receivables Purchase Agreement--Representations and Warranties."
"Initial Closing Date" means December 15, 1992.
"Initial Cut-Off Date" means for Receivables in Accounts owned by
each Originator, the date on which the last cycle of such Originator was
billed in the September 1992 fiscal month.
"In-Store Payments" means any payment made by an Obligor with
respect to a Receivable by delivery of cash, check, money order, or any
other form of payment to a cashier or other employee of any Originator or
any merchant which sells merchandise or services on credit pursuant to a
Charge Account Agreement.
"Interest Accrual Period" means, with respect to any Distribution
Date, the period from and including the preceding Distribution Date (or,
with respect to the initial Interest Accrual Period, from and including
the Closing Date) to and excluding such Distribution Date, which shall be
deemed to be a 30-day period.
"Interest Funding Account" means an account established by the
Trustee for the benefit of Certificateholders.
"Invested Amount" means the sum of (a) the Class A Adjusted
Invested Amount, (b) the Class B Invested Amount, and (c) the Class C
Invested Amount; provided, however, that for purposes of calculating the
"Pool Factor" for Series 1997-1 the amount specified in clause (a) above
shall be the Class A Invested Amount.
"Investment Company Act" means the Investment Company Act of 1940,
as amended from time to time.
"Investor Default Amount" means, with respect to each business day,
an amount equal to the product of the aggregate Default Amount for all
Defaulted Accounts on such business day and the Floating Allocation
Percentage applicable for such business day.
"IRA" is defined at page 75 in "Employee Benefit Plan
Considerations."
"IRS" means the Internal Revenue Service.
"John Hancock" is defined at page 75 in "Employee Benefit Plan
Considerations."
"Lock-Box Account" means an account in the name of the Trustee with
a Lock-Box Bank.
"Lock-Box Agreement" means each agreement between the respective
Originator, the Trustee, and the respective Lock-Box Bank, pursuant to
which such Lock-Box Bank receives collections from time to time as
provided therein.
"Lock-Box Bank" means any of the banks that holds one or more
Lock-Box Accounts for receiving collections, pursuant to a Lock-Box
Agreement.
"Macy's" means R.H. Macy & Co., Inc.
"Macy's Credit Card Program" is defined at page 29 in "Federated's
Credit Card Business--Federated's Credit Card Business."
"Macy's Program Owner" is defined at page 34 in "The Accounts."
"Merger" means the acquisition by Federated of Macy's on December
19, 1994, in a reverse acquisition merger, with Macy's, as the surviving
corporation in the merger, changing its name to "Federated Department
Stores, Inc."
"Merger Date" means December 19, 1994.
"Minimum Aggregate Principal Receivables" means, as of any date of
determination, an amount equal to the sum of (a) the initial invested
amounts for all outstanding Series on such date (except any Series
created pursuant to a Variable Funding Supplement or a Paired Series),
(b) with respect to any Series created pursuant to a Variable Funding
Supplement, during the revolving period for such Series, the invested
amount on such date of determination or, during the amortization period
for such Series, the invested amount of such Series on the last day of
the revolving period for such Series, and (c) with respect to any Paired
Series, the invested amount of such Series as of such date (after taking
into account any payments, deposits or adjustments made on such date).
"Minimum Transferor Interest" means the product of (i) the sum of
(a) the aggregate Principal Receivables and (b) the amounts on deposit in
the Excess Funding Account and (ii) the highest Minimum Transferor
Percentage for any Series.
"Minimum Transferor Percentage" means during each fiscal year, for
the Series 1997-1 Certificates (i) [10.5]% for the period from the
January Monthly Period to and including the October Monthly Period; (ii)
[11.5]% for the November Monthly Period; and (iii) [13.5]% for the
December Monthly Period; provided, however, that such percentage may be
adjusted from time to time upon written notice from the Transferor to the
Trustee if each Rating Agency initially contracted to rate the Class A
Certificates, the Class B Certificates, and, if applicable, the Class C
Certificates shall have been notified of such amendment and shall have
provided notice to the Trustee or the Servicer that such action would not
result in a reduction or withdrawal of its rating of the Class A
Certificates, the Class B Certificates, or the Class C Certificates, and
such action will not, in the opinion of counsel satisfactory to the
Trustee, result in certain adverse tax consequences.
"Monthly Period" means the period from and including the first day
of each fiscal month of the Transferor to and including the last day of
such fiscal month, except that the first Monthly Period with respect to
the Certificates will begin on and include the Closing Date and will end
on and include ______________.
"Monthly Servicing Fee" is defined at page 64 in "Description of
the Offered Certificates--Servicing Compensation and Payment of
Expenses."
"Moody's" means Moody's Investors Service, Inc.
"Negative Carry Amount" is defined at page 55 in "Description of
the Offered Certificates--Reallocation of Cash Flows."
"Net Finance Charge Portfolio Yield" means, with respect to any
Monthly Period, the annualized percentage equivalent of a fraction, the
numerator of which is the amount of Finance Charge Collections for such
Monthly Period, calculated on a cash basis after subtracting the Investor
Default Amount for such Monthly Period, and the denominator of which is
the average daily Invested Amount during the preceding Monthly Period.
"Net Principal Collections" means for any Series on any business
day, (i) the product, during the Revolving Period, of the Floating
Allocation Percentage for such Series and, during the Accumulation Period
or any Early Amortization Period, the Fixed/Floating Allocation
Percentage for such Series and the amount of Principal Collections on
such business day minus (ii) on or after the occurrence and during the
continuance of a Discount Trigger Event, the lesser of (a) the sum of (x)
the product of the Discount Allocation Percentage and the Discount Amount
for such business day and (y) the Carryover Discount Amount for such
business day and (b) the amount determined pursuant to clause (i).
"Obligor" means a person or persons obligated to make payments with
respect to a Receivable arising under an Account pursuant to a Charge
Account Agreement.
"Offered Certificate Owners" means the holders of beneficial
interests in the Offered Certificates.
"Offered Certificates" means the Class A Certificates and the Class
B Certificates.
"OID" means original issue discount.
"Originators" means the Federated Subsidiaries and FDS, with Macy's
East, Inc. being an Originator solely in its capacity as the successor to
Federated's former Abraham & Straus, Inc. and Jordan Marsh Stores
Corporation subsidiaries, which were merged with and into Macy's East,
Inc. in fiscal 1995.
"Outstanding Balance" means, with respect to a Receivable on any
day, the aggregate amount owed by the Obligor thereunder on such day.
"Paired Series" means each Series which has been paired with a
prefunded Series, and such prefunded Series.
"Participants" is defined at page 42 in "Description of the Offered
Certificates--General."
"Pay Out Event" is defined at page 63 in "Description of the
Offered Certificates--Pay Out Events."
"Paying Agent" is defined at page 53 in "Description of the Offered
Certificates--Trust Accounts."
"Permitted Lien" means with respect to the Receivables: (i) liens
in favor of the Transferor created pursuant to the Purchase Agreement
assigned to the Trustee pursuant to the Pooling and Servicing Agreement;
(ii) liens in favor of the Trustee pursuant to the Pooling and Servicing
Agreement; and (iii) liens which secure the payment of taxes,
assessments, and governmental charges or levies, if such taxes are either
(a) not delinquent or (b) being contested in good faith by appropriate
legal or administrative proceedings and as to which adequate reserves in
accordance with generally accepted accounting principles shall have been
established.
"Pooling and Servicing Agreement" means the Amended and Restated
Pooling and Servicing Agreement, dated as of December 15, 1992, among the
Transferor, Federated, and the Trustee, as supplemented or amended in
accordance with its terms. Unless the context requires otherwise, the
term "Pooling and Servicing Agreement" refers to the Pooling and
Servicing Agreement as supplemented by the Series 1997-1 Supplement.
"Portfolio Yield" means, with respect to any Monthly Period, the
annualized percentage equivalent of a fraction, the numerator of which is
the amount equal to the sum of (i) the aggregate Total Finance Charge
Collections for such Monthly Period, calculated on a cash basis plus
(ii)(a) the interest and other investment income earned from amounts on
deposit in the Principal Funding Account and the Pre-Funding Account
which shall be available on the related Distribution Date and (b)
Transferor Finance Charge Collections allocated to Certificateholders
with respect to each Business Day in such Monthly Period minus the
aggregate Investor Default Amount for such Monthly Period, and the
denominator of which is the sum of (i) the average daily Invested Amount
during such Monthly Period and (ii) the average daily amount on deposit
the Principal Funding Account during such Monthly Period.
"Pre-Funded Amount" is defined at page 14 in "Prospectus
Summary--Funding Period."
"Pre-Funding Account" is defined at page 14 in "Prospectus
Summary--Funding Period."
"Principal Account" is defined at page 52 in "Descriptions of the
Offered Certificates--Trust Accounts."
"Principal Collections" means with respect to any business day for
any Series the product of (i) collections received with respect to the
Receivables minus Recoveries and (ii) one minus the Finance Charge
Receivable Factor.
"Principal Funding Account" means a trust account established for
the benefit of the Class A Certificateholders and in which, during the
Accumulation Period, Principal Collections allocable to the Class A
Certificateholders' Interest plus Shared Principal Collections, if any,
from other Series allocable to the Class A Certificates, plus certain
other amounts comprising but not exceeding Class A Monthly Principal,
will be deposited.
"Principal Receivables" means for any business day, the aggregate
amount of Eligible Receivables as of such business day (determined on the
basis of a calculation performed by the Servicer) minus the amount of
Finance Charge Receivables on such business day.
"Principal Shortfalls" is defined at page 46 in "Description of the
Offered Certificates--Principal Payments."
"Principal Terms" is defined at page 48 in "Description of the
Offered Certificates--Exchanges."
"PTE" is defined at page 75 in "Employee Benefit Plan
Considerations."
"Purchase Agreement" is defined at page 68 in "Description of the
Receivables Purchase Agreement--Purchases of Receivables."
"Purchase Termination Date" is defined at page 70 in "Description
of the Receivables Purchase Agreement--Purchase Termination Date."
"Qualified Institution" is defined at page 52 in "Description of
the Offered Certificates--Trust Accounts."
"Rating Agencies" means the two nationally recognized rating
agencies that have been requested to rate the Class A Certificates and
the Class B Certificates.
"Reallocated Class B Principal Collections" is defined at page 56
in "Description of the Offered Certificates--Reallocated Principal
Collections."
"Reallocated Class C Principal Collections" is defined at page 56
in "Description of the Offered Certificates--Reallocated Principal
Collections."
"Reallocated Principal Collections" is defined at page 56 in
"Description of the Offered Certificates--Reallocated Principal
Collections."
"Receivable" means, with respect to any Obligor, any account,
chattel paper, or general intangible representing the indebtedness of
such Obligor under a Charge Account Agreement arising from a sale of
merchandise or services, and includes the right to payment of any
interest or finance charges and other obligations of such Obligor with
respect thereto. Each Receivable includes, without limitation, (i) all
rights of the Originator under the applicable Charge Account Agreement
and (ii) all obligations of the Obligor thereof under the Charge Account
Agreement pursuant to which such Receivable was created.
"Record Date" means, with respect to any Distribution Date, the
last business day of the preceding Monthly Period.
"Recoveries" means any amounts received by the Servicer with
respect to Receivables in accounts that previously became Defaulted
Accounts.
"Regulations" is defined at page 73 in "Certain Federal Income Tax
Consequences--Taxation of Interest and Discount Income of Offered
Certificate Owners."
"Relevant UCC State" means each jurisdiction in which the filing of
a UCC financing statement is necessary to evidence the security interest
of the Trustee established under the Pooling and Servicing Agreement.
"Removed Accounts" means accounts that have been designated by the
Transferor, the Receivables of which pursuant to the terms of the Pooling
and Servicing Agreement will no longer be transferred to the Trust.
"Required Amount" is defined at page 60 in "Description of the
Offered Certificates--Application of Collections--Payment of Fees,
Interest, and Other Items."
"Revolving Period" means the period beginning on the Closing Date
and ending with the commencement of the Accumulation Period or an Early
Amortization Period.
"Securities Act" means the Securities Act of 1933, as amended.
"Series" means any series of investor certificates issued by the
Trust, including the Series 1997-1 Certificates.
"Series Account" means the Principal Account, the Interest Funding
Account, the Principal Funding Account, and any account or accounts
established pursuant to the Series 1997-1 Supplement for the benefit of
the Certificateholders.
"Series Allocation Percentage" means, 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 of all Series then outstanding.
"Series Discount Factor" means for any Series and any business day
the amount for such Series, if any, calculated as of the second preceding
Monthly Period, by which either (x) the product of (i) the Base Rate plus
one-half of one percent minus the Net Finance Charge Portfolio Yield
divided by the Annual Portfolio Turnover Rate and (ii) the Floating
Allocation Percentage exceeds (b) zero or, (y) solely at the option of
the Transferor, the amount by which (a) the product of (i) the Base Rate
plus one percent minus the Net Finance Charge Portfolio Yield divided by
the Annual Portfolio Turnover Rate and (ii) the Floating Allocation
Percentage exceeds (b) zero; provided, however, that the Series Discount
Factor will never exceed 4%.
"Series 1992-1 Principal Funding Account" is defined at page 14 in
"Prospectus Summary--Paired Series."
"Series 1997-1 Certificates" or "Series 1997-1" means,
collectively, the Class A Certificates, the Class B Certificates, and the
Class C Certificates.
"Series 1997-1 Supplement" means the Supplement, dated as of the
Closing Date, among the Transferor, the Servicer, and the Trustee
relating to the Series 1997-1 Certificates.
"Series 1997-1 Termination Date" means the earlier to occur of (i)
the day after the Distribution Date on which the Series 1997-1
Certificates are paid in full and (ii) the [ ] Distribution Date.
"Service Transfer" is defined at page 65 in "Description of the
Offered Certificates--Servicer Default."
"Servicer" means FDS in its capacity as Servicer of the Receivables
pursuant to the Pooling and Servicing Agreement.
"Servicer Default" is defined at page 65 in "Description of the
Offered Certificates--Servicer Default."
"Shared Principal Collections" means the amount of collections of
Principal Receivables for any business day allocated by the Servicer to
the Invested Amount for Series 1997-1 remaining after covering required
deposits or payments of principal to the Certificateholders and any
similar amount remaining for any other Series.
"Special Payment Date" means a Distribution Date following the
Monthly Period in which a Pay Out Event has occurred with respect to any
Early Amortization Period and each Distribution Date following the Class
A Expected Final Payment Date.
"Standard & Poor's" means Standard & Poor's Ratings Services, a
Division of The McGraw-Hill Companies, Inc.
"Supplement" means any Supplement to the Pooling and Servicing
Agreement.
"Supplemental Accounts" is defined at page 51 in "Description of
the Offered Certificates--Automatic Addition of Accounts."
"Tax Counsel" means Jones, Day, Reavis & Pogue, counsel to the
Transferor.
"Terms and Conditions" is defined at page 44 in "Description of the
Offered Certificates--Book-Entry Registration."
"Total Finance Charge Collections" means, with respect to a Series
and any business day, the sum of (i)(a) on any day prior to the
occurrence of a Pay Out Event, the product of the Floating Allocation
Percentage for such Series and the amount of Finance Charge Collections
deposited in the Collection Account for such business day or (b) on and
after the occurrence of a Pay Out Event, the product of the
Fixed/Floating Allocation Percentage for such Series and the amount of
Finance Charge Collections for such business day, plus, on and after the
occurrence of and during the continuance of a Discount Trigger Event,
(ii) the lesser of (a) the sum of (x) the product of the Discount
Allocation Percentage for such Series and the Discount Amount for such
business day and (y) the Carryover Discount Amount for such Series for
such business day and (b) the product of, during the Revolving Period,
the Floating Allocation Percentage for such Series and, during the
Accumulation Period or Early Amortization Period, the Fixed/Floating
Allocation Percentage for such Series and the amount of Principal
Collections deposited in the Collection Account for such business day.
"Transfer Date" is defined at page 57 in "Description of the
Offered Certificates--Application of Collections."
"Transferor" means Prime Receivables Corporation, a Delaware
corporation.
"Transferor Finance Charge Collections" is defined at page 55 in
"Description of the Offered Certificates--Reallocation of Cash Flows."
"Transferor Interest" means, on any date of determination, the
aggregate amount of Principal Receivables at the end of the day
immediately prior to such date of determination plus all amounts on
deposit in the Excess Funding Account (but not including investment
earnings on such amounts), minus the aggregate invested amount of all
Series at the end of such day.
"Transferor Subordination Amount" means with respect to the Series
1997-1 Certificates, [ ], less the aggregate amount of collections
allocated to the holder of the Exchangeable Transferor Certificate or any
portion of the Transferor Interest previously applied to cover any
deficiency in the amount otherwise available, on and after the Class B
Principal Payment Commencement Date, to pay accrued and unpaid interest
to the Class B Certificateholders and to cover any Investor Default
Amounts and Class B Investor Charge-Offs.
"Transferor Percentage" is defined at page 42 in "Description of
the Offered Certificates--General" and at page 55 in "Description of the
Offered Certificates--Allocation Percentages."
"Trust" means the Prime Credit Card Master Trust.
"Trustee" means The Chase Manhattan Bank (formerly Chemical Bank).
"UCC" means the Uniform Commercial Code.
"Underwriters" is defined at page 76 in "Underwriting."
"Underwriting Agreement" is defined at page 76 in "Underwriting."
"U.S. Person" is defined at page 95 in "Annex II: Global Clearance,
Settlement and Tax Documentation Procedures."
"Variable Funding Certificates" means a series of certificates, in
one or more classes, issued pursuant to the Pooling and Servicing
Agreement and a Variable Funding Supplement.
"Yield Factor" means with respect to any business day the
percentage equivalent of an amount determined on the preceding Date of
Determination (or on such business day with respect to each Date of
Determination) equal to (i)(x) the product of the Billed Finance Charges
for the Monthly Period preceding such Date of Determination and one minus
the Delinquency Percentage for the preceding Date of Determination (or on
such business day with respect to each Date of Determination) plus (y)
Recoveries for the Monthly Period preceding such Date of Determination
divided by (ii) the aggregate amount of collections on Receivables for
the Monthly Period preceding such Date of Determination.
ANNEX I
OTHER SERIES
The table below sets forth the principal characteristics of the
five Series heretofore issued by the Trust: Series 1992-1, Series 1992-2,
Series 1992-3, Series 1995-1 and Series 1996-1. For more specific
information with respect to any Series, any prospective investor should
contact the Servicer at 9111 Duke Boulevard, Mason, Ohio 45040-8999,
telephone number (513) 573-2265. The Servicer will provide, without
charge, to any prospective purchaser of the Certificates, a copy of the
disclosure documents for any previous publicly issued Series.
SERIES 1992-1
1. CLASS A CERTIFICATES
Initial Invested Amount............................ $450,000,000
Certificate Rate................................... 7.05%
Current Invested Amount............................ $450,000,000
Controlled Amortization Amount..................... $150,000,000
Annual Servicing Fee Percentage.................... 2.0%
Credit Support..................................... Subordination of
Series 1992-1
Class B and Class C
Certificates
Expected Final Payment Date........................ December 15, 1997
Scheduled Series Termination Date.................. February 15, 2001
Series Issuance Date............................... December 15, 1992
2. CLASS B CERTIFICATES
Initial Invested Amount............................ $40,500,000
Certificate Rate................................... 7.55%
Current Invested Amount............................ $40,500,000
Controlled Amortization Amount..................... N/A
Annual Servicing Fee Percentage.................... 2.0%
Credit Support..................................... Subordination of
Series 1992-1
Class C Certificates
Expected Final Payment Date........................ January 15, 1998
Scheduled Series Termination Date.................. February 15, 2001
Series Issuance Date............................... December 15, 1992
3. CLASS C CERTIFICATES
Initial Invested Amount............................ $55,000,000
Certificate Rate................................... 8.05%
Current Invested Amount............................ $55,000,000
Controlled Amortization Amount..................... N/A
Annual Servicing Fee Percentage.................... 2.0%
Expected Final Payment Date........................ February 15, 1998
Scheduled Series Termination Date.................. February 15, 2001
Series Issuance Date............................... December 15, 1992
SERIES 1992-2
1. CLASS A CERTIFICATES
Initial Invested Amount............................ $450,000,000
Certificate Rate................................... 7.45%
Current Invested Amount............................ $450,000,000
Controlled Amortization Amount..................... $75,000,000
Annual Servicing Fee Percentage.................... 2.0%
Credit Support..................................... Subordination of
Series 1992-2
Class B and Class C
Certificates
Expected Final Payment Date........................ December 15, 1999
Scheduled Series Termination Date.................. November 15, 2002
Series Issuance Date............................... December 15, 1992
2. CLASS B CERTIFICATES
Initial Invested Amount............................ $40,500,000
Certificate Rate................................... 7.95%
Current Invested Amount............................ $40,500,000
Controlled Amortization Amount..................... N/A
Annual Servicing Fee Percentage.................... 2.0%
Credit Support..................................... Subordination of
Series 1992-2
Class C Certificates
Expected Final Payment Date........................ January 18, 2000
Scheduled Series Termination Date.................. November 15, 2002
Series Issuance Date............................... December 15, 1992
3. CLASS C CERTIFICATES
Initial Invested Amount............................ $55,000,000
Certificate Rate................................... 8.45%
Current Invested Amount............................ $55,000,000
Controlled Amortization Amount..................... N/A
Annual Servicing Fee Percentage.................... 2.0%
Expected Final Payment Date........................ February 15, 2000
Scheduled Series Termination Date.................. November 15, 2002
Series Issuance Date............................... December 15, 1992
SERIES 1992-3 VARIABLE FUNDING CERTIFICATES
Invested Amount.................................... Variable
Maximum Permitted Invested Amount.................. $455,000,000
Certificate Rate................................... Variable
Commencement of Amortization Period................ January 1, 1998
(subject to
extension)
Annual Servicing Fee Percentage.................... 2.00%
Scheduled Series Termination Date.................. January 15, 2001
(subject to
extension)
Series Issuance Date............................... January 5, 1993
SERIES 1995-1
1. CLASS A CERTIFICATES
Initial Invested Amount............................ $546,000,000
Certificate Rate................................... 6.75%
Current Invested Amount............................ $546,000,000
Controlled Amortization Amount..................... $68,250,000
Annual Servicing Fee Percentage.................... 2.0%
Credit Support..................................... Subordination of
Series 1995-1
Class B and Class C
Certificates
Expected Final Payment Date........................ August 15, 2002
Scheduled Series Termination Date.................. November 15, 2005
Series Issuance Date............................... July 27, 1995
2. CLASS B CERTIFICATES
Initial Invested Amount............................ $52,000,000
Certificate Rate................................... 6.90%
Current Invested Amount............................ $52,000,000
Controlled Amortization Amount..................... N/A
Annual Servicing Fee Percentage.................... 2.0%
Credit Support..................................... Subordination of
Series 1995-1
Class C Certificates
Expected Final Payment Date........................ September 16, 2002
Scheduled Series Termination Date.................. November 15, 2005
Series Issuance Date............................... July 27, 1995
3. CLASS C CERTIFICATES
Initial Invested Amount............................ $52,000,000
Certificate Rate................................... 9.00%
Current Invested Amount............................ $52,000,000
Controlled Amortization Amount..................... N/A
Annual Servicing Fee Percentage.................... 2.0%
Expected Final Payment Date........................ October 15, 2002
Scheduled Series Termination Date.................. November 15, 2005
Series Issuance Date............................... July 27, 1995
SERIES 1996-1
1. CLASS A CERTIFICATES
Initial Invested Amount............................ $218,000,000
Certificate Rate................................... 6.70%
Current Invested Amount............................ $218,000,000
Controlled Amortization Amount
(subject to adjustment).......................... $24,222,222.22
Annual Servicing Fee Percentage.................... 2.0%
Credit Support..................................... Subordination of
Series 1996-1
Class B and Class C
Certificates
Expected Final Payment Date........................ May 15, 2001
Scheduled Series Termination Date.................. July 15, 2004
Series Issuance Date............................... May 1, 1996
2. CLASS B CERTIFICATES
Initial Invested Amount............................ $20,800,000
Certificate Rate................................... 6.85%
Current Invested Amount............................ $20,800,000
Controlled Amortization Amount..................... N/A
Annual Servicing Fee Percentage.................... 2.0%
Credit Support..................................... Subordination of
Series 1996-1
Class C Certificates
Expected Final Payment Date........................ June 15, 2001
Scheduled Series Termination Date.................. July 15, 2004
Series Issuance Date............................... May 1, 1996
3. CLASS C CERTIFICATES
Initial Invested Amount............................ $20,800,000
Certificate Rate................................... 9.00%
Current Invested Amount............................ $20,800,000
Controlled Amortization Amount..................... N/A
Annual Servicing Fee Percentage.................... 2.0%
Expected Final Payment Date........................ July 15, 2001
Scheduled Series Termination Date.................. July 15, 2004
Series Issuance Date............................... May 1, 1996
ANNEX II
GLOBAL CLEARANCE, SETTLEMENT AND
TAX DOCUMENTATION PROCEDURES
Except in certain limited circumstances, the globally offered Asset
Backed Certificates, Series 1997-1 will be available only in book-entry
form. Investors in the Offered Certificates may hold such Offered
Certificates through any of DTC, Cedel, or Euroclear. The Offered
Certificates will be tradeable as home market instruments in both the
European and U.S. domestic markets. Initial settlement and all secondary
trades will settle in same-day funds.
Secondary market trading between investors holding Offered
Certificates through Cedel and Euroclear will be conducted in the
ordinary way in accordance with their normal rules and operating
procedures and in accordance with conventional eurobond practice (i.e.,
seven calendar day settlement).
Secondary market trading between investors holding Offered
Certificates through DTC will be conducted according to the rules and
procedures applicable to U.S. corporate debt obligations.
Secondary cross-market trading between Cedel or Euroclear and DTC
Participants holding Offered Certificates will be effected on a
delivery-against-payment basis through the respective Depositaries of
Cedel and Euroclear (in such capacity) and as DTC Participants.
Non-U.S. holders (as described below) of Offered Certificates will
be subject to U.S. withholding taxes unless such holders meet certain
requirements and deliver appropriate U.S. tax documents to the securities
clearing organizations or their participants.
Initial Settlement
All Offered Certificates will be held in book-entry form by DTC in
the name of Cede & Co. as nominee of DTC. Investors' interests in the
Offered Certificates will be represented through financial institutions
acting on their behalf as direct and indirect Participants in DTC. As a
result, Cedel and Euroclear will hold positions on behalf of their
participants through their respective Depositaries, which in turn will
hold such positions in accounts as DTC Participants.
Investors electing to hold their Offered Certificates through DTC
will follow the settlement practices applicable to conventional credit
card certificate issues. Investor securities custody accounts will be
credited with their holdings against payment in same-day funds on the
settlement date.
Investors electing to hold their Offered Certificates through Cedel
or Euroclear accounts will follow the settlement procedures applicable to
conventional eurobonds, except that there will be no temporary global
security and no "lock-up" or restricted period. Offered Certificates will
be credited to the securities custody accounts on the settlement date
against payment in the same-day funds.
Secondary Market Trading
Since the purchaser determines the place of delivery, it is
important to establish at the time of the trade where both the
purchaser's and seller's accounts are located to ensure that settlement
can be made on the desired value date.
Trading between DTC Participants. Secondary market trading between
DTC Participants will be settled using the procedures applicable to
conventional credit card certificate issues in same-day funds.
Trading between Cedel and/or Euroclear Participants. Secondary
market trading between Cedel Participants or Euroclear Participants will
be settled using the procedures applicable to conventional eurobonds in
same-day funds.
Trading between DTC seller and Cedel or Euroclear purchaser. When
Offered Certificates are to be transferred from the account of a DTC
Participant to the accounts of a Cedel Participant or a Euroclear
Participant, the purchaser will send instructions to Cedel or Euroclear
through a Cedel Participant or Euroclear Participant at least one
business day prior to settlement. Cedel or Euroclear, as the case may be,
will instruct the respective Depositary to receive the Offered
Certificates against payment. Payment will include interest accrued on
the Offered Certificates from and including the last coupon payment date
to and excluding the settlement date, on the basis of actual days elapsed
and a 360-day year. Payment will then be made by the Depositary to the
DTC Participant's account against delivery of the Offered Certificates.
After settlement has been completed, the Offered Certificates will be
credited to the respective clearing system and by the clearing system, in
accordance with its usual procedures, to the Cedel Participant's or
Euroclear Participant's account. The Offered Certificates credit will
appear the next day (European time) and the cash debit will be
back-valued to, and the interest on the Offered Certificates will accrue
from, the value date (which would be the preceding day when settlement
occurred in New York). If settlement is not completed on the intended
value date (i.e., the trade fails), the Cedel or Euroclear cash debit
will be valued instead as of the actual settlement date.
Cedel Participants and Euroclear Participants will need to make
available to the respective clearing systems the funds necessary to
process same-day funds settlement. The most direct means of doing so is
to pre-position funds for settlement, either from cash on hand or
existing lines of credit, as they would for any settlement occurring
within Cedel or Euroclear. Under this approach, they may take on credit
exposure to Cedel or Euroclear until the Offered Certificates are
credited to their accounts one day later.
As an alternative, if Cedel or Euroclear has extended a line of
credit to them, Cedel Participants or Euroclear Participants can elect
not to pre-position funds and allow that credit line to be drawn upon the
finance settlement. Under this procedure, Cedel Participants or Euroclear
Participants purchasing Offered Certificates would incur overdraft
charges for one day, assuming they cleared the overdraft when the Offered
Certificates were credited to their accounts. However, interest on the
Offered Certificates would accrue from the value date. Therefore, in many
cases the investment income on the Offered Certificates earned during
that one-day period may substantially reduce or offset the amount of such
overdraft charges, although this result will depend on each Cedel
Participant's or Euroclear Participant's particular cost of funds.
Since the settlement is taking place during New York business
hours, DTC Participants can employ their usual procedures for sending
Offered Certificates to the respective Depositary for the benefit of
Cedel Participants or Euroclear Participants. The sale proceeds will be
available to the DTC seller on the settlement date. Thus, to the DTC
Participants a cross-market transaction will settle no differently than a
trade between two DTC Participants.
Trading between Cedel or Euroclear seller and DTC purchaser. Due to
time zone differences in their favor, Cedel Participants and Euroclear
Participants may employ their customary procedures for transactions in
which Offered Certificates are to be transferred by the respective
clearing system, through the respective Depositary, to a DTC Participant.
The seller will send instructions to Cedel or Euroclear through a Cedel
Participant or Euroclear Participant at least one business day prior to
settlement. In these cases, Cedel or Euroclear will instruct the
respective Depositary, as appropriate, to deliver the bonds to the DTC
Participant's account against payment. Payment will include interest
accrued on the Offered Certificates from and including the last coupon
payment date to and excluding the settlement date on the basis of actual
days elapsed and a 360-day year. The payment will then be reflected in
the account of the Cedel Participant or Euroclear Participant the
following day, and receipt of the cash proceeds in the Cedel
Participant's or Euroclear Participant's account would be back-valued to
the value date (which would be the preceding day, when settlement
occurred in New York). Should the Cedel Participant or Euroclear
Participant have a line of credit with its respective clearing system and
elect to be in debt in anticipation of receipt of the sale proceeds in
its account, the back-valuation will extinguish any overdraft charges
incurred over that one-day period. If settlement is not completed on the
intended value date (i.e., the trade fails), receipt of the cash proceeds
in the Cedel Participant's or Euroclear Participant's account would
instead be valued as of the actual settlement date.
Finally, day traders that use Cedel or Euroclear and that purchase
Offered Certificates from DTC Participants for delivery to Cedel
Participants or Euroclear Participants should note that these trades
would automatically fail on the sale side unless affirmative action were
taken. At least three techniques should be readily available to eliminate
this potential problem:
(a) borrowing through Cedel or Euroclear for one day (until
the purchase side of the day trade is reflected in their Cedel or
Euroclear accounts) in accordance with the clearing system's
customary procedures;
(b) borrowing the Offered Certificates in the U.S. from a DTC
Participant no later than one day prior to settlement, which would
give the Offered Certificates sufficient time to be reflected in
their Cedel or Euroclear account in order to settle the sale side
of the trade; or
(c) staggering the value dates for the buy and sell sides of
the trade so that the value date for the purchase form the DTC
Participant is at least one day prior to the value date for the
sale to the Cedel Participant or Euroclear Participant.
CERTAIN U.S. FEDERAL INCOME TAX DOCUMENTATION REQUIREMENTS
A beneficial owner of Offered Certificates holding securities
through Cedel or Euroclear (or through DTC if the holder has an address
outside the U.S.) will be subject to the 30% U.S. withholding tax that
generally applies to payments of interest (including original issue
discount) on registered debt issued by U.S. Persons, unless (i) each
clearing system, bank, or other financial institution that holds
customers' securities in the ordinary course of its trade or business in
the chain of intermediaries between such beneficial owner and the U.S.
entity required to withhold tax complies with applicable certification
requirements and (ii) such beneficial owner takes one of the following
steps to obtain an exemption or reduced tax rate:
Exemption for non-U.S. Persons (Form W-8). Beneficial owners of
Offered Certificates that are non-U.S. Persons can obtain a complete
exemption from the withholding tax by filing a signed Form W-8
(Certificate of Foreign Status). If the information shown on Form W-8
changes, a new Form W-8 must be filed within 30 days of such change.
Exemption for non-U.S. Persons with effectively connected income
(Form 4224). A non-U.S. Person, including a non-U.S. corporation or bank
with a U.S. branch, for which the interest income is effectively
connected with its conduct of a trade or business in the United States,
can obtain an exemption from the withholding tax by filing Form 4224
(Exemption from Withholding of Tax on Income Effectively Connected with
the Conduct of a Trade or Business in the United States).
Exemption or reduced rate for non-U.S. persons resident in treaty
countries (Form 1001). Non-U.S. Persons that are Offered Certificate
Owners residing in a country that has a tax treaty with the United States
can obtain an exemption or reduced tax rate (depending on the treaty
terms) by filing Form 1001 (Ownership, Exemption or Reduced Rate
Certificate). If the treaty provides only for a reduced rate, withholding
tax will be imposed at that rate unless the filer alternatively files
Form W-8. Form 1001 may be filed by the Offered Certificate Owner or his
agent.
Exemption for U.S. Persons (Form W-9). U.S. Persons can obtain a
complete exemption from the withholding tax by filing Form W-9 (Payer's
Request for Taxpayer Identification Number and Certification).
U.S. Federal Income Tax Reporting Procedure. The Offered
Certificate Owner or, in the case of a Form 1001 or a Form 4224 filer,
his agent, files by submitting the appropriate form to the person through
whom it holds (the clearing agency, in the case of persons holding
directly on the books of the clearing agency). Form W-8 and Form 1001 are
effective for three calendar years and Form 4224 is effective for one
calendar year.
The term "U.S. Person" means (i) a citizen or resident of the
United States, (ii) a corporation or partnership organized in or under
the laws of the United States or any political subdivision thereof, or
(iii) an estate or trust the income of which is includible in gross
income for United States tax purposes, regardless of its source. This
summary does not deal with all aspects of U.S. Federal income tax
withholding that may be relevant to foreign holders of the Offered
Certificates. Investors are advised to consult their own tax advisors for
specific tax advice concerning their holding and disposing of the Offered
Certificates.
- --------------------------------------- ------------------------------
NO DEALER, SALESPERSON, OR OTHER
INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY $[ ]
REPRESENTATIONS OTHER THAN THOSE
CONTAINED OR INCORPORATED BY REFERENCE
IN THIS PROSPECTUS IN CONNECTION WITH PRIME CREDIT CARD
THIS OFFER MADE BY THIS PROSPECTUS AND, MASTER TRUST
IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON
AS HAVING BEEN AUTHORIZED BY PRIME
RECEIVABLES CORPORATION OR THE $[ ]
UNDERWRITERS. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE [ ]% Class A Asset Backed
HEREUNDER SHALL UNDER ANY CIRCUMSTANCE Certificates,
CREATE AN IMPLICATION THAT THERE HAS Series 1997-1
BEEN NO CHANGE IN THE AFFAIRS OF PRIME
RECEIVABLES CORPORATION OR THE
RECEIVABLES OR THE ACCOUNTS SINCE THE
DATE THEREOF. THIS PROSPECTUS DOES NOT $[ ]
CONSTITUTE AN OFFER OR SOLICITATION BY
ANYONE IN ANY STATE IN WHICH SUCH OFFER [ ]% Class B Asset Backed
OR SOLICITATION IS NOT AUTHORIZED OR IN Certificates,
WHICH THE PERSON MAKING SUCH OFFER OR Series 1997-1
SOLICITATION IS NOT QUALIFIED TO DO SO
OR TO ANYONE TO WHOM IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION.
TABLE OF CONTENTS
PAGE
Reports to Prime Receivables Corporation
Certificateholders............. 4 Transferor
Available Information............ 4
Prospectus Summary............... 5
Risk Factors..................... 23
The Trust........................ 29
Federated's Credit
Card Business................. 29
The Accounts..................... 34
Federated, The FDS National Bank
Transferor, and FDS............ 39 Servicer
Maturity Assumptions............. 40
Pool Factor and Related
Information.................... 41
Use of Proceeds.................. 42
Description of the
Offered Certificates........... 42
Description of the
Receivables Purchase PROSPECTUS
Agreement...................... 68
Certain Legal Aspects
of the Receivables............. 70
Certain Federal Income
Tax Consequences............... 72
Employee Benefit Plan Underwriters of the
Considerations................. 74 Class A Certificates
Underwriting..................... 76 Credit Suisse First Boston
Legal Matters.................... 76 [ ]
Glossary of Terms................ 77
UNTIL [ ] ALL DEALERS EFFECTING
TRANSACTIONS IN THE OFFERED
CERTIFICATES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY Underwriter of the
BE REQUIRED TO DELIVER A PROSPECTUS. Class B Certificates
THIS DELIVERY REQUIREMENT IS IN ADDITION Credit Suisse First Boston
TO THE OBLIGATION OF DEALERS TO DELIVER
A PROSPECTUS WHEN ACTING AS UNDERWRITERS
AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
- ----------------------------------------- ------------------------------
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Estimates of various expenses expected to be incurred in connection
with the issuance and distribution of the Offered Certificates, other
than underwriting discounts and commissions, are set forth below.
Registration Fee *
Printing and Engraving *
Trustee's Fees *
Legal Fees and Expenses *
Blue Sky Fees and Expenses *
Accountants' Fees and Expenses *
Rating Agency Fees *
Miscellaneous Fees and Expenses *
---
Total *
===
- ------------------
* To be provided by amendment.
ITEM 14. INDEMNIFICATION OF OFFICERS AND DIRECTORS
The Transferor's Certificate of Incorporation and By-Laws provide
for the indemnification of the directors, officers, employees, and agents
of the Transferor to the full extent that may be permitted by Delaware
law from time to time, and the By-Laws provide for various procedures
relating thereto. Certain provisions of the Transferor's Certificate of
Incorporation protect the Transferor's directors against personal
liability for monetary damages resulting from breaches of their fiduciary
duty of care, except as set forth below. Under Delaware law, absent these
provisions, directors could be held liable for gross negligence in the
performance of their duty of care, but not for simple negligence. The
Transferor's Certificate of Incorporation absolves directors of liability
for negligence in the performance of their duties, including gross
negligence. However, the Transferor's directors remain liable for
breaches of their duty of loyalty to the Transferor, as well as for acts
or omissions not in good faith or which involve intentional misconduct or
a knowing violation of law and transactions from which a director derives
improper personal benefit. The Transferor's Certificate of Incorporation
also does not absolve directors of liability under section 174 of the
Delaware General Corporation Law, which makes directors personally liable
for unlawful dividends or unlawful stock repurchases or redemptions in
certain circumstances and expressly sets forth a negligence standard with
respect to such liability.
Under Delaware law, directors, officers, employees, and other
individuals may be indemnified against expenses (including attorneys'
fees), judgments, fines, and amounts paid in settlement in connection
with specified actions, suits or proceedings, whether civil, criminal,
administrative, or investigative (other than an action by or in the right
of the corporation--a "derivative action") if they acted in good faith
and in a manner they reasonably believed to be in or not opposed to the
best interests of the corporation and, with respect to any criminal
action or proceeding, had no reasonable cause to believe their conduct
was unlawful. A similar standard of care is applicable in the case of a
derivative action, except that indemnification only extends to expenses
(including attorneys' fees) incurred in connection with defense or
settlement of such an action and Delaware law requires court approval
before there can be any indemnification of expenses where the person
seeking indemnification has been found liable to the corporation.
The Transferor's Certificate of Incorporation provides, among other
things, that each person who was or is made a party to, or is threatened
to be made a party to any action, suit, or proceeding by reason of the
fact that he or she is or was a director, officer, employee, or agent of
the Transferor (or was serving at the request of the Transferor as a
director, officer, employee, or agent of another entity), will be
indemnified and held harmless by the Transferor to the full extent
authorized by Delaware law against all expense, liability, or loss
(including attorneys' fees, judgments, fines, and amounts to be paid in
settlement) actually and reasonably incurred by such person in connection
therewith. The rights conferred thereby will be deemed to be contract
rights and will include the right to be paid by the Transferor for the
expenses incurred in defending the proceedings specified above in advance
of their final disposition.
The Transferor has entered into indemnification agreements with
each of its directors and officers. These indemnification agreements
provide for, among other things, (i) the indemnification by the
Transferor of the indemnitees thereunder to the extent described above,
(ii) the advancement of attorneys' fees and other expenses, and (iii) the
establishment, upon approval by its Board of Directors, of trusts or
other funding mechanisms to fund the Transferor's indemnification
obligations thereunder.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
The Series 1992-1 and 1992-2 Class C Certificates described on
Annex I to the Prospectus included in this Registration Statement
(collectively, the "Series 1992 Class C Certificates") were initially
issued to the Transferor on December 15, 1992. On January 18, 1995, the
Transferor sold the Series 1992 Class C Certificates to a financial
institution for an aggregate sale price of $77.0 million pursuant to an
agreement providing for the allocation of payments received on account of
the Series 1992 Class C Certificates as though such financial institution
owned $77.0 million in principal amount thereof and the Transferor owned
$33.0 million in principal amount thereof (with the Transferor's
entitlement to such payments being subordinated to such financial
institution's entitlement to such payments).
The foregoing transactions were effected in reliance on the
exemption from registration provided by Section 4(2) of the Securities
Act.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
1 -- Form of Underwriting Agreement.*
3.1 -- Certificate of Incorporation of the Transferor.(1)
3.2 -- By-Laws of the Transferor.(1)
4.1 -- Amended and Restated Pooling and Servicing Agreement, dated
as of December 15, 1992 (the "Pooling and Servicing
Agreement"), among Federated, Prime Receivables Corporation
and The Chase Manhattan Bank, as Trustee.(1)
4.2 -- Receivables Purchase Agreement, dated as of December 15,
1992 (the "Purchase Agreement"), among Abraham & Straus,
Inc., Bloomingdale's, Inc., Burdines, Inc., Jordan Marsh
Stores Corporation, Lazarus, Inc., Rich's Department Stores,
Inc., Stern's Department Stores, Inc., The Bon, Inc., and
Prime Receivables Corporation.(1)
4.3 -- First Amendment, dated as of December 1, 1993, to the
Pooling and Servicing Agreement.(2)
4.4 -- Second Amendment, dated as of February 28, 1994, to the
Pooling and Servicing Agreement.(2)
4.5 -- Third Amendment, dated as of May 31, 1994, to the Pooling and
Servicing Agreement.(2)
4.6 -- Assumption Agreement under the Pooling and Servicing
Agreement, dated as of September 15, 1993.(2)
4.7 -- Form of Series 1997-1 Supplement.*
4.8 -- First Amendment, dated as of June 23, 1993, to the Receivables
Purchase Agreement.(2)
4.9 -- Second Amendment, dated as of December 1, 1993, to the
Receivables Purchase Agreement.(2)
4.10 -- Third Amendment, dated as of February 28, 1994, to the
Receivables Purchase Agreement.(2)
4.11 -- Fourth Amendment, dated as of May 31, 1994, to the Receivables
Purchase Agreement.(2)
4.12 -- First Supplement, dated as of September 15, 1993, to the
Receivables Purchase Agreement.(2)
4.13 -- Second Supplement, dated as of May 31, 1994, to the
Receivables Purchase Agreement.(2)
4.14 -- Fourth Amendment, dated as of January 18, 1995, to the
Pooling and Servicing Agreement.(3)
4.15 -- Fifth Amendment, dated as of April 30, 1995, to the
Pooling and Servicing Agreement.(3)
4.16 -- Sixth Amendment, dated as of July 27, 1995, to the Pooling and
Servicing Agreement.(3)
4.17 -- Fifth Amendment, dated as of April 30, 1995, to the
Receivables Purchase Agreement.(3)
4.18 -- Seventh Amendment, dated as of May 14, 1996, to the Pooling
and Servicing Agreement.(4)
4.19 -- Sixth Amendment, dated as of August 26, 1995, to the
Receivables Purchase Agreement.(3)
4.20 -- Seventh Amendment, dated as of August 26, 1995, to the
Receivables Purchase Agreement.(3)
4.21 -- Eighth Amendment, dated as of May 14, 1996, to the Receivables
Purchase Agreement.(5)
4.22 -- Third Supplement, dated as of August 26, 1995, to the
Receivables Purchase Agreement.(3)
4.23 -- Fourth Supplement, dated as of May 14, 1996, to the Receivables
Purchase Agreement.
4.24 -- Eighth Amendment, dated as of March 3, 1997, to the Pooling
and Servicing Agreement.(6)
4.25 -- Ninth Amendment, dated as of March 3, 1997, to the Receivables
Purchase Agreement.(7)
4.26 -- Ninth Amendment, dated as of ______, 1997, to the Pooling and
Servicing Agreement.*
5 -- Opinion of Jones, Day, Reavis & Pogue with respect to
legality.*
8 -- Opinion of Jones, Day, Reavis & Pogue with respect to tax
matters.*
23 -- Consent of Jones, Day, Reavis & Pogue (included in its
opinions filed as Exhibits 5 and 8).*
24 -- Powers of Attorney.
- ----------
* To be filed by amendment.
(1) Incorporated by reference to the exhibit to the Transferor's
Registration Statement on Form S-1 (Registration No. 33-52374)
having the same numerical designation.
(2) Incorporated by reference to the exhibit to the Transferor's
Registration Statement on Form S-1 (Registration No. 33-92850)
having the same numerical designation.
(3) Incorporated by reference to the exhibit to the Transferor's
Registration Statement on Form S-1 (Registration No. 333-1790-01)
having the same numerical designation.
(4) Incorporated by reference to exhibit 10.6.7 to Federated's Annual
Report on Form 10-K for the fiscal year ended February 1, 1997.
(5) Incorporated by reference to exhibit 10.13.8 to Federated's Annual
Report on Form 10-K for the fiscal year ended February 1, 1997.
(6) Incorporated by reference to exhibit 10.6.8 to Federated's Annual
Report on Form 10-K for the fiscal year ended February 1, 1997.
(7) Incorporated by reference to exhibit 10.13.9 to Federated's Annual
Report on Form 10-K for the fiscal year ended February 1, 1997.
(b) Financial Statements
All financial statements, schedules, and historical financial
information have been omitted as they are not applicable.
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes as follows:
(a) To provide to the Underwriter at the closing specified in
the Underwriting Agreement, certificates in such denominations and
registered in such names as required by the Underwriter to permit
prompt delivery to each purchaser.
(b) Insofar as indemnification for liabilities arising under
the Securities Act may be permitted to directors, officers, and
controlling persons of the Registrant pursuant to the provisions
described under Item 14 above, or otherwise, the Registrant has
been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer, or controlling person of
the Registrant in the successful defense of any action, suit, or
proceeding) is asserted by such director, officer, or controlling
person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification
by it is against public policy as expressed in the Securities Act
and will be governed by the final adjudication of such issue.
(c) For purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of
prospectus filed as part of this Registration Statement in reliance
upon Rule 430A and contained in a form of prospectus filed by the
Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the
Securities Act of 1933 shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(d) For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains
a form of prospectus shall be deemed to be a new registration
statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Cincinnati, State of Ohio, on August 25, 1997.
PRIME RECEIVABLES CORPORATION
(REGISTRANT)
By: /s/ Susan P. Storer
Susan P. Storer, President
Pursuant to the Requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons on August
25, 1997 in the capacities indicated.
SIGNATURE TITLE
--------- -----
*
-------------------------
Karen M. Hoguet Chairman of the Board and Director
(principal executive officer)
/s/ Susan P. Storer
-------------------------
Susan P. Storer President and Director
(principal financial and accounting
officer)
*
-------------------------
John R. Sims Director
*
-------------------------
Joan Dobrzynski Director
*
-------------------------
Francis B. Jacob II Director
* The undersigned, by signing her name hereto, does sign and execute this
Registration Statement pursuant to the Powers of Attorney executed by the
above-named officers and directors.
/s/ Susan P. Storer
--------------------
Susan P. Storer
Attorney-in-Fact
Exhibit 24
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person
whose signature appears below does hereby constitute and appoint
John R. Sims, Susan P. Storer and Dennis J. Broderick as her
true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, to do any and all acts and
things for her and in her name, place and stead, in any and all
capacities, that said attorney-in-fact and agent may deem
necessary or advisable to enable Prime Receivables Corporation
to comply with the Securities Act of 1933, as amended, and any
rules, regulations and requirements of the Securities and
Exchange Commission thereunder, in connection with a
Registration Statement on Form S-1 to be filed by Prime
Receivables Corporation with respect to certain asset backed
certificates representing undivided interests in Prime Credit
Card Master Trust, including specifically, but not limited to,
power and authority to sign any and all amendments, including
post-effective amendments, to the Registration Statement, and to
file the same, with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange
Commission; granting unto said attorney-in-fact and agent full
power and authority to do and perform each and every act and
thing requisite and necessary to be done, as fully to all
intents and purposes as she might or could do in person, hereby
ratifying and confirming all that said attorney-in-fact and
agent or his or her substitute or substitutes may lawfully do or
cause to be done by virtue hereof.
/s/ Karen M. Hoguet Chairman of the Board
Karen M. Hoguet and Director of Prime
Receivables Corporation
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person
whose signature appears below does hereby constitute and appoint
John R. Sims, Karen M. Hoguet and Dennis J. Broderick as her
true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, to do any and all acts and
things for her and in her name, place and stead, in any and all
capacities, that said attorney-in-fact and agent may deem
necessary or advisable to enable Prime Receivables Corporation
to comply with the Securities Act of 1933, as amended, and any
rules, regulations and requirements of the Securities and
Exchange Commission thereunder, in connection with a
Registration Statement on Form S-1 to be filed by Prime
Receivables Corporation with respect to certain asset backed
certificates representing undivided interests in Prime Credit
Card Master Trust, including specifically, but not limited to,
power and authority to sign any and all amendments, including
post-effective amendments, to the Registration Statement, and to
file the same, with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange
Commission; granting unto said attorney-in-fact and agent full
power and authority to do and perform each and every act and
thing requisite and necessary to be done, as fully to all
intents and purposes as she might or could do in person, hereby
ratifying and confirming all that said attorney-in-fact and
agent or his or her substitute or substitutes may lawfully do or
cause to be done by virtue hereof.
/s/ Susan P. Storer President and Director of
Susan P. Storer Prime Receivables Corporation
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person
whose signature appears below does hereby constitute and appoint
Susan P. Storer, Karen M. Hoguet and Dennis J. Broderick as his
true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, to do any and all acts and
things for her and in her name, place and stead, in any and all
capacities, that said attorney-in-fact and agent may deem
necessary or advisable to enable Prime Receivables Corporation
to comply with the Securities Act of 1933, as amended, and any
rules, regulations and requirements of the Securities and
Exchange Commission thereunder, in connection with a
Registration Statement on Form S-1 to be filed by Prime
Receivables Corporation with respect to certain asset backed
certificates representing undivided interests in Prime Credit
Card Master Trust, including specifically, but not limited to,
power and authority to sign any and all amendments, including
post-effective amendments, to the Registration Statement, and to
file the same, with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange
Commission; granting unto said attorney-in-fact and agent full
power and authority to do and perform each and every act and
thing requisite and necessary to be done, as fully to all
intents and purposes as she might or could do in person, hereby
ratifying and confirming all that said attorney-in-fact and
agent or his or her substitute or substitutes may lawfully do or
cause to be done by virtue hereof.
/s/ John R. Sims Director of Prime
John R. Sims Receivables Corporation
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person
whose signature appears below does hereby constitute and appoint
Susan P. Storer, Karen M. Hoguet and Dennis J. Broderick as his
true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, to do any and all acts and
things for her and in her name, place and stead, in any and all
capacities, that said attorney-in-fact and agent may deem
necessary or advisable to enable Prime Receivables Corporation
to comply with the Securities Act of 1933, as amended, and any
rules, regulations and requirements of the Securities and
Exchange Commission thereunder, in connection with a
Registration Statement on Form S-1 to be filed by Prime
Receivables Corporation with respect to certain asset backed
certificates representing undivided interests in Prime Credit
Card Master Trust, including specifically, but not limited to,
power and authority to sign any and all amendments, including
post-effective amendments, to the Registration Statement, and to
file the same, with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange
Commission; granting unto said attorney-in-fact and agent full
power and authority to do and perform each and every act and
thing requisite and necessary to be done, as fully to all
intents and purposes as she might or could do in person, hereby
ratifying and confirming all that said attorney-in-fact and
agent or his or her substitute or substitutes may lawfully do or
cause to be done by virtue hereof.
/s/ Joan Dobrzynski Director of Prime
Joan Dobrzynski Receivables Corporation
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person
whose signature appears below does hereby constitute and appoint
Susan P. Storer, Karen M. Hoguet and Dennis J. Broderick as his
true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, to do any and all acts and
things for her and in her name, place and stead, in any and all
capacities, that said attorney-in-fact and agent may deem
necessary or advisable to enable Prime Receivables Corporation
to comply with the Securities Act of 1933, as amended, and any
rules, regulations and requirements of the Securities and
Exchange Commission thereunder, in connection with a
Registration Statement on Form S-1 to be filed by Prime
Receivables Corporation with respect to certain asset backed
certificates representing undivided interests in Prime Credit
Card Master Trust, including specifically, but not limited to,
power and authority to sign any and all amendments, including
post-effective amendments, to the Registration Statement, and to
file the same, with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange
Commission; granting unto said attorney-in-fact and agent full
power and authority to do and perform each and every act and
thing requisite and necessary to be done, as fully to all
intents and purposes as she might or could do in person, hereby
ratifying and confirming all that said attorney-in-fact and
agent or his or her substitute or substitutes may lawfully do or
cause to be done by virtue hereof.
/s/ Francis B. Jacobs II Director of Prime
Francis B. Jacobs II Receivables Corporation
