<PAGE> 1
Filed Pursuant to Rule 424(b)(5)
Registration No. 333-45760
PROSPECTUS SUPPLEMENT TO PROSPECTUS, DATED NOVEMBER 22, 2000
PRIME CREDIT CARD MASTER TRUST
Issuer
$400,000,000 6.70% CLASS A ASSET BACKED CERTIFICATES, SERIES 2000-1
PRIME RECEIVABLES CORPORATION, Transferor
FDS BANK, Servicer
<TABLE>
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Class A certificates
<S> <C>
Principal Amount..................................... $400,000,000
Price................................................ $399,687,500 (99.921875%)
Underwriters' Commissions............................ $1,200,000 (0.300000%)
Proceeds to the Transferor........................... $398,487,500 (99.621875%)
Certificate Rate..................................... 6.70% p.a.
Interest Payment Dates............................... monthly on the 15th
First Interest Payment Date.......................... January 16, 2001
Expected Final Payment Date.......................... November 15, 2005
</TABLE>
THE CERTIFICATES ARE INTERESTS IN PRIME CREDIT CARD MASTER TRUST AND ARE
BACKED ONLY BY THE ASSETS OF THE TRUST. NONE OF THE CERTIFICATES OR THE ASSETS
OF THE TRUST ARE OBLIGATIONS OF FDS BANK, FEDERATED DEPARTMENT STORES, INC.,
PRIME RECEIVABLES CORPORATION, OR ANY OF THEIR AFFILIATES OR ARE OBLIGATIONS
INSURED BY THE FDIC.
THESE SECURITIES ARE HIGHLY STRUCTURED. BEFORE YOU PURCHASE THESE
SECURITIES, BE SURE YOU UNDERSTAND THE STRUCTURE AND THE RISKS. SEE "RISK
FACTORS" BEGINNING ON PAGE S-9 OF THIS PROSPECTUS SUPPLEMENT.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED ON THE
ADEQUACY OR ACCURACY OF THE DISCLOSURES IN THIS PROSPECTUS SUPPLEMENT AND THE
ATTACHED PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The underwriters of the Class A certificates have agreed to purchase the
Class A certificates, subject to the terms and conditions in the underwriting
agreement. The Class B certificates and the Class C certificates will initially
be retained by Prime Receivables Corporation.
CREDIT SUISSE FIRST BOSTON
BANC OF AMERICA SECURITIES LLC
CHASE SECURITIES INC.
The date of this Prospectus Supplement is November 30, 2000.
<PAGE> 2
TABLE OF CONTENTS
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PAGE
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WHERE TO FIND INFORMATION IN THESE
DOCUMENTS........................... S-3
SUMMARY OF TERMS...................... S-4
STRUCTURAL SUMMARY.................... S-5
RISK FACTORS.......................... S-9
Potential Early Repayment or Delayed
Payment due to Reduced Portfolio
Yield............................ S-9
Dependence on Federated Department
Stores........................... S-10
Changes in Social, Technological and
Economic Factors May Affect
Purchase and Payment Patterns and
Could Affect the Timing of
Payments to You.................. S-11
Allocations of Charged-Off
Receivables Could Result in a
Loss to Your Certificates........ S-11
Adjustments Due to Rebates,
Exchanges and Write-downs Could
Reduce Payments to You........... S-12
The Timing of Payments to You May Be
Affected by the Issuance of
Additional Series by the Trust... S-12
You May Not Be Able to Resell Your
Certificates..................... S-12
Insolvency or Bankruptcy of PRC or
FDS Could Result in Accelerated,
Delayed or Reduced Payments to
You.............................. S-12
You Will Have Limited Control of
Trust Actions.................... S-13
FEDERATED DEPARTMENT STORES, INC. .... S-14
TRUST CREDIT CARD PORTFOLIO........... S-14
The Federated Portfolio............. S-14
Delinquency and Loss Experience..... S-14
Characteristics of the Trust
Portfolio........................ S-16
MATURITY CONSIDERATIONS............... S-20
Accumulation Period................. S-20
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PAGE
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Pay Out Event....................... S-21
Paired Series....................... S-21
Historical Payment Rates of the
Federated Portfolio.............. S-21
RECEIVABLE YIELD CONSIDERATIONS....... S-21
USE OF PROCEEDS....................... S-22
DESCRIPTION OF THE OFFERED
CERTIFICATES........................ S-22
General............................. S-22
Interest Payments................... S-23
Principal Payments.................. S-24
Postponement of Accumulation
Period........................... S-25
Subordination....................... S-26
Transfer of the Class B Certificates
or the Class C Certificates...... S-26
Allocation Percentages.............. S-27
Application of Collections.......... S-28
Reallocation of Cash Flows.......... S-32
Sharing of Excess Finance Charge
Collections...................... S-32
Shared Principal Collections........ S-33
Defaulted Receivables; Investor
Charge-Offs...................... S-33
Principal Funding Account........... S-34
Withdrawals from the Collection
Account.......................... S-34
Paired Series....................... S-36
Pay Out Events...................... S-36
Servicing Fees and Expenses......... S-37
Optional Termination................ S-38
Series Termination.................. S-38
GENERAL INFORMATION................... S-38
UNDERWRITING.......................... S-39
OTHER SERIES ISSUED AND OUTSTANDING... S-41
GLOSSARY OF TERMS FOR PROSPECTUS
SUPPLEMENT.......................... S-43
</TABLE>
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WHERE TO FIND INFORMATION IN THESE DOCUMENTS
The attached prospectus provides general information about the Prime Credit
Card Master Trust, including terms and conditions that are generally applicable
to certificates issued by the trust. The specific terms of the certificates are
described in this prospectus supplement.
This prospectus supplement begins with several introductory sections
describing your series and the Prime Credit Card Master Trust in abbreviated
form:
- Summary of Terms provides important amounts, dates and other terms of
your series,
- Structural Summary gives a brief introduction to the key structural
features of your series and directions for locating further information,
- Receivables Flow Chart illustrates the flow of receivables, and
- Risk Factors describes some of the risks that apply to your certificates.
As you read through these sections, cross-references will direct you to
more detailed descriptions in the attached prospectus and elsewhere in this
prospectus supplement. You can also directly reference key topics by looking at
the table of contents in this prospectus supplement and the attached prospectus.
You should rely only on the information contained or incorporated by
reference in this prospectus supplement and the prospectus. We have not
authorized anyone to provide you with different information.
We are not offering these certificates in any state where the offer is not
permitted.
We do not make any representation as to the accuracy of the information in
this prospectus supplement as of any date other than the date set forth on its
cover.
TO UNDERSTAND THE STRUCTURE AND TERMS OF THESE SECURITIES, YOU MUST READ
CAREFULLY THE ATTACHED PROSPECTUS AND THIS PROSPECTUS SUPPLEMENT IN THEIR
ENTIRETY.
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SUMMARY OF TERMS
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Trust: Prime Credit Card Master Trust
Transferor: Prime Receivables Corporation -- "PRC"
Servicer: FDS Bank -- "FDS"
Trustee: The Chase Manhattan Bank
Pricing Date: November 30, 2000
Closing Date: December 7, 2000
Clearance and Settlement: DTC/Clearstream/Euroclear
Trust Assets: receivables originated in consumer open-end
credit card accounts of FDS and other credit
card originators, including recoveries on
charged-off receivables.
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AMOUNT % OF TOTAL SERIES
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<S> <C> <C> <C>
Series Structure:
Class A $400,000,000 84%
Class B $ 38,100,000 8%
Class C $ 38,100,000 8%
Annual Servicing Fee Rate: 2%
CLASS A
Credit Enhancement: subordination of Class B and Class C
Certificate Rate: 6.70% p.a.
Interest Accrual Method: 30/360
Interest Payment Dates: monthly on the 15th
First Interest Payment Date: January 16, 2001
Expected Final Principal Payment Date: November 2005 distribution date
Series 2000-1 Legal Final Maturity: October 2009 distribution date
Commencement of Accumulation Period (subject to
adjustment): First day of November 2004
CUSIP Number: 74155QAJ9
Anticipated Ratings:
(Moody's/Standard & Poor's) Aaa/AAA
</TABLE>
It is a condition of issuance that at least one of the anticipated ratings be
obtained for the Class A certificates.
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<PAGE> 5
STRUCTURAL SUMMARY
This summary briefly describes certain major structural components of
Series 2000-1. To fully understand the terms of Series 2000-1 you will need to
read both this prospectus supplement and the attached prospectus in their
entirety.
THE SERIES 2000-1 CERTIFICATES
Your certificates represent the right to receive a portion of collections on the
underlying trust assets. Your certificates bear interest at the rate stated in
the summary of terms. Your certificates will also be allocated a portion of net
losses on the receivables. Any collections allocated to your series in excess of
the amount owed to you or the servicer of the receivables will be shared with
other series of certificates issued by the trust or returned to PRC. In no case
will you receive more than the principal and interest owed to you under the
terms described in this prospectus supplement.
The certificates are backed by interests in a pool of revolving credit card
receivables. The receivables currently arise primarily under credit card
accounts relating to the sale of merchandise and services by retail stores owned
and operated by Federated Department Stores, Inc. and its subsidiaries. FDS
services these credit card accounts.
For more information on the certificates, see "Description of the Offered
Certificates" in this prospectus supplement. For more information on the
allocation of collections to and payments to Series 2000-1, see "Description of
the Offered Certificates -- Interest Payments," "-- Principal Payments" and
"-- Allocation Percentages" in this prospectus supplement.
PRIME CREDIT CARD MASTER TRUST
The trustee maintains the trust for several beneficiaries:
- the certificateholders of Series 2000-1 certificates,
- certificateholders of other series issued by the trust, and
- PRC, as the transferor of the receivables to the trust.
The certificates will be one of four outstanding series issued by the trust.
Each series has a claim to a specific dollar amount of the trust's assets,
regardless of the total amount of receivables in the trust at any time. PRC, as
holder of the exchangeable transferor certificate, holds the remaining claims to
the trust's assets. The size of these claims fluctuate with the total amount of
receivables in the trust. PRC, as the holder of the exchangeable transferor
certificate, will also have the right to purchase your certificates on any
distribution date when the outstanding amount of the certificateholders'
interest in the trust sold by PRC to you or other purchasers is less than or
equal to 11% of the original amount of that interest. PRC will also have the
right to purchase your certificates on or before the second distribution date
following the expected final payment date for the Class A certificates. The
price PRC will pay for the outstanding amount of that interest will be equal to
the entire unpaid balance of that amount plus accrued and unpaid interest.
CREDIT ENHANCEMENT
Your Class A certificates feature credit enhancement by means of the
subordination of the Class B certificates and the Class C certificates. This
credit enhancement is intended to protect you from losses and shortfalls in cash
flow.
The effect of subordination is that the more subordinated certificates will
absorb any losses allocated to Series 2000-1, and make up any shortfalls in cash
flow, before the Class A certificates are affected. If the cash flow and the
subordinated Class B certificates and Class C certificates do not cover all
losses allocated to Series 2000-1, your payments of interest and principal will
be reduced and you may suffer a loss of principal.
For a more detailed description of the subordination provisions of Series
2000-1, see "Description of the Offered Certificates -- Subordination" in this
prospectus supplement.
EXPECTED FINAL PRINCIPAL PAYMENTS AND POTENTIAL EARLIER OR LATER PAYMENTS
The Class A certificates are expected to be paid in full on the November 2005
payment date.
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The trust expects to pay the entire principal amount of the Class A certificates
in full on November 15, 2005 if a pay out event has not occurred. The trust will
accumulate principal collections in a principal funding account during an
"accumulation period" to pay the Class A certificates as expected. The length of
the accumulation period will be as many months as is expected to be necessary
for the accumulation of the Class A payment amount, but will not be less than
one month. The accumulation period will end on the expected final payment date
for the Class A certificates, when the funds on deposit in the principal funding
account are paid to the Class A certificates.
If the Class A certificates are not paid in full on their expected final payment
date, the Class A certificates will begin to receive monthly payments of
principal until they are paid in full.
The certificates will mature, and any remaining principal and interest will be
payable on October 15, 2009. No further payments on the certificates will be
made after that date assuming certificates have been repaid in full.
For more information on the payment of principal on the certificates and the
accumulation period, see "Description of the Offered Certificates -- Principal
Payments" and "Maturity Considerations -- Accumulation Period" in this
prospectus supplement.
MINIMUM YIELD ON THE RECEIVABLES; POSSIBLE EARLY PRINCIPAL REPAYMENT OF YOUR
SERIES
The offered certificates may be repaid earlier than their expected final payment
date if collections on the underlying receivables, together with other amounts
available for payment to certificateholders, are too low. The minimum amount
that must be available for payment to your series in any month, referred to as
the base rate, is generally the weighted average of the Class A, Class B and
Class C certificate rates, plus the servicing fee rate, in each case for the
related interest period. If the average portfolio yield, which reflects a
reduction for receivable defaults for your series, for any three consecutive
months is less than the average base rate for the same three consecutive months,
a pay out event will occur and the trust will commence early amortization and
holders of your series will receive principal payments earlier than the expected
final principal payment date.
Your series is also subject to several other pay out events, which could cause
your series to amortize. If your series begins to amortize, the Class A
certificates will receive monthly payments of principal until they are fully
repaid; the Class B certificates and then the Class C certificates will
subsequently receive monthly payments of principal until they are fully repaid.
In that event, your certificates may be repaid before the expected final payment
date.
For more information on pay out events, the portfolio yield and base rate, early
principal payment and early amortization, see "Maturity Considerations,"
"Description of the Offered Certificates -- Principal Payments," "-- Pay Out
Events" and "-- Optional Termination" in this prospectus supplement and
"Description of the Certificates -- Principal" and "-- Pay Out Events" and "The
Pooling and Servicing Agreement -- Termination of the Trust" in the attached
prospectus.
INCOME TAX STATUS OF CLASS A CERTIFICATES AND THE PRIME CREDIT CARD MASTER TRUST
Jones, Day, Reavis & Pogue, special federal income tax counsel to PRC, is of the
opinion that:
- under existing law the Class A certificates will be classified as debt of
the transferor for U.S. federal income tax purposes, and
- the trust will not be an association or publicly traded partnership taxable
as a corporation for U.S. federal income tax purposes.
For further information regarding the application of U.S. federal income tax
laws, see "Tax Matters" in the attached prospectus.
ERISA CONSIDERATIONS
The underwriters anticipate that the Class A certificates will be held by at
least 100 persons who are independent of PRC and each other. PRC anticipates
that the Class A certificates will meet the other criteria for treatment as
"publicly-offered securities." If so, subject to important considerations
described under "Employee Benefit Plan Considerations" in the attached
prospectus, the Class A certificates will be eligible for
S-6
<PAGE> 7
purchase by persons investing assets of employee benefit plans or individual
retirement accounts.
For further information regarding the application of ERISA, see "Employee
Benefit Plan Considerations" in the attached prospectus.
MAILING ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE OFFICES
The mailing address of Prime Receivables Corporation is 7 West Seventh Street,
Cincinnati, Ohio 45202 and the telephone number is (513) 579-7580.
S-7
<PAGE> 8
Receivables Flow Chart
S-8
<PAGE> 9
RISK FACTORS
You should consider the following risk factors in deciding whether to
purchase the Class A certificates described in this prospectus supplement.
POTENTIAL EARLY REPAYMENT
OR DELAYED PAYMENT DUE TO
REDUCED PORTFOLIO YIELD If there is a decline in the amount of the
receivables collected by the trust or another pay
out event, an early amortization of the
certificates may occur and you will receive
principal payments earlier than the expected final
payment date. If the average portfolio yield,
which reflects a reduction for receivable defaults
for Series 2000-1, for any three consecutive
months is less than the average base rate for the
same three consecutive months, a "pay out event"
will occur for Series 2000-1. If this occurs, the
early amortization of Series 2000-1 will commence,
and you may receive principal payments earlier
than the expected final principal payment date.
Moreover, if principal collections on receivables
allocated to other series or the transferor are
available to be applied to an early amortization
of any outstanding certificates, the period during
which that early amortization occurs may be
substantially shortened.
Conversely, any reduction in collections may cause
the period necessary to repay your certificates to
go beyond the expected final payment date of your
certificates.
The following factors could result in reduced
collections:
FDS MAY CHANGE THE
TERMS AND CONDITIONS
OF THE ACCOUNTS FDS will sell receivables arising under specified
credit card accounts to PRC which will transfer
those receivables to the trust, but FDS will
continue to own those accounts. As the owner of
those accounts, FDS retains the right to change
various terms and conditions of those accounts,
including finance charges and other fees it
charges and the required minimum monthly payment.
Certain changes in the terms of the accounts may
reduce the amount of receivables arising under the
accounts, reduce the portfolio yield, reduce the
amount of collections on those receivables or
otherwise alter payment patterns.
ACCOUNTS ADDED TO THE
TRUST PORTFOLIO MAY
HAVE DIFFERENT TERMS
AND CONDITIONS So long as certain conditions are satisfied, PRC
will automatically designate additional accounts
for the trust portfolio and transfer the
receivables in those accounts to the trust. Any
new accounts and receivables may have different
terms and conditions than the terms and conditions
for the accounts and receivables already in the
trust. Credit card accounts purchased by FDS or
originated by other credit card originators may be
included as additional accounts, if certain
conditions are satisfied. The new accounts and
receivables may perform differently over time than
the accounts and receivables already in the trust
and could reduce the amount of collections
allocated to your series.
S-9
<PAGE> 10
PRC MAY NOT BE ABLE TO
ADD ACCOUNTS TO THE
TRUST If PRC's percentage interest in the accounts of
the trust falls to a minimum level, PRC will be
required to maintain that level by designating
additional accounts for the trust portfolio and
transferring the receivables in those accounts to
the trust. PRC may not be able to designate
additional accounts to be added to the trust
portfolio when required. If PRC fails to designate
additional accounts when required, a pay out event
will occur and you could receive payment of
principal sooner than expected.
CHANGES TO CONSUMER
PROTECTION LAWS MAY
IMPEDE FDS'S
COLLECTION EFFORTS Federal and state consumer protection laws
regulate the creation and enforcement of consumer
loans, including credit card accounts and
receivables. Changes or additions to those laws or
failure to comply with those laws could make it
more difficult for FDS to collect payments on the
receivables or could reduce the finance charges
and other fees that FDS can charge on credit card
account balances, or could render some receivables
uncollectible.
Receivables that do not comply with consumer
protection laws may not be valid or enforceable in
accordance with their terms against the obligor on
those receivables. FDS and PRC each make
representations and warranties relating to the
validity and enforceability of the receivables
arising under the accounts in the trust portfolio.
No other party will examine the receivables or the
related records for the purpose of determining the
presence or absence of defects, compliance with
representations and warranties or for any other
purpose. The only remedy if any representation or
warranty is violated, and the violation continues
beyond the period of time PRC has to correct the
violation, is that PRC must accept reassignment of
the receivables affected by the violation, subject
to certain conditions. See "The Pooling and
Servicing Agreement -- Representations and
Warranties" and "Legal Aspects of the
Receivables -- Consumer Protection Laws" in the
attached prospectus.
CARDHOLDERS MAY MAKE
PRINCIPAL PAYMENTS AT
ANY TIME The receivables transferred to the trust may be
paid at any time. We cannot assure the creation of
additional receivables in those accounts or that
any particular pattern of cardholder payments will
occur.
DEPENDENCE ON FEDERATED
DEPARTMENT STORES The Federated credit cards currently can be used
to purchase merchandise and services only from
department stores, and associated
direct-to-customer catalog and electronic commerce
businesses operated by Federated's subsidiaries
"Bloomingdale's," "Bloomingdale's By Mail,"
"bloomingdales.com," "Burdines," "Goldsmith's,"
"Lazarus," "Macy's," "Macy's By Mail,"
"macys.com," "Rich's," "Stern's," and "The Bon
Marche." Accordingly, the trust is completely
dependent upon Federated's department stores and
its direct-to-customer catalog and electronic
commerce businesses for the generation of
receivables. The retailing industry, in general,
and the department store business, in particular,
are and will continue to be
S-10
<PAGE> 11
intensely competitive. Federated's department
stores and its direct-to-customer catalog and
electronic commerce businesses will face
increasing competition not only with other
department stores in the geographic areas in which
they operate but also with numerous 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
the Internet), and manufacturers outlets. The
pooling and servicing agreement does not prohibit
Federated from transferring all or any portion of
the business or assets of its subsidiaries. There
can, therefore, be no assurance that Federated's
subsidiaries will continue to generate receivables
at the same rate as in prior years.
Prior to Federated's acquisition of Macy's in
December, 1994, a third party financial
institution bought the revolving credit card
accounts of customers of the then-existing Macy's
stores. A significant portion of the current
customers accounts of Macy's are still owned by
this third party and are not sold to PRC or
transferred to the master trust. Similar
consequences of receivables not being transferred
to the master trust could result from the
Federated stores or businesses being sold to third
parties. PRC has been advised by Federated that
decisions with respect to the above 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 vary from those of the holders of the
certificates offered in this document.
CHANGES IN SOCIAL,
TECHNOLOGICAL AND ECONOMIC
FACTORS MAY AFFECT PURCHASE
AND PAYMENT PATTERNS AND
COULD AFFECT THE TIMING OF
PAYMENTS TO YOU Changes in purchase and payment patterns by
obligors under the accounts may result from a
variety of social, technological and economic
factors. Social factors include potential changes
in consumers' attitudes toward financing purchases
with debt. Technological factors include new
methods of payment. Economic factors include the
rate of inflation, unemployment levels and
relative interest rates. Each of these factors may
have a disparate impact on the payment by obligors
and the generation of new receivables under FDS's
credit card accounts, which may result in a loss
to you. For example, Federated's department stores
generally accept third party revolving credit
cards such as VISA and MasterCard cards issued by
various financial institutions and charge cards
such as the American Express Card. Changes in
interest rates charged by or incentives offered to
use these other cards could lead to fewer
purchases with FDS's credit cards even though
overall sales at Federated's department stores
remain the same or increase.
ALLOCATIONS OF CHARGED-OFF
RECEIVABLES COULD RESULT IN
A LOSS TO YOUR CERTIFICATES FDS will write off as uncollectible some portion
of the receivables arising in accounts in the
trust portfolio. Each class of certificates will
be allocated a portion of those charged-off
receivables. If the amount of charged-off
receivables allocated to any class of certificates
exceeds the amount of other funds available for
reimbursement of those
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<PAGE> 12
charge-offs -- which could occur if the limited
amount of Class B certificates and Class C
certificates is reduced to zero -- the holders of
the Class A certificates may not receive the full
amount of principal and interest due to them. See
"Trust Credit Card Portfolio -- Delinquency and
Loss Experience" and "Description of the Offered
Certificates -- Reallocation of Cash Flows,"
"-- Application of Collections" and "-- Defaulted
Receivables; Investor Charge-Offs" in this
prospectus supplement.
ADJUSTMENTS DUE TO REBATES,
EXCHANGES AND WRITE-DOWNS
COULD REDUCE PAYMENTS TO
YOU A portion of the receivables will not be collected
as a result of rebates, exchanges, write-downs and
similar occurrences. If the interest in the trust
retained by PRC is at a minimum level, PRC will be
obligated to make payments to compensate the
holders of the certificates for the amount of
receivables which become uncollectible for these
reasons. If PRC fails to make any of these
payments, the amount of the resulting
insufficiency will be allocated to PRC's interest.
If the amount of PRC's interest does not cover
this insufficiency, the available credit
enhancement may be reduced and you may not receive
the full amount of principal and interest due.
THE TIMING OF PAYMENTS TO
YOU MAY BE AFFECTED BY THE
ISSUANCE OF ADDITIONAL
SERIES BY THE TRUST The trust, as a master trust, may issue series of
certificates from time to time. The trust may
issue additional series with terms that are
different from your series without the prior
review or consent of any certificateholders. It is
a condition to the issuance of each new series
that each rating agency that has rated an
outstanding series confirm in writing that the
issuance of the new series will not result in a
reduction or withdrawal of its rating of any class
of any outstanding series. However, the terms of a
new series could affect the timing and amounts of
payments on any other outstanding series.
YOU MAY NOT BE ABLE TO
RESELL YOUR CERTIFICATES The underwriters may assist in resales of your
certificates but they are not required to do so. A
secondary market for the certificates may not
develop. If a secondary market does develop, it
might not continue or it might not be sufficiently
liquid to allow you to resell any of your
certificates.
INSOLVENCY OR BANKRUPTCY OF
PRC OR FDS COULD RESULT IN
ACCELERATED, DELAYED OR
REDUCED PAYMENTS TO YOU The receivables in which you have an interest are
conveyed to the trust by PRC. PRC acquired the
receivables from FDS. The conveyance from FDS to
PRC is intended to be treated as a sale. However,
a court could conclude that FDS still owns the
receivables and that PRC only holds a security
interest in the receivables. The conveyance from
PRC to the Trust is either a sale or a pledge of a
security interest in the receivables to the Trust.
The receivables may then be subject to tax or
other governmental liens and to administrative
expenses of the bankruptcy or bank receivership
proceeding of PRC or FDS. Furthermore, a
bankruptcy trustee or a creditor may attempt to
cause FDS or PRC to be substantively consolidated
with
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<PAGE> 13
Federated. Recharacterization as a pledge or
substantive consolidation can delay or even reduce
payments on your certificates.
FDS is chartered as a federally chartered savings
bank and is subject to regulation and supervision
by the Office of Thrift Supervision. If FDS
becomes insolvent or is in an unsound condition,
the Comptroller is authorized to appoint the FDIC
as receiver. Under these circumstances, the FDIC
could:
- require the trustee of the trust to go through
an administrative claims procedure to establish
its right to payments collected on the
receivables in the trust,
- request a stay of proceedings relating to the
trust's claims against FDS, or
- repudiate the pooling and servicing agreement
and limit the trust's resulting claim against
the receivables to "actual direct compensatory
damages" measured as of the date of
receivership.
See "Legal Aspects of the Receivables -- Matters
Relating to Bankruptcy or Receivership" in the
attached prospectus.
If the FDIC were to take any of those actions,
payments on your certificates could be delayed and
possibly reduced.
If specified events related to the conservatorship
or receivership of FDS, or the bankruptcy or
insolvency of PRC were to occur then a pay out
event would occur for all outstanding series.
The conservator or receiver may have the power:
- regardless of the terms of the pooling and
servicing agreement:
-- to prevent the beginning of an early
amortization period or rapid accumulation
period,
-- to prevent the early sale of the receivables
and termination of the trust,
-- to require new principal receivables to
continue being transferred to the trust,
-- to require the trustee of the trust to go
through an administrative claims procedure to
establish its right to payments collected on
the receivables in the trust, or
-- to repudiate the pooling and servicing
agreement which establishes the trust and
limit the trust's resulting claim, or
- regardless of the instructions of the
certificateholders:
-- to require the early sale of the trust's
receivables,
-- to require termination of the trust and
retirement of the trust's certificates
including your series, or
-- to prohibit the continued transfer of
principal receivables to the trust.
YOU WILL HAVE LIMITED
CONTROL OF TRUST ACTIONS You will have limited voting rights relating to
actions of the trust and the trustee. You will not
have the right to vote to direct the trustee to
take any actions other than the right to vote to
declare a pay out event or a servicer default.
S-13
<PAGE> 14
FEDERATED DEPARTMENT STORES, INC.
Federated is one of the leading operators of full-line department stores in
the United States, with more than 400 department stores in 33 states as of
August 3, 2000. Federated also operates the Fingerhut, Bloomingdale's By Mail,
Macy's By Mail, macys.com and bloomingdales.com direct-to-customer catalog and
electronic commerce subsidiaries.
The following table provides information with respect to each of
Federated's retail operating divisions as of January 29, 2000. In this table:
- "Gross Square Feet" 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, and office buildings.
<TABLE>
<CAPTION>
NUMBER OF FISCAL GROSS SQUARE
STORES 1999 SALES FEET
--------- ------------- --------------
(IN MILLIONS) (IN THOUSANDS)
<S> <C> <C> <C>
Bloomingdale's......................................... 24 $ 1,788 6,375
The Bon Marche......................................... 42 975 5,329
Burdines............................................... 52 1,385 8,393
Macy's East............................................ 87 4,675 23,477
Macy's West............................................ 99 4,011 19,994
Rich's/Lazarus/Goldsmith's............................. 74 2,176 13,623
Stern's................................................ 25 840 4,796
--- ------- ------
Total Department Stores...................... 403 $15,850 81,987
=== ======= ======
</TABLE>
TRUST CREDIT CARD PORTFOLIO
Defined terms are indicated by boldface type. Both the attached prospectus
and this prospectus supplement contain a glossary of important terms where
definitions can be found.
THE FEDERATED PORTFOLIO
The following information reflects the composition and historical
performance of the Federated portfolio of credit card accounts. See "Federated's
Credit Card Business" in the attached prospectus for a description of
Federated's credit card business.
DELINQUENCY AND LOSS 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 personnel of FACS Group, a subsidiary of Federated, 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 received 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 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.
S-14
<PAGE> 15
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. "Average Receivables Outstanding" is
the arithmetic average of receivables outstanding as of the beginning of each
fiscal month during the period indicated. "Net Charge-Offs" shown include the
sum of any 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. "Recoveries" include finance
charge receivables and late payment fee recoveries and include sales tax
recoveries and are net of collection agency fees. The percentages reflected for
the 39 weeks ended October 28, 2000 and October 30, 1999 are annualized figures.
LOSS EXPERIENCE
FOR THE FEDERATED PORTFOLIO
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
39 WEEKS ENDED FISCAL YEAR ENDED
-------------------------- -----------------------------------------
OCTOBER 28, OCTOBER 30, JANUARY 29, JANUARY 30, JANUARY 31,
2000 1999 2000 1999 1998
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Average Receivables Outstanding........ $2,043,266 $1,948,557 $1,997,844 $2,096,811 $2,326,859
Net Charge-Offs........................ $ 93,764 $ 100,863 $ 132,719 $ 182,214 $ 207,347
Net Charge-Offs as a Percentage of
Average Receivables Outstanding...... 6.12% 6.90% 6.64% 8.69% 8.91%
</TABLE>
The following table provides the delinquency experience for the Federated
portfolio as of the indicated dates. Because the composition of the Federated
portfolio may change in the future, this table is not necessarily indicative of
the composition of the Federated portfolio at any later time. In the following
table:
- the percentages result from dividing the "Amount" by the sum of the
receivables outstanding as of the billing date for each billing cycle
during the applicable period.
DELINQUENCY EXPERIENCE
FOR THE FEDERATED PORTFOLIO
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
AS OF AS OF
------------------------------------- ---------------------------------------------------------
OCTOBER 28, 2000 OCTOBER 30, 1999 JANUARY 29, 2000 JANUARY 30, 1999 JANUARY 31, 1998
----------------- ----------------- ----------------- ----------------- -----------------
NUMBER OF DAYS DELINQUENT AMOUNT % AMOUNT % AMOUNT % AMOUNT % AMOUNT %
------------------------- --------- ----- --------- ----- --------- ----- --------- ----- --------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Retail Age 2............... $ 39,967 2.05% $ 38,885 2.10% $ 39,491 1.88% $ 50,658 2.40% $ 66,313 2.82%
(30-59 Days Past Due)
Retail Age 3............... 21,154 1.09 19,028 1.02 20,723 0.99 26,116 1.24 34,124 1.45
(60-89 Days Past Due)
Retail Age 4 and higher.... 58,712 3.02 45,928 2.48 50,073 2.39 64,961 3.07 84,473 3.59
(90 Days or More Past
Due)
-------- ---- -------- ---- -------- ---- -------- ---- -------- ----
Total.................. $119,833 6.16% $103,841 5.60% $110,287 5.26% $141,735 6.71% $184,910 7.86%
======== ==== ======== ==== ======== ==== ======== ==== ======== ====
</TABLE>
As of October 28, 2000, accounts 30 or more days delinquent were 6.16% of
total receivables compared with 5.26%, 6.71% and 7.86% of total receivables as
of January 29, 2000 and January 30, 1999 and January 31, 1998, respectively.
Delinquencies are a leading indicator of future charge-offs.
S-15
<PAGE> 16
CHARACTERISTICS OF THE TRUST PORTFOLIO
The assets of the trust include credit card receivables generated through
accounts that PRC has designated as trust accounts. The trust accounts are:
- Federated card accounts originated in accordance with the respective
originator's credit and collection policy existing at the close of
business on the INITIAL CUT-OFF DATE,
- AUTOMATIC ADDITIONAL ACCOUNTS automatically added to the trust as they
are created, and
- SUPPLEMENTAL ACCOUNTS that have been designated since the trust was
established.
The receivables arising from the accounts as of September 30, 2000 totaled
$1,881,000,528.03
The following tables summarize characteristics of the Federated portfolio
as of the end of the day on September 30, 2000. Because the composition of the
Federated portfolio may change in the future, these tables are not necessarily
indicative of the character or performance of the Federated portfolio at any
later time. In the following tables:
- 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 September 30, 2000.
- 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 in the future.
- Accounts currently having no balance are included, as receivables may be
generated with respect to those accounts in the future.
COMPOSITION BY ACCOUNT BALANCE
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE
OF TOTAL OF TOTAL
NUMBER OF NUMBER OF RECEIVABLES RECEIVABLES
ACCOUNT BALANCE RANGE ACCOUNTS ACCOUNTS OUTSTANDING OUTSTANDING
--------------------- ---------- ---------- ----------------- -----------
<S> <C> <C> <C> <C>
Credit Balance........................ 406,066 2.37% $ (40,197,395.44) (2.14)%
No Balance............................ 11,679,948 68.24 -- 0.00
$0.01 to $500.00...................... 3,982,602 23.27 662,715,366.68 35.23
$500.01 to $1,000.00.................. 647,285 3.79 449,464,480.23 23.90
$1,000.01 to $2,000.00................ 274,198 1.60 375,050,687.92 19.94
$2,000.01 to $3,000.00................ 70,166 0.41 169,127,192.74 8.99
$3,000.01 to $4,000.00................ 27,092 0.16 92,958,028.13 4.94
Over $4,000.00........................ 27,931 0.16 171,882,167.77 9.14
---------- ------ ----------------- ------
Total............................ 17,115,288 100.00% $1,881,000,528.03 100.00%
========== ====== ================= ======
</TABLE>
S-16
<PAGE> 17
COMPOSITION BY CREDIT GUIDELINE
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE
OF TOTAL OF TOTAL
NUMBER OF NUMBER OF RECEIVABLES RECEIVABLES
CREDIT GUIDELINE RANGE ACCOUNTS ACCOUNTS OUTSTANDING OUTSTANDING
---------------------- ---------- ---------- ----------------- -----------
<S> <C> <C> <C> <C>
Under $500.00......................... 4,173,390 24.38% $ 323,074,195.75 17.18%
$500.00 to $1,000.00.................. 4,967,669 29.02 438,393,982.20 23.31
$1,000.01 to $2,000.00................ 4,135,340 24.16 416,708,502.08 22.15
$2,000.01 to $3,000.00................ 1,965,189 11.48 245,204,561.92 13.03
$3,000.01 to $4,000.00................ 866,099 5.06 148,837,428.70 7.91
$4,000.01 to $5,000.00................ 680,440 3.98 100,401,347.77 5.34
$5,000.01 to $6,000.00................ 179,101 1.05 64,910,702.72 3.45
Over $6,000.00........................ 148,060 0.87 143,469,806.89 7.63
---------- ------ ----------------- ------
Total............................ 17,115,288 100.00% $1,881,000,528.03 100.00%
========== ====== ================= ======
</TABLE>
COMPOSITION BY AGE
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE
OF TOTAL OF TOTAL
NUMBER OF NUMBER OF RECEIVABLES RECEIVABLES
AGE RANGE ACCOUNTS ACCOUNTS OUTSTANDING OUTSTANDING
--------- ---------- ---------- ----------------- -----------
<S> <C> <C> <C> <C>
Under 6 months........................ 749,859 4.38% $ 71,227,629.28 3.79%
6 months to 1 year.................... 1,341,646 7.85 103,558,199.70 5.51
1-2 years............................. 2,259,961 13.20 170,672,487.98 9.07
2-3 years............................. 2,002,991 11.70 137,295,849.87 7.30
3-4 years............................. 1,387,800 8.11 136,432,456.30 7.25
4 years and older..................... 9,373,031 54.76 1,261,813,904.90 67.08
---------- ------ ----------------- ------
Total............................ 17,115,288 100.00% $1,881,000,528.03 100.00%
========== ====== ================= ======
</TABLE>
S-17
<PAGE> 18
Billing addresses for the accounts include all 50 states and the District
of Columbia and some foreign addresses. Receivables in accounts with foreign
addresses represented less than 1% of total receivables outstanding on September
30, 2000.
COMPOSITION BY GEOGRAPHIC DISTRIBUTION
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE
OF TOTAL OF TOTAL
NUMBER OF NUMBER OF RECEIVABLES RECEIVABLES
STATE ACCOUNTS ACCOUNTS OUTSTANDING OUTSTANDING
----- ---------- ---------- ----------------- -----------
<S> <C> <C> <C> <C>
Florida............................... 2,502,644 14.62% $ 311,023,788.77 16.54%
New York.............................. 2,517,733 14.71 289,608,249.49 15.40
California............................ 2,220,403 12.97 235,954,950.20 12.54
Washington............................ 1,276,001 7.46 158,527,366.75 8.43
Georgia............................... 951,898 5.56 152,125,661.02 8.09
Ohio.................................. 987,080 5.77 119,300,333.76 6.34
New Jersey............................ 1,358,345 7.94 117,015,553.35 6.22
Massachusetts......................... 744,200 4.35 65,848,974.44 3.50
Pennsylvania.......................... 609,543 3.56 54,979,730.59 2.92
Tennessee............................. 297,290 1.74 53,435,282.01 2.84
Kentucky.............................. 347,465 2.03 40,834,955.45 2.17
Indiana............................... 412,336 2.41 35,260,136.39 1.87
Alabama............................... 206,501 1.21 28,338,759.63 1.51
Idaho................................. 213,124 1.25 21,552,727.62 1.15
South Carolina........................ 161,102 0.94 18,304,947.08 0.97
Arizona............................... 219,328 1.28 16,705,689.35 0.89
Illinois.............................. 191,490 1.12 16,069,491.41 0.85
Oregon................................ 201,847 1.18 14,649,554.00 0.78
Connecticut........................... 149,508 0.87 12,316,389.54 0.65
Rhode Island.......................... 117,955 0.69 11,147,614.13 0.59
Nevada................................ 90,315 0.52 10,537,676.22 0.57
Other................................. 1,339,180 7.82 97,462,696.83 5.18
---------- ------- ----------------- -------
Total............................ 17,115,288 100.00% $1,881,000,528.03 100.00%
========== ======= ================= =======
</TABLE>
S-18
<PAGE> 19
In the following table:
- The figures for number of accounts and receivables outstanding are
compiled from data as of each cycle billing date during the month of
September 2000 and exclude accounts with zero or credit balances.
- Current and Retail Age 1 includes both current accounts and accounts that
are less than 30 days past due. Accounts that were 1-29 days past due
constituted 6.55% of the total number of accounts and the receivables in
those accounts constituted 7.47% of the total receivables outstanding.
COMPOSITION BY PAYMENT STATUS
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE
OF TOTAL OF TOTAL
NUMBER OF NUMBER OF RECEIVABLES RECEIVABLES
PAYMENT STATUS ACCOUNTS ACCOUNTS OUTSTANDING OUTSTANDING
-------------- --------- ---------- ----------------- -----------
<S> <C> <C> <C> <C>
Current and Retail Age 1............... 4,930,803 95.48% $1,810,909,468.11 93.90%
Retail Age 2 (30-59 days past due)..... 78,834 1.53 36,250,797.79 1.88
Retail Age 3 (60-89 days past due)..... 41,069 0.80 19,929,495.31 1.03
Retail Age 4 (90-119 days past due).... 38,937 0.75 19,524,143.18 1.02
Retail Age 5 (120-149 days past due)... 29,802 0.58 16,566,151.25 0.86
Retail Age 6 (150-179 days past due)... 24,474 0.47 14,307,679.31 0.74
Retail Age 7 (180 or more days past
due)................................. 20,108 0.39 10,989,776.13 0.57
--------- ------ ----------------- ------
Total............................. 5,164,027 100.00% $1,928,477,511.08 100.00%
========= ====== ================= ======
</TABLE>
S-19
<PAGE> 20
MATURITY CONSIDERATIONS
The Class A certificates are scheduled to receive principal on the November
2005 DISTRIBUTION DATE, referred to in this document as the CLASS A EXPECTED
FINAL PAYMENT DATE. The Class B certificates are scheduled to receive principal
on the December 2005 DISTRIBUTION DATE, referred to in this document as the
CLASS B EXPECTED FINAL PAYMENT DATE. Principal may be paid earlier if a PAY OUT
EVENT occurs. Final payment of principal may also be delayed if this series is
paired with another series.
ACCUMULATION PERIOD
On each business day during the ACCUMULATION PERIOD, collections of
PRINCIPAL RECEIVABLES allocable to the Class A certificates will be deposited in
the PRINCIPAL FUNDING ACCOUNT. On each business day, the amount to be deposited
in the PRINCIPAL FUNDING ACCOUNT will generally be the lesser of:
- the FIXED/FLOATING ALLOCATION PERCENTAGE of PRINCIPAL COLLECTIONS but not
more than the NET PRINCIPAL COLLECTIONS, plus SHARED PRINCIPAL
COLLECTIONS and other amounts allocated to the Class A certificates, and
- the amount by which the CONTROLLED DEPOSIT AMOUNT for the related
DISTRIBUTION DATE exceeds the amount deposited in the PRINCIPAL FUNDING
ACCOUNT in the current month.
If no PAY OUT EVENT occurs, this amount will be paid to the Class A
certificateholders on the CLASS A EXPECTED FINAL PAYMENT DATE.
On each business day after the CLASS A INVESTED AMOUNT is paid in full, the
FIXED/FLOATING ALLOCATION PERCENTAGE of PRINCIPAL COLLECTIONS, but not more than
the NET PRINCIPAL COLLECTIONS, plus SHARED PRINCIPAL COLLECTIONS and other
principal amounts allocable to the Class B certificates will be deposited into
the PRINCIPAL ACCOUNT for distribution to the Class B certificateholders on the
CLASS B EXPECTED FINAL PAYMENT DATE.
The ability of the trust to distribute payments of principal on the final
payment date may depend on one or more of the following factors:
- the monthly payment rates on the receivables may vary due to the
following:
-- cardholders fail to make a required minimum payment,
-- cardholders pay only the minimum required amount,
-- cardholders pay off the entire outstanding balance,
-- seasonal purchasing, and
-- payment habits of cardholders, and
- the amount of outstanding receivables, charge-offs and new borrowings may
vary due to:
-- changes in credit terms and conditions,
-- seasonal variations,
-- changes in cardholders,
-- the availability of other sources of credit,
-- legal factors,
-- general economic conditions,
-- spending and borrowing habits of individual cardholders, and
-- other factors, and
- the potential issuance by the trust of additional series.
S-20
<PAGE> 21
PAY OUT EVENT
If a PAY OUT EVENT occurs, you will receive payments of principal on each
SPECIAL PAYMENT DATE in which the event has occurred. These payments will
continue until the earlier of the payment in full of the INVESTED AMOUNT or the
SERIES 2000-1 TERMINATION DATE. The average life and maturity of your
certificates can be significantly reduced if a PAY OUT EVENT occurs. See
"Description of the Offered Certificates -- Pay Out Events" for additional
discussion.
PAIRED SERIES
The transferor may cause the trust to issue one or more series after the
ACCUMULATION PERIOD begins that will be paired with your series. The outstanding
principal amount of that paired series may vary and the interest rate for that
series will be established on its date of issuance. If a pay out event occurs
for the other paired series before payment is made in full on your certificates,
the final payment of principal on your certificates may be delayed. For example,
the numerator used in the FIXED/FLOATING ALLOCATION PERCENTAGE may be decreased
or the denominator used in the FIXED/FLOATING ALLOCATION PERCENTAGE may increase
if a pay out event occurs on the other paired series. This could cause a
reduction of the percentage of collections of PRINCIPAL RECEIVABLES for your
series. See "Description of the Offered Certificates -- Paired Series" for
additional discussion.
HISTORICAL PAYMENT RATES OF THE FEDERATED PORTFOLIO
The following table provides you with the highest and lowest and average
cardholder monthly payment rates for the Federated portfolio during any month in
the periods shown. These payment rates are calculated as total deemed payments
of PRINCIPAL RECEIVABLES and FINANCE CHARGE RECEIVABLES for each month as a
percentage of total opening monthly account balances. Monthly averages are shown
as an arithmetic average of the payment rate for each month during the indicated
period.
CARDHOLDER MONTHLY PAYMENT RATES
FOR THE FEDERATED PORTFOLIO
<TABLE>
<CAPTION>
39 WEEKS ENDED FISCAL YEAR ENDED
-------------------------- -----------------------------------------
OCTOBER 28, OCTOBER 30, JANUARY 29, JANUARY 30, JANUARY 31,
PAYMENT RATES 2000 1999 2000 1999 1998
------------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Lowest Monthly Rate............... 18.23% 19.32% 19.32% 18.07% 16.09%
Highest Monthly Rate.............. 20.43% 21.86% 23.69% 24.95% 21.07%
Average Monthly Rate.............. 19.45% 20.33% 20.72% 19.90% 17.81%
</TABLE>
Because the future composition of the portfolios may change over time, this
table does not necessarily indicate the composition or performance of the
Federated portfolio or the trust portfolio at any later time.
RECEIVABLE YIELD CONSIDERATIONS
Gross revenues from finance charges and fees billed to accounts in the
Federated portfolio for each of the three fiscal years 1999, 1998 and 1997 and
for the 39 weeks ended on October 28, 2000 and October 30, 1999 are set forth in
the following table.
In the following table:
- all figures represent amounts billed to customers before deductions due
to charge-offs, fraud, returned goods, customer disputes or other
customer service adjustments, shown on a sum of cycles basis,
- "Average Receivables Outstanding" is the average of receivables
outstanding at the beginning of each fiscal month during the period
indicated,
S-21
<PAGE> 22
- "Finance Charges and Fees Billed" are based on beginning of the month
balances,
- "Yield from Finance Charges and Fees Billed" is the result of dividing
finance charges and fees billed by average receivables outstanding, and
- the percentages reflected for the 39 weeks ended October 28, 2000 and
October 30, 1999 are annualized figures.
REVENUE AND YIELD EXPERIENCE
FOR THE FEDERATED PORTFOLIO
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
39 WEEKS ENDED FISCAL YEAR ENDED
----------------------------- ---------------------------------------------
OCTOBER 28, OCTOBER 30, JANUARY 29, JANUARY 30, JANUARY 31,
2000 1999 2000 1999 1998
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Average Receivables Outstanding... $2,043,266.00 $1,948,557.00 $1,997,844.10 $2,096,811.44 $2,326,858.58
Finance Charges and Fees Billed... $ 409,761.00 $ 400,001.00 $ 542,180.00 $ 562,732.00 $ 599,056.00
Yield from Finance Charges and
Fees............................ 26.74% 27.37% 27.14% 26.84% 25.75%
</TABLE>
USE OF PROCEEDS
The net proceeds from the sale of the Class A certificates will be paid to
PRC. PRC will use the net proceeds to make an initial deposit to the INTEREST
FUNDING ACCOUNT in the amount of $1,000,000 to make interest payments on the
first DISTRIBUTION DATE and to pay the purchase price of receivables purchased
from the originators and PRC may use a portion of the net proceeds to repay
principal of the Series 1992-3 Variable Funding Certificates and to make certain
payments to Federated and its subsidiaries. Federated has informed PRC that
Federated and its subsidiaries will use these proceeds for general corporate
purposes.
DESCRIPTION OF THE OFFERED CERTIFICATES
The following is a summary of the material provisions of the offered
certificates. This summary is not a complete description of the terms of the
offered certificates. You should refer to "Description of the Certificates" and
"The Pooling and Servicing Agreement" in the attached prospectus as well as the
Pooling and Servicing Agreement and the Series 2000-1 Supplement for a complete
description.
GENERAL
The offered certificates will be issued under the POOLING AND SERVICING
AGREEMENT and the SERIES 2000-1 SUPPLEMENT. Each offered certificate represents
the right to receive allocations of cardholder payments that have been received
from receivables transferred to the trust. In particular, the offered
certificates will be allocated:
- a percentage of collections of FINANCE CHARGE RECEIVABLES that will be a
floating percentage for so long as a PAY OUT EVENT does not occur,
- a floating percentage of DEFAULT AMOUNTS that will reduce your INVESTED
AMOUNT if not paid from collections of FINANCE CHARGE RECEIVABLES or
REALLOCATED PRINCIPAL COLLECTIONS,
- during the REVOLVING PERIOD, a floating percentage of collections of
PRINCIPAL RECEIVABLES that will be paid to PRC except for SHARED
PRINCIPAL COLLECTIONS paid to holders of certificates of other series,
and
- during the ACCUMULATION PERIOD or the EARLY AMORTIZATION PERIOD, a
fixed/floating percentage of collections of PRINCIPAL RECEIVABLES based
on a fraction whose numerator will be fixed at the end of the REVOLVING
PERIOD.
S-22
<PAGE> 23
In addition to representing the right to payment from collections of
FINANCE CHARGE RECEIVABLES and PRINCIPAL RECEIVABLES allocated to your series,
each offered certificate also represents the right to receive payments from:
- EXCESS FINANCE CHARGE COLLECTIONS,
- TRANSFEROR FINANCE CHARGE COLLECTIONS, and
- SHARED PRINCIPAL COLLECTIONS.
Offered certificates will also be entitled to amounts in the PRINCIPAL
FUNDING ACCOUNT, and the series share of amounts in the EXCESS FUNDING ACCOUNT
and the COLLECTION ACCOUNT, and investment earnings on amounts in these
accounts.
Offered certificates will be issued in $1,000 denominations and will be
available only in book-entry form through DTC. As described in the attached
prospectus, as long as the offered certificates are held in book-entry form, you
will only be able to transfer your offered certificates through the facilities
of DTC. You will receive payments and notices through DTC and its participants.
Payments of interest and principal will be made on each DISTRIBUTION DATE to
offered certificateholders in whose names certificates are registered on the
RECORD DATE, to the extent of available funds.
The trust has also issued the EXCHANGEABLE TRANSFEROR CERTIFICATE. PRC
initially will own the EXCHANGEABLE TRANSFEROR CERTIFICATE. PRC may transfer the
EXCHANGEABLE TRANSFEROR CERTIFICATE in whole or in part under the limitations
and conditions described in the POOLING AND SERVICING AGREEMENT. See
"Description of the Certificates -- The Exchangeable Transferor Certificate" in
the attached prospectus.
INTEREST PAYMENTS
If you purchase Class A certificates you will receive from available funds
a payment of CLASS A MONTHLY INTEREST, plus CARRYOVER CLASS A INTEREST on the
15th day of each month that the offered certificates are outstanding beginning
with January 16, 2001. If that date is not a business day you will be paid on
the next business day.
On each DISTRIBUTION DATE, you will receive an interest payment based on
the interest rate for your Class A certificates, and the outstanding balance of
your Class A certificates, as follows:
Interest on the Class A certificates for each DISTRIBUTION DATE will be
paid to you by multiplying:
- the CLASS A CERTIFICATE RATE which is 6.70% per annum, by
- the outstanding principal balance of the Class A certificates, as
applicable, as of the last day of the preceding MONTHLY PERIOD, by
- a fraction equal to 30 divided by 360.
If you do not receive your interest in full on any DISTRIBUTION DATE, you
will be paid the shortfall on the next succeeding DISTRIBUTION DATE together
with interest on the shortfall amount if there are funds available to make that
payment.
Interest payments will be funded from:
- FINANCE CHARGE RECEIVABLES allocated to your series for the related
MONTHLY PERIOD, and
- to the extent FINANCE CHARGE RECEIVABLES allocated to your series are
insufficient to pay the interest, from:
-- EXCESS FINANCE CHARGE COLLECTIONS allocated to your series,
-- TRANSFEROR FINANCE CHARGE COLLECTIONS allocated to your series, and
-- REALLOCATED PRINCIPAL COLLECTIONS.
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PRINCIPAL PAYMENTS
Principal payments on the offered certificates will be funded from:
- collections of PRINCIPAL RECEIVABLES allocated to your series, plus
- SHARED PRINCIPAL COLLECTIONS allocated to your series.
If there is a shortfall in the amount of collections of FINANCE CHARGE
RECEIVABLES available to pay the CLASS A REQUIRED AMOUNT, collections of
PRINCIPAL RECEIVABLES allocated to the Class C certificates and, if necessary,
the Class B certificates will be reallocated to pay the shortfall amount. If
there is a shortfall in the amount of collections of FINANCE CHARGE RECEIVABLES
available to pay the CLASS B REQUIRED AMOUNT, collections of PRINCIPAL
RECEIVABLES allocated to the Class C certificates will be reallocated to pay the
shortfall amount. These REALLOCATED CLASS B PRINCIPAL COLLECTIONS or REALLOCATED
CLASS C PRINCIPAL COLLECTIONS will not be available to make principal payments
to the Class A certificates or Class B certificates, unless they are applied to
cover INVESTOR DEFAULT AMOUNTS, INVESTOR CHARGE-OFFS or unpaid ADJUSTMENT
PAYMENTS. Collections of PRINCIPAL RECEIVABLES allocated to your series but not
needed to make payments to your series may be reallocated to other series.
Revolving Period. During the REVOLVING PERIOD no principal payments will
be made to Class A, Class B and Class C certificateholders. The REVOLVING PERIOD
begins on the CLOSING DATE and ends on the day before the ACCUMULATION PERIOD or
EARLY AMORTIZATION PERIOD begins. On each DISTRIBUTION DATE during the REVOLVING
PERIOD, collections of PRINCIPAL RECEIVABLES allocated to your series will be:
- treated as REALLOCATED CLASS C PRINCIPAL COLLECTIONS used to pay the
CLASS A REQUIRED AMOUNT and the CLASS B REQUIRED AMOUNT,
- treated as REALLOCATED CLASS B PRINCIPAL COLLECTIONS used to pay the
CLASS A REQUIRED AMOUNT,
- treated as SHARED PRINCIPAL COLLECTIONS used to pay principal to other
series, or
- paid to PRC.
Accumulation Period. During the ACCUMULATION PERIOD, collections of
PRINCIPAL RECEIVABLES will be deposited in the PRINCIPAL FUNDING ACCOUNT on each
business day in an amount equal to the lesser of:
- the FIXED/FLOATING ALLOCATION PERCENTAGE of PRINCIPAL COLLECTIONS, but
not more than the NET PRINCIPAL COLLECTIONS, plus SHARED PRINCIPAL
COLLECTIONS and other amounts allocated to the Class A certificates, and
- the amount by which the CONTROLLED DEPOSIT AMOUNT for the related
DISTRIBUTION DATE exceeds the amount deposited in the PRINCIPAL FUNDING
ACCOUNT in the current month.
On the CLASS A EXPECTED FINAL PAYMENT DATE, the trustee will pay to Class A
certificateholders the amount on deposit in the PRINCIPAL FUNDING ACCOUNT. If a
PAY OUT EVENT occurs during the ACCUMULATION PERIOD, the amount on deposit in
the PRINCIPAL FUNDING ACCOUNT will be paid to Class A certificateholders on the
first SPECIAL PAYMENT DATE.
On each business day after the amount deposited in the PRINCIPAL FUNDING
ACCOUNT is equal to the CLASS A INVESTED AMOUNT, the FIXED/FLOATING ALLOCATION
PERCENTAGE of PRINCIPAL COLLECTIONS, but not more than the NET PRINCIPAL
COLLECTIONS, plus SHARED PRINCIPAL COLLECTIONS and other principal amounts
allocable to the Class B certificates will be deposited into the PRINCIPAL
ACCOUNT for distribution to the Class B certificateholders on the CLASS B
EXPECTED FINAL PAYMENT DATE.
During the ACCUMULATION PERIOD until the final principal payment to Class A
or Class B certificateholders, the portion of PRINCIPAL COLLECTIONS not
allocated to the INVESTED AMOUNT will generally be treated as SHARED PRINCIPAL
COLLECTIONS or, under specified circumstances, deposited in the EXCESS FUNDING
ACCOUNT.
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<PAGE> 25
Early Amortization Period. On each SPECIAL PAYMENT DATE during the EARLY
AMORTIZATION PERIOD:
- the Class A certificateholders will be entitled to receive collections
for the related MONTHLY PERIOD until the earlier of:
-- the date the CLASS A INVESTED AMOUNT has been paid in full,
-- the SERIES 2000-1 TERMINATION DATE,
- after payment in full of the CLASS A INVESTED AMOUNT, Class B
certificateholders will be entitled to receive collections for the
related MONTHLY PERIOD until the earlier of:
-- the date the CLASS B INVESTED AMOUNT has been paid in full, and
-- the SERIES 2000-1 TERMINATION DATE, and
- after payment in full of the CLASS B INVESTED AMOUNT, Class C
certificateholders will be entitled to receive collections for the
related MONTHLY PERIOD until the earlier of:
-- the date the CLASS C INVESTED AMOUNT has been paid in full, and
-- the SERIES 2000-1 TERMINATION DATE.
The portion of PRINCIPAL COLLECTIONS for any MONTHLY PERIOD allocated to the
CLASS A INVESTED AMOUNT will be first used to cover required deposits into the
PRINCIPAL FUNDING ACCOUNT for the benefit of Class A certificateholders, or
required payments of principal to the Class A certificateholders, during the
ACCUMULATION PERIOD or EARLY AMORTIZATION PERIOD. On and after the CLASS B
PRINCIPAL PAYMENT COMMENCEMENT DATE, the portion of PRINCIPAL COLLECTIONS for
any MONTHLY PERIOD allocated to the CLASS B INVESTED AMOUNT will be used to
cover required deposits into the PRINCIPAL ACCOUNT for the benefit of Class B
certificateholders. On and after the CLASS C PRINCIPAL PAYMENT COMMENCEMENT
DATE, the portion of PRINCIPAL COLLECTIONS for any MONTHLY PERIOD allocated to
the CLASS C INVESTED AMOUNT will be used to cover deposits into the PRINCIPAL
ACCOUNT for the benefit of Class C certificateholders. The balance of remaining
PRINCIPAL COLLECTIONS for any of these MONTHLY PERIODS will be treated as SHARED
PRINCIPAL COLLECTIONS and will be available to make payments to
certificateholders of other series or to PRC.
POSTPONEMENT OF ACCUMULATION PERIOD
The ACCUMULATION PERIOD is scheduled to last 12 months. However, the
servicer may elect to extend the Revolving Period and postpone the start of the
ACCUMULATION PERIOD. The servicer may make this election only if the number of
months needed to fund the PRINCIPAL FUNDING ACCOUNT to pay the Class A
certificates is less than 12 months. On the second business day before each
DISTRIBUTION DATE beginning in October 2004 until the ACCUMULATION PERIOD
begins, the servicer will determine the length of the ACCUMULATION PERIOD needed
to fund the PRINCIPAL FUNDING ACCOUNT to allow the CLASS A INVESTED AMOUNT to be
paid in full on the CLASS A EXPECTED FINAL PAYMENT DATE. In making this
determination, the servicer is required to assume that:
- the principal payment rate will be no greater than the lowest monthly
payment rate for the previous 12 months,
- no additional series will be issued,
- the total amount of PRINCIPAL RECEIVABLES will remain the same throughout
the ACCUMULATION PERIOD, and
- no PAY OUT EVENT will occur for any series.
If the number of months determined to be required to fund the PRINCIPAL
FUNDING ACCOUNT is less than 12 months, the servicer may elect to postpone the
start of the ACCUMULATION PERIOD so that the number of months included in the
ACCUMULATION PERIOD will be equal to or exceed the length of the required
ACCUMULATION PERIOD as determined by the servicer. After making an election to
postpone the start of the ACCUMULATION PERIOD but before the ACCUMULATION PERIOD
begins, the servicer may elect to
S-25
<PAGE> 26
further postpone the start of the ACCUMULATION PERIOD or be required to extend
the ACCUMULATION PERIOD in accordance with the requirements described above. The
length of the ACCUMULATION PERIOD will not be less than one month.
SUBORDINATION
The Class B certificates will be subordinated to the Class A certificates.
Principal payments on the Class B certificates will not begin until the Class A
certificates are paid in full. If there are insufficient funds on any
DISTRIBUTION DATE to pay the CLASS A REQUIRED AMOUNT and REALLOCATED CLASS C
PRINCIPAL COLLECTIONS are insufficient to cover the CLASS A REQUIRED AMOUNT,
principal payments allocable to Class B certificateholders will be reallocated
to cover amounts due on the Class A certificates and the CLASS B INVESTED AMOUNT
will be reduced. If these REALLOCATED CLASS B PRINCIPAL COLLECTIONS are not
sufficient to fund the remaining CLASS A REQUIRED AMOUNT and the CLASS C
INVESTED AMOUNT has been reduced to zero, then the CLASS B INVESTED AMOUNT will
be reallocated to the Class A certificates as needed to absorb reductions in the
INVESTED AMOUNT of your series due to DEFAULT AMOUNTS. The CLASS B INVESTED
AMOUNT may be reimbursed from subsequent collections of FINANCE CHARGE
RECEIVABLES.
The Class C certificates will be subordinated to the Class A certificates
and the Class B certificates. At the closing, the Class C certificates will not
have a stated interest rate and will not be entitled to payments of interest.
Principal payments on the Class C certificates will not begin until the Class A
certificates and the Class B certificates have been paid in full.
If there are insufficient funds on any DISTRIBUTION DATE to pay the CLASS A
REQUIRED AMOUNT or the CLASS B REQUIRED AMOUNT, principal payments allocable to
the Class C certificateholders will be reallocated to cover amounts due on the
Class A certificates and the Class B certificates and the CLASS C INVESTED
AMOUNT will be reduced. If these REALLOCATED CLASS C PRINCIPAL COLLECTIONS are
not sufficient to fund the CLASS A REQUIRED AMOUNT and the CLASS B REQUIRED
AMOUNT, then the CLASS C INVESTED AMOUNT will be reallocated to the Class A
certificates or the Class B certificates as needed to absorb reductions in the
INVESTED AMOUNT of your series due to DEFAULT AMOUNTS. The CLASS C INVESTED
AMOUNT may be reimbursed from subsequent collections of FINANCE CHARGE
RECEIVABLES.
To the extent that the CLASS C INVESTED AMOUNT or the CLASS B INVESTED
AMOUNT is reduced, the amount of FINANCE CHARGE COLLECTIONS allocated to the
offered certificates in subsequent months will be reduced. If the amount of any
reduction of the CLASS B INVESTED AMOUNT is not reimbursed, the amount of
principal distributable to the Class B certificateholders will be reduced.
TRANSFER OF THE CLASS B CERTIFICATES OR THE CLASS C CERTIFICATES
PRC will initially retain the Class B certificates. PRC may sell all or a
portion of the Class B certificates in accordance with the restrictions on
transfer described in the SERIES 2000-1 SUPPLEMENT.
PRC will initially retain the Class C certificates. PRC may sell all or a
portion of the Class C certificates. If PRC does sell the Class C certificates,
PRC will enter into an agreement with the trustee that will specify the interest
rate for the Class C certificates as well as other relevant provisions of those
certificates. PRC may only sell Class C certificates if:
- PRC notifies the trustee, the servicer and the rating agencies of the
proposed transfer of the Class C certificates,
- the rating agencies advise the trustee that the transfer will not have a
RATINGS EFFECT,
- no PAY OUT EVENT occurs before the transfer,
- PRC delivers an officer's certificate to the trustee stating that the
transferor believes that the transfer will not cause a PAY OUT EVENT to
occur, and
- the transferor delivers a tax opinion to the trustee regarding the
transfer.
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<PAGE> 27
ALLOCATION PERCENTAGES
For each MONTHLY PERIOD, the servicer will allocate collections of FINANCE
CHARGE RECEIVABLES, PRINCIPAL RECEIVABLES and all DEFAULT AMOUNTS among:
- the Class A certificateholders, the Class B certificateholders and the
Class C certificateholders for your series,
- the interests of certificateholders for all other series issued and
outstanding, and
- the TRANSFEROR INTEREST.
The trustee will use the FLOATING ALLOCATION PERCENTAGE to allocate to your
series DEFAULT AMOUNTS at all times, PRINCIPAL COLLECTIONS during the REVOLVING
PERIOD and FINANCE CHARGE COLLECTIONS before a PAY OUT EVENT occurs. The trustee
will use the FIXED/FLOATING ALLOCATION PERCENTAGE to allocate to your series
PRINCIPAL COLLECTIONS during the ACCUMULATION PERIOD or EARLY AMORTIZATION
PERIOD and FINANCE CHARGE COLLECTIONS after a PAY OUT EVENT occurs.
The FLOATING ALLOCATION PERCENTAGE as determined on any business day is
generally a proportionate share equal to a fraction:
- whose numerator is the sum of the CLASS A ADJUSTED INVESTED AMOUNT, CLASS
B INVESTED AMOUNT and the CLASS C INVESTED AMOUNT at the end of the
preceding business day, and
- whose denominator is the total amount of PRINCIPAL RECEIVABLES and
amounts on deposit in the EXCESS FUNDING ACCOUNT at the end of the
preceding business day.
The FIXED/FLOATING ALLOCATION PERCENTAGE with respect to PRINCIPAL
COLLECTIONS as determined at any time after the AMORTIZATION PERIOD COMMENCEMENT
DATE is generally equal to a fraction:
- whose numerator is the INVESTED AMOUNT at the end of the REVOLVING
PERIOD, and
- whose denominator is the greater of the sum of the amount of PRINCIPAL
RECEIVABLES and the amount on deposit in the EXCESS FUNDING ACCOUNT at
the end of the preceding business day and the sum of the numerators used
to calculate the allocation percentages with respect to PRINCIPAL
COLLECTIONS for all classes of all series outstanding on that business
day.
The numerator of this fraction can be reduced if the certificates are
paired with another series of certificates and a pay out event occurs with
respect to the paired series, and Standard & Poor's confirms that the reduction
of the numerator would not cause them to reduce or withdraw their ratings of any
series, in which case the numerator will be equal to the INVESTED AMOUNT of this
series on the business day before the pay out event occurred.
The FIXED/FLOATING ALLOCATION PERCENTAGE with respect to FINANCE CHARGE
COLLECTIONS as determined at any time after a PAY OUT EVENT occurs is generally
equal to a fraction:
- whose numerator is the INVESTED AMOUNT at the end of the business day
preceding the occurrence of a PAY OUT EVENT, and
- whose denominator is the greater of the sum of the amount of PRINCIPAL
RECEIVABLES and the amount on deposit in the EXCESS FUNDING ACCOUNT at
the end of the preceding business day and the sum of the numerators used
to calculate the allocation percentages with respect to FINANCE CHARGE
COLLECTIONS for all series then outstanding on that business day.
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<PAGE> 28
APPLICATION OF COLLECTIONS
Payment of Interest, Fees and Other Items. On each business day during a
MONTHLY PERIOD, the servicer will apply AVAILABLE SERIES FINANCE CHARGE
COLLECTIONS for the related MONTHLY PERIOD in the following order:
- an amount equal to CLASS A MONTHLY INTEREST and CARRYOVER CLASS A
INTEREST will be deposited into the INTEREST FUNDING ACCOUNT for payment
on the related DISTRIBUTION DATE,
- an amount equal to CLASS B MONTHLY INTEREST and CARRYOVER CLASS B
INTEREST accrued on the outstanding principal amount of the Class B
certificates will be paid to PRC,
- the MONTHLY SERVICING FEE will be paid to the servicer,
- an amount equal to the total INVESTOR DEFAULT AMOUNT for that
DISTRIBUTION DATE will be:
-- treated as SHARED PRINCIPAL COLLECTIONS during the REVOLVING PERIOD,
and
-- during the ACCUMULATION PERIOD, on and before the date the CLASS A
INVESTED AMOUNT is paid in full or available in the PRINCIPAL FUNDING
ACCOUNT, deposited in the PRINCIPAL FUNDING ACCOUNT and afterwards or
during the EARLY AMORTIZATION PERIOD will be deposited in the
PRINCIPAL ACCOUNT for payment to Class A certificateholders or paid
to PRC as holder of the Class B certificates or Class C certificates,
- an amount equal to the unreimbursed CLASS A INVESTOR CHARGE-OFFS, if any,
will be applied to reimburse CLASS A INVESTOR CHARGE-OFFS, and this
amount will be:
-- treated as SHARED PRINCIPAL COLLECTIONS during the REVOLVING PERIOD,
and
-- during the ACCUMULATION PERIOD, on and before the date an amount
equal to the CLASS A INVESTED AMOUNT is paid in full or deposited in
the PRINCIPAL FUNDING ACCOUNT, deposited in the PRINCIPAL FUNDING
ACCOUNT and afterwards or during the EARLY AMORTIZATION PERIOD will
be deposited in the PRINCIPAL ACCOUNT for payment to Class A
certificateholders,
- an amount equal to the unreimbursed reduction in the CLASS B INVESTED
AMOUNT because of CLASS B INVESTOR CHARGE-OFFS and REALLOCATED CLASS B
PRINCIPAL COLLECTIONS, if any, will be:
-- treated as SHARED PRINCIPAL COLLECTIONS during the REVOLVING PERIOD,
and
-- during the ACCUMULATION PERIOD, on and before the date an amount
equal to the CLASS A INVESTED AMOUNT is paid in full or deposited in
the PRINCIPAL FUNDING ACCOUNT, deposited in the PRINCIPAL FUNDING
ACCOUNT and afterwards or during the EARLY AMORTIZATION PERIOD will
be deposited in the PRINCIPAL ACCOUNT for payment to Class A
certificateholders or paid to PRC as holder of the Class B
certificates,
- an amount equal to Class C Monthly Interest, if any.
- an amount equal to the unreimbursed reduction in the CLASS C INVESTED
AMOUNT because of CLASS C INVESTOR CHARGE-OFFS and REALLOCATED CLASS C
PRINCIPAL COLLECTIONS, if any, will be:
-- treated as SHARED PRINCIPAL COLLECTIONS during the REVOLVING PERIOD,
and
-- during the ACCUMULATION PERIOD, on and before the date an amount
equal to the CLASS A INVESTED AMOUNT is paid in full or deposited in
the PRINCIPAL FUNDING ACCOUNT, deposited in the PRINCIPAL FUNDING
ACCOUNT and afterwards or during the EARLY AMORTIZATION PERIOD
deposited in the PRINCIPAL ACCOUNT for payment to Class A
certificateholders or paid to PRC as holder of the Class B
certificates or Class C certificates, and
- the balance, if any, will constitute EXCESS FINANCE CHARGE COLLECTIONS
that will be made available to certificateholders of other series to the
extent of shortfalls in amounts payable from FINANCE CHARGE COLLECTIONS
or paid to PRC, provided that during the EARLY AMORTIZATION PERIOD these
amounts will be retained in the INTEREST FUNDING ACCOUNT until the last
business day of the month.
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<PAGE> 29
The following diagram provides you with an outline of the allocation of
collections of FINANCE CHARGE RECEIVABLES. This diagram is a simplified
demonstration of the allocation and payment provisions contained in this
prospectus supplement and the attached prospectus.
ALLOCATION OF COLLECTIONS OF FINANCE CHARGE RECEIVABLES
LOGO
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<PAGE> 30
Excess Finance Charge Collections. On each business day, EXCESS FINANCE
CHARGE COLLECTIONS allocated to Series 2000-1 will be applied to cover
shortfalls in amounts to be paid or deposited as described above in "-- Payment
of Interest, Fees and Other Items."
EXCESS FINANCE CHARGE COLLECTIONS from Series 2000-1 will be applied in the
following order:
- to pay certificateholders of other series to the extent of any
shortfalls,
- to pay any unpaid reasonable costs and expenses of a successor servicer,
if any, and
- paid to PRC on any business day, or if a PAY OUT EVENT has occurred, only
on the last business day of a MONTHLY PERIOD.
Transferor Finance Charge Collections. On each business day, the trustee
will apply TRANSFEROR FINANCE CHARGE COLLECTIONS allocated to your series to
cover the amount of the excess of:
- the amount that would be earned by funds on deposit in the PRINCIPAL
FUNDING ACCOUNT and the EXCESS FUNDING ACCOUNT if they were invested at
the BASE RATE over
- the actual amount of investment earnings on funds on deposit in the
PRINCIPAL FUNDING ACCOUNT and the EXCESS FUNDING ACCOUNT.
Payment of Principal. On each DISTRIBUTION DATE during the REVOLVING
PERIOD, the product of:
- the FLOATING ALLOCATION PERCENTAGE, and
- collections of PRINCIPAL RECEIVABLES for that DISTRIBUTION DATE,
will be treated as SHARED PRINCIPAL COLLECTIONS.
On each business day during the ACCUMULATION PERIOD, collections of
PRINCIPAL RECEIVABLES allocated to Class A certificateholders equal to the NET
PRINCIPAL COLLECTIONS, amounts on deposit in the EXCESS FUNDING ACCOUNT
allocated to the certificates, SHARED PRINCIPAL COLLECTIONS allocated to the
certificates and other amounts, but not more than the CONTROLLED DEPOSIT AMOUNT,
will be deposited in the PRINCIPAL FUNDING ACCOUNT for payment to Class A
certificateholders on the CLASS A EXPECTED FINAL PAYMENT DATE.
On each business day after the CLASS A INVESTED AMOUNT is paid in full, the
NET PRINCIPAL COLLECTIONS, amounts on deposit in the EXCESS FUNDING ACCOUNT
allocated to the certificates, SHARED PRINCIPAL COLLECTIONS allocated to the
certificates and other amounts will be paid to PRC as holder of the Class B
certificates on the CLASS B EXPECTED FINAL PAYMENT DATE.
On each SPECIAL PAYMENT DATE after the CLASS A EXPECTED FINAL PAYMENT DATE
and, if earlier, after a PAY OUT EVENT occurs, the trustee will apply the amount
on deposit in the PRINCIPAL ACCOUNT and available for payment of principal in
the following order:
- an amount equal to the CLASS A INVESTED AMOUNT to Class A
certificateholders,
- after the CLASS A INVESTED AMOUNT has been paid in full, an amount equal
to CLASS B MONTHLY PRINCIPAL to Class B certificateholders,
- after the CLASS B INVESTED AMOUNT has been paid in full, an amount equal
to CLASS C MONTHLY PRINCIPAL to Class C certificateholders, and
- an amount equal to the excess, if any, will be treated as SHARED
PRINCIPAL COLLECTIONS.
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 necessary to meet the CONTROLLED DEPOSIT AMOUNT for the benefit of the
Class A certificates.
You will receive the final payment of principal and interest on the Class A
certificates no later than October 15, 2009 . After October 15, 2009 the trust
will have no further obligation to pay principal or interest on the Class A
certificates.
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<PAGE> 31
The following diagram provides you with an outline of the allocation of
collections of PRINCIPAL RECEIVABLES. This diagram is a simplified demonstration
of the allocation and payment provisions contained in this prospectus supplement
and the attached prospectus.
ALLOCATIONS OF COLLECTIONS OF PRINCIPAL RECEIVABLES
PRCFLOCHART
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<PAGE> 32
REALLOCATION OF CASH FLOWS
For each DISTRIBUTION DATE, the servicer will calculate the CLASS A
REQUIRED AMOUNT, which is generally equal to the excess, if any, of (1) CLASS A
MONTHLY INTEREST, CARRYOVER CLASS A INTEREST, the Class A portion of the MONTHLY
SERVICING FEE and the Class A portion of the INVESTOR DEFAULT AMOUNT over (2)
the AVAILABLE SERIES FINANCE CHARGE COLLECTIONS plus any available TRANSFEROR
FINANCE CHARGE COLLECTIONS, plus EXCESS FINANCE CHARGE COLLECTIONS from other
series allocated to the amounts described above.
For each DISTRIBUTION DATE, the servicer will also calculate the CLASS B
REQUIRED AMOUNT, which is generally equal to the excess, if any, of (1) CLASS B
MONTHLY INTEREST, CARRYOVER CLASS B INTEREST, determined based on the
outstanding principal amount of the Class B certificates, the Class B portion of
the MONTHLY SERVICING FEE and the Class B portion of the INVESTOR DEFAULT AMOUNT
over (2) the AVAILABLE SERIES FINANCE CHARGE COLLECTIONS, plus any available
TRANSFEROR FINANCE CHARGE COLLECTIONS, plus EXCESS FINANCE CHARGE COLLECTIONS
from other series applied to the amounts described above.
The CLASS A REQUIRED AMOUNT and the CLASS B REQUIRED AMOUNT will be paid
from REALLOCATED CLASS C PRINCIPAL COLLECTIONS. If REALLOCATED CLASS C PRINCIPAL
COLLECTIONS are not sufficient to fund the CLASS A REQUIRED AMOUNT and the CLASS
B REQUIRED AMOUNT, then the CLASS C INVESTED AMOUNT will be reduced to the
extent of the INVESTOR DEFAULT AMOUNT but not below zero. The remaining CLASS A
REQUIRED AMOUNT will be paid from REALLOCATED CLASS B PRINCIPAL COLLECTIONS. If
REALLOCATED CLASS B PRINCIPAL COLLECTIONS are not sufficient to fund the
remaining CLASS A REQUIRED AMOUNT then the CLASS B INVESTED AMOUNT will be
reduced to the extent of the remaining INVESTOR DEFAULT AMOUNT but not below
zero. If the CLASS B INVESTED AMOUNT and the CLASS C INVESTED AMOUNT have both
been reduced to zero, the CLASS A INVESTED AMOUNT will be reduced to the extent
of the remaining INVESTOR DEFAULT AMOUNT, but not below zero.
Any reduction in the CLASS B INVESTED AMOUNT or CLASS C INVESTED AMOUNT
will have the effect of slowing or reducing the return of principal and interest
to Class A certificateholders. If the CLASS C INVESTED AMOUNT and the CLASS B
INVESTED AMOUNT have been reduced to zero, Class A certificateholders will bear
the credit and other risks associated with their interests in the trust.
Reductions of the CLASS A INVESTED AMOUNT, the CLASS B INVESTED AMOUNT and
the CLASS C INVESTED AMOUNT described in the four preceding paragraphs will be
reimbursed, and the CLASS A INVESTED AMOUNT, the CLASS B INVESTED AMOUNT and the
CLASS C INVESTED AMOUNT increased, on later DISTRIBUTION DATES to the extent of:
- AVAILABLE SERIES FINANCE CHARGE COLLECTIONS,
- TRANSFEROR FINANCE CHARGE COLLECTIONS available for that purpose on each
DISTRIBUTION DATE, and
- EXCESS FINANCE CHARGE COLLECTIONS from other series.
SHARING OF EXCESS FINANCE CHARGE COLLECTIONS
Collections of FINANCE CHARGE RECEIVABLES -- and other amounts treated like
collections of FINANCE CHARGE RECEIVABLES -- in excess of the amount required to
make payments or deposits for the certificates of your series will be made
available to other series whose allocation of collections of FINANCE CHARGE
RECEIVABLES is not sufficient to make their required payments or deposits. We
call these amounts EXCESS FINANCE CHARGE COLLECTIONS. If the certificates of
your series require more collections of FINANCE CHARGE RECEIVABLES than
allocated to your series, you will have access to collections of FINANCE CHARGE
RECEIVABLES -- and other amounts treated like finance charge collections -- from
other series. Each series that has a shortfall will receive a share of the total
amount of EXCESS FINANCE CHARGE COLLECTIONS available for that month based on
the amount of the shortfall for that series divided by the total shortfall for
all series for that same month. EXCESS FINANCE CHARGE COLLECTIONS remaining
after payment of all shortfalls for other series will be paid to PRC.
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<PAGE> 33
SHARED PRINCIPAL COLLECTIONS
Collections of PRINCIPAL RECEIVABLES allocated to the Series 2000-1
certificateholders' interest in excess of:
- during the REVOLVING PERIOD, the amount of REALLOCATED PRINCIPAL
COLLECTIONS,
- during the ACCUMULATION PERIOD before the CLASS A EXPECTED FINAL PAYMENT
DATE, the CONTROLLED DEPOSIT AMOUNT and the amount of REALLOCATED
PRINCIPAL COLLECTIONS, and
- during the ACCUMULATION PERIOD after the CLASS A EXPECTED FINAL PAYMENT
DATE and during the EARLY AMORTIZATION PERIOD, the INVESTED AMOUNT of the
certificates,
will be made available to other series whose allocation of principal collections
is not sufficient to make payments or deposits required to be made from
principal collections allocated to those series. We call these collections
SHARED PRINCIPAL COLLECTIONS. If your certificates require more principal
collections than allocated to your series based on the FIXED/FLOATING ALLOCATION
PERCENTAGE, you will share in the excess available from other outstanding
series. Each outstanding series that has a shortfall will receive a share of the
total amount of SHARED PRINCIPAL COLLECTIONS available for that month based on
the amount of the shortfall for that series divided by the total shortfall for
all outstanding series for that same month.
If SHARED PRINCIPAL COLLECTIONS exceed shortfalls for all series, the
trustee will deposit the remaining amount into the EXCESS FUNDING ACCOUNT and
distribute the remaining amount to PRC to the extent that the TRANSFEROR
INTEREST exceeds the MINIMUM TRANSFEROR INTEREST.
SHARED PRINCIPAL COLLECTIONS cover PRINCIPAL SHORTFALLS of the Series
2000-1 certificates by using collections of PRINCIPAL RECEIVABLES that would
have been paid to PRC and, in specified circumstances, may allow the length of
the ACCUMULATION PERIOD to be shortened. This type of reallocation of
collections of PRINCIPAL RECEIVABLES will not result in a reduction in the
INVESTED AMOUNT of the series to which the collections were initially allocated.
There can be no assurance that there will be any SHARED PRINCIPAL COLLECTIONS
for any MONTHLY PERIOD.
DEFAULTED RECEIVABLES; INVESTOR CHARGE-OFFS
The INVESTOR DEFAULT AMOUNT represents the investor's share of receivables
charged-off as uncollectible. On each business day, the servicer will calculate
the INVESTOR DEFAULT AMOUNT for your series by multiplying:
- the FLOATING ALLOCATION PERCENTAGE for that business day, by
- the DEFAULT AMOUNT for all DEFAULTED ACCOUNTS on that business day.
The INVESTOR DEFAULT AMOUNT will be paid from:
- AVAILABLE SERIES FINANCE CHARGE COLLECTIONS,
- TRANSFEROR FINANCE CHARGE COLLECTIONS allocated to Series 2000-1,
- EXCESS FINANCE CHARGE COLLECTIONS from other series allocated to Series
2000-1, and
- REALLOCATED PRINCIPAL COLLECTIONS.
If on any DISTRIBUTION DATE, the REQUIRED AMOUNT exceeds the sum of:
- TRANSFEROR FINANCE CHARGE COLLECTIONS allocable to Series 2000-1,
- EXCESS FINANCE CHARGE COLLECTIONS from other series allocable to Series
2000-1, and
- REALLOCATED PRINCIPAL COLLECTIONS,
S-33
<PAGE> 34
then the CLASS C INVESTED AMOUNT will be reduced by the amount of that excess
but not more than the INVESTOR DEFAULT AMOUNT. This type of reduction is called
a CLASS C INVESTOR CHARGE-OFF. If this reduction causes the CLASS C INVESTED
AMOUNT to be a negative number, then:
- the CLASS C INVESTED AMOUNT will be reduced to zero, and
- the CLASS B INVESTED AMOUNT will be reduced by the amount by which the
CLASS C INVESTED AMOUNT would have been reduced below zero,
but not more than the INVESTOR DEFAULT AMOUNT less the amount of the reduction
of the CLASS C INVESTED AMOUNT. This type of reduction is called a CLASS B
INVESTOR CHARGE-OFF.
If this reduction causes the CLASS B INVESTED AMOUNT to be a negative number,
then:
- 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 INVESTOR DEFAULT AMOUNT less the amount of the reduction
of the CLASS B INVESTED AMOUNT and the CLASS C INVESTED AMOUNT. This type of
reduction is called a CLASS A INVESTOR CHARGE-OFF.
PRINCIPAL FUNDING ACCOUNT
Under the SERIES 2000-1 SUPPLEMENT, the trustee will establish and maintain
a PRINCIPAL FUNDING ACCOUNT in which it will collect principal for payment to
Class A certificateholders during the ACCUMULATION PERIOD.
Amounts collected in the PRINCIPAL FUNDING ACCOUNT will be used to pay
principal to Class A certificateholders on the earlier of:
- the CLASS A EXPECTED FINAL PAYMENT DATE, and
- if a PAY OUT EVENT occurs during the ACCUMULATION PERIOD, the first
SPECIAL PAYMENT DATE.
Amounts on deposit in the PRINCIPAL FUNDING ACCOUNT will be invested until
the following DISTRIBUTION DATE by the trustee (at PRC's direction) in CASH
EQUIVALENTS. The proceeds from these investments will be deposited in the
COLLECTION ACCOUNT on each DISTRIBUTION DATE and applied as AVAILABLE SERIES
FINANCE CHARGE COLLECTIONS.
WITHDRAWALS FROM THE COLLECTION ACCOUNT
The servicer will withdraw the following amounts from the COLLECTION
ACCOUNT for application on each business day:
- an amount equal to the TRANSFEROR PERCENTAGE of the amount of PRINCIPAL
COLLECTIONS will be paid to PRC as holder of the EXCHANGEABLE TRANSFEROR
CERTIFICATE to the extent those funds are not allocated to any series;
- an amount equal to the TRANSFEROR PERCENTAGE of the amount of FINANCE
CHARGE COLLECTIONS will be paid to PRC as holder of the EXCHANGEABLE
TRANSFEROR CERTIFICATE to the extent those funds are not allocated to any
series;
- an amount equal to:
-- the FLOATING ALLOCATION PERCENTAGE of the amount of FINANCE CHARGE
COLLECTIONS,
-- TRANSFEROR FINANCE CHARGE COLLECTIONS,
-- investment earnings on amounts on deposit in the PRINCIPAL FUNDING
ACCOUNT to the extent on deposit in the COLLECTION ACCOUNT on that
business day, and
-- EXCESS FINANCE CHARGE COLLECTIONS from other series allocable to
Series 2000-1, and,
S-34
<PAGE> 35
-- if a DISCOUNT TRIGGER EVENT has occurred, discounted PRINCIPAL
COLLECTIONS allocable to Series 2000-1,
will be allocated and paid as described above in "-- Application of
Collections -- Payment of Interest, Fees and Other Items;"
- during the Revolving Period, an amount equal to:
-- the FLOATING ALLOCATION PERCENTAGE of PRINCIPAL COLLECTIONS, less the
resulting amount which may be applied as REALLOCATED CLASS B
PRINCIPAL COLLECTIONS or REALLOCATED CLASS C PRINCIPAL COLLECTIONS,
will be applied as SHARED PRINCIPAL COLLECTIONS; provided, that during the
continuance of a DISCOUNT TRIGGER EVENT, discounted PRINCIPAL COLLECTIONS
are subject to reallocation as FINANCE CHARGE COLLECTIONS;
- during the ACCUMULATION PERIOD, an amount equal to:
-- the FIXED/FLOATING ALLOCATION PERCENTAGE of PRINCIPAL COLLECTIONS,
less the resulting amount 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 that business day,
will be deposited in the PRINCIPAL FUNDING ACCOUNT; provided, that during
the continuance of a DISCOUNT TRIGGER EVENT, discounted 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 CONTROLLED DEPOSIT AMOUNT, the excess will be treated
as SHARED PRINCIPAL COLLECTIONS;
- 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 PRINCIPAL COLLECTIONS,
less the resulting amount 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 that business day, up
to the amount of the INVESTED AMOUNT,
will be deposited into the PRINCIPAL ACCOUNT; provided, that during the
continuance of a DISCOUNT TRIGGER EVENT, discounted PRINCIPAL COLLECTIONS
are subject to reallocation as FINANCE CHARGE COLLECTIONS;
- SHARED PRINCIPAL COLLECTIONS will be allocated to each outstanding
series, on a proportional basis, based on the allocation percentage for
PRINCIPAL RECEIVABLES applicable to any series:
-- first to be applied to any shortfalls with respect to the controlled
deposit amount for each series, and
-- then to accelerate principal payments with respect to any series
which is in its amortization period but not subject to a controlled
deposit amount, and
-- then, at the option of the transferor, to make payments of principal
with respect to the variable funding certificates.
S-35
<PAGE> 36
The servicer will pay any remaining SHARED PRINCIPAL COLLECTIONS on that
business day to the holder of the EXCHANGEABLE TRANSFEROR CERTIFICATE; and
- EXCESS FINANCE CHARGE COLLECTIONS will be allocated as described above in
"-- Application of Collections -- Payment of Interest, Fees and Other
Items."
Any SHARED PRINCIPAL COLLECTIONS and other amounts not paid to the
transferor because the TRANSFEROR INTEREST does not exceed the MINIMUM
TRANSFEROR INTEREST, will be deposited into and held in the EXCESS FUNDING
ACCOUNT, and on the AMORTIZATION PERIOD COMMENCEMENT DATE with respect to any
series, those amounts will be deposited in the principal account or principal
funding account of that series to the extent specified in the related supplement
until the principal funding account of that series has been funded in full or
the holders of certificates of that series have been paid in full.
PAIRED SERIES
The Series 2000-1 certificates may be paired with one or more other series.
The paired series either:
- will be prefunded with an initial deposit in a PRE-FUNDING ACCOUNT up to
the initial principal balance of that paired series, or
- will have a variable principal amount.
Any PRE-FUNDING ACCOUNT will be for the benefit of the paired series. As
principal is deposited in the PRINCIPAL FUNDING ACCOUNT or paid to the Series
2000-1 certificates, either:
- in the case of a prefunded paired series, an equal amount of funds on
deposit in any PRE-FUNDING ACCOUNT for that paired series will be
released to PRC, or
- in the case of a paired series with a variable principal amount, an
interest in that paired series up to the amount paid to your series may
be sold by the trust.
The invested amount in the trust of that paired series will increase by an
amount up to the principal paid on your series. Upon payment of the Series
2000-1 certificates, assuming no unreimbursed charge-offs for any related paired
series, the total invested amount of the related paired series will have been
increased by an amount up to the total amount paid to Series 2000-1
certificateholders since the issuance of that paired series.
If a PAY OUT EVENT occurs with respect to Series 2000-1, if paired, or any
related paired series during the ACCUMULATION PERIOD for Series 2000-1, either:
- subject to confirmation of existing ratings by Standard & Poor's of all
series then rated by Standard & Poor's, the numerators used in the
FIXED/FLOATING ALLOCATION PERCENTAGE for Series 2000-1 and the related
paired series will be reset to be equal to the respective invested
amounts of each series on the last day before the PAY OUT EVENT occurred,
or
- the denominator of the FIXED/FLOATING ALLOCATION PERCENTAGE for Series
2000-1 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
2000-1 if the event allowed the payment of principal at that time to the
paired series and required reliance by Series 2000-1 on the sum of the
numerators or the denominator of the FIXED/FLOATING ALLOCATION
PERCENTAGE.
PAY OUT EVENTS
The REVOLVING PERIOD shall continue until the earlier of:
- the start of the ACCUMULATION PERIOD, or
- the occurrence of a PAY OUT EVENT.
S-36
<PAGE> 37
The following chart indicates whether each PAY OUT EVENT is an event which
automatically triggers an EARLY AMORTIZATION PERIOD or an event which requires
the vote of a majority of the certificateholders or the trustee to trigger an
EARLY AMORTIZATION PERIOD.
<TABLE>
<CAPTION>
AUTOMATICALLY
CAUSES AN
REQUIRES A EARLY
MAJORITY VOTE OF AMORTIZATION
CERTIFICATEHOLDERS OF
PAY OUT EVENTS OR THE TRUSTEE SERIES 2000-1
-------------- ------------------ -------------
<S> <C> <C>
1. The transferor fails to make a payment or deposit when X
required to under the POOLING AND SERVICING AGREEMENT or
the SERIES 2000-1 SUPPLEMENT within five days after the
required date.
2. The transferor fails to observe or perform any covenant X
or agreement and that failure has a material adverse
effect on you and the failure continues unremedied for
60 days after written notice to the transferor.
3. The transferor makes a representation or warranty in the X
POOLING AND SERVICING AGREEMENT or the SERIES 2000-1
SUPPLEMENT that was materially incorrect when made and
that continues to be materially incorrect for 60 days
after written notice to the transferor and as a result
you are materially and adversely affected, unless the
transferor accepts reassignment of the related
receivables.
4. The average of the PORTFOLIO YIELDS for three X
consecutive MONTHLY PERIODS is less than the average of
the BASE RATES for such three consecutive monthly
periods.
5. A SERVICER DEFAULT occurs which has a material adverse X
effect on you.
6. FDS, FEDERATED DEPARTMENT STORES or the transferor X
admits in writing its inability to pay its debts, is
subject to a bankruptcy proceeding or enters
receivership or conservatorship or otherwise becomes
subject to an insolvency event.
7. The trust becomes subject to regulation as an X
"investment company" under the Investment Company Act.
8. The ADJUSTED TRANSFEROR INTEREST is less than the MINIMUM X
TRANSFEROR INTEREST for 15 consecutive days.
9. The sum of the ADJUSTED PRINCIPAL RECEIVABLES AMOUNT and X
the amount on deposit in the EXCESS FUNDING ACCOUNT is
less than the MINIMUM AGGREGATE PRINCIPAL RECEIVABLES for
15 consecutive days.
</TABLE>
SERVICING FEES AND EXPENSES
The Monthly Servicing Fee allocable to your series shall equal one-twelfth
of the product of:
- 2%, and
- an amount equal to the sum of the CLASS A ADJUSTED INVESTED AMOUNT, the
CLASS B INVESTED AMOUNT and the CLASS C INVESTED AMOUNT at the end of the
MONTHLY PERIOD second preceding the related DISTRIBUTION DATE.
S-37
<PAGE> 38
The remainder of the servicing fee not paid by Series 2000-1 will be paid
from amounts allocable to the holder of the EXCHANGEABLE TRANSFEROR CERTIFICATE
or the certificateholders of other series. The trust, the trustee or the Series
2000-1 certificateholders will not be liable for the share of the servicing fee
to be paid from amounts allocable to the holder of the EXCHANGEABLE TRANSFEROR
CERTIFICATE, or the certificateholders of any other series.
OPTIONAL TERMINATION
The Class A certificates may be repurchased by the transferor after the
INVESTED AMOUNT of all Class A certificates, Class B certificates and Class C
certificates previously sold by PRC to the underwriters or other investors is
less than or equal to 11% of the initial INVESTED AMOUNT of those certificates.
The Class A certificates may also be purchased by the transferor on the second
DISTRIBUTION DATE following the CLASS A EXPECTED FINAL PAYMENT DATE. The
purchase price for the Class A certificates will equal the sum of:
- the CLASS A INVESTED AMOUNT, plus
- accrued and unpaid interest on the unpaid principal amount of the Class A
certificates through the day preceding that DISTRIBUTION DATE at the
CLASS A CERTIFICATE RATE, and
if any Class B certificates have been sold by PRC, the purchase price of the
Class B certificates will equal the sum of:
- THE CLASS B INVESTED AMOUNT, plus
- accrued and unpaid interest on the unpaid principal amount of the Class B
certificates through the day preceding that DISTRIBUTION DATE at the
CLASS B CERTIFICATE RATE, and
if any Class C certificates have been sold by PRC, the purchase price of the
Class C certificates will equal the CLASS C INVESTED AMOUNT.
SERIES TERMINATION
The trustee will solicit bids for the sale of some of the PRINCIPAL
RECEIVABLES together with the related FINANCE CHARGE RECEIVABLES if the INVESTED
AMOUNT is greater than zero on the SERIES 2000-1 TERMINATION DATE. The amount of
receivables to be sold will not be more than 110% of the INVESTED AMOUNT on the
SERIES 2000-1 TERMINATION DATE.
The proceeds of the sale will be applied first to the Class A certificates
until paid in full, then to the Class B certificates until paid in full and then
to the Class C certificates.
You will incur a loss if the proceeds of the sale, together with the amount
of collections available in the COLLECTION ACCOUNT, are less than the CLASS A
ADJUSTED INVESTED AMOUNT plus accrued and unpaid interest on the Class A
certificates if you own Class A certificates.
GENERAL INFORMATION
Copies of the POOLING AND SERVICING AGREEMENT, the SERIES 2000-1
SUPPLEMENT, the annual report of independent certified public accountants
described in "The Pooling and Servicing Agreement -- Evidence as to Compliance"
in the attached prospectus, the documents listed under "Where You Can Find More
Information" and the reports to certificateholders referred to under "Reports to
Certificateholders" and "Description of the Certificates -- Reports to
Certificateholders" in the attached prospectus may be obtained from the
servicer. Financial information reflecting PRC is assimilated in the
consolidated financial statements of Federated in its Annual Report on Form 10-K
for the fiscal year ended January 29, 2000.
The certificates, the POOLING AND SERVICING AGREEMENT and the SERIES 2000-1
SUPPLEMENT are governed by the laws of the State of New York.
S-38
<PAGE> 39
UNDERWRITING
PRC has agreed to sell to the underwriters listed below the amount of Class
A certificates indicated next to each underwriter's name. Each underwriter has
agreed to purchase that amount of Class A certificates.
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT OF
CLASS A CLASS A
UNDERWRITERS CERTIFICATES
------------ ------------
<S> <C>
Credit Suisse First Boston Corporation...................... $133,334,000
Banc of America Securities LLC.............................. 133,333,000
Chase Securities Inc. ...................................... 133,333,000
------------
Total............................................. $400,000,000
============
</TABLE>
The purchase commitment of the underwriters may be increased or ended if
any underwriter defaults. The price to public, underwriters' discounts and
commission, the concessions that the underwriters may allow to some dealers, and
the discounts that those dealers may reallow to other dealers, each expressed as
a percentage of the principal amount of the Class A certificates, shall be as
follows:
<TABLE>
<CAPTION>
UNDERWRITING SELLING
PRICE TO DISCOUNT AND CONCESSIONS, REALLOWANCE
PUBLIC COMMISSIONS NOT TO EXCEED NOT TO EXCEED
--------- ------------ ------------- -------------
<S> <C> <C> <C> <C>
Class A certificates...................... 99.921875% 0.30% 0.20% 0.10%
</TABLE>
After the offering is completed, PRC will receive the proceeds, after
deduction of the underwriting and other expenses, listed below:
<TABLE>
<CAPTION>
PROCEEDS TO PRC
(AS % OF THE
PRINCIPAL AMOUNT UNDERWRITING
PROCEEDS TO OF THE CLASS A DISCOUNTS AND
PRC CERTIFICATES) COMMISSIONS
------------ ---------------- -------------
<S> <C> <C> <C>
Class A certificates............................. $398,487,500 99.621875% $1,200,000
</TABLE>
After the public offering, the public offering price and other selling
terms may be changed by the underwriters. Additional offering expenses are
estimated to be $425,000.
Any underwriter may engage in the following transactions, to the extent
permitted by Regulation M under the Securities Exchange Act:
- over-allotment transactions, which involve syndicate sales in excess of
the offering size creating a syndicate short position,
- stabilizing transactions, which permit bids to purchase the Class A
certificates so long as the stabilizing bids do not exceed a specified
maximum,
- syndicate covering transactions, which involve purchases of the Class A
certificates in the open market after the distribution has been completed
to cover syndicate short positions, and
- penalty bids, which permit the underwriters to reclaim a selling
concession from a syndicate member when the Class A certificates
originally sold by the syndicate member are purchased in a syndicate
covering transaction.
The use of the above transactions may cause the price of the Class A
certificates to be higher than it would otherwise be. These transactions, if or
once commenced, may be stopped without notice.
S-39
<PAGE> 40
Each underwriter has represented and agreed that:
- it has only issued or passed on and will only issue or pass on in the
United Kingdom any document received by it in connection with the issue
of the Class A certificates to a person who is of a kind described in
Article 11(3) of the Financial Services Act 1986 (Investment
Advertisements) (Exemptions) Order 1996, as amended, or who is a person
to whom the document may otherwise lawfully be issued or passed on,
- it has complied and will comply with all provisions of the Financial
Services Act 1986 and other laws and regulations for anything done by it
which apply to the Class A certificates in, from or otherwise involving
the United Kingdom, and
- if that underwriter is an authorized person under the Financial Services
Act 1986, it has only promoted and will only promote, as that term is
defined in Regulation 1.02 of the Financial Services (Promotion of
Unregulated Schemes) Regulations 1991, to any person in the United
Kingdom the scheme described in this prospectus supplement if that person
is of a kind described either in Section 76(2) of the Financial Services
Act 1986 or in Regulation 1.04 of the Financial Services (Promotion of
Unregulated Schemes) Regulations 1991.
PRC has agreed to indemnify the underwriters against liabilities which
include liabilities under the securities laws or to contribute to payments that
the underwriters may be required to make with respect to these liabilities.
The underwriters and their respective affiliates have engaged and may in
the future engage in investment banking or commercial banking transactions with
PRC and its affiliates.
S-40
<PAGE> 41
OTHER SERIES ISSUED AND OUTSTANDING
The trust has previously issued three other series that remain outstanding.
The table below discusses the principal characteristics of these series. For
more specific information relating to any series, any prospective investor
should contact the transferor at (513) 579-7580. The transferor will provide,
without charge, to any prospective purchaser of the certificates, a copy of the
disclosure documents for any previous publicly issued series.
<TABLE>
<S> <C>
SERIES 1992-3 VARIABLE FUNDING CERTIFICATES
Invested Amount as of November 30, 2000................. $452,178,061.83
Maximum Permitted Invested Amount....................... $455,000,000
Certificate Rate........................................ Variable
Commencement of Amortization Period..................... December 31, 2000 (subject to extension)
Annual Servicing Fee Percentage......................... 2.00%
Scheduled Series Termination Date....................... May 15, 2004 (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 (subject to
adjustment)........................................... $68,250,000
Accumulation Period Commencement Date................... December 2001 Monthly Period
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
</TABLE>
S-41
<PAGE> 42
<TABLE>
<S> <C>
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)........................................... $109,000,000.00
Accumulation Period Commencement Date................... March 2001 Monthly Period
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
</TABLE>
S-42
<PAGE> 43
GLOSSARY OF TERMS FOR PROSPECTUS SUPPLEMENT
"ACCUMULATION PERIOD" means for Series 2000-1, the period:
- beginning on the first day of the November 2004 Monthly Period, or a
later date as described in "Description of the Offered
Certificates -- Postponement of Accumulation Period" and
- ending on the earliest of:
-- the date a Pay Out Event occurs,
-- the end of the October 2005 Monthly Period, and
-- the Trust Termination Date; and
during which collections of Principal Receivables up to the Class A Invested
Amount are accumulated in a Principal Funding Account for payment to Class A
certificateholders on the Class A Expected Final Payment Date.
"ADJUSTED PRINCIPAL RECEIVABLES AMOUNT" means, on any date of
determination, the product of
- the aggregate amount of Principal Receivables at the end of the day
immediately prior to such date of determination and
- one minus the Foreign Receivables Excess Percentage for such date of
determination.
"ADJUSTED TRANSFEROR INTEREST" means, on any date of determination,
- the Adjusted Principal Receivables Amount 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 amount, minus
- the sum of the invested amounts of all series outstanding at the end of
that day.
"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 total 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 Monthly Period.
"AVAILABLE SERIES FINANCE CHARGE COLLECTIONS" means for any Distribution
Date, 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,
allocated and distributed to Series 2000-1 as indicated under "Description of
the Offered Certificates -- Application of Collections."
"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
2%.
S-43
<PAGE> 44
"CARRYOVER CLASS A INTEREST" means for any Distribution Date:
- any Class A Monthly Interest due but not paid on any previous
Distribution Date, plus
- any Class A Additional Interest.
"CARRYOVER CLASS B INTEREST" means for any Distribution Date:
- any Class B Monthly Interest due but not paid on any previous
Distribution Date, plus
- any Class B Additional Interest.
"CARRYOVER CLASS C INTEREST" means for any Distribution Date:
- any Class C Monthly Interest due but not paid on any previous
Distribution Date, plus
- any Class C Additional Interest.
"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
-- the Discount Amount and
the Carryover Discount Amount
for that series for the preceding business day, divided by
- the amount of Principal Collections added to Total Finance Charge
Collections for that series on that preceding business day.
"CARRYOVER INTEREST" means for any Distribution Date, the sum of Carryover
Class A Interest, Carryover Class B Interest and Carryover Class C Interest.
"CLASS A ADDITIONAL INTEREST" means for any Distribution Date, an amount
equal to one-twelfth of the product of:
- the excess, if any, of Class A Monthly Interest for the preceding
Distribution Date over the amount available to be paid to Class A
certificateholders relating to interest on that preceding Distribution
Date, and
- the sum of the Class A Certificate Rate plus 2% per annum.
"CLASS A ADJUSTED INVESTED AMOUNT" means for any business day, an amount
equal to:
- the Class A Invested Amount, minus
- the total amount on deposit in the Principal Funding Account on that day.
"CLASS A CERTIFICATE RATE" means a rate of 6.70% per annum.
"CLASS A EXPECTED FINAL PAYMENT DATE" means the December 2005 Distribution
Date.
"CLASS A FLOATING ALLOCATION PERCENTAGE" means, for 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:
- 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
- the sum of the numerators used to calculate the allocation percentage for
all classes of all series then outstanding.
"CLASS A INITIAL INVESTED AMOUNT" means $400,000,000.
S-44
<PAGE> 45
"CLASS A INVESTED AMOUNT" means for any date, an amount equal to:
- the Class A Initial Invested Amount, minus
- the total amount of principal paid to Class A certificateholders before
that date, minus
- the excess, if any, of the total amount of Class A Investor Charge-Offs
for all previous business days preceding that date over the total amount
of any reimbursements of Class A Investor Charge-Offs for all
Distribution Dates before that date.
"CLASS A INVESTOR CHARGE-OFF" means for any Monthly Period, the amount by
which the Class A Invested Amount is reduced after the Class B Invested Amount
has been reduced to zero because of Investor Charge-Offs resulting from the
allocation of the Investor Default Amount and the Series 2000-1 Allocation
Percentage of any unpaid Adjustment Payments.
"CLASS A INVESTOR DEFAULT AMOUNT" means a portion of the Investor Default
Amount that is allocated to Class A certificateholders on each Distribution Date
in an amount equal to the product of:
- the Class A Floating Allocation Percentage for the related Monthly
Period, and
- the Default Amount for that Monthly Period.
"CLASS A MONTHLY INTEREST" means for any Distribution Date, an amount equal
to one-twelfth of the product of:
- the Class A Certificate Rate, and
- the outstanding principal balance of the Class A certificates on the last
business day of the preceding Monthly Period;
except for the initial Distribution Date, Class A Monthly Interest will equal
$2,828,889.
"CLASS A MONTHLY PRINCIPAL" for any Distribution Date relating to the
Accumulation Period or the Early Amortization Period will equal the sum of:
- an amount equal to the aggregate Net Principal Collections received
during the Monthly Period immediately preceding that Distribution Date,
minus the aggregate amount of Reallocated Principal Collections for that
Monthly Period,
- any amount on deposit in the Excess Funding Account allocated to the
certificates on that Distribution Date, and
- the amount allocated to the Class A certificates with respect to that
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.
except for:
- on any Distribution Date during the Accumulation Period, Class A Monthly
Principal may not exceed the Controlled Deposit Amount for that
Distribution Date,
- on any Distribution Date, Class A Monthly Principal may not exceed the
Class A Adjusted Invested Amount, and
- on the Series 2000-1 Termination Date, Class A Monthly Principal shall be
an amount equal to the Class A Invested Amount.
"CLASS A REQUIRED AMOUNT" means the amount required to be paid for the
benefit of the Class A certificates described under "Description of the Offered
Certificates -- Reallocation of Cash Flows."
S-45
<PAGE> 46
"CLASS B ADDITIONAL INTEREST" means for any Distribution Date, an amount
equal to one-twelfth of the product of:
- the excess, if any, of Class B Monthly Interest for the preceding
Distribution Date over the amount available to be paid to Class B
certificateholders relating to interest on that preceding Distribution
Date, and
- the sum of the Class B Certificate Rate plus 2% per annum.
"CLASS B CERTIFICATE RATE" means 7.00% per annum.
"CLASS B EXPECTED FINAL PAYMENT DATE" means the December 2005 Distribution
Date.
"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:
- 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
- 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 $38,100,000.
"CLASS B INVESTED AMOUNT" means for any day, an amount equal to:
- the Class B Initial Invested Amount, minus
- the total amount of principal paid to Class B certificateholders before
that date, minus
- the total amount of Class B Investor Charge-Offs for all previous
business days, including the amount by which the Class B Invested Amount
has been reduced to fund the Investor Default Amount on all previous
business days, minus
- the total amount of Reallocated Class B Principal Collections for all
previous Distribution Dates for which the Class C Invested Amount has not
been reduced for those previous days, plus
- the total amount of Available Series Finance Charge Collections,
Transferor Finance Charge Collections and Excess Finance Charge
Collections applied on all previous business days for the purpose of
reimbursing amounts deducted under the two preceding bullet points.
"CLASS B INVESTOR CHARGE-OFF" means for any Monthly Period, the amount by
which the Class B Invested Amount is reduced because of Investor Charge-Offs
resulting from the application of Reallocated Principal Collections and the
allocation of the Investor Default Amount, and the Series 2000-1 Allocation
Percentage of any unpaid Adjustment Payments in excess of Reallocated Class B
Principal Collections.
"CLASS B INVESTOR DEFAULT AMOUNT" means a portion of the Investor Default
Amount that is allocated to Class B certificateholders on each Distribution Date
in an amount equal to the product of:
- the Class B Floating Allocation Percentage for the related Monthly
Period, and
- the Default Amount for that Monthly Period.
"CLASS B MONTHLY INTEREST" means for any Distribution Date, an amount equal
to one-twelfth of the product of:
- the Class B Certificate Rate, and
- the outstanding principal balance of the Class B certificates on the last
business day of the preceding Monthly Period;
except for the initial Distribution Date, Class B Monthly Interest will equal
$281,517.
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<PAGE> 47
"CLASS B MONTHLY PRINCIPAL" for any Distribution Date on or after the Class
B Principal Payment Commencement Date will equal the sum of:
- an amount equal to the total Net Principal Collections received during
the Monthly Period immediately preceding that Distribution Date, less any
payments to be made to Class A certificateholders to the extent of any
remaining Class A Invested Amount on that Distribution Date, minus the
aggregate amount of Reallocated Principal Collections for that Monthly
Period,
- any amount on deposit in the Excess Funding Account allocated to the
Class B certificates on that Distribution Date, and
- the amount allocated to the Class B certificates with respect to that
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;
except on the Series 2000-1 Termination Date, Class B Monthly Principal shall be
an amount equal to the Class B Invested Amount.
"CLASS B PRINCIPAL PAYMENT COMMENCEMENT DATE" means the earlier of:
- during:
-- the Accumulation Period, the Class B Expected Final Payment Date or
-- 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 that Distribution Date, the next succeeding
Distribution Date, and
- the Distribution Date following a mandatory sale or repurchase of the
receivables under the Pooling and Servicing Agreement.
"CLASS B REQUIRED AMOUNT" means the amount required to be paid for the
benefit of the Class B certificates described under "Description of the Offered
Certificates -- Reallocation of Cash Flows."
"CLASS C ADDITIONAL INTEREST" means for any Distribution Date, an amount
equal to one-twelfth of the product of:
- the excess, if any, of Class C Monthly Interest for the preceding
Distribution Date over the amount available to be paid to Class C
certificateholders relating to interest on that preceding Distribution
Date, and
- the sum of the Class C Certificate Rate plus 2% per annum.
"CLASS C CERTIFICATE RATE" means a rate of 0% per annum.
"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:
- the total amount of Principal Receivables and the amount on deposit in
the Excess Funding Account as of the end of the preceding business day
and
- the sum of the numerators used to calculate the allocation percentages
for all classes of all series then outstanding on such business day.
"CLASS C INITIAL INVESTED AMOUNT" means $38,100,000.
"CLASS C INVESTED AMOUNT" means for any date, an amount equal to:
- the Class C Initial Invested Amount, minus
- the total amount of principal paid to Class C certificateholders before
that date, minus
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<PAGE> 48
- the total amount of Class C Investor Charge-Offs for all previous
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, minus
- the total amount of Reallocated Class C Principal Collections for all
previous Distribution Dates for which the Class C Invested Amount has
been reduced for those previous dates, plus
- the total 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 under the preceding two bullet points.
"CLASS C INVESTOR CHARGE-OFF" means for any Monthly Period, the amount by
which the Class C Invested Amount is reduced because of Investor Charge-Offs
resulting from the application of Reallocated Principal Collections and the
allocation of the Investor Default Amount, and the Series 2000-1 Allocation
Percentage of any unpaid Adjustment Payments in excess of Reallocated Class C
Principal Collections.
"CLASS C INVESTOR DEFAULT AMOUNT" means a portion of the Investor Default
Amount that is allocated to Class C certificateholders on each Distribution Date
in an amount equal to the product of:
- the Class C Floating Allocation Percentage for the related Monthly
Period, and
- the Default Amount for that Monthly Period.
"CLASS C MONTHLY INTEREST" means, initially, zero. However, PRC may, after
issuing the Series 2000-1 certificates, set an interest rate for the Class C
certificates without the consent of Class A certificateholders and Class B
certificateholders.
"CLASS C MONTHLY PRINCIPAL" for any Distribution Date on or after the Class
C Principal Payment Commencement Date will equal the sum of:
- an amount equal to the aggregate Net Principal Collections received
during the Monthly Period immediately preceding that Distribution Date
(less any payments to be made to Class B certificateholders to the extent
of any remaining Class B Invested Amount on that Distribution Date),
minus the aggregate amount of Reallocated Principal Collections for that
Monthly Period,
- any amount on deposit in the Excess Funding Account allocated to the
Class C certificates on that Distribution Date, and
- the amount allocated to the Class C certificates with respect to that
Distribution Date on account of the Investor Default Amount and any
reimbursements of unreimbursed Class C Investor Charge-Offs;
except on the Series 2000-1 Termination Date, Class C Monthly Principal shall be
an amount equal to the Class C Invested Amount.
"CLASS C PRINCIPAL PAYMENT COMMENCEMENT DATE" means the earlier of:
- 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 that Distribution Date, the
next succeeding Distribution Date, and
- the Distribution Date following a mandatory sale or repurchase of the
receivables under the Pooling and Servicing Agreement.
"CONTROLLED ACCUMULATION AMOUNT" means $33,333,334; provided, however,
that:
- this amount may be modified if the Accumulation Period is shorter than 12
months, and
- the sum of the Controlled Accumulation Amounts for all Distribution Dates
relating to the modified Accumulation Period may not be less than the
Class A Invested Amount.
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<PAGE> 49
"CONTROLLED DEPOSIT AMOUNT" means for any Distribution Date during the
Accumulation Period, an amount equal to:
- the Controlled Accumulation Amount, plus
- any Deficit Controlled Accumulation Amount for the preceding Distribution
Date.
"DEFAULT AMOUNT" means, on any business day:
- the aggregate outstanding balance of receivables in Accounts that became
Defaulted Accounts on such business day that do not constitute finance
charges, late fees, or any other fee or charge minus
- the portion of the Ineligible Default Amount that does not constitute
finance charges, late fees, or any other fee or charge.
"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 that account as uncollectible.
"DEFICIT CONTROLLED ACCUMULATION AMOUNT" means initially zero and for any
later Distribution Date, means the excess of:
- the Controlled Deposit Amount for that Distribution Date over
- the Net Principal Collections received during the related Monthly Period,
together with the total amount of Shared Principal Collections received
during the related Monthly Period allocable to the Class A certificates;
each to the extent available to be distributed to Class A certificateholders on
that Distribution Date.
"DELINQUENCY PERCENTAGE" means with respect to any business day, the
percentage equivalent of an amount determined on the preceding date of
determination, or on that business day with respect to each date of
determination, equal to:
- the product of:
-- 0.5 and
-- the total Outstanding Balance of all receivables retail age 2 or
greater -- 30 or more days past due -- divided by
- the total Outstanding Balance of all receivables on that date of
determination.
"DISCOUNT ALLOCATION PERCENTAGE" means with respect to any series and any
business day, the percentage equivalent of a fraction:
- whose numerator is the Series Discount Factor for that series, and
- whose denominator is the Discount Factor on that business day.
"DISCOUNT AMOUNT" means for any business day, the Discount Factor
multiplied by the Outstanding Balance of receivables transferred to the trust on
that 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 before
that business day and having not revoked that consent.
"DISTRIBUTION DATE" means the 15th day of each month, or if the 15th day is
not a business day, the next business day.
S-49
<PAGE> 50
"EARLY AMORTIZATION PERIOD" means for Series 2000-1, the period:
- beginning on the earlier of the day a Pay Out Event occurs or the Class A
Expected Final Payment Date if the Class A Invested Amount has not been
paid in full on that date, and
- ending on the earlier of:
-- the date the Invested Amount has been paid in full,
-- the Trust Termination Date, and
-- the Series 2000-1 Termination Date; and
during which collections of Principal Receivables allocable to Series 2000-1
will be paid on each Special Payment Date to certificateholders.
"FIXED/FLOATING ALLOCATION PERCENTAGE" means with respect to Principal
Collections during the Accumulation Period or Early Amortization Period and
Finance Charge Collections after a Pay Out Event occurs, the allocation
percentage determined as described under "Description of the Offered
Certificates -- Allocation Percentages."
"FLOATING ALLOCATION PERCENTAGE" means the Class A Floating Allocation
Percentage plus the Class B Floating Allocation Percentage, plus the Class C
Floating Allocation Percentage.
"FOREIGN RECEIVABLES DETERMINATION DATE" means the Date of Determination in
each of the January, April, July and October Monthly Periods on which the Yield
Factor and the Finance Charge Receivable Factor is determined.
"FOREIGN RECEIVABLES EXCESS PERCENTAGE" means, on any date of
determination, the percentage determined on the preceding Foreign Receivables
Determination Date equal to the excess, if any, of
- the percentage equivalent of a fraction
-- the numerator of which is the aggregate amount of Principal
Receivables in accounts the obligor for which has a billing address
that is not located in the United States or its territories or
possessions, or is not a United States military address and
-- the denominator of which is the aggregate amount of Principal
Receivables in each case as determined on the last day of the
Monthly Period preceding the applicable Foreign Receivables
Determination Date over
- 1%, or such higher percentage as may be designated by the Transferor upon
receipt by the Trustee of written confirmation from each Rating Agency to
the effect that the then current rating of any series or any class of any
series will not be reduced or withdrawn as a result of the higher
percentage.
"INELIGIBLE DEFAULT AMOUNT" means, as of any business day, the total
Outstanding Balance of receivables in accounts that are:
- identified on the servicer's computer records as not being Eligible
Accounts and
- reported in the servicer's computer records on that business day as
becoming Defaulted Accounts.
"INTEREST ACCRUAL PERIOD" means in relation to any Distribution Date, the
period from the previous Distribution Date through the day before that
Distribution Date, except the first Interest Accrual Period begins on the
Closing Date and ends on the day before the first Distribution Date. Each period
is deemed to last 30 days.
"INVESTED AMOUNT" means, when used with respect to any business day, the
sum of the Class A Adjusted Invested Amount, the Class B Invested Amount and the
Class C Invested Amount.
"INVESTOR CHARGE-OFF" means for any Monthly Period for Series 2000-1 the
sum of the Class A Investor Charge-Offs, the Class B Investor Charge-Offs and
the Class C Investor Charge-Offs.
S-50
<PAGE> 51
"INVESTOR DEFAULT AMOUNT" means for any Monthly Period, an amount equal to
the product of the Default Amount and the Floating Allocation Percentage as of
the related Distribution Date.
"MINIMUM TRANSFEROR PERCENTAGE" means during each fiscal year for the
Series 2000-1 certificates:
- 10.5% for the period from and including the January Monthly Period to and
including the October Monthly Period,
- 11.5% for the November Monthly Period, and
- 13.5% for the December Monthly Period;
provided, however, that this percentage may be adjusted from time to time upon
written notice from the transferor to the trustee if:
- each rating agency initially rating the Class A certificates, the Class B
certificates, and, if applicable, the Class C certificates:
-- shall have been notified of the adjustment of this percentage, and
-- shall have provided notice to the trustee or the servicer that the
adjustment would not result in a reduction or withdrawal of its
rating of these certificates, and
- that adjustment will not, in the opinion of counsel satisfactory to the
trustee, result in specified adverse tax consequences.
"MONTHLY INTEREST" means the Class A Monthly Interest, the Class B Monthly
Interest and the Class C Monthly Interest.
"MONTHLY SERVICING FEE" means for any Distribution Date, the amount
determined as described under "Description of the Offered
Certificates -- Servicing Fees and Expenses."
"NEGATIVE CARRY AMOUNT" means an amount equal to the excess of:
- the product of:
-- the Base Rate, and
-- the product of (1) the total amounts on deposit in the Excess
Funding Account and the Principal Funding Account and (2) the
number of days elapsed since the previous business day divided by
the actual number of days in that year, divided by
- the total 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.
"NET FINANCE CHARGE PORTFOLIO YIELD" means, with respect to any Monthly
Period, the annualized percentage equivalent of a fraction:
- whose numerator is the amount of Finance Charge Collections for that
Monthly Period, calculated on a cash basis after subtracting the Investor
Default Amount for that Monthly Period, and
- whose denominator is the average daily Invested Amount during the
preceding Monthly Period.
"NET PRINCIPAL COLLECTIONS" means for any series on any business day:
- the product, during the Revolving Period, of the Floating Allocation
Percentage for that series and, during the Accumulation Period or the
Early Amortization Period, the Fixed/Floating Allocation Percentage for
that series and the amount of Principal Collections on that business day
minus
- on or after the occurrence and during the continuance of a Discount
Trigger Event, the lesser of:
-- the sum of (1) the product of the Discount Allocation Percentage
and the Discount Amount for that business day and (2) the Carryover
Discount Amount for that business day, and
S-51
<PAGE> 52
-- the amount determined under the first bullet point.
"OUTSTANDING BALANCE" means, with respect to a receivable on any day, the
total amount owed by the Obligor under that receivable on that day.
"PAY OUT EVENT" means any of the events described under "Description of the
Offered Certificates -- Pay Out Events."
"PORTFOLIO YIELD" means, with respect to any Monthly Period, the annualized
percentage equivalent of a fraction:
- whose numerator is the amount equal to the sum of:
-- the Total Finance Charge Collections for that Monthly Period,
calculated on a cash basis plus:
- the interest and other investment income earned from amounts on
deposit in the Principal Funding Account which shall be available
on the related Distribution Date and
- Transferor Finance Charge Collections allocated to
certificateholders with respect to each business day in that
Monthly Period minus the total Investor Default Amount for that
Monthly Period, and
- whose denominator is the sum of:
-- the average daily Invested Amount during that Monthly Period, and
-- the average daily amount on deposit the Principal Funding Account
during that Monthly Period.
"PRINCIPAL ACCOUNT" means a segregated trust account held for the benefit
of certificateholders:
- in which Principal Collections are deposited, and
- from which those collections are withdrawn and distributed as described
under "Description of the Offered Certificates -- Application of
Collections."
"PRINCIPAL FUNDING ACCOUNT" means a segregated trust account held for the
benefit of the Class A certificateholders in which collections of Principal
Receivables allocated to the Class A certificateholders are accumulated during
the Accumulation Period as described under "Description of the Offered
Certificates -- Principal Funding Account."
"REALLOCATED CLASS B PRINCIPAL COLLECTIONS" means for each Monthly Period,
collections of Principal Receivables allocable to the Class B certificates for
that Monthly Period in an amount not to exceed the greater of:
- the Class B Invested Amount, and
- the amount applied to fund the Class A Required Amount, if any.
"REALLOCATED CLASS C PRINCIPAL COLLECTIONS" means for each Monthly Period,
collections of Principal Receivables allocable to the Class C certificates for
that Monthly Period in an amount not to exceed the greater of:
- the Class C Invested Amount, and
- the amount applied to fund the Class A Required Amount and the Class B
Required Amount, if any.
"REALLOCATED PRINCIPAL COLLECTIONS" equals the sum of Reallocated Class B
Principal Collections and Reallocated Class C Principal Collections.
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<PAGE> 53
"RECORD DATE" means the last business day of the Monthly Period preceding a
Distribution Date which is the day a certificateholder must be the registered
holder of a certificate to receive a payment on that Distribution Date.
"REQUIRED AMOUNT" means for any Monthly Period, the amount by which:
- the sum of:
-- Monthly Interest and Carryover Interest,
-- Monthly Servicing Fee,
-- the Investor Default Amount, and
-- unreimbursed Investor Charge-Offs and unreimbursed Reallocated
Principal Collections, exceeds
- the Available Series Finance Charge Collections.
"SERIES 2000-1 SUPPLEMENT" means the supplement to the Pooling and
Servicing Agreement relating to the Series 2000-1 certificates.
"SERIES 2000-1 TERMINATION DATE" means the October 2009 Distribution Date.
"SERIES DISCOUNT FACTOR" means for any series and any business day, the
amount for that series, if any, calculated as of the second preceding Monthly
Period, by which either:
- the product of:
-- the Base Rate plus one-half of one percent minus the Net Finance
Charge Portfolio Yield divided by the Annual Portfolio Turnover Rate
and the Floating Allocation Percentage exceeds zero, or,
- solely at the option of the transferor, the amount by which:
-- the product of (1) the Base Rate plus one percent minus the Net
Finance Charge Portfolio Yield divided by the Annual Portfolio
Turnover Rate and (2) the Floating Allocation Percentage exceeds
zero;
provided, however, that the Series Discount Factor will never exceed 4%.
"SPECIAL PAYMENT DATE" means each Distribution Date following:
- the Monthly Period in which a Pay Out Event occurs, and
- the Class A Expected Final Payment Date.
"TOTAL FINANCE CHARGE COLLECTIONS" means, with respect to a series and any
business day, the sum of:
- on any day before a Pay Out Event occurs, the product of the Floating
Allocation Percentage for that series and the amount of Finance Charge
Collections deposited in the Collection Account for that business day or
- on and after a Pay Out Event occurs, the product of the Fixed/Floating
Allocation Percentage for that series and the amount of Finance Charge
Collections for that business day, plus,
- on and after the occurrence of and during the continuance of a Discount
Trigger Event:
-- the lesser of:
- the sum of (1) the product of the Discount Allocation Percentage
for that series and the Discount Amount for that business day and
(2) the Carryover Discount Amount for that series for that
business day, and
S-53
<PAGE> 54
- the product of, during the Revolving Period, the Floating
Allocation Percentage for that series and, during the
Accumulation Period or Early Amortization Period, the Fixed/
Floating Allocation Percentage for that series and the amount of
Principal Collections deposited in the Collection Account for
that business day plus
- for the Closing Date, the $1,000,000 initial deposit to the Interest
Funding Account.
"TRANSFEROR FINANCE CHARGE COLLECTIONS" means with respect to Series
2000-1, the amount of Finance Charge Collections otherwise allocable to the
Exchangeable Transferor Certificate equal to the least of:
- the Required Amount,
- the product of the Transferor Percentage, the Finance Charge Collections,
and the Series 2000-1 Allocation Percentage, and
- the Negative Carry Amount.
S-54
<PAGE> 55
PROSPECTUS
PRIME CREDIT CARD MASTER TRUST
Issuer
PRIME RECEIVABLES CORPORATION
Transferor
FDS BANK
Servicer
ASSET BACKED SECURITIES
----------------------------
A security is not a
deposit and neither
the securities nor the
underlying accounts or
receivables are
insured or guaranteed
by the FDIC or any
other governmental
agency.
The securities will
represent an interest
in the trusts only and
do not represent
interests in or
recourse obligations
of Federated
Department Stores,
Inc., FDS Bank, Prime
Receivables
Corporation or any of
their affiliates.
This prospectus may be
used to offer and sell
any series of
securities only if
accompanied by the
prospectus supplement
for that series.
----------------------------
THE TRUST --
- may periodically issue asset backed certificates in
one or more series with one or more classes, and
- will own --
- receivables in a portfolio of consumer open end
credit card accounts,
- payments due on those receivables, and
- other property described in this prospectus and in
the prospectus supplement.
THE SECURITIES --
- will represent interests in the trust and will be
paid only from the assets of the trust,
- offered by this prospectus will be rated in one of
the four highest rating categories by at least one
nationally recognized statistical rating
organization,
- may have one or more forms of enhancement, and
- will be issued as part of a series which may include
one or more classes of securities and enhancement.
THE SECURITYHOLDERS --
- will receive interest and principal payments from a
varying percentage of credit card account
collections.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED ON THE
ADEQUACY OR ACCURACY OF THE DISCLOSURES IN THIS PROSPECTUS AND THE ATTACHED
PROSPECTUS SUPPLEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is November 22, 2000
<PAGE> 56
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
OVERVIEW OF THE INFORMATION IN THIS
PROSPECTUS AND THE PROSPECTUS
SUPPLEMENT.......................... 3
THE PRIME CREDIT CARD MASTER TRUST.... 4
FEDERATED DEPARTMENT STORES, INC. .... 4
FDS BANK.............................. 4
PRIME RECEIVABLES CORPORATION......... 5
FEDERATED'S CREDIT CARD BUSINESS...... 5
Credit Card Business................ 5
FDS' Underwriting Processes and
Account Origination.............. 5
Servicing of Accounts............... 7
Delinquency and Collections
Procedures for FDS Credit
Cards............................ 8
THE RECEIVABLES....................... 8
Addition of Accounts................ 8
Removal of Accounts................. 9
Additional Information in the
Prospectus Supplement............ 9
MATURITY CONSIDERATIONS............... 9
DESCRIPTION OF THE CERTIFICATES....... 10
Form of Your Certificates........... 11
DTC................................. 12
Clearstream......................... 12
Euroclear........................... 13
Book-Entry Registration............. 14
Definitive Certificates............. 16
Initial Settlement.................. 17
Secondary Market Trading............ 17
Investor Percentage................. 19
Interest............................ 20
Principal........................... 21
The Exchangeable Transferor
Certificate...................... 21
New Issuances....................... 21
Trust Accounts...................... 22
Deposits in Collection Account...... 23
Sharing of Excess Finance Charge
Collections...................... 24
Shared Principal Collections........ 24
Excess Funding Account.............. 25
Paired Series....................... 25
Funding Period...................... 26
Defaulted Receivables............... 26
Dilution............................ 26
Pay Out Events...................... 27
Reports to Certificateholders....... 27
List of Certificateholders.......... 28
ENHANCEMENT........................... 28
Specific Forms of Enhancement....... 29
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE POOLING AND SERVICING AGREEMENT... 31
Conveyance of Receivables........... 31
Addition of Trust Assets............ 32
Removal of Accounts................. 33
Representations and Warranties...... 33
Certain Covenants................... 36
Eligible Accounts; Eligible
Receivables...................... 36
Collection and Other Servicing
Procedures....................... 37
Servicing Compensation and Payment
of Expenses...................... 38
Certain Matters Regarding the
Servicer......................... 39
Servicer Default.................... 39
Evidence as to Compliance........... 40
Amendments.......................... 41
Trustee............................. 41
Termination of the Trust............ 42
THE RECEIVABLES PURCHASE AGREEMENT.... 42
Representations and Warranties...... 42
Covenants........................... 44
Termination......................... 45
SECURITY RATINGS...................... 45
LEGAL ASPECTS OF THE RECEIVABLES...... 46
Transfer of Receivables............. 46
Matters Relating to Bankruptcy or
Receivership..................... 47
Consumer Protection Laws............ 49
Claims and Defenses of Cardholders
Against the Trust................ 50
TAX MATTERS........................... 51
Tax Characterization of the Trust... 51
Tax Considerations Relating to
Certificateholders............... 52
Non-U.S. Certificate Owners......... 55
Information Reporting and Backup
Withholding...................... 57
State and Local Taxation............ 57
EMPLOYEE BENEFIT PLAN
CONSIDERATIONS...................... 58
Regulation Under ERISA and the Tax
Code............................. 58
Final Regulation Issued by the
DOL.............................. 58
Exemptions to Prohibited
Transactions..................... 59
Special Considerations for Insurance
Companies........................ 59
General Investment Considerations... 60
PLAN OF DISTRIBUTION FOR THE OFFERED
CERTIFICATES........................ 60
LEGAL MATTERS......................... 61
REPORTS TO CERTIFICATEHOLDERS......... 61
WHERE YOU CAN FIND MORE INFORMATION... 62
GLOSSARY OF TERMS FOR PROSPECTUS...... 63
</TABLE>
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<PAGE> 57
OVERVIEW OF THE INFORMATION IN THIS PROSPECTUS
AND THE PROSPECTUS SUPPLEMENT
We provide information to you about the securities in two separate
documents that progressively provide more detail: (1) this prospectus, which
provides general information, some of which may not apply to a particular series
of securities, including your series, and (2) the prospectus supplement, which
will describe the specific terms of your series of securities, including:
- the timing and amount of interest and principal payments;
- information about the receivables;
- information about enhancement for each offered class;
- credit ratings; and
- the method for selling the securities.
You should rely only on the information provided in this prospectus and the
prospectus supplement, including the information incorporated by reference. We
have not authorized anyone to provide you with different information.
We include cross-references in this prospectus and in the prospectus
supplement to captions in these materials where you can find further related
discussions. The preceding table of contents and the table of contents included
in the prospectus supplement provide the pages on which captions are located.
You can find a glossary of the defined terms that appear in this document
in boldface type under the caption "Glossary of Terms for Prospectus" beginning
on page 63 in this prospectus.
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THE PRIME CREDIT CARD MASTER TRUST
The Prime Credit Card Master Trust was formed under a POOLING AND SERVICING
AGREEMENT among PRC, as the transferor of the receivables, FDS, as the servicer
and originator of the receivables, and The Chase Manhattan Bank, as trustee. The
POOLING AND SERVICING AGREEMENT is governed by the laws of the State of New
York. The trust was formed to issue certificates representing interests in a
pool of credit card receivables held by the trust. Certificates issued by the
trust will be issued in amounts, at prices and on terms to be determined at the
time of sale as described in the attached prospectus supplement.
The trust will only engage in the following business activities:
- acquiring and holding receivables,
- issuing series of certificates and an EXCHANGEABLE TRANSFEROR
CERTIFICATE,
- making payments on these certificates,
- obtaining any credit enhancement or entering into any enhancement
contract necessary to issue certificates, and
- engaging in related activities.
Because of the restricted nature of its activities, we do not expect that
the claims against the trust will ever exceed the value of its assets.
FEDERATED DEPARTMENT STORES, INC.
Federated Department Stores, Inc. or FEDERATED is one of the leading
operators of full-line department stores in the United States. In general, each
of FEDERATED'S retail operating divisions is a separate subsidiary of FEDERATED.
However, the Macy's West 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, Bloomingdale's By Mail, Fingerhut, Macy's By Mail, macys.com
and bloomingdales.com are operated may be changed from time to time.
FEDERATED has advised PRC 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 acquisitions are consummated, subject to compliance with the
applicable provisions of the POOLING AND SERVICING AGREEMENT, PRC may, but will
not be obligated to, designate those accounts as AUTOMATIC ADDITIONAL ACCOUNTS
and cause the receivables in those Accounts to be transferred to the trust.
FDS BANK
FDS Bank or FDS received its charter on September 8, 1993. As of July 3,
2000, FDS was converted to a federally chartered savings bank and is subject to
regulation and supervision by the Office of Thrift Supervision. FDS is an
indirect wholly owned subsidiary of FEDERATED. Under an assumption agreement
dated September 15, 1993, FDS replaced FEDERATED as servicer under the POOLING
AND SERVICING AGREEMENT. Following its formation in September 1993, FDS was
added as a party to the PURCHASE AGREEMENT and FEDERATED caused substantially
all its then existing accounts to be transferred to FDS. Currently, 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 in those
ACCOUNTS to PRC for transfer to the trust under 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.
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PRIME RECEIVABLES CORPORATION
Prime Receivables Corporation or PRC was incorporated in Delaware on
September 23, 1992, and is a wholly owned subsidiary of FEDERATED. PRC 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 Prime Credit Card Master Trust, and
transferring the receivables to those trusts, causing those trusts to issue
securities from time to time. The principal executive offices of PRC are located
at 7 West Seventh Street, Cincinnati, Ohio 45202. Its telephone number is (513)
579-7580.
FEDERATED'S CREDIT CARD BUSINESS
CREDIT CARD BUSINESS
Pursuant to the PURCHASE AGREEMENT, the ORIGINATORS sell receivables
arising in the Accounts to PRC; those receivables are automatically transferred
by PRC to the trust under the POOLING AND SERVICING AGREEMENT. The ACCOUNTS are
created by the respective ORIGINATORS and enable the holders of the credit cards
issued by the ORIGINATORS under department store tradenames to purchase 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, one of FEDERATED'S nationwide catalog businesses and
bloomingdales.com, one of FEDERATED'S retail websites. Cards bearing the
Goldsmith's or Rich's tradename may be used to purchase merchandise at both
Goldsmith's and Rich's stores. FEDERATED has partnered with the
WeddingChannel.com through an equity position. Customers can make merchandise
purchases on WeddingChannel.com from the FEDERATED STORES. All other FEDERATED
CARDS may be used only to make purchases at stores bearing the same nameplate as
the tradename on the card.
FACS Group, a subsidiary of FEDERATED located in Mason, Ohio, Tampa,
Florida, and Tempe, Arizona, provides credit services for FDS under 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 Group may from time to time
subcontract with other parties for the performance of those functions by those
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 other businesses under the names
of Macy's By Mail and macys.com. Cards bearing the Macy's tradename may be used
to purchase merchandise from Macy's By Mail and macys.com. Under 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 a majority of the revolving credit card accounts of customers of
those other stores. 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 currently, and, absent modifications to that
program, will not be, purchased by the transferor or transferred to the trust.
FDS' UNDERWRITING PROCESSES AND ACCOUNT ORIGINATION
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,
Bloomingdale's By Mail, Macy's By Mail, bloomingdales.com and macys.com and
other services such as credit life insurance and travel services. Maintenance of
account balances in the trust consistent with historical levels will depend on
the continued ability of the FEDERATED STORES, Bloomingdale's By Mail, Macy's By
Mail, bloomingdales.com and macys.com to generate credit sales. In addition,
because the FEDERATED STORES, Bloomingdale's By Mail,
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<PAGE> 60
Macy's By Mail, bloomingdales.com and macys.com accept, in addition to the
FEDERATED CARDS, other cards, including American Express charge cards and
MasterCard, Visa and JCB 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, maintenance of account balance levels in the trust also
will depend upon decisions of customers purchasing merchandise and services to
use the FEDERATED CARDS rather than other cards or cash.
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
$100.00 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 2.50% 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
<TABLE>
<CAPTION>
HIGHEST NEW BALANCE MINIMUM PAYMENT
------------------- ---------------
<S> <C>
$0.01 - 4.99 New Balance
$5.00 - 200.00 $5.00
$200.01 and over 2.50%
</TABLE>
Minimum payment is subject to increase for new purchases but not subject to
decrease.
FDS periodically 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.
New accounts are generated:
- 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
those stores formerly operated under other nameplates, "Macy's",
- by account applications made over the telephone to Bloomingdale's By Mail
and Macy's By Mail or on the internet at macys.com and bloomingdales.com,
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.
Currently, 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 those 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
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<PAGE> 61
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 that cardholder's account. Under each 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.
SERVICING OF ACCOUNTS
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 that 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, scheduled due date 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. For a description of the servicing procedures, see "The Pooling and
Servicing Agreement -- 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. For discussions of the factors possibly affecting finance charges, fees
and other charges and, accordingly, the amount of collections on receivables and
payments on your certificates, see "Risk Factors" and "Trust Credit Card
Portfolio -- Characteristics of the Trust Portfolio" in the prospectus
supplement and "Legal Aspects of the Receivables -- Consumer Protection Laws,"
"The Receivables," "Maturity Considerations" and "The Pooling and Servicing
Agreement -- Addition of Trust Assets" in this prospectus.
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<PAGE> 62
DELINQUENCY AND COLLECTIONS PROCEDURES FOR FDS CREDIT CARDS
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 received by 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 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 RECEIVABLES
The receivables in the trust include PRINCIPAL RECEIVABLES and FINANCE
CHARGE RECEIVABLES. These receivables are generated from eligible accounts
selected by FDS from the FEDERATED portfolio to be conveyed to the trust.
ADDITION OF ACCOUNTS
FDS has sold to PRC and PRC has transferred to the trust, all receivables
existing in each initial account on the INITIAL CUT-OFF DATE. Each company has
also agreed to sell or transfer receivables existing in any AUTOMATIC ADDITIONAL
ACCOUNT on the date of its creation and receivables generated in the initial
accounts and the AUTOMATIC ADDITIONAL ACCOUNTS after these dates.
PRC also has the right, and in some cases the obligation, to assign
additional accounts to the trust. All receivables in these SUPPLEMENTAL ACCOUNTS
are then conveyed to the trust, whether these receivables already exist or are
later created.
Under the PURCHASE AGREEMENT, FDS has the obligation to sell receivables to
PRC to allow PRC to satisfy its obligations and to exercise its options under
the POOLING AND SERVICING AGREEMENT. The accounts must meet eligibility
requirements, as specified in the POOLING AND SERVICING AGREEMENT, as of the
date PRC designates that receivables in those accounts will be included in the
trust. According to the eligibility requirements, FDS will represent and warrant
to PRC and PRC will represent and warrant to the trust that:
- the account has not been, and does not have:
-- any receivables that have been sold, pledged or assigned to any
person except according to the POOLING AND SERVICING AGREEMENT,
-- any receivables that are charged off receivables, and
-- any receivables identified as having been incurred through fraudulent
use of any related credit cards, and
- for any receivable existing under these accounts, the receivable:
-- has arisen under an eligible account,
-- arises under a CHARGE ACCOUNT AGREEMENT and constitutes a legal,
valid, binding and enforceable obligation of the cardholder and
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<PAGE> 63
-- at the time of transfer to the trust will be transferred free and
clear of any liens and security interests arising through the
transferor, except PERMITTED LIENS.
There can be no assurance that all the accounts will continue to meet the
applicable eligibility requirements throughout the life of the trust. See "The
Pooling and Servicing Agreement -- Representations and Warranties" for a
detailed discussion.
It is possible that ADDITIONAL ACCOUNTS will not be accounts of the same
type previously included in the trust. There can be no assurance that ADDITIONAL
ACCOUNTS will be of the same credit quality as the initial accounts. ADDITIONAL
ACCOUNTS may contain receivables which consist of fees, charges and amounts that
are different from the fees, charges and amounts described in this prospectus.
ADDITIONAL ACCOUNTS may also have different credit limits, balances and ages. As
a result, there can be no assurance that the accounts will continue to have the
characteristics described in this prospectus as ADDITIONAL ACCOUNTS are added.
In addition, the inclusion in the trust of ADDITIONAL ACCOUNTS with lower
periodic finance charges or fees may have the effect of reducing the PORTFOLIO
YIELD. See "The Pooling and Servicing Agreement -- Addition of Trust Assets" and
"-- Removal of Accounts" for a description of the conditions to addition and
removal of accounts.
REMOVAL OF ACCOUNTS
PRC may also designate accounts as REMOVED ACCOUNTS. The receivables in the
REMOVED ACCOUNTS will be removed from the trust and reassigned to PRC.
Throughout the term of the trust, the trust portfolio will consist of the
initial ACCOUNTS plus any ADDITIONAL ACCOUNTS minus any REMOVED ACCOUNTS. See
"The Pooling and Servicing Agreement -- Removal of Accounts" for a description
of the conditions to any removal of accounts.
ADDITIONAL INFORMATION IN THE PROSPECTUS SUPPLEMENT
The prospectus supplement for each series of certificates will provide
information about the trust portfolio. This information will include:
- the composition of the ACCOUNTS by account balance,
- the composition of the ACCOUNT by credit guidelines,
- the composition of the ACCOUNTS by payment status,
- the composition of the ACCOUNTS by age,
- the composition of the ACCOUNTS by geographic distribution, and
- the delinquency and loss statistics relating to the accounts.
MATURITY CONSIDERATIONS
Following the REVOLVING PERIOD, each series of certificates is expected to
begin to accumulate principal or begin to distribute principal to
certificateholders. The attached prospectus supplement describes the conditions
under which the ACCUMULATION PERIOD or AMORTIZATION PERIOD will begin for your
class of certificates.
Principal will accumulate in a funding account if your series features a
CONTROLLED ACCUMULATION PERIOD or RAPID ACCUMULATION PERIOD and one of these
principal ACCUMULATION PERIODS begins. As described in the attached prospectus
supplement, during a CONTROLLED ACCUMULATION PERIOD on each business day an
amount of principal, up to the amount specified, will be set aside in the
funding account. If a PAY OUT EVENT or a similar event described in the related
prospectus supplement occurs and your series features a RAPID ACCUMULATION
PERIOD, the full amount of principal available to your series will be deposited
in a funding account, up to the amount specified in the related prospectus
supplement. This accumulated principal will be paid to you on the EXPECTED FINAL
PAYMENT DATE for your class of
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<PAGE> 64
certificates, or earlier if an AMORTIZATION PERIOD begins before your first
EXPECTED FINAL PAYMENT DATE. Note that, although your series may feature an
ACCUMULATION PERIOD, your class of certificates may not make use of it.
Principal will be paid to you in increments, up to the amount specified in
the attached prospectus supplement, if your class of certificates features a
CONTROLLED AMORTIZATION PERIOD and this period begins. Your class of
certificates might also begin to pay principal to you if the attached prospectus
supplement specifies that your class will begin early amortization. Early
amortization will begin, for all classes of your series, when a PAY OUT EVENT
occurs. Principal will be paid to you only on a DISTRIBUTION DATE during any
AMORTIZATION PERIOD.
The prospectus supplement provides the following information about
maturity:
- the date any ACCUMULATION PERIOD or AMORTIZATION PERIOD is scheduled to
begin,
- the principal amount of the payments expected or available for each
period,
- the priority of accumulations and payments among the classes of each
series,
- any PAY OUT EVENTS that may cause a RAPID ACCUMULATION PERIOD or an EARLY
AMORTIZATION PERIOD,
- historical data showing payments by cardholders and total charge-offs,
and
- other information about the FEDERATED portfolio.
We can give you no assurance that principal will be available when
expected, either to accumulate or to pay you. Collection of principal may or may
not be constant from month to month or be similar to any historical experience.
Collections may be affected by seasonality, by changes in payment habits of
cardholders or by general economic conditions. A slowdown in the payment rate
may extend the expected life of your certificates if principal is collected more
slowly. This may affect your anticipated yield to maturity. Also, the occurrence
of any PAY OUT EVENT may substantially shorten the average life of your
certificates. You may find it difficult to reinvest funds in an instrument with
a comparable interest rate and comparable risk characteristics if the
certificates are paid sooner than anticipated.
DESCRIPTION OF THE CERTIFICATES
Following is a summary describing the material provisions common to each
series of certificates. If you are purchasing certificates, the attached
prospectus supplement describes any series-specific provisions supplementing the
information in this prospectus. Each series of certificates will be issued
through the POOLING AND SERVICING AGREEMENT and a supplement to that agreement.
This prospectus and the attached prospectus supplement do not contain all
information about your certificates. For a detailed description of the
certificates, also read the POOLING AND SERVICING AGREEMENT and the SUPPLEMENT.
The certificates offered through this prospectus and the attached
prospectus supplement will be issued in "series" consisting of one or more
"classes," which may be senior to other classes. Each series of certificates
will represent an interest in the trust distinct from the EXCHANGEABLE
TRANSFEROR CERTIFICATE and any other series of certificates issued by the trust.
Each class of a series will evidence the right to receive a specified portion of
principal and finance charge collections on receivables in the trust portfolio.
Each class of a series may differ from other classes in some aspects, including:
- maturity date,
- interest rate, and
- availability and amount of enhancement.
Payments will be made to certificateholders in whose names the certificates were
registered on the RECORD DATES specified in the attached prospectus supplement.
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For each series of certificates, the INVESTED AMOUNT on any date generally
will be equal to the initial INVESTED AMOUNT for that series reduced by:
- the amount of principal paid to the related certificateholders, and
- the amount of unreimbursed INVESTOR CHARGE-OFFS and reallocated principal
collections for that series.
The INVESTED AMOUNT may further be adjusted by:
- the amount of principal on deposit in any specified account, and
- any other amount stated in the related prospectus supplement.
Each series of certificates may consist of one or more classes, one or more
of which may be senior certificates and one or more of which may be subordinated
certificates. Each class of a series will have the right to receive a specified
portion of each distribution of principal or interest or both. PRC currently
owns the EXCHANGEABLE TRANSFEROR CERTIFICATE. The EXCHANGEABLE TRANSFEROR
CERTIFICATE represents the undivided interest in the trust not represented by
the certificates or the rights of any enhancement providers to receive payments
from the trust. The holder of the EXCHANGEABLE TRANSFEROR CERTIFICATE will have
the right to a percentage of all collections on the receivables in the trust.
Certificates offered through this prospectus and the attached prospectus
supplement will be:
- represented by certificates registered in the name of a DTC nominee,
- available for purchase in minimum denominations and integral multiples of
$1,000, and
- available for purchase in book-entry form only.
The certificates in book-entry form, in which you will hold a beneficial
interest as described under "-- Book-Entry Registration," are "global
securities." The attached prospectus supplement will specify if:
- your series of certificates, or one or more classes of your series, may
be issued in a different form, and
- your certificates have any other characteristics different from those
listed above.
The attached prospectus supplement may state that application will be made
to list your series or class of certificates on the Luxembourg Stock Exchange or
another exchange.
FORM OF YOUR CERTIFICATES
The following description of the form of your certificates includes how
they are transferred and how the trust makes payments to you. One or more of the
following clearing systems performs transactions in your certificates:
- The Depository Trust Company or "DTC,"
- Clearstream Banking, societe anonyme or "CLEARSTREAM," and
- the system operated by Morgan Guaranty Trust Company of New York's
Brussels, Belgium office referred to as "EUROCLEAR."
DTC provided the information in this section concerning DTC and its
book-entry system. PRC has not independently verified the accuracy of this
information.
DTC has informed PRC that its nominee is Cede & Co. or "Cede." Cede is
expected to be the holder of record of each class of certificates offered under
this prospectus. This means that you, as an owner of certificates, will only be
entitled to a DEFINITIVE CERTIFICATE representing your interest in the issued
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certificates under specified circumstances. Instead, you will own certificates
through a book-entry record maintained by DTC. All references in this document
to:
- distributions, reports, notices and statements will be made to DTC or
Cede, as the registered holder of the certificates, for distribution to
you following DTC procedures, and
- actions by certificateholders refer to actions taken by DTC upon
instructions from DTC PARTICIPANTS.
You may hold your certificates through DTC in the U.S., CLEARSTREAM or
EUROCLEAR in Europe or in any other manner described in the attached prospectus
supplement. You may hold your certificates directly with one of these systems if
you are a participant in the system, or indirectly through organizations which
are participants. Descriptions of the clearing systems follow.
DTC
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 Uniform
Commercial Code, and
- a "clearing agency" registered under the Securities Exchange Act of 1934,
as amended.
DTC performs various services for its participating organizations, referred to
as DTC PARTICIPANTS. These services include:
- holding securities that DTC PARTICIPANTS deposit with it, and
- providing a system where DTC PARTICIPANTS may clear and settle securities
transactions, including transfers and pledges, in deposited securities
through electronic book-entry changes in their accounts, so there is no
physical movement of securities certificates.
DTC PARTICIPANTS:
- include securities brokers and dealers, banks, trust companies, and
clearing corporations, and
- may include other organizations, including the underwriters of any series
of certificates issued through this document.
A number of DTC PARTICIPANTS, the New York Stock Exchange, Inc., the American
Stock Exchange, Inc. and the National Association of Securities Dealers, Inc.
own DTC. Securities brokers and dealers, banks, trust companies and other
financial organizations that clear through or maintain a custodial relationship
with a DTC PARTICIPANT, either directly or indirectly, have indirect access to
the DTC system. The rules applicable to DTC and its DTC PARTICIPANTS are on file
with the SEC.
CLEARSTREAM
CLEARSTREAM is incorporated under the laws of Luxembourg as a professional
depository and:
- holds securities for CLEARSTREAM CUSTOMERS,
- provides a system where CLEARSTREAM CUSTOMERS may clear and settle
securities transactions through electronic book-entry changes in their
accounts, so there is no physical movement of securities certificates,
- settles transactions in any of 36 currencies, including U.S. dollars,
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- provides for CLEARSTREAM CUSTOMERS, among other services, safekeeping,
administration, clearance and settlement of internationally traded
securities and securities lending and borrowing, and
- deals with domestic securities markets in over 30 countries through
established depository and custodial relationships.
CLEARSTREAM has established an electronic bridge with Morgan Guaranty's
Brussels, Belgium office, acting as EUROCLEAR operator, to facilitate settlement
of trades between CLEARSTREAM and EUROCLEAR. CLEARSTREAM currently accepts over
110,000 securities issues on its books. As a professional depository,
CLEARSTREAM is regulated by the Luxembourg Commission for the Supervision of the
Financial Sector, which supervises Luxembourg banks. CLEARSTREAM CUSTOMERS:
- are recognized financial institutions around the world, including
underwriters, securities brokers and dealers, banks, trust companies,
clearing corporations and other organizations,
- may include the underwriters of any series of certificates issued through
this document, and
- in the U.S., are limited to securities brokers, dealers and banks.
Currently, CLEARSTREAM has approximately 2,000 customers located in over 80
countries, including all major European countries, Canada and the United States.
Banks, brokers, dealers, trust companies and other organizations that clear
through or maintain a custodial relationship with a CLEARSTREAM CUSTOMER, either
directly or indirectly, have indirect access to CLEARSTREAM.
EUROCLEAR
The EUROCLEAR system was created in 1968:
- to hold securities of its participating organizations, referred to as
EUROCLEAR PARTICIPANTS, and
- to clear and settle transactions between EUROCLEAR PARTICIPANTS through
simultaneous electronic book-entry delivery against payment, so there is:
-- no need for physical movement of securities certificates, and
-- no risk from lack of simultaneous transfers of securities and cash.
The EUROCLEAR system's various services include:
- settlement of transactions in any of 34 currencies, including U.S.
dollars, and
- securities lending and borrowing and interfaces with domestic markets in
several countries similar to the arrangements for cross-market transfers
with DTC.
The EUROCLEAR system is operated by Morgan Guaranty's Brussels, Belgium office,
acting as EUROCLEAR operator, under contract with the Euroclear Clearance
System, S.C., a Belgian cooperative corporation, which establishes policy for
the EUROCLEAR system on behalf of EUROCLEAR PARTICIPANTS. EUROCLEAR
PARTICIPANTS:
- include central banks and other banks, securities brokers and dealers and
other professional financial intermediaries, and
- may include the underwriters of any series of certificates offered
through this document.
Other firms that clear through or maintain a custodial relationship with a
EUROCLEAR PARTICIPANT, either directly or indirectly, have indirect access to
the EUROCLEAR system.
The EUROCLEAR operator conducts all operations for EUROCLEAR, and holds all
EUROCLEAR securities clearance accounts and cash accounts. The EUROCLEAR
operator is the Belgian branch of a New York banking corporation which is a
member bank of the Federal Reserve System. 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.
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The Terms and Conditions Governing Use of EUROCLEAR and the related
Operating Procedures of the EUROCLEAR system and applicable Belgian law govern:
- securities clearance accounts and cash accounts with the EUROCLEAR
operator,
- transfers of securities and cash within the EUROCLEAR system,
- withdrawal of securities and cash from the EUROCLEAR system, and
- receipts of payments for securities in the EUROCLEAR system.
The EUROCLEAR system holds all securities (1) on a fungible basis and (2)
without knowledge of the actual owners holding through EUROCLEAR PARTICIPANTS
and to whose accounts the securities are credited. The EUROCLEAR operator acts
under these terms and conditions only on behalf of EUROCLEAR PARTICIPANTS and
has no record of or relationship with persons holding through EUROCLEAR
PARTICIPANTS.
BOOK-ENTRY REGISTRATION
Cede, as DTC's nominee, holds the global securities. CLEARSTREAM will hold
omnibus positions on behalf of CLEARSTREAM CUSTOMERS, while EUROCLEAR will do
the same on behalf of EUROCLEAR PARTICIPANTS, through customers' securities
accounts in CLEARSTREAM'S and EUROCLEAR'S names on the books of each of their
depositaries. These depositaries will, in turn, hold these positions in
customers' securities accounts in the depositaries' names on DTC's books.
Transfers between:
- DTC PARTICIPANTS occur under the DTC rules, and
- CLEARSTREAM CUSTOMERS and EUROCLEAR PARTICIPANTS occur in the ordinary
way under their applicable rules and operating procedures.
Cross-market transfers occur through DTC, under its rules, on behalf of
CLEARSTREAM or EUROCLEAR by each of their depositaries, whether between persons
holding securities directly or indirectly:
- through DTC, on the one hand, and
- through CLEARSTREAM CUSTOMERS or EUROCLEAR PARTICIPANTS, on the other
hand.
However, these cross-market transactions will require delivery of instructions
to CLEARSTREAM or EUROCLEAR by the counterparty in its system under either
clearing system's rules and procedures, and within its established European time
deadlines. CLEARSTREAM or EUROCLEAR will, if the transaction meets its
settlement requirements, deliver instructions to its depositary to take action
to accomplish final settlement on its behalf by:
- delivering or receiving securities in DTC, and
- making or receiving payment under normal procedures for same-day funds
settlement applicable to DTC.
CLEARSTREAM CUSTOMERS and EUROCLEAR PARTICIPANTS may not deliver instructions
directly to the depositaries.
Because of time-zone differences, credits of securities in CLEARSTREAM or
EUROCLEAR due to a transaction with a DTC PARTICIPANT will be made during the
subsequent securities settlement processing, dated the business day following
the DTC settlement date. These credits or any other transactions in the
securities settled during that processing will be reported to the relevant
CLEARSTREAM CUSTOMERS or
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EUROCLEAR PARTICIPANTS on that day. Cash received in CLEARSTREAM or EUROCLEAR
because of sales of securities by or through a CLEARSTREAM CUSTOMER or a
EUROCLEAR PARTICIPANT:
- will be received with value on the DTC settlement date, and
- will only be available in the relevant CLEARSTREAM or EUROCLEAR cash
account only as of the business day following settlement in DTC.
Your purchases of certificates under the DTC system must be made by or
through DTC PARTICIPANTS, which will receive a credit for the certificates on
DTC's records. Your ownership interest is, in turn, recorded on the DTC
PARTICIPANTS' and indirect participants' records. You will not receive written
confirmation from DTC of their purchase, but you can expect to receive written
confirmation providing details of the transaction, as well as periodic
statements of your holdings, from the DTC PARTICIPANT or indirect participant
through which you entered into the transaction. Transfers of ownership interests
in the certificates are accomplished by entries made on the books of DTC
PARTICIPANTS acting on behalf of you and other certificateholders. You will not
receive certificates representing your ownership interest in the certificates
offered through this document, unless use of the book-entry system for these
certificates has ended.
DTC registers all certificates deposited with it by DTC PARTICIPANTS in the
name of its nominee, Cede, to make all later transfers of certificates easier.
The deposit of certificates with DTC and their registration in the name of Cede
will not change beneficial ownership of the certificates. DTC has no knowledge
of the actual owners of the certificates; its records reflect only the identity
of the DTC PARTICIPANTS to whose accounts the certificates are credited, which
may or may not be the actual certificate owners. DTC PARTICIPANTS remain
responsible for keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by:
- DTC to DTC PARTICIPANTS,
- DTC PARTICIPANTS to indirect participants, and
- DTC PARTICIPANTS and indirect participants to certificateholders,
will be governed by arrangements among them, under any applicable statutory or
regulatory requirements.
Neither DTC nor Cede will consent or vote on these certificates. Under its
usual procedures, DTC mails an omnibus proxy to PRC as soon as possible after
the record date. In this way, DTC assigns Cede's consenting or voting rights to
those DTC PARTICIPANTS to whose accounts these certificates are credited on the
relevant record date.
For each DISTRIBUTION DATE:
- the trustee makes principal and interest payments on the certificates to
DTC, and
- DTC credits each of those payments to DTC PARTICIPANTS' accounts on that
date according to each of the participants' holdings shown on DTC's
records unless DTC has reason to believe that it will not receive payment
on that date.
Payments by any DTC PARTICIPANT to certificateholders will be:
- governed by standing instructions and customary practices, as is the case
with securities held for the accounts of customers in bearer form or
registered in "street name," and
- the responsibility of that DTC PARTICIPANT and not of DTC, the trustee or
PRC, under any applicable statutory or regulatory requirements.
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The responsibility for:
- payment of principal and interest to DTC belongs to the trustee,
- disbursement of these payments to DTC PARTICIPANTS belongs to DTC, and
- disbursement of these payments to certificateholders belongs to DTC
PARTICIPANTS and indirect participants.
DTC may stop providing its services as securities depository for these
certificates at any time by giving reasonable notice to PRC or the trustee. If
this occurs and if a successor securities depository is not obtained, DEFINITIVE
CERTIFICATES will be printed and delivered. PRC may decide to end use of the
system of book-entry transfers through DTC or a successor securities depository.
If so, DEFINITIVE CERTIFICATES will be delivered to each certificateholder. See
"-- Definitive Certificates" for a description of the circumstances under which
the trust will issue Definitive Certificates to you.
CLEARSTREAM or EUROCLEAR will credit distributions on certificates held
through it to the cash accounts of CLEARSTREAM CUSTOMERS or EUROCLEAR
PARTICIPANTS under its rules and procedures, to the extent received by its
depositary. These distributions will require tax reporting under relevant U.S.
tax laws and regulations as described under "Tax Matters." CLEARSTREAM or the
EUROCLEAR operator will take any other action permitted to be taken by a
certificateholder under the POOLING AND SERVICING AGREEMENT on behalf of a
CLEARSTREAM CUSTOMER or EUROCLEAR PARTICIPANT:
- only under its relevant rules and procedures, and
- to the extent its depositary can carry out those actions on its behalf
through DTC.
Although DTC, CLEARSTREAM and EUROCLEAR have agreed to the procedures above
to provide a system that makes transfers of certificates among their
participants or customers easier:
- they are under no obligation to perform or continue to perform these
procedures, and
- they may stop these procedures at any time.
DEFINITIVE CERTIFICATES
The certificates offered through this prospectus will be initially issued
in book-entry form. DEFINITIVE CERTIFICATES in fully registered, certificated
form will not be issued to any party except DTC or its nominee unless:
- PRC advises the trustee in writing:
-- that DTC is no longer willing or able to discharge properly its
responsibilities as depository for this series of certificates, and
the trustee or PRC is unable to locate a qualified successor,
-- that it chooses to end the book-entry system through DTC, or
- after a SERVICER DEFAULT occurs:
-- certificateholders representing (1) not less than 50% or (2) another
percentage specified in the attached prospectus supplement of the
total unpaid principal amount of the certificates advise the trustee
and DTC through DTC PARTICIPANTS in writing that the continuation of
a book-entry system through DTC or its successor is no longer in the
best interests of the certificateholders.
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If any of these events occurs, DTC must notify all DTC PARTICIPANTS of the
availability through DTC of DEFINITIVE CERTIFICATES. Once DTC gives the
definitive certificate representing these certificates and instructions for
re-registration to the trustee:
- the trustee will issue the certificates as DEFINITIVE CERTIFICATES, and
- afterwards, the trustee will recognize the holders of these DEFINITIVE
CERTIFICATES as holders under the POOLING AND SERVICING AGREEMENT.
The trustee then makes payments:
- directly to holders of DEFINITIVE CERTIFICATES under the procedures
provided in this prospectus and in the POOLING AND SERVICING AGREEMENT,
and
- on each DISTRIBUTION DATE, to holders in whose names the DEFINITIVE
CERTIFICATES were registered at the close of business on the related
RECORD DATE.
If you own DEFINITIVE CERTIFICATES, payments will be made by check and
mailed to you at an address maintained by the trustee.
The final payment will be made only when a certificate is presented and
surrendered at the office or agency specified in the notice of final
distribution to certificateholders, whether it is:
- a DEFINITIVE CERTIFICATE, or
- a certificate registered in the name of DTC or its nominee.
The trustee will provide this notice to registered certificateholders no later
than the fifth day of the month in which the final distribution will occur.
DEFINITIVE CERTIFICATES will be transferable and exchangeable at the office
of the transfer agent and registrar, which shall initially be the trustee. The
transfer agent and registrar will impose no service charge but may require
payment of a sum sufficient to cover any tax or other governmental charge
imposed in connection with the transfer or exchange. The transfer agent and
registrar shall 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 on the DEFINITIVE CERTIFICATES.
INITIAL SETTLEMENT
Each class of certificates offered under this prospectus and the attached
prospectus supplement will be held in book-entry form by DTC in the name of its
nominee, Cede. Investors' interests in the certificates will be represented
through financial institutions acting on their behalf as direct and indirect
participants in DTC. As a result, CLEARSTREAM and EUROCLEAR will hold positions
on behalf of their customers or participants through their respective
depositaries, which will hold positions in accounts as DTC PARTICIPANTS.
Custody accounts of investors who elect to hold certificates through DTC
will be credited with their holdings against payment in same-day funds on the
settlement date.
Investors who elect to hold certificates through CLEARSTREAM or EUROCLEAR
accounts will follow the settlement procedures that apply to conventional
eurobonds, except that there will be no temporary global security and no
"lock-up" or restricted period. Certificates will be credited to the securities
custody accounts on the settlement date against payment in same-day funds.
SECONDARY MARKET TRADING
Trading between DTC Participants. Secondary market trading between
investors holding certificates through DTC will be conducted according to the
rules and procedures for U.S. corporate debt obligations. Secondary market
trading between DTC PARTICIPANTS will be settled in same-day funds.
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Trading between Clearstream Customers and/or Euroclear
Participants. Secondary market trading between investors holding certificates
through CLEARSTREAM and EUROCLEAR will be conducted in the ordinary way under:
- their normal rules and operating procedures, and
- conventional eurobond practice, which means a seven calendar day
settlement.
Secondary market trading between CLEARSTREAM CUSTOMERS or EUROCLEAR PARTICIPANTS
will be settled using the procedures for conventional eurobonds in same-day
funds.
Trading between DTC seller and Clearstream or Euroclear
purchaser. Transfers of certificates from the account of a DTC PARTICIPANT to
the account of a CLEARSTREAM CUSTOMER or a EUROCLEAR PARTICIPANT usually occur
as follows:
- the purchaser sends instructions to CLEARSTREAM or EUROCLEAR through that
customer or participant at least one business day before settlement,
- CLEARSTREAM or EUROCLEAR instructs its depositary to receive the
securities against payment, which includes interest accrued on the
securities from and including the last coupon payment date to and
excluding the settlement date,
- that depositary credits payments to the DTC PARTICIPANT'S account against
delivery of the securities, and
- after settlement has been completed, the depositary credits securities to
the relevant clearing system, which, in turn, under its usual procedures,
credits those securities to that customer's or participant's account.
The securities credit will appear the next day, European time, and the cash
debit will be back-valued to, and the interest on the securities 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,
which means the trade fails, the CLEARSTREAM or EUROCLEAR cash debit will be
valued instead as of the actual settlement date.
CLEARSTREAM CUSTOMERS or EUROCLEAR PARTICIPANTS will need to make available
to each of their 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 CLEARSTREAM or EUROCLEAR. Under this
approach, they may take on credit exposure to CLEARSTREAM or EUROCLEAR until the
securities are credited to their accounts one day later.
As an alternative, if CLEARSTREAM or EUROCLEAR has extended a line of
credit to them, CLEARSTREAM CUSTOMERS or EUROCLEAR PARTICIPANTS can elect not to
pre-position funds and allow that credit line to be drawn upon to finance
settlement. Under this procedure, CLEARSTREAM CUSTOMERS or EUROCLEAR
PARTICIPANTS purchasing securities would incur overdraft charges for one day,
assuming they cleared the overdraft when the securities were credited to their
accounts. However, interest on the securities would accrue from the value date.
So, the investment income on the securities earned during that one-day period
may substantially reduce or offset the amount of the overdraft charges, although
this result will depend on each CLEARSTREAM CUSTOMER'S or EUROCLEAR
PARTICIPANT'S particular cost of funds.
Since the settlement is taking place during New York business hours, DTC
PARTICIPANTS can use their usual procedures for sending securities to their
depositaries for the benefit of CLEARSTREAM CUSTOMERS or EUROCLEAR PARTICIPANTS.
The sale proceeds will be available to the DTC seller on the settlement date. In
this way, to the DTC PARTICIPANT a cross-market transaction will settle no
differently than a trade between two DTC PARTICIPANTS.
Trading between Clearstream or Euroclear seller and DTC purchaser. Due to
time zone differences in their favor, CLEARSTREAM CUSTOMERS and EUROCLEAR
PARTICIPANTS may use their customary procedures for
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transfers of securities by a clearing system, through its depositary, to a DTC
PARTICIPANT. Trading usually occurs as follows:
- the seller sends instructions to CLEARSTREAM or EUROCLEAR through a
CLEARSTREAM CUSTOMER or EUROCLEAR PARTICIPANT at least one business day
before settlement,
- CLEARSTREAM or EUROCLEAR instructs its depositary to deliver the bonds to
the DTC PARTICIPANT'S account against payment, which includes interest
accrued on the securities from and including the last coupon payment date
to and excluding the settlement date, and
- the payment is reflected in the account of that customer or participant
the next day, and receipt of the cash proceeds in that customer's or
participant's account is back-valued to the value date -- the preceding
day when settlement occurred in New York.
Should the CLEARSTREAM CUSTOMER or EUROCLEAR PARTICIPANT have a line of credit
with its clearing system and elect to be in debit in anticipation of receipt of
the sale proceeds in its account, the back-valuation will cancel out any
overdraft charges incurred over that one-day period. If settlement is not
completed on the intended value date, which means the trade fails, receipt of
the cash proceeds in the CLEARSTREAM CUSTOMER'S or EUROCLEAR PARTICIPANT'S
account would instead be valued as of the actual settlement date. Finally, day
traders that use CLEARSTREAM or EUROCLEAR and that purchase securities from DTC
PARTICIPANTS for delivery to CLEARSTREAM CUSTOMERS 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:
- borrowing through CLEARSTREAM or EUROCLEAR for one day -- until the
purchase side of the day trade is reflected in their CLEARSTREAM or
EUROCLEAR accounts -- under the clearing system's customary procedure,
- borrowing the securities in the U.S. from a DTC PARTICIPANT no later than
one day before settlement which would give the securities sufficient time
to be reflected in their CLEARSTREAM or EUROCLEAR account to settle the
sale side of the trade, or
- staggering the value dates for the buy and sell sides of the trade so
that the value date for the purchase from the DTC PARTICIPANT is at least
one day before the value date for the sale to the CLEARSTREAM CUSTOMER or
EUROCLEAR PARTICIPANT.
INVESTOR PERCENTAGE
The assets of the trust are allocated among:
- certificateholders of each series,
- providers of uncertificated enhancement backed by receivables, and
- the holder of the EXCHANGEABLE TRANSFEROR CERTIFICATE.
Each series issued by the trust is backed by an amount of PRINCIPAL
RECEIVABLES and amounts on deposit in various trust bank accounts. The attached
prospectus supplement may describe how your series' INVESTED AMOUNT will be
adjusted by the amount of funds deposited in a bank account or accounts or in
any other way. The INVESTED AMOUNT can vary from period to period, and on any
date is generally equal to:
(initial INVESTED AMOUNT on the series' CLOSING DATE) -- (total principal
payments made to the series' certificateholders) -- (total unreimbursed
charge-offs and reallocated principal collections for the series)
Any COLLATERAL INVESTED AMOUNT in a series will also be included in that
series' INVESTED AMOUNT. If your series includes a COLLATERAL INVESTED AMOUNT, a
description will be included in the attached prospectus supplement. During each
series' REVOLVING PERIOD, the INVESTED AMOUNT is expected to remain constant to
the extent noted in the attached prospectus supplement unless certificates are
purchased by PRC.
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The total INVESTED AMOUNT in the trust is the sum of the INVESTED AMOUNTS
for all series issued from the trust.
The certificates of each series represent undivided interests in the assets
of the trust, including the right to each series' INVESTOR PERCENTAGE of all
cardholder payments on receivables in the trust. Certificateholders of each
series will receive varying amounts of collections of principal and finance
charges each month, and will also be allocated a varying portion of receivables
in defaulted accounts written off during each month. Principal collections,
finance charge collections and receivables in defaulted accounts may be
allocated to your series in different ways: the attached prospectus supplement
will describe how the various INVESTOR PERCENTAGES are calculated. If your
series includes multiple classes of certificates, collections allocated to your
series may be further allocated among each class.
As a certificateholder, your right to collections is limited to the amounts
needed to make required payments to you. Collections allocated to your series or
your class of certificates might be reallocated. The attached prospectus
supplement and the POOLING AND SERVICING AGREEMENT explain how collections will
be allocated to, or reallocated from, your certificates.
Each series of certificates may be included in a group of series. Series in
a group may share excess principal collections, finance charge collections or
both among themselves. The attached prospectus supplement will state if your
series is in a group and, if it is, what other series in your group were
outstanding on your series' CLOSING DATE. In addition, the attached prospectus
supplement will state whether classes of your series are entitled to TRANSFEROR
FINANCE CHARGE COLLECTIONS.
Each series of certificates represents interests in the trust only, and
does not represent interests in or recourse obligations of FEDERATED, FDS or PRC
or any of their affiliates. A certificate is not a deposit and neither the
certificates nor the underlying trust accounts or receivables are insured or
guaranteed by the FDIC or any other governmental agency.
INTEREST
Interest will accrue from the CLOSING DATE on the related certificate
principal balance, or other amount specified in the related prospectus
supplement, at the CERTIFICATE RATE. The CERTIFICATE RATE may be a fixed,
floating or variable rate as specified in the related prospectus supplement.
Interest will be distributed to certificateholders on the DISTRIBUTION DATES
specified in the related prospectus supplement.
Interest payments on any DISTRIBUTION DATE will most likely be funded from
FINANCE CHARGE COLLECTIONS allocated to the certificateholders' interest during
the previous MONTHLY PERIOD. Interest payments on any DISTRIBUTION DATE may also
be funded from:
- investment earnings on funds held in accounts of the trust,
- FINANCE CHARGE COLLECTIONS allocated initially to certificateholders of
other series or PRC as holder of the EXCHANGEABLE TRANSFEROR CERTIFICATE,
- any applicable enhancement, if necessary, or
- other amounts as specified in the related prospectus supplement.
If the DISTRIBUTION DATES for payment of interest for a series or class
occur less frequently than monthly, any collections or other amounts may be
deposited in one or more trust accounts for distribution to the
certificateholders of that series or class. Each class may have a separate
INTEREST FUNDING ACCOUNT if a series has more than one class of certificates.
The prospectus supplement relating to each series of certificates and each
class will describe:
- the amounts and sources of interest payments to be made,
- the CERTIFICATE RATE, and
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- for a series or class bearing interest at a floating or a variable
CERTIFICATE RATE:
-- the dates and the manner for determining the CERTIFICATE RATES, and
-- the formula, index or other method by which the CERTIFICATE RATES are
determined.
PRINCIPAL
No principal payments will be made to the certificateholders of a series
during the REVOLVING PERIOD, except to the extent specified in the related
prospectus supplement. Principal will be paid to the certificateholders in the
amounts and on the DISTRIBUTION DATES specified in the related prospectus
supplement or will be accumulated in a PRINCIPAL FUNDING ACCOUNT for later
distribution to certificateholders on the EXPECTED FINAL PAYMENT DATE during:
- the ACCUMULATION PERIOD, or
- the EARLY AMORTIZATION PERIOD.
Principal payments for any series or class will be funded from collections
of PRINCIPAL RECEIVABLES received during the related MONTHLY PERIOD or periods
allocated to that series or shared from other series or from PRC as holder of
the EXCHANGEABLE TRANSFEROR CERTIFICATE and from other sources as specified in
the related prospectus supplement. These payments will be allocated to the
certificateholders' interest of the related series or class. If a series has
more than one class of certificates, the certificateholders of one or more
classes may receive payments of principal at different times. The related
prospectus supplement will describe the manner, timing and priority of payments
of principal to certificateholders of each class.
THE EXCHANGEABLE TRANSFEROR CERTIFICATE
The certificate evidencing the TRANSFEROR INTEREST in the trust is referred
to as the EXCHANGEABLE TRANSFEROR CERTIFICATE. The EXCHANGEABLE TRANSFEROR
CERTIFICATE represents the right to a percentage of all cardholder payments on
the receivables equal to 100% minus the sum of the applicable allocation
percentages for all series of certificates then outstanding. The EXCHANGEABLE
TRANSFEROR CERTIFICATE may be transferred subject to limitations and conditions
described in the POOLING AND SERVICING AGREEMENT.
NEW ISSUANCES
The POOLING AND SERVICING AGREEMENT allows the transferor to direct the
trustee to issue a new series. Each new issuance will have the effect of
decreasing the TRANSFEROR INTEREST by the INVESTED AMOUNT of the new series.
The transferor, the servicer, the trustee and the trust are not required to
and do not intend to obtain the consent of, or allow prior review by, any
certificateholder of any outstanding series to issue any additional series. The
transferor may offer any series to the public under a prospectus or other
disclosure document in transactions either registered under the Securities Act
of 1933, as amended, or exempt from registration. Each new series may be
offered:
- directly, through one or more underwriters or placement agents,
- in fixed-price offerings, or
- in negotiated transactions or otherwise.
Any new series may be issued in fully registered or book-entry form in
minimum denominations determined by the transferor.
Under the POOLING AND SERVICING AGREEMENT, the transferor may designate
principal terms so that each series has an ACCUMULATION PERIOD or an
AMORTIZATION PERIOD. In addition, one or more series may be in their
ACCUMULATION PERIOD or AMORTIZATION PERIOD while other series are not.
The related prospectus supplement specifies whether PRINCIPAL COLLECTIONS
otherwise available to a series that is not amortizing or accumulating principal
may be treated as SHARED PRINCIPAL COLLECTIONS and
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reallocated to a series that is amortizing or accumulating principal. In
addition, PRINCIPAL COLLECTIONS and FINANCE CHARGE COLLECTIONS otherwise payable
to the transferor may be designated to be paid to the certificateholders of the
applicable series. Each series may have the benefits of enhancement issued by
enhancement providers different from the enhancement providers used in any other
series. Under the POOLING AND SERVICING AGREEMENT, the trustee will hold the
enhancement only on behalf of the certificateholders of the series to which the
enhancement is given. For each enhancement, the transferor may deliver a
different form of enhancement agreement.
The transferor also has the option under the POOLING AND SERVICING
AGREEMENT to vary among series the terms on which a series may be repurchased by
the transferor or remarketed to other investors. There is no limit to the number
of new issuances the transferor may issue under the POOLING AND SERVICING
AGREEMENT. The trust will end only as described in the POOLING AND SERVICING
AGREEMENT. There can be no assurance that the terms of any series might not have
an impact on the timing and amount of payments received by a certificateholder
of another series.
A new issuance may only be issued after the satisfaction of the conditions
given in the POOLING AND SERVICING AGREEMENT and under the related SUPPLEMENT.
The obligation of the trustee to authenticate the certificates of each new
series and to execute and deliver the related SUPPLEMENT must satisfy the
following conditions:
- the transferor gives the trustee written notice of the new issuance and
its date of issuance, at least five business days before the date of the
new issuance,
- the transferor delivers to the trustee the related SUPPLEMENT, in a form
satisfactory to the trustee,
- the transferor delivers to the trustee the related enhancement agreement,
if any, executed by each party to that agreement,
- the transferor, the servicer, and the trustee receive confirmation from
each rating agency that the new issuance will not result in a RATINGS
EFFECT,
- the transferor delivers to the trustee and each rating agency an opinion
of counsel acceptable to the trustee that for federal income tax
purposes:
-- the certificates of the new series will be characterized as
indebtedness or as partnership interests, and
-- the new issuance will not adversely affect the federal income tax
characterization of any outstanding series,
- the TRANSFEROR INTEREST will not be less than the MINIMUM TRANSFEROR
INTEREST on the date of the new issuance, and
- any other conditions specified in any SUPPLEMENT.
After satisfying these conditions, the trustee will execute the SUPPLEMENT
and issue to the transferor the certificates of the new series for execution and
redelivery to the trustee for authentication.
TRUST ACCOUNTS
The servicer has established and will maintain in the name of the trust and
for the benefit of the certificateholders of each series, an account called the
COLLECTION ACCOUNT. The COLLECTION ACCOUNT is a non-interest-bearing segregated
account that must be maintained with the servicer or a QUALIFIED INSTITUTION.
The trustee will establish and maintain with a QUALIFIED INSTITUTION for the
benefit of the certificateholders two segregated accounts for each series, the
INTEREST FUNDING ACCOUNT and the PRINCIPAL ACCOUNT. 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 means a United States depository institution which
at all times is acceptable to each rating agency.
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Funds in the INTEREST FUNDING ACCOUNT and PRINCIPAL ACCOUNT will be
invested in the following CASH EQUIVALENTS:
- obligations fully guaranteed by the United States,
- time deposits, promissory notes or certificates of deposit of depository
institutions or trust companies having at the time of investment the
highest short-term debt rating from Moody's and Standard & Poor's,
- commercial paper having, at the time of the trust's investment, a rating
in the highest rating category from Moody's and Standard & Poor's,
- 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,
- 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,
- bankers' acceptances issued by any depository institution or trust
company having the highest rating from Moody's and Standard & Poor's,
- Eurodollar time deposits with an entity having the highest rating from
Moody's and Standard & Poor's, and
- any other investments approved in writing by each rating agency.
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
on the last day of the MONTHLY PERIOD. 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 or the PRINCIPAL
ACCOUNT for the purpose of carrying out its duties under the POOLING AND
SERVICING AGREEMENT and the SUPPLEMENTS. Under the POOLING AND SERVICING
AGREEMENT, a paying agent will be appointed having the revocable power to
withdraw funds from the DISTRIBUTION ACCOUNT to make distributions to the
certificateholders. The paying agent will initially be the trustee.
DEPOSITS IN COLLECTION ACCOUNT
Cardholders make payments on the receivables:
- to LOCK-BOX ACCOUNTS maintained by LOCK-BOX BANKS under LOCK-BOX
AGREEMENTS,
- to the servicer, who deposits all those payments in LOCK-BOX ACCOUNTS no
later than the second business day following receipt, or
- as IN-STORE PAYMENTS.
All collections on receivables deposited in the LOCK-BOX ACCOUNTS will 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. IN-STORE PAYMENTS will be
deposited in the COLLECTION ACCOUNT as promptly as possible after the date of
processing, but in no event later than the second business day following that
date of processing. On the same day as any deposit to the COLLECTION ACCOUNT is
made, the servicer makes the deposits and payments to the accounts and parties
as indicated below; provided, that if FDS or any affiliate of FDS remains the
servicer under the POOLING AND SERVICING AGREEMENT, and
- with respect to any enhancement covering the risk of collection of the
servicer:
-- the servicer provides to the trustee a letter of credit or other
form of enhancement covering that risk acceptable to the rating
agency and
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-- the transferor has not received a notice from the rating agency
that the letter of credit or other form of enhancement would result
in the lowering of that rating agency's then-current rating of any
series of certificates then outstanding,
- 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
- each rating agency confirms that the action will not result in a
downgrading or withdrawal of the then-current rating of any outstanding
series,
then the servicer may make deposits and payments on the business day immediately
before the DISTRIBUTION DATE in an amount equal to the net amount of those
deposits and payments which would have been made had the conditions of this
proviso not applied and some payments and allocations described in this
prospectus supplement may be made on a monthly, rather than a daily, basis.
If any of the criteria above are satisfied, payments on the receivables
collected by the servicer will not be segregated from the assets of the
servicer. Until payments on the receivables collected by the servicer are
deposited into the COLLECTION ACCOUNT, those funds may be used by the servicer
for its own benefit, and the proceeds of any short-term investment of those
funds will accrue to the servicer. While the servicer holds funds representing
payments on the receivables collected by the servicer and is permitted to use
those 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 collected on the receivables.
SHARING OF EXCESS FINANCE CHARGE COLLECTIONS
The related prospectus supplement specifies if the certificateholders of a
series or any class may be entitled to receive all or a portion of EXCESS
FINANCE CHARGE COLLECTIONS of another series to cover any shortfalls on amounts
payable from FINANCE CHARGE COLLECTIONS allocable to that series or class.
EXCESS FINANCE CHARGE COLLECTIONS for any MONTHLY PERIOD will equal the excess
of FINANCE CHARGE COLLECTIONS and other amounts allocated to the
certificateholders' interest of a series or class over the sum of:
- interest accrued for the current month and overdue MONTHLY INTEREST on
the certificates,
- accrued and unpaid MONTHLY SERVICING FEES,
- the INVESTOR DEFAULT AMOUNT,
- unreimbursed INVESTOR CHARGE-OFFS, and
- other amounts specified in the related prospectus supplement.
EXCESS FINANCE CHARGE COLLECTIONS will be applied to cover any shortfalls
to amounts payable from FINANCE CHARGE COLLECTIONS allocable to any other series
in the same group. EXCESS FINANCE CHARGE COLLECTIONS will be distributed evenly
to each series based on the amount of the shortfall, if any, to each other
series. There can be no assurance that any other series will be outstanding or
that there will be any EXCESS FINANCE CHARGE COLLECTIONS available to that group
for any MONTHLY PERIOD.
SHARED PRINCIPAL COLLECTIONS
The related prospectus supplement will specify if PRINCIPAL COLLECTIONS for
any MONTHLY PERIOD allocated to the certificateholders' interest of that series,
after required distributions for that series, will be available to other series.
The servicer will determine SHARED PRINCIPAL COLLECTIONS as follows:
- the amount of PRINCIPAL COLLECTIONS for any MONTHLY PERIOD, plus
- other amounts described in the SUPPLEMENT of that series, allocated to
that series remaining after covering the required deposits and
distributions and any similar amount remaining for any other series.
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The servicer will allocate the SHARED PRINCIPAL COLLECTIONS to cover any
principal distributions to certificateholders and deposits to PRINCIPAL FUNDING
ACCOUNTS for any series that are either scheduled or permitted and that have not
been covered out of the investor principal collections and other amounts for
that series. If these PRINCIPAL SHORTFALLS exceed SHARED PRINCIPAL COLLECTIONS
for any MONTHLY PERIOD, SHARED PRINCIPAL COLLECTIONS will be allocated evenly
among the applicable series based on the respective PRINCIPAL SHORTFALLS of each
series. To the extent that SHARED PRINCIPAL COLLECTIONS exceed PRINCIPAL
SHORTFALLS, the balance will be allocated to the holder of the EXCHANGEABLE
TRANSFEROR CERTIFICATE, but only if:
- the TRANSFEROR INTEREST is greater than the MINIMUM TRANSFEROR INTEREST,
or
- in all other circumstances the SHARED PRINCIPAL COLLECTIONS will be
deposited in the EXCESS FUNDING ACCOUNT.
Any reallocation of PRINCIPAL COLLECTIONS will not result in a reduction in
the INVESTED AMOUNT of the series to which collections were initially allocated.
There can be no assurance that there will be any SHARED PRINCIPAL COLLECTIONS in
any MONTHLY PERIOD.
EXCESS FUNDING ACCOUNT
The servicer will establish and maintain with a QUALIFIED INSTITUTION in
the name of the trust, for the benefit of the certificateholders of all series,
an EXCESS FUNDING ACCOUNT. Whenever the TRANSFEROR INTEREST would otherwise be
less than the MINIMUM TRANSFEROR INTEREST, funds otherwise payable to the
transferor will be deposited in the EXCESS FUNDING ACCOUNT on each 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 following the distribution the TRANSFEROR
INTEREST will continue to exceed the MINIMUM TRANSFEROR INTEREST. The SUPPLEMENT
may provide for the payments to be made to certificateholders instead of the
transferor. Deposits in and withdrawals from the EXCESS FUNDING ACCOUNT may be
made on a daily basis.
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. All net investment income earned on amounts in the EXCESS
FUNDING ACCOUNT during each MONTHLY PERIOD will be withdrawn from the EXCESS
FUNDING ACCOUNT and treated as FINANCE CHARGE COLLECTIONS for that MONTHLY
PERIOD.
PAIRED SERIES
Each series may be paired with another series only if specified in the
attached prospectus supplement. A paired series is a series which has been
paired with a previously issued series and has an INVESTED AMOUNT that increases
as the INVESTED AMOUNT of the previously issued series decreases, or any series
designated as a paired series in the related SUPPLEMENT. The prospectus
supplement will specify the relationship between the paired series.
There can be no assurance that the terms of any paired series might not
have an impact on the timing or amount of payments received by your series. If a
PAY OUT EVENT occurs with respect to either series, if paired, either:
- subject to confirmation of existing ratings by Standard & Poor's of all
series then rated by Standard & Poor's, the numerator used in the
FIXED/FLOATING ALLOCATION PERCENTAGE for each series will be reset to be
equal to the respective invested amounts at the end of the last day
before a PAY OUT EVENT occurs or
- the denominator of the FIXED/FLOATING ALLOCATION PERCENTAGE for your
series may be increased, in either case resulting in a possible reduction
of the percentage of PRINCIPAL COLLECTIONS allocated to your series.
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FUNDING PERIOD
The related prospectus supplement may specify a FUNDING PERIOD that begins
on the CLOSING DATE and ends on a specified date before the start of an
AMORTIZATION PERIOD or an ACCUMULATION PERIOD. During the FUNDING PERIOD, the
total amount of PRINCIPAL RECEIVABLES in the trust may be less than the total
principal amount of the certificates of that series. The amount of this
deficiency will be held in a trust account established with the trustee for the
benefit of the certificateholders of that series awaiting the transfer of
additional PRINCIPAL RECEIVABLES to the trust or awaiting the reduction of the
INVESTED AMOUNTS of other series.
The related prospectus supplement for a series will define:
- the initial INVESTED AMOUNT on the CLOSING DATE,
- the total principal amount, and
- the date when the INVESTED AMOUNT is expected to equal the total
principal amount.
The INVESTED AMOUNT will increase as receivables are delivered to the trust
or as the INVESTED AMOUNTS of other series are reduced. The INVESTED AMOUNT may
also decrease due to INVESTOR CHARGE-OFFS as described in the related prospectus
supplement.
During the FUNDING PERIOD, funds on deposit in the PRE-FUNDING ACCOUNT for
a series of certificates will be withdrawn and paid to the transferor to the
extent there are any increases in the INVESTED AMOUNT. If the INVESTED AMOUNT
does not for any reason equal the full INVESTED AMOUNT by the end of the FUNDING
PERIOD, any amount remaining in the PRE-FUNDING ACCOUNT and any additional
amounts specified in the related prospectus supplement will be payable to the
certificateholders of that series described in the related prospectus
supplement.
The related prospectus supplement specifies if monies in the PRE-FUNDING
ACCOUNT:
- are invested by the trustee at PRC'S direction in CASH EQUIVALENTS,
- have a guaranteed rate, or
- have an investment agreement or other similar arrangement.
In connection with each DISTRIBUTION DATE during the FUNDING PERIOD,
investment earnings on funds in the PRE-FUNDING ACCOUNT will be withdrawn from
the PRE-FUNDING ACCOUNT and deposited, together with any other payment under a
guaranteed rate or investment agreement or other similar arrangement, into the
COLLECTION ACCOUNT for distribution as interest on the certificates of that
series as specified in the related prospectus supplement.
DEFAULTED RECEIVABLES
Receivables in any ACCOUNT will be charged off as uncollectible in
accordance with the servicer's 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 the default by making payments which
qualify under the standards customarily applied by the servicer. The INVESTOR
DEFAULT AMOUNT will be allocated to the certificateholders of each series on
each business day in an amount generally equal to the product of the floating
allocation percentage applicable on that business day for that series and the
amount of PRINCIPAL RECEIVABLES in DEFAULTED ACCOUNTS for that business day.
DILUTION
If on any business day the servicer adjusts the amount of any PRINCIPAL
RECEIVABLE because of a rebate or refund to a cardholder, or because the
PRINCIPAL RECEIVABLE was created in respect of merchandise that was refused or
returned by a cardholder, then the amount of the TRANSFEROR INTEREST in
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the trust will be reduced by the amount of the adjustment on that business day.
In addition, the TRANSFEROR INTEREST in the trust will be reduced as a result of
transactions in respect of any PRINCIPAL RECEIVABLE which was discovered as
having been created through a fraudulent or counterfeit charge.
The transferor will be required to pay an amount equal to the deficiency
into the EXCESS FUNDING ACCOUNT if the adjustment of any receivables would cause
the TRANSFEROR INTEREST at that time to be less than the MINIMUM TRANSFEROR
INTEREST.
PAY OUT EVENTS
A PAY OUT EVENT for each series would occur automatically when:
- FEDERATED, FDS or PRC is bankrupt, insolvent or enters receivership,
- the trust becomes an "investment company" within the meaning of the
Investment Company Act, or
- the transferor becomes unable for any reason to transfer receivables to
the trust.
The related prospectus supplement for any series may specify additional PAY
OUT EVENTS that apply to that series.
The EARLY AMORTIZATION PERIOD or the RAPID ACCUMULATION PERIOD, if
specified for a series, will begin on the date a PAY OUT EVENT occurs.
Certificateholders may begin receiving distributions of principal earlier than
expected if the EARLY AMORTIZATION PERIOD or the RAPID ACCUMULATION PERIOD
begins before the series CONTROLLED AMORTIZATION PERIOD or before an EXPECTED
FINAL PAYMENT DATE. This may shorten the average life of the certificates.
REPORTS TO CERTIFICATEHOLDERS
On each DISTRIBUTION DATE, the paying agent will forward to each
certificateholder of record a statement prepared by the servicer with respect to
certificates of that series with the following information:
- the total amount distributed,
- the amount of the distribution allocable to principal on each class of
the certificates,
- the amount of the distribution allocable to interest on each class of the
certificates,
- the amount of collections of PRINCIPAL RECEIVABLES processed during the
related MONTHLY PERIOD and allocated in respect of each class of the
certificates,
- the amount of collections of FINANCE CHARGE RECEIVABLES processed during
the related MONTHLY PERIOD and allocated in respect of each class of the
certificates,
- the aggregate amount of PRINCIPAL RECEIVABLES, the INVESTED AMOUNT, the
INVESTED AMOUNT of each class of the certificates, the FLOATING
ALLOCATION PERCENTAGE, and during the AMORTIZATION PERIOD, the
FIXED/FLOATING ALLOCATION PERCENTAGE with respect to PRINCIPAL
COLLECTIONS as of the close of business on the RECORD DATE,
- 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,
- the aggregate INVESTOR DEFAULT AMOUNT for the related MONTHLY PERIOD,
- the aggregate amount of INVESTOR CHARGE-OFFS for each class of the
certificates for the related MONTHLY PERIOD and
- the aggregate amount of the MONTHLY SERVICING FEE.
The servicer and the trustee will not be required to provide any reports
directly to beneficial owners. See "-- Book-Entry Registration" for a general
description of DTC procedures.
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On or before January 31 of each calendar year, the paying agent will
provide to any certificateholder of record during the preceding year a statement
containing the information required to be given by an issuer of debt under the
Internal Revenue Code along with any other customary information which is
necessary to allow the certificateholders to prepare their tax returns.
LIST OF CERTIFICATEHOLDERS
Certificateholders representing 10% or more of the invested amount of a
series, or of all outstanding series, may request access to the current list of
certificateholders of the series, or of all outstanding series, for purposes of
communicating with other certificateholders about their rights under the POOLING
AND SERVICING AGREEMENT, any SUPPLEMENT or the certificates. See "-- Book-Entry
Registration" for a general description of distribution of notices under DTC
procedures.
The POOLING AND SERVICING AGREEMENT does not provide for any annual or
other meetings of certificateholders.
ENHANCEMENT
The related prospectus supplement will state if the trust provides
enhancement for one or more classes of a series, including your series, offered
by this prospectus. If so, any form of enhancement may be structured so as to be
drawn upon by more than one class to the extent described in that prospectus
supplement.
The type, characteristics and amount of enhancement for any series or
class:
- will be determined based on several factors, including the
characteristics of the receivables and accounts included in the trust
portfolio as of the CLOSING DATE for that series and the desired rating
for each class, and
- will be established on the basis of requirements of each rating agency
rating the certificates of that series or class.
Enhancement may be in the form of:
- the subordination of one or more classes of the certificates of a series,
- the establishment of any cash collateral guaranty or account,
- a COLLATERAL INVESTED AMOUNT,
- a letter of credit,
- a surety bond,
- an insurance policy,
- a guaranteed rate agreement,
- a maturity guaranty facility,
- a tax protection agreement,
- an interest rate swap or cap,
- a spread account,
- a reserve account,
- the use of cross-support features, or
- any combination of the above.
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Enhancement will not provide protection against all risks of loss or
guarantee repayment of the entire principal balance of the certificates and/or
payment of interest. If losses occur which exceed the amount covered by
enhancement or which are not covered by enhancement, certificateholders will
bear their allocable share of deficiencies.
If enhancement is provided for a series or class of certificates, the
related prospectus supplement will describe:
- the amount payable under the enhancement,
- any additional conditions to payment under enhancement not described in
this prospectus,
- the conditions, if any, under which:
-- the amount payable under enhancement may be reduced, and
-- enhancement may be ended or replaced, and
- any material provision of any agreement relating to enhancement.
The related prospectus supplement may also provide information about any
enhancement provider, including:
- a brief description of its principal business activities,
- its principal place of business, place of incorporation and the
jurisdiction under which it is chartered or licensed to do business,
- if applicable, the identity of regulatory agencies which exercise primary
jurisdiction over the conduct of its business, and
- its total assets, and its stockholders' or policy holders' surplus, if
applicable, and other appropriate financial information as of the date
specified in the related prospectus supplement.
The related prospectus supplement may specify if enhancement for a series
may be available to pay principal of the series' certificates after PAY OUT
EVENTS occur for that series. If so, the enhancement provider may have an
interest in cash flows relating to the receivables, to the extent described in
the related prospectus supplement.
SPECIFIC FORMS OF ENHANCEMENT
The related prospectus supplement will also specify the manner and to what
extent the following forms of enhancement or other enhancement applies to your
series of certificates or any class of your series:
Subordination
One or more classes of certificates of any series may be subordinated as
described in the related prospectus supplement to the extent necessary to fund
payments on the senior certificates. The rights of the holders of any
subordinated certificates to receive distributions of principal and/or interest
on any DISTRIBUTION DATE for that series will be subordinated in right and
priority to the rights of the holders of senior certificates, but only to the
extent described in the related prospectus supplement. The related prospectus
supplement may specify if subordination may apply only for some types of losses
not covered by another enhancement. The related prospectus supplement will also
provide information concerning:
- the amount of subordination of a class or classes of subordinated
certificates in a series,
- the circumstances in which subordination will be applicable,
- the manner, if any, in which the amount of subordination will decrease
over time, and
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- the conditions under which amounts available from payments that would
otherwise be made to holders of subordinated certificates will be
distributed to holders of senior certificates.
If collections of receivables otherwise distributable to holders of a
subordinated class of a series will be used as support for a class of another
series, the related prospectus supplement will specify the manner and conditions
for applying this cross-support feature.
Cash Collateral Guaranty or Account
Support for a series or one or more classes of certificates may be provided
by:
- a CASH COLLATERAL GUARANTY secured by the deposit of cash or some CASH
EQUIVALENTS in a CASH COLLATERAL ACCOUNT reserved for the beneficiaries
of the CASH COLLATERAL GUARANTY, or
- a CASH COLLATERAL ACCOUNT alone.
The amount available from the CASH COLLATERAL GUARANTY or the CASH
COLLATERAL ACCOUNT will be the lesser of (1) amounts on deposit in the CASH
COLLATERAL ACCOUNT and (2) an amount specified in the related prospectus
supplement. The related prospectus supplement will describe the circumstances
under which payments are made to beneficiaries of the CASH COLLATERAL GUARANTY
from the CASH COLLATERAL ACCOUNT or from the CASH COLLATERAL ACCOUNT directly.
Collateral Invested Amount
An undivided interest in the trust called the COLLATERAL INVESTED AMOUNT,
in an amount initially equal to the percentage of the certificates of a series
specified in the prospectus supplement for that series, may initially provide
support for a series or one or more classes of certificates. That series may
also have the benefit of a CASH COLLATERAL GUARANTY or CASH COLLATERAL ACCOUNT
with an initial amount on deposit in that account, if any, as specified in the
related prospectus supplement which will be increased to the extent:
- PRC chooses, under the conditions specified in the related prospectus
supplement, to apply principal collections allocable to the COLLATERAL
INVESTED AMOUNT to decrease the COLLATERAL INVESTED AMOUNT,
- principal collections allocable to the COLLATERAL INVESTED AMOUNT are
required to be deposited into the CASH COLLATERAL ACCOUNT as specified in
the related prospectus supplement, and
- excess finance charge collections are required to be deposited into the
CASH COLLATERAL ACCOUNT as specified in the related prospectus
supplement.
The total amount of enhancement available from the COLLATERAL INVESTED
AMOUNT and, if applicable, the CASH COLLATERAL GUARANTY or CASH COLLATERAL
ACCOUNT will be the lesser of the sum of:
- the COLLATERAL INVESTED AMOUNT and the amount on deposit in the CASH
COLLATERAL ACCOUNT, and
- an amount specified in the related prospectus supplement.
The related prospectus supplement will describe the circumstances under
which:
- payments which otherwise would be made to holders of the COLLATERAL
INVESTED AMOUNT will be distributed to holders of certificates, and
- if applicable, payment will be made under the CASH COLLATERAL GUARANTY or
under the CASH COLLATERAL ACCOUNT.
Letter of Credit
One or more letters of credit may provide support for a series or one or
more classes of certificates. The letter of credit may provide limited
protection against some losses in addition to or instead of other enhancement.
The issuer of the letter of credit will be obligated to honor demands as to the
letter of
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credit, to the extent of the amount available under the letter of credit, to
provide funds under the circumstances and under the conditions specified in the
related prospectus supplement.
Surety Bond or Insurance Policy
A surety bond may be purchased for the benefit of the holders of any series
or class of certificates to assure distributions of interest or principal for
that series or class in the manner and amount specified in the related
prospectus supplement.
One or more insurance companies may provide insurance, to a series or one
or more classes of certificates, to guarantee, for one or more classes of that
series, distributions of interest or principal in the manner and amount
specified in the related prospectus supplement.
Spread Account
Support for a series or one or more classes of certificates may be provided
by the periodic deposit of available excess cash flow from the trust assets into
a spread account, intended to assist with subsequent distribution of interest
and principal on that series or class in the manner specified in the related
prospectus supplement.
Reserve Account
The establishment of a RESERVE ACCOUNT provides support for a series or one
or more classes of certificates. The RESERVE ACCOUNT may be funded, to the
extent provided in the related prospectus supplement, by:
- an initial cash deposit,
- the retention of excess cash,
- periodic distributions of principal or interest or both otherwise payable
to one or more classes of certificates, including subordinated
certificates,
- the provision of a letter of credit, guarantee, insurance policy or other
form of credit, or
- any combination of these items.
The RESERVE ACCOUNT will assist with the subsequent distribution of
principal or interest on that series or class in the manner provided in the
related prospectus supplement.
THE POOLING AND SERVICING AGREEMENT
CONVEYANCE OF RECEIVABLES
Under the POOLING AND SERVICING AGREEMENT, PRC has transferred to the trust
its interest in:
- all receivables and proceeds existing on and after the INITIAL CUT-OFF
DATE and all receivables and proceeds existing on and after each ADDITION
DATE in any AUTOMATIC ADDITIONAL ACCOUNTS,
- the PURCHASE AGREEMENT, and
- RECOVERIES.
PRC must indicate in its computer records that the receivables transferred
to the trust have been conveyed to the trust. PRC must also file all necessary
Uniform Commercial Code financing statements.
The physical documentation relating to the accounts or the receivables will
not be stamped or marked to show the transfer of receivables to the trust. FDS
will retain all other records or agreements about the accounts or the
receivables.
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ADDITION OF TRUST ASSETS
ACCOUNTS will be designated to have their receivables added to the trust
automatically as they are originated and the receivables in these accounts will
be immediately sold by the ORIGINATOR to PRC and then transferred by PRC to the
trust. Each AUTOMATIC ADDITIONAL ACCOUNT will be included as an account from the
date it is created, and all existing and future receivables in these accounts
will be transferred to the trust after being purchased by PRC.
PRC may elect at any time to end or suspend the inclusion of accounts that
would otherwise be AUTOMATIC ADDITIONAL ACCOUNTS by delivering to the trustee
and the servicer, written notice of this election. PRC will be permitted to
continue designating AUTOMATIC ADDITIONAL ACCOUNTS if the AGGREGATE ADDITION
LIMIT would not be exceeded because of the inclusion of the AUTOMATIC ADDITIONAL
ACCOUNTS as accounts.
In any event, the number of accounts to be included as AUTOMATIC ADDITIONAL
ACCOUNTS for the related period must be less than or equal to:
- 20% of the number of Active Accounts as of the first day of the
then-current twelve-month period, and
- 15% of the number of Active Accounts as of the first day of the
then-current three-month period.
The AGGREGATE ADDITION LIMIT is intended to limit the extent to which PRC,
by designating AUTOMATIC ADDITIONAL ACCOUNTS, may alter the composition of the
accounts without rating agency consent.
If the transferor has elected to terminate or suspend the inclusion of
AUTOMATIC ADDITIONAL ACCOUNTS, PRC must make an addition to the trust on the
required designation date if, on the last business day of any MONTHLY PERIOD,
either:
- the TRANSFEROR INTEREST is less than the MINIMUM TRANSFEROR INTEREST, or
- the amount of PRINCIPAL RECEIVABLES in the trust is less than the MINIMUM
AGGREGATE PRINCIPAL RECEIVABLES.
PRC will not be required to add receivables in ADDITIONAL ACCOUNTS if the
TRANSFEROR INTEREST equals or exceeds the MINIMUM TRANSFEROR INTEREST or the
total amount of PRINCIPAL RECEIVABLES in the trust equals or exceeds the MINIMUM
AGGREGATE PRINCIPAL RECEIVABLES before the proposed ADDITION DATE. The
receivables to be added will be from receivables generated from accounts owned
by FDS or another ORIGINATOR.
In connection with an addition of a SUPPLEMENTAL ACCOUNT, FDS or another
ORIGINATOR may sell to PRC and PRC will then transfer to the trust the
receivables from these accounts on the following conditions:
- on or before the twentieth business day before any addition, PRC has
given the trustee, the servicer, each rating agency and the enhancement
providers, if any, written notice that the receivables from SUPPLEMENTAL
ACCOUNTS will be included as trust assets,
- for SUPPLEMENTAL ACCOUNTS, on or before the date the receivables are
added to the trust, PRC has delivered to the trustee a written assignment
and a computer file, microfiche list or printed list containing a true
and complete list of these SUPPLEMENTAL ACCOUNTS specifying for each
account its account number and the total amount outstanding in the
account, and
- PRC has received confirmation from each rating agency that the addition
will not result in a RATINGS EFFECT.
FDS or its affiliates may originate or acquire portfolios of open end
credit card accounts. The receivables in an acquired portfolio may be sold to
PRC and then transferred to the trust. These sales must meet the conditions for
additions of SUPPLEMENTAL ACCOUNTS.
ADDITIONAL ACCOUNTS may include accounts originated using criteria
different from those that were applied to the initial accounts. These accounts
may have been originated at a later date or may have been
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part of a portfolio of open end credit card accounts that were not part of the
FEDERATED portfolio as of the CUT-OFF DATE. Some of these accounts may have been
acquired from other institutions. ADDITIONAL ACCOUNTS may not be of the same
type as those previously included in the trust. For these reasons, there can be
no assurance that the ADDITIONAL ACCOUNTS will be of the same credit quality or
have the same payment characteristics as the initial accounts or the ADDITIONAL
ACCOUNTS previously included in the trust.
ADDITIONAL ACCOUNTS of a type different from the initial accounts may
consist of fees, charges and amounts that are different from the FINANCE CHARGE
RECEIVABLES and PRINCIPAL RECEIVABLES in the initial FEDERATED portfolio. The
servicer will designate the portions of funds collected or to be collected for
these receivables to be treated for purposes of the POOLING AND SERVICING
AGREEMENT as PRINCIPAL RECEIVABLES and FINANCE CHARGE RECEIVABLES.
REMOVAL OF ACCOUNTS
PRC has the right to require reassignment to itself, or another company
designated by it, of all of the trust's rights in and to the receivables from
REMOVED ACCOUNTS under the following conditions on each second business day
preceding each DISTRIBUTION DATE on which the TRANSFEROR INTEREST exceeds 17% of
the PRINCIPAL RECEIVABLES with respect to that day:
- on or before twenty days before the removal date, PRC gives the trustee,
the servicer and each rating agency written notice of the removal
including the date for removal of the REMOVED ACCOUNTS,
- on the removal date, PRC delivers to the trustee a computer file,
microfiche list or printed list containing an accurate and complete list
of the REMOVED ACCOUNTS specifying the account number and the total
amount outstanding in the account,
- PRC will represent and warrant that as of the removal date the list of
REMOVED ACCOUNTS delivered to the trustee is accurate and complete in all
material respects,
- PRC receives confirmation from each rating agency that the removal will
not result in a RATINGS EFFECT, and
- PRC delivers to the trustee and any enhancement provider entitled under
the SUPPLEMENT a certificate of an authorized officer, dated the removal
date, confirming the above items.
The removal can occur for a number of reasons including a determination by
PRC that the trust contains more receivables than PRC is obligated to retain in
the trust under the POOLING AND SERVICING AGREEMENT and any SUPPLEMENTS and a
determination that PRC does not desire to obtain additional financing through
the trust at that time.
After satisfying the above conditions, the trustee will execute and deliver
to PRC or its designee a written reassignment. The trustee will then be
considered to sell, transfer, assign, set over and otherwise convey to PRC or
its designee, all of its rights in the receivables arising in the REMOVED
ACCOUNTS.
In addition, 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. The
transferor will be permitted to deposit funds in the EXCESS FUNDING ACCOUNT in
connection with any designation of REMOVED ACCOUNTS to the extent necessary to
permit designation.
REPRESENTATIONS AND WARRANTIES
On the CLOSING DATE, PRC will represent and warrant to the trustee on
behalf of the trust that:
- on the INITIAL CUT-OFF DATE, and, on the date of creation for each
AUTOMATIC ADDITIONAL ACCOUNT, and on the ADDITION CUT-OFF DATE for each
SUPPLEMENTAL ACCOUNT, each account that PRC classifies as an "eligible
account" satisfied or will satisfy the requirements of an ELIGIBLE
ACCOUNT,
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- on the INITIAL CUT-OFF DATE, and, on the date of creation for each
AUTOMATIC ADDITIONAL ACCOUNT, and on the ADDITION CUT-OFF DATE for each
SUPPLEMENTAL ACCOUNT, each receivable that PRC classifies as an "eligible
receivable" satisfied or will satisfy the requirements of an ELIGIBLE
RECEIVABLE, and
- on the date of creation of any new receivable, that receivable will be an
ELIGIBLE RECEIVABLE.
A receivable will be designated an INELIGIBLE RECEIVABLE and will be
assigned a principal balance of zero for the purpose of determining the total
amount of PRINCIPAL RECEIVABLES on any day that any representation or warranty
of PRC is not true and correct in any material respect for any receivables
transferred to the trust by PRC and, as a result the servicer will:
- deduct an amount equal to the unpaid balance of the INELIGIBLE RECEIVABLE
multiplied by one minus the FINANCE CHARGE RECEIVABLE FACTOR from the
PRINCIPAL RECEIVABLES in the trust and
- decrease PRC'S interest in the trust by the same amount.
Under the POOLING AND SERVICING AGREEMENT, the transferor represents and
warrants that,
- 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,
- the execution and delivery of the POOLING AND SERVICING AGREEMENT, any
SUPPLEMENT, and the PURCHASE AGREEMENT, and the consummation of the
transactions provided for in those documents, have been duly authorized
by the transferor by all necessary corporate action on its part,
- each of the POOLING AND SERVICING AGREEMENT, any SUPPLEMENT, and the
PURCHASE AGREEMENT constitutes a legal, valid, and binding obligation of
the transferor, and
- 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 their
proceeds, or
-- the grant of a first priority security interest, subject to PERMITTED
LIENS, in the receivables and their proceeds.
If there is a breach of any of the representations and warranties described in
this paragraph, either the trustee or the holders of certificates aggregating
more than 50% of the invested amount of any series, by written notice to the
transferor and to the trustee and the servicer if given by the
certificateholders of the 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 the notice, or within a
longer period as specified in that notice. The transferor will then be obligated
to accept reassignment of the receivables on a DISTRIBUTION DATE occurring
within the applicable period. The reassignment will not be required to be made,
however, if at any time during the applicable period the representations and
warranties are then true and correct in all material respects or the
reassignment would cause either a PAY OUT EVENT to occur or a 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 a reassignment will be equal to:
- the invested amount for all series of certificates required to be
repurchased, less the amount, if any, previously allocated for payment of
principal to those certificateholders, plus
- an amount equal to all interest accrued but unpaid on those certificates
at the applicable certificate rate, less the amount transferred to the
DISTRIBUTION ACCOUNT from the INTEREST FUNDING ACCOUNT in respect of
interest on those certificates.
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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 series.
The obligation of the transferor to make this deposit will be the sole remedy
available to the trustee and the certificateholders with respect to any breach
of these representations and warranties of the transferor.
Under the POOLING AND SERVICING AGREEMENT, the transferor also represents
and warrants that:
- the execution and delivery of the POOLING AND SERVICING AGREEMENT, any
SUPPLEMENT and the PURCHASE AGREEMENT, 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 those filings,
registrations, consents, or approvals as have already been obtained and
are in full force and effect,
- 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,
- there are no proceedings or investigations pending or threatened against
the transferor, asserting the invalidity of the POOLING AND SERVICING
AGREEMENT, any SUPPLEMENT or the PURCHASE AGREEMENT, seeking to prevent
the transactions contemplated by those documents, seeking any
determination that would materially and adversely affect the performance
by the transferor of its obligations under those documents, or seeking
any determination or ruling that would materially and adversely affect
the validity or enforceability of those documents or of the tax
attributes of the trust,
- with respect to each receivable:
-- it is or will be an account receivable arising out of the
transferor's performance in accordance with the terms of the CHARGE
ACCOUNT AGREEMENT,
-- the transferor has no knowledge that should have led it to expect at
the time of the classification of any receivable as an ELIGIBLE
RECEIVABLE that the 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, and
- the transferor is not an "investment company" within the meaning of the
Investment Company Act.
If any of these representations or warranties 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, then the trustee or
50% of the certificateholders' interest of any class may give notice to the
transferor declaring that a PAY OUT EVENT has occurred; provided, that a PAY OUT
EVENT will not be deemed to have occurred if the transferor has accepted a
reassignment of the affected receivables.
In addition, it is not anticipated or required that the trustee make any
initial or periodic general examination of PRC or the servicer for the purpose
of establishing:
- the compliance by PRC or the servicer with their respective
representations or warranties or
- the performance by PRC or the servicer of their respective obligations
under the POOLING AND SERVICING AGREEMENT or
- for any other purpose.
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The servicer, however, will deliver to the trustee on or before March 31 of each
calendar year an opinion of counsel as to the validity of the interest of the
trust in and to the receivables and other components of the trust.
CERTAIN COVENANTS
Under the POOLING AND SERVICING AGREEMENT, the transferor covenants that:
- it will not cause any receivable to be evidenced by an instrument or to
be anything except an account, general intangible, or chattel paper,
- 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,
- 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 those agreements
or policies except as provided in the POOLING AND SERVICING AGREEMENT,
- if it is unable for any reason to transfer receivables to the trust, it
will continue to allocate and pay all collections from all receivables to
the trust,
- if it receives a collection on any receivables, it will pay that
collection to the servicer as soon as practicable,
- it will notify the trust promptly after becoming aware of any lien on any
receivable except PERMITTED LIENS,
- it will engage in no other business except the business contemplated
under the POOLING AND SERVICING AGREEMENT and the PURCHASE AGREEMENT,
- it will take all actions necessary to enforce its rights and claims under
the PURCHASE AGREEMENT,
- except with respect to IN-STORE PAYMENTS, it will not commingle its
assets with those of FEDERATED or any affiliate of FEDERATED, and
- it will not acquire receivables from any person except an ORIGINATOR.
ELIGIBLE ACCOUNTS; ELIGIBLE RECEIVABLES
An ELIGIBLE ACCOUNT means each ACCOUNT owned by an ORIGINATOR:
- which is payable in United States dollars,
- which has not been identified by its ORIGINATOR in its computer files as
an account as to which the ORIGINATOR or the servicer has any confirmed
record of any fraud-related activity by the cardholder,
- which has not been sold or pledged to any other party and does not have
receivables that have been sold or pledged to any other party,
- which was created in accordance with the credit and collection policies
of its ORIGINATOR at the time of creation of the account or the
receivables which each rating agency permits to be added automatically to
the trust,
- the receivables in which the ORIGINATOR has not charged off in its
customary and usual manner for charging off receivables, and
- which is not an AUTOMATIC ADDITIONAL ACCOUNT designated by the transferor
to be included as an ACCOUNT after the occurrence of specified events or
in excess of the AGGREGATE ADDITION LIMIT unless the rating agencies have
consented to the inclusion of the AUTOMATIC ADDITIONAL ACCOUNT as an
ELIGIBLE ACCOUNT.
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An ELIGIBLE RECEIVABLE means each receivable that satisfies the following
criteria:
- it arises under an ELIGIBLE ACCOUNT,
- it constitutes an "account," a "general intangible," or "chattel paper"
as defined in Article 9 of the UCC as then in effect in 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,
- it is the legal, valid, and binding obligation of a person who:
-- is living,
-- is not a minor under the laws of his/her state of residence, and
-- is competent to enter into a contract and incur debt,
- it and the underlying CHARGE ACCOUNT AGREEMENT do not contravene in any
material respect any applicable laws, rules, or regulations that could
reasonably be expected to have an adverse impact on the amount of
collections under the receivable, and the ORIGINATOR of the receivable is
not in violation of any of those laws, rules, or regulations in any
respect material to the CHARGE ACCOUNT AGREEMENT,
- 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 the 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 the receivables,
- 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 except
PERMITTED LIENS,
- it is not, at the time of its transfer to the trust, a receivable in a
DEFAULTED ACCOUNT, and
- it arises under a CHARGE ACCOUNT AGREEMENT that has been duly authorized
and which, together with the receivable, is in full force and effect and
constitutes the legal, valid, and binding obligation of the obligor of
the receivable enforceable against the obligor in accordance with its
terms and is not subject to any dispute, offset, counterclaim, or defense
whatsoever except the discharge in bankruptcy of the obligor.
COLLECTION AND OTHER SERVICING PROCEDURES
The servicer is responsible for servicing, collecting, enforcing and
administering the receivables under the CREDIT AND COLLECTION POLICIES and doing
any and all things in connection with the servicing and administration which it
considers necessary or desirable.
Servicing activities to be performed by the servicer include:
- collecting and recording payments,
- communicating with cardholders,
- collection activities for delinquent accounts,
- evaluating the issuance of credit cards,
- providing billing and tax records, if any, to cardholders, and
- maintaining internal records of each account.
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Under the POOLING AND SERVICING AGREEMENT, the servicer is authorized and
empowered to:
- make withdrawals from the COLLECTION ACCOUNT,
- after the delinquency of any receivable, to commence enforcement
proceedings with respect to that receivable, and
- make all filings, reports, notices, applications, registrations with, and
to seek any consents or authorizations from government agencies as may be
necessary or advisable to comply with all federal and state securities
laws.
Unless the trustee revokes the power and authority following the occurrence
of a SERVICER DEFAULT, under the POOLING AND SERVICING AGREEMENT, the servicer
is authorized and empowered to:
- instruct the trustee to make withdrawals and payments, from the INTEREST
FUNDING ACCOUNT, the EXCESS FUNDING ACCOUNT, the PRINCIPAL ACCOUNT and
any series account and
- instruct the trustee in writing to take any action permitted or required
under any enhancement at a time specified under the POOLING AND SERVICING
AGREEMENT and any SUPPLEMENT.
Under the POOLING AND SERVICING AGREEMENT, FDS, as servicer, has the right
to delegate any of its responsibilities and obligations as servicer to any
person who agrees to conduct FDS' servicing duties under the POOLING AND
SERVICING AGREEMENT and the CREDIT AND COLLECTION POLICIES.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
As compensation for its servicing activities and as reimbursement for its
expenses, the servicer will receive a servicing fee payable on each day
specified in the applicable SUPPLEMENT in an amount equal to the product of:
- a fraction, whose numerator is the actual number of days in the measuring
period specified in the applicable SUPPLEMENT and whose denominator is
the actual number of days in the year,
- the weighted average series servicing fee percentage and
- the daily average total outstanding balance of all PRINCIPAL RECEIVABLES
over the term of that measuring period.
The share of the servicing fee for any particular series with respect to
any date of payment will be equal to the product of:
- a fraction, whose numerator is the actual number of days in the measuring
period specified in the applicable SUPPLEMENT and whose denominator is
the actual number of days in the year,
- the applicable series servicing fee percentage for that series and
- the INVESTED AMOUNT of that series, as appropriate, as of the date of
determination for that payment as specified in the applicable SUPPLEMENT.
The remainder of the servicing fee shall be paid by PRC or retained by the
servicer and none of the trust, the trustee or any enhancement provider will be
liable to pay the share of the servicing fee to be paid by PRC.
The servicer's expenses include:
- amounts due to the trustee under the POOLING AND SERVICING AGREEMENT,
- the reasonable fees and disbursements of independent public accountants,
and
- all other expenses incurred by the servicer in connection with its
activities under the POOLING AND SERVICING AGREEMENT.
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However, the servicer will not be liable for any liabilities, costs or expenses
of the trust, the investor certificateholders or the certificate owners arising
under any tax law.
If the servicer fails to pay any amounts due to the trustee by the servicer
under the POOLING AND SERVICING AGREEMENT, the trustee will be entitled to
deduct and receive the portion of the servicing fee that is equal to the unpaid
amounts from the servicing fee before the payment is made to the servicer. The
servicer shall be required to pay expenses for its own account and will not be
entitled to any payment other than the servicing fee.
CERTAIN MATTERS REGARDING THE SERVICER
The servicer may not resign from its obligations and duties under the
POOLING AND SERVICING AGREEMENT, except:
- on the determination that its duties are no longer permissible under
applicable law, or
- as may be required for any merger or consolidation of the servicer or the
conveyance or transfer of all or substantially all of the servicer's
assets.
No 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 may also transfer its servicing
obligations to an affiliate and be relieved of its obligations and duties under
the POOLING AND SERVICING AGREEMENT.
Any person with whom the servicer may be merged or consolidated or any
person resulting from any merger or consolidation to which the servicer is a
party, or any person succeeding to the business of the servicer, will be the
successor to the servicer under the POOLING AND SERVICING AGREEMENT.
SERVICER DEFAULT
A SERVICER DEFAULT refers to:
- any failure by the servicer to make any payment, transfer or deposit or
to give instructions or notice to the trustee as required by the POOLING
AND SERVICING AGREEMENT or any SUPPLEMENT or to instruct the trustee to
make any required drawing, withdrawal or payment under any enhancement on
or before the date occurring five business days after the date the
payment, transfer or deposit or instruction or notice is required to be
made or given,
- failure by the servicer to observe or perform any other covenants or
agreements of the servicer as described in the POOLING AND SERVICING
AGREEMENT or any SUPPLEMENT which has a material adverse effect on the
interests of the certificateholders of any series and which continues
unremedied for 60 days after written notice was given to the servicer
requiring that the situation be remedied,
- any representation, warranty or certification made by the servicer in the
POOLING AND SERVICING AGREEMENT or any SUPPLEMENT or in any certificate
delivered under the POOLING AND SERVICING AGREEMENT or any SUPPLEMENT
which proves to have been incorrect when made, and has a material adverse
effect on the rights of the certificateholders of any series and which
continues incorrect in any material respect for 60 days after written
notice was given to the servicer requiring that the situation be
remedied, or
- the occurrence of some events of bankruptcy, insolvency or receivership
of the servicer.
If the delay or failure was caused by an act of God or other similar
occurrence and could not be prevented by the use of reasonable diligence in the
case of a failure to observe or perform any other covenants or agreements, or in
the case of any representation, warranty or certification proving to have been
incorrect when made, the failure for a period of 60 business days will not
constitute a SERVICER DEFAULT. However, in the case of a failure to make
payment, transfer or deposit, or notice, the servicer is allowed an additional
five business days to remedy the situation before a SERVICER DEFAULT occurs.
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The servicer agrees to provide the trustee, each rating agency, enhancement
providers, if any, PRC and the certificateholders of each series with a
description of any failure or delay by it to perform its obligation, together
with its notice to the trustee. The servicer shall not be relieved from using
its best efforts to perform its obligations in a timely manner after a SERVICER
DEFAULT occurs.
If a SERVICER DEFAULT occurs, the trustee may end all of the rights and
obligations of the servicer under the POOLING AND SERVICING AGREEMENT by sending
a termination notice, in writing, to the servicer. Certificateholders holding
certificates comprising more than 50% of the aggregate INVESTED AMOUNT of all
outstanding series may also end all the rights and obligations of the servicer
under the POOLING AND SERVICING AGREEMENT by sending termination notices, in
writing, to the servicer, the trustee and to any enhancement providers.
The trustee will appoint a successor servicer after the receipt by the
servicer of a termination notice. All rights, authority, power and obligations
of the servicer under the POOLING AND SERVICING AGREEMENT will pass to and be
vested in the trustee if:
- no successor servicer is appointed by the trustee, or
- no successor servicer has accepted the appointment by the time the
servicer stops acting as servicer.
The trustee shall, if it is legally unable to act as successor servicer,
petition a court to appoint any established financial institution meeting the
eligibility requirements described in the POOLING AND SERVICING AGREEMENT as the
successor servicer.
Before any successor servicer is appointed, the trustee will seek to obtain
bids from potential servicers meeting eligibility requirements described in the
POOLING AND SERVICING AGREEMENT to serve as a successor servicer for servicing
compensation which may be in excess of the servicing fee specified in any
SUPPLEMENT. The rights and interest of PRC as holder of the EXCHANGEABLE
TRANSFEROR CERTIFICATE will not be affected by any termination notice or
appointment of a successor servicer.
If the trustee within 60 days of receipt of a termination notice is unable
to obtain any bids from eligible successor servicers and the servicer delivers
an officer's certificate stating that the servicer cannot in good faith cure the
SERVICER DEFAULT that gave rise to the transfer of servicing and if the trustee
is legally unable to act as the successor servicer, then the trustee will sell
the receivables. The purchase price for the purchase will not be less than an
amount equal to the total invested amount of the series on the date of the
purchase plus all interest accrued but unpaid on all outstanding investor
certificates at the applicable certificate rate through the date of the
purchase.
EVIDENCE AS TO COMPLIANCE
The POOLING AND SERVICING AGREEMENT requires the servicer to cause a firm
of independent public accountants to prepare a report to the effect that the
firm has compared the mathematical calculations in the monthly statements
described in the first paragraph under "Description of the Certificates --
Reports to Certificateholders" for the MONTHLY PERIODS covered by the report
with the transferor's computer reports regarding the receivables and that those
reports are in agreement, except for any exceptions the firm believes to be
immaterial and any other exceptions set forth in the report. A copy of this
report will be sent to each certificateholder of record.
The POOLING AND SERVICING AGREEMENT requires the servicer to cause a firm
of independent public accountants to prepare on an annual basis a report to the
effect that the 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 the
examination, the firm is of the opinion that:
- the system of internal controls in effect at the end of the reporting
period relating to servicing procedures performed by the servicer
provided reasonable assurance that the internal control system was
sufficient for the prevention and detection of errors and irregularities
and
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- the servicing was conducted in compliance with the provisions of the
POOLING AND SERVICING AGREEMENT, except for any exceptions as the firm
believes to be immaterial and any other exceptions stated in the report.
A copy of this report will be sent to each certificateholder of record.
The POOLING AND SERVICING AGREEMENT also requires delivery to the trustee,
on or before a specified 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 of its obligations,
describing each default. A copy of this certificate may be obtained by any
certificateholder upon submission of a written request addressed to the trustee.
AMENDMENTS
The POOLING AND SERVICING AGREEMENT and any SUPPLEMENT may be amended
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
the POOLING AND SERVICING AGREEMENT and that SUPPLEMENT or of modifying in any
manner the rights of the certificateholders; provided, that:
- the servicer has provided an officer's certificate to the effect that the
amendment will not adversely affect in any material respect the interests
of the certificateholders,
- 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 except the
list of receivables, each rating agency shall have confirmed that the
amendment would not result in a reduction or withdrawal of its rating of
the certificates, and
- the amendment will not, in the opinion of counsel, result in specified
adverse tax consequences.
The POOLING AND SERVICING AGREEMENT and any SUPPLEMENT may be amended with
the consent of the holders of certificates representing not less than 66 2/3% of
the investor interests of each and every series adversely affected, 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 amendment, however, may:
- reduce in any manner the amount of, or delay the timing of, distributions
required to be made on any series,
- change the definition of or the manner of calculating the interest of any
certificateholder of any series, or
- reduce the percentage of undivided interests whose holders are required
to consent to any amendment,
in each case without the consent of all certificateholders of all series
adversely affected.
TRUSTEE
The Chase Manhattan Bank is the trustee under the POOLING AND SERVICING
AGREEMENT. The Corporate Trust Department of the trustee is located at 450 West
33rd Street, New York, NY 10001.
The trustee and its affiliates may:
- enter into normal banking and trust relationships with the transferor,
the servicer and their affiliates,
- hold certificates of any series in its name but will not be allowed to
participate in any decisions or instructions to be given to the trust by
certificateholders as a group,
- appoint a co-trustee or separate trustees for all or any part of the
trust, or
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- resign at any time.
If the trustee appoints a co-trustee or separate trustees, all rights,
powers, duties and obligations of the trustee will be conferred or imposed on
the trustee and each separate trustee or co-trustee jointly. In any jurisdiction
in which the trustee is incompetent or unqualified to perform some acts, those
rights, powers, duties and obligations will be conferred or imposed on each
separate trustee or co-trustee individually. If so, each separate trustee or
co-trustee will exercise and perform those rights, powers, duties and
obligations only at the direction of the trustee.
If the trustee resigns, PRC will be required to appoint a successor
trustee. The trustee may also be removed by the servicer if the trustee becomes
ineligible to continue as a trustee under the POOLING AND SERVICING AGREEMENT or
if the trustee becomes insolvent. The servicer will then be required to appoint
a successor trustee. Any resignation or removal of the trustee and appointment
of a successor trustee will not become effective until the successor trustee
accepts the appointment.
TERMINATION OF THE TRUST
Unless PRC instructs the trustee otherwise, the trust will end on the TRUST
TERMINATION DATE. Once the trust has ended, all right, title and interest in and
to the receivables and other funds of the trust will be conveyed and transferred
to the holder of the EXCHANGEABLE TRANSFEROR CERTIFICATE except for amounts in
accounts maintained by the trust for the final payment of principal and interest
to certificateholders.
THE RECEIVABLES PURCHASE AGREEMENT
The receivables transferred by PRC to the trust under the POOLING AND
SERVICING AGREEMENT are purchased by PRC under a Receivables Purchase Agreement
among PRC, as purchaser, and the ORIGINATORS, as sellers. On each business day
before the PURCHASE TERMINATION DATE applicable to an ORIGINATOR, each
ORIGINATOR is required to deliver all of its receivables to the transferor.
Under the POOLING AND SERVICING AGREEMENT, those receivables are then
transferred immediately by the transferor to the trust.
Since September 1993, substantially all of the ACCOUNTS have been
established by FDS. However, the other ORIGINATORS remain as parties to the
PURCHASE AGREEMENT and may still establish ACCOUNTS and sell receivables to the
transferor.
REPRESENTATIONS AND WARRANTIES
In the PURCHASE AGREEMENT, each ORIGINATOR represents and warrants to PRC
as of the INITIAL CLOSING DATE -- or, in the case of some ORIGINATORS, the date
upon which they first become ORIGINATORS -- and on each ADDITION DATE that:
- each ORIGINATOR is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation, and is
duly qualified to do business and in good standing, or is exempt from
these requirements, in any state required in order to conduct its
business and has obtained all necessary licenses and approvals required
under applicable law, and has the requisite corporate power and authority
to conduct its business and to perform its obligations under the PURCHASE
AGREEMENT,
- 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 the ORIGINATOR by all necessary corporate action on its
part,
- the execution, delivery, and performance of the PURCHASE AGREEMENT do not
contravene the 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 of those laws, except
for filings, registrations, consents, or approvals that have already been
obtained and are in full force and effect,
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- the 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 that ORIGINATOR,
- there are no proceedings or investigations pending or, to the best
knowledge of the ORIGINATOR, threatened against that 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,
- each receivable of the ORIGINATOR is or will be an account receivable
arising out of that ORIGINATOR'S performance in accordance with the terms
of the CHARGE ACCOUNT AGREEMENT which creates that receivable,
- the ORIGINATOR has no knowledge of any fact which should have led it to
expect at the time of the classification of a receivable as an ELIGIBLE
RECEIVABLE that the ELIGIBLE RECEIVABLE would not be paid in full when
due, and each receivable classified as an ELIGIBLE RECEIVABLE by the
ORIGINATOR in any document or report delivered under the PURCHASE
AGREEMENT satisfies the requirements of eligibility contained in the
definition of ELIGIBLE RECEIVABLE,
- the PURCHASE AGREEMENT constitutes the legal, valid, and binding
obligation of the ORIGINATOR, enforceable against that ORIGINATOR in
accordance with its terms,
- the ORIGINATOR is not insolvent,
- the ORIGINATOR is the legal and beneficial owner of all right, title, and
interest in and to each receivable conveyed to the transferor by that
ORIGINATOR under the PURCHASE AGREEMENT, and each of those receivables
has been or will be transferred to the transferor free and clear of any
lien except PERMITTED LIENS,
- the PURCHASE AGREEMENT constitutes a valid transfer, assignment, and
conveyance to the transferor of all of the ORIGINATOR'S right, title, and
interest in and to the receivables conveyed to the transferor under that
agreement,
- all material information with respect to the ACCOUNTS and the receivables
provided to the transferor by the ORIGINATOR was true and correct as of
the CLOSING DATE or as of the day receivables arising under an ACCOUNT
are created, and
- each of the ORIGINATOR'S receivables has been conveyed to the transferor
free and clear of any lien of any person claiming through or under that
ORIGINATOR or any of its affiliates, except PERMITTED LIENS, and in
compliance in all material respects with all requirements of law
applicable to that ORIGINATOR.
In the PURCHASE AGREEMENT, each of the ORIGINATORS additionally represents
and warrants that, among other things:
- each receivable of that ORIGINATOR is an account receivable arising out
of that ORIGINATOR'S performance in accordance with the terms of the
CHARGE ACCOUNT AGREEMENT giving rise to that receivable,
- the ORIGINATOR has no knowledge of any fact which should have led it to
expect at the time of the classification of the receivable as an ELIGIBLE
RECEIVABLE that the ELIGIBLE RECEIVABLE would not be paid in full when
due, and each receivable classified as an ELIGIBLE RECEIVABLE by an
ORIGINATOR in any document or report under the PURCHASE AGREEMENT
satisfies the requirements of eligibility contained in the definition of
ELIGIBLE RECEIVABLE in the PURCHASE AGREEMENT,
- each receivable of the ORIGINATOR has been conveyed to the transferor
free and clear of any lien of any person claiming through or under that
ORIGINATOR or any of its affiliates, except PERMITTED LIENS,
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- all consents, licenses, approvals or authorizations of or any
declarations with any governmental authority required to be obtained by
the ORIGINATOR in connection with the transfer of a receivable to the
transferor have been duly obtained and remain in full force and effect,
and
- all material information with respect to a receivable provided to the
transferor by the 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 were not true at the
time the representation or warranty was made and as a result of that breach:
- the transferor is required to repurchase any receivable from the trust
under the POOLING AND SERVICING AGREEMENT or
- any receivable is designated an INELIGIBLE RECEIVABLE under the POOLING
AND SERVICING AGREEMENT,
then the ORIGINATOR will be obligated to pay to the transferor an amount equal
to the amount of all losses, damages, and liabilities of the transferor that
result from that breach, including but not limited to the cost of any of the
transferor's repurchase obligations under the POOLING AND SERVICING AGREEMENT.
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 that REMOVED ACCOUNT from the trust, the
ORIGINATOR of the removed receivables is required to immediately repurchase each
receivable from the transferor by paying to the transferor an amount in
immediately available funds equal to the amount the transferor remitted to the
trust in consideration for the transfer of the removed receivables from the
trust to the transferor.
COVENANTS
In the PURCHASE AGREEMENT, each ORIGINATOR covenants that, among other
things, subject to specified exceptions and limitations:
- it will take no action to cause any receivable to be anything other than
an account, general intangible, or chattel paper,
- 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,
- 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 these agreements or policies
except as provided in the PURCHASE AGREEMENT,
- if it receives a collection on any receivable, it will pay that
collection to the servicer as soon as practicable,
- it will not convey or transfer any ACCOUNTS, except for transfers to FDS
and as otherwise provided in the PURCHASE AGREEMENT,
- it will comply with all laws, rules, and regulations applicable to the
receivables,
- it will maintain in all material respects its corporate existence and
corporate franchises,
- it will permit PRC or its agents to examine the records relating to the
receivables,
- it will maintain and implement any administrative or operating procedure
reasonably necessary for the collection of receivables,
- if PRC purchases a receivable that does not satisfy the eligibility
requirements in the PURCHASE AGREEMENT, the ORIGINATOR will give prompt
notice of that failure to PRC, and will furnish to PRC the information,
documents, records, or reports as PRC may reasonably request,
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- it will take all actions reasonably necessary to maintain its rights
under all CHARGE ACCOUNT AGREEMENTS to which it is a party,
- 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 that sale, if applicable,
- it will maintain PRC'S valid and properly perfected title to each
receivable and will execute and deliver all other documents or take all
further action to protect PRC'S rights in the receivables and enable PRC
to exercise those rights, including without limitation, by filing UCC
financing statements in each relevant jurisdiction,
- it will cause any receivable that constitutes chattel paper to bear a
legend stating that the receivable has been conveyed to the trust, and
- 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.
FDS may reduce required minimum monthly payment charges, the calculation of
the amount or the timing of charge-offs and the periodic finance charges and
other fees to be assessed or change the terms and provisions of CHARGE ACCOUNT
AGREEMENTS or the CREDIT AND COLLECTION POLICIES. However, FDS may not otherwise
take these actions if, either:
- as a result of a reduction or change it is reasonably expected that the
reduction or change will cause a PAY OUT EVENT to occur for that series,
or
- a reduction or change:
-- when FDS owns a comparable segment of receivables, is not applied to
the comparable segment of consumer open end credit accounts owned by
FDS with the same characteristics as the receivables that are being
reduced or changed, and
-- when FDS does not own a comparable segment of receivables, will be
made with the intent to benefit PRC over the certificateholders or to
materially adversely affect the certificateholders, unless restricted
by an endorsement, sponsorship, or other agreement between PRC and an
unrelated third party or by the terms of the accounts.
TERMINATION
If any of the ORIGINATORS becomes insolvent, PRC'S obligations under the
PURCHASE AGREEMENT to that ORIGINATOR will automatically be terminated. In
addition, if a PAY OUT EVENT occurs as to all series of certificates, PRC'S
obligations under the PURCHASE AGREEMENT as to all of the ORIGINATORS will
automatically be terminated. The date of that termination will be the "PURCHASE
TERMINATION DATE" as to the related ORIGINATOR.
SECURITY RATINGS
Any rating of the certificates by a rating agency will indicate:
- its view on the likelihood that certificateholders will receive required
interest and principal payments, and
- its evaluation of the receivables and the availability of any enhancement
for the certificates.
Among the things a rating will not indicate are:
- the likelihood that a PAY OUT EVENT will occur,
- the likelihood that a United States withholding tax will be imposed on
non-U.S. certificateholders,
- the marketability of the certificates,
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- the market price of the certificates, or
- whether the certificates are an appropriate investment for you.
A rating will not be a recommendation to buy, sell or hold the
certificates. A rating may be lowered or withdrawn at any time by a rating
agency.
PRC will request a rating of the certificates offered by this prospectus
and the prospectus supplement from at least one rating agency. It will be a
condition to the issuance of the certificates of each series or class offered by
this prospectus and the related prospectus supplement that they be rated in one
of the four highest rating categories by at least one nationally recognized
rating organization selected by PRC to rate any series. The rating or ratings
applicable to the certificates of each series or class offered by this
prospectus will be provided in the related prospectus supplement. Rating
agencies other than those requested could assign a rating to the certificates
and that rating could be lower than any rating assigned by a rating agency
chosen by PRC.
LEGAL ASPECTS OF THE RECEIVABLES
TRANSFER OF RECEIVABLES
The transfer of the receivables by PRC to the trust constitutes either a
valid transfer and assignment of all of PRC'S interest in and to the receivables
or a grant of a security interest in the receivables. See "The Pooling and
Servicing Agreement -- Representations and Warranties."
The receivables are accounts, general intangibles or chattel paper for
purposes of the UCC. Both the transfer and assignment of accounts and the
transfer of accounts as security for an obligation are treated under Article 9
of the UCC as creating a security interest. The filing of a financing statement
is required to perfect the trust's interest. If a transfer of general
intangibles is considered the creation of a security interest, rather than a
sale, Article 9 of the UCC applies and the filing of one or more financing
statements is also required to perfect the trust's security interest. Financing
statements covering the receivables of the trust will be filed under the UCC.
If a transfer of general intangibles is treated as a sale, the UCC is not
applicable and no further action is required to protect the trust's interest.
Although the priority of general intangibles that come into existence after the
initial closing date in this case is not as clear, FDS and PRC believe that it
would not be consistent for a court to give the trust less favorable treatment
if the transfer of the receivables is considered to be a sale than if it were
considered to be creating a security interest.
There are some limited circumstances under the UCC in which an earlier or
later transferee of receivables could have an interest in the receivables with
priority over the trust's interest. Under the POOLING AND SERVICING AGREEMENT,
PRC will represent and warrant that it has transferred the receivables to the
trust free and clear of all liens and security interests other than tax liens
and the interest of PRC as holder of the EXCHANGEABLE TRANSFEROR CERTIFICATE. In
addition, PRC will covenant that it will not sell, pledge, assign or transfer,
or grant, create, incur, assume or suffer to exist any lien on, any receivable
except to the trust or in connection with any transfer of the accounts selected
for the trust. A tax or other governmental lien on PRC'S property arising before
a receivable comes into existence also may have priority over the interest of
the trust in the receivable. There is a good possibility that the trust may not
have a perfected security interest in any of the receivables created after the
filing of a petition for relief by or against an ORIGINATOR or PRC under the
U.S. bankruptcy code or after the appointment of a receiver or conservator for
FDS. It is anticipated that the trust will either own or have a perfected
security interest in receivables existing on the date of filing a petition by or
against an ORIGINATOR or PRC under the U.S. bankruptcy code or after the date of
appointment of a receiver or conservator for FDS and will be able to make
payments of principal and interest on the investor certificates, although there
can be no assurance that any of these payments would be timely.
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Because the trust's interest in the receivables is dependent upon PRC'S
interest in the receivables, any negative change in the priority or perfection
of PRC'S security interest would correspondingly affect the trust's interest in
the affected receivables. In addition, if a receiver or conservator were
appointed for FDS, some administrative expenses of the receiver or conservator
also may have priority over the interest of the trust in those receivables.
While FDS is the servicer, some cash collections on the receivables may be held
by FDS and commingled with its funds for brief periods, and if an insolvency
event occurs, the trust may not have a perfected interest in the commingled
collections.
MATTERS RELATING TO BANKRUPTCY OR RECEIVERSHIP
FDS has represented and warranted to PRC that the sale of the receivables
is a valid sale. In addition, FDS and PRC have treated and will treat the
transfer of the receivables as a sale. FDS has taken or will take all actions
that are required by the UCC to perfect PRC'S ownership interest in the
receivables.
The FDIC may be appointed a conservator or receiver of FDS. In that
capacity, the FDIC has the power to repudiate or disaffirm the obligations of
the transferor under the POOLING AND SERVICING AGREEMENT or to request a stay of
any judicial action or proceeding involving FDS.
A valid perfected security interest of PRC should be enforceable, to the
extent of PRC'S "actual direct compensatory damages," regardless of the
insolvency of FDS or the appointment of a receiver or conservator for FDS if:
- FDS granted a security interest in the receivables to PRC and PRC granted
a security interest in the receivables to the trust,
- the interest was validly perfected before FDS' insolvency,
- the interest was not taken or granted in contemplation of FDS' insolvency
or with the intent to hinder, delay or defraud FDS or its creditors,
- each of the PURCHASE AGREEMENT and the POOLING AND SERVICING AGREEMENT is
continuously a record of FDS, and
- each of the PURCHASE AGREEMENT and the POOLING AND SERVICING AGREEMENT
represents a bona fide and arm's length transaction undertaken for
adequate consideration in the ordinary course of business.
If so, payments to the trust should not be open to an automatic stay of
payment or to recovery by the FDIC as unperfected or unenforceable. The FDIC has
the right to require the trustee to establish its right to payments by
submitting to and completing the administrative claims procedure established
under the Financial Institutions Reform, Recovery and Enforcement Act of 1989.
The conservator or receiver has the right to request a stay of proceedings as to
FDS. This could result in delays in payments on the certificates and possible
losses to you.
The amount that the FDIC is required to pay is limited to your "actual
direct compensatory damages" determined as of the date of the FDIC's appointment
as receiver. There is not a statutory definition of "actual direct compensatory
damages." The staff of the FDIC takes the position that upon repudiation or
disaffirmation these damages would not include interest accrued to the date of
actual repudiation or disaffirmation. Under the FDIC interpretation, you would
receive interest only through the date of the appointment of the receiver. Since
the FDIC may delay actual repudiation or disaffirmation for up to 180 days
following its appointment as receiver, you may not receive the full amount of
interest owing to you under the certificates. There is one reported federal
district court decision that construes the term "actual direct compensatory
damages." This 1993 court case construed the term, in the context of the
repudiation of zero coupon bonds, to mean the fair market value of those bonds
as of the date of repudiation. You would not be compensated for the period
between the appointment of the receiver and the date of repudiation under either
interpretation.
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In a 1993 decision, Octagon Gas Systems, Inc. v. Rimmer, 997 F.2d 948 (10th
Cir. 1993), cert. denied, 114 S. Ct. 554 (1993), the United States Court of
Appeals for the 10th Circuit suggested that even where a transfer of accounts
from a seller to a buyer constitutes a "true sale," the accounts would
nevertheless constitute property of the seller's bankruptcy estate in a
bankruptcy of the seller. If PRC were to become part of a bankruptcy proceeding
or FDS were to become subject to receivership and a court were to follow the
Octagon court's reasoning, certificateholders might experience delays in payment
and possibly losses in their investment in the certificates. Counsel has advised
PRC that the facts of the Octagon case are distinguishable from those in the
sale transaction between FDS and PRC and between PRC and the trust and that the
reasoning of the Octagon case appears to be inconsistent with established
precedent and the UCC. Also, because FDS, PRC, the trust and the transaction
governed by the POOLING AND SERVICING AGREEMENT do not have any particular link
to the 10th Circuit, it is unlikely that FDS or PRC would be subject to an
insolvency proceeding in the 10th Circuit. For this reason, the Octagon case
should not be binding precedent on a court or receiver in an insolvency
proceeding involving the receivables.
PRC has taken or will take all actions that are required under the UCC to
perfect the trust's interest in the receivables. PRC has also warranted to the
trust that the trust will have a first priority interest in the receivables and,
with some exceptions, in the proceeds as well. However, a tax or government lien
on property of FDS or PRC which predates the time a receivable is conveyed to
the trust may have priority over the interest of the trust in that receivable.
PRC'S articles of incorporation state that it shall not file a voluntary
petition for relief under the U.S. bankruptcy code without the unanimous
affirmative vote of all of its directors, including the independent directors.
According to the POOLING AND SERVICING AGREEMENT, the trustee will covenant that
it will not at any time institute against PRC any bankruptcy, reorganization or
other proceedings under any federal or state bankruptcy or similar law. In
addition, other steps have been or will be taken to avoid PRC'S becoming a
debtor in a bankruptcy case. Aside from these steps, if PRC were to become a
debtor in a bankruptcy case, and a bankruptcy trustee for PRC or a creditor of
PRC were to take the position that the transfer of the receivables from PRC to
the trust should be recharacterized as a pledge of the receivables, then delays
in payments on the certificates and, should the court rule in favor of the
trustee or any creditor, reductions in the amount of the payments could result.
PRC has been structured in a manner intended to reduce the likelihood of
the voluntary or involuntary application for relief under the U.S. bankruptcy
code or similar applicable state laws. PRC is also structured to avoid the
substantive consolidation of PRC with FDS. PRC is a separate, special purpose
subsidiary, whose articles of incorporation contain limitations on the nature of
PRC'S business and restrictions on the ability of PRC to commence voluntary or
involuntary cases or proceedings under these laws without the unanimous vote of
all its directors. Additionally, PRC does not intend to file, and FDS has agreed
that it will not file, a voluntary petition for relief under the U.S. bankruptcy
code or any similar state laws as to PRC.
If PRC were to become a debtor in a bankruptcy case causing a PAY OUT EVENT
to occur, then, under the POOLING AND SERVICING AGREEMENT, additional PRINCIPAL
RECEIVABLES would not be transferred to the trust. On the occurrence of some
events of bankruptcy, insolvency or receivership, if no PAY OUT EVENT except the
commencement of the bankruptcy or similar event exists, the
trustee-in-bankruptcy may have the power to continue to require PRC to transfer
new receivables to the trust and to prevent the commencement of the EARLY
AMORTIZATION PERIOD or, if applicable for any series as specified in the related
prospectus supplement, the RAPID ACCUMULATION PERIOD.
Specified events of insolvency, conservatorship or receivership of the
servicer will result in a SERVICER DEFAULT, which will result in a PAY OUT
EVENT. A conservator or receiver of the servicer may have the power to prevent
the trustee and the certificateholders from appointing a successor servicer if
no SERVICER DEFAULT exists except the commencement of a bankruptcy or similar
event.
Payments made on repurchases of receivables by FDS or PRC may be
recoverable by FDS or PRC, or by a creditor, conservator, receiver or a
trustee-in-bankruptcy of FDS or PRC, as a preferential transfer
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from FDS or PRC if these payments are made within one year before the filing of
a bankruptcy case as to FDS or PRC.
CONSUMER PROTECTION LAWS
The relationship of the cardholder and credit card issuer is extensively
regulated by federal and state consumer protection and related laws. For credit
cards issued by FDS, the most significant laws include:
- the federal Truth-in-Lending Act,
- the Fair Credit Billing Act,
- the Fair Debt Collection Practices Act,
- the Equal Credit Opportunity Act,
- the Fair Credit Reporting Act,
- the Electronic Funds Transfer Act,
- the National Banking Act, and
- applicable state laws.
Claims may be brought under these statutes by private consumers as well as
federal and state regulators. These statutes impose disclosure requirements when
a credit card account is advertised, when it is opened, at the end of monthly
billing cycles and at year end and, in addition, prohibit discriminatory
practices in extending credit and impose limitations on the type of
account-related charges that may be assessed. Federal law requires credit card
issuers to disclose to consumers:
- the interest rates,
- cardholder fees,
- grace periods, and
- balance calculation methods.
In addition, cardholders are entitled under current laws to have payments
and credits applied to the credit card account promptly, to receive prescribed
notices and to require billing errors to be resolved promptly.
Some laws, including the laws described above, may limit FDS' ability to
collect amounts owing on the receivables regardless of any act or omission on
the part of FDS. For example, under the federal Fair Credit Billing Act, a
credit card issuer is open to all claims, other than tort claims, and defenses
arising out of transactions in which a credit card is used as a method of
payment or extension of credit if:
- the obligor has made a good faith attempt to obtain satisfactory
resolution of a disagreement or problem relative to the transaction from
the person honoring the credit card, and
- except in cases where there is a relationship between the person honoring
the card and the credit card issuer, the amount of the initial
transaction exceeds $50 and the place where the initial transaction
occurred was in the same state as the cardholder's mailing address or
within 100 miles of that address.
These statutes further provide that in some cases cardholders cannot be
held liable for, or the cardholder's liability is limited to, charges to the
credit card account that result from unauthorized use of the credit card.
Various proposed laws and amendments to existing laws may be enacted that
would further regulate the credit card industry. The potential effect of any
legislation which limits the amount of finance charges and fees that may be
charged on credit cards could be to reduce the PORTFOLIO YIELD on the accounts.
If the PORTFOLIO YIELD is reduced, a PAY OUT EVENT may occur, and the EARLY
AMORTIZATION PERIOD would
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commence. Any new laws or rulings that may be adopted, and existing consumer
protection laws, may adversely affect the ability to collect on the receivables.
In addition, failure of the servicer to comply with those requirements could
adversely affect the servicer's ability to enforce the receivables.
Some jurisdictions may attempt to require out-of-state credit card issuers
to comply with their consumer protection laws in connection with their
operations in those jurisdictions. These laws may include a limitation on the
charges imposed by credit card issuers. If it were determined that out-of-state
credit card issuers must comply with a jurisdiction's laws limiting the charges
imposed by credit card issuers, those actions could have an adverse impact on
FDS' credit card operations. Application of federal and state bankruptcy and
debtor relief laws, including the Soldiers' and Sailors' Civil Relief Act of
1940, would affect the interests of the holders of the certificates if the
protection provided to debtors under those laws result in any receivables of the
trust being written off as uncollectible.
The trust may be liable for violations of consumer protection laws that
apply to the receivables transferred to it, either as assignee from PRC for
obligations arising before the transfer or as a party directly responsible for
obligations arising after the transfer. In addition, a cardholder may be
entitled to assert these violations by way of set-off against his or her
obligation to pay the amount of receivables owing. PRC will warrant to the trust
in the POOLING AND SERVICING AGREEMENT that all receivables transferred to the
trust have been and will be created in compliance with the requirements of these
laws. See "The Pooling and Servicing Agreement -- Representations and
Warranties" for additional discussion.
CLAIMS AND DEFENSES OF CARDHOLDERS AGAINST THE TRUST
The UCC provides that unless a cardholder has made an enforceable agreement
not to assert defenses or claims arising out of a transaction, the rights of the
trust are limited by:
- all the terms of the cardholder agreement between FDS and the cardholder,
- any defense or claim of the cardholder,
- rights of set-off, and
- any other defense or claim of the cardholder against FDS that accrues
before the cardholder receives notification of the assignment.
The UCC also provides that any cardholder is authorized to continue to pay
FDS until:
- the cardholder receives notification, reasonably identifying the rights
assigned, that the amount due or to become due has been assigned and that
payment is to be made to the trustee or successor servicer, and
- if requested by the cardholders, the trustee or successor servicer has
furnished reasonable proof of assignment.
No agreement as to defenses has been entered into and no notice of the
assignment of the receivables to the trust will be sent to the cardholders
obligated on the accounts in connection with the transfer of the receivables to
the trust.
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TAX MATTERS
The following general discussion summarizes material U.S. federal income
tax consequences relating to the purchase, ownership and disposition of a
certificate. This discussion applies only to certificates offered under this
prospectus. This summary deals primarily with U.S. CERTIFICATE OWNERS who
acquire their certificates at their original issue price in the original
issuance of those certificates and who hold their certificates as a capital
asset.
This discussion is based on present provisions of the Internal Revenue Code
of 1986, as amended, the proposed, temporary and final Treasury regulations
under the tax code, and administrative rulings or pronouncements and judicial
decisions:
- all as in effect on the date of this prospectus, and
- all of which are subject to change, possibly with retroactive effect.
This discussion does not address all of the tax consequences that may be
relevant to a certificateholder because of that certificateholder's particular
circumstances. It also does not address the U.S. federal income tax consequences
that may be relevant to some types of certificateholders that are subject to
special treatment under the tax code, including:
- dealers in securities or currencies,
- financial institutions,
- tax-exempt entities,
- insurance companies,
- persons holding certificates as a part of a hedging, integrated,
conversion or constructive sale transaction or a straddle, or
- persons whose functional currency is not the U.S. dollar.
Also, the following discussion does not consider the alternative minimum tax
consequences, if any, of the investment in the certificates, or the state, local
or foreign tax consequences of the investment. Each prospective
certificateholder is urged to consult its own tax advisor in determining the
federal, state, local and foreign income and any other tax consequences of the
purchase, ownership and disposition of a certificate.
The trust will not ask the IRS for a ruling regarding any of the U.S.
federal income tax consequences discussed in this prospectus. As a result, the
trust can give no assurance that the IRS will not take positions contrary to
those described below. Opinions of counsel are not binding on the IRS or the
courts. In addition, the opinions of Jones, Day, Reavis & Pogue described below
are based on the representations and assumptions described in those opinions,
including, but not limited to, the assumption that all of the relevant parties
will comply with all terms of the POOLING AND SERVICING AGREEMENT, the
SUPPLEMENT, and the PURCHASE AGREEMENT. The conclusions of tax counsel described
in the opinions and the discussion of the U.S. federal income tax consequences
in this prospectus may not be accurate:
- if those representations are inaccurate, and/or
- if the relevant parties fail to comply with the terms of these
agreements.
TAX CHARACTERIZATION OF THE TRUST
The transferor anticipates that Jones, Day, Reavis & Pogue will furnish an
opinion to the transferor, in relation to the issuance of certificates of any
series offered by this prospectus, that the trust will not be classified as an
association or as a publicly traded partnership taxable as a corporation for
U.S. federal income tax purposes. The opinion will be based on the assumptions
and qualifications described in that opinion and on certain representations or
covenants. As discussed in the previous paragraph, however, this opinion is not
binding on the IRS and no assurance can be given that this characterization will
prevail.
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See the last three paragraphs of this subsection for discussion of possible
alternative characterizations of the trust.
The assumptions and qualifications described in the opinion will include:
- an assumption that any secondary transactions entered into for any
certificates or other interests in the trust, like the deposit of
certificates into a second trust and the issuance of securities out of
that trust, will not adversely affect the U.S. federal income tax status
of the trust, and
- the qualification that the opinion is limited to the issuance of the
certificates of that series by the trust.
If other interests in the trust, excluding the certificates, for which no
opinion will be rendered that those interests would constitute debt for U.S.
federal income tax purposes, are characterized as equity interests in a
partnership, then the trust could be treated as a publicly traded partnership.
If all or part of the trust were treated as a partnership in which some or
all holders of one or more series were partners, that partnership could be
classified as a publicly traded partnership taxable as a corporation. Unless
specified exceptions apply, a partnership will be classified as a publicly
traded partnership taxable as a corporation if equity interests in that
partnership:
- are traded on an "established securities market", or
- are "readily tradeable" on a "secondary market" or its "substantial
equivalent".
One exception would be if the trust is not engaged in a "financial business" and
90% or more of its income consists of interest and other types of passive
income. Because Treasury regulations do not clarify the meaning of "financial
business" for this purpose, it is unclear whether this exception applies. The
POOLING AND SERVICING AGREEMENT and each SUPPLEMENT contain provisions designed
to reduce the risk that the trust could be classified as a publicly traded
partnership taxable as a corporation due to trading of interests in the trust
other than the certificates for which an opinion is furnished that the
certificates constitute debt for U.S. federal income tax purposes. There can be
no assurance, however, that the trust could not become a publicly traded
partnership taxable as a corporation, because some of the actions necessary to
comply with the exception are not fully within the control of the transferor.
If the trust were treated in whole or in part as a publicly traded
partnership taxable as a corporation, the taxable income of the trust would be
subject to U.S. federal income tax at the applicable marginal corporate income
tax rates applicable to that income. This entity-level tax could result in
reduced distributions to certificateholders. In addition, the distributions from
the trust would not be deductible in computing the taxable income of the deemed
corporation, except to the extent that:
- any certificates were treated as debt of the corporation, and
- distributions to the related certificateholders were treated as payments
of interest on the certificates.
Further, distributions to certificateholders not treated as holding debt would
be treated as dividends for U.S. federal income tax purposes to the extent of
the current and accumulated earnings and profits of the deemed corporation.
TAX CONSIDERATIONS RELATING TO CERTIFICATEHOLDERS
Tax Characterization of the Certificates as Debt
The transferor will express in the POOLING AND SERVICING AGREEMENT its
intent that the certificates will be treated as debt of the transferor for all
U.S. tax purposes. The transferor, by entering into the POOLING AND SERVICING
AGREEMENT, and each certificateholder, by the acceptance of a beneficial
interest in a certificate, will agree to treat the certificates as debt of the
transferor for U.S. tax purposes. However, the POOLING AND SERVICING AGREEMENT
generally refers to the transfer of receivables as a "transfer, assignment and
conveyance," and the transferor will treat the POOLING AND SERVICING AGREEMENT,
for some non-tax
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accounting purposes, as causing a transfer of an ownership interest in the
receivables to the trust and not as creating a debt obligation.
For U.S. federal income tax purposes, the economic substance of a
transaction usually determines its tax consequences. The form of a transaction,
while a relevant factor, is generally not conclusive evidence of the economic
substance of the transaction. In appropriate circumstances, the courts have
allowed the IRS, as well as taxpayers, in more limited circumstances, to treat a
transaction in accordance with its economic substance, as determined under U.S.
federal income tax law, even though the participants in the transaction have
characterized it differently for non-tax purposes.
The IRS and the courts have determined whether the economic substance of a
purported sale of an interest in property is, instead, a loan secured by the
transferred property based on numerous factors designed to determine whether the
seller has relinquished and the purchaser has obtained substantial incidents of
ownership in the transferred property. The primary factors examined are whether
the purchaser has the opportunity for gain if the property increases in value
and has the risk of loss if the property decreases in value. Except as otherwise
specified in the related prospectus supplement, Jones, Day, Reavis & Pogue will,
upon the issuance of a series of certificates, opine that, although no
transaction closely comparable to that contemplated in this prospectus and the
related prospectus supplement has been the subject of any Treasury regulation,
revenue ruling or judicial decision, the certificates will be properly
characterized as indebtedness of the transferor for U.S. federal income tax
purposes. The discussion below assumes that the certificates will be considered
debt of the transferor for U.S. federal income tax purposes.
Taxation of Interest Income on the Certificates
General. The transferor intends to take the position that a U.S.
CERTIFICATE OWNER generally will include the stated interest on a certificate in
gross income when that interest income is received or accrued according to that
U.S. CERTIFICATE OWNER'S regular method of tax accounting. This conclusion is
based on the transferor's position that the stated interest on a certificate is
unconditionally payable.
Under the applicable Treasury regulations, the stated interest on the
certificates will be considered unconditionally payable only if the terms and
conditions of the certificates make the likelihood of late payment or
non-payment of the stated interest a remote contingency. The transferor believes
that the late payment or non-payment of stated interest on the certificates is a
remote contingency:
- because the trust and the trustee will have no discretion to withhold,
delay or otherwise defer scheduled monthly payments of stated interest on
the certificates, if the trust has sufficient cash on hand to allow the
trustee to make those interest payments, and
- based on the ratings of the certificates.
If, however, the stated interest on the certificates is not considered
unconditionally payable:
- the stated interest on the certificates will be considered original issue
discount, and
- a U.S. CERTIFICATE OWNER will be required to include that stated interest
in income, as original issue discount, on a daily economic accrual basis
despite that person's regular method of tax accounting and without regard
to whether cash related to that income is paid at the same time.
In addition, if the stated interest on the certificates is not paid in full on a
DISTRIBUTION DATE, the certificates may at that time, and at all later times, be
considered to be issued with original issue discount and all U.S. CERTIFICATE
OWNERS would be required to include that stated interest in income as original
issue discount on an economic accrual basis.
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Original Issue Discount Obligations. Assuming that the stated interest on
the certificates is considered to be "unconditionally payable," a series of
certificates will not be considered to have been issued with original issue
discount unless:
- a substantial amount of that series of certificates is sold, in the
original issuance of those certificates, to investors at a price that is
less than the stated principal amount of those certificates, and
- the amount of the discount exceeds a statutory de minimis amount of
original issue discount.
Under applicable regulations, a holder of a certificate issued with de minimis
original issue discount must include the original issue discount in income
proportionately as principal payments are made on a class of certificates.
A U.S. CERTIFICATE OWNER must include the amount of the original issue
discount in income on a daily economic accrual basis without regard to that
person's method of accounting and without regard to receipt of cash related to
that income. A U.S. CERTIFICATE OWNER will not be required to include in income
separately any payments received on the certificates of the original issue
discount. The relevant prospectus supplement will disclose if any series of
certificates is issued with original issue discount.
A certificateholder who purchases a certificate at a discount from its
adjusted issue price may be subject to the "market discount" rules of the tax
code. The relevant parts of these rules provide:
- for gain attributable to accrued market discount to be treated as
ordinary income when partial principal payments are received, or when the
certificate is sold or disposed of, and
- for interest deductions related to any debt incurred to acquire or carry
the market discount certificate to be deferred.
A certificateholder that purchases a certificate for an amount greater than
the sum of all amounts payable on that certificate after the purchase date other
than payments of "qualified stated interest," the "stated redemption amount,"
will be considered to have purchased the certificate at a premium. That
certificateholder may generally choose to amortize the premium as an offset to
interest income using a constant yield method over the remaining term of the
certificate.
Sale, Exchange or Retirement of Certificates
Upon a sale or other taxable exchange, retirement or disposition of a
certificate, a U.S. CERTIFICATE OWNER will recognize gain or loss equal to the
difference between:
- the amount realized on that sale, exchange, retirement or other
disposition, less an amount equal to any accrued but unpaid interest that
the U.S. CERTIFICATE OWNER has not included in gross income previously,
which will be taxable as gross income, and
- the U.S. CERTIFICATE OWNER'S adjusted tax basis in that certificate:
-- as increased by any original issue discount or market discount
previously included in income by the holder, and
-- as decreased by any deductions previously allowed for amortizable
bond premium and by any payments reflecting principal or original
issue discount received for that certificate.
This gain or loss generally will be capital gain or loss and generally will be
considered long-term capital gain or loss if the U.S. CERTIFICATE OWNER held the
certificate for more than one year at the time of the sale, exchange, retirement
or other disposition and subject to the market discount provisions of the tax
code. The long-term capital gains of individuals, estates, and trusts generally
are eligible for reduced rates of taxation. Capital losses generally may be used
only to offset capital gains.
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NON-U.S. CERTIFICATE OWNERS
Assuming that all of the certificates issued to NON-U.S. CERTIFICATE OWNERS
are considered debt of the transferor for U.S. federal income tax purposes and
the interest on the certificates is not "contingent interest," under present
U.S. federal income tax law, and subject to the discussion on backup withholding
below under "-- Information Reporting and Backup Withholding":
- no withholding of U.S. federal income tax will be required for the
payment by the transferor or any withholding agent of principal or
interest on a certificate owned by a NON-U.S. CERTIFICATE OWNER if:
-- the beneficial owner does not actually or constructively own 10% or
more of the total combined voting power of all classes of stock of
the transferor entitled to vote within the meaning of section
871(h)(3) of the tax code and the Treasury regulations under the tax
code,
-- the beneficial owner is not a controlled foreign corporation that is
related to the transferor through stock ownership,
-- the beneficial owner is not a bank whose receipt of interest on a
certificate is described in section 881(c)(3)(A) of the tax code, and
-- the beneficial owner satisfies the statement requirement provided in
section 871(h) and section 881(c) of the tax code and the Treasury
regulations under the tax code.
To satisfy the statement requirement referred to above, the
certificateholder, or a financial institution holding the certificate on behalf
of the owner, must provide, in accordance with specified procedures, the
transferor or any withholding agent with a statement to the effect that the
certificateholder is not a U.S. CERTIFICATE OWNER. Currently, these requirements
will be met if:
- the certificateholder provides its name and address, and certifies, under
penalties of perjury, that it is not a U.S. CERTIFICATE OWNER, which
certification may be made on an IRS Form W-8 or successor form, or
- a financial institution holding the certificate on behalf of a
certificate owner certifies, under penalties of perjury, that the
statement has been received by it and furnishes any withholding agent
with a copy.
Under recently finalized Treasury regulations, the statement requirement also
may be satisfied with other documentary evidence for interest paid after
December 31, 2000 to an offshore account or through some foreign intermediaries.
If a NON-U.S. CERTIFICATE OWNER cannot satisfy the requirements described
above, payments of interest made to that beneficial owner will be subject to a
30% withholding tax unless that beneficial owner provides the transferor or any
withholding agent with a properly executed:
- IRS Form 1001, or successor form, claiming an exemption from, or a
reduction in the rate of, that withholding tax under the benefit of an
applicable U.S. income tax treaty, or
- IRS Form 4224, or successor form, stating that the interest paid on the
certificate is not subject to that withholding tax because it is
effectively connected with the certificateholder's conduct of a trade or
business in the United States.
Under recently finalized Treasury regulations, NON-U.S. CERTIFICATE OWNERS
generally will be required to provide an IRS Form W-8 in lieu of an IRS Form
1001 and IRS Form 4224, although alternative documentation may be applicable in
some situations.
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The NON-U.S. CERTIFICATE OWNER, although exempt from the U.S. withholding
tax discussed above, will be subject to U.S. federal income tax on the interest
on a net income basis in the same manner as if it were a U.S. CERTIFICATE OWNER
if:
- it is engaged in a trade or business in the United States, and
- the interest on its certificates is effectively connected with the
conduct of that trade or business.
In addition, if that NON-U.S. CERTIFICATE OWNER is a foreign corporation, it may
be subject to a U.S. branch profits tax equal to 30%, or lower applicable treaty
rate, of its effectively connected earnings and profits for the taxable year,
subject to adjustments. For this purpose, the interest income will be included
in that foreign corporation's earnings and profits.
Any gain realized by a NON-U.S. CERTIFICATE OWNER upon the sale, exchange,
retirement or other disposition of a certificate generally will not be subject
to U.S. federal income or withholding tax unless:
- the gain is effectively connected with a U.S. trade or business of the
NON-U.S. CERTIFICATE OWNER in the United States,
- for a NON-U.S. CERTIFICATE OWNER who is an individual, that individual is
present in the United States for 183 days or more in the taxable year of
the sale, exchange, retirement or other disposition, and other conditions
are met, or
- to the extent the gain is considered accrued but unpaid interest, the
requirements described above for interest are not satisfied.
If the certificates were treated as an interest in a partnership, except a
publicly traded partnership taxable as a corporation, instead of indebtedness
that characterization could cause a NON-U.S. CERTIFICATE OWNER to be treated as
engaged in a trade or business in the United States, in which case, the NON-U.S.
CERTIFICATE OWNER:
- would be required to file a U.S. federal income tax return, and
- generally would be subject to U.S. federal income tax, including, for a
NON-U.S. CERTIFICATE OWNER that is a corporation, the U.S. branch profits
tax, on its allocable share of the net income from the partnership.
Further, withholding may apply to partnership income that is allocable to a
NON-U.S. CERTIFICATE OWNER that is considered to be a partner in the
partnership. That withholding would be imposed at a rate equal to the highest
marginal U.S. federal income tax rate applicable to the NON-U.S. CERTIFICATE
OWNER. Alternatively, if some or all of the certificates were treated as equity
interests in a publicly traded partnership taxable as a corporation, the gross
amount of any related dividend distributions to a NON-U.S. CERTIFICATE OWNER
generally would be subject to U.S. withholding tax at the rate of 30%, unless
that rate were reduced under an applicable U.S. income tax treaty. See the last
three paragraphs of "-- Tax Characterization of the Trust" above for discussion
of possible alternative characterizations of the trust.
Special rules may apply for NON-U.S. CERTIFICATE OWNERS who:
- have an office or other fixed place of business in the U.S.,
- are former U.S. citizens,
- are engaged in a banking, financing, insurance or similar business in the
U.S., or
- are "controlled foreign corporations," "foreign personal holding
companies," "passive foreign investment companies" or corporations that
accumulate earnings in order to avoid U.S. federal income tax.
These persons should consult their own U.S. tax advisors before investing in the
certificates.
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INFORMATION REPORTING AND BACKUP WITHHOLDING
In general, information reporting requirements will apply to some payments
of principal and interest paid on certificates and to the proceeds of the sale
of a certificate made by U.S. CERTIFICATE OWNERS except some exempt recipients,
like corporations. A 31% backup withholding tax will apply to those payments if
the U.S. CERTIFICATE OWNER fails to provide a taxpayer identification number or
certification of exempt status or fails to report in full dividend and interest
income.
No information reporting or backup withholding will be required for
payments made by the transferor or any withholding agent to a NON-U.S.
CERTIFICATE OWNER if the statement described above under "-- Non-U.S.
Certificate Owners" has been received and the payor does not have knowledge that
the NON-U.S. CERTIFICATE OWNER is actually a U.S. CERTIFICATE OWNER.
In addition, backup withholding and information reporting will not apply if
payments of principal and interest on a certificate are paid or collected by a
foreign office of a custodian, nominee or other foreign agent on behalf of a
certificateholder or if a foreign office of a broker, as defined in applicable
Treasury regulations, pays the proceeds of the sale of a certificate to the
owner of that security. If, however, the custodian, nominee, agent or broker is,
for U.S. federal income tax purposes:
- a United States person,
- a controlled foreign corporation,
- a foreign person that derives 50% or more of its gross income for
specified periods from the conduct of a trade or business in the United
States, or
- for taxable years beginning after December 31, 2000, a foreign
partnership in which one or more United States persons, in total, own
more than 50% of the income or capital interests in the partnership or
which is engaged in a trade or business in the United States,
those payments will not be subject to backup withholding but will be subject to
information reporting, unless:
- that custodian, nominee, agent or broker has documentary evidence in its
records that the relevant certificateholder is not a United States person
and other conditions are met, or
- the certificateholder establishes an exemption.
Payments of principal and interest on a certificate paid to the
certificateholder by a United States office of a custodian, nominee or agent, or
the payment by the United States office of a broker of the proceeds of the sale
of a certificate, will be subject to both backup withholding and information
reporting unless:
- the relevant certificateholder provides the statement referred to above
under "-- Non-U.S. Certificate Owners," and
- the payor has no knowledge that the certificateholder is actually a U.S.
CERTIFICATE OWNER or the certificateholder establishes an exemption.
Any amounts withheld under the backup withholding rules will be allowed as
a refund or a credit against a certificateholder's U.S. federal income tax
liability if the required information is furnished to the IRS.
STATE AND LOCAL TAXATION
The discussion above does not address the tax consequences of the purchase,
ownership or disposition of a certificate under any state or local tax law. Each
investor should consult its own tax advisor regarding state and local tax
consequences of purchasing, owning and disposing of a certificate.
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EMPLOYEE BENEFIT PLAN CONSIDERATIONS
A plan fiduciary considering an investment in the offered certificates
should consider that an investment might constitute or give rise to a prohibited
transaction under Employee Retirement Income Security Act of 1974, as amended,
and the tax code or any substantially similar federal, state or local law. ERISA
and the tax code impose restrictions on:
- employee benefit plans as defined in Section 3(3) of ERISA,
- plans described in Section 4975(e)(1) of the tax code, including
retirement accounts and Keogh plans,
- entities whose underlying asset include plan assets by reason of a plan's
investment in these entities, and
- persons who have specified relationships to a plan described as "parties
in interest" under ERISA and "disqualified persons" under the tax code.
REGULATION UNDER ERISA AND THE TAX CODE
ERISA imposes duties on persons who are fiduciaries of a plan. Under ERISA,
any person who exercises any authority or control over the management or
disposition of a plan's assets is considered to be a fiduciary of that plan.
Both ERISA and the tax code prohibit some transactions involving "plan assets"
between a plan and parties in interest or disqualified persons. Violations of
these rules may result in the imposition of an excise tax or penalty.
The term "plan assets" is not defined by ERISA or the tax code. However, a
plan's assets may be considered to include an interest in the underlying assets
of the trust if the plan acquires an "equity interest" in the trust. An equity
interest includes the certificates. If so, the operation of the trust may result
in a prohibited transaction under ERISA and the tax code.
FINAL REGULATION ISSUED BY THE DOL
The U.S. Department of Labor issued a final regulation which provides
exceptions to a plan which acquires an equity interest in the trust. If a plan
acquires a "publicly-offered security," the issuer of the security is not
treated as holding plan assets. A publicly-offered security is a security that:
- is freely transferable,
- is part of a class of securities that is owned by 100 or more investors
independent of the issuer and of one another, and
- is either:
-- part of a class of securities registered under Section 12(b) or 12(g)
of the Securities Exchange Act, or
-- sold to the plan as part of an offering of securities to the public
under an effective registration statement under the Securities Act
and the class of securities of which that security is part is
registered under the Securities Exchange Act within the requisite
time.
Although it is anticipated that the conditions of this exception may be met
for some classes of certificates, no assurances can be given and no monitoring
will be done.
In addition, the final regulation provides that if at all times more than
75% of the value of all classes of equity interests in certificates of a series
are held by investors other than plan investors, an investing plan's assets will
not include any of the underlying assets of the trust.
If the criteria for publicly-offered securities are not met for any class
of offered certificates, the trust assets may be treated as including assets of
plans that are certificateholders. If so, transactions involving the trust and
parties in interest or disqualified persons relating to plans that are
certificateholders might be
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prohibited under ERISA and the tax code. For example, if a participant in any
plan is a cardholder of one of the accounts, under DOL interpretations the
holding of interests in certificates by that plan could constitute a prohibited
transaction. In addition, if PRC or any underwriter of that series is a party in
interest or a disqualified person for an investing plan, the purchase of an
interest in certificates by that plan could constitute a prohibited transaction.
An investment by a plan in certificates could result in liability under ERISA
and the tax code unless a statutory or administrative exemption exists and the
plan satisfies all conditions for exemptive relief.
EXEMPTIONS TO PROHIBITED TRANSACTIONS
There are five class exemptions issued by the DOL that could apply in the
event of a prohibited transaction. These DOL Prohibited Transaction Class
Exemptions apply to:
- plan asset transactions determined by independent qualified professional
asset managers (PTE 84-14),
- some transactions involving bank collective investment funds (PTE 91-38),
- some transactions involving insurance company pooled separate accounts
(PTE 90-1),
- some transactions involving insurance company general accounts (PTE
95-60), and
- plan asset transactions determined by in-house asset managers (PTE
96-23).
We can provide no assurance that these exemptions or any other exemption
will apply, even if all of the conditions specified are satisfied.
SPECIAL CONSIDERATIONS FOR INSURANCE COMPANIES
Based on the reasoning of the United States Supreme Court in John Hancock
Life Ins. Co. v. Harris Trust and Savings Bank, 114 S. Ct. 517 (1993), an
insurance company's general account may be deemed to include assets of the plans
investing in the general account, e.g., through the purchase of an annuity
contract, and the insurance company might be treated as a party-in-interest with
respect to a plan by virtue of that investment.
Any purchaser that is an insurance company using the assets of an insurance
company general account should note that the Small Business Job Protection Act
of 1996 added new Section 401(c) of ERISA relating to the status of the assets
of insurance company general accounts under ERISA and Section 4975 of the tax
code. Pursuant to Section 401(c), the Department of Labor issued final
regulations effective January 5, 2000 with respect to insurance policies issued
on or before December 31, 1998 that are supported by an insurer's general
account. As a result of these regulations, assets of an insurance company
general account will not be treated as "plan assets" for purposes of the
fiduciary responsibility provisions of ERISA and Section 4975 of the tax code to
the extent those assets relate to contracts issued to employee benefit plans on
or before December 31, 1998 and the insurer satisfies various conditions.
Section 401(c) also provides that, except in the case of avoidance of the
final regulations issued by the Department of Labor and actions brought by the
Secretary of Labor relating to certain breaches of fiduciary duties that also
constitute breaches of state or federal criminal law, until the date that is 18
months after the final regulations issued by the Department of Labor become
final, no liability under the fiduciary responsibility and prohibited
transaction provisions of ERISA and Section 4975 of the tax code may result on
the basis of a claim that the assets of the general account of an insurance
company constitute the "plan assets" of any such plan.
The plan asset status of insurance company separate accounts is unaffected
by new Section 401(c) of ERISA, and separate account assets continue to be
treated as the plan assets of any of those plans invested in a separate account.
Potential investors considering the purchase of certificates of any series on
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behalf of an insurance company general account should consult their legal
advisors regarding the effect of these regulations on the investment.
GENERAL INVESTMENT CONSIDERATIONS
Prospective fiduciaries of a plan considering the purchase of interests in
certificates of any series should consult with their legal advisors concerning
the impact of ERISA and the tax code and the potential consequences of making an
investment in the certificates based on their specific circumstances. Each plan
fiduciary should take into account, among other considerations:
- whether the fiduciary has the authority to make the investment,
- the composition of the plan's portfolio as to diversification by type of
asset,
- the plan's funding objectives,
- the tax effects of the investment,
- whether the assets of the trust which are represented by these interests
would be considered plan assets, and
- whether, under the general fiduciary standards of investment prudence and
diversification an investment in certificates of any series is
appropriate for the plan taking into account the overall investment
policy of the plan and the composition of the plan's investment
portfolio.
Some employee benefit plans, for example, governmental plans and some
church plans, are not subject to the provisions of Title I of ERISA and Section
4975 of the tax code. For this reason, assets of these plans may be invested in
the certificates of each series without regard to the ERISA considerations
described here, subject to the provisions of any other applicable federal and
state law. It should be noted that any plan that is qualified and exempt from
taxation under the tax code is subject to the prohibited transaction rules
described in the tax code.
PLAN OF DISTRIBUTION FOR THE OFFERED CERTIFICATES
The place and time of delivery for any series of certificates will be
described in the accompanying prospectus supplement. PRC may sell certificates:
- through underwriters or dealers,
- directly to one or more purchasers, or
- through agents.
The prospectus supplement for any offered series will describe the terms of
the offering of the offered certificates, including:
- the name or names of any underwriters for the certificates,
- the purchase price of the certificates,
- the proceeds to PRC from the sale,
- any underwriting discounts,
- any other compensation of the underwriters,
- the initial offering price, and
- any discounts or concessions allowed or reallowed or paid to dealers.
Under each underwriting agreement, PRC will agree to sell to each of the
underwriters in the related prospectus supplement the principal amount of the
offered certificates. In turn, each of those underwriters
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will agree to purchase from PRC the principal amount of certificates described
in the underwriting agreement and in the related prospectus supplement. The
underwriting agreement may allow for a proportional adjustment in the event of
an increase or decrease in the full amount of the offered certificates. If there
is a default by any underwriter, the underwriting agreement will provide that,
in some circumstances, purchase commitments of the nondefaulting underwriters
may be increased or the underwriting agreement may be ended.
Each underwriting agreement will provide that PRC will indemnify the
related underwriters against some liabilities, including liabilities under the
federal securities laws.
LEGAL MATTERS
Legal matters relating to the issuance of certificates will be passed upon
for PRC by Jones, Day, Reavis & Pogue, New York, New York. Legal matters
relating to the issuance of certificates will be passed upon for the
underwriters by Skadden, Arps, Slate, Meagher & Flom LLP, New York, New York.
Skadden, Arps, Slate, Meagher & Flom LLP from time to time performs legal
services for FEDERATED and its affiliates.
REPORTS TO CERTIFICATEHOLDERS
Unless and until DEFINITIVE CERTIFICATES are issued, monthly and annual
reports, which contain unaudited information concerning the trust and which are
prepared by the servicer, will be sent on behalf of the trust to Cede & Co., as
nominee of DTC and registered holder of the related certificates. These reports
will not constitute financial statements prepared under generally accepted
accounting principles. PRC does not intend to send any of its financial reports
to registered holders of certificates or to owners of beneficial interests in
the certificates. PRC will file with the SEC the periodic reports relating to
the trust that are required under federal securities laws. PRC may suspend the
filing of periodic reports to the extent the filings are no longer required of
PRC. See "Description of the Certificates -- Book-Entry Registration" and
"-- Reports to Certificateholders" and "The Pooling and Servicing Agreement --
Evidence as to Compliance."
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WHERE YOU CAN FIND MORE INFORMATION
We filed a registration statement relating to the securities with the SEC.
This prospectus is part of the registration statement, but the registration
statement includes additional information.
The SEC allows us to incorporate information by reference to SEC filings.
This means that we can disclose information to you by referring to those
documents. The information incorporated by reference is considered to be part of
this prospectus. We refer you to the registration statement for additional
information, including any amendments and exhibits. We also incorporate by
reference any future annual, monthly and special SEC reports and proxy materials
filed by or on behalf of the trust until the offering of the certificates has
ended.
Information that we file later with the SEC will automatically update the
information in this prospectus. You should always rely on the later information
over different information included in this prospectus or the related prospectus
supplement. All reports, statements and other information we file are available
for inspection without charge at the public reference facilities maintained by
the SEC at:
- 450 Fifth Street, N.W., Washington, D.C. 20549,
- 7 World Trade Center, New York, New York 10048, and
- Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511.
Copies of the filings may be obtained from the Public Reference Section of
the SEC, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates.
Please call the SEC at (800) SEC-0330 for further information on the operation
of the public reference rooms. In addition, the SEC maintains a Web site at
"http://www.sec.gov" that contains filings and information regarding registrants
that file electronically with the SEC.
As a recipient of this prospectus, you may request a copy of any document
we incorporate, except exhibits to those documents (unless the exhibits are
specifically incorporated by reference in those documents), at no cost, by
writing us at: Prime Receivables Corporation, 7 West Seventh Street, Cincinnati,
Ohio 45202, attention: David Dawson, or calling us at (513) 579-7580.
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GLOSSARY OF TERMS FOR PROSPECTUS
"ACCOUNTS" means all of the consumer open end credit card accounts owned by
the originators on the Initial Cut-Off Date, each Automatic Additional Account,
and each Supplemental Account.
"ACCUMULATION PERIOD" means for any series or class, a period:
- beginning on a date determined as described in the related prospectus
supplement, and
- ending on the earliest of:
-- the start of the Early Amortization Period,
-- the date specified in the related prospectus supplement, and
-- the date that the Trust Termination Date; and
during which collections of Principal Receivables up to the amount specified in
the related prospectus supplement are accumulated in a Principal Funding Account
for payment to certificateholders of that series or class on the Expected Final
Payment Date.
"ACTIVE ACCOUNTS" means any Account in which there has been either purchase
or merchandise return activity during the preceding 12 Monthly Periods.
"ADDITION CUT-OFF DATE" means any date PRC designates any Supplemental
Account for inclusion in the trust.
"ADDITION DATE" means the date PRC, under the conditions specified in the
Pooling and Servicing Agreement, adds receivables arising in Accounts owned by
FDS or another Originator to the trust.
"ADDITIONAL ACCOUNT" means each Automatic Additional Account and
Supplemental Account.
"ADDITIONAL INTEREST" means interest on overdue Monthly Interest at the
rate specified in the related prospectus supplement.
"ADJUSTMENT PAYMENT" means any payment PRC must make into the Excess
Funding Account equal to the amount by which the servicer adjusts downward the
Principal Receivables:
- for which it received no collections and no charge-off has occurred, and
- which causes the Minimum Transferor Interest to exceed the Transferor
Interest.
"AGGREGATE ADDITION LIMIT" means a number of accounts which either:
- for any three-month period, may not exceed 15% of the number of Active
Accounts as of the first day of the calendar year during which those
Monthly Periods begin, or
- for any twelve-month period, equals 20% of the number of Active Accounts
as of the first day of that twelve-month period.
"AMORTIZATION PERIOD" means, for any series or any class within a series,
any Early Amortization or Accumulation Period.
"AUTOMATIC ADDITIONAL ACCOUNTS" means:
- each consumer open end credit card account:
-- originated by an Originator during the normal operation of its credit
card business and not acquired by the transferor or that Originator
from another credit card issuer,
-- in existence and owned by that Originator and the receivables of
which had been transferred to the transferor under the Purchase
Agreement on the Addition Date and in existence at the close of
business on the date that receivables generated in that account are
designated for inclusion in the trust,
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-- payable in United States dollars, and
-- whose receivables have not been charged off before the date of their
designation for inclusion in the trust, and
- other consumer credit card accounts whose receivables each rating agency
permits to be added automatically to the trust.
"BASE RATE" means, generally, for any Monthly Period, the annualized
percentage equivalent of the sum of:
- the weighted average certificate rate for all classes of certificates of
a series, and
- a fraction:
-- whose numerator is the Monthly Servicing Fee for that Monthly Period,
and
-- whose denominator is the Invested Amount on the last business day of
the preceding Monthly Period;
provided that this fraction for the Base Rate may be altered in the related
Supplement.
"CASH COLLATERAL ACCOUNT" means an account providing credit enhancement for
a series or class of certificates directly or indirectly as security for a Cash
Collateral Guaranty.
"CASH COLLATERAL GUARANTY" means a guaranty secured by the deposit of cash
or Cash Equivalents in a Cash Collateral Account reserved for the beneficiaries
of that Cash Collateral Guaranty.
"CASH EQUIVALENTS" means those investments described under "Description of
the Certificates -- Trust Accounts."
"CERTIFICATE RATE" means the interest rate per annum applicable for any
series or class of certificates.
"CHARGE ACCOUNT AGREEMENT" means the agreement:
- consisting of one or more documents,
- whose terms and conditions obligates a person to pay for purchased
merchandise or services under a credit plan that permits that person to
purchase merchandise and services on credit, together with any finance
charges and other related charges,
as that agreement may be amended, modified or supplemented from time to time;
provided, however, that only agreements between that person and (1) an
Originator or (2) a creditor approved by each of the rating agencies will be
considered a Charge Account Agreement.
"CLEARSTREAM" means Clearstream Banking, societe anonyme, an institution
administering a book-entry settlement system for trading of securities in
Europe.
"CLEARSTREAM CUSTOMERS" means organizations participating in Clearstream's
book-entry system.
"CLOSING DATE" means the date of issuance of a series.
"COLLATERAL INVESTED AMOUNT" means a subordinated interest in a series of
certificates in an amount initially equal to the percentage of the certificates
of that series specified in the related prospectus supplement.
"COLLECTION ACCOUNT" means a non-interest bearing segregated account held
for the benefit of the certificateholders into which the servicer deposits
collections on the receivables.
"CONTROLLED ACCUMULATION PERIOD" means for any series or class, a period:
- beginning on a date specified in the related prospectus supplement after
the Revolving Period, and
- ending on the earliest of:
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-- the start of the Early Amortization Period or the Rapid Accumulation
Period,
-- the date specified in the related prospectus supplement, and
-- the Trust Termination Date; and
during which collections of Principal Receivables up to the amount specified in
the related prospectus supplement are deposited monthly into the Principal
Funding Account for payment to certificateholders on the Expected Final Payment
Date.
"CONTROLLED AMORTIZATION PERIOD" means for any series or class, a period:
- beginning on a date specified in the related prospectus supplement, and
- ending on the earliest of:
-- the start of the Early Amortization Period, and
-- the date specified in the related prospectus supplement; and
during which collections of Principal Receivables allocable to the Invested
Amount and other amounts up to an amount specified in the related prospectus
supplement are paid to certificateholders of that series or class on each
Distribution Date.
"CREDIT AND COLLECTION POLICIES" means the written policies and procedures
of any Originator relating to the operation of its consumer revolving lending
business, including:
- determining the creditworthiness of credit card customers,
- the extension of credit to credit card customers, and
- relating to the maintenance of credit card accounts and collection of
receivables,
as these policies and procedures may be modified in accordance with requirements
of law, the Pooling and Servicing Agreement and the Purchase Agreement.
"DATE OF DETERMINATION" means with respect to the Yield Factor or the
Finance Charge Receivable Factor, respectively, the date on which that 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 amount of defaulted
receivables described under "Description of the Certificates -- Defaulted
Receivables" and calculated as described in the related prospectus supplement.
"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 that account as uncollectible.
"DEFINITIVE CERTIFICATES" means certificates in fully registered,
certificated form that are only issued to certificateholders under the
circumstances described under "Description of the Certificates -- Definitive
Certificates."
"DISTRIBUTION ACCOUNT" means a non-interest bearing segregated demand
deposit account from which the trust makes all distributions to
certificateholders.
"DISTRIBUTION DATE" means each date specified in the related prospectus
supplement on which distributions of interest or principal are to be made to
certificateholders.
"DTC PARTICIPANTS" means participants of DTC including securities brokers
and dealers, banks, trust companies, clearing corporations, and certain other
organizations.
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"EARLY AMORTIZATION PERIOD" means for any series, a period:
- beginning on the earliest of:
-- the day a Pay Out Event occurs,
-- the Expected Final Payment Date for the most senior class, if the
Invested Amount for that class has not been paid in full on that date
and
-- any other date specified in the related prospectus supplement, and
- ending on the earlier of:
-- the Trust Termination Date and
-- the Series Termination Date; and
"ELIGIBLE ACCOUNT" means each account satisfying the requirements listed in
"The Pooling and Servicing Agreement -- Eligible Accounts; Eligible
Receivables."
"ELIGIBLE RECEIVABLE" means each receivable satisfying the requirements
listed in "The Pooling and Servicing Agreement -- 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 as described in the related prospectus supplement.
"ENHANCEMENT INVESTED AMOUNT" means a subordinated interest in cash flows
in respect of the receivables to the extent described in the related prospectus
supplement.
"EUROCLEAR" means the system operated by Morgan Guaranty Trust Company of
New York's Brussels, Belgium office under contract with Euroclear Clearance
System, S.C., a Belgian cooperative corporation.
"EUROCLEAR PARTICIPANTS" means participants of the Euroclear system.
"EXCESS FINANCE CHARGE COLLECTIONS" means those Finance Charge Collections
and other amounts described under "Description of the Certificates -- Sharing of
Excess Finance Charge Collections."
"EXCESS FUNDING ACCOUNT" means a demand deposit account held for the
benefit of the certificateholders in which principal collections are held as
collateral if the Transferor Interest is less than the Minimum Transferor
Interest.
"EXCHANGEABLE TRANSFEROR CERTIFICATE" means the certificate that represents
the Transferor Interest in the trust.
"EXPECTED FINAL PAYMENT DATE" means for a series or class with an
Accumulation Period, the expected date of final payment of principal and any
accrued and unpaid interest for that series or class specified in the
Supplement.
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"FEDERATED CARDS" means the holders of the credit cards issued by the
Originators under department store tradenames to purchase virtually all of the
various types of merchandise and services offered by the Federated Stores.
"FEDERATED STORES" means 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 those stores formerly operated
under other nameplates, "Macy's."
"FINANCE CHARGE COLLECTIONS" means with respect to any series for any
business day:
- the product of (1) collections received with respect to the receivables
minus Recoveries and (2) the Yield Factor plus
- any investment earnings on amounts on deposit in the Excess Funding
Account plus
- Recoveries.
"FINANCE CHARGE RECEIVABLE FACTOR" means with respect to any Date of
Determination:
- the total amount of finance charges, late fees, and other fees and
charges outstanding on the last day of the preceding Monthly Period
divided by
- the total Outstanding Balances of the Eligible Receivables on the last
day of that 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 that business day with respect to each Date of
Determination, and
- the total amount of Eligible Receivables as of that business day,
determined on the basis of a calculation performed by the servicer.
"FIXED/FLOATING ALLOCATION PERCENTAGE" means for each Monthly Period, the
percentage used to allocate to your series collections of Finance Charge
Receivables and collections of Principal Receivables as described in the related
prospectus supplement.
"FLOATING ALLOCATION PERCENTAGE" means for each Monthly Period, the
percentage used to allocate to your series Default Amounts and collections of
Finance Charge Receivables as described in the related prospectus supplement.
"FUNDING PERIOD" means for any pre-funded series, the period beginning on
the Closing Date and ending on the earliest of
- 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 total amount of
Principal Receivables in the trust,
- the day immediately preceding the day on which a Pay Out Event is deemed
to occur, and
- the first day of a Monthly Period specified in the related prospectus
supplement.
"INELIGIBLE RECEIVABLES" means receivables not satisfying the requirements
of Eligible Receivables.
"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 that 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 under a Charge Account Agreement.
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"INTEREST FUNDING ACCOUNT" means a segregated trust account held for the
benefit of the certificateholders of a series in which amounts to be paid to
those certificateholders as interest will be deposited on a monthly basis, if
interest payments are made to certificateholders less frequently than monthly.
"INVESTED AMOUNT" means for certificateholders in a series, the total
principal amount of their interest in trust assets as specified in the related
prospectus supplement.
"INVESTOR CHARGE-OFF" means for any Monthly Period and for any series, the
amount by which the Invested Amount will be reduced to cover Default Amounts
allocated to the series and other amounts as may be specified in the prospectus
supplement for any series that are not covered from collections of Finance
Charge Receivables or other sources as specified in the prospectus supplement
for any series.
"INVESTOR DEFAULT AMOUNT" means, with respect to each business day, an
amount equal to the product of:
- the Floating Allocation Percentage applicable for that business day, and
- the total Default Amount for all Defaulted Accounts on that business day.
"INVESTOR PERCENTAGE" means with respect to Principal Collections, Finance
Charge Collections and Receivables in Defaulted Accounts for any series of
certificates, the Floating Allocation Percentage or the Fixed/Floating
Allocation Percentage, as applicable.
"LOCK-BOX ACCOUNT" means an account in the name of the trustee with a
Lock-Box Bank.
"LOCK-BOX AGREEMENT" means each agreement among the respective Originator,
the trustee, and the respective Lock-Box Bank, under which the Lock-Box Bank
receives collections from time to time as provided in that agreement.
"LOCK-BOX BANK" means any of the banks that holds one or more Lock-Box
Accounts for receiving collections, under a Lock-Box Agreement.
"MINIMUM AGGREGATE PRINCIPAL RECEIVABLES" means, as of any date of
determination, an amount equal to the sum of:
- the initial invested amounts for all outstanding series on that date,
except any series created under a variable funding supplement or a paired
series,
- with respect to any series created under a variable funding supplement,
during the revolving period for that series, the invested amount on that
date of determination or, during the amortization period for that series,
the invested amount of that series on the last day of the revolving
period for that series, and
- with respect to any paired series, the invested amount of that series as
of that date, after taking into account any payments, deposits or
adjustments made on that date.
"MINIMUM TRANSFEROR INTEREST" means the product of:
- the sum of:
-- the aggregate Principal Receivables and
-- the amounts on deposit in the Excess Funding Account and
- the highest minimum transferor percentage for any series specified in the
related prospectus supplement.
"MONTHLY INTEREST" means interest accrued for a monthly interest accrual
period as specified in the related prospectus supplement for any series or
class.
"MONTHLY PERIOD" means a fiscal month of PRC.
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"MONTHLY SERVICING FEE" means for any Distribution Date with respect to any
series, the amount payable to the servicer with respect to a Monthly Period
described in the related prospectus supplement
"NON-U.S. CERTIFICATE OWNER" means a beneficial owner of a certificate that
is not a U.S. Certificate Owner.
"OBLIGOR" means a person or persons obligated to make payments with respect
to a receivable arising under an Account under the terms and conditions of a
Charge Account Agreement.
"ORIGINATOR" means FDS and any transferee, successor or assign of FDS or
any other originator of consumer open end credit card accounts designated to
have their receivables included in the trust.
"PAY OUT EVENT" means for any series of certificates issued by the trust,
any of the events identified in the related prospectus supplement and any of the
events described under "Description of the Certificates -- Pay Out Events"
causing the Rapid Accumulation Period or the Early Amortization Period to begin.
"PERMITTED LIEN" means, with respect to the receivables:
- liens in favor of the transferor created under the Purchase Agreement
assigned to the trustee under the Pooling and Servicing Agreement,
- liens in favor of the trustee under the Pooling and Servicing Agreement
and
- liens which secure the payment of taxes, assessments, and governmental
charges or levies, if those taxes are either (1) not delinquent or (2)
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 PRC, as transferor
of the receivables to the trust, FDS, as servicer and originator of the
receivables, and The Chase Manhattan Bank, as trustee, as amended from time to
time.
"PORTFOLIO YIELD" means with respect to any series for any Monthly Period,
the annualized percentage specified in the related prospectus supplement.
"PRE-FUNDING ACCOUNT" means a trust account:
- established with the trustee for the benefit of certificateholders of a
pre-funded series, and
- in which is deposited the pre-funded amount.
"PRINCIPAL ACCOUNT" means a segregated trust account held for the benefit
of certificateholders:
- in which Principal Collections are deposited, and
- from which those collections are withdrawn and distributed as described
in the related prospectus supplement under "Description of the Offered
Certificates -- Application of Collections."
"PRINCIPAL COLLECTIONS" means with respect to any series for any business
day, the product of:
- collections received with respect to the receivables minus Recoveries and
- one minus the Yield Factor.
"PRINCIPAL FUNDING ACCOUNT" means a segregated trust account held for the
benefit of the certificateholders of a series with an Accumulation Period in
which collections of Principal Receivables are accumulated during the
Accumulation Period. At the end of the Accumulation Period, the amount in this
account will be paid to certificateholders of that series or any class.
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"PRINCIPAL RECEIVABLES" means for any business day, the total amount of
Eligible Receivables as of that business day, determined on the basis of a
calculation performed by the servicer, minus the amount of Finance Charge
Receivables on that business day.
"PRINCIPAL SHORTFALLS" means for any series, the deficiency that occurs
when Principal Collections allocable to certificateholders and other amounts are
insufficient to cover required principal payments or deposits.
"PURCHASE AGREEMENT" means the Receivables Purchase Agreement among PRC, as
purchaser, and the Originators, as sellers, under which PRC purchases the
receivables from the Originators.
"PURCHASE TERMINATION DATE" means the date described under "The Receivable
Purchase Agreement -- Termination."
"QUALIFIED INSTITUTION" means a United States depository institution which
at all times is acceptable to each rating agency holding the trust accounts
described under "Description of the Certificates -- Trust Accounts."
"RAPID ACCUMULATION PERIOD" means for any series or class, a period:
- beginning when a Pay Out Event occurs or at another time specified in the
related prospectus supplement, and
- ending on the earliest of:
-- the start of the Early Amortization Period,
-- payment in full of the Invested Amount of the certificates of that
series or class, and
-- the Series Termination Date; and
during which collections of Principal Receivables allocable to a series or class
will be deposited on each Transfer Date into the Principal Funding Account and
used to pay principal to the certificateholders of that series on the Expected
Final Payment Date.
"RATINGS EFFECT" means a reduction or withdrawal by any rating agency of
its then-current rating of the investor certificates of any outstanding series
or class for which it is a rating agency.
"RECORD DATE" means with respect to any payment to certificateholders, the
date specified in the related prospectus supplement as of which a
certificateholder must be the registered holder of a certificate to receive a
payment on the following Distribution Date.
"RECOVERIES" means any amounts received by the servicer with respect to
receivables in accounts that previously became Defaulted Accounts.
"REMOVED ACCOUNTS" means accounts designated by PRC to have their
receivables conveyed from the trust to PRC and which will no longer constitute
trust accounts if PRC satisfies the conditions specified in the Pooling and
Servicing Agreement.
"RESERVE ACCOUNT" means a bank account established to provide support for a
series or one or more classes of certificates. This account may be funded by an
initial cash deposit or any other method specified in the related prospectus
supplement.
"REVOLVING PERIOD" means for any series, a period:
- beginning on the Closing Date, and
- ending when an Amortization Period or Accumulation Period begins; and
during which collections of Principal Receivables allocable to that series are
not paid to certificateholders or accumulated but are paid to the holder of the
Exchangeable Transferor Certificate or distributed in any other manner described
in the related prospectus supplement.
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"SERIES ALLOCATION PERCENTAGE" means on any date of determination, the
percentage equivalent of a fraction:
- whose numerator is the Invested Amount of a series, and
- whose denominator is the sum of the Invested Amounts of all then
outstanding series.
"SERIES TERMINATION DATE" means for any series, the final Distribution Date
on which principal and accrued and unpaid interest is scheduled to be paid as
described in the related prospectus supplement.
"SERVICER DEFAULT" means any failure of the servicer under the Pooling and
Servicing Agreement and any Supplement:
- to perform its duties or fulfill its obligations (each, a "breach") which
has a material adverse impact on certificateholders, and
- to cure the breach within a specified period of time, including any grace
period, after discovery or notice of the breach,
and certain events of bankruptcy and insolvency. See "The Pooling and Servicing
Agreement -- Servicer Default" for a description of the specific events that
could result in a Servicer Default.
"SHARED PRINCIPAL COLLECTIONS" means those principal collections and other
amounts described under "Description of the Certificates -- Shared Principal
Collections."
"SUPPLEMENT" means the supplement to the Pooling and Servicing Agreement
relating to a particular series.
"SUPPLEMENTAL ACCOUNTS" means after the Initial Cut-Off Date, those
accounts, except Automatic Additional Accounts, PRC designates to be added to
the trust only if they are Eligible Accounts. However, PRC must add Supplemental
Accounts to the trust if:
- the Transferor Interest is less than the Minimum Transferor Interest, or
- the total amount of Principal Receivables in the trust is less than the
Minimum Aggregate Principal Receivables.
"TRANSFER DATE" means the business day immediately before a Distribution
Date.
"TRANSFEROR FINANCE CHARGE COLLECTIONS" means those Finance Charge
Collections allocated to the transferor described in the applicable prospectus
supplement.
"TRANSFEROR INTEREST" means on any date of determination:
- the total amount of Principal Receivables in the trust at the end of the
day immediately before that date of determination, and
- amounts on deposit in the Excess Funding Account excluding any investment
earnings in those accounts and other trust assets, including any other
accounts specified in the related prospectus supplement, and
not allocated to certificateholders or any enhancement provider.
"TRANSFEROR PERCENTAGE" means a percentage of all cardholder payments on
the receivables in the trust equal to 100% minus the sum of the applicable
investor allocation percentage for all series of certificates then outstanding.
"TRUST TERMINATION DATE" means the earlier to occur of:
- unless a trust extension has occurred, the day after the Distribution
Date with respect to any series following the date on which funds have
been deposited in the Distribution Account or the applicable series
account for the payment of investor certificateholders of each series
then issued and outstanding sufficient to pay in full the aggregate
Invested Amount plus interest accrued at the
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applicable Certificate Rate through the end of the day prior to the
Distribution Date with respect to each such series,
- if a Trust extension has occurred in accordance with the Pooling and
Servicing Agreement, the extended Trust Termination Date.
"U.S. CERTIFICATE OWNER" means a beneficial owner of a certificate that is:
- a citizen or resident of the United States,
- a corporation or partnership created or organized in the United States or
under the laws of the United States or any political subdivision of the
United States,
- an estate whose income is subject to United States federal income
taxation regardless of its source, or
- a trust that is subject to the supervision of a court within the United
States and the control of a United States person as described in section
7701(a)(30) of the tax code or that has a valid election in effect under
applicable U.S. Treasury regulations to be treated as a United States
person.
"YIELD FACTOR" means with respect to any business day, the percentage
equivalent of an amount determined on the preceding Date of Determination, or on
that business day with respect to each Date of Determination, equal to:
- an amount equal to:
-- the product of the amount of finance charges, late fees, and other
fees and charges billed to cardholders on the receivables for the
Monthly Period preceding that date of determination and one minus the
Delinquency Percentage for the preceding Date of Determination, or on
that business day with respect to each Date of Determination, plus
-- Recoveries for the Monthly Period preceding that Date of
Determination
divided by
- the total amount of collections on receivables for the Monthly Period
preceding that date of determination.
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Prospectus Supplement
PRIME CREDIT CARD MASTER TRUST
SERIES 2000-1
$400,000,000
6.70%
CLASS A
ASSET BACKED CERTIFICATES
PRIME RECEIVABLES CORPORATION
Transferor
FDS BANK
Servicer
Underwriters
CREDIT SUISSE FIRST BOSTON
BANC OF AMERICA SECURITIES LLC
CHASE SECURITIES INC.
You should rely only on the information contained or incorporated by
reference in this prospectus supplement and the prospectus. We have not
authorized anyone to provide you with different information.
We are not offering these certificates in any state where the offer is not
permitted.
Dealers will deliver a prospectus supplement and prospectus when acting as
underwriters of these certificates and with respect to their unsold allotments
or subscriptions. In addition, all dealers selling these certificates will
deliver a prospectus supplement and prospectus until February 28, 2001.
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