<PAGE>
Filed Pursuant to Rule 424(b)(5)
Registration Nos. 333-39062 and 333-39062-01
Prospectus Supplement to Prospectus
dated December 8, 2000
Spiegel Credit Card Master Note Trust
Issuer
Spiegel Credit Corporation III First Consumers National Bank
Seller Servicer
Series 2000-A Asset Backed Notes
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<S> <C>
Principal amount $600,000,000
Interest Rate One-month LIBOR plus 0.30% per year*, payable monthly
on the 15th
Expected principal payment date November 2005 distribution date
Final maturity date November 2010 distribution date
Price to public $600,000,000 (or 100.00%)
Underwriting discount $1,800,000 (or 0.30%)
Proceeds to issuer $598,200,000 (or 99.70%)
</TABLE>
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* After the expected principal payment date, interest in excess of 7.5% per
annum will be paid on the notes only to the extent that there are funds
available for that purpose, and interest in excess of that amount will not be
covered by the insurance policy referred to below.
The notes will be paid from the trust assets, consisting primarily of an
interest in receivables in a portfolio of private label revolving credit card
accounts owned by First Consumers National Bank, and from payments received
under an interest rate swap agreement. The timely monthly payment of interest
on the notes and the full and timely payment of principal of the notes on the
final maturity date, will be guaranteed under a financial guaranty insurance
policy issued by MBIA Insurance Corporation.
We expect to issue the notes in book-entry form on or about December 19,
2000.
[MBIA LOGO]
You should consider carefully the risk factors beginning on page S-12
in this prospectus supplement and page 2 in the prospectus.
A note is not a deposit and neither the notes nor the underlying
accounts or receivables are insured or guaranteed by the Federal Deposit
Insurance Corporation or any other governmental agency.
The notes are obligations of Spiegel Credit Card Master Note Trust only
and are not obligations of Spiegel Credit Corporation III, First Consumers
National Bank or any other person.
This prospectus supplement may be used to offer and sell the notes only
if accompanied by the prospectus.
Neither the Securities and Exchange Commission nor any state securities
commission has approved these notes or determined that this prospectus
supplement or the prospectus is accurate or complete. Any representation to the
contrary is a criminal offense.
Underwriters of the Notes
Banc of America Securities LLC
Deutsche Banc Alex. Brown
J.P. Morgan & Co.
ABN AMRO Incorporated
HSBC
December 8, 2000
<PAGE>
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS
We (Spiegel Credit Corporation III) provide information to you about the
notes in two separate documents: (a) the accompanying prospectus, which
provides general information, some of which may not apply to your series of
notes, and (b) this prospectus supplement, which describes the specific terms
of your series of notes.
Whenever the information in this prospectus supplement is more specific
than the information in the accompanying prospectus, you should rely on the
information in this prospectus supplement.
You should rely only on the information provided in this prospectus
supplement and the accompanying prospectus, including the information
incorporated by reference. We have not authorized anyone to provide you with
different information. We are not offering the notes in any state where the
offer is not permitted.
We include cross references in this prospectus supplement and the
accompanying prospectus to captions in these materials where you can find
further related discussions. The following Table of Contents and the Table of
Contents in the accompanying prospectus provide the pages on which these
captions are located.
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TABLE OF CONTENTS
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Summary of Terms........................................................... S-1
Structural Summary......................................................... S-3
The Issuer................................................................ S-3
Collateral for the Notes.................................................. S-3
Spiegel Master Trust...................................................... S-4
Other Claims on the Receivables........................................... S-4
Allocations of Collections and Losses..................................... S-4
Excess Interest........................................................... S-6
Application of Finance Charge Collections................................. S-6
Principal Collections..................................................... S-7
Credit Enhancement........................................................ S-7
Interest Rate Swap........................................................ S-8
Pay Out Events............................................................ S-9
Events of Default......................................................... S-9
Optional Redemption....................................................... S-10
Tax Status................................................................ S-11
ERISA Considerations...................................................... S-11
Risk Factors.............................................................. S-11
Ratings................................................................... S-11
Spiegel Credit Corporation III............................................ S-11
Risk Factors............................................................... S-12
Receivables Performance.................................................... S-15
Delinquency and Loss Experience........................................... S-15
Revenue Experience........................................................ S-17
The Trust Portfolio........................................................ S-18
Maturity Considerations.................................................... S-22
Controlled Accumulation Period............................................ S-22
Rapid Amortization Period................................................. S-22
Payment Rates............................................................. S-22
Paired Series............................................................. S-23
Spiegel's Retail Operations................................................ S-23
Spiegel Catalog........................................................... S-23
Eddie Bauer............................................................... S-24
Newport News.............................................................. S-24
Description of Series Provisions........................................... S-25
General................................................................... S-25
Collateral Amount......................................................... S-25
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Page
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Allocation Percentages.................................................... S-25
Interest Payments......................................................... S-26
Excess Interest........................................................... S-27
Interest Rate Swap........................................................ S-28
Interest Rate Swap Counterparty........................................... S-28
Principal Payments........................................................ S-30
Controlled Accumulation Period............................................ S-30
Rapid Amortization Period................................................. S-31
Application of Finance Charge Collections................................. S-31
Reallocation of Principal Collections..................................... S-33
Investor Charge-Offs...................................................... S-33
Sharing Provisions........................................................ S-34
Principal Accumulation Account............................................ S-34
Reserve Account........................................................... S-34
Excess Collateral Amount.................................................. S-36
Spread Account............................................................ S-37
Spread Account Distributions.............................................. S-38
Paired Series............................................................. S-39
Pay Out Events............................................................ S-39
Events of Default......................................................... S-41
Servicing Compensation and Payment of Expenses............................ S-42
Certain Information Regarding the Insurance Policy and the Insurer......... S-43
The Insurance Policy...................................................... S-43
The Insurer............................................................... S-45
Insurer Financial Information............................................. S-45
Where You Can Obtain Additional Information About the Insurer............. S-46
Financial Strength Ratings of the Insurer................................. S-47
The Insurance Agreement................................................... S-47
Underwriting............................................................... S-48
Experts.................................................................... S-49
Glossary of Terms for Prospectus Supplement................................ S-50
Other Securities Issued and Outstanding.................................... I-1
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SUMMARY OF TERMS
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Issuer: Spiegel Credit Card Master Note Trust
Seller of Receivables to
Spiegel Master Trust: Spiegel Credit Corporation III
Originator and Servicer: First Consumers National Bank
Indenture Trustee: The Bank of New York
Owner Trustee: Bankers Trust Company
Closing Date: December 19, 2000
Clearance and Settlement: DTC/Clearstream/Euroclear
Minimum Denominations: $1,000
Servicing Fee Rate: 2% per annum
Initial Collateral Amount: $670,400,000 or greater amount
Excess Collateral Amount: $70,400,000 (10.5% of the collateral
amount) or greater amount
Primary Assets of the Issuer: An interest in receivables originated in
private label credit card accounts that can
be used to purchase goods and services from
Spiegel, Inc.'s retail subsidiaries and to
obtain cash advances on a limited basis
Principal Amount: $600,000,000
Percentage of Collateral Amount: No greater than 89.5%
Anticipated Ratings:* Moody's Standard & Poor's Fitch
Aaa AAA AAA
Credit Enhancement: An excess collateral amount, a spread
account, an interest rate swap and a
financial guaranty insurance policy
Interest Rate: One-month LIBOR plus 0.30% per year
After the expected principal payment date,
interest in excess of 7.5% per year will be
paid on the notes only to the extent that
there are funds available for that purpose,
and interest in excess of that amount will
not be covered by the financial guaranty
insurance policy.
</TABLE>
S-1
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Interest Accrual Method: Actual/360
Interest Payment Dates: Monthly (15th)
Interest Rate Index Reset Date: 2 London banking days before each
interest payment date
First Interest Payment Date: January 16, 2001
Commencement of Accumulation Period
(subject to adjustment): November 1, 2004
Expected Principal Payment Date: November 2005 distribution date
Final Maturity Date: November 2010 distribution date
ERISA eligibility: Yes, subject to important
considerations described under
"ERISA Considerations" in the
accompanying prospectus.
Debt for United States Federal Income Tax
Purposes: Yes, subject to important
considerations described under
"Federal Income Tax Consequences"
in the accompanying prospectus.
</TABLE>
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*It is a condition to issuance that one of these ratings be obtained and
that the collateral certificate be rated investment grade.
S-2
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STRUCTURAL SUMMARY
This summary does not contain all of the information that you need to
consider in making your investment decision. You should carefully read this
entire document and the accompanying prospectus before you purchase any notes.
[FLOW CHART]
The Issuer
The notes will be issued by Spiegel Credit Card Master Note Trust, an
Illinois common law trust, under an indenture supplement to an indenture, each
between the issuer and the indenture trustee.
The indenture trustee is The Bank of New York.
Collateral for the Notes
The notes are secured by a beneficial interest in a pool of receivables
that arise under FCNB Preferred Charge accounts, which are private label retail
credit card accounts originated by First Consumers National Bank, a wholly-
owned subsidiary of Spiegel, Inc. Each FCNB Preferred Charge card bears the
insignia of one of three retailers affiliated with Spiegel--Spiegel Catalog,
Inc., Eddie Bauer, Inc. or Newport News, Inc. However, a customer holding any
of the three types of FCNB Preferred Charge cards may use the card to purchase
all types of goods or services offered in catalogs, retail stores and
e-commerce sites of any of the three retailers.
First Consumers National Bank has designated all of the eligible accounts
in its portfolio of private label retail credit card accounts and has
transferred the receivables in those accounts to us, directly or indirectly,
under a receivables purchase agreement. Indirect sales occur when the bank
designates accounts that have outstanding receivables, which receivables the
bank previously has sold to our mutual affiliate Spiegel Acceptance
Corporation. Spiegel Acceptance then sells those outstanding receivables to us.
We have, in turn, transferred those receivables to Spiegel Master Trust.
Spiegel Master Trust has issued a collateral certificate representing an
interest in the receivables and the other assets of Spiegel Master Trust to the
issuer, and that certificate serves as collateral for the notes.
The receivables in Spiegel Master Trust as of October 31, 2000 were as
follows:
. total receivables: $1,934,662,026
. principal receivables: $1,886,704,384
. finance charge receivables: $47,957,642
The notes also have the benefit of an interest rate swap, covering the
period from
S-3
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the closing date through the expected principal payment date.
In addition, a share of investment earnings from temporary investments of
receivables collections that are held by the trust will be added to the
collateral for your notes.
Spiegel Master Trust
Spiegel Master Trust is a common law trust formed by us under a pooling and
servicing agreement on September 20, 1994. As described above under "--
Collateral for the Notes," we have transferred the credit card receivables
purchased from the bank and Spiegel Acceptance to Spiegel Master Trust under
that pooling and servicing agreement.
The trustee for Spiegel Master Trust is The Bank of New York.
After all outstanding series of investor certificates that have been issued
by Spiegel Master Trust have been retired, we may cause Spiegel Master Trust to
terminate, at which time the receivables will be transferred to the issuer and
held directly by the issuer as collateral for the notes. We refer to the
entity--either Spiegel Master Trust or the issuer--that holds the receivables
at any given time as the trust.
Other Claims on the Receivables
Other Series of Notes
Series 2000-A is the first series of notes issued by the issuer. The issuer
may issue other series of notes from time to time in the future. Neither you
nor any other noteholder will have the right to consent to the issuance of
future series of notes.
Outstanding Series of Investor Certificates
The collateral certificate issued by Spiegel Master Trust to the issuer
will be the seventh series of investor certificates issued by Spiegel Master
Trust. In addition to the collateral certificate, there will be two other
series of investor certificates outstanding on the closing date. Each series of
investor certificates represents a beneficial interest in the receivables and
the other trust assets. A summary of the outstanding series of investor
certificates is in "Annex I: Other Securities Issued and Outstanding" included
at the end of this prospectus supplement. Neither you nor any other noteholder
will have the right to consent to the issuance of future series of investor
certificates.
The Seller Interest
Spiegel Acceptance owns the interest, called the seller interest, in the
receivables and the other assets of the trust not securing your series or any
other series of notes or investor certificates. The seller interest does not
provide credit enhancement for your series or any other series.
Allocations of Collections and Losses
Your notes represent the right to payments from a portion of the
collections on the receivables. The servicer will also allocate to your notes a
portion of defaulted receivables and would also allocate a portion of the
dilution on the receivables to your series if we failed to comply with our
obligation to compensate the trust for dilution. Dilution means any reduction
to the principal balances of receivables made by the servicer because of
S-4
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merchandise returns or any other reason except losses or payments.
The portion of collections, defaulted receivables and uncovered dilution
allocated to your series will be based mainly upon the ratio of the amount of
collateral for your series to the sum of the total amount of principal
receivables in the trust and any balance in the trust's excess funding account.
The way this ratio is calculated will vary during each of three periods that
will or may apply to your notes:
. The revolving period, which will begin on the closing date and end when
either of the other two periods begins.
. The controlled accumulation period, which is scheduled to begin on
November 1, 2004 and end when the notes have been paid in full. However,
if a pay out event occurs before the controlled accumulation period
begins, there will be no controlled accumulation period. If a pay out
event occurs during the controlled accumulation period, the controlled
accumulation period will end, and a rapid amortization period will
begin.
. The rapid amortization period, which will only occur if one or more
adverse events, known as pay out events, occurs.
For most purposes, the collateral amount used in determining these ratios
will be reset no less frequently than at the end of each month. However, for
allocations of principal collections during the controlled accumulation period
or the rapid amortization period, the collateral amount at the end of the
revolving period will be used, subject to reduction during the controlled
accumulation period if a pay out event occurs for a series paired with Series
2000-A.
The collateral amount for your series is:
. the original principal amount of the notes, plus
. an initial excess collateral amount of no less than $70,400,000, plus
. increases in the excess collateral amount required under the insurance
agreement, minus
. principal payments on the notes and the balance held in the principal
accumulation account for such payment, minus
. reductions in the excess collateral amount that result from reductions
in the required amount of the excess collateral, minus
. the amount of any principal collections reallocated to cover interest,
net swap payments and servicing payments for your series to non-
affiliates, minus
. your series' share of defaults and uncovered dilution to the extent not
reimbursed from finance charge collections and investment earnings
allocated to your series.
A reduction to the collateral amount because of reallocated principal
collections, defaults or uncovered dilution will be reversed to the extent that
your series has
S-5
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extra finance charge collections and investment earnings in future periods.
Excess Interest
After the expected principal payment date, interest accrued during any
interest period in excess of 7.5% per year--referred to as the excess interest
for that interest period--will be paid on the notes only to the extent that
Series 2000-A has sufficient finance charge collections and investment earnings
on any distribution date, as described below under "--Application of Finance
Charge Collections" and under "Description of Series Provisions--Application of
Finance Charge Collections."
The insurance policy will not cover payments of excess interest. In
addition, funds on deposit in the spread account will not be available to pay
excess interest and principal collections will not be reallocated to pay excess
interest.
References to "interest" below and in the accompanying prospectus will, for
purposes of Series 2000-A, be deemed not to include excess interest.
Application of Finance Charge Collections
The issuer will apply your series' share of collections of finance charge
receivables, net swap receipts and investment earnings each month in the
following order of priority:
. to pay interest on the notes (other than excess interest) and make net
swap payments under the interest rate swap relating to the notes;
. to pay the servicing fee for your series if the servicer is not our
affiliate;
. to cover your series' share of defaults and uncovered dilution;
. to cover reductions in your series' collateral amount resulting from
defaults and uncovered dilution allocated to your series and from
reallocated principal collections, in each case that have not been
reimbursed;
. to pay the monthly premium for the insurance policy covering the notes;
. to fund, in limited circumstances, a reserve account to cover interest
payment shortfalls for the Series 2000-A notes during the controlled
accumulation period;
. to make a deposit, if needed, to the spread account up to the required
spread account amount;
. if a pay out event has occurred, to pay principal on the notes;
. to reimburse the issuer of the insurance policy for any claims on the
insurance policy and to pay interest on the outstanding amount of those
claims;
. to pay any other amounts owed to the insurer;
. after the expected principal payment date, to pay excess interest on the
notes;
. to make any early termination or other miscellaneous payments due under
the interest rate swap relating to the notes;
S-6
<PAGE>
. to pay the servicing fee for your series if the servicer is our
affiliate; and
. to other series that share excess finance charge collections with Series
2000-A, to make any required deposits to the excess funding account or
to Spiegel Acceptance.
Principal Collections
Revolving Period
During the revolving period, no principal will be paid or accumulated in a
trust account for you.
Controlled Accumulation Period
During the controlled accumulation period, your series' share of principal
collections will be deposited in a trust account, up to a specified deposit
amount on each distribution date. On the expected principal payment date,
amounts on deposit in that account will be paid to the noteholders.
Rapid Amortization Period
A rapid amortization period for your series may start if a pay out event
occurs. The pay out events for your series are described below in this summary
and under "Description of Series Provisions--Pay Out Events" in this prospectus
supplement. During the rapid amortization period, your series' share of
principal collections will be paid monthly to the noteholders, until paid in
full.
Reallocation of Principal Collections
During any of the above periods, principal collections allocated to your
series may be reallocated, if necessary, to make required payments of interest
on the notes, net swap payments due from the issuer and monthly servicing fee
payments to non-affiliates not made from your series' share of finance charge
collections and other amounts treated as finance charge collections for your
series. This reallocation is one of the ways that the notes obtain the benefit
of excess collateral, as described in the next section of this summary. The
amount of reallocated principal collections is limited by the amount of
available excess collateral.
At all times, collections of principal receivables allocated to your series
that are not needed for payments on your series will first be made available to
other series and then be paid to Spiegel Acceptance or deposited in the excess
funding account.
Credit Enhancement
Credit enhancement for the notes is provided by the excess collateral
amount, the spread account, an interest rate swap and a financial guaranty
insurance policy.
Excess Collateral Amount
The excess collateral amount serves as credit enhancement by absorbing any
shortfalls and collateral deterioration before your notes do.
Insurance Policy
MBIA Insurance Corporation will issue a financial guaranty insurance policy
that guarantees the full and timely payment of interest, net swap payments
payable by the issuer and, if the servicer is not our affiliate, the monthly
servicing fee for
S-7
<PAGE>
Series 2000-A on each distribution date and the full and timely payment of
principal on the final maturity date. The insurance policy will not cover
excess interest or any early termination payments due under the interest rate
swap.
Unless the insurer is the subject of an insolvency proceeding or the
insurer has failed to make a payment required under the insurance policy, the
insurer will generally be deemed to be the sole registered holder of the notes
for the purpose of exercising voting rights and the giving of any consents,
approvals, instructions, directions, declarations and notices relating to the
notes. However, for any amendment or waiver requiring the consent of all
affected noteholders, the consent of the insurer and all affected noteholders
will be required.
For a more detailed description of the credit enhancement provided by the
insurance policy, see "Certain Information Regarding the Insurance Policy and
the Insurer--The Insurance Policy."
Spread Account
On the closing date, the initial balance on deposit in the spread account
will be $0. After the Series 2000-A notes are issued, deposits into the spread
account will be made each month from finance charge collections allocated to
your series and excess finance charge collections available from other series
up to the required spread account amount as described in this prospectus
supplement under "Description of Series Provisions--Spread Account." The spread
account will be used to make payments on the notes, net swap payments due from
the issuer and servicing fee payments to non-affiliates if collections of
receivables available to the notes are insufficient to make those payments.
Credit enhancement for your series is for your series' benefit only, and
you are not entitled to the benefits of credit enhancement available to other
series.
Interest Rate Swap
As additional enhancement for the notes, the issuer will enter into an
interest rate swap, covering the period from the closing date through the
expected principal payment date.
The notional amount of the interest rate swap will, for each interest
period, generally be equal to the aggregate outstanding principal balance of
the notes as of the end of the first day of the related interest period. Under
the swap, if one-month LIBOR exceeds a fixed rate per annum of 6.21%, the trust
will receive payments from the swap counterparty equal to:
rate note days in interest period
differential X principal balance X 360
where the rate differential equals one-month LIBOR minus the specified fixed
rate. Alternatively, if one-month LIBOR is less than the applicable specified
fixed rate, the trust will be required to make a payment to the swap
counterparty equal to the result of the equation shown above, where the rate
differential equals the specified fixed rate minus one-month LIBOR.
The interest rate swap is more fully described in "Description of Series
Provisions--Interest Rate Swap."
S-8
<PAGE>
Pay Out Events
The issuer will begin to repay the principal of the notes before the
expected principal payment date if a pay out event occurs. A pay out event will
occur if the finance charge collections on the receivables in the designated
accounts, plus net swap receipts, are too low. The minimum amount that must be
available for payments to your series in any month, referred to as the base
rate, is the sum of the interest payable on the notes (other than excess
interest), and any net swap payment due from the issuer for the related
interest period, the monthly insurance premium and your series' share of the
servicing fee for the related calendar month. If the average net yield for the
trust portfolio, after deducting net defaulted receivables, for any three
consecutive calendar months is less than the average base rate for the same
three consecutive calendar months, a pay out event will occur.
The other pay out events are:
. Our failure to make required payments or deposits or material failure to
perform other obligations, subject to applicable grace periods;
. Material inaccuracies in our representations and warranties;
. The Series 2000-A notes are not paid in full on the expected principal
payment date;
. Bankruptcy, insolvency or similar events relating to us, the bank,
Spiegel, certain subsidiaries of Spiegel or the insurer;
. We are unable to transfer receivables to the trust when required;
. We do not transfer receivables in additional accounts to the trust
within 10 days after we are required to do so;
. Material defaults of the servicer;
. Spiegel Master Trust or the issuer becomes subject to regulation as an
"investment company" under the Investment Company Act of 1940;
. An event of default occurs for the Series 2000-A notes;
. A draw is made on the insurance policy;
. Failure of any interest rate swap counterparty to make a payment
required under the interest rate swap for 5 business days after it is
due or the early termination of the interest rate swap; or
. Our failure or the servicer's failure to observe or perform specified
covenants or agreements under the insurance agreement, subject to
applicable grace periods as described under "Certain Information
Regarding the Insurance Policy and the Insurer--The Insurance
Agreement."
Events of Default
The Series 2000-A notes are subject to events of default described under
"Description of Series Provisions--Events of Default" in this prospectus
supplement and under "The Indenture--Events of Default; Rights upon Event of
Default" in the accompanying prospectus. These include, among other things, the
failure to pay interest within the applicable grace
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period, which will not exceed 35 days after it is due, or to pay principal when
it is due on the final maturity date. The failure to pay excess interest on any
distribution date will not cause an event of default.
In the case of an event of default involving bankruptcy, insolvency or
similar events relating to the issuer, the principal amount of the Series 2000-
A notes automatically will become immediately due and payable. If any other
event of default occurs and continues with respect to the Series 2000-A notes,
the indenture trustee or holders of a majority of the then-outstanding
principal balance of the Series 2000-A notes may declare the principal amount
of the Series 2000-A notes to be immediately due and payable. These
declarations may be rescinded by holders of a majority of the then-outstanding
principal balance of the Series 2000-A notes if the related event of default
has been cured, subject to the conditions described under "The Indenture--
Events of Default; Rights upon Event of Default" in the accompanying
prospectus.
After an event of default and the acceleration of the Series 2000-A notes,
funds allocated to Series 2000-A and on deposit in the collection account, the
excess funding account and the other trust accounts will be applied to pay
principal of and interest on the Series 2000-A notes to the extent permitted by
law. Principal collections and finance charge collections allocated to Series
2000-A will be applied to make monthly principal and interest payments on the
Series 2000-A notes until the earlier of the date those notes are paid in full
or the final maturity date of those notes.
If the Series 2000-A notes are accelerated or the issuer fails to pay the
principal of the Series 2000-A notes on the final maturity date, subject to the
conditions described in the prospectus under "The Indenture--Events of Default;
Rights upon Event of Default," the indenture trustee may, if legally permitted,
cause the issuer to sell principal receivables in an amount equal to the
collateral amount for Series 2000-A and the related finance charge receivables.
As described under "Risk Factors--Voting rights and default remedies may be
exercised by the insurer" and "Description of Series Provisions--Events of
Default" in this prospectus supplement, the insurer will have the right to
exercise all of the voting rights of the noteholders, including the rights of
the noteholders to accelerate the notes following an event of default and to
direct the indenture trustee to sell receivables following acceleration of the
notes, unless the insurer is insolvent or has defaulted on its obligations
under the insurance policy. Following the occurrence of an event of default,
the insurer may also elect, in its sole discretion, to pay all or any portion
of the outstanding principal amount of the notes, plus accrued interest on the
notes.
Optional Redemption
The servicer has the option to purchase your notes when the outstanding
principal amount for your series has been reduced to 10% or less of the initial
principal amount. See "Description of the Notes--Final Payment of Principal" in
the accompanying prospectus.
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<PAGE>
Tax Status
Subject to important considerations described under "Federal Income Tax
Consequences" in the accompanying prospectus, Rooks, Pitts and Poust, as
special tax counsel to the issuer, is of the opinion that under existing law
your Series 2000-A notes will be characterized as debt for federal income tax
purposes and that the issuer will not be classified as an association or
publicly traded partnership taxable as a corporation for U.S. federal income
tax purposes. By your acceptance of a Series 2000-A note, you will agree to
treat your Series 2000-A notes as debt for federal, state and local income and
franchise tax purposes. See "Federal Income Tax Consequences" in the
accompanying prospectus for additional information concerning the application
of federal income tax laws.
ERISA Considerations
Subject to important considerations described under "ERISA Considerations"
in the accompanying prospectus, the Series 2000-A notes are eligible for
purchase by persons investing assets of employee benefit plans or individual
retirement accounts. If you are contemplating purchasing the Series 2000-A
notes on behalf of or with plan assets of any plan or account, we suggest that
you consult with counsel regarding whether the purchase or holding of the
Series 2000-A notes could give rise to a transaction prohibited or not
otherwise permissible under ERISA or Section 4975 of the Internal Revenue Code.
Risk Factors
There are material risks associated with an investment in the Series 2000-A
notes and you should consider the matters set forth under "Risk Factors" on
pages S-12 through S-14 below and on pages 2 through 9 of the accompanying
prospectus.
Ratings
It is a condition to the issuance of your notes that one of the ratings set
forth in the "Summary of Terms" above be obtained.
Any rating assigned to the notes by a credit rating agency will reflect the
rating agency's assessment solely of the likelihood that noteholders will
receive the payments of interest (other than excess interest) and principal
required to be made under the terms of the series and will be based primarily
on the value of the receivables in the trust and the credit enhancement
provided. The rating is not a recommendation to purchase, hold or sell any
notes. The rating does not constitute a comment as to the marketability of any
notes, any market price or suitability for a particular investor. Any rating
can be changed or withdrawn by a rating agency at any time.
Spiegel Credit Corporation III
Our address is 400 West 9th Street, Suite 101B, Wilmington, Delaware 19801.
Our phone number is (302) 429-7609.
S-11
<PAGE>
This prospectus supplement uses defined terms. You can find a glossary of
terms under the caption "Glossary of Terms for Prospectus Supplement" beginning
on page S-50 in this prospectus supplement and under the caption "Glossary of
Terms for Prospectus" beginning on page 78 in the accompanying prospectus.
RISK FACTORS
In addition to the risk factors described in the prospectus, you should
consider the following.
Guarantee of interest payments by insurance policy is limited.
The insurance policy will guarantee the full and
complete payment of accrued and unpaid interest due on
the notes on each distribution date on or prior to the
expected principal payment date. After the expected
principal payment date, the insurance policy will
guarantee the full and complete payment of accrued and
unpaid interest due on the notes up to 7.5% per year.
No payments will be made under the insurance policy to
cover excess interest.
Note ratings are limited.
It is a condition to the issuance of the notes that
the notes be rated in the highest rating category by at
least one rating agency. The ratings are based
primarily on the quality of the receivables, the
insurance policy, the credit support provided by the
excess collateral amount and the spread account, and
the interest rate swap. The ratings address the
likelihood of full payment of principal of the notes by
the final maturity date, and the full and timely
payment of interest (other than excess interest) on
each distribution date. However, the ratings do not
address the likelihood of any payment of excess
interest after the expected principal payment date. In
addition, the ratings do not address the possibility of
the occurrence of a pay out event or an event of
default.
Voting rights and default remedies may be exercised by the insurer.
So long as the insurer is not insolvent and has not
defaulted on its obligations under the insurance policy
and the notes are outstanding, the insurer will be
treated as a 100% holder of the Series 2000-A notes. As
a result, the insurer will have the right to exercise
all of your voting rights, which include the rights:
. to declare an event of default under the
indenture and accelerate the Series 2000-A notes;
S-12
<PAGE>
. to direct the indenture trustee to sell the
receivables after an event of default and
acceleration of the Series 2000-A notes;
. to remove the administrator following an
administrator default or the servicer following a
servicer default;
. to consent to the appointment of a successor
servicer; or
. to consent to all amendments and actions that
require noteholder consent;
except that, in the case of any amendment or waiver
that would require the consent of all affected
noteholders, the consent of the affected noteholders
will be required in addition to the consent of the
insurer.
Actions pursued by the insurer under these
circumstances could be adverse to the interests of the
holders of the notes, and the insurer will have no
obligation to consider any possible adverse effects to
such interests.
Following an event of default and acceleration of
the notes, so long as the insurer is not insolvent and
has not defaulted on its obligations under the
insurance policy, the insurer will have the right, but
not the obligation, to cause the sale of principal
receivables in an amount equal to the collateral amount
for your series plus related finance charge
receivables, which may result in a prepayment of the
notes in advance of the expected principal payment
date. Following the occurrence of an event of default,
the indenture trustee will continue to submit claims
under the insurance policy as necessary to enable the
issuer to continue to make payments on the notes on
each distribution date. Following the occurrence of an
event of default, the insurer may also elect, in its
sole discretion, to pay all or any portion of the
outstanding principal amount of the notes, plus accrued
interest on the notes. You may not be able to reinvest
the principal repaid to you earlier than expected at a
rate of return that is at least equal to the rate of
return on the notes.
Default by interest rate swap counterparty or
termination of interest rate swap could lead to a rapid
amortization.
The issuer will enter into an interest rate swap
for the benefit of the notes. This agreement will
require the counterparty to make payments to the issuer
if one month LIBOR exceeds the specified fixed rate
applicable to that agreement.
S-13
<PAGE>
If a counterparty does not make a required payment,
the issuer will have less funds available to pay
interest on your notes. This could cause delays or
reductions in the amount of interest paid to you. The
failure of a counterparty to make a required payment
will also cause a pay out event and commencement of the
rapid amortization period. If this were to happen, you
could be paid sooner than expected and may not be able
to reinvest the amount paid to you at the same rate you
would have been able to earn on the notes.
We cannot assure you that the servicer will be able
to enter into a replacement interest rate swap or make
other arrangements to hedge the issuer's interest
payment obligations if a counterparty defaults on its
obligations.
A recent regulatory proposal could affect the
servicer's regulatory capital position.
A pay out event will occur for your series if the
servicer fails to be "well capitalized" within the
meaning of Federal bank regulations and that failure is
not cured within 30 days. Currently the servicer is
well capitalized. However, the Federal bank regulators
recently proposed a rule change that would require
banks to increase the amount of capital that they hold
against some residual interests in securitizations. If
adopted in the form originally proposed, this rule
change would increase the servicer's capital
requirements to an extent so that the servicer would
not be "well capitalized," unless the servicer is able
to take actions to reduce its capital requirements or
raise additional capital. The servicer is monitoring
this proposal and reviewing alternative actions to take
if it is adopted. We believe that the servicer will be
able to remedy this situation if it arises, but we
cannot guarantee that this is the case.
S-14
<PAGE>
RECEIVABLES PERFORMANCE
The tables below contain performance information for the receivables in the
FCNB Preferred Charge card portfolio for the ten calendar months in the period
ended October 31, 2000 and for the fiscal years ended December 31, 1999, 1998,
1997, 1996 and 1995. The composition of the trust portfolio is expected to
change over time. The actual performance of the receivables in the trust
portfolio may be different from that set forth below.
Delinquency and Loss Experience
The following tables set forth the aggregate delinquency and loss
experience for cardholder payments on the credit card accounts in the FCNB
Preferred Charge card portfolio, consisting of Spiegel Catalog, Eddie Bauer and
Newport News credit card accounts, for each of the five fiscal years in the
period ended December 31, 1999, and for the ten calendar months in the period
ended October 31, 2000.
The delinquency and loss experience primarily reflects the overall credit
quality of the cardholders, the seasoning of the accounts, servicing procedures
utilized and general economic conditions. The servicer's experience indicates
that new customers demonstrate higher delinquency rates than more seasoned
customers. Recent increases in Speigel Catalog and Newport News account
originations have decreased the ratio of seasoned accounts in the portfolio. As
a result, delinquency rates have increased through October 31, 2000.
We cannot assure you that the future delinquency and loss experience for
the receivables will be similar to the historical experience set forth below.
The minimum monthly payment required under the accounts and shown on a
cardholder's monthly statement is 1/33 of the outstanding balance, subject to a
floor of $15 or, if less, the total outstanding balance. However, for purposes
of the following delinquency experience table, an account is only considered
delinquent if less than 50% of the minimum monthly payment is received, again
with a floor of $15 or, if less, the total outstanding balance. If a 100% of
minimum monthly payment standard were used in place of the 50% standard
reflected below, total delinquencies of 31 days or more would not have been
more than 11% on December 31, 1998 or 1999 and would not have been more than
14% on October 31, 2000. We do not have sufficient information to calculate
delinquency experience using a 100% standard prior to December 31, 1998.
S-15
<PAGE>
DELINQUENCY EXPERIENCE
(Dollars in Thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
Ten Months Ended -----------------------------------------------
October 31, 2000 1999 1998
----------------------- ----------------------- -----------------------
Percentage Percentage Percentage
of Total of Total of Total
Receivables Receivables Receivables Receivables Receivables Receivables
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Receivables............. $1,934,662 $1,640,643 $1,320,793
Outstanding Receivables
Delinquent:
31-60 Days............ 72,366 3.74% 42,626 2.60% 37,361 2.83%
61-90 Days............ 49,556 2.56 27,867 1.70 22,724 1.72
91 Days or more....... 90,191 4.66 69,569 4.24 49,404 3.74
---------- ----- ---------- ---- ---------- ----
Total.............. $ 212,113 10.96% $ 140,062 8.54% $ 109,489 8.29%
========== ===== ========== ==== ========== ====
<CAPTION>
Year Ended December 31,
-----------------------------------------------------------------------
1997 1996 1995
----------------------- ----------------------- -----------------------
Percentage Percentage Percentage
of Total of Total of Total
Receivables Receivables Receivables Receivables Receivables Receivables
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Receivables............. $1,371,950 $1,618,430 $1,700,684
Outstanding Receivables
Delinquent:
31-60 Days............ 46,348 3.38% 58,389 3.61% 57,833 3.40%
61-90 Days............ 27,702 2.02 33,991 2.10 34,229 2.01
91 Days or more....... 55,979 4.08 64,213 3.97 65,941 3.88
---------- ----- ---------- ---- ---------- ----
Total.............. $ 130,029 9.48% $ 156,593 9.68% $ 158,003 9.29%
========== ===== ========== ==== ========== ====
</TABLE>
S-16
<PAGE>
For purposes of the following loss experience table:
. Average receivables outstanding is the average of the receivable balance
during each month for the period indicated.
. Total principal charge-offs are shown on a cash basis for principal
receivables only, before recoveries, and do not include the amount of
any reductions in principal receivables outstanding due to fraud,
returned goods, customer disputes or other miscellaneous credit
adjustments.
. The net principal charge-off rate reflected for the ten months ended
October 31, 2000 is an annualized figure.
LOSS EXPERIENCE
(Dollars in Thousands)
<TABLE>
<CAPTION>
Year Ended December
31,
Ten Months Ended ----------------------
October 31, 2000 1999 1998
---------------- ---------- ----------
<S> <C> <C> <C>
Average Receivables Outstanding........ $1,769,442 $1,379,608 $1,250,371
Total Principal Charge-Offs............ $ 158,783 $ 134,728 $ 140,930
Recoveries............................. $ 31,512 $ 24,373 $ 23,148
Net Principal Charge-Offs.............. $ 127,271 $ 110,355 $ 117,782
Net Principal Charge-Off Rate.......... 8.63% 8.00% 9.42%
<CAPTION>
Year Ended December 31,
---------------------------------------
1997 1996 1995
---------------- ---------- ----------
<S> <C> <C> <C>
Average Receivables Outstanding........ $1,387,447 $1,577,414 $1,461,041
Total Principal Charge-Offs............ $ 172,994 $ 176,776 $ 108,324
Recoveries............................. $ 18,939 $ 19,391 $ 14,682
Net Principal Charge-Offs.............. $ 154,055 $ 157,385 $ 93,642
Net Principal Charge-Off Rate.......... 11.10% 9.98% 6.41%
</TABLE>
Revenue Experience
The gross revenues from finance charges, credit card fees and merchant fees
related to accounts in the FCNB Preferred Charge credit card portfolio for each
of the five fiscal years in the period ended December 31, 1999 and for the ten
calendar months in the period ended October 31, 2000 are set forth in the
following table. The historical yield figures reflected in the following table
are calculated on an accrual basis.
For purposes of the following gross portfolio yield table:
. The revenue for the accounts is comprised of monthly periodic finance
charges, merchant fees and credit card fees. These revenues vary for
each account based on the type and volume of activity for each account.
See "The Bank's Private Label Credit Card Activities" in the
accompanying prospectus.
S-17
<PAGE>
. Average receivables outstanding is the average of the receivable balance
during each month for the period indicated.
. The percentages reflected for the ten months ended October 31, 2000 is
an annualized figure.
GROSS PORTFOLIO YIELD
(Dollars in Thousands)
<TABLE>
<CAPTION>
Year Ended December
31,
Ten Months Ended ----------------------
October 31, 2000 1999 1998
---------------- ---------- ----------
<S> <C> <C> <C>
Average Receivables Outstanding....... $1,769,442 $1,379,608 $1,250,371
Billed Finance Charges, Fees and
Merchant Fees....................... $ 382,098 $ 367,932 $ 332,648
Gross Portfolio Yield................. 25.91% 26.67% 26.60%
<CAPTION>
Year Ended December 31,
---------------------------------------
1997 1996 1995
---------------- ---------- ----------
<S> <C> <C> <C>
Average Receivables Outstanding....... $1,387,447 $1,577,414 $1,461,041
Billed Finance Charges, Fees and
Merchant Fees....................... $ 326,510 $ 357,947 $ 324,405
Gross Portfolio Yield................. 23.53% 22.69% 22.20%
</TABLE>
THE TRUST PORTFOLIO
As of October 31, 2000:
. The receivables in the trust portfolio included $1,886,704,384 of
principal receivables and $47,957,642 of finance charge receivables.
. The accounts with debit balances designated for the trust portfolio had
an average principal receivable balance of $705.
. The accounts designated for the trust portfolio had an average credit
limit of $2,983.
. The percentage of the aggregate total receivable balance to the
aggregate total credit limit was 9.14%.
. The average age of the accounts was approximately 47 months.
. Cardholders whose accounts are designated for the trust portfolio had
billing addresses in all 50 states and the District of Columbia.
The receivables in the trust portfolio are created by purchases of
merchandise and services from Spiegel's retail subsidiaries and by cash
advances to accountholders. During 1999, cash advances accounted for less than
1% of new principal receivables. Since Spiegel's subsidiaries accept other
credit cards, including American Express, MasterCard, VISA and Discover, the
issuer will depend upon the decisions of customers to use their FCNB Preferred
Charge cards rather than other credit cards or other payment methods in order
to
S-18
<PAGE>
generate additional receivables. The following table sets forth for the periods
indicated the total sales of goods and merchandise by Spiegel's retail
subsidiaries, including Spiegel Catalog, Eddie Bauer and Newport News, and the
percentage of those sales that are charged to the FCNB Preferred Charge cards,
including Spiegel Catalog, Eddie Bauer and Newport News credit cards. The
remaining percentage of sales are either made on a cash basis or were made
using credit cards other than FCNB Preferred Charge cards. There can be no
assurance that the percentage of total sales charged to the FCNB Preferred
Charge cards will be similar to the historical experience set forth below.
USAGE OF FCNB PREFERRED CHARGE CARDS
(Dollars in Thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
Ten Months Ended ------------------------
October 31, 2000 1999 1998
---------------- ----------- -----------
<S> <C> <C> <C>
Total net sales..................... $2,217,366 $ 2,916,455 $ 2,641,956
Percentage of total net sales
charged to FCNB Preferred Charge
cards............................. 43% 39% 34%
<CAPTION>
Year Ended December 31,
-----------------------------------------
1997 1996 1995
---------------- ----------- -----------
<S> <C> <C> <C>
Total net sales..................... $2,835,297 $ 2,850,555 $ 2,886,225
Percentage of total net sales
charged to FCNB Preferred Charge
cards............................. 35% 42% 50%
</TABLE>
S-19
<PAGE>
The following tables summarize the trust portfolio by various criteria as
of October 31, 2000. Because the future composition of the trust portfolio will
change over time, these tables are not indicative of the composition of the
trust portfolio at any subsequent time. The number of accounts represents all
accounts in the trust that have made a payment or purchase during the past two
years. Percentages in the following tables may not add to 100% due to rounding.
COMPOSITION BY ACCOUNT BALANCE
Trust Portfolio
<TABLE>
<CAPTION>
Percentage
of Total Percentage
Number of Number of of Total
Account Balance Range Accounts Accounts Receivables Receivables
--------------------- --------- ---------- -------------- -----------
<S> <C> <C> <C> <C>
Credit Balance................. 91,908 1.30% $ (2,761,031) (0.14)%
No Balance..................... 4,255,013 59.97 0 0.00
$ 0.01-$ 999.99............ 2,138,976 30.15 687,939,185 35.56
$1,000.00-$1,999.99............ 385,758 5.44 541,985,767 28.01
$2,000.00-$2,999.99............ 131,518 1.85 318,150,480 16.44
$3,000.00-$3,999.99............ 50,662 0.71 173,536,041 8.97
$4,000.00-$4,999.99............ 21,356 0.30 94,695,999 4.89
$5,000.00 or More.............. 19,874 0.28 121,115,585 6.26
--------- ------ -------------- ------
Total..................... 7,095,065 100.00% $1,934,662,026 100.00%
========= ====== ============== ======
COMPOSITION BY CREDIT LIMIT
Trust Portfolio
<CAPTION>
Percentage
of Total Percentage
Number of Number of of Total
Credit Limit Range Accounts Accounts Receivables Receivables
------------------ --------- ---------- -------------- -----------
<S> <C> <C> <C> <C>
Zero credit limit.............. 6,791 0.10% $ 1,487,211 0.08%
$ 0.01-$ 999.99............ 2,572,483 36.26 313,117,321 16.18
$1,000.00-$1,999.99............ 1,556,329 21.94 368,926,512 19.07
$2,000.00-$2,999.99............ 981,806 13.84 398,595,217 20.60
$3,000.00-$3,999.99............ 641,820 9.05 273,765,031 14.15
$4,000.00-$4,999.99............ 350,815 4.94 196,197,732 10.14
$5,000.00 or More.............. 985,021 13.88 382,573,002 19.77
--------- ------ -------------- ------
Total...................... 7,095,065 100.00% $1,934,662,026 100.00%
========= ====== ============== ======
</TABLE>
S-20
<PAGE>
COMPOSITION BY PERIOD OF DELINQUENCY
Trust Portfolio
<TABLE>
<CAPTION>
Percentage
of Total Percentage
Number of Number of of Total
Delinquency Period Range Accounts Accounts Receivables Receivables
------------------------ --------- ---------- -------------- -----------
<S> <C> <C> <C> <C>
Up to 29 Days................... 6,856,120 96.63% $1,722,549,525 89.04%
30 to 59 Days................... 85,537 1.21 72,365,611 3.74
60 to 89 Days................... 56,423 0.80 49,556,201 2.56
90 or More Days................. 96,985 1.37 90,190,689 4.66
--------- ------ -------------- ------
Total....................... 7,095,065 100.00% $1,934,662,026 100.00%
========= ====== ============== ======
</TABLE>
COMPOSITION BY ACCOUNT AGE
Trust Portfolio
<TABLE>
<CAPTION>
Percentage of Percentage
Number Total Number of Total
Account Age Range of Accounts of Accounts Receivables Receivables
----------------- ----------- ------------- -------------- -----------
<S> <C> <C> <C> <C>
Not More Than 6 Months.... 1,062,797 14.98% $ 112,804,827 5.83%
Over 6 Months to 12
Months.................. 773,071 10.90 172,134,403 8.90
Over 12 Months to 24
Months.................. 1,307,744 18.43 355,083,697 18.35
Over 24 Months to 36
Months.................. 956,408 13.48 274,349,674 14.18
Over 36 Months............ 2,995,045 42.21 1,020,289,425 52.74
--------- ----- -------------- -----
Total................. 7,095,065 100.0% $1,934,662,026 100.0%
========= ===== ============== =====
</TABLE>
Cardholders whose accounts are designated for the trust portfolio had
billing addresses in all 50 states and the District of Columbia. Except for the
four states listed below, no state accounted for more than 5% of the number of
accounts or 5% of the total receivables balance as of October 31, 2000.
GEOGRAPHIC DISTRIBUTION OF ACCOUNTS
Trust Portfolio
<TABLE>
<CAPTION>
California Florida New York Texas
---------- ------- -------- -----
<S> <C> <C> <C> <C>
% of total number of accounts................. 9.86% 5.60% 7.95% 6.89%
% of total receivable balance................. 9.46% 5.40% 9.52% 7.46%
</TABLE>
S-21
<PAGE>
MATURITY CONSIDERATIONS
Unless a pay out event occurs, you will not receive payments of principal
until the expected payment date for your notes, which is the November 2005
distribution date. We expect the issuer to have sufficient funds to pay the
full principal amount of the notes on the expected principal payment date.
However, if a pay out event occurs, principal payments may begin prior to the
expected principal payment date.
Controlled Accumulation Period
During the controlled accumulation period, principal allocated to the
Series 2000-A noteholders will accumulate in the principal accumulation account
in an amount calculated to pay the notes in full on the expected principal
payment date. We expect, but cannot assure you, that the amounts available in
the principal accumulation account on the expected principal payment date will
be sufficient to pay in full the outstanding principal amount of the notes. If
these amounts are not available on the expected principal payment date, a pay
out event will occur and the rapid amortization period will begin.
Rapid Amortization Period
If a pay out event occurs during either the revolving period or the
controlled accumulation period, the rapid amortization period will begin. If a
pay out event occurs during the controlled accumulation period, on the next
distribution date any amount on deposit in the principal accumulation account
will be paid to the noteholders.
In addition, if the outstanding principal balance of the notes has not been
paid in full, the issuer will continue to pay principal to the noteholders on
each distribution date during the rapid amortization period until the final
maturity date, which is the November 2010 distribution date. If the notes are
not paid in full from collections on the final maturity date, the insurer will
be required to pay the outstanding balance of the notes on that date.
Payment Rates
The most important factor that will determine whether the issuer has funds
available to repay the notes on the expected principal payment date and the
size of principal payments during a rapid amortization period is the payment
rate on the receivables. The following table sets forth the highest and lowest
cardholder monthly payment rates on the credit card accounts during any month
in the periods shown and the average cardholder monthly payment rates for all
months in the periods shown, in each case calculated as a percentage of average
principal receivables for each month during the periods shown. Payment rates
shown in the table are based on amounts which would be deemed payments of
principal receivables and finance charge receivables with respect to the
accounts, including recoveries on charged-off accounts.
S-22
<PAGE>
CARDHOLDER MONTHLY PAYMENT RATES
<TABLE>
<CAPTION>
Ten Months
Ended Year Ended December 31,
October 31, ----------------------------------
2000 1999 1998 1997 1996 1995
----------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Lowest Month..................... 6.29% 6.99% 8.41% 8.39% 8.65% 8.12%
Highest Month.................... 8.19% 10.14% 11.08% 11.28% 10.98% 12.12%
Monthly Average.................. 7.01% 8.33% 9.26% 9.63% 9.51% 9.67%
</TABLE>
We cannot assure you that the cardholder monthly payment rates in the
future will be similar to the historical experience set forth above. In
addition, the amount of collections of receivables may vary from month to month
due to seasonal variations, general economic conditions and payment habits of
individual cardholders.
Paired Series
The issuer may issue another series of notes as a paired series for Series
2000-A. If issued, a paired series may have terms that are different than the
terms of Series 2000-A and other series. For example, the pay out events for
the paired series may vary from the pay out events for Series 2000-A and may
include pay out events that are unrelated to the status of the issuer or the
servicer, such as pay out events related to the continued availability and
rating of the providers of credit enhancement for the paired series. If a pay
out event occurs with respect to the paired series prior to the payment in full
of the Series 2000-A notes, the allocation percentage used to determine your
series' share of principal collections may be reduced, which may delay the
final payment of principal for your series. See "Description of Series
Provisions--Paired Series" in this prospectus supplement.
SPIEGEL'S RETAIL OPERATIONS
Spiegel offers merchandise primarily through three subsidiaries--Spiegel
Catalog, Inc., Eddie Bauer, Inc. and Newport News, Inc.
Spiegel Catalog
Spiegel Catalog is a leading lifestyle resource for the working woman.
Spiegel Catalog serves its customers by offering an extensive array of
fashionable apparel, home furnishings and other merchandise through its
trademark semi-annual catalog, seasonal and specialty catalogs, and the
spiegel.com e-commerce site. Spiegel Catalog offers overstock, end-of-season
and other merchandise through its Ultimate Outlet stores, predominantly located
in outlet malls, catalogs and the ultimate-outlet.com e-commerce site. Total
net sales were $717 million and $587 million for the fiscal years ended January
1, 2000 and January 2, 1999, respectively. Sales through catalog offerings
comprise approximately 86 percent of total net sales. Spiegel Catalog
distributed over 129 million catalogs in 1999 and at January 1, 2000 had
approximately 3.0 million active customers who had purchased merchandise within
the last 18 months.
S-23
<PAGE>
Eddie Bauer
Eddie Bauer is a leading specialty retailer serving the active, casual
lifestyle needs of men and women through the sale of high quality private-label
apparel, accessories and home furnishings. Eddie Bauer markets its products
through stores, catalogs and e-commerce sites. Total net sales were $1.8
billion and $1.7 billion for the years ended January 1, 2000 and January 2,
1999, respectively. Approximately 74 percent of total net sales for Eddie Bauer
are retail and outlet store sales.
Eddie Bauer's apparel category comprised 86 percent of its total net sales
in 1999. Eddie Bauer presents its active, casual apparel and related
accessories through its trademark Eddie Bauer sportswear stores, catalogs and
the eddiebauer.com and eddiebaueroutlet.com e-commerce sites. The apparel
category includes full seasonal collections of fine quality sportswear and
dress casual, outerwear, footwear and accessories. Eddie Bauer presents its
comfortable, relaxed home furnishings and decor for the bed and bath through
its Eddie Bauer HOME retail stores, catalogs and on its e-commerce sites.
At January 1, 2000, Eddie Bauer operated a total of 532 stores, consisting
of 479 retail stores and 53 outlets. There are 492 stores located in the United
States and 40 stores in Canada. The Eddie Bauer catalog division distributed 97
million catalogs in 1999 and at January 1, 2000 had approximately 3.4 million
active customers who had purchased merchandise within the last 18 months.
Newport News
Newport News is a specialty catalog business offering fashionable,
moderately priced women's apparel and home furnishings. Total net sales were
$411 million for the fiscal year ended January 1, 2000, compared to $345
million for the year ended January 2, 1999. Newport News distributed 212
million catalogs in 1999 and at January 1, 2000 had approximately 3.9 million
active customers who had purchased merchandise within the last 18 months. In
1999, Newport News launched an e-commerce site, newport-news.com, to broaden
its sales and marketing reach.
S-24
<PAGE>
DESCRIPTION OF SERIES PROVISIONS
We have summarized the material terms of the Series 2000-A notes below and
under "Description of the Notes" in the accompanying prospectus.
General
The Series 2000-A notes will be issued under the indenture, as supplemented
by the Series 2000-A indenture supplement, in each case between the issuer and
the indenture trustee.
The Series 2000-A notes will be issued in denominations of $1,000 and
integral multiples of $1,000 and will be available only in book-entry form,
registered in the name of Cede & Co., as nominee of DTC. See "Description of
the Notes--General," "--Book-Entry Registration" and "--Definitive Notes" in
the accompanying prospectus. Payments of interest and principal will be made on
each distribution date on which those amounts are due to the noteholders in
whose names Series 2000-A notes were registered on the related record date,
which will be the last day of the calendar month preceding that distribution
date.
Collateral Amount
Your notes are secured by collateral consisting of an interest in the
receivables. At any time, the principal amount of the collateral for your
notes, which we call the collateral amount, is calculated as follows:
(a) the initial collateral amount, which equals the aggregate initial
principal amount of the notes in your series plus an excess collateral
amount of $70,400,000, plus
(b) increases in the excess collateral amount required under the
insurance agreement, as described under "--Excess Collateral Amount"
below, less
(c) all previous principal payments made on your series and the
balance held in the principal accumulation account for such payments, less
(d) reductions in the excess collateral amount that result from
reductions in the required amount of the excess collateral, less
(e) all unreimbursed reductions to the collateral amount as a result
of defaulted receivables or uncovered dilution allocated to your series or
reallocations of principal collections to cover interest or the servicing
fee for your series.
The collateral amount will also be reduced if we purchase and cancel notes
in your series. The collateral amount will also increase or reduce if we
increase or reduce the excess collateral amount as described under "--Excess
Collateral Amount" below. The collateral amount cannot be less than zero.
Allocation Percentages
The servicer will allocate among your series, other series of notes issued
and outstanding, outstanding series of investor certificates issued by Spiegel
Master Trust and
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<PAGE>
Spiegel Acceptance's unpledged interest in the trust the following items:
collections of finance charge receivables and principal receivables; defaulted
receivables; and any dilution amounts that are not absorbed by Spiegel
Acceptance's interest in the trust or reimbursed by us. On any day, the
allocation percentage for your series will be the percentage equivalent--which
may not exceed 100%--of a fraction:
. the numerator of which is the collateral amount measured as of a
specified date, and
. the denominator of which is the greater of:
(a) the sum of the total amount of principal receivables in the
trust, the amount on deposit in the excess funding account, after
excluding investment earnings, and the amount of principal collections
on deposit in the collection account, after excluding investment
earnings, in each case as of the preceding day, and
(b) the sum of the numerators used to calculate the applicable
allocation percentages for all series of notes or investor
certificates outstanding as of the date of determination.
The numerator referred to above will initially be set as of the closing
date. For purposes of allocating finance charge collections and defaulted
receivables at all times, and principal collections during the revolving
period, the numerator will be reset at the end of each calendar month for
allocations during the following calendar month. For purposes of allocations of
principal collections during the controlled accumulation period and the rapid
amortization period, the numerator will be fixed at the end of the revolving
period and will not change thereafter except as follows.
The Series 2000-A notes are subject to being paired with a future series.
If a pay out event occurs with respect to a series paired with Series 2000-A
during the controlled accumulation period for Series 2000-A, we may, by written
notice delivered to the indenture trustee and the servicer, designate a
different numerator for allocating principal collections to your series,
provided that:
(1) the numerator is not less than the collateral amount as of the
last day of the revolving period for the series paired with Series 2000-A;
and
(2) each rating agency confirms that the designation will not impair
its rating of the Series 2000-A notes.
Any reduction in the numerator made as described in the preceding paragraph
will also apply during any rapid amortization period that begins after the
reduction is made.
Interest Payments
The notes will accrue interest from and including the closing date through
but excluding January 16, 2001, and for each following interest period, at a
rate of 0.30% above LIBOR for the related interest period. Each interest period
will begin on and include a distribution date and end on but exclude the next
distribution date. However, the first interest period will begin on and include
the closing date.
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<PAGE>
For purposes of determining the interest rates applicable to each interest
period, LIBOR will be determined two London banking days before that interest
period begins and will equal the rate for deposits in United States dollars for
a one-month period which appears on the display page currently designated as
"Telerate Page 3750" on the Bridge Telerate Capital Markets Report, or any
other page as may replace that page on that service for the purpose of
displaying comparable rates or prices, as of 11:00 a.m., London time, on that
date. If that rate does not appear on that display page, the rate for that
interest period will be determined based on the rates at which deposits in
United States dollars are offered by four major banks, selected by the servicer
or the interest rate swap counterparty as calculation agent under the interest
rate swap, at approximately 11:00 a.m., London time, on that day to prime banks
in the London interbank market for a one-month period. The indenture trustee or
the interest rate swap counterparty will request the principal London office of
each of those banks to provide a quotation of its rate. If at least two
quotations are provided, the rate for that interest period will be the
arithmetic mean of the quotations. If fewer than two quotations are provided,
the rate for that interest period will be the arithmetic mean of the rates
quoted by major banks in New York City, selected by the servicer, at
approximately 11:00 a.m., New York City time, on that day for loans in United
States dollars to leading European banks for a one-month period.
The interest rates applicable to the then current and immediately preceding
interest period may be obtained by telephoning the indenture trustee at its
corporate trust office at (312) 827-8500 or any other telephone number
identified in a written notice from the indenture trustee to the Series 2000-A
noteholders from time to time.
Interest on the notes will be calculated on the basis of the actual number
of days in the related interest period and a 360-day year.
If the issuer does not pay interest as calculated above when due on a
distribution date and the insurer fails to pay the interest under the insurance
policy, the amount not paid will be due on the next distribution date, together
with interest on the overdue amount of regular monthly interest at the
applicable note interest rate for that interest period, to the extent permitted
by law.
Excess Interest
After the expected principal payment date, excess interest will be paid on
the notes only to the extent that Series 2000-A has sufficient finance charge
collections and investment earnings on any distribution date as described under
"Structural Summary--Application of Finance Charge Collections" and under "--
Application of Finance Charge Collections" below. If sufficient funds are not
available to pay excess interest on any distribution date, the amount not paid
will be payable on the following distribution date, together with interest on
the overdue amount at the applicable note interest rate for that interest
period, to the extent permitted by law.
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<PAGE>
The insurance policy will not cover payments of excess interest. In
addition, funds on deposit in the spread account will not be available to pay
excess interest and principal collections will not be reallocated to pay excess
interest.
References to "interest" in this prospectus supplement and in the
accompanying prospectus will, for purposes of Series 2000-A, be deemed not to
include excess interest.
The ratings of the Series 2000-A notes do not address the likelihood of
payment of excess interest.
Interest Rate Swap
To hedge the issuer's interest payment obligations, the issuer will enter
into an interest rate swap, covering the period from the closing date through
the expected principal payment date.
The notional amount of the interest rate swap will, for each interest
period, generally be equal to the aggregate outstanding principal balance of
the notes as of the end of the first day of the related interest period. Under
the swap, if one-month LIBOR exceeds a fixed rate per annum of 6.21%, the trust
will receive payments from the swap counterparty equal to:
days in interest
rate note period
differential X principal balance X ------------------
360
where the rate differential equals one-month LIBOR minus the specified fixed
rate. Alternatively, if one-month LIBOR is less than the applicable specified
fixed rate, the trust will be required to make a payment to the swap
counterparty equal to the result of the equation shown above, where the rate
differential equals the specified fixed rate minus one-month LIBOR.
Any net amounts received by the issuer under the interest rate swap will be
treated as collections of finance charge receivables. Any net amounts payable
by the issuer under the interest rate swap will be paid from finance charge
collections at the same priority as the interest payments on the notes.
The trust can only enter into and maintain an interest rate swap agreement
with a counterparty that has debt ratings consistent with the standards of the
insurer and the rating agencies for the notes. If one of these rating agencies
withdraws or lowers its rating for the swap counterparty, the insurer may
direct the servicer to obtain a replacement interest rate swap from a
counterparty having the required credit ratings. Alternatively, it may enter
into some other arrangement satisfactory to the insurer and the rating agencies
for the notes.
Interest Rate Swap Counterparty
Bank of America, N.A. is the initial counterparty to the interest rate
swap. It is a national banking association organized under the laws of the
United States, and its principal executive offices are located in Charlotte,
North Carolina. The initial counterparty is a
S-28
<PAGE>
wholly-owned, indirect subsidiary of Bank of America Corporation and is engaged
in general, commercial banking and trust business, offering a wide range of
commercial, corporate, international, financial market, retail and fiduciary
banking services.
As of September 30, 2000, based upon information reported by the initial
counterparty, the initial counterparty had consolidated assets of $607 billion
dollars, consolidated deposits of $376 billion dollars and shareholder equity
of $49 billion dollars based on regulatory accounting principles.
Bank of America Corporation is a bank holding company registered under the
Bank Holding Company Act of 1956, as amended, with its principal executive
offices located in Charlotte, North Carolina. Additional information regarding
Bank of America Corporation is set forth in its Annual Report on Form 10-K for
the fiscal year ended December 31, 1999, together with any subsequent documents
it filed with the Securities and Exchange Commission pursuant to the Exchange
Act.
Moody's currently rates the initial counterparty's long-term certificates
of deposit as "Aa1" and short-term certificates of deposit as "P-1." Standard &
Poor's currently rates the initial counterparty's long-term certificates of
deposit as "AA-" and its short-term certificates of deposit as "A-1+". Fitch
currently rates the initial counterparty's long-term certificates of deposit
"AA" and short-term certificates of deposit "F1+". Further information with
respect to such ratings may be obtained from Moody's, Standard & Poor's and
Fitch, respectively. No assurances can be given that the current ratings of the
initial counterparty's instruments will be maintained.
The initial counterparty will provide copies of the most recent Bank of
America Corporation Annual Report on Form 10-K and the publicly available
portions of the most recent quarterly Call Report of the initial counterparty
delivered to the Comptroller of the Currency, without charge, to each person to
whom this document is delivered, on the written request of such person. Written
requests should be directed to:
Bank of America Corporate Communications
Bank of America Corporate Center, 18th Floor
Charlotte, North Carolina 28255
The information contained in this section relates to and has been supplied
by and obtained from the initial counterparty. The information concerning Bank
of America Corporation and the initial counterparty contained herein is
furnished solely to provide limited introductory information regarding Bank of
America Corporation and the initial counterparty and does not purport to be
comprehensive. Such information is qualified in its entirety by the detailed
information appearing in the documents and financial statements referenced
above.
The delivery of this prospectus supplement shall not create any implication
that there has been no change in the affairs of Bank of America Corporation or
the initial counterparty since the date hereof, or that the information
contained or referred to in this section is
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<PAGE>
correct as of any time subsequent to its date. We have not made any independent
investigation of the information relating to Bank of America Corporation or the
initial counterparty in this section and we do not make any representation as
to the accuracy or completeness of such information.
Principal Payments
During the revolving period, no principal payments will be made on your
notes. During the controlled accumulation period and the rapid amortization
period, deposits to the principal accumulation account and principal payments
on the Series 2000-A notes will be made on each distribution date from the
following sources:
(a) principal collections allocated to your series based on your
allocation percentage and retained in the collection account during the
prior calendar month, less any amounts required to be reallocated to cover
interest payments on the Series 2000-A notes, net swap payments due from
the issuer and servicing fee payments to non-affiliates; plus
(b) any amount on deposit in the excess funding account allocated to
your series on that distribution date; plus
(c) any finance charge collections or other amounts required to be
treated as principal collections either:
(i) in order to cover the share of defaulted receivables and
uncovered dilution amounts allocated to your series or to reinstate
prior reductions to the collateral amount; or
(ii) due to the occurrence of a pay out event; plus
(d) any principal collections from other series that are shared with
your series; plus
(e) on the final maturity date, any amounts paid by the insurer under
the insurance policy in respect of the outstanding principal balance of
the notes.
Controlled Accumulation Period
The controlled accumulation period is scheduled to commence on November 1,
2004 and to last twelve months. However, the servicer may elect to extend the
revolving period and postpone the controlled accumulation period, subject to
the conditions described under "Description of the Notes--Suspension and
Postponement of Controlled Accumulation Period" in the accompanying prospectus.
The servicer may elect to postpone the controlled accumulation period only if
the number of months needed to fund the principal accumulation account is less
than twelve months. In no event will the servicer postpone the beginning of the
controlled accumulation period to later than October 1, 2005.
The servicer may also elect to suspend the controlled accumulation period,
subject to the conditions described under "Description of the Notes--Suspension
and Postponement of Controlled Accumulation Period" in the accompanying
prospectus.
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<PAGE>
On each distribution date relating to the controlled accumulation period,
the indenture trustee will deposit in the principal accumulation account an
amount equal to the least of:
(1) funds available for this purpose for your series with respect to
that distribution date;
(2) $50,000,000 or, if the commencement of the controlled accumulation
is postponed, any higher deposit amount as the servicer may determine is
necessary to fully fund the principal accumulation account, plus any
amounts required to be deposited to the principal accumulation account on
prior distribution dates that have not yet been deposited;
(3) an amount equal to the outstanding principal amount of the notes,
minus the amount on deposit in the principal accumulation account prior to
any deposits on that date; and
(4) the collateral amount.
If the rapid amortization period has not commenced, amounts in the
principal accumulation account will be paid to the noteholders on the expected
principal payment date.
During the controlled accumulation period, the portion of funds available
but not required to be deposited in the principal accumulation account on a
distribution date may be applied to make payments to Spiegel Acceptance that
will reduce your excess collateral amount, to the extent that the excess
collateral amount is greater than the required excess collateral amount. Any
remaining funds will be made available to investors in other series as shared
principal collections, be paid to us to purchase additional interests in
receivables in order to maintain the collateral amount or be deposited in the
excess funding account if necessary to maintain the Minimum Seller Amount.
Rapid Amortization Period
On each distribution date relating to the rapid amortization period, you
will be entitled to receive funds available for principal payments for Series
2000-A for the related calendar month in an amount up to the lesser of (a) the
collateral amount for the notes and (b) the outstanding principal balance of
the notes.
See "--Pay Out Events" below for a discussion of events that might lead to
the commencement of the rapid amortization period.
Application of Finance Charge Collections
We refer to your series' share of finance charge collections, plus net
payments received under interest rate hedges, net investment proceeds
transferred from the principal accumulation account and amounts withdrawn from
the reserve account and any available excess finance charge collections from
other series, collectively, as finance charge collections. On each distribution
date, the servicer will direct the indenture trustee to apply your series'
share of finance charge collections for the prior month in the following order:
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<PAGE>
(1) to pay interest on the notes (other than excess interest),
including any overdue interest (other than excess interest) and additional
interest on the overdue interest (other than excess interest), and net
payments due from the issuer under the interest rate swap for your series;
(2) if the bank or any affiliate of the bank is not the servicer, to
pay the servicing fee for your series for the prior calendar month and any
overdue servicing fee;
(3) an amount equal to your series' share of the defaulted
receivables and uncovered dilution, if any, for the related calendar
month, will be treated as principal collections for the prior calendar
month;
(4) an amount equal to any previously unreimbursed reductions to the
collateral amount on account of defaulted receivables, uncovered dilution
or reallocations of principal collections will be treated as principal
collections for the prior calendar month;
(5) an amount equal to the monthly premium for the insurance policy
covering the notes and any previously accrued and unpaid monthly premium
will be paid to the note insurer;
(6) on and after the reserve account funding date, an amount equal
to the excess, if any, of the required reserve account amount over the
amount then on deposit in the reserve account will be deposited into the
reserve account;
(7) an amount equal to the excess, if any, of the required spread
account amount over the amount then on deposit in the spread account will
be deposited into the spread account;
(8) if a pay out event has occurred, an amount up to the outstanding
principal amount of the notes, less funds already on deposit to pay that
principal, will be treated as principal collections for the prior calendar
month;
(9) an amount equal to any unreimbursed claims on the insurance
policy, plus interest on those claims, will be paid to the insurer to
reimburse the claims;
(10) an amount equal to any other amounts owed to the insurer will
be paid to the insurer;
(11) after the expected principal payment date, to pay excess
interest on the notes, including any unpaid excess interest for prior
interest periods and interest on any unpaid excess interest for prior
interest periods;
(12) to make any early termination or other miscellaneous payments
due under the interest rate swap relating to the notes;
(13) to pay any unpaid servicing fee for your series for the prior
calendar month and any overdue servicing fee to the extent not paid in
accordance with clause (2) above; and
(14) all remaining amounts will constitute excess finance charge
collections and will be available to cover any shortfalls in finance
charge collections for other outstanding series in group one and, after
payment of these shortfalls, the remaining amount will be paid to Spiegel
Acceptance or deposited in the excess funding account.
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<PAGE>
If your series' share of finance charge collections for any calendar month
is insufficient to pay interest (other than excess interest) on the notes--
including any overdue interest and additional interest on the overdue
interest--when due, to make net payments due from the issuer under the interest
rate swap for your series or to pay servicing fees due to any non-affiliate,
then a draw will be made from amounts available in the spread account and will
be applied for those purposes on the related distribution date.
Reallocation of Principal Collections
If your series share of finance charge collections plus any withdrawal from
the spread account are not sufficient to pay interest on the notes, net swap
payments due from the issuer or the servicing fee for your series payable to
non-affiliates, then principal collections will be reallocated to cover these
amounts. Any reallocation of principal collections is a use of the collateral
for your notes. Consequently, these uses will reduce the remaining collateral
amount by a corresponding amount. The amount of principal collections that will
be reallocated on any distribution date will not exceed 10.5% of the initial
collateral amount, plus any additional excess collateral amounts required under
the insurance agreement, minus the sum of the amount of unreimbursed investor
charge-offs after giving effect to investor charge-offs for the related
calendar month and the amount of unreimbursed reallocated principal collections
as of the previous distribution date.
Investor Charge-Offs
The servicer will allocate a portion of defaulted receivables for each
calendar month to your series based on the allocation percentage for your
series. The allocation percentage is described under "--Allocation Percentages"
above.
Dilution will also be allocated to your series in the circumstances
described in "Description of the Notes--Defaulted Receivables; Dilution;
Investor Charge-Offs" in the accompanying prospectus. If dilution is allocated
among series, your series' share of dilution will equal:
(1) dilution to be allocated to all series, times
(2) a fraction,
. the numerator of which is your series' allocation percentage for
purposes of allocating finance charge collections, as described
under "--Allocation Percentages" above, and
. the denominator of which is the sum of the allocation percentages
used by all outstanding series for purposes of allocating finance
charge collections.
On each distribution date, if the sum of the defaulted receivables and
dilution allocated to your series is greater than finance charge collections
used to cover those amounts, then the collateral amount will be reduced by the
amount of the excess.
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Any reductions in the collateral amount on account of defaulted receivables
and uncovered dilution will be reinstated to the extent that finance charge
collections are available for that purpose on any subsequent distribution date.
Sharing Provisions
Your series is in group one for purposes of sharing excess finance charge
collections. Your series will share excess finance charge collections with
other series of notes in group one and other series of investor certificates in
group one for Spiegel Master Trust. See "Description of the Notes--Shared
Excess Finance Charge Collections" in the accompanying prospectus.
Your series is a principal sharing series. See "Description of the Notes--
Shared Principal Collections" in the accompanying prospectus.
Principal Accumulation Account
The indenture trustee will establish and maintain a segregated trust
account held for the benefit of the noteholders to serve as the principal
accumulation account. During the controlled accumulation period, the indenture
trustee at the direction of the servicer will make deposits to the principal
accumulation account as described under "Description of the Notes--Principal
Payments" in this prospectus supplement.
Funds on deposit in the principal accumulation account will be invested to
the following distribution date by the indenture trustee at the direction of
the servicer in highly rated liquid investments that meet the criteria
described in the indenture supplement. Investment earnings, net of investment
losses and expenses, on funds on deposit in the principal accumulation account
will be deposited in the collection account and treated as finance charge
collections available to your series for the related interest period. If, for
any distribution date, these net investment earnings are less than the product
of:
(a)the balance of the principal accumulation account on the record
date immediately preceding that distribution date,
(b)the note interest rate for the related interest period, and
(c)the number of days in the related interest period divided by 360,
then the indenture trustee will withdraw the shortfall, to the extent required
and available, from the reserve account and deposit it in the collection
account for use as finance charge collections that are available to your
series.
Reserve Account
The indenture trustee will establish and maintain a segregated trust
account held for the benefit of the noteholders to serve as the reserve
account. The reserve account is established to assist with the distribution of
interest on the notes during the controlled accumulation period and on the
first distribution date with respect to the rapid amortization period. On
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each distribution date from and after the reserve account funding date, but
prior to the termination of the reserve account, the indenture trustee will
apply finance charge collections allocated to your series to increase the
amount on deposit in the reserve account to the extent the amount on deposit in
the reserve account is less than the required reserve account amount.
The reserve account funding date will be the distribution date with respect
to the calendar month which commences three months prior to the commencement of
the controlled accumulation period, or an earlier date as the servicer may
determine.
The required reserve account amount for any distribution date on or after
the reserve account funding date will be equal to (a) 0.50% of the outstanding
principal balance of the Series 2000-A notes or (b) any other amount designated
by us. We may only designate a lesser amount if each rating agency confirms
that the designation will not impair its rating of the notes, without reliance
on the insurance policy, and we certify to the indenture trustee that, based on
the facts known to the certifying officer at the time, in our reasonable
belief, the designation will not cause a pay out event to occur for Series
2000-A.
On each distribution date, after giving effect to any deposit to be made
to, and any withdrawal to be made from, the reserve account on that
distribution date, the indenture trustee will withdraw from the reserve account
an amount equal to the excess, if any, of the amount on deposit in the reserve
account over the required reserve account amount, will deposit the excess in
the spread account to the extent that funds available in the spread account are
less than the required spread account amount and will distribute any remaining
excess to Spiegel Acceptance. Any amounts withdrawn from the reserve account
and distributed to Spiegel Acceptance will not be available for distribution to
the noteholders.
All amounts on deposit in the reserve account on any distribution date--
after giving effect to any deposits to, or withdrawals from, the reserve
account to be made on that distribution date--will be invested to the following
distribution date by the indenture trustee, at the direction of the servicer,
in highly rated liquid investments that meet the criteria described in the
indenture supplement. The interest and other investment income, net of losses
and investment expenses, earned on these investments will be either retained in
the reserve account to the extent the amount on deposit is less than the
required reserve account amount or deposited in the collection account and
treated as finance charge collections available to your series.
On or before each distribution date with respect to the controlled
accumulation period and on or before the first distribution date with respect
to the rapid amortization period, the indenture trustee will withdraw from the
reserve account and deposit in the collection account an amount equal to the
least of:
(1)the amount then on deposit in the reserve account with respect to
that distribution date;
(2)the required reserve account amount; and
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(3)the amount of the shortfall described under "--Principal
Accumulation Account" above.
Amounts withdrawn from the reserve account on any distribution date will be
included as finance charge collections available to your series for that
distribution date.
The reserve account will be terminated upon the earliest to occur of:
(1)the first distribution date for the rapid amortization period;
(2)the expected principal payment date; and
(3)the termination of the issuer.
Upon the termination of the reserve account, all amounts on deposit in the
reserve account, after giving effect to any withdrawal from the reserve account
on that date, will be deposited in the spread account to the extent that funds
available in the spread account are less than the required spread account
amount and any remaining amounts will be distributed to Spiegel Acceptance. Any
amounts withdrawn from the reserve account and distributed to Spiegel
Acceptance will not be available for distribution to the noteholders.
Excess Collateral Amount
An excess collateral amount provides credit enhancement for your series.
The initial excess collateral amount will be at least $70,400,000, which equals
10.5% or more of the initial collateral amount.
The collateral amount for your series will be reduced as the collateral is
applied for the benefit of your series, for instance as principal payments are
made on your series. Reductions due to principal payments should not directly
cause a loss on the notes.
However, the collateral amount can be applied for the benefit of your
series in two other ways:
. by reallocating principal collections to make interest payments and to
pay net swap payments due from the issuer and the servicing fee for your
series payable to non-affiliates, when finance charge collections and
investment earnings are not sufficient to make these payments; and
. to absorb your series share of defaulted receivables and any uncovered
dilution amounts, when finance charge collections and investment
earnings are not sufficient to cover these amounts.
The excess collateral amount provides credit enhancement by absorbing these
types of reductions. If the total amount of these types of reductions exceeds
the excess collateral amount, then the notes may not be repaid in full.
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The excess collateral amount may be decreased by payments to Spiegel
Acceptance during the controlled accumulation period to the extent that it
exceeds the required amount. See "Description of Series Provisions--Controlled
Accumulation Period" in this prospectus supplement and under "Credit
Enhancement--Excess Collateral Amount" in the accompanying prospectus.
The required excess collateral amount for your series on any day is
currently equal to no less than 10.5% of the total collateral amount on that
day. However, a percentage lower than 10.5% may be used to calculate the
required excess collateral amount in the future if the insurer consents and
each rating agency we designate for the Series 2000-A notes confirms that the
use of a lower percentage will not impair its ratings of the notes without the
reliance on the insurance policy. In addition:
(a)except as provided in clause (c), the required excess collateral
amount will never be less than 3% of the initial collateral amount,
(b)except as provided in clause (c), the required excess collateral
amount will not reduce during a rapid amortization period, and
(c)the required excess collateral amount will never exceed the
aggregate outstanding principal amount of the notes, minus the balances on
deposit in the spread account and the principal accumulation account.
The insurer may require the required excess collateral amount to be
calculated based on a percentage higher than 10.5% if in the future the
accounts in the trust portfolio do not meet the criteria required by the
insurance agreement, including requirements relating to the delinquency status
of the accounts and limitations on the number of accounts in the trust
portfolio that offer deferred payment or delayed payment options to customers.
Spread Account
The indenture trustee will establish and maintain as a segregated account
held as security primarily for the benefit of the noteholders to serve as the
spread account. Amounts on deposit in the spread account will be used as
described below under "--Spread Account Distributions."
The spread account will have an initial balance of $0 on the closing date
and will be funded up to the required spread account amount on each
distribution date from finance charge collections allocated to your series to
the extent available for that purpose.
The required spread account amount will be determined on each distribution
date as follows:
. Prior to a pay out event with respect to Series 2000-A, the required
spread account amount for any date of determination will not be less
than the product of (a) the spread account percentage determined in
accordance with the table below for that date of determination and (b)
the initial principal balance of the Series 2000-A notes, but will not
exceed the outstanding principal balance of the notes, minus the
principal accumulation account balance on that date of determination.
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The spread account percentage will be determined as follows:
<TABLE>
<CAPTION>
If the Average Excess Spread Percentage is then, the spread account
greater than: less than or equal to: percentage will equal:
------------- and ---------------------- ------------------------
<S> <C> <C> <C>
5.5% -- 2.00% (level 1)
5.0% 5.5% 4.50% (level 2)
4.5% 5.0% 5.50% (level 3)
3.5% 4.5% 7.00% (level 4)
-- 3.5% 10.00% (level 5)
</TABLE>
. If a pay out event with respect to the Series 2000-A notes has
occurred, the required spread account amount for any distribution date
will be equal to the outstanding principal amount of the Series 2000-A
notes and may not be subsequently reduced.
After the spread account percentage has been increased above 2.00% as
specified in the table above, it will remain at the specified percentage until:
. further increased to a higher required percentage as specified above,
or
. the third consecutive distribution date on which the Average Excess
Spread Percentage has increased to a level above that for the then-
current spread account percentage, in which case the spread account
percentage will be decreased to the appropriate percentage as specified
above; provided that, if the appropriate spread account percentage
would be more than one level below the current spread account
percentage, the spread account percentage will be decreased by one
level on that distribution date and by one additional level on each
subsequent distribution date until the spread account percentage has
been reduced to the appropriate spread account percentage based on the
Average Excess Spread Percentages for the then-current and two prior
distribution dates.
Funds on deposit in the spread account will be invested, at the direction
of the servicer, in highly rated liquid investments that meet the criteria
described in the indenture supplement. Investment earnings, net of losses and
investment expenses, will, except as otherwise indicated in this prospectus
supplement, not be deposited into the spread account and will be paid to
Spiegel Acceptance. However, after an event of default and acceleration of your
series of notes, these investment earnings will be available for payment to
holders of the notes.
Spread Account Distributions
On each distribution date, funds on deposit in the spread account--
including, after an event of default and acceleration of the notes, investment
earnings--will be applied to cover the following items in the following order
of priority, to the extent not covered by finance charge collections or
reallocated principal collections:
(1)interest on the notes and net swap payments owed by the issuer; and
(2)servicing fees payable to anyone other than our affiliates.
S-38
<PAGE>
On the Series 2000-A final maturity date, funds available in the spread
account, after giving effect to any withdrawals to be made as discussed in the
preceding paragraph, will be used to fund any shortfall in the payment of the
outstanding principal balance of the notes.
Funds on deposit in the spread account on any distribution date, after
giving effect to all withdrawals from and deposits to the spread account, in
excess of the required spread account amount will be paid to Spiegel
Acceptance. On the date on which all amounts due to the noteholders from the
spread account have been paid in full, all amounts, if any, then remaining in
the spread account will be distributed to Spiegel Acceptance.
Paired Series
Your series may be paired with one or more other series issued at a later
time once the controlled accumulation period for your series begins. We call
each of these later issued series a paired series. See "Description of the
Notes--Paired Series" in the accompanying prospectus. The issuance of the
paired series will be subject to the conditions described under "Description of
the Notes--New Issuances of Notes" in the accompanying prospectus.
We cannot guarantee that the terms of any paired series will not have an
impact on the calculation of the allocation percentage used to allocate
principal collections to your series or the timing or amount of payments
received by you as a Series 2000-A noteholder. In particular, the numerator for
the allocation percentage used to allocate principal collections to your series
may be reduced upon the occurrence of a pay out event for a paired series, but
not below the collateral amount as of the last day of the revolving period for
the paired series. The extent to which the timing or amount of payments
received by you may be affected will depend on many factors, only one of which
is a change in the calculation of the allocation percentage.
Pay Out Events
A pay out event will occur for the Series 2000-A notes upon the occurrence
of any of the following events:
(a)our failure (i) to make any payment or deposit on the date required
to be made under the transfer and servicing agreement, the indenture or
the Series 2000-A indenture supplement within the applicable grace period
which shall not exceed 5 days or (ii) to observe or perform in any
material respect any of our other covenants or agreements set forth in the
transfer and servicing agreement, the indenture or the Series 2000-A
indenture supplement, which failure has a material adverse effect on the
Series 2000-A noteholders and which continues unremedied for a period of
45 days after written notice of the failure, requiring the same to be
remedied;
(b)any representation or warranty made by us in the transfer and
servicing agreement or the pooling and servicing agreement or any
information required to be given by us to identify the accounts proves to
have been incorrect in any material respect when made or delivered and
which continues to be incorrect in any material
S-39
<PAGE>
respect for a period of 45 days after written notice of the failure,
requiring the same to be remedied, and as a result of which the interests
of the noteholders are materially and adversely affected and continue to
be materially and adversely affected for the designated period; except
that a pay out event described in this subparagraph (b) will not occur if
we have accepted reassignment of the related receivable or all related
receivables, if applicable, within the designated period;
(c)our failure to convey receivables in additional accounts to the
trust within 10 days after we are required to do so;
(d)any servicer default occurs;
(e)the average of the Portfolio Yields for any 3 consecutive calendar
months is less than the average of the Base Rates for the same calendar
months;
(f)sufficient funds are not available to pay in full the outstanding
principal balance of the Series 2000-A notes on the expected principal
payment date;
(g)specified bankruptcy, insolvency, liquidation, conservatorship,
receivership or similar events relating to us, Spiegel, Inc. or the bank;
(h)we are unable for any reason to transfer receivables to the trust;
(i)Spiegel Master Trust or the issuer becomes subject to regulation as
an "investment company" within the meaning of the Investment Company Act
of 1940, as amended;
(j)an event of default for Series 2000-A occurs under the indenture;
(k)a draw is made on the insurance policy;
(l)failure of any interest rate swap counterparty to make a payment
required under the interest rate swap for 5 business days after it is due
or early termination of the interest rate swap;
(m)our failure or the servicer's failure to observe or perform
covenants or agreements set forth in the insurance agreement within the
applicable grace periods as described under "Certain Information Regarding
the Policy and the Insurer--The Insurance Agreement" below;
(n)specified bankruptcy, insolvency, liquidation, conservatorship,
receivership or similar events relating to certain subsidiaries of
Spiegel; or
(o)specified bankruptcy, insolvency, liquidation, conservatorship,
receivership or similar events relating to the insurer.
In the case of any event described in clause (a), (b), (d) or (m) above, a
pay out event will be deemed to have occurred with respect to the notes only
if, after any applicable grace period, either the indenture trustee or the
Series 2000-A noteholders evidencing interests aggregating more than 50% of the
aggregate unpaid principal amount of the Series 2000-A notes, by written notice
to us, the servicer and, if notice is given by the Series 2000-A noteholders,
the indenture trustee, declare that a pay out event has occurred with respect
to the Series 2000-A notes as of the date of the notice.
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<PAGE>
In the case of any event described in clause (g), (h) or (i), a pay out
event with respect to all series of notes then outstanding, and in the case of
any event described in clause (c), (e), (f), (j), (k), (l), (n) or (o) a pay
out event with respect to only the Series 2000-A notes, will occur without any
notice or other action on the part of the indenture trustee or the Series 2000-
A noteholders immediately upon the occurrence of the event.
On the business day immediately before the date on which a pay out event is
deemed to have occurred, the rapid amortization period will begin.
See "Description of the Notes--Pay Out Events" in the accompanying
prospectus for an additional discussion of the consequences of insolvency,
conservatorship or receivership events related to us.
Events of Default
Unless the insurer is insolvent or has defaulted on its obligations under
the insurance policy, an event of default will occur under the indenture for
Series 2000-A upon the occurrence of any of the following events, unless waived
by the insurer:
(1) the issuer fails to pay principal when it becomes due and payable on
the final maturity date for the Series 2000-A notes;
(2) the issuer fails to pay interest when it becomes due and payable and
the default continues for a period of 28 days;
(3) bankruptcy, insolvency, conservatorship, receivership, liquidation or
similar events relating to the issuer;
(4) the issuer fails to observe or perform covenants or agreements made in
the indenture in respect of the Series 2000-A notes in any material respect and
the failure continues, or is not cured, for 45 days after notice to the issuer
and the indenture trustee by the insurer; or
(5) any servicer default occurs.
Upon the occurrence of an event of default and acceleration of the notes,
so long as the insurer is not insolvent and has not defaulted on its
obligations under the insurance policy, the insurer will have the right, but
not the obligation, to cause the indenture trustee to sell principal
receivables in an amount equal to the collateral amount for your series,
together with the related finance charge receivables. Following the occurrence
of an event of default, the indenture trustee will continue to submit claims
under the insurance policy as necessary to enable the issuer to continue to
make payments on the notes on each distribution date. Following the occurrence
of an event of default, the insurer may also elect, in its sole discretion, to
pay all or any portion of the outstanding principal amount of the notes, plus
accrued interest on the notes.
If the insurer is insolvent or has defaulted on its obligations under the
insurance policy, events of default for Series 2000-A will consist of the
events of default described under "The Indenture--Events of Default; Rights
Upon Event of Default" in the accompanying prospectus, and the indenture
trustee and the noteholders will have the rights under the indenture described
therein.
S-41
<PAGE>
Failure to pay excess interest on any distribution date will not be an
event of default for your series.
Servicing Compensation and Payment of Expenses
The servicing fee rate for your series is 2% per annum. Your series' share
of the servicing fee for each month will be calculated as described under
"Description of the Notes--Servicing Compensation and Payment of Expenses" in
the accompanying prospectus. However, the monthly servicing fee allocable to
your series for the first distribution date will equal $484,178.
S-42
<PAGE>
CERTAIN INFORMATION REGARDING THE INSURANCE POLICY AND THE INSURER
The Insurance Policy
On or before the closing date, MBIA Insurance Corporation will issue an
insurance policy pursuant to the provisions of an insurance and reimbursement
agreement to be dated as of the closing date among the issuer, us, the
servicer and MBIA, and which is described under "--The Insurance Agreement"
below.
The insurance policy will irrevocably and unconditionally guarantee
payment to the indenture trustee for the benefit of noteholders the full and
complete payment of (a) on each distribution date, accrued and unpaid interest
(other than excess interest) due on the notes, net swap payments payable by
the issuer and, if the servicer is not our affiliate, the monthly servicing
fee payment due to the servicer, and (b) on the final maturity date, the
outstanding principal balance of the notes together with accrued and unpaid
interest thereon (other than excess interest).
The insurance policy does not cover shortfalls, if any, attributable to
the liability of the issuer or the servicer for withholding taxes, if any,
including interest and penalties in respect of such liability. The insurance
policy will also not cover early termination payments due under the interest
rate swap or excess interest.
The indenture trustee will give written notice of any claims on the
insurance policy to the insurer by the close of business on the second
business day before the payment date or final maturity date, as applicable.
Payment of claims on the insurance policy will be made by the insurer
following receipt by the insurer of the appropriate notice for payment, not
later than 12:00 noon, New York City time, on the second business day
following receipt of the notice for payment.
If payment of any amount guaranteed by the insurer pursuant to the
insurance policy is avoided as a preference payment under applicable
bankruptcy, insolvency, receivership or similar law in the event of an
insolvency of the servicer, us or the issuer, the insurer will pay such amount
out of the funds of the insurer on the date when due to be paid pursuant to
the order referred to below or, if later, the first to occur of:
(1)the fourth business day following receipt by the insurer from the
indenture trustee of:
(a)a certified copy of the order of the court or other
governmental body which exercised jurisdiction to the effect that the
indenture trustee is required to return the amount of any interest or
principal payment distributed with respect to the notes during the
term of the insurance policy because such distributions were avoidable
preference payments under applicable bankruptcy law, which order is
final and not subject to appeal,
(b)a notice for payment in the form specified by the insurance
policy, and
S-43
<PAGE>
(c)an assignment duly executed and delivered by the noteholders,
in such form as is reasonably required by the insurer and provided to
the noteholders by the insurer, irrevocably assigning to the insurer
all rights and claims of the noteholders relating to or arising under
the Series 2000-A notes against the issuer, or
(2)the date of receipt by the insurer from the indenture trustee of
the items referred to in clauses (a) through (c) above if, at least four
business days prior to the date of receipt, the insurer had received
written notice from the indenture trustee that those items were to be
delivered on that date and that date had been specified in the notice.
Such payment will be disbursed to the receiver, conservator, debtor-in-
possession or trustee in bankruptcy named in the order and not to the indenture
trustee or the Series 2000-A noteholders directly, as the case may be. However,
if the indenture trustee or the Series 2000-A noteholders have made payment of
the preference amount to the receiver, conservator, debtor-in-possession or
trustee in bankruptcy named in the order, such payment will be made to the
indenture trustee or the Series 2000-A noteholders, as the case may be.
For purposes of this description of the insurance policy, any reference to
"receipt or received" means actual delivery to the insurer and to the fiscal
agent appointed by the insurer at its option, if any, prior to 1:00 p.m., New
York City time, on a business day. Delivery either on a day that is not a
business day or after 1:00 p.m., New York City time, will be deemed to be
received on the following business day. If any notice or certificate given
under the insurance policy by the indenture trustee is not in proper form or is
not properly completed, executed or delivered, the insurer or the fiscal agent
will promptly advise the indenture trustee and the notice or certificate, as
applicable, will be deemed not to have been received. The indenture trustee may
submit an amended notice or certificate.
The insurer's obligations under the insurance policy in respect of
guaranteed distributions will be discharged to the extent funds are transferred
to the indenture trustee as provided in the insurance policy or deposited by
the servicer into the collection account, whether or not such funds are
properly applied by the indenture trustee.
The insurer will be subrogated to the rights of each noteholder to receive
payments of principal and interest, as applicable, with respect to
distributions on the notes to the extent of any payment by the insurer under
the insurance policy. To the extent the insurer makes guaranteed distributions,
either directly or indirectly (as by paying through the indenture trustee), to
the noteholders, the insurer will be subrogated to the rights of the
noteholders with respect to those guaranteed distributions, will be deemed, to
the extent of the payments so made, to be a registered noteholder for purposes
of payment and will receive all future guaranteed distributions until all such
guaranteed distributions by the insurer have been fully reimbursed, but only if
the noteholders have received the full amount of the guaranteed distributions.
The terms of the insurance policy cannot be modified, altered or affected
by any other agreement or instrument without the consent of the insurer and the
indenture trustee. The
S-44
<PAGE>
insurance policy by its terms may not be cancelled or revoked. The insurance
policy is governed by the laws of the State of New York.
Unless the insurer has failed to make a required payment for two business
days after a payment is due under the insurance policy or the insurer becomes
the subject of certain insolvency events, the insurer will be deemed to be the
holder of the notes for certain purposes (other than with respect to payments
on the notes) and will be entitled to exercise all rights of the noteholders
without the consent of the noteholders, except with respect to any amendment or
waiver requiring the consent of all affected noteholders, in which case the
consent of both the insurer and all affected noteholders will be required. In
addition, the insurer is an express third-party beneficiary of the indenture
supplement, to the extent of provisions relating to the insurer.
In the absence of payments under the insurance policy, noteholders will
bear directly the credit and other risks associated with their notes.
The Insurer
The insurer, MBIA Insurance Corporation, is the principal operating
subsidiary of MBIA Inc., a New York Stock Exchange listed company. MBIA Inc. is
not obligated to pay the debts of or claims against the insurer. The insurer is
domiciled in the State of New York and licensed to do business in and is
subject to regulation under the laws of all 50 states, the District of
Columbia, the Commonwealth of Puerto Rico, the Commonwealth of the Northern
Mariana Islands, the Virgin Islands of the United States and the Territory of
Guam. The insurer has two European branches, one in the Republic of France and
the other in the Kingdom of Spain. New York has laws prescribing minimum
capital requirements, limiting classes and concentrations of investments and
requiring the approval of policy rates and forms. State laws also regulate the
amount of both the aggregate and individual risks that may be insured, the
payment of dividends by the insurer, changes in control and transactions among
affiliates. Additionally, the insurer is required to maintain contingency
reserves on its liabilities in certain amounts and for certain periods of time.
The insurer does not accept any responsibility for the accuracy or
completeness of this prospectus supplement, the prospectus or any information
or disclosure contained herein or therein, other than with respect to the
accuracy of the information under the headings "--The Insurer," "--Insurer
Financial Information," "--Where You Can Obtain Additional Information About
the Insurer" and "--Financial Strength Ratings of the Insurer." Additionally,
the insurer makes no representation regarding the notes or the advisability of
investing in the notes.
The insurance policy is not covered by the Property/Casualty Insurance
Security Fund specified in Article 76 of the New York Insurance Law.
Insurer Financial Information
The consolidated financial statements of the insurer and its subsidiaries
as of December 31, 1999 and December 31, 1998 and for each of the three years
in the period ended
S-45
<PAGE>
December 31, 1999 prepared in accordance with generally accepted accounting
principals, included in the Annual Report on Form 10-K of MBIA Inc. for the
year ended December 31, 1999, and the consolidated financial statements of the
insurer and its subsidiaries as of September 30, 2000 and for the nine-month
periods ended September 30, 2000 and September 30, 1999 included in the
Quarterly Report on Form 10-Q of MBIA Inc. for the period ended September 30,
2000, are hereby incorporated by reference into this prospectus supplement and
shall be deemed to be a part hereof. Any statement contained in a document
incorporated by reference herein shall be modified or superseded for purposes
of this prospectus supplement to the extent that a statement contained herein
or in any other subsequently filed document which also is incorporated by
reference herein modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this prospectus supplement.
All financial statements of the insurer and its subsidiaries included in
documents filed by MBIA Inc. pursuant to Section 13(a), 13(c), 14 or 15(d) of
the Exchange Act subsequent to the date of this prospectus supplement and prior
to the termination of the offering of the notes shall be deemed to be
incorporated by reference into this prospectus supplement and to be a part
hereof from the respective dates of filing such documents.
The following tables present selected financial information of the insurer
determined in accordance with statutory accounting practices prescribed or
permitted by insurance regulatory authorities and generally accepted accounting
principles.
<TABLE>
<CAPTION>
Statutory Accounting
Practices
--------------------------
December 31, September 30,
1999 2000
------------ -------------
(Audited) (Unaudited)
(In millions)
<S> <C> <C>
Admitted Assets................................ $7,045 $7,525
Liabilities.................................... 4,632 5,101
Capital and Surplus............................ 2,413 2,424
<CAPTION>
GAAP
--------------------------
December 31, September 30,
1999 2000
------------ -------------
(Audited) (Unaudited)
(In millions)
<S> <C> <C>
Assets......................................... $7,446 $8,124
Liabilities.................................... 3,218 3,531
Shareholder's equity........................... 4,228 4,593
</TABLE>
Where You Can Obtain Additional Information About the Insurer
Copies of the financial statements of the insurer incorporated by reference
herein and copies of the insurer's 1999 year-end audited financial statements
prepared in accordance with statutory accounting practices are available,
without charge, from the insurer. The
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<PAGE>
address of the insurer is 113 King Street, Armonk, New York 10504. The
telephone number of the insurer is (914) 273-4545.
Financial Strength Ratings of the Insurer
Moody's rates the financial strength of the insurer "Aaa."
Standard & Poor's rates the financial strength of the insurer "AAA."
Fitch rates the financial strength of the insurer "AAA."
Each rating of the insurer should be evaluated independently. The ratings
reflect the respective rating agency's current assessment of the
creditworthiness of the insurer and its ability to pay claims on its policies
of insurance. Any further explanation as to the significance of the above
ratings may be obtained only from the applicable rating agency.
The above ratings are not recommendations to buy, sell or hold the notes,
and such ratings may be subject to revision or withdrawal at any time by the
assigning rating agencies. Any downward revision or withdrawal of any of the
above ratings may have an adverse effect on the market price of the notes. The
insurer does not guaranty the market price of the notes nor does it guaranty
that the ratings on the notes will not be revised or withdrawn.
The Insurance Agreement
Under the insurance agreement, the occurrence of any of the following
events, unless waived by the insurer, will cause a pay out event to occur for
your series:
. the average amount of dilution with respect to principal receivables in
the trust portfolio for any three consecutive calendar months exceeds
8.5% of the average aggregate amount of principal receivables in the
trust portfolio during the same three-month period;
. the servicer fails to maintain a sub-servicing agreement with First
Data Resources, Inc. or another sub-servicer acceptable to the insurer;
. the servicer fails to remain "well capitalized" within the meaning of
Federal bank regulations and that failure is not cured within 30 days;
. a material change in control of Spiegel, Inc. occurs; or
. we or any of our affiliates fails to observe or perform in any material
respect any of the covenants or agreements set forth in the insurance
agreement or breaches in any material respect any representation or
warranty made in the insurance agreement and that failure or breach is
not cured within the applicable grace period specified in the insurance
agreement.
Under the insurance agreement, the prior consent of the insurer will be
required for specified actions under the transfer and servicing agreement, the
indenture, the indenture supplement and the related documents. For example,
under the circumstances described in the insurance agreement, the consent of
the insurer may be required for mergers or consolidations of the servicer or
the addition and removal of accounts. In addition, if the servicer or the
seller fails to perform or observe its covenants or other agreements under, or
breaches its representations and warranties made in, the transfer and servicing
agreement, the indenture, the indenture supplement and the related documents,
the grace periods for curing those failures or breaches described in this
prospectus supplement and the accompanying prospectus may be shorter if the
insurer is exercising the rights and remedies of the noteholders.
S-47
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting agreement
between us, Spiegel and the underwriters named below, we have agreed to sell to
the underwriters, and each of the underwriters has severally agreed to
purchase, the principal amount of the notes set forth opposite its name:
<TABLE>
<CAPTION>
Principal Amount
Underwriters of Notes
------------ ----------------
<S> <C>
Banc of America Securities LLC........................... $420,000,000
Deutsche Bank Securities Inc. ........................... 60,000,000
J.P. Morgan Securities Inc. ............................. 60,000,000
ABN AMRO Incorporated.................................... 30,000,000
HSBC Securities (USA) Inc. .............................. 30,000,000
------------
Total................................................ $600,000,000
============
</TABLE>
In the underwriting agreement, the underwriters have agreed, subject to the
terms and conditions set forth in that agreement, to purchase all of the notes
offered by this prospectus supplement if any of the notes are purchased.
The underwriters have advised us that they propose initially to offer the
notes to the public at the prices set forth in this prospectus supplement, and
to dealers chosen by the underwriters at the prices set forth in this
prospectus supplement less a concession not in excess of 0.18%. The
underwriters and those dealers may reallow a concession not in excess of 0.15%.
After the initial public offering of the notes, the public offering prices and
the concessions referred to in this paragraph may be changed.
The underwriters will be compensated as set forth in the following table:
<TABLE>
<CAPTION>
Underwriters' Amount
Discounts and per $1,000
Commissions of Principal Total Amount
------------- ------------ ------------
<S> <C> <C>
0.30% $3.00 $1,800,000
</TABLE>
Each underwriter has represented and agreed that:
(a)it has complied and will comply with all applicable provisions of
the Financial Services Act 1986 with respect to anything done by it in
relation to the notes in, from or otherwise involving the United Kingdom;
(b)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 or sale of the notes to a person who is of a kind described in
Article 11(3) of the Financial Services Act 1986 (Investment
Advertisements) (Exemptions) Order 1996 or is a person to whom that
document may otherwise lawfully be issued or passed on;
(c)if it is an authorized person under Chapter III of part I of the
Financial Services Act 1986, it has only promoted and will only promote
(as that term is defined
S-48
<PAGE>
in Regulation 1.02(2) of the Financial Services (Promotion of Unregulated
Schemes) Regulations 1991) to any person in the United Kingdom the scheme
described in this prospectus supplement and the accompanying prospectus 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; and
(d)it is a person of a kind described in Article 11(3) of the
Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order
1996.
We will indemnify the underwriters against the liabilities specified in the
underwriting agreement, including liabilities under the Securities Act, or will
contribute to payments the underwriters may be required to make in connection
with those liabilities.
The underwriters may engage in over-allotment transactions, stabilizing
transactions, syndicate covering transactions and penalty bids with respect to
the notes in accordance with Regulation M under the Exchange Act. Over-
allotment transactions involve syndicate sales in excess of the offering size,
which creates a syndicate short position. The underwriters do not have an
"overallotment" option to purchase additional notes in the offering, so
syndicate sales in excess of the offering size will result in a naked short
position. The underwriters must close out any naked short position through
syndicate covering transactions in which the underwriters purchase notes in the
open market. A naked short position is more likely to be created if the
underwriters are concerned that there may be downward pressure on the price of
the notes in the open market after pricing that would adversely affect
investors who purchase in the offering. Stabilizing transactions permit bids to
purchase the notes so long as the stabilizing bids do not exceed a specified
maximum. Penalty bids permit the underwriters to reclaim a selling concession
from a syndicate member when the notes originally sold by that syndicate member
are purchased in a syndicate covering transaction. Over-allotment transactions,
stabilizing transactions, syndicate covering transactions and penalty bids may
have the effect of raising or maintaining the market price of the notes or
preventing or retarding a decline in the market price of the notes. As a
result, the price of the notes may be higher than the price that might
otherwise exist in the open market. Neither we nor the underwriters represent
that the underwriters will engage in any of these transactions or that those
transactions, once commenced, will not be discontinued without notice at any
time.
In the ordinary course of their respective businesses, the underwriters and
their respective affiliates have engaged and may in the future engage in
investment banking or commercial banking transactions with us and our
affiliates.
EXPERTS
The consolidated balance sheets of MBIA Insurance Corporation and
subsidiaries as of December 31, 1999, and December 31, 1998, and the related
consolidated statements of income, changes in shareholder's equity, and cash
flows for each of the three years in the period ended December 31, 1999,
incorporated by reference in this prospectus supplement, have been incorporated
into this prospectus supplement in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
that firm as experts in accounting and auditing.
S-49
<PAGE>
GLOSSARY OF TERMS FOR PROSPECTUS SUPPLEMENT
"Average Excess Spread Percentage" means, for any distribution date, the
percentage determined as follows:
<TABLE>
<C> <S>
For the January 16, 2001
distribution date: The Excess Spread Percentage for the January 16,
2001 distribution date
For the February 15, 2001
distribution date: The sum of the Excess Spread Percentage for the
January 16, 2001 distribution date, plus the
Excess Spread Percentage for the February 15, 2001
distribution date
--------------------------------------------------
2
For each following
distribution date: The sum of the Excess Spread Percentages for the
then-current distribution date and the two prior
distribution dates
--------------------------------------------------
3
</TABLE>
"Base Rate" means, with respect to any calendar month, the annualized
percentage equivalent of a fraction:
. the numerator of which is the sum of (a) the interest due on the Series
2000-A notes, other than excess interest, (b) the monthly servicing fee
for the Series 2000-A notes, (c) any net swap payment due from the
issuer and (d) the monthly insurance premium, each for the following
distribution date; and
. the denominator of which is the outstanding principal balance of the
Series 2000-A notes as of the first day of that calendar month.
"Excess Spread Percentage" means, for any distribution date, the amount, if
any, by which the Portfolio Yield for the prior calendar month exceeds the Base
Rate for the prior calendar month. However, the Excess Spread Percentage for
the first distribution date will be calculated for the period from the closing
date through the end of the calendar month preceding the first distribution
date.
"Portfolio Yield" means, with respect to any calendar month, the annualized
percentage equivalent of a fraction:
(1) the numerator of which is (a) the amount of finance charge
collections allocated to your series, plus (b) net payments received under
the interest rate hedges, minus (c) the amount of defaulted receivables
allocated to your series for that calendar month; and
(2) the denominator of which is the collateral amount as of the first
day of that calendar month.
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The allocation of finance charge collections referred to in clause (1) above
will be made in accordance with the method of estimation that the servicer uses
from time to time to allocate collections between finance charge collections
and principal collections. The amount of finance charge collections referred to
in clause (1) will also include net payments received under the interest rate
swap, net investment proceeds transferred from the principal accumulation
account, amounts withdrawn from the reserve account and, if the rating agencies
confirm that this will not impair their ratings of your series, any available
excess finance charge collections from other series.
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Annex I
OTHER SECURITIES ISSUED AND OUTSTANDING
The principal characteristics of the other outstanding series of investor
certificates issued by Spiegel Master Trust are set forth in the table below.
All of the outstanding series of investor certificates are in group one. For
more specific information with respect to any series of investor certificates,
any prospective investor should contact Spiegel Credit Corporation III at (302)
429-7609.
Series 1999-A
Initial Class A Investor Amount..................................... $99,000,000
Initial Class B Investor Amount..................................... $34,783,784
Maximum Class A Investor Amount.................................... $350,000,000
Maximum Class B Investor Amount.................................... $122,972,973
Class A interest rate....... Floating rate generally based upon commercial paper
rates
Class B interest rate...................................... non-interest bearing
Scheduled Pay Out Commencement Date............. February 2001 Distribution Date
Paired Series.......................................... Series 1994-B and 1995-A
Annual servicing fee percentage.................................. 2.0% per annum
Enhancement for the Class A certificates............... Subordination of Class B
certificates, spread
account
Series 1999-A termination date...................... July 2006 distribution date
Series Issuance Date.......................................... November 15, 1999
Series 1999-B
Initial Class A Investor Amount.............................................. $0
Initial Class B Investor Amount.............................................. $0
Maximum Class A Investor Amount.................................. $1,125,000,000
Maximum Class B Investor Amount.................................... $281,250,000
Class A interest rate....... Floating rate generally based upon commercial paper
rates
Class B interest rate...................................... non-interest bearing
Scheduled Pay Out Commencement Date.... last day of December 2002 Monthly Period
Annual servicing fee percentage.................................. 2.0% per annum
Enhancement for the Class A certificates.. Subordination of Class B certificates
Series 1999-B termination date.. 36 months after the earlier of the commencement
of the Controlled Amortization Period or a
Rapid Amortization period
Series Issuance Date........................................... December 9, 1999
I-1
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PROSPECTUS
Spiegel Credit Card Master Note Trust
Issuer
Spiegel Credit Corporation III
Seller
First Consumers National Bank
Servicer
Asset Backed Notes
The Issuer--
. may periodically issue asset backed notes in one or more series with one
or more classes; and
. will have a direct or indirect interest in--
. receivables in a portfolio of private label retail revolving credit
card accounts owned by First Consumers National Bank;
. payments due on those receivables; and
. other property described in this prospectus and in the accompanying
prospectus supplement.
The Notes--
. will be paid only from the trust assets;
. offered with this prospectus will be rated in one of the four highest
rating categories by at least one nationally recognized rating
organization;
. may have one or more forms of credit enhancement; and
. will be issued as part of a designated series which may include one or
more classes of notes.
You should consider carefully the risk factors beginning on page 2
in this prospectus.
A note is not a deposit and neither the notes nor the underlying
accounts or receivables are insured or guaranteed by the Federal
Deposit Insurance Corporation or any other governmental agency.
The notes are obligations of Spiegel Credit Card Master Note Trust
only and are not obligations of First Consumers National Bank,
Spiegel Credit Corporation III or any other person.
This prospectus may be used to offer and sell notes of a series
only if accompanied by the prospectus supplement for that series.
Neither the Securities and Exchange Commission nor any state securities
commission has approved these notes or determined that this prospectus is
accurate or complete. Any representation to the contrary is a criminal
offense.
December 8, 2000
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<PAGE>
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS AND THE ACCOMPANYING PROSPECTUS SUPPLEMENT
We provide information to you about the notes in two separate documents:
(a) this prospectus, which provides general information, some of which may not
apply to your series of notes, and (b) the accompanying prospectus supplement,
which describes the specific terms of your series of notes, including:
.the terms, including interest rates, for each class;
.the timing of interest and principal payments;
.information about the receivables;
.information about credit enhancement, if any, for each class;
.the ratings for each class being offered; and
.the method for selling the notes.
If the terms of your series of notes vary between this prospectus and the
accompanying prospectus supplement, you should rely on the information in the
prospectus supplement.
You should rely only on the information provided in this prospectus and the
accompanying prospectus supplement, including the information incorporated by
reference. We have not authorized anyone to provide you with different
information. We are not offering the notes in any state where the offer is not
permitted.
We include cross references in this prospectus and the accompanying
prospectus supplement to captions in these materials where you can find further
related discussions. The following Table of Contents and the Table of Contents
in the accompanying prospectus supplement provide the pages on which these
captions are located.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
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<S> <C>
Summary: Overview of Transactions.......................................... 1
Risk Factors............................................................... 2
Important Parties.......................................................... 9
The Issuer................................................................ 9
Spiegel Master Trust...................................................... 9
Spiegel, Inc. and its Retail Subsidiaries................................. 10
First Consumers National Bank............................................. 10
Spiegel Credit Corporation III............................................ 11
Spiegel Acceptance Corporation............................................ 11
The Bank's Private Label Credit Card Activities............................ 11
General................................................................... 11
Credit Granting Procedures................................................ 11
Pre-approved.............................................................. 11
Non-Pre-approved.......................................................... 12
Billing and Payments...................................................... 13
Delinquency and Collections............................................... 14
Customer Service and Account Management................................... 15
Description of First Data Resources....................................... 15
The Trust Portfolio........................................................ 16
Use of Proceeds............................................................ 18
Description of the Notes................................................... 18
General................................................................... 18
Book-Entry Registration................................................... 19
Definitive Notes.......................................................... 23
Interest Payments......................................................... 24
Principal Payments........................................................ 25
Suspension and Postponement of Controlled Accumulation Period............. 25
Transfer and Assignment of Receivables.................................... 27
New Issuances of Notes.................................................... 28
Representations and Warranties............................................ 29
Addition of Trust Assets.................................................. 30
Removal of Accounts....................................................... 31
</TABLE>
<TABLE>
<CAPTION>
Page
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Collection and Other Servicing Procedures................................. 32
Discount Option........................................................... 32
Trust Accounts............................................................ 33
Funding Period............................................................ 33
Application of Collections................................................ 34
Shared Excess Finance Charge Collections.................................. 35
Shared Principal Collections.............................................. 35
Excess Funding Account.................................................... 36
Defaulted Receivables; Dilution; Investor Charge-Offs..................... 36
Defeasance................................................................ 37
Final Payment of Principal................................................ 37
Paired Series............................................................. 38
Pay Out Events............................................................ 39
Servicing Compensation and Payment of Expenses............................ 40
Matters Regarding the Seller and the Servicer............................. 40
Servicer Default.......................................................... 43
Reports to Noteholders.................................................... 45
Evidence as to Compliance................................................. 46
Amendments................................................................ 47
The Indenture.............................................................. 49
Events of Default; Rights upon Event of Default........................... 49
Covenants................................................................. 52
Modification of the Indenture............................................. 54
Annual Compliance Statement............................................... 56
Indenture Trustee's Annual Report......................................... 56
List of Noteholders....................................................... 56
Satisfaction and Discharge of Indenture................................... 56
The Indenture Trustee..................................................... 56
Matters Regarding the Administrator....................................... 57
Pooling and Servicing Agreement............................................ 57
New Issuances of Investor Certificates.................................... 57
</TABLE>
i
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<TABLE>
<CAPTION>
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<S> <C>
Amendments................................................................ 58
Credit Enhancement......................................................... 58
General................................................................... 58
Excess Collateral Amount.................................................. 60
Subordination............................................................. 60
Letter of Credit.......................................................... 61
Cash Collateral Guaranty or Account....................................... 61
Surety Bond or Insurance Policy........................................... 61
Spread Account............................................................ 62
Reserve Account........................................................... 62
Description of the Receivables Purchase Agreement.......................... 62
Sale of Receivables....................................................... 63
Representations and Warranties............................................ 63
Covenants................................................................. 64
Amendments................................................................ 65
Termination............................................................... 65
Note Ratings............................................................... 65
Material Legal Aspects of the Receivables.................................. 66
Transfer of Receivables................................................... 66
</TABLE>
<TABLE>
<CAPTION>
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Conservatorship, Receivership and Bankruptcy.............................. 67
Consumer Protection Laws.................................................. 69
Federal Income Tax Consequences............................................ 70
General................................................................... 70
Tax Classification of the Issuer and the Notes............................ 71
Consequences to Holders of the Offered Notes.............................. 72
State and Local Tax Consequences.......................................... 74
ERISA Considerations....................................................... 74
Plan of Distribution....................................................... 76
Reports to Noteholders..................................................... 77
Where You Can Find More Information........................................ 77
Glossary of Terms For Prospectus........................................... 78
Annex I
Global Clearance, Settlement and Tax Documentation Procedures............. A-1
</TABLE>
ii
<PAGE>
SUMMARY: OVERVIEW OF TRANSACTIONS
[Flow Chart]
Each series of notes will be turn, transferred those credit card
issued by Spiegel Credit Card receivables to Spiegel Master Trust
Master Note Trust and will include under a pooling and servicing
one or more classes of notes, agreement. The bank will continue
representing debt of the issuer. to own the accounts that are
Each series and class may differ as designated to the trust. After all
to timing and priority of outstanding series of investor
distributions, allocations of certificates that have been issued
losses, interest rates, amount of by Spiegel Master Trust have been
distributions in respect of retired, we may cause Spiegel
principal or interest and credit Master Trust to terminate, at which
enhancement. We, Spiegel Credit time the receivables will be
Corporation III, will disclose the transferred to the issuer and held
details of these timing, priority directly by the issuer. We refer to
and other matters in a prospectus the entity--either Spiegel Master
supplement. Trust or the issuer--that holds the
receivables at any given time as
the trust.
Initially, the primary asset of
the issuer will be a collateral The notes will represent the
certificate issued by Spiegel right to payments from a portion of
Master Trust to us and transferred collections on the credit card
to the issuer under a transfer and receivables held by the trust. All
servicing agreement. It represents new receivables generated in the
a beneficial interest in the assets accounts will be automatically
of Spiegel Master Trust. Spiegel transferred to the trust. The total
Master Trust owns primarily credit amount of receivables held by the
card receivables arising in private trust will fluctuate daily as new
label retail revolving credit card receivables are generated and
accounts. payments are received on existing
receivables.
First Consumers National Bank
is the originator of the credit The bank continues to service
card receivables. It has designated the receivables that are
all eligible accounts from its transferred to the trust and will
portfolio of private label retail act as the issuer's administrator.
credit card accounts and has
transferred the receivables in The Bank of New York is the
those accounts to us, directly or trustee for Spiegel Master Trust.
indirectly, under a receivables The Bank of New York will also act
purchase agreement. Indirect sales as indenture trustee for the
occur when the bank designates issuer. The issuer will grant a
accounts that have outstanding security interest in its assets--
receivables, which receivables the including the collateral
bank previously has sold to our certificate or, if Spiegel Master
mutual affiliate Spiegel Acceptance Trust has terminated, the
Corporation. Spiegel Acceptance receivables--to the indenture
then sells those outstanding trustee for the benefit of the
receivables to us. We have, in noteholders.
1
<PAGE>
RISK FACTORS
The following is a summary of the principal risk factors that apply to an
investment in the notes. You should consider the following risk factors and any
risk factors in the accompanying prospectus supplement before deciding whether
to purchase the notes.
It may not be possible to find an investor to purchase
your notes.
The underwriters may assist in resales of the notes
but they are not required to do so. A secondary market
for any notes 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
notes.
Some liens would be given priority over your notes
which could cause delayed or reduced payments.
We, the bank and Spiegel Acceptance account for the
transfer of the receivables as a sale. Even so, a court
could conclude that we, Spiegel Acceptance or the bank
owns the receivables and that the trust holds only a
security interest. Even if a court would reach that
conclusion, however, the indenture trustee will have a
first-priority perfected security interest, either
directly or through Spiegel Master Trust.
If a court were to conclude that the trust has only
a security interest, a tax or governmental lien or
other lien imposed under applicable state or federal
law without consent on the property of the person that
owns the receivables arising before receivables come
into existence may be senior to the trust's interest in
the receivables. Additionally, if a receiver or
conservator were appointed for the bank, the fees and
expenses of the receiver or conservator might be paid
from the receivables before the trust receives any
payments on the receivables. In addition, the trust may
not have a first-priority perfected security interest
in collections commingled and used for the benefit of
the servicer if (a) insolvency proceedings were
commenced by or against the servicer or (b) a ten-day
period were to elapse after receipt by the servicer of
collections that have been commingled with other funds.
If any of these events were to occur, payments to you
could be delayed or reduced. See "Material Legal
Aspects of the Receivables--Transfer of Receivables"
and "Description of the Notes--Representations and
Warranties" in this prospectus.
2
<PAGE>
If a conservator or receiver were appointed for First
Consumers National Bank, or if we or Spiegel Acceptance
became a debtor in a bankruptcy case, delays or
reductions in payment of your notes could occur.
If the bank were to become insolvent, the FDIC
could act as conservator or receiver for the bank. In
that role, the FDIC would have broad powers to
repudiate contracts to which the bank was party if the
FDIC determined that the contracts were burdensome and
that repudiation would promote the orderly
administration of the bank's affairs. In addition, no
agreement that tended to diminish or defeat the FDIC's
interest in an asset acquired from the bank would be
enforceable against the FDIC unless the agreement meets
legal requirements. One of those requirements is that
the agreement would have to have been executed by the
bank contemporaneously with the bank's acquisition of
the asset.
The FDIC has adopted a rule stating that the FDIC
shall not use its repudiation power to reclaim, recover
or recharacterize as property of an FDIC-insured bank
any financial assets transferred by the bank in
connection with a securitization transaction. The same
rule states that the FDIC shall not seek to avoid an
otherwise legally enforceable securitization agreement
solely because the agreement does not satisfy the
contemporaneous execution requirement. Although the
FDIC has the power to repeal or amend its own rules,
the securitization rule states that any repeal or
amendment of that rule will not apply to any transfers
of financial assets made in connection with a
securitization that was in effect before the repeal or
modification.
We have structured the issuance of the notes with
the intention that the direct or indirect transfers of
the receivables from the bank to us will have the
benefit of this rule. If the FDIC were to assert that
the rule does not apply to these transfers of
receivables, however, payments of principal and
interest on your notes could be delayed and, if the
FDIC were successful, possibly reduced. Furthermore, if
the FDIC's assertion were successful, the FDIC could--
. require the indenture trustee to go through the
administrative claims procedure established by the
FDIC in order to obtain payments on the notes;
. obtain a stay of any actions by the indenture
trustee to enforce against the bank the
receivables purchase agreement or the purchase
agreement between Spiegel Acceptance and the bank;
or
3
<PAGE>
. repudiate the receivables purchase agreement and
limit our claims to our "actual direct
compensatory damages" (as defined in the statute
that governs the FDIC's authority and actions as a
receiver or conservator).
If the FDIC were to successfully take any of these
actions, the amount payable to you could be lower than
the outstanding principal and accrued interest on the
notes, thus resulting in losses to you.
We are a wholly-owned, bankruptcy remote subsidiary
of Spiegel. Our certificate of incorporation limits the
nature of our business and restricts our ability to
commence a voluntary case under the bankruptcy code
without the unanimous consent of our board of
directors.
If, however, we or Spiegel Acceptance became a
debtor in a bankruptcy case, and if Spiegel
Acceptance's transfer of the receivables to us or our
transfer of the receivables to the trust were construed
as the grant of a security interest to secure a
borrowing, your payments of outstanding principal and
interest could be delayed and possibly reduced. In
addition, if we, Spiegel or Spiegel Acceptance were to
become a debtor in a bankruptcy case and our assets and
liabilities were substantively consolidated with those
of Spiegel or Spiegel Acceptance, your payments of
outstanding principal and interest could be delayed and
possibly reduced.
If a conservator or receiver were appointed for the
bank, or if we or Spiegel Acceptance were to become a
debtor in a bankruptcy case, an early payment of
principal on all outstanding series could result. Under
the terms of the agreement that governs the transfer of
the receivables from us to the trust, new principal
receivables would not be transferred to the trust.
However, the bankruptcy court, the conservator or the
receiver may have the power, regardless of the terms of
that agreement, to prevent the early payment of
principal or to require new principal receivables to
continue being transferred.
In addition, a conservator or receiver for the
servicer may have the power to prevent either the
indenture trustee or the noteholders from appointing a
new servicer.
See "Material Legal Aspects of the Receivables--
Conservatorship, Receivership and Bankruptcy" in this
prospectus.
4
<PAGE>
The account owner may change the terms and conditions
of the accounts in a way that reduces collections.
As owner of the accounts, the bank retains the
right to change various account terms, including
finance charges, other fees and the required monthly
minimum payment. These changes may be voluntary on the
part of the bank or may be forced by law or market
conditions. Changes in interest and fees could decrease
the effective yield on the accounts and this could
result in an early payment of principal of your notes.
Changes could also cause a reduction in the credit
ratings on your notes.
Changes to consumer protection laws may impede
collection efforts or reduce collections.
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 regulations could make it more
difficult for the servicer of the receivables to
collect payments on the receivables or reduce the
finance charges and other fees that the originator can
charge on credit card account balances, resulting in
reduced collections.
Receivables that do not comply with consumer
protection laws may not be valid or enforceable under
their terms against the obligors on those receivables.
If a cardholder sought protection under federal or
state bankruptcy or debtor relief laws, a court could
reduce or discharge completely the cardholder's
obligations to repay amounts due on its account and, as
a result, the related receivables would be written off
as uncollectible. See "Material Legal Aspects of the
Receivables--Consumer Protection Laws" in this
prospectus.
Limited remedies for breaches of representations could
reduce or delay payments.
When we transfer the receivables to the trust, we
make representations and warranties relating to the
validity and enforceability of the receivables arising
under the accounts designated to the trust, and as to
the perfection and priority of the indenture trustee's
interest in the receivables. However, none of the
trustee for Spiegel Master Trust, the owner trustee or
the indenture trustee will make any examination of the
receivables or the related assets to determine the
presence of defects or compliance with the
representations and warranties or for any other
purpose.
5
<PAGE>
A representation or warranty relating to the
receivables may be violated if the related obligors
have defenses to payment or offset rights, or our
creditors or creditors of the bank claim rights to the
trust assets. If a representation or warranty is
violated, we may have an opportunity to cure the
violation. If we are unable to cure the violation
within the specified time period or if there is no
right to cure the violation, we must accept
reassignment of the receivables affected by the
violation. These reassignments are the only remedy for
breaches of representations and warranties, even if
your damages exceed your share of the reassignment
price. See "Description of the Notes--Representations
and Warranties" in this prospectus.
Payment patterns of receivables could reduce
collections.
The receivables transferred to the trust may be
paid at any time. We cannot assure the creation of
additional receivables in the accounts designated to
the trust or that any particular pattern of cardholder
payments will occur. A significant decline in the
amount of new receivables generated could result in the
occurrence of a pay out event for one or more series
and the commencement of the rapid amortization period
for each of those series. If a pay out event occurs,
you could receive payment of principal sooner than
expected. The bank's ability to compete in the current
industry environment will affect its ability to
generate new receivables and might also affect payment
patterns on the receivables. In addition, changes in
finance charges can alter the monthly payment rates of
cardholders. A significant decrease in monthly payment
rates could slow the return or accumulation of
principal during an amortization period or accumulation
period. See "Maturity Considerations" in the
accompanying prospectus supplement.
Allocations of charged-off receivables or uncovered
dilution could reduce payments to you.
The servicer will write off the receivables arising
in accounts designated to the trust if the receivables
become uncollectible. Your series will be allocated a
portion of these charged-off receivables. See
"Description of Series Provisions--Allocation
Percentages" and "--Investor Charge-Offs" in the
accompanying prospectus supplement. Unlike charged-off
receivables, reductions in the receivables due to
returns of merchandise, unauthorized charges and the
like, called dilution, are typically absorbed by
reductions in Spiegel Acceptance's interest in the
trust or
6
<PAGE>
reimbursed by us through cash deposits to the excess
funding account and are not intended to be allocated to
investors. However, to the extent Spiegel Acceptance's
interest is insufficient to cover dilution for any
calendar month and we then default in our obligation to
compensate the trust for these reductions, your series
will be allocated a portion of the uncovered dilution.
If the amount of charged-off receivables and any
uncovered dilution allocated to your series of notes
exceeds the amount of funds available to reimburse
those amounts, you may not receive the full amount of
principal and interest due to you. See "Description of
Series Provisions--Investor Charge-Offs" in the
accompanying prospectus supplement and "Description of
the Notes--Defaulted Receivables; Dilution; Investor
Charge-Offs" in this prospectus.
Subordinated classes bear losses before senior classes.
One or more classes of notes in a series may be
subordinated to one or more senior classes of notes in
the same series. Principal allocations to the
subordinated class or classes may not begin until each
of the more senior classes has been paid in full.
Additionally, if collections of finance charge
receivables allocated to a series are insufficient to
cover amounts due for that series' senior notes or to
reimburse for that series' share of charged-off
receivables, the collateral amount for the series might
be reduced. This would reduce the amount of finance
charge collections available to the subordinated notes
in future periods and could cause a possible delay or
reduction in principal and interest payments on the
subordinated notes.
Recharacterization of principal receivables would
reduce principal receivables and may require addition
of new receivables.
As described under "Description of the Notes--
Discount Option," we may designate a percentage of the
receivables that would otherwise be treated as
principal receivables to be treated as finance charge
receivables. This designation should decrease the
likelihood of a pay out event occurring as a result of
a reduction of the average net portfolio yield for a
given period. However, this designation will also
reduce the aggregate amount of principal receivables,
which may increase the likelihood that we will be
required to add receivables to the trust. If we were
unable to add receivables and could not make a
sufficient cash deposit into the excess funding
account, one or more series of notes, including your
series, could go into rapid amortization.
7
<PAGE>
The note interest rate and the receivables interest
rate may re-set at different times, resulting in
reduced or early payments to you.
The accounts currently have finance charges
assessed at a variable rate. A series of notes may bear
interest either at a fixed rate or at a floating rate
based on a different index. If the interest rate
charged on the accounts declines, collections of
finance charge receivables may be reduced without a
corresponding reduction in the amounts of interest
payable on your notes and other amounts required to be
paid out of collections of finance charge receivables.
If the interest rate on the accounts declines or the
interest rate on a series increases, this could
decrease the spread, or difference, between collections
of finance charge receivables and those collections
allocated to make interest payments on your notes. This
would increase the risk of early repayment of your
notes, as well as the risk that there may not be
sufficient collections to make all required payments on
your notes.
The trust is dependent on Spiegel's retail subsidiaries
to generate new receivables.
Because FCNB Preferred Charge accounts can be used
for purchases of merchandise and services only from
Spiegel's retail subsidiaries, the trust is completely
dependent upon Spiegel's retail subsidiaries for the
generation of receivables. Currently, Spiegel's primary
retail subsidiaries are Spiegel Catalog, Inc., Eddie
Bauer, Inc. and Newport News, Inc. The business of
catalog and retail store marketing of merchandise and
services is highly competitive. Although Spiegel is one
of the largest retail catalog merchandisers in the
United States, it and its retail subsidiaries have
several major competitors on a national level and many
competitors with their retail stores. Many
considerations enter into the competition for the
consumer's patronage, including price, quality, style,
service, product mix, convenience and credit
availability and terms. We cannot guarantee that
Spiegel's retail subsidiaries will continue to generate
receivables at the same rate as in prior years. See
"The Bank's Private Label Credit Card Activities--
Spiegel."
Use of private label cards by customers of Spiegel's
retail subsidiaries may decline.
Because Spiegel's retail subsidiaries accept other
credit cards in addition to the FCNB Preferred Charge,
including American Express, MasterCard, Discover and
VISA, not all sales on credit by Spiegel's retail
subsidiaries will generate receivables that will
8
<PAGE>
be transferred to the trust. In addition, the bank
issues MasterCard and VISA credit cards, some of which
are issued to holders of FCNB Preferred Charge
accounts. No receivables arising under those MasterCard
and VISA credit card accounts are currently being
transferred to the trust. We cannot guarantee that the
FCNB Preferred Charge accounts will continue to
maintain their current percentage of Spiegel Catalog,
Eddie Bauer and Newport News sales against competition
from other credit sources. See "The Bank's Private
Label Credit Card Activities--Spiegel."
This prospectus uses defined terms. You can find a glossary of terms under
the caption "Glossary of Terms for Prospectus" beginning on page 78 in this
prospectus.
IMPORTANT PARTIES
The Issuer
The issuer of your notes will be Spiegel Credit Card Master Note Trust. The
issuer is a common law trust created under the laws of the State of Illinois.
It is operated under a trust agreement, dated as of December 1, 2000, between
us and Bankers Trust Company, as owner trustee.
The activities of the issuer are limited to:
. acquiring, owning and managing the trust assets and the proceeds of
those assets;
. issuing and making payments on the notes; and
. engaging in related activities.
The issuer's principal offices are in New York, in care of Bankers Trust
Company, as owner trustee, at the following address: 4 Albany Street, 10th
Floor, New York, New York 10006, Attention: Structured Finance Group.
We will pay the fees of the owner trustee and will reimburse it for various
liabilities and expenses.
Spiegel Master Trust
The notes are secured by a beneficial interest in a pool of receivables
that arise under private label retail credit card accounts owned by the bank
and designated by the bank as trust accounts. The receivables are currently
held by Spiegel Master Trust, an Illinois common law trust formed by us in
September 1994 to securitize a portion of the bank's private label credit card
receivables. Spiegel Master Trust is operated under a pooling and servicing
agreement, amended and restated in December 1994, among us, as seller, the
bank, as servicer, and The Bank of New York, as trustee.
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Spiegel Master Trust has issued a collateral certificate to us that
represents a beneficial interest in the receivables. We have transferred this
collateral certificate to the issuer under a transfer and servicing agreement
among us, as seller, the bank, as servicer, and the issuer. The other
outstanding series of investor certificates issued by Spiegel Master Trust and
the notes are referred to in this prospectus, collectively, as the securities
and the holders of those securities are referred to as the securityholders.
After all the outstanding series of investor certificates issued by Spiegel
Master Trust are retired, we may cause Spiegel Master Trust to terminate, at
which time the receivables will be transferred to the issuer under the transfer
and servicing agreement and held directly by the issuer.
Spiegel, Inc. and its Retail Subsidiaries
Though not a party to the agreements governing the notes, the trust, the
issuer or the accounts, Spiegel is our parent and the parent of First Consumers
National Bank and Spiegel Acceptance. The receivables arise from sales by the
retail operations of Spiegel's subsidiaries and limited cash advances. Spiegel
is a leading international specialty retailer that offers merchandise through
its subsidiaries, including Eddie Bauer, Inc., Newport News, Inc. and Spiegel
Catalog, Inc. Spiegel's retail subsidiaries distribute apparel, household
furnishings and other merchandise through catalogs, Internet sites and retail
stores.
Spiegel and its predecessors date from 1865. Spiegel has operated as a
catalog merchandiser since 1905 and was incorporated in Delaware in 1965. In
1988, Spiegel acquired Eddie Bauer. In August 1993, Spiegel acquired
substantially all of the assets of Newport News, which was formerly named New
Hampton, Inc. until 1995.
The retail businesses of Spiegel Catalog, Eddie Bauer and Newport News are
described under "Spiegel's Retail Operations" in the accompanying prospectus
supplement.
First Consumers National Bank
First Consumers National Bank is headquartered in Beaverton, Oregon, which
is a suburb of Portland. The bank was organized as a national banking
association on December 12, 1988, and operates as a "credit card bank." The
bank was acquired by Spiegel on November 1, 1990. As a credit card bank, the
banks activities are limited primarily to the issuance of credit cards,
including MasterCard and VISA credit cards, as well as the bank's private label
credit card, the FCNB Preferred Charge card. A portion of the bank's portfolio
of private label credit card accounts are designated as trust accounts. The
bank continues to service the receivables that are transferred to the trust.
The bank, in its capacity as administrator under the administration
agreement, dated as of December 1, 2000, between the administrator and the
issuer, will provide the notices and perform on behalf of the issuer other
administrative obligations required by the transfer and servicing agreement,
the indenture and the indenture supplement for each series, and will be
compensated for acting as the administrator.
The bank is regulated, supervised, and examined by the Office of the
Comptroller of the Currency.
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Spiegel Credit Corporation III
We--Spiegel Credit Corporation III--were incorporated in Delaware on
September 13, 1994, and are a wholly-owned, direct subsidiary of Spiegel. We
were organized for the limited purpose of purchasing, holding, owning and
transferring receivables and related activities.
Spiegel Acceptance Corporation
Spiegel Acceptance was incorporated in Delaware on November 26, 1965. It
purchases all receivables arising in FCNB Preferred Charge accounts other than
those that have been charged-off and those required to be sold to us or other
parties.
THE BANK'S PRIVATE LABEL CREDIT CARD ACTIVITIES
General
Each of Spiegel Catalog, Eddie Bauer and Newport News offers a FCNB
Preferred Charge card that bears its company insignia. However, a customer
holding any of three types of FCNB Preferred Charge cards may use his or her
FCNB Preferred Charge card to purchase all types of goods or services offered
in catalogs, retail stores and e-commerce sites of the three retailers. For
example, an FCNB Preferred Charge card bearing the insignia of Eddie Bauer may
be used to purchase merchandise from Spiegel Catalog or Newport News.
Credit Granting Procedures
FCNB Preferred Charge accounts are generated on a non-pre-approved basis
through:
. an instant credit program at all retail locations,
. an instant credit program offered to catalog customers when placing a
telephone order, and
. account applications made available in Spiegel Catalog, Eddie Bauer and
Newport News catalogs,
FCNB Preferred Charge accounts are generated on a pre-approved basis
through applications made available in direct mail solicitations by Spiegel
Catalog, Eddie Bauer and Newport News.
Pre-approved
Pre-approved accounts constitute the majority of new account originations.
FCNB obtains lists of prospective candidates for pre-approved offers from one
of several list brokers and major credit bureaus. These lists are prescreened
based on the bank's proprietary scoring models to develop a refined list of
pre-approved prospects. The bank then compares this refined list of pre-
approved prospects against its own database, and excludes customers who, among
other things:
. have an existing account with the bank,
. are in bankruptcy,
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. have a history of fraud,
. have judgments or liens against them, or
. are deceased
Credit limits on pre-approved offers range from $250 to $3,300. The initial
credit lines are based on the information contained in the credit bureau report
obtained when the applicant responds to the offer.
Non-Pre-approved
Application data for customers applying for the FCNB Preferred Charge card
at retail locations is entered directly into the FDR system by salespeople. The
bank's credit personnel enter application data for customers applying for
credit over the telephone. When account applications are mailed to the bank,
they are reviewed for completeness and processed in the same manner as instant
credit applications.
All non-pre-approved applications are processed through an empirically
derived, statistically validated scoring model. A credit report is obtained for
each non-pre-approved application. Credit limits are assigned based on the
credit score obtained from one of the major credit bureaus and range from $250
to $3,300.
The bank's internal scoring models for both pre-approved and non-pre-
approved accounts were developed based on historical data from the bank's
account base and by identifying distinguishing characteristics on customer
payment behavior. The models were revised in 1996 to capture diversified trends
within each merchant portfolio. For example, customers of Eddie Bauer
traditionally have a higher average income than customers of Spiegel Catalog
and Newport News. The new models should more accurately predict losses for a
given credit score and will be periodically re-validated for predictability
every six to twelve months. The predictive nature of the models will be
evaluated based on the actual performance of accounts versus the predicted
performance at origination. Each of the models evaluates a variety of factors.
Although the relative importance of these factors varies among models, the
following factors currently contribute the most to the credit score:
. performance with other creditors,
. number of references on credit file,
. length of time on credit file,
. utilization of credit lines with other creditors,
. types of trade lines,
. total amount of available credit,
. recent inquiries into credit file, and
. payment performance on other trade lines.
A small portion of total applications processed through the internal
scoring model are routed by the system for manual verification handling. These
applications are so routed due
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to credit bureau alert messages, name or address variations between
applications and credit reports or an existing credit line from the bank
listed on the report. Only applications meeting the final credit score
requirement are referred for verification procedures. Once applications are
referred, they are approved only upon successful verification of the
information in question.
Generally, all approvals are automated, except for requested credit limits
on non-pre-approved applications in excess of $3,300. Limits in excess of
$3,300 and up to $7,591 must be approved by a credit supervisor. The Senior
Vice President/Credit Operations Manager is authorized to approve limits
ranging from $7,591 to $25,000. Limits in excess of $25,000 and up to $50,000
must be approved by the Executive Vice President/Director of Operations.
Limits in excess of $50,000 must be approved by the bank's board of directors.
New purchases for existing accounts must fall within the authorized credit
limit plus an approval buffer determined by behavior scores and a set of
strategies, collectively referred to as "adaptive control software." All
existing account authorizations are approved if the account is in good credit
standing and the resulting balance is within the credit limit and the approval
buffer. The vast majority of existing account authorizations are handled by
the bank's system logic without manual interruption.
Each accountholder is subject to an agreement governing the terms and
conditions of the account. Each of these agreements permits the bank to change
or terminate any terms, conditions, services or features of the account,
including increasing or decreasing finance charges, other charges or minimum
payments.
The bank may change its credit standards or screening criteria and methods
at any time.
Billing and Payments
The bank assesses finance charges on an account based upon the average
daily balance outstanding on the account during a monthly billing cycle. If a
payment is not received by the payment due date, a finance charge is imposed
on all purchases from the date of the transaction to the date of repayment. A
finance charge is imposed on each cash advance from the day that advance is
made. Generally, the finance charge is currently assessed at an annual
variable percentage rate subject to a floor of 22.6% for purchases made with
most Spiegel Catalog and Newport News cards and 18.9% for purchases made with
most Eddie Bauer cards. Finance charges may be assessed on selected accounts
based on promotional rates below these interest rate floors. The finance
charge is applied to the average daily balance, which is the sum of the daily
unpaid balances of purchases and cash advances, finance charges and fees on
each day of the cycle divided by the number of days in the cycle. Daily unpaid
balances are determined by deducting payments and credits and by adding new
purchases, cash advances and other charges, in each case, as of the date of
the transaction. A $.50 minimum finance charge is imposed for any billing
cycle in which a finance charge of less than $.50 would otherwise be imposed.
Accountholders are given a grace period averaging 30 days from the closing
date of the cycle to the payment due date. If the entire balance on the
account is paid during the grace period, a finance charge is not imposed.
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Subject to applicable laws, accountholders are charged $29.00 if a check is
dishonored and a late charge of up to $25.00 each month the required payment is
not received within 10 days after the payment due date. The bank does not
impose overlimit fees, annual fees or other transaction-related service fees.
Currently accountholders must make a minimum monthly payment equal to
approximately 1/33 of the account balance, but not less than $15.00. The bank
considers an account delinquent for aging purposes if less than 50.0% of the
minimum monthly payment is received for any month. Payments by accountholders
are applied first to finance charges and other charges or fees, and then to
purchases in the order made, then to cash advances in the order made.
From time to time the bank offers optional payment plans in connection with
an account. These options allow the accountholder to defer regular monthly
payments or delay the billing of the account for specific purchases. Under a
deferred payment option, the accountholder has the right not to make monthly
payments for a specified period of time. However, the accountholder will have
to pay regular finance charges during the period of deferral. Under a delayed
billing option, purchases are not billed to the account until the end of the
delayed billing period. As a result, the purchases are not reflected on the
account until billed and the accountholder does not pay finance charges for
these purchases during the delayed billing period.
Delinquency and Collections
The bank operates collection centers located in Beaverton, Oregon and
Trevose, Pennsylvania. Generally the Trevose collection center services
accounts with billing addresses in the eastern half of the United States, with
the remaining accounts serviced from the Beaverton collection center. Both
collection centers are capable of collecting on accounts with any billing
address and delinquent accounts can be routed to either site in the case of
heavy call volume or a natural disaster at one collection center.
The bank classifies an account as delinquent for collections purposes when
the minimum payment due on the account is not received by the payment due date
specified in the cardholder's billing statement. The bank collections staff is
segregated into five separate collection departments, each of which is made up
of six queues based on severity of delinquency. The collections staff initiates
collection efforts as early as the third day of delinquency if no contact has
been made through the autodialer as discussed below. Accounts are placed in the
collection office at various levels of delinquency, with all accounts being
placed no later than 60 days after the first payment is missed. The majority of
accounts are placed within the first 30 days of a missed payment. The bank uses
behavioral scoring of all accounts to adjust its collection efforts based on
the potential risk of an account and the dollars at risk. Collection efforts
escalate in intensity as an account cycles into a more advanced delinquency
category.
The bank's collection strategy begins with an early delinquency calling
program using state of the art technology that includes predictive dialing for
accounts that are up to two payments past due. Statement messaging and
automatic letter dunning are also used on
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delinquent accounts up to two payments past due. Accounts which are placed in
the collections office are assigned to specific members of the bank collections
staff for accelerated collection efforts, including demands for balance in
full, correspondence from one or more of the national credit bureaus describing
the impact that the delinquent credit obligation has on the cardholder's credit
history and preparatory actions to place accounts with attorneys for legal
action. Additionally, in 1999 the bank began outsourcing a portion of pre-
charge-off accounts to external collection agencies for resolution.
Additional purchases are not permitted to be charged to accounts which are
two or more payments past due.
The bank recognizes losses six months from the date due on the last
"current" billing statement. Losses are recognized earlier upon notification
that a customer has filed bankruptcy. If a compromise settlement is reached and
a payment for less than the balance is accepted as payment in full, the
deficiency amount is charged off. The bank will automatically re-age delinquent
accounts which pay three consecutive minimum or greater monthly payments to a
current status.
The bank outsources collections for charged-off accounts to third party
collection agents based on where the defaulted accountholder resides. Once
outsourced to a third party collector, the charged-off account may be sent to a
second or third additional collection agency until resolution. All collection
agencies are reviewed by the bank on a six month audit cycle and the results of
the agencies in each region are compared against each other.
The bank's credit evaluation, servicing and charge-off policies and
collections practices may change at any time as dictated by the bank's business
judgment and applicable law.
Customer Service and Account Management
The bank's customer service department handles all credit related issues
pertaining to the accounts, while Spiegel maintains a separate customer service
group to address any customer service issues with respect to merchandise. An
automated voice response unit at the bank's headquarters in Beaverton handles a
substantial percentage of incoming calls and enables accountholders to receive
account information 24 hours a day, including balance, payment and credit
information, and to request documents without having to speak with a customer
service representative.
The bank will review accounts for potential credit line increases every
three to six months. All credit line increases are automated except as
described under "--Credit Granting Procedures" above. Using adaptive control
software, the bank is able to identify accountholders who have demonstrated
good payment history and high usage patterns with the bank. The amount of a
credit line increase depends on the score assigned by the adaptive control
software and available credit bureau information.
Description of First Data Resources
First Data Resources, Inc. provides new account processing, account
management, billing and new card production for the bank. The bank believes
that its relationship with
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First Data Resources allows it to achieve operational efficiencies while
remaining flexible enough to handle additional growth. If First Data Resources
were to fail to perform its services for the bank or become insolvent, delays
in processing could occur, and the replacement of the services First Data
Resources currently provides to the bank could be time consuming.
First Data Resources provides computer data processing services primarily
to the bankcard industry. First Data Resources is a subsidiary of First Data
Corp.
THE TRUST PORTFOLIO
We refer to the accounts that have been designated as trust accounts as the
trust portfolio. References to the trustee in this prospectus will refer to (a)
The Bank of New York, as trustee of Spiegel Master Trust under the pooling and
servicing agreement for so long as Spiegel Master Trust holds the receivables,
or (b) The Bank of New York, as indenture trustee, if the issuer holds the
receivables.
In addition to the receivables in the trust portfolio, the notes will be
secured by:
. all proceeds of these receivables and related recoveries;
. all proceeds of any credit insurance policies relating to these
receivables;
. all monies on deposit in specified trust accounts or investments made
with these monies, including any earned investment proceeds if the
prospectus supplement for your series of notes so indicates;
. proceeds of any credit enhancement or derivative contracts, consisting
of interest rate swaps, currency swaps, credit swaps, interest rate caps
or bankruptcy options, which are instruments under which a counterparty
assumes the risk of an increase in bankruptcies in exchange for payment,
as described in the prospectus supplement for your series of notes.
Receivables in the trust consist of:
. principal receivables, which are amounts charged by trust account
cardholders for goods and services and cash advances; and
. finance charge receivables, which are periodic finance charges and other
amounts charged to trust accounts, including late fees.
We currently designate all newly created eligible FCNB Preferred Charge
accounts to the trust as they arise and we expect to continue to do so.
However, our right to automatically add all additional eligible FCNB Preferred
Charge accounts to the trust as they arise is subject to the quantitative
limitations described in "Description of the Notes--Addition of Trust Assets"
in this prospectus. We may also elect to stop designating all new accounts to
the trust. If we do so, we have the right, and in some cases the obligation, to
designate from time to time additional eligible accounts to the trust portfolio
and to convey to the trust all receivables in those additional accounts,
whether those receivables are then
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existing or thereafter created. The bank has a corresponding obligation to
transfer those receivables to us, either directly or indirectly through Spiegel
Acceptance, so that we can satisfy our obligations to transfer receivables to
the trust.
The accounts must be Eligible Accounts as of the date we designate them as
additional accounts. Once these accounts are designated, only the receivables
arising under these accounts, and not the accounts themselves, are sold. In
addition, as of the date on which any new receivables are created, the bank
will represent and warrant to us and we in turn will represent and warrant to
the trust that the receivables conveyed to the trust on that day are Eligible
Receivables. However, we cannot guarantee that all the accounts will continue
to meet the applicable eligibility requirements throughout the life of the
trust.
Under some circumstances, we may also designate that some accounts will no
longer be trust accounts, and the receivables originated under these accounts
will be removed from the trust. Throughout the term of the trust, the trust
portfolio will consist of receivables originated in the initial accounts plus
receivables originated in any additional accounts and minus receivables
originated in any removed accounts.
We can designate accounts to the trust that are different from the current
accounts, if the rating agencies for each outstanding series of securities
confirm that doing so will not impair their ratings of any outstanding
securities. These additional accounts may include private label credit card
accounts offered by the bank for additional retailers that may or may not be
affiliated with Spiegel, as well as MasterCard and VISA credit card accounts.
In any case, there can be no assurance that additional accounts will be of the
same credit quality as the initial accounts. Moreover, additional accounts may
contain receivables which consist of fees, charges and amounts which are
different from the fees, charges and amounts described in this prospectus.
Additional accounts may also have different credit guidelines, balances and
ages. Consequently, 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, if we designate additional accounts with lower periodic
finance charges, that may have the effect of reducing the portfolio yield.
The prospectus supplement relating to each series of notes will provide the
following information about the trust portfolio as of the date specified:
. the amount of principal receivables;
. the amount of finance charge receivables;
. the range and average of principal balances of the accounts;
. the range and average of credit limits of the accounts;
. the range and average of ages of the accounts;
. the geographic distribution of the accounts; and
. delinquency statistics relating to the accounts.
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USE OF PROCEEDS
We will receive the net proceeds from the sale of each series of notes
offered by this prospectus and will use those proceeds (a) to retire existing
series of investor certificates and (b) to make payments to Spiegel Acceptance
as holder of the seller interest.
DESCRIPTION OF THE NOTES
The issuer will issue one or more series of notes under a master indenture
and an indenture supplement entered into by the issuer and the indenture
trustee. The following summaries describe all material provisions common to
each series of notes. The accompanying prospectus supplement gives you all of
the additional material terms specific to the notes of your series. The
summaries are qualified by all of the provisions of the transfer and servicing
agreement, the indenture and the related indenture supplement and the pooling
and servicing agreement. We have filed a copy of the pooling and servicing
agreement for Spiegel Master Trust and a form of each of the transfer and
servicing agreement, the indenture and an indenture supplement with the SEC as
exhibits to the registration statement relating to the notes.
General
The notes will be secured by and paid from the assets of the issuer. The
amount of collateral allocated for any series of notes, called its collateral
amount, will be specified in the related prospectus supplement. Each series of
notes will be allocated collections of principal receivables and finance
receivables based on its allocation percentage, which will be based on the
collateral amount for that series and will be calculated as described in the
related prospectus supplement.
Each series of notes may consist of one or more classes, one or more of
which may be senior notes and one or more of which may be subordinated notes.
Each class of a series will evidence the right to receive a specified portion
of each distribution of principal or interest or both. Each class of a series
may differ from other classes in some aspects, including:
.amounts allocated to principal payments;
.maturity date;
.interest rate; and
.availability and amount of enhancement.
Spiegel Acceptance will have the right to receive all cash flows from the
assets of the trust not required to make payments on the securities or to make
payments to credit enhancement providers for any series of securities. Spiegel
Acceptance's interest is called the seller interest and is an amount equal to
the Seller Amount.
During the revolving period, the amount of collateral for a series will
remain constant unless reduced on account of:
.defaulted receivables or dilution; or
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. reallocation of principal collections to cover shortfalls in the payment
of interest or other specified amounts to be paid from finance charge
collections.
See "--Defaulted Receivables; Dilution; Investor Charge-Offs" in this
prospectus. The amount of principal receivables in the trust, however, will
vary each day as new principal receivables are created and others are paid. The
Seller Amount will fluctuate each day to reflect the changes in the amount of
the principal receivables in the trust. When a series is amortizing, the
collateral amount of that series will decline as customer payments of principal
receivables are collected and distributed, or accumulated for distribution, to
the noteholders. As a result, the Seller Amount will generally increase to
reflect reductions in the collateral amount for that series and will also
change to reflect the variations in the amount of principal receivables in the
trust. The Seller Amount may also be reduced as the result of new issuances by
the issuer, see "--New Issuances" in this prospectus, or new issuances of
investor certificates by Spiegel Master Trust, see "Pooling and Servicing
Agreement--New Issuances of Investor Certificates" in this prospectus.
Generally, notes offered under this prospectus and the accompanying
prospectus supplement:
. will be represented by notes registered in the name of a DTC nominee;
. will be available for purchase in minimum denominations of $1,000 and
multiples of $1,000 in excess of that amount; and
. will be available for purchase in book-entry form only.
The accompanying prospectus supplement will specify if your notes have
different characteristics from those listed above.
DTC has informed us that its nominee will be Cede & Co. Accordingly, Cede &
Co. is expected to be the holder of record of each series of notes. As an owner
of beneficial interests in the notes, you will generally not be entitled to a
definitive note representing your interest in the issued notes because you will
own notes through a book-entry record maintained by DTC. References in this
prospectus and the accompanying prospectus supplement to distributions,
reports, notices and statements to noteholders refer to DTC or Cede & Co., as
registered holder of the notes, for distribution to you in accordance with DTC
procedures. All references in this prospectus and the accompanying prospectus
supplement to actions by noteholders shall refer to actions taken by DTC upon
instructions from DTC participants.
The accompanying prospectus supplement may state that application will be
made to list your series or class of notes on the Luxembourg Stock Exchange or
another exchange.
Book-Entry Registration
Following is a description of the form your notes will take. We also
describe how your notes may be transferred and how payments will be made to
you.
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The information in this section concerning DTC and DTC's book-entry system
has been provided by DTC. We have not independently verified the accuracy of
this information.
You may hold your notes through DTC in the U.S., Clearstream or Euroclear
in Europe or in any other manner described in the accompanying prospectus
supplement. You may hold your notes directly with one of these systems if you
are a participant in the system, or indirectly through organizations which are
participants.
Cede & Co., as nominee for DTC, will hold the global notes. Clearstream and
Euroclear will hold omnibus positions on behalf of the Clearstream customers
and the Euroclear participants, respectively, through customers' securities
accounts in Clearstream's and Euroclear's names on the books of their
respective depositaries, which in turn will hold those positions in customers'
securities accounts in the depositaries' names on the books of DTC.
DTC is a limited-purpose trust company organized under the laws of the
State of New York, 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 provisions of Section 17A of the
Securities Exchange Act of 1934. DTC was created to hold securities for its
participants and facilitate the clearance and settlement of securities
transactions between participants through electronic book-entry changes in
accounts of participants, thereby eliminating the need for physical movement of
certificates. Participants include securities brokers and dealers, banks, trust
companies and clearing corporations and may include other organizations.
Participants also may include the underwriters of any series. Indirect access
to the DTC system also is available to others, including banks, brokers,
dealers and trust companies, as indirect participants, that clear through or
maintain a custodial relationship with a participant, either directly or
indirectly.
Transfers between DTC participants will occur in accordance with DTC rules.
Transfers between Clearstream customers and Euroclear participants will occur
in the ordinary way in accordance with their applicable rules and operating
procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly or indirectly through Clearstream
customers or Euroclear participants, on the other, will be effected through DTC
in accordance with DTC rules on behalf of the relevant European international
clearing system by its depositary; however, those cross-market transactions
will require delivery of instructions to the relevant European international
clearing system by the counterparty in that system in accordance with its rules
and procedures and within its established deadlines, which will be based on
European time. The relevant European international clearing system will, if the
transaction meets its settlement requirements, deliver instructions to its
depositary to take action to effect final settlement on its behalf by
delivering or receiving securities in DTC, and making or receiving payment in
accordance with normal procedures for same-day funds settlement applicable to
DTC. Clearstream customers and Euroclear participants may not deliver
instructions directly to Clearstream's and Euroclear's depositaries.
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Because of time-zone differences, credits of securities in Clearstream or
Euroclear as a result of a transaction with a participant will be made during
the subsequent securities settlement processing, dated the business day
following the DTC settlement date, and those credits or any transactions in
those securities settled during that processing will be reported to the
relevant Clearstream customer or Euroclear participant on that business day.
Cash received in Clearstream or Euroclear as a result of sales of securities by
or through a Clearstream customer or a Euroclear participant to a DTC
participant will be received with value on the DTC settlement date but will be
available in the relevant Clearstream or Euroclear cash account only as of the
business day following settlement in DTC.
Note owners that are not participants or indirect participants but desire
to purchase, sell or otherwise transfer ownership of, or other interest in,
notes may do so only through participants and indirect participants. In
addition, note owners will receive all distributions of principal of and
interest on the notes from the indenture trustee through the participants who
in turn will receive them from DTC. Under a book-entry format, note owners may
experience some delay in their receipt of payments, since payments will be
forwarded by the indenture trustee to Cede & Co., as nominee for DTC. DTC will
forward those payments to its participants, which thereafter will forward them
to indirect participants or note owners. It is anticipated that the only
"noteholder" will be Cede & Co., as nominee of DTC. Note owners will not be
recognized by the indenture trustee as noteholders, as that term is used in the
indenture, and note owners will only be permitted to exercise the rights of
noteholders indirectly through the participants who in turn will exercise the
rights of noteholders through DTC.
Under the rules, regulations and procedures creating and affecting DTC and
its operations, DTC is required to make book-entry transfers among participants
on whose behalf it acts with respect to the notes and is required to receive
and transmit distributions of principal and interest on the notes. Participants
and indirect participants with which note owners have accounts with respect to
the notes similarly are required to make book-entry transfers and receive and
transmit those payments on behalf of their respective note owners. Accordingly,
although note owners will not possess notes, note owners will receive payments
and will be able to transfer their interests.
Because DTC can only act on behalf of participants, who in turn act on
behalf of indirect participants and certain banks, the ability of a note owner
to pledge notes to persons or entities that do not participate in the DTC
system, or otherwise take actions in respect of those notes, may be limited due
to the lack of a physical certificate for those notes.
DTC has advised us that it will take any action permitted to be taken by a
noteholder under the indenture only at the direction of one or more
participants to whose account with DTC the notes are credited. Additionally,
DTC has advised us that it will take those actions with respect to specified
percentages of the collateral amount only at the direction of and on behalf of
participants whose holdings include interests that satisfy those specified
percentages. DTC may take conflicting actions with respect to other interests
to the extent that those actions are taken on behalf of participants whose
holdings include those interests.
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Clearstream is incorporated under the laws of Luxembourg. Clearstream holds
securities for its customers and facilitates the clearance and settlement of
securities transactions between Clearstream customers through electronic book-
entry changes in accounts of Clearstream customers, thereby eliminating the
need for physical movement of notes. Transactions may be settled in Clearstream
in any of 36 currencies, including United States dollars. Clearstream provides
to its Clearstream customers, among other things, services for safekeeping,
administration, clearance and settlement of internationally traded securities
and securities lending and borrowing. Clearstream also deals with domestic
securities markets in over 30 countries through established depository and
custodial relationships. Clearstream is registered as a bank in Luxembourg, and
therefore is subject to regulation by the Commission de Surveillance du Secteur
Financier, which supervises Luxembourg banks. Clearstream's customers are
world-wide financial institutions, including underwriters, securities brokers
and dealers, banks, trust companies and clearing corporations, among others,
and may include the underwriters of any series of notes. Clearstream's U.S.
customers are limited to securities brokers and 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. Indirect
access to Clearstream is also available to other institutions that clear
through or maintain a custodial relationship with an account holder of
Clearstream. Clearstream has established an electronic bridge with Morgan
Guaranty Trust Company of New York as the operator of the Euroclear System in
Brussels to facilitate settlement of trades between Clearstream and Euroclear.
Euroclear was created in 1968 to hold securities for participants of the
Euroclear System and to clear and settle transactions between Euroclear
participants through simultaneous electronic book-entry delivery against
payment, thereby eliminating the need for physical movement of notes and any
risk from lack of simultaneous transfers of securities and cash. Transactions
may now be settled in any of 27 currencies, including United States dollars.
The Euroclear System includes various other services, including securities
lending and borrowing and interfaces with domestic markets in several countries
generally similar to the arrangements for cross-market transfers with DTC
described above. The Euroclear System is operated by Morgan Guaranty Trust
Company of New York, Brussels, Belgium office as the Euroclear operator, under
contract with Euroclear Clearance System, S.C., a Belgian cooperative
corporation. All operations are conducted by the Euroclear operator, and all
Euroclear securities clearance accounts and Euroclear cash accounts are
accounts with the Euroclear operator, not the cooperative. The cooperative
establishes policy for the Euroclear System on behalf of Euroclear
participants. Euroclear participants include central banks and other banks,
securities brokers and dealers and other professional financial intermediaries
and may include the underwriters of any series of notes. Indirect access to the
Euroclear System is also available to other firms that clear through or
maintain a custodial relationship with a Euroclear participant, either directly
or indirectly.
The Euroclear operator is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. As such, it
is regulated and examined by the Board of Governors of the Federal Reserve
System and the New York State Banking Department, as well as the Belgian
Banking Commission.
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Securities clearance accounts and cash accounts with the Euroclear operator
are governed by the Terms and Conditions Governing Use of Euroclear and the
related Operating Procedures of the Euroclear System and applicable Belgian
law. These rules and laws govern transfers of securities and cash within the
Euroclear System, withdrawal of securities and cash from the Euroclear System,
and receipts of payments with respect to securities in the Euroclear System.
All securities in the Euroclear System are held on a fungible basis without
attribution of specific certificates to specific securities clearance accounts.
The Euroclear operator acts under these rules and laws only on behalf of
Euroclear participants and has no record of or relationship with persons
holding through Euroclear participants.
Distributions with respect to notes held through Clearstream or Euroclear
will be credited to the cash accounts of Clearstream customers or Euroclear
participants in accordance with the relevant system's rules and procedures, to
the extent received by its depositary. Those distributions will be subject to
tax reporting in accordance with relevant United States tax laws and
regulations. See "Federal Income Tax Consequences" in this prospectus.
Clearstream or the Euroclear operator, as the case may be, will take any other
action permitted to be taken by a noteholder under the indenture on behalf of a
Clearstream customer or Euroclear participant only in accordance with its
relevant rules and procedures and subject to its depositary's ability to effect
those actions on its behalf through DTC.
Although DTC, Clearstream and Euroclear have agreed to the foregoing
procedures in order to facilitate transfers of notes among participants of DTC,
Clearstream and Euroclear, they are under no obligation to perform or continue
to perform those procedures and those procedures may be discontinued at any
time.
Definitive Notes
Notes that are initially cleared through DTC will be issued in definitive,
fully registered, certificated form to note owners or their nominees, rather
than to DTC or its nominee, only if:
. the issuer advises the indenture trustee in writing that DTC is no
longer willing or able to discharge properly its responsibilities as
depository with respect to that series or class of notes, and the
indenture trustee or the issuer is unable to locate a qualified
successor;
. we, at our option, advise the indenture trustee in writing that we elect
to terminate the book-entry system through DTC with respect to that
series or class of notes; or
. after the occurrence of a servicer default, note owners representing
more than 50%--or another percentage specified in the accompanying
prospectus supplement--of the collateral amount advise the indenture
trustee and DTC through participants in writing that the continuation of
a book-entry system through DTC or a successor to DTC is no longer in
the best interest of the note owners.
If any of these events occurs, DTC must notify all participants of the
availability through DTC of definitive notes. Upon surrender by DTC of the
definitive instrument
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representing the notes and instructions for re-registration, the issuer will
execute and the indenture trustee will authenticate the notes as definitive
notes, and thereafter the indenture trustee will recognize the registered
holders of those definitive notes as noteholders under the indenture.
Distribution of principal and interest on the notes will be made by the
indenture trustee directly to holders of definitive notes in accordance with
the procedures set forth in this prospectus and in the indenture. Interest
payments and any principal payments on each distribution date will be made to
holders in whose names the definitive notes were registered at the close of
business on the related record date. Distributions will be made by check mailed
to the address of the noteholders as it appears on the register maintained by
the indenture trustee. However, the final payment on any note--whether
definitive notes or the notes registered in the name of Cede & Co. representing
the notes--will be made only upon presentation and surrender of that note at
the office or agency specified in the notice of final distribution to
noteholders. The indenture trustee will provide this notice to registered
noteholders not later than the fifth day of the month of the final
distributions.
Definitive notes will be transferable and exchangeable at the offices of
the transfer agent and registrar, which will initially be the indenture
trustee. No service charge will be imposed for any registration of transfer or
exchange, but the issuer and transfer agent and registrar 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 will
not be required to register the transfer or exchange of definitive notes for a
period of twenty days preceding the due date for any payment on those
definitive notes.
Interest Payments
Your class of notes will pay interest on the dates and at the interest rate
specified in the accompanying prospectus supplement. The interest rate on any
note may be a fixed, floating or any other type of rate as specified in the
accompanying prospectus supplement. If your notes bear interest at a floating
or variable rate, the accompanying prospectus supplement will describe how that
rate is calculated.
Interest payments or deposits on any distribution date will be funded from:
. collections of finance charge receivables and recoveries of charged-off
receivables allocated to the series during the preceding monthly period
or periods;
. investment earnings, if any, on any funds held in trust accounts, to the
extent described in the accompanying prospectus supplement;
. any credit enhancement or derivative instrument, to the extent described
in the accompanying prospectus supplement; and
. collections of principal receivables treated as collections of finance
charge receivables as described under "--Discount Option," to the extent
described in the accompanying prospectus supplement.
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If interest payments will be made less frequently than monthly, an interest
funding account may be established to accumulate the required interest amount.
If a series has more than one class of notes, that series may have more than
one interest funding account.
Principal Payments
Each series will begin with a revolving period during which no principal
payments will be made to the noteholders of that series.
The revolving period for each series will be scheduled to end on or no
later than a specified date, at which time a new period will begin during which
principal collections available to that series will be set aside on daily basis
to repay the series. That new period is called an amortization period if
partial principal payments are made each month and an accumulation period if
the available principal is accumulated for a series over one or more months to
pay off a class in full. If the amount paid or accumulated each month is
limited to some specified figure then the period is called a controlled
amortization period or controlled accumulation period.
However, each series will also be subject to pay out events, which could
cause the revolving period to end earlier than scheduled or could terminate an
existing amortization period or accumulation period. Upon a pay out event, a
rapid amortization period will begin, during which available principal will be
distributed monthly and will not be subject to any controlled amount or
accumulation provision. Finally, a series with an accumulation period may
specify some adverse events as accumulation events, rather than pay out events,
resulting in an early start to an accumulation period or removing any
limitation based on a controlled accumulation amount.
Principal payments for any series or the related class will be funded from
collections of principal receivables allocated to that series or class and from
other sources specified in the accompanying prospectus supplement. In the case
of a series with more than one class of notes, the noteholders of one or more
classes may receive payments of principal at different times. The accompanying
prospectus supplement will describe the manner, timing and priority of payments
of principal to noteholders of each class.
Funds on deposit in any principal accumulation account for a series may be
subject to a guaranteed rate agreement or guaranteed investment contract or
other arrangement intended to assure a minimum rate of return on the investment
of those funds if specified in the related prospectus supplement. In order to
enhance the likelihood of the payment in full of the principal amount of a
series or a related class of notes at the end of an accumulation period, that
series or class of notes may be subject to a principal guaranty or other
similar arrangement if specified in the related prospectus supplement.
Suspension and Postponement of Controlled Accumulation Period
The prospectus supplement for any series having a controlled accumulation
period will specify the date on which that period is scheduled to commence and
the scheduled length of
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that period. However, if specified in the prospectus supplement for any series,
upon notice to the indenture trustee, the servicer may extend the revolving
period and postpone the controlled accumulation period, or may elect to suspend
the controlled accumulation, subject to the conditions described in the third
following paragraph and any other conditions described in the related
prospectus supplement.
On each determination date until the controlled accumulation period begins
for any series, the servicer will review the amount of expected principal
collections and determine the number of months expected to be required to fully
fund the principal accumulation account by the related expected principal
payment date for each class of notes in that series. If the number of months
needed to fully fund the principal accumulation account by the related expected
principal payment date for each class is less than the number of months in the
scheduled controlled accumulation period, the servicer may then elect to
postpone the controlled accumulation period. In making its decision, the
servicer is required to assume that the principal payment rate will be no
greater than the lowest monthly principal payment rate for the prior 12 months
and will consider the amount of principal expected to be allocable to
noteholders of all other series and certificateholders of all other series of
investor certificates issued by Spiegel Master Trust, which are expected to be
amortizing or accumulating principal during the controlled accumulation period
for that series. In no case will the controlled accumulation period for any
series be reduced to less than one month.
The method for determining the number of months required to fully fund the
principal accumulation account may be changed if each rating agency confirms
that the change will not impair its rating of any outstanding series or class.
If specified in the prospectus supplement for any series having a
controlled accumulation period, the servicer may also elect to suspend the
controlled accumulation period if it:
. obtains a qualified maturity agreement in which an Eligible Institution
agrees to deposit in the related principal accumulation account on the
expected principal payment date for each class of notes of that series
an amount equal to the outstanding principal amount of those notes as of
their respective expected principal payment dates; and
. delivers an opinion of counsel to the indenture trustee to the effect
that the qualified maturity agreement is enforceable against the
provider of that agreement.
The servicer will pledge to the indenture trustee, for the benefit of the
noteholders of the related series, all right, title and interest in any
qualified maturity agreement.
If the servicer obtains a qualified maturity agreement, the servicer will
cause the provider of that agreement to deposit in the principal accumulation
account for the related series or class on or before its expected principal
payment date an amount equal to the outstanding principal amount of that series
or class. However, on the expected principal payment date for any series or
class, we may instead elect to fund all or a portion of the
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required deposit from either the proceeds of a new series or collections of
principal receivables and other amounts allocated to that series or class for
that purpose.
A qualified maturity agreement for any series or class will terminate at
the close of business on the related expected principal payment date. However,
(1) the servicer may terminate a qualified maturity agreement earlier
than the expected principal payment date if:
(a) the servicer obtains a substitute qualified maturity
agreement,
(b) the institution providing the qualified maturity agreement
ceases to be an Eligible Institution and the servicer is unable to
obtain a substitute qualified maturity agreement, or
(c) a pay out event occurs for the related series; and
(2) the servicer may terminate a qualified maturity agreement prior to
the later of:
(a) the date on which the controlled accumulation period was
scheduled to begin, before giving effect to the suspension of the
controlled accumulation period, and
(b) the date to which the commencement of the controlled
accumulation period may be postponed, as determined on the
determination date preceding the termination of the qualified maturity
agreement.
If the institution providing a qualified maturity agreement ceases to be
an Eligible Institution, the servicer will use its best efforts to obtain a
substitute qualified maturity agreement, unless the servicer elects to
terminate the qualified maturity agreement and is not required to obtain a
substitute qualified maturity agreement for any of the reasons described in
the preceding paragraph.
If a qualified maturity agreement is terminated prior to the earlier of
the expected principal payment date for the related series or class and the
commencement of the rapid amortization period for that series and the servicer
does not obtain a substitute qualified maturity agreement, the controlled
accumulation period will begin on the latest of:
. the date on which the controlled accumulation period was scheduled to
begin, before giving effect to the suspension of the controlled
accumulation period;
. at the servicer's election, the date to which the controlled
accumulation period may be postponed, as determined on the determination
date preceding the termination of the qualified maturity agreement; and
. the first day of the calendar month following the termination of the
qualified maturity agreement.
Transfer and Assignment of Receivables
The bank has transferred and assigned to us, either directly or indirectly
through Spiegel Acceptance, and we have, in turn, transferred and assigned to
the trust, the receivables in the accounts designated as accounts of the trust
and future receivables created in these accounts.
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We, Spiegel Acceptance and the bank have indicated and, in connection with
each future transfer of receivables to the trust, will indicate in our computer
files or books and records that the receivables have been conveyed to the
trust. In addition, we and the bank have provided or caused to be provided to
the trustee and the owner trustee computer files or microfiche lists,
containing a true and complete list showing each account, identified by account
number and by total outstanding balance on the date of transfer. Neither the
bank nor we will deliver to the trustee or the owner trustee any other records
or agreements relating to the accounts or the receivables, except in connection
with additions or removals of accounts. Except as stated in this paragraph, the
records and agreements relating to the accounts and the receivables maintained
by the bank are not and will not be segregated from other documents and
agreements relating to other credit card accounts and receivables and are not
and will not be stamped or marked to reflect the transfers described in this
paragraph, but our computer records and the bank's computer records are and
will be required to be marked to evidence these transfers. We, Spiegel
Acceptance and the bank have filed in all appropriate jurisdictions Uniform
Commercial Code financing statements with respect to the receivables meeting
the requirements of applicable law. See "Risk Factors-- Some liens would be
given priority over your notes which could cause delayed or reduced payments"
and "Material Legal Aspects of the Receivables" in this prospectus.
New Issuances of Notes
We may cause the owner trustee, on behalf of the issuer, to issue one or
more new series of notes. We will define all principal terms of each new series
in an indenture supplement. Each series issued may have terms and enhancements
that are different than those for any other series. Upon the issuance of an
additional series of notes, neither we nor any of the servicer, the indenture
trustee or the issuer will be required or will intend to obtain the consent of
any noteholder of any other series previously issued by the issuer. We may
offer any series under a prospectus or other disclosure document in
transactions either registered under the Securities Act or exempt from
registration under the Securities Act directly, through one or more other
underwriters or placement agents, in fixed-price offerings or in negotiated
transactions or otherwise.
Unless Spiegel Master Trust has been terminated, the interests of all
series of notes in the receivables and the other trust assets will be evidenced
by a single global certificate held by the issuer. A new collateral certificate
will be deemed to be issued and evidenced by the global certificate upon the
issuance of each series of notes.
No new series may be issued unless we satisfy various conditions, including
that:
(1) each rating agency confirms that the new issuance will not impair
its rating of any outstanding series or class;
(2) we certify that we reasonably believe, based on the facts known to
the certifying officer, that the new issuance will not:
(a) cause a pay out event or an event of default, or
(b) materially and adversely affect the amount or timing of
payments to be made to the noteholders of any series or class;
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(3) after giving effect to the new issuance, the Aggregate Principal
Balance is not less than the Minimum Aggregate Principal Balance;
(4) we deliver an opinion of counsel to the effect that, for federal
income tax purposes:
(a) except as otherwise stated in the related indenture
supplement, the notes of the new series will be characterized as debt;
(b) the issuance will not adversely affect the tax
characterization as debt of the notes of any outstanding series or
class that were characterized as debt at the time of their issuance;
(c) the new issuance will not cause the issuer to be deemed to be
an association or publicly traded partnership taxable as a
corporation; and
(d) the new issuance will not cause or constitute an event in
which gain or loss would be recognized by any noteholder; and
(5) unless Spiegel Master Trust has been terminated, all of the
conditions required for it to issue a new series of investor certificates
are satisfied, as described under "Pooling and Servicing Agreement-- New
Issuances of Investor Certificates."
Representations and Warranties
As of the date each receivable is transferred to the trust, we represent
to the trust that:
(1) each receivable is an Eligible Receivable;
(2) each receivable has been transferred to the trust free and clear
of any liens, other than liens permitted by the pooling and servicing
agreement and the transfer and servicing agreement, and in compliance in
all material respects with all applicable laws;
(3) all required governmental approvals in connection with the
transfer of each receivable to the trust have been obtained and remain in
full force and effect; and
(4) the trust has all right, title and interest in each receivable or
has a first priority perfected security interest in that receivable.
If any of these representations is not true with respect to any receivable
as of the date that receivable is transferred to the trust, we are required to
accept reassignment of the affected receivable. Except with respect to the
breach of the representation set forth in clause (2) above, before accepting
reassignment, we will be permitted 60 days to cure the breach or a longer
period not to exceed 120 days agreed to by the trustee and the servicer. If,
with respect to any receivable, there has been a breach of the representation
set forth in clause (2) above, we will be obligated to immediately accept
retransfer of that receivable.
We will accept retransfer of a receivable by directing the servicer to
deduct the principal amount of the ineligible receivable from the Seller
Amount. If this would reduce the Seller Amount below the Minimum Seller
Amount, we will make a cash deposit in the excess funding account in the
amount by which the Seller Amount would have been reduced below
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the Minimum Seller Amount. Any deduction or deposit is considered a repayment
in full of the ineligible receivable.
We will also make representations and warranties to the trust as to
enforceability against us of the agreement that governs the transfer of the
receivables to the trust--either the pooling and servicing agreement or the
transfer and servicing agreement--and the effectiveness of that agreement as an
absolute assignment of, or a grant of a security interest in, the receivables.
If any of these representations and warranties is false in any material respect
and the breach of the representation or warranty has a material adverse effect
on the receivables or the availability of the proceeds of the receivables to
the trust, then any of (1) the owner trustee, (2) the trustee or (3)
securityholders representing not less than 50% of the aggregate principal
amount of all outstanding series of securities may direct us to accept
retransfer of the entire trust portfolio. We will be permitted 60 days after
notice is given, or a longer period, not to exceed 120 days, as may be
specified in the notice, to cure the breach.
The reassignment price would equal the aggregate outstanding principal
amounts for all series of securities, in each case as of the distribution date
on which the reassignment is scheduled to be made, plus accrued and unpaid
interest on the securities through the distribution date, plus any other
amounts specified in any prospectus supplement.
Reassignment of any affected receivables or the entire trust portfolio to
us, as the case may be, is the sole remedy respecting any breach of the
representations and warranties described in this section.
Addition of Trust Assets
We may, at our option, designate additional accounts to the trust, the
receivables in which will be sold and assigned to the trust. As described above
under "The Trust Portfolio," we currently designate all new Eligible Accounts
to the trust upon their establishment, and we expect to continue to do so. We
are permitted to continue to automatically designate all new Eligible Accounts
as they arise, so long as the number of accounts that we designate in this
manner does not exceed the following limits:
(1) The new accounts designated during any calendar year may not
exceed 20% of the number of accounts as of the first day of that calendar
year; or
(2) For any calendar quarter, the new accounts designated during that
calendar quarter may not exceed 15% of the number of accounts as of the
first day of that calendar quarter.
We may exceed these limitations if each rating agency confirms that doing
so will not impair its rating of any outstanding series or class of securities.
In addition, we will be required to designate additional accounts, to the
extent available, to maintain the Aggregate Principal Balance so that the
Aggregate Principal Balance is not less than the Minimum Aggregate Principal
Balance.
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When we transfer receivables in additional accounts to the trust in our
discretion, we must satisfy several conditions, including:
. each rating agency and each credit enhancement provider must receive
prior notice of each addition;
. we must certify that any additional accounts are Eligible Accounts and
that:
. no selection procedures materially adverse to the securityholders were
used in selecting the additional accounts;
. as of the addition date, we are not insolvent and would not become
insolvent by the addition of the accounts; and
. the transfer of the additional receivables constitutes a valid
transfer to the trust of all our right, title and interest in the
receivables in the additional accounts or the grant to the trust of a
first priority perfected security interest in those receivables; and
. we must deliver an opinion of counsel with respect to the perfection of
the transfer and related matters.
In addition to the periodic reports otherwise required to be filed by the
servicer with the SEC in accordance with the Securities Exchange Act of 1934,
we will file a Report on Form 8-K with respect to any addition to the trust of
receivables in additional accounts that would have a material effect on the
composition of the trust assets.
Defaulted accounts that have been charged-off as uncollectible in
accordance with the servicer's credit card guidelines and the servicer's
customary and usual policies and procedures for servicing revolving credit card
receivables will not be included in any account addition. See "--Defaulted
Receivables; Dilution; Investor Charge-Offs" in this prospectus. In addition,
less than 20% of the receivables in the trust portfolio, by outstanding
principal balance, will be 30 or more days delinquent immediately following any
account addition. For purposes of determining whether less than 20% of the
receivables in the trust portfolio are delinquent immediately following any
account addition, an account will be considered delinquent if less than 100% of
the minimum monthly payment is received for any month.
Removal of Accounts
We also have the right to remove accounts from the list of designated
accounts and to require the reassignment to us of all receivables in the
removed accounts, whether the receivables already exist or arise after the
designation. However, we may not designate removed accounts more than once
during any calendar month and, prior to the termination of Spiegel Master
Trust, we may not designate removed accounts at any time that any series is not
in its revolving period. Our right to remove accounts is subject to the
satisfaction of several conditions, including that:
(1) if the accounts to be removed have outstanding receivables, each
rating agency confirms that the removal will not impair its rating of any
outstanding series or class of securities;
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(2) we certify that:
(a) individual accounts or administratively convenient groups of
accounts, such as billing cycles, were chosen for removal randomly or
at any rate not on a basis intended to select particular accounts or
groups of accounts for removal for any reason other than
administrative convenience;
(b) no selection procedures materially adverse to the
securityholders were used in selecting the removed accounts;
(c) in our reasonable belief, the removal will not cause a pay out
event, or an event that with notice or lapse of time or both, would
constitute a pay out event; and
(d) as of the removal date, we are not insolvent and have no
intention of seeking protection under any federal or state bankruptcy
or debtor relief laws; and
(3) the removal will not cause the Aggregate Principal Balance to be
less than the Minimum Aggregate Principal Balance after giving effect to
the removal.
Collection and Other Servicing Procedures
The servicer will be responsible for servicing and administering the
receivables in the trust portfolio in accordance with the servicer's policies
and procedures for servicing credit card receivables comparable to the
receivables in the trust portfolio. The servicer will be required to maintain
fidelity bond coverage insuring against losses through wrongdoing of its
officers and employees who are involved in the servicing of credit card
receivables.
Discount Option
We have the option to reclassify a percentage of collections of principal
receivables in the trust portfolio as collections of finance charge
receivables. If we do so, the reclassified percentage of collections of
principal receivables for the trust portfolio for each monthly period will be
considered collections of finance charge receivables and will be allocated with
all other collections of finance charge receivables in the trust portfolio.
We may exercise this option in order to compensate for a decline in the
portfolio yield, but only if there would be sufficient principal receivables to
allow for that discounting. Exercise of this option would result in a larger
amount of collections of finance charge receivables and a smaller amount of
collections of principal receivables. By doing so, we would reduce the
likelihood that a pay out event would occur as a result of a decreased
portfolio yield and, at the same time, would increase the likelihood that we
will have to add principal receivables to the trust. We may not exercise our
option to reclassify collections of principal receivables as collections of
finance charge receivables if we reasonably believe that doing so would cause a
pay out event, or any event that with notice or lapse of time or both, would
constitute a pay out event for any series of securities.
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In addition, we may exercise this option only if each rating agency
confirms that doing so will not impair its rating of any outstanding series or
class of securities.
Trust Accounts
The servicer has established and maintains a collection account and an
excess funding account, each in the name of the trustee, for the benefit of the
securityholders. Both the collection account and the excess funding account
must be Qualified Accounts.
The funds on deposit in these accounts may only be invested, at the
direction of the servicer, in highly rated liquid investments that meet the
criteria described in the indenture or the related indenture supplement for
that series.
The indenture trustee, acting as the initial paying agent--or any entity
then acting as paying agent--will have the revocable power to withdraw funds
from the collection account and the excess funding account for the purpose of
making payments to the noteholders of any series under the related indenture
supplement.
Funding Period
On the closing date for any series of notes, the total amount of principal
receivables in the trust available to that series may be less than the total
principal amount of the notes of that series. If this occurs, the initial
collateral amount for that series of notes will be less than the principal
amount of that series of notes. In this case, the related prospectus supplement
will set forth the terms of the funding period, which is the period from that
series' closing date to the earlier of:
. the date that series' collateral amount equals the principal amount of
that series of notes; and
. the date specified in the related prospectus supplement, which will be
no later than one year after that series' closing date.
During the funding period, the portion of the collateral amount not
invested in receivables will be maintained in a prefunding account, which is a
trust account established with the indenture trustee for the benefit of the
noteholders of that series. On the closing date for that series of notes, this
amount may be up to 100% of the principal balance of that series of notes. The
collateral amount for that series will increase as new receivables are
transferred to the trust or as the collateral amounts of other outstanding
series of securities are reduced. The collateral amount may decrease due to
investor charge-offs allocated to the series.
During the funding period, funds on deposit in the prefunding account will
be paid to us as the collateral amount increases. If the collateral amount for
that series is not increased so that the initial collateral amount equals the
initial principal balance of the notes of that series, plus any initial excess
collateral amount, by the end of the funding period, any amount remaining in
the prefunding account will be repaid to noteholders.
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The prospectus supplement for a series with a funding period will set
forth:
. the series' initial collateral amount;
. the series' full collateral amount, which is the initial principal
balance of the series of notes plus any initial excess collateral
amount;
. the date on which the series' collateral amount is expected to equal the
series' full collateral amount;
. the date by which the funding period will end; and
. what other events, if any, will occur if the end of the funding period
is reached before the full collateral amount is funded.
The servicer will file a Current Report on Form 8-K with the SEC following
the termination of the funding period containing updated trust portfolio
information.
Application of Collections
The servicer must deposit into the collection account, no later than two
business days after processing, all payments made on receivables in the trust
portfolio. However, the servicer will be able to make these deposits on a
monthly or other periodic basis if:
(1) the bank remains the servicer and no servicer default has occurred
and is continuing; and
(2) either
(a) (i) the servicer provides to the trustee a letter of credit or
other arrangement covering risk of collection of the servicer; and
(ii) written confirmation is received from each rating agency that
the arrangement will not impair its rating of any outstanding series
or class of securities; or
(b) the servicer has and maintains a certificate of deposit or
short-term deposit rating acceptable to Standard & Poor's and Moody's
and has deposit insurance as required by law and by the FDIC, unless
any rating agency then rating any class or series of securities, has
notified the servicer that making monthly deposits will impair its
rating of any outstanding series or class of securities.
For purposes of allocating collections on a daily basis, the servicer may
estimate the portion of collections on the entire Spiegel private label credit
card portfolio that is allocable to the trust portfolio. The servicer may also
estimate for each business day the amount of collections that are attributable
to finance charge receivables and principal receivables. The servicer may
change the method for determining the amount of collections that are
attributable to the trust portfolio and the allocation of those collections as
finance charge collections or principal collections from time to time to more
accurately reflect the amounts being collected in respect of the principal
receivables and finance charge receivables in the trust portfolio. However, the
servicer must give each rating agency written notice of any change in its
method for estimating the amount of collections from the entire Spiegel private
label credit card portfolio that are allocable to the trust portfolio.
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The servicer will also deposit into the collection account on the business
day before each distribution date, the excess of (i) all of the recoveries by
the servicer during the preceding calendar month on receivables that have
previously been charged-off as uncollectible over (ii) the aggregate amount of
receivables in accounts that have been charged-off as uncollectible during that
calendar month. The servicer will treat these net recoveries as collections of
finance charge receivables.
The servicer will then allocate all collections of finance charge
receivables and principal receivables among each series of securities and the
Seller Amount based on the respective allocation percentages for each series
and the seller allocation percentage. The seller allocation percentage at any
time will equal 100% minus the total of the applicable allocation percentages
for all outstanding series. The seller allocation percentage of principal
collections and finance charge collections will first be deposited in the
excess funding account to the extent required to maintain the Minimum Seller
Amount and any remaining principal collections and finance charge collections
will then be paid to Spiegel Acceptance. The collections allocated to each
series will be retained in the collection account or applied as described in
the related prospectus supplement.
Shared Excess Finance Charge Collections
If a series is identified in the prospectus supplement for that series as
included in a group, collections of finance charge receivables allocated to
that series in excess of the amount needed to make deposits or payments for the
benefit of that series may be shared with other series of securities that have
been designated for inclusion in the same group. The servicer will allocate the
aggregate of the excess finance charge collections for all series in the same
group to cover any payments required to be made out of finance charge
collections for any series in that group that have not been covered out of the
finance charge collections allocable to those series. If the finance charge
shortfalls exceed the excess finance charge collections for any group for any
calendar month, excess finance charge collections will be allocated pro rata
among the applicable series based on the relative amounts of finance charge
shortfalls. If excess finance charge collections exceed finance charge
shortfalls for any group for any calendar month, the balance will be paid to
Spiegel Acceptance or deposited in the excess funding account to maintain the
Minimum Seller Amount as described under "--Excess Funding Account" below.
Shared Principal Collections
Each series of notes will share excess principal collections with each
other series of securities unless the related prospectus supplement excludes
that series from this sharing arrangement. If a principal sharing series--
including any series of investor certificates designated as a principal sharing
series--is allocated principal in excess of the amount needed for deposits or
distributions of principal collections, that excess will be shared with other
principal sharing series. The servicer will allocate the aggregate of the
shared principal collections for all principal sharing series to cover any
scheduled or permitted principal distributions to securityholders and deposits
to principal accumulation accounts, if any, for
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any series that have not been covered out of the collections of principal
receivables allocable to those series. Shared principal collections will not be
used to cover investor charge-offs for any series of securities. If principal
collections for one series are shared with another series, the collateral
amount or investor amount for the series from which collections were shared
will not be reduced.
If the principal shortfalls exceed the amount of shared principal
collections for any calendar month, shared principal collections for all series
will be allocated pro rata among the applicable series based on the relative
amounts of principal shortfalls. If shared principal collections exceed
principal shortfalls, the balance will be paid to Spiegel Acceptance or
deposited in the excess funding account under the circumstances described under
"--Excess Funding Account" below.
Excess Funding Account
On each business day on which the Seller Amount is less than the Minimum
Seller Amount, the servicer will deposit collections of principal receivables
and finance charge receivables allocable to the Seller Amount, as described in
"--Application of Collections" above, and excess finance charge collections and
excess shared principal collections otherwise distributable to Spiegel
Acceptance, into the excess funding account until the Seller Amount equals the
Minimum Seller Amount. Funds on deposit in the excess funding account will be
withdrawn and paid to Spiegel Acceptance to the extent that on each day the
Seller Amount exceeds the Minimum Seller Amount. In addition, when any series
of securities is in an amortization period or accumulation period, the
principal balance in the excess funding account will be applied like shared
principal collections.
Investment earnings on amounts on deposit in the excess funding account
will be treated as finance charge collections and allocated to each series of
securities based on the respective allocation percentages for each series.
Defaulted Receivables; Dilution; Investor Charge-Offs
Receivables in any account will be charged-off as uncollectible in
accordance with the servicer's credit card guidelines and the servicer's
customary and usual policies and procedures for servicing revolving credit card
receivables and other revolving credit account receivables comparable to the
receivables. The servicer's current policy is to charge off the receivables in
an account when that account becomes 180 days delinquent. On the date on which
an account is charged-off, the trust will automatically be deemed to transfer
all receivables in the charged-off account to us and the charged-off account
will cease to be a trust account.
Each series will be allocated a portion of the excess, if any, of (i)
defaulted receivables for each calendar month over (ii) all of the recoveries
received during that calendar month, as specified in the accompanying
prospectus supplement. For this purpose, defaulted receivables for any monthly
period are principal receivables that were charged-off as uncollectible in that
monthly period.
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Unlike defaulted receivables, dilution, which includes reductions in
principal receivables as a result of returns, unauthorized charges and the
like, is not intended to be allocated to investors. Instead, these reductions
are applied to reduce Spiegel Acceptance's interest in the trust, and to the
extent they would reduce Spiegel Acceptance's interest in the trust below the
Minimum Seller Amount, we are required to deposit the amount of the reduction
into the trust's collection account and the deposited amount will be treated as
principal collections. However, if we default in our obligation to make a
payment to cover dilution, then a portion of any resulting shortfall in
receivables will be allocated to your series as specified in the accompanying
prospectus supplement.
On each distribution date, if the sum of the defaulted receivables and any
dilution allocated to any series is greater than the finance charge collections
and other funds available to cover those amounts as described in the related
prospectus supplement, then the collateral amount for that series will be
reduced by the amount of the excess. Any reductions in the collateral amount
for any series on account of defaulted receivables and dilution will be
reinstated to the extent that finance charge collections and other amounts on
deposit in the collection account are available for that purpose on any
subsequent distribution date as described in the related prospectus.
Defeasance
If so specified in the prospectus supplement relating to a series, the
issuer may, at our direction, terminate its substantive obligations in respect
of that series or the trust by depositing with the indenture trustee, from
amounts representing, or acquired with, collections of receivables, money or
eligible investments sufficient to make all remaining scheduled interest and
principal payments on that series on the dates scheduled for those payments and
to pay all amounts owing to any credit enhancement provider with respect to
that series or all outstanding series, as the case may be, if that action would
not result in a pay out event for any series. Prior to its first exercise of
its right to substitute money or eligible investments for receivables, the
issuer will deliver to the indenture trustee an opinion of counsel to the
effect that:
. for federal income tax purposes, the deposit and termination of
obligations will not cause the trust, or any portion of the trust, to be
deemed to be an association or publicly traded partnership taxable as a
corporation; and
. the deposit and termination of obligations will not result in the trust
being required to register as an "investment company" within the meaning
of the Investment Company Act of 1940, as amended.
Final Payment of Principal
For each series, the servicer has the option to purchase the notes at any
time after the remaining outstanding principal amount of that series is 10% or
less of the initial principal amount of that series. The purchase price will
equal:
. the outstanding principal amount of the notes of that series, plus
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. any accrued and unpaid interest through the day preceding the
distribution date on which the repurchase occurs or, if the repurchase
occurs on any other date, through the day preceding the distribution
date immediately following the repurchase date.
For any series of notes, the related prospectus supplement may specify
additional conditions to the servicer's purchase option.
Each prospectus supplement will specify the final maturity date for the
related series of notes, which will generally be a date falling substantially
later than the expected principal payment date. For any series, the failure to
pay principal in full not later than the final maturity date will be an event
of default and the indenture trustee or holders of a specified percentage of
the notes of that series will have the rights described under "The Indenture--
Events of Default; Rights upon Event of Default" in this prospectus.
Paired Series
The prospectus supplement for a series of notes will specify whether that
series may be paired with a previously or later issued series so that a
decrease in the collateral amount of the previously issued series results in a
corresponding increase in the collateral amount of the later issued series. In
general, a series may be issued as a paired series so the trust can fund the
amount by which the previously issued series either has amortized or has
accumulated funds for a principal payment.
The later issued series will either be prefunded with an initial deposit to
a prefunding account in an amount up to the initial principal balance of the
previously issued series or will have a variable principal amount.
During the controlled amortization period or controlled accumulation period
for any series that is paired with a later issued series, as principal payments
are made on that previously issued series or deposits are made to the principal
accumulation account for that previously issued series, as applicable,
(a) in the case of a prefunded paired series, an equal amount of funds
on deposit in any prefunding account for that prefunded paired series will
be released, which funds will be distributed to us;
(b) in the case of a paired series having a variable principal amount,
an interest in that variable paired series in an equal or lesser amount
may be sold by the issuer, and the proceeds from the issuance will be
distributed to us; and
(c) in either case, the collateral amount of the later issued series
will increase by up to a corresponding amount.
If a pay out event occurs for the previously issued series or its paired
series when the previously issued series is amortizing, the allocation
percentage for the allocation of collections of principal receivables for the
previously issued series may be reset to a lower percentage as described in the
prospectus supplement for that series and the period over
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which it will amortize may be lengthened as a result. The extent to which the
period over which it amortizes is lengthened will depend on many factors, only
one of which is the reduction of its allocation percentage. For a discussion of
these factors, see "Risk Factors--Issuance of additional series by the trust
may affect the timing of payments to you" in this prospectus and "Maturity
Considerations" in the accompanying prospectus supplement.
Pay Out Events
The revolving period for your series of notes will continue through the
date specified in the accompanying prospectus supplement unless a pay out event
occurs prior to that date. A pay out event occurs with respect to all series
issued by the issuer upon the occurrence of any of the following events:
(a) bankruptcy, insolvency, liquidation, conservatorship, receivership
or similar events relating to us, the bank or Spiegel;
(b) we are unable for any reason to transfer receivables to the trust;
or
(c) Spiegel Master Trust or the issuer becomes subject to regulation
as an "investment company" within the meaning of the Investment Company
Act of 1940.
In addition, a pay out event may occur with respect to any series upon the
occurrence of any other event specified in the accompanying prospectus
supplement. On the date on which a pay out event is deemed to have occurred,
the rapid amortization period or, if so specified in the accompanying
prospectus supplement, the early accumulation period will commence. If, because
of the occurrence of a pay out event, the rapid amortization period begins
earlier than the scheduled commencement of an amortization period or prior to
an expected principal payment date, noteholders will begin receiving
distributions of principal earlier than they otherwise would have, which may
shorten the average life of the notes.
In addition to the consequences of a pay out event discussed above, unless
otherwise specified in the accompanying prospectus supplement, if bankruptcy,
insolvency or similar proceedings under the Bankruptcy Code or similar laws
occur with respect to us, on the day of that event we will immediately cease to
transfer principal receivables to the trust and promptly give notice to the
trustee for Spiegel Master Trust, the indenture trustee, the owner trustee and
the rating agencies of this event. Any principal receivables transferred to the
trust prior to the event, as well as collections on those principal receivables
and finance charge receivables accrued at any time with respect to those
principal receivables, will continue to be part of the trust assets. Unless
Spiegel Master Trust has terminated and the issuer holds the receivables
directly, upon the occurrence of an event of this type, the trustee for Spiegel
Master Trust will sell the receivables held by Spiegel Master Trust in a
commercially reasonable manner and on commercially reasonable terms. However,
the holders of 50% of the unpaid principal amount of any series of securities
may prevent the sale by giving the trustee other instructions within 90 days of
publication of notice of the event. The proceeds of that sale or liquidation
will be applied to payments on the outstanding series of securities as
specified above in "--Application of Collections" and in the accompanying
prospectus supplement.
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If the only pay out event to occur is either our insolvency or the
commencement of a bankruptcy case by or against us, the bankruptcy court may
have the power to require the continued transfer of principal receivables to
the trust. See "Risk Factors--If a conservator or receiver were appointed for
First Consumers National Bank, or if we or Spiegel Acceptance became a debtor
in a bankruptcy case, delays or reductions in payment of your notes could
occur" in this prospectus.
Servicing Compensation and Payment of Expenses
The servicer receives a fee for its servicing activities and reimbursement
of expenses incurred in administering the issuer. The share of the servicing
fee allocable to each series of notes for any distribution date will be equal
to one-twelfth of the product of (a) the servicing fee rate specified in the
related prospectus supplement and (b) (i) the collateral amount for that series
as of the last day of the calendar period preceding that distribution date,
minus (ii) the product of the amount, if any, on deposit in the excess funding
account as of the last day of the calendar month preceding that distribution
date and the allocation percentage for that series with respect to finance
charge collections for that calendar month.
The servicer will pay from its servicing compensation expenses of servicing
the receivables, including payment of the fees and disbursements of the
indenture trustee, the trustee for Spiegel Master Trust, the owner trustee and
independent certified public accountants and other fees which are not expressly
stated in the transfer and servicing agreement, the indenture, any indenture
supplement or the pooling and servicing agreement for Spiegel Master Trust to
be payable by the issuer or the securityholders, other than federal, state and
local income and franchise taxes, if any, of the issuer or Spiegel Master
Trust.
Each series' servicing fee is payable each period from collections of
finance charge receivables allocated to the series. Neither the issuer nor the
noteholders are responsible for any servicing fee allocable to the Seller
Amount.
Matters Regarding the Seller and the Servicer
The servicer may not resign from its obligations and duties, except upon a
determination that:
. performance of its duties is no longer permissible under applicable law,
as evidenced by an opinion of counsel to that effect delivered to the
trustee; and
. there is no reasonable action that the servicer could take to make the
performance of its duties permissible under applicable law.
If within 120 days of the determination that the servicer is no longer
permitted to act as servicer, the indenture trustee is unable to appoint a
successor, then the indenture trustee will act as servicer. If the indenture
trustee is unable to act as servicer, it will petition an appropriate court to
appoint an eligible successor.
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The servicer's resignation will not become effective until the indenture
trustee or another successor has assumed the servicer's obligations and duties.
The resigning servicer will notify each rating agency of its resignation. The
servicer may delegate any of its servicing duties to any entity, including
Spiegel, that agrees to conduct those duties in accordance with the charge
account guidelines for the bank. However, the servicer's delegation of its
duties will not relieve it of its liability and responsibility with respect to
the delegated duties.
The servicer will indemnify the indenture trustee and its officers,
directors, employees and agents for any losses, including legal fees, incurred
by the indenture trustee in connection with its performance of its duties under
the indenture, the transfer and servicing agreement and related documents
except for any losses or expenses incurred as a result of the indenture
trustee's willful misconduct or negligence.
The servicer will indemnify Spiegel Master Trust, the issuer, the owner
trustee and the trustee for Spiegel Master Trust for any losses suffered as a
result of actions or omissions arising out of the activities of Spiegel Master
Trust, the issuer, the owner trustee or the trustee for Spiegel Master Trust
under the pooling and servicing agreement, the transfer and servicing
agreement, the indenture and related documents including its actions or
omissions as servicer, except in each case, for losses resulting from the
fraud, negligence or breach of fiduciary duty by the trustee for Spiegel Master
Trust or the fraud, gross negligence or breach of fiduciary duty by the owner
trustee. The indemnity also does not include:
. any liabilities, costs or expenses of Spiegel Master Trust or the issuer
arising from any action taken by the trustee for Spiegel Master Trust or
the indenture trustee at the direction of the securityholders;
. any losses, liabilities, expenses, damages or injuries that are incurred
by the issuer or any noteholder in the capacity of an investor,
including losses incurred as a result of the performance of the
receivables; and
. any federal, state or local income or franchise taxes or any other tax
imposed on or measured by income or any penalties under any related tax
laws required to be paid by Spiegel Master Trust, the issuer or any
securityholder.
Neither the servicer nor any of its directors, officers, employees or
agents will be under any other liability to Spiegel Master Trust, the issuer,
the owner trustee, the indenture trustee, the trustee for Spiegel Master Trust,
the securityholders or any other person for any action taken, or for refraining
from taking any action, in good faith under the pooling and servicing agreement
or the transfer and servicing agreement. However, none of them will be
protected against any liability resulting from willful wrongdoing, bad faith or
gross negligence in the performance of its duties or by reason of its willful
misconduct under the pooling and servicing agreement or the transfer and
servicing agreement. In addition, the servicer is not under any obligation to
appear in, prosecute or defend any legal action which is not incidental to its
servicing responsibilities under the pooling and servicing agreement and the
transfer and servicing agreement and which in its reasonable opinion may expose
it to any expense or liability.
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Neither we nor any of our directors, officers, employees or agents will be
liable to Spiegel Master Trust, the issuer, the owner trustee, the indenture
trustee, the trustee for Spiegel Master Trust, the securityholders or any other
person for any action taken, or for refraining from taking any action, under
the pooling and servicing agreement or the transfer and servicing agreement.
However, neither we nor any of the foregoing persons will be protected against
any liability resulting from willful wrongdoing, bad faith or gross negligence
in the performance of its duties or by reason of its willful misconduct under
the pooling and servicing agreement or the transfer and servicing agreement.
The trust agreement provides that we may transfer our interest in all or a
portion of our beneficial interest in the issuer by exchanging the ownership
certificate representing our interest in the issuer for a newly issued
ownership certificate representing our remaining interest and a second
ownership certificate representing the transferred interest. The terms of the
ownership certificate representing the transferred interest must be defined in
a supplement to the trust agreement. Before a new ownership certificate is
issued to any entity that is not our affiliate, the following must occur:
(1) each rating agency confirms that the exchange will not impair its
rating of any outstanding series or class of notes;
(2) we certify to the owner trustee and the indenture trustee that,
based on the facts known to the certifying officer, the new issuance will
not:
(a) cause a pay out event or an event of default; or
(b) materially and adversely affect the amount or timing of
payments to be made to the noteholders of any series or class;
(3) after giving effect to the exchange, the Aggregate Principal
Balance exceeds the Minimum Aggregate Principal Balance;
(4) we deliver an opinion of counsel to the effect that, for federal
income tax purposes:
(a) the exchange will not adversely affect the tax
characterization as debt of notes of any outstanding series or class
that were characterized as debt at the time of their issuance;
(b) the exchange will not cause the issuer to be deemed to be an
association or publicly traded partnership taxable as a corporation;
and
(c) the exchange will not cause or constitute an event in which
gain or loss would be recognized by any noteholder.
No ownership certificate may be transferred or exchanged unless an opinion
of the type described in clause (4) above is delivered to the owner trustee and
the indenture trustee regarding the exchange.
We or the servicer may consolidate with, merge into, or sell our or its
respective businesses to, another entity, in accordance with the pooling and
servicing agreement and the transfer and servicing agreement on the following
conditions:
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(1) the entity, if other than us or the servicer, as applicable,
formed by the consolidation or merger or that acquires our property or
assets or the servicer's property or assets, as the case may be:
(a) is organized under the laws of the United States or any one of
its states;
(b) expressly assumes, by a supplemental agreement, to perform
every covenant and obligation of us or the servicer, as applicable;
except that, unless otherwise specified in the indenture supplement
for any series, if any right, covenant or obligation of the servicer
under the pooling and servicing agreement or the transfer and
servicing agreement is inapplicable to the successor entity, the
successor entity will be subject to that covenant or obligation, or
benefit from that right, as would apply, to the extent practicable, to
the successor entity;
(2) delivery to the trustee for Spiegel Master Trust, the indenture
trustee and each credit enhancement provider, of an officer's certificate
and an opinion of counsel stating that the merger, consolidation or
transfer and the related supplemental agreement comply with the pooling
and servicing agreement and the transfer and servicing agreement and that
all conditions precedent relating to the applicable transaction have been
complied with and, in the case of the opinion of counsel, the related
supplemental agreement is legal, valid and binding with respect to us or
the servicer, as applicable; and
(3) delivery of notice of the applicable transaction to each rating
agency or, in the case of any transaction to which we are a party,
confirmation from each rating agency that the transaction will not impair
its rating of any outstanding series or class of notes.
Servicer Default
Each of the following events constitutes a servicer default:
(1) failure by the servicer to make any payment, transfer or deposit
or to make any required drawing, withdrawal or payment under any credit
enhancement, or to give instructions or notice to the trustee to do so, on
the required date under the pooling and servicing agreement, any series
supplement to the pooling and servicing agreement with respect to a series
of investor certificates, the transfer and servicing agreement, the
indenture or any indenture supplement, in each case on or before the date
occurring 5 business days after the date that payment, transfer or deposit
or that instruction or notice is required to be made or given by the
servicer under the applicable document;
(2) failure on the part of the servicer to observe or perform in any
material respect any of its other covenants or agreements if the failure:
(a) has a material adverse effect on the securityholders;
(b) continues unremedied and continues to have a material adverse
effect on the securityholders for a period of 60 days after notice to
(i) the servicer by the trustee, (ii) if Spiegel Master Trust has been
terminated, the servicer and the indenture trustee by noteholders of
10% or more of the then-outstanding principal
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amount of the notes of any adversely affected series or (iii) prior to
the termination of Spiegel Master Trust, the servicer and the
indenture trustee for Spiegel Master Trust by investor
certificateholders of 50% or more of the then-outstanding principal
amount of the investor certificates of any adversely affected series;
(3) the servicer assigns or delegates its duties, except as
specifically permitted under the pooling and servicing agreement and the
transfer and servicing agreement;
(4) any representation, warranty or certification made by the servicer
in the pooling and servicing agreement or the transfer and servicing
agreement, or in any certificate delivered in accordance with either
agreement, proves to have been incorrect when made if it:
(a) has a material adverse effect on the rights of the
securityholders of any series;
(b) continues to be incorrect and to have a material adverse
effect on those securityholders for a period of 60 days after notice
to (i) the servicer by the trustee, (ii) if Spiegel Master Trust has
been terminated, the servicer and the indenture trustee by noteholders
of 10% or more of the then-outstanding principal amount of the notes
of any adversely affected series or (iii) prior to the termination of
Spiegel Master Trust, the servicer and the trustee for Spiegel Master
Trust by investor certificateholders of 50% or more of the then-
outstanding principal amount of the investor certificates of any
adversely affected series, or if the failure cannot be cured within
the applicable 60-day period due to causes beyond the control of the
servicer, if the servicer fails to proceed promptly to cure the
failure with diligence and continuity;
(5) specific bankruptcy, insolvency, liquidation, conservatorship,
receivership or similar events relating to the servicer; or
(6) any other event specified in the accompanying prospectus
supplement.
If a servicer default occurs, for as long as it has not been remedied, the
trustee or securityholders representing more than 50% of the aggregate
principal amount of all outstanding series of securities may give notice to the
servicer and, if notice is given by the securityholders, the trustee,
terminating all of the rights and obligations of the servicer under the pooling
and servicing agreement and the transfer and servicing agreement. The trustee
will as promptly as possible appoint an eligible successor to the servicer with
the consent of securityholders representing more than 50% of the then-
outstanding principal amount of each series of securities. If the trustee is
unable to obtain bids from eligible servicers and the servicer delivers a
certificate of an authorized officer to the effect that it cannot in good faith
cure the servicer default which gave rise to a transfer of servicing, then the
trustee for Spiegel Master Trust or the owner trustee, as applicable, will
offer us the right to accept retransfer of all of the receivables. However, if
our long-term unsecured debt obligations are not rated at least Baa3 by Moody's
and BBB- by Standard & Poor's at the time of the proposed retransfer, no
retransfer will occur unless we have delivered an opinion of counsel reasonably
acceptable to the trustee that the retransfer would not constitute a fraudulent
conveyance by us.
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The retransfer price to be received by each series of notes will be equal
to the higher of:
(1) the outstanding principal balance of the notes of that series,
plus accrued interest at the applicable interest rate, through the date of
retransfer; and
(2) the average bid price quoted by two recognized dealers for a
similar security rated in the highest rating category by Moody's and
Standard & Poor's and having a remaining maturity similar to the remaining
maturity of those notes.
If no successor has been appointed or has accepted the appointment by the
time the servicer ceases to act as servicer, the trustee will automatically
become the successor. If the trustee is legally unable to act as servicer, the
trustee may petition a court of competent jurisdiction to appoint an eligible
servicer.
Prior to the termination of Spiegel Master Trust, the securityholders of
50% or more of the then-outstanding principal amount of the securities of any
series affected by any default by the servicer or us in the performance of its
or our obligations under the pooling and servicing agreement and the transfer
and servicing agreement may waive, on behalf of all securityholders, that
default and its consequences unless the default relates to a failure to make
any required deposits or payments with respect to any series. If Spiegel
Master Trust is terminated, any default by the servicer or us in the
performance of its or our obligations under the transfer and servicing
agreement may be waived by noteholders holding 66 2/3% or more of the then-
outstanding principal balance of the notes of each series as to which that
default relates, or with respect to any series with two or more classes, each
class as to which the default relates, unless that default relates to a
failure to make any required deposits or payments to be made to noteholders.
No waiver by the securityholders will affect the rights of any credit
enhancement providers for any series.
Our rights and obligations under the pooling and servicing agreement and
the transfer and servicing agreement will be unaffected by any change in
servicer.
If a conservator or receiver is appointed for the servicer, the
conservator or receiver may have the power to prevent either the trustee or
the securityholders from appointing a successor servicer.
Reports to Noteholders
Noteholders of each series issued by the issuer will receive reports with
information on the series and the trust. The paying agent will forward to each
noteholder of record a report, prepared by the servicer, for its series on the
distribution dates for that series. The report will contain the information
specified in the related prospectus supplement. If a series has multiple
classes, information will be provided for each class, as specified in the
related prospectus supplement.
Periodic information to noteholders generally will include:
. the total amount distributed;
. the amount of principal and interest for distribution;
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. collections of principal receivables and finance charge receivables
allocated to the series;
. the aggregate amount of principal receivables, the collateral amount and
the collateral amount as a percentage of the aggregate amount of the
principal receivables in the trust portfolio;
. the aggregate outstanding balance of accounts broken out by delinquency
status;
. the aggregate defaults and dilution allocated to the series;
. the amount of reductions, if any, to the collateral amount due to
defaulted receivables and dilution allocated to the series and any
reimbursements of previous reductions to the collateral amount;
. the monthly servicing fee for that series;
. the amount available under the credit enhancement, if any, for the
series or each class of the series;
. the "pool factor," which is the ratio of the current collateral amount
to the initial collateral amount;
. the Base Rate and Portfolio Yield, each as defined in the accompanying
prospectus supplement for the series;
. if the series or a class of the series bears interest at a floating or
variable rate, information relating to that rate;
. for any distribution date during a funding period, the remaining balance
in the prefunding account; and
. for the first distribution date that is on or immediately following the
end of a funding period, the amount of any remaining balance in the
prefunding account that has not been used to fund the purchase of
receivables and is being paid as principal on the notes.
By January 31 of each calendar year, the paying agent will also provide to
each person who at any time during the preceding calendar year was a noteholder
of record a statement, prepared by the servicer, containing the type of
information presented in the periodic reports, aggregated for that calendar
year or the portion of that calendar year that the person was a noteholder,
together with other information that is customarily provided to holders of
debt, to assist noteholders in preparing their United States tax returns.
Evidence as to Compliance
The pooling and servicing agreement and the transfer and servicing
agreement provide that on or before April 30 of each calendar year, the
servicer will have a firm of independent certified public accountants furnish a
report showing that, for the prior calendar year:
. the accounting firm has applied the procedures required by those
agreements to the documents and records relating to the servicing of the
accounts, compared the
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information contained in the servicer's certificates delivered during
the prior calendar year with those documents and records, and that based
upon those procedures, no matters came to the attention of that
accounting firm that caused them to believe that servicing was not
conducted in compliance with specified sections of the pooling and
servicing agreement and the transfer and servicing agreement, and
. the accounting firm has compared specified amounts set forth in the
periodic reports prepared by the servicer for the prior calendar year
with the servicer's computer reports and that, in the accounting firm's
opinion, the amounts are in agreement,
in either case, except for any discrepancies or exceptions they consider
immaterial or that are otherwise disclosed.
The pooling and servicing agreement and the transfer and servicing
agreement also provide that by April 30 of each calendar year, the servicer
will deliver to the trustee for Spiegel Master Trust, the indenture trustee,
each credit enhancement provider and each rating agency a certificate of an
authorized officer to the effect that the servicer has fully performed its
obligations under the pooling and servicing agreement and the transfer and
servicing agreement during the preceding year, or, if there has been a default
in the performance of any of its obligations, specifying the nature and status
of the default.
Amendments
The transfer and servicing agreement may be amended by us, the servicer and
the issuer, without the consent of the indenture trustee or the noteholders of
any series to cure any ambiguity, to correct or supplement any provisions of
the agreement that are inconsistent with any other provisions of the agreement
or to add any other provisions concerning matters or questions raised under the
agreement that are not inconsistent with the provisions of the agreement, so
long as the amendment does not adversely affect in any material respect the
interests of any noteholder. In addition, the transfer and servicing agreement
may be amended by us, the servicer and the issuer, without the consent of the
indenture trustee or the noteholders of any series, on the following
conditions:
(1) we deliver to the owner trustee and the indenture trustee a
certificate of an authorized officer stating that, in our reasonable
belief, the amendment will not:
(a) result in the occurrence of a pay out event or an event of
default; or
(b) materially and adversely affect the amount or timing of
distributions to be made to noteholders of any series or class; and
(2) each rating agency confirms that the amendment will not impair its
rating of any outstanding series or class of notes.
The transfer and servicing agreement may also be amended by us, the
servicer and the issuer at our direction, without the consent of the indenture
trustee, the noteholders of any series or the credit enhancement providers for
any series to add, modify or eliminate any provisions necessary or advisable in
order to enable the issuer or any portion of the issuer to
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(i) qualify as, and to permit an election to be made for the issuer to be
treated as, a "financial asset securitization investment trust" under the
Internal Revenue Code and (ii) avoid the imposition of state or local income or
franchise taxes on the issuer's property or its income. However, we may not
amend the transfer and servicing agreement as described in this paragraph
unless each rating agency confirms that the amendment will not impair its
rating of any outstanding series or class of notes. In addition, the amendment
must not affect the rights, duties or obligations of the indenture trustee or
the owner trustee under the transfer and servicing agreement.
The amendments that we may make without the consent of the noteholders of
any series or the credit enhancement providers for any series may include the
addition or sale of receivables in the trust portfolio and the addition of one
or more persons, other than us, as sellers of receivables to the issuer.
The transfer and servicing agreement may also be amended by us, the
servicer and the issuer with the consent of noteholders representing more than
66 2/3% of the then-outstanding principal balance of the notes of each series
adversely affected by the amendment, except that no amendment may occur if it:
(1) reduces the amount of, or delays the timing of:
(a) any distributions to be made to noteholders of any series or
deposits of amounts to be distributed; or
(b) the amount available under any credit enhancement,
in each case, without the consent of each affected noteholder;
(2) changes the manner of calculating the interest of any noteholder
without the consent of each affected noteholder;
(3) reduces the percentage of the outstanding principal balance of the
notes required to consent to any amendment, without the consent of each
affected noteholder; or
(4) adversely affects the rating of any series or class by each rating
agency, without the consent of noteholders representing more than 66 2/3%
of the then-outstanding principal balance of the notes of each affected
series or class.
For purposes of clause (1) above, changes in pay out events or events of
default that decrease the likelihood of the occurrence of those events will not
be considered delays in the timing of distributions.
In no event may any amendment to the transfer and servicing agreement
adversely affect the interests of any credit enhancement provider without the
consent of that credit enhancement provider.
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THE INDENTURE
We have summarized the material terms of the indenture below. The summary
is not complete and is qualified in its entirety by reference to the indenture.
Events of Default; Rights upon Event of Default
An event of default will occur under the indenture for any series of notes
upon the occurrence of any of the following events:
(1) the issuer fails to pay principal when it becomes due and payable
on the final maturity date for that series of notes;
(2) the issuer fails to pay interest when it becomes due and payable
and the default continues for a period of 35 days;
(3) bankruptcy, insolvency, conservatorship, receivership, liquidation
or similar events relating to the issuer; or
(4) the issuer fails to observe or perform covenants or agreements
made in the indenture in respect of the notes of that series, and:
(a) the failure continues, or is not cured, for 60 days after
notice to the issuer by the indenture trustee or to the issuer and the
indenture trustee by noteholders representing 25% or more of the then-
outstanding principal amount of that series of notes; and
(b) as a result, the interests of the noteholders are materially
and adversely affected, and continue to be materially and adversely
affected during the 60-day period.
An event of default will not occur if the issuer fails to pay the full
principal amount of a note on its expected principal payment date.
An event of default with respect to one series of notes will not
necessarily be an event of default with respect to any other series of notes.
If an event of default referred to in clause (1), (2) or (4) above occurs
and is continuing with respect to any series of notes, the indenture trustee or
noteholders holding a majority of the then-outstanding principal balance of the
notes of the affected series may declare the principal of the notes of that
series to be immediately due and payable. If an event of default referred to in
clause (3) above occurs and is continuing, the unpaid principal and interest
due on the notes automatically will be deemed to be declared due and payable.
Before a judgment or decree for payment of the money due has been obtained by
the indenture trustee, noteholders holding a majority of the then-outstanding
principal balance of the notes of that series may rescind the declaration of
acceleration of maturity if:
(1) the issuer has paid or deposited with the indenture trustee all
principal and interest due on the Notes and all other amounts that would
then be due if the event of
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default giving rise to the acceleration had not occurred, including all
amounts then payable to the indenture trustee; and
(2) all events of default have been cured or waived.
If an event of default occurs, the indenture trustee will be under no
obligation to exercise any of the rights or powers under the indenture if
requested or directed by any of the holders of the notes of the affected series
if:
(1) the indenture trustee is advised by counsel the action it is
directed to take is in conflict with applicable law or the indenture;
(2) the indenture trustee determines in good faith that the requested
actions would be illegal or involve the indenture trustee in personal
liability or be unjustly prejudicial to noteholders not making the request
or direction; or
(3) the indenture trustee reasonably believes it will not be
adequately indemnified against the costs, expenses and liabilities which
might be incurred by it in complying with that request.
Subject to those provisions for indemnification and those limitations
contained in the indenture, noteholders holding more than 50% of the then-
outstanding principal balance of the notes of the affected series will have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the indenture trustee if an event of default has occurred
and is continuing. Prior to the acceleration of the maturity of the notes of
the affected series, the noteholders holding more than 50% of the then-
outstanding principal balance of the notes of the affected series may also
waive any default with respect to the notes, except a default in the payment of
principal or interest or a default relating to a covenant or provision of the
indenture that cannot be modified without the waiver or consent of each
affected noteholder.
After acceleration of a series of notes, principal collections and finance
charge collections allocated to those notes will be applied to make monthly
principal and interest payments on the notes until the earlier of the date the
notes are paid in full or the final maturity date of the notes. Funds in the
collection account, the excess funding account and the other trust accounts for
an accelerated series of notes will be applied immediately to pay principal of
and interest on those notes.
Upon acceleration of the maturity of a series of notes following an event
of default, the indenture trustee will have a lien on the collateral for those
notes for its unpaid fees and expenses that ranks senior to the lien of those
notes on the collateral.
In general, the indenture trustee will enforce the rights and remedies of
the holders of accelerated notes. However, noteholders will have the right to
institute any proceeding with respect to the indenture if the following
conditions are met:
. the noteholder or noteholders have previously given the indenture
trustee written notice of a continuing event of default;
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. the noteholders of at least 25% of the then-outstanding principal
balance of each affected series make a written request of the indenture
trustee to institute a proceeding as indenture trustee;
. the noteholders offer indemnification to the indenture trustee against
the costs, expenses and liabilities of instituting a proceeding that is
satisfactory to the indenture trustee;
. the indenture trustee has not instituted a proceeding within 60 days
after receipt of the request and offer of indemnification; and
. during the 60-day period following receipt of the request and offer of
indemnification, the indenture trustee has not received from noteholders
holding more than 50% of the then-outstanding principal balance of the
notes of that series a direction inconsistent with the request.
If the indenture trustee receives conflicting or inconsistent requests and
indemnity from two or more groups of any affected series, each representing no
more than 50% of the then-outstanding principal balance of that series, the
indenture trustee in its sole discretion may determine what action, if any,
will be taken.
Each holder of a note will have an absolute and unconditional right to
receive payment of the principal of and interest in respect of that note as
principal and interest become due and payable, and to institute suit for the
enforcement of any payment of principal and interest then due and payable and
those rights may not be impaired without the consent of that noteholder.
If any series of notes has been accelerated following an event of default,
and the indenture trustee has not received any valid directions from those
noteholders, the indenture trustee may, but is not required to, elect to
continue to hold the portion of the trust assets that secures those notes and
apply distributions on the trust assets to make payments on those notes to the
extent funds are available.
Subject to the provisions of the indenture relating to the duties of the
indenture trustee, if any series of notes has been accelerated following an
event of default, the indenture trustee may:
. institute proceedings in its own name and as trustee for the collection
of all amounts then payable on the notes of the affected series; or
. take any other appropriate action to protect and enforce the rights and
remedies of the indenture trustee and the noteholders of the affected
series.
Subject to the conditions described in the following sentence, the
indenture trustee also may cause the trust to sell principal receivables in an
amount equal to the collateral amount for the series of accelerated notes and
the related finance charge receivables. Before exercising this remedy, the
indenture trustee must receive an opinion of counsel to the effect
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that exercise of this remedy complies with applicable federal and state
securities laws and one of the following conditions must be satisfied:
. receipt by the indenture trustee of the consent of all noteholders of
the affected series;
. determination by the indenture trustee that any proceeds from exercising
the remedy will be sufficient to discharge in full all principal and
interest due on the accelerated notes, and the indenture trustee obtains
the consent of noteholders holding more than 50% of the then-outstanding
principal balance of the affected series; or
. determination by the indenture trustee that the assets may not continue
to provide sufficient funds for the payment of principal of and interest
on those notes as they would have become due if the notes had not been
accelerated, and the indenture trustee obtains the consent of
noteholders holding at least 66 2/3% of the then-outstanding principal
balance of each class of the notes of the affected series.
The remedies described above are the exclusive remedies provided to
noteholders and each noteholder by accepting its interest in the notes of any
series or the indenture trustee expressly waives any other remedy that might
have been available under the Uniform Commercial Code.
The indenture trustee and the noteholders will covenant that they will not
at any time institute against the issuer, Spiegel Master Trust or us any
bankruptcy, reorganization or other proceeding under any federal or state
bankruptcy or similar law.
None of us, the administrator, the owner trustee, the indenture trustee,
the servicer, the bank or Spiegel Master Trust, nor any holder of an ownership
interest in the issuer, nor any of their respective owners, beneficiaries,
agents, officers, directors, employees, successors or assigns shall, in the
absence of an express agreement to the contrary, be personally liable for the
payment of the principal of or interest on the notes or for the agreements of
the issuer contained in the indenture. The notes will represent obligations
solely of the issuer, and the notes will not be insured or guaranteed by us,
the servicer, the administrator, the owner trustee, the indenture trustee, the
bank or any other person or entity.
Covenants
The indenture provides that the issuer may not consolidate with, merge into
or sell its business to, another entity, unless:
(1) the entity, if other than the issuer, formed by or surviving the
consolidation or merger or that acquires the issuer's business:
(a) is organized under the laws of the United States or any one of
its states;
(b) is not subject to regulation as an "investment company" under
the Investment Company Act of 1940;
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(c) expressly assumes, by supplemental indenture, the issuer's
obligation to make due and punctual payments upon the notes and the
performance of every covenant of the issuer under the indenture;
(d) in the case of a sale of the issuer's business, expressly
agrees, by supplemental indenture that (i) all right, title and
interest so conveyed or transferred by the issuer will be subject and
subordinate to the rights of the noteholders and (ii) it will make all
filings with the Securities and Exchange Commission required by the
Securities Exchange Act of 1934 in connection with the notes; and
(e) in the case of a sale of the issuer's business, expressly
agrees to indemnify the issuer from any loss, liability or expense
arising under the indenture and the notes;
(2) no pay out event or event of default will exist immediately after
the merger, consolidation or sale;
(3) each rating agency confirms that the transaction will not impair
its rating of any outstanding series or class of notes;
(4) the issuer will have received an opinion of counsel to the effect
that for federal income tax purposes:
(a) the transaction will not adversely affect the tax
characterization as debt of notes of any outstanding series or class
that were characterized as debt at the time of their issuance;
(b) the transaction will not cause the issuer to be deemed to be
an association or publicly traded partnership taxable as a
corporation; and
(c) the transaction will not cause or constitute an event in which
gain or loss would be recognized by any noteholder;
(5) any action necessary to maintain the lien and security interest
created by the indenture will have been taken; and
(6) the issuer has delivered to the indenture trustee an opinion of
counsel and officer's certificate each stating that the consolidation,
merger or sale satisfies all requirements under the indenture and that the
supplemental indenture is duly authorized, executed and delivered and is
valid, binding and enforceable.
As long as the notes are outstanding, the issuer will not, among other
things:
. except as expressly permitted by the indenture, the transfer and
servicing agreement or related documents, sell, transfer, exchange or
otherwise dispose of any of the assets of the issuer that secure the
notes unless directed to do so by the indenture trustee;
. claim any credit on or make any deduction from payments in respect of
the principal of and interest on the notes--other than amounts withheld
under the Internal Revenue
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Code or applicable state law--or assert any claim against any present or
former noteholders because of the payment of taxes levied or assessed
upon the assets of the issuer that secure the notes;
. voluntarily dissolve or liquidate in whole or in part; or
. permit (A) the validity or effectiveness of the indenture or the lien
under the indenture to be impaired, or permit any person to be released
from any covenants or obligations with respect to the notes under the
indenture except as may be expressly permitted by the indenture, (B) any
lien or other claim of a third party to be created with respect to the
assets of the issuer or (C) the lien of the indenture not to constitute
a valid first priority perfected security interest in the assets of the
issuer that secure the notes.
The issuer may not engage in any activity other than as specified under
"The Issuer" in this prospectus. The issuer will not incur, assume or guarantee
any indebtedness other than indebtedness under the notes and the indenture.
Modification of the Indenture
The issuer and the indenture trustee may, without the consent of any
noteholders but with prior written notice to each rating agency, enter into one
or more supplemental indentures for any of the following purposes:
. to correct or enhance the description of any property subject to the
lien of the indenture, or to take any action that will enhance the
indenture trustee's lien under the indenture, or to add to the property
pledged to secure the notes;
. to reflect the agreement of another person to assume the role of the
issuer;
. to add to the covenants of the issuer, for the benefit of the
noteholders, or to surrender any right or power of the issuer;
. to transfer or pledge any property to the indenture trustee;
. to cure any ambiguity, to correct or supplement any provision in the
indenture or in any supplemental indenture that may be inconsistent with
any other provision in the indenture or in any supplemental indenture as
long as that action would not adversely affect the interests of the
noteholders;
. to appoint a successor to the indenture trustee with respect to the
notes and to add to or change any of the provisions of the indenture to
allow more than one indenture trustee to act under the indenture;
. to modify, eliminate or add to the provisions of the indenture as
necessary to qualify the indenture under the Trust Indenture Act of
1939, or any similar federal statute later enacted;
. to permit the issuance of one or more new series of notes under the
indenture; or
. to terminate any interest rate swap agreement or other credit
enhancement in accordance with the related indenture supplement.
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The issuer and the indenture trustee may also, without the consent of any
noteholders, enter into one or more supplemental indentures to amend the
indenture, upon:
(1) receipt of written confirmation from each rating agency that the
action will not impair its rating of any outstanding series or class of
notes; and
(2) our certification to the effect that, in the reasonable belief of
the certifying officer, the action will not (i) cause a pay out event or
an event of default or (ii) materially and adversely affect the amount or
timing of payments to be made to the noteholders of any series or class.
The issuer and the indenture trustee may also, without the consent of the
noteholders of any series or the credit enhancement providers for any series,
enter into one or more supplemental indentures to add, modify or eliminate any
provisions necessary or advisable in order to enable the issuer or any portion
of the issuer (i) to qualify as, and to permit an election to be made for the
issuer to be treated as, a "financial asset securitization investment trust"
under the Internal Revenue Code and (ii) to avoid the imposition of state or
local income or franchise taxes on the issuer's property or its income. Prior
to any amendment described in this paragraph, each rating agency must confirm
that the amendment will not impair its rating of any outstanding series or
class of notes. In addition, no amendment described in this paragraph may
affect the rights, duties or obligations of the indenture trustee or the owner
trustee under the indenture.
The issuer and the indenture trustee will not, without prior notice to each
rating agency and the consent of each noteholder affected, enter into any
supplemental indenture to:
. change the date of payment of any installment of principal of or
interest on any note or reduce the principal amount of a note, the note
interest rate or the redemption price of the note or change any place of
payment where, or the currency in which, any note is payable;
. impair the right to institute suit for the enforcement of specified
payment provisions of the indenture;
. reduce the percentage of the aggregate principal amount of the notes of
any series, whose consent is required (a) for execution of any
supplemental indenture or (b) for any waiver of compliance with
specified provisions of the indenture or of some defaults under the
indenture and their consequences provided in the indenture;
. reduce the percentage of the aggregate outstanding amount of the notes
required to direct the indenture trustee to sell or liquidate the trust
assets if the proceeds of the sale would be insufficient to pay the
principal amount and interest due on those notes;
. decrease the percentage of the aggregate principal amount of the notes
required to amend the sections of the indenture that specify the
percentage of the principal amount of the notes of a series necessary to
amend the indenture or other related agreements;
. modify provisions of the indenture prohibiting the voting of notes held
by the issuer, any other party obligated on the notes, the bank, or any
of their affiliates; or
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. permit the creation of any lien superior or equal to the lien of the
indenture with respect to any of the collateral for any notes or, except
as otherwise permitted or contemplated in the indenture, terminate the
lien of the indenture on the collateral or deprive any noteholder of the
security provided by the lien of the indenture.
The issuer and the indenture trustee may otherwise, with receipt of written
confirmation from each rating agency that the action will not impair its rating
of any outstanding series or class and with the consent of noteholders holding
more than 66 2/3% of the then-outstanding principal balance of the notes of
each series adversely affected, enter into one or more supplemental indentures
to add provisions to or change in any manner or eliminate any provision of the
indenture or to change the rights of the noteholders under the indenture.
Annual Compliance Statement
The issuer will be required to present to the indenture trustee each year a
written statement as to the performance of its obligations under the indenture.
Indenture Trustee's Annual Report
The indenture trustee will be required to mail to the noteholders each year
a brief report relating to its eligibility and qualification to continue as
indenture trustee under the indenture, the property and funds physically held
by the indenture trustee and any action it took that materially affects the
notes and that has not been previously reported.
List of Noteholders
Upon the issuance of definitive notes, three or more holders of the notes
who have each owned a note for at least six months may obtain access to the
list of noteholders the indenture trustee maintains for the purpose of
communicating with other noteholders. The indenture trustee may elect not to
allow the requesting noteholders access to the list of noteholders if it agrees
to mail the requested communication or proxy, on behalf and at the expense of
the requesting noteholders, to all noteholders of record.
Satisfaction and Discharge of Indenture
The indenture will be discharged with respect to the notes upon the
delivery to the indenture trustee for cancellation of all the notes or, with
specific limitations, upon deposit with the indenture trustee of funds
sufficient for the payment in full of all the notes.
The Indenture Trustee
The indenture trustee may resign at any time. Noteholders holding more than
66 2/3% of the aggregate outstanding principal balance of all series may remove
the indenture trustee and may appoint a successor indenture trustee. In
addition, the administrator will remove the indenture trustee if it ceases to
be eligible to continue as an indenture trustee under the indenture or if the
indenture trustee becomes insolvent or otherwise becomes legally unable to act
as indenture trustee. If the indenture trustee resigns or is removed, the
administrator
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will then be obligated to appoint a successor indenture trustee. If a successor
indenture trustee does not assume the duties of indenture trustee within 60
days after the retiring indenture trustee resigns or is removed, the retiring
indenture trustee, the issuer or noteholders representing more than 50% of the
aggregate outstanding principal balance of all series may petition a court of
competent jurisdiction to appoint a successor indenture trustee. In addition,
if the indenture trustee ceases to be eligible to continue as indenture
trustee, any noteholder may petition a court of competent jurisdiction for the
removal of the indenture trustee and the appointment of a successor indenture
trustee.
If an event of default occurs under the indenture, under the Trust
Indenture Act of 1939, the indenture trustee may be deemed to have a conflict
of interest and be required to resign as indenture trustee for one or more
classes of each series of notes. In that case, a successor indenture trustee
will be appointed for one or more of those classes of notes and may provide for
rights of senior noteholders to consent to or direct actions by the indenture
trustee which are different from those of subordinated noteholders. Any
resignation or removal of the indenture trustee and appointment of a successor
indenture trustee for any class or series of notes will not become effective
until the successor indenture trustee accepts its appointment.
The indenture trustee is not responsible for the accuracy, validity or
adequacy of any of the information contained in this prospectus.
Matters Regarding the Administrator
The administrator will, to the extent provided in the administration
agreement, provide the notices and perform on behalf of the issuer other
administrative obligations required by the indenture.
POOLING AND SERVICING AGREEMENT
We have summarized the terms of the pooling and servicing agreement that
are material to noteholders in this prospectus. The summary is not complete and
is qualified in its entirety by reference to the pooling and servicing
agreement.
New Issuances of Investor Certificates
The pooling and servicing agreement provides that, in any one or more
series supplements to the pooling and servicing agreement, we may direct the
trustee for Spiegel Master Trust to issue one or more new series of investor
certificates and may define all principal terms of those series. A series
supplement may only modify or amend the terms of the pooling and servicing
agreement as applied to the new series. There is no limit to the number of new
issuances we may cause under the pooling and servicing agreement.
No new series may be issued unless we satisfy various conditions, including
that:
(1) each rating agency confirms that the issuance of the new series
will not impair its rating of any outstanding series or class of investor
certificates;
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(2) we certify that, after giving effect to the issuance of the new
series:
(i) we would not be required to add additional accounts; and
(ii) the Seller Amount would exceed the Minimum Seller Amount; and
(3) each person who previously delivered the federal income tax
opinions in connection with the issuance of any existing series of
securities reissues those opinions and confirms that the issuance of the
new series will not affect those opinions or the holder of the seller
interest delivers a new opinion of counsel substantially the same as the
original tax opinion.
Amendments
The pooling and servicing agreement and any series supplement to the
pooling and servicing agreement may be amended by us, the servicer and the
trustee for Spiegel Master Trust, without the consent of certificateholders of
any series, to cure any ambiguity, to correct or supplement any provisions
which may be inconsistent with any other provisions of the pooling and
servicing agreement or to add any other provisions which would not be
inconsistent with the pooling and servicing agreement if the amendment would
not adversely effect the interests of the certificateholders in any material
respect and we deliver an opinion of counsel to that effect to the rating
agencies.
The amendments that we may make without the consent of the
certificateholders of any series or the credit enhancement providers for any
series may include the addition or sale of receivables in the trust portfolio.
The pooling and servicing agreement may also be amended by us, the servicer
and the trustee for Spiegel Master Trust with the consent of certificateholders
representing more than 50% of the investor amount of the investor certificates
of all series adversely affected by the amendment. Even with consent, no
amendment may occur if it:
(1) reduces the amount of, or delays the timing of any distributions
to be made to certificateholders of any series without the consent of each
affected certificateholder;
(2) changes the manner of calculating the investor amounts and
allocation percentages for any series or changes the manner of allocating
defaulted receivables to any series without the consent of each affected
certificateholder; or
(3) reduces the percentage of undivided interests the holders of which
are required to consent to any amendment, without the consent of each
affected noteholder.
CREDIT ENHANCEMENT
General
For any series, credit enhancement may be provided with respect to one or
more of the related classes. Credit enhancement may be in the form of setting
the collateral amount for that series at an amount greater than the initial
principal amount of the notes in that series,
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the subordination of one or more classes of the notes of that series, a letter
of credit, the establishment of a cash collateral guaranty or account, a surety
bond, an insurance policy, a spread account, a reserve account, the use of
cross support features or another method of credit enhancement described in the
accompanying prospectus supplement, or any combination of these. If so
specified in the accompanying prospectus supplement, any form of credit
enhancement may be structured so as to be drawn upon by more than one class to
the extent described in that accompanying prospectus supplement. Any credit
enhancement that constitutes a guarantee of the applicable notes will be
separately registered under the Securities Act unless exempt from registration
under the Securities Act.
In the prospectus supplement for each series, we will describe the amount
and the material terms of the related credit enhancement. Often, the credit
enhancement will not provide protection against all risks of loss and will not
guarantee repayment of the entire principal balance of the notes and interest
thereon. If losses occur which exceed the amount covered by the credit
enhancement or which are not covered by the credit enhancement, noteholders
will bear their allocable share of deficiencies.
If credit enhancement is provided with respect to a series, the
accompanying prospectus supplement will include a description of:
. the amount payable under that credit enhancement;
. any conditions to payment not described here;
. the conditions, if any, under which the amount payable under that credit
enhancement may be reduced and under which that credit enhancement may
be terminated or replaced; and
. any material provision of any agreement relating to that credit
enhancement.
The accompanying prospectus supplement may also set forth additional
information with respect to any credit 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 prospectus supplement.
If so specified in the accompanying prospectus supplement, credit
enhancement with respect to a series may be available to pay principal of the
notes of that series following the occurrence of one or more pay out events
with respect to that series. In this event, the credit enhancement provider
will have an interest in the cash flows in respect of the receivables to the
extent described in that prospectus supplement.
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Excess Collateral Amount
If specified in the accompanying prospectus supplement, support for a
series may be provided by an excess collateral amount. The excess collateral
amount for any series will equal the collateral amount for that series
(calculated prior to any reduction to the collateral amount for amounts on
deposit in any principal accumulation account), minus the aggregate
outstanding principal amount of the notes of that series, after giving effect
to all other reductions through the date of determination. Because the
collateral amount of a series having an excess collateral amount will be
higher than the outstanding principal amount of the notes of that series, a
greater amount of finance charge collections and principal collections will be
allocated to that series. In addition, losses from defaulted receivables and
uncovered dilution amounts allocated to that series will first reduce the
excess collateral amount before reducing the principal amount ultimately paid
on the notes. The excess collateral amount for any series will be reduced by
the amount of reallocated principal collections applied to make payments for
that series.
If your series is supported by an excess collateral amount, the
accompanying prospectus supplement will specify the required excess collateral
amount for your series. The required excess collateral amount for any series
may be decreased at any time with the consent of the rating agencies then
rating that series. During the controlled accumulation period or controlled
amortization period for a series, the portion of funds available but not
required to be deposited to the principal accumulation account or to make
principal payments to noteholders, as the case may be, on any distribution
date may be applied to make payments to Spiegel Acceptance that will reduce
the excess collateral amount for that series, but only to the extent that the
excess collateral amount exceeds the required excess collateral amount.
The excess collateral amount for a series may also be increased under the
circumstances described in the related prospectus supplement.
Subordination
If so specified in the accompanying prospectus supplement, one or more
classes of any series will be subordinated as described in the accompanying
prospectus supplement to the extent necessary to fund payments with respect to
the senior notes. The rights of the holders of these subordinated notes to
receive distributions of principal and/or interest on any distribution date
for that series will be subordinate in right and priority to the rights of the
holders of senior notes, but only to the extent set forth in the accompanying
prospectus supplement. If so specified in the accompanying prospectus
supplement, subordination may apply only in the event that a specified type of
loss is not covered by another credit enhancement.
The accompanying prospectus supplement will also set forth information
concerning:
. the amount of subordination of a class or classes of subordinated notes
in a series;
. the circumstances in which that 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 those subordinated notes will be
distributed to holders of senior notes.
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 accompanying prospectus supplement will specify the manner and
conditions for applying that cross-support feature.
Letter of Credit
If so specified in the accompanying prospectus supplement, support for a
series or one or more of the related classes will be provided by one or more
letters of credit. A letter of credit may provide limited protection against
some losses in addition to or in lieu of other credit enhancement. The issuer
of the letter of credit, will be obligated to honor demands with respect to
that letter of credit, to the extent of the amount available thereunder, to
provide funds under the circumstances and subject to any conditions as are
specified in the accompanying prospectus supplement.
The maximum liability of the issuer of a letter of credit under its letter
of credit will generally be an amount equal to a percentage specified in the
accompanying prospectus supplement of the initial collateral amount of a series
or a class of that series. The maximum amount available at any time to be paid
under a letter of credit will be set forth in the accompanying prospectus
supplement.
Cash Collateral Guaranty or Account
If so specified in the accompanying prospectus supplement, support for a
series or one or more of the related classes will be provided by a cash
collateral guaranty, secured by the deposit of cash or permitted investments in
a cash collateral account, reserved for the beneficiaries of the cash
collateral guaranty or by a cash collateral account alone. The amount available
from the cash collateral guaranty or the cash collateral account will be the
lesser of amounts on deposit in the cash collateral account and an amount
specified in the accompanying prospectus supplement. The accompanying
prospectus supplement will set forth 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.
Surety Bond or Insurance Policy
If so specified in the accompanying prospectus supplement, insurance with
respect to a series or one or more of the related classes will be provided by
one or more insurance companies and will guarantee, with respect to one or more
classes of the related series, distributions of interest or principal in the
manner and amount specified in the accompanying prospectus supplement.
If so specified in the accompanying prospectus supplement, a surety bond
will be purchased for the benefit of the holders of any series or class of that
series to assure
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distributions of interest or principal with respect to that series or class of
notes in the manner and amount specified in the accompanying prospectus
supplement.
If an insurance policy or a surety bond is provided for any series or
class, the provider of the insurance policy or surety bond will be permitted to
exercise the voting rights of the noteholders of the applicable series or class
to the extent described in the prospectus supplement for that series. For
example, if specified in the related prospectus supplement, the provider of the
insurance policy or surety bond, rather than the noteholders of that series,
may have the sole right to:
. consent to amendments to the indenture, the pooling and servicing
agreement, the transfer and servicing agreement or any other document
applicable to that series;
. if an event of default occurs, accelerate the notes of that series or
direct the trustee to exercise any remedy available to the noteholders;
or
. waive any event of default for that series.
Spread Account
If so specified in the accompanying prospectus supplement, support for a
series or one or more of the related classes will be provided by the periodic
deposit of all or a portion of available excess cash flow from the trust assets
into a spread account intended to assist with subsequent distribution of
interest and principal on the notes of that class or series in the manner
specified in the accompanying prospectus supplement.
Reserve Account
If so specified in the accompanying prospectus supplement, support for a
series or one or more of the related classes or any related enhancement will be
provided by a reserve account. The reserve account may be funded, to the extent
provided in the accompanying prospectus supplement, by an initial cash deposit,
the retention of a portion of periodic distributions of principal or interest
or both otherwise payable to one or more classes of notes, including the
subordinated notes, or the provision of a letter of credit, guarantee,
insurance policy or other form of credit or any combination of these
arrangements. The reserve account will be established to assist with the
subsequent distribution of principal or interest on the notes of that series or
the related class or any other amount owing on any related enhancement in the
manner provided in the accompanying prospectus supplement.
DESCRIPTION OF THE RECEIVABLES PURCHASE AGREEMENT
The following is a summary of the material terms of the receivables
purchase agreement entered into by the bank, Spiegel Acceptance and us. The
summary is qualified in its entirety by reference to the receivables purchase
agreement. This receivables purchase agreement is filed as an exhibit to the
registration statement of which this prospectus is a part.
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Sale of Receivables
Under the receivables purchase agreement, the bank and Spiegel Acceptance
sold and, in the future, may sell to us all of their right, title and interest
in and to (i) all of the receivables existing in the initial accounts as of the
initial cut-off date and in additional accounts as of the related addition
dates and (ii) recoveries allocable to those receivables and other related
property.
All Eligible Receivables arising in the initial accounts had been
previously transferred by the bank to Spiegel Acceptance prior to the formation
of Spiegel Master Trust. Concurrently with the formation of Spiegel Master
Trust, those receivables were transferred to us under the receivables purchase
agreement. Since then, all Eligible Receivables arising in the initial accounts
have been transferred directly from the bank to us.
In addition, under an operating agreement between the bank and Spiegel
Acceptance, Spiegel Acceptance has agreed to purchase and the bank has agreed
to sell, on an ongoing basis, all receivables arising in the FCNB Preferred
Charge accounts, other than receivables that have been charged-off and
receivables that the bank is obligated to transfer to the trust or other third-
parties. Therefore, prior to the designation of any FCNB Preferred Charge
account to the trust portfolio, the bank will sell the receivables in that
account to Spiegel Acceptance. Upon designation of additional accounts to the
trust portfolio, either the bank, or, if the bank has transferred the
receivables in those accounts to Spiegel Acceptance, Spiegel Acceptance will
transfer all receivables in the designated additional accounts to us on the
addition date. However, after the applicable addition date, receivables in all
designated additional accounts will be transferred directly from the bank to
us.
In connection with the sale of receivables to us, the bank and Spiegel
Acceptance will each indicate in their files that those receivables have been
sold to us for further transfer to the trust. The records and agreements
relating to the accounts and receivables for the trust portfolio may not be
segregated by the bank, Spiegel Acceptance or us from other documents and
agreements relating to other credit accounts and receivables. We, Spiegel
Acceptance and the bank will each file UCC financing statements meeting the
requirements of applicable law in each of the jurisdictions necessary to
perfect the ownership or security interest of the trust in those receivables.
See "Risk Factors--Some liens would be given priority over your notes which
would cause delayed or reduced payments" and "Material Legal Aspects of the
Receivables" in this prospectus.
Representations and Warranties
In the receivables purchase agreement, each of the bank and Spiegel
Acceptance represents and warrants as to itself to us to the effect that, among
other things, as of the date of the receivables purchase agreement and, with
respect to any receivables transferred by it in any designated additional
accounts, as of the related addition date, it is duly organized and in good
standing and has the authority to consummate the transactions contemplated by
the receivables purchase agreement. In the receivables purchase agreement, each
of the bank and
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Spiegel Acceptance additionally represents and warrants that any receivable
transferred by it under the receivables purchase agreement is an Eligible
Receivable as of the applicable cut-off date for that receivable. In the event
of a breach of any representation and warranty set forth in the receivables
purchase agreement which results in the requirement that we accept retransfer
of an ineligible receivable under the pooling and servicing agreement or the
transfer and servicing agreement, we can require the bank or Spiegel
Acceptance, as the case may be, to repurchase that ineligible receivable on the
date of the retransfer. The purchase price for the ineligible receivables will
be the aggregate face amount of those receivables.
In the receivables purchase agreement, each of the bank and Spiegel
Acceptance also represents and warrants that, among other things, as of the
date of the receivables purchase agreement and, with respect to itself and any
receivables transferred by it in any designated additional accounts, as of each
addition date (a) the receivables purchase agreement constitutes a valid and
binding obligation of the bank or Spiegel Acceptance, as the case may be, and
(b) the receivables purchase agreement constitutes a valid sale to us of all
right, title and interest of the bank or Spiegel Acceptance, as the case may
be, in and to the receivables then-existing and thereafter created in the
accounts and in the proceeds of the accounts free and clear of any liens other
than liens permitted under the receivables purchase agreement. If the breach of
any of the representations or warranties described in this paragraph results in
our obligation under the pooling and servicing agreement or the transfer and
servicing agreement to accept retransfer of the receivables, we can require the
bank or Spiegel Acceptance, as the case may be, to repurchase the receivables
retransferred to us, for an amount of cash at least equal to the amount of cash
we are required to deposit under the pooling and servicing agreement or the
transfer and servicing agreement in connection with the retransfer.
Covenants
In the receivables purchase agreement, the bank covenants that it will
comply with and perform its obligations under the charge agreements relating to
the accounts and its policies and procedures relating to the accounts unless
the failure to do so would not have a material adverse effect on the rights of
the trustee and the rights of the securityholders. The bank may change the
terms and provisions of the charge agreements or policies and procedures in any
respect, including the calculation of the amount, or the timing of, charge-
offs, so long as any changes made are also made to comparable accounts in the
Spiegel private label credit card portfolio.
The bank also covenants that it will not reduce the finance charges and
other fees on the accounts, if as a result of the reduction, its reasonable
expectation of the portfolio yield as of the time of the reduction would be
less than the highest of the base rates of all outstanding series, except as
required by law or as is consistent with the pooling and servicing agreement
and the transfer and servicing agreement and as the bank deems advisable for
its private label program based on a good faith assessment of various factors
impacting the use of its private label credit cards.
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Amendments
The receivables purchase agreement may be amended without the consent of
the noteholders. However, no amendment may adversely affect in any material
respect the interests of the securityholders. If Spiegel Master Trust is
terminated, the parties to the receivables purchase agreement will not be
permitted to amend the purchase price for receivables or change any obligation
of us, Spiegel Acceptance or the bank under the receivables purchase agreement
unless each rating agency confirms that the amendment will not impair its
rating of any outstanding series or class.
Termination
The receivables purchase agreement will terminate immediately after the
trust terminates. In addition, if a receiver or conservator is appointed for
the bank or either we or Spiegel Acceptance becomes a debtor in a bankruptcy
case or other specified liquidation, bankruptcy, insolvency or similar events
occur or the bank or Spiegel Acceptance becomes unable for any reason to
transfer receivables to us in accordance with the receivables purchase
agreement, we will immediately cease to purchase receivables under the
receivables purchase agreement.
NOTE RATINGS
Any rating of the notes by a rating agency will indicate:
. its view on the likelihood that noteholders will receive required
interest and principal payments; and
. its evaluation of the receivables and the availability of any credit
enhancement for the notes.
Among the things a rating will not indicate are:
. the likelihood that principal payments will be paid on a scheduled date;
. the likelihood that a pay out event will occur;
. the likelihood that a U.S. withholding tax will be imposed on non-U.S.
noteholders;
. the marketability of the notes;
. the market price of the notes; or
. whether the notes are an appropriate investment for any purchaser.
A rating will not be a recommendation to buy, sell or hold the notes. A
rating may be lowered or withdrawn at any time by a rating agency.
We will request a rating of the notes offered by this prospectus and the
accompanying prospectus supplement from at least one rating agency. Rating
agencies other than those requested could assign a rating to the notes and, if
so, that rating could be lower than any
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rating assigned by a rating agency chosen by us. Except as otherwise expressly
stated, any reference in this prospectus or the accompanying prospectus
supplement to a rating agency refers to a rating agency selected by us to rate
the securities issued by the issuer or Spiegel Master Trust.
MATERIAL LEGAL ASPECTS OF THE RECEIVABLES
Transfer of Receivables
Each of the bank and Spiegel Acceptance in the receivables purchase
agreement will represent and warrant that its transfer of receivables
constitutes a valid sale and assignment of all of its right, title and interest
in and to the receivables. In the pooling and servicing agreement and the
transfer and servicing agreement, we will represent and warrant that our
transfer of receivables constitutes a valid sale and assignment of all of our
right, title and interest in and to the receivables or creates in favor of the
issuer a valid first-priority perfected security interest in our rights in the
receivables in existence at the time that the trust is formed or at the time
that receivables in additional accounts are transferred, as the case may be,
and a valid first-priority perfected security interest in our rights in the
receivables arising in accounts already designated for the trust portfolio on
and after their creation, in each case until termination of the trust. For a
discussion of the issuer's rights arising from these representations and
warranties not being satisfied, see "Description of the Notes--Representations
and Warranties" in this prospectus.
We will represent in the pooling and servicing agreement and the transfer
and servicing agreement, and the bank and Spiegel Acceptance will represent in
the receivables purchase agreement that the receivables are "accounts,"
"general intangibles" or "chattel paper" for purposes of the UCC. Both the sale
of accounts and chattel paper and the transfer of accounts and chattel paper as
security for an obligation are subject to the provisions of Article 9 of the
UCC. In addition, a transfer of general intangibles as security for an
obligation is subject to the provisions of Article 9 of the UCC. Therefore, we,
the bank and Spiegel Acceptance will file appropriate UCC financing statements
to perfect the respective transferee's security interest in the receivables.
There are limited circumstances in which prior or subsequent transferees of
receivables coming into existence after a series closing date could have an
interest in those receivables with priority over the trust's interest. Under
the receivables purchase agreement, however, each of the bank and Spiegel
Acceptance will represent and warrant, as to itself and the receivables
transferred by it, that it has transferred the receivables to us free and clear
of the lien of any third party other than the indenture trustee. In addition,
each of the bank and Spiegel Acceptance will covenant that it will not sell,
pledge, assign, transfer or grant any lien on any receivable or any interest in
any receivable other than to us or the indenture trustee. Similarly, under the
pooling and servicing agreement and the transfer and servicing agreement, we
will represent and warrant that we have transferred the receivables to the
trust free and clear of the lien of any third party other than the indenture
trustee, and we will covenant that we will not sell, pledge, assign, transfer,
or grant any lien on any receivable or any interest in any receivable other
than to the trust. Nevertheless, a tax, governmental or
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other nonconsensual lien on our or the property of the bank or Spiegel
Acceptance arising prior to the time a receivable comes into existence may have
priority over the interest of the trust in that receivable. Furthermore, if the
FDIC were appointed as a receiver or conservator of the bank, administrative
expenses of the receiver or conservator may have priority over the interest of
the trust in the receivables.
If the servicer has satisfied the conditions discussed in "Description of
the Notes--Application of Collections" in this prospectus, the servicer will be
permitted to make deposits of collections on a monthly or other periodic basis.
In that event, cash collections held by the servicer may be commingled and used
for the benefit of the servicer prior to each distribution date and, in the
event of the insolvency of the servicer or the lapse of a ten-day period after
receipt by the servicer of collections that have been commingled with other
funds, the trust may not have a first-priority perfected security interest in
those collections. In that event, the amount payable to you could be lower than
the outstanding principal and accrued interest on the notes, thus resulting in
losses to you.
Conservatorship, Receivership and Bankruptcy
The bank is chartered as a national banking association and is regulated
and supervised principally by the Office of the Comptroller of the Currency,
which is required to appoint the FDIC as conservator or receiver for the bank
if specified events occur relating to the bank's financial condition or the
propriety of its actions. In addition, the FDIC could appoint itself as
conservator or receiver for the bank.
In its role as conservator or receiver, the FDIC would have broad powers to
repudiate contracts to which the bank was party if the FDIC determined that the
contracts were burdensome and that repudiation would promote the orderly
administration of the bank's affairs. In addition, no agreement that tended to
diminish or defeat the FDIC's interest in an asset acquired from the bank would
be enforceable against the FDIC unless the agreement were to meet certain legal
requirements. One of those requirements is that the agreement would have to
have been executed by the bank contemporaneously with the bank's acquisition of
the asset.
The FDIC has adopted a rule stating that the FDIC shall not use its
repudiation power to reclaim, recover or recharacterize as property of an FDIC-
insured bank any financial assets transferred by the bank in connection with a
securitization transaction. The same rule states that the FDIC shall not seek
to avoid an otherwise legally enforceable securitization agreement solely
because the agreement does not satisfy the contemporaneous execution
requirement. Although the FDIC has the power to repeal or amend its own rules,
the securitization rule states that any repeal or amendment of that rule will
not apply to any transfers of financial assets made in connection with a
securitization that was in effect before the repeal or modification.
We have structured the issuance of the notes with the intention that the
direct or indirect transfers of the receivables from the bank to us would have
the benefit of this rule. Nevertheless, if the FDIC were to assert that the
rule does not apply to these transfers, or
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were to require the indenture trustee to go through the administrative claims
procedure established by the FDIC in order to obtain payments on the notes, or
were to request a stay of any actions by the indenture trustee to enforce the
receivables purchase agreement or the purchase agreement between the bank and
Spiegel Acceptance against the bank, delays in payments on outstanding series
of notes could occur. Furthermore, if the FDIC's assertions were successful,
possible reductions in the amount of those payments could occur.
In addition, regardless of the terms of the indenture, the FDIC as
conservator or receiver for the bank may have the power to prevent the
commencement of a rapid amortization period, to prevent or limit the early
liquidation of the receivables and termination of the trust, or to require the
continued transfer of new principal receivables. Regardless of the instructions
of those authorized to direct the indenture trustee's action, moreover, the
FDIC as conservator or receiver for the bank may have the power to require the
early liquidation of the receivables, to require the early termination of the
trust and the retirement of the notes, or to prohibit or limit the continued
transfer of new principal receivables.
In the event of the conservatorship or receivership of the servicer, the
conservator or receiver may have the power to prevent either the indenture
trustee or the noteholders from appointing a successor servicer. See
"Description of the Notes--Servicer Default" in this prospectus.
We and Spiegel Acceptance treat the initial transfer of receivables in the
initial accounts to us, as well as Spiegel Acceptance's supplemental conveyance
of receivables in additional accounts, as absolute conveyances and not pledges
of those receivables. After these sales the receivables are not part of Spiegel
Acceptance's bankruptcy estate and therefore should not be available to Spiegel
Acceptance's creditors. However, if a bankruptcy trustee for Spiegel or Spiegel
Acceptance, Spiegel or Spiegel Acceptance as debtor-in-possession or a creditor
of Spiegel or Spiegel Acceptance were to take the view that our assets and
liabilities should be substantively consolidated with either Spiegel and/or
Spiegel Acceptance or that the transfer of the receivables from Spiegel
Acceptance to us should be characterized as a pledge of those receivables, then
delays in payments on the notes and possible reductions in the amount of those
payments could result.
Our organizational documents and corporate structure have been designed so
that (a) the filing of a voluntary or involuntary petition for relief by or
against us under the Bankruptcy Code and (b) the substantive consolidation of
our assets and liabilities with those of Spiegel or Spiegel Acceptance is
unlikely. We are a separate, limited purpose corporation, and our certificate
of incorporation contains limitations on the nature of our business and
restrictions on our ability to commence a voluntary case or proceeding under
the Bankruptcy Code or similar laws without the prior unanimous consent of all
of our directors. In addition, the indenture trustee will covenant in the
indenture and the trustee for Spiegel Master Trust has covenanted in the
pooling and servicing agreement that it will not at any time institute against
us any bankruptcy, insolvency or similar proceedings under the Bankruptcy Code
or similar laws. Nevertheless, if we were to become a debtor in a bankruptcy
case and if a bankruptcy trustee or one of our creditors or we as debtor-in-
possession were to take the
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position that the transfer of the receivables by us to the trust should be
characterized as a pledge of those receivables, or if our assets and
liabilities were substantively consolidated with those of an entity in
bankruptcy, then delays in payments on the notes and possible reductions in the
amount of those payments could result.
If bankruptcy, insolvency or similar proceedings under the Bankruptcy Code
or similar laws occur with respect to us, we will promptly notify the indenture
trustee and a pay out event will occur with respect to each series. Under the
pooling and servicing agreement and the transfer and servicing agreement, newly
created receivables will not be transferred to the trust on and after any of
these bankruptcy or insolvency related events. Any principal receivables
transferred to the trust prior to the event, as well as collections on those
principal receivables and finance charge receivables accrued at any time with
respect to those principal receivables, will continue to be part of the trust
assets and will be applied as specified above in "Description of the Notes--
Application of Collections" and in the accompanying prospectus supplement.
A conservator or receiver or a bankruptcy court, however, may have the
power to delay application of collections or to require the continued transfer
of principal receivables to the trust. See "Risk Factors--If a conservator or
receiver were appointed for First Consumers National Bank, or if we or Spiegel
Acceptance became a debtor in a bankruptcy case, delays or reductions in
payment of your notes could occur" in this prospectus.
Application of federal and state bankruptcy and debtor relief laws would
affect the interests of the noteholders if those laws result in any receivables
being charged-off as uncollectible. See "Description of the Notes--Defaulted
Receivables; Dilution; Investor Charge-Offs" in this prospectus.
Consumer Protection Laws
The relationship of the consumer and the provider of consumer credit is
extensively regulated by federal and state consumer protection laws. With
respect to credit accounts issued by the bank, the most significant federal
laws include the Federal Truth-in-Lending, Equal Credit Opportunity, Fair
Credit Reporting and Fair Debt Collection Practices Acts. These statutes impose
various disclosure requirements either before or when an account is opened, or
both, and at the end of monthly billing cycles, and, in addition, limit account
holder liability for unauthorized use, prohibit various discriminatory
practices in extending credit and regulate practices followed in collections.
In addition, account holders are entitled under these laws to have payments and
credits applied to the revolving credit account promptly and to request prompt
resolution of billing errors. Congress and the states may enact new laws and
amendments to existing laws to regulate further the consumer revolving credit
industry. The trust may be liable for violations of consumer protection laws
that apply to the receivables, either as assignee from us with respect to
obligations arising before transfer of the receivables to the trust or as the
party directly responsible for obligations arising after the transfer. In
addition, an account holder may be entitled to assert those violations by way
of set-off against the obligation to pay the amount of receivables owing.
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All receivables that were not created in compliance in all material respects
with the requirements of consumer protection laws, if the noncompliance has a
material adverse effect on the noteholders' interest therein, will be
reassigned to us. The servicer has also agreed in the pooling and servicing
agreement and the transfer and servicing agreement to indemnify the trust,
among other things, for any liability arising from those types of violations.
For a discussion of the trust's rights if the receivables were not created in
compliance in all material respects with applicable laws, see "Description of
the Notes--Representations and Warranties" in this prospectus.
FEDERAL INCOME TAX CONSEQUENCES
General
The following summary describes the material United States federal income
tax consequences of the purchase, ownership and disposition of the notes.
Additional federal income tax considerations relevant to a particular series
may be set forth in the accompanying prospectus supplement. The following
summary has been prepared and reviewed by Rooks, Pitts and Poust as special tax
counsel to the Issuer. The summary is based on the Internal Revenue Code of
1986, as amended as of the date hereof, and existing final, temporary and
proposed Treasury regulations, revenue rulings and judicial decisions, all of
which are subject to prospective and retroactive changes. The summary is
addressed only to original purchases of the notes, deals only with notes held
as capital assets within the meaning of Section 1221 of the Internal Revenue
Code and, except as specifically set forth below, does not address tax
consequences of holding notes that may be relevant to investors in light of
their own investment circumstances or their special tax situations, for
example:
. banks and thrifts,
. insurance companies,
. regulated investment companies,
. dealers in securities,
. holders that will hold the offered notes as a position in a "straddle"
for tax purposes or as a part of a "synthetic security," "conversion
transaction" or other integrated investment comprised of the offered
notes, and one or more other investments,
. trusts and estates, and
. pass-through entities, the equity holders of which are any of the
foregoing.
Further, this discussion does not address alternative minimum tax
consequences or any tax consequences to holders of interests in a noteholder.
Special tax counsel to the issuer is of the opinion that the following summary
of federal income tax consequences is correct in all material respects. An
opinion of special tax counsel to the issuer, however, is not binding on the
Internal Revenue Service or the courts, and no ruling on any of the issues
discussed below will be sought from the IRS. In addition, no transaction
closely comparable to the purchase of the notes has been the subject of any
Treasury Regulation, revenue ruling or
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judicial decision. Accordingly, we suggest that persons considering the
purchase of notes consult their own tax advisors with regard to the United
States federal income tax consequences of an investment in the notes and the
application of United States federal income tax laws, as well as the laws of
any state, local or foreign taxing jurisdictions, to their particular
situations.
Tax Classification of the Issuer and the Notes
Treatment of the Issuer as an Entity, Not Subject to Tax. Special tax
counsel to the issuer is of the opinion that, although no transaction closely
comparable to that contemplated herein has been the subject of any Treasury
Regulation, revenue ruling or judicial decision, the trust will not be
classified as an association or as a publicly traded partnership taxable as a
corporation for federal income tax purposes. As a result, special tax counsel
to the issuer is of the opinion that the issuer will not be subject to federal
income tax. However, as discussed above, this opinion is not binding on the IRS
and no assurance can be given that this classification will prevail.
The precise tax classification of the issuer for federal income tax
purposes is not certain. It might be viewed as merely holding assets on our
behalf as collateral for notes issued by us. On the other hand, the issuer
could be viewed as a separate entity for tax purposes issuing its own notes.
This distinction may have a significant tax effect on particular noteholders as
stated below under "Possible Alternative Classifications."
Treatment of the Notes as Debt. Special tax counsel to the issuer is of the
opinion that, although no transaction closely comparable to that contemplated
herein has been the subject of any Treasury regulation, revenue ruling or
judicial decision, the notes will be characterized as debt for United States
federal income tax purposes. The issuer agrees by entering into the Indenture,
and the noteholders agree by their purchase and holding of notes, to treat the
notes as debt for United States federal income tax purposes.
Possible Alternative Classifications. If, contrary to the opinion of
special tax counsel to the issuer, the IRS successfully asserted that a series
or class of notes did not represent debt for United States federal income tax
purposes, those notes might be treated as equity interests in the issuer or
some other entity for United States federal income tax purposes. If so treated,
investors could be treated for United States federal income tax purposes either
as partners in a partnership or, alternatively, as shareholders in a taxable
corporation. Treatment of a noteholder as a partner could have adverse tax
consequences to certain holders; for example, income to foreign persons
generally would be subject to United States tax and United States tax return
filing and withholding requirements, and individual holders might be subject to
limitations on their ability to deduct their share of partnership expenses. If
notes instead were treated as corporate stock, the taxable corporation would
not be able to reduce its taxable income by deductions for interest expense on
notes recharacterized as equity, and any increase in the corporate tax imposed
with respect to the taxable corporation could materially reduce cash available
to make payments on the notes; further, noteholders might not be entitled to
any dividends received deduction in respect of payments of interest on
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notes treated as dividends. In addition, even if the notes are treated as debt,
the issuer is also able to issue other securities which may be treated as debt
or as equity interests in the issuer. The issuance of additional securities
requires the delivery of a new opinion of counsel generally to the effect that
the new issuance will not cause the issuer to become taxable as a separate
entity for federal income tax purposes; however, the new opinion would not bind
the IRS, and the issuer could become taxable as a corporation as a result of
the new issuance, potentially diminishing cash available to make payments on
the notes. We suggest that prospective investors consult with their own tax
advisors with regard to the consequences of each of the possible alternative
characterizations to them in their particular circumstances. The following
discussion assumes that the classifications of the notes as debt is correct.
Consequences to Holders of the Offered Notes
Interest and Original Issue Discount. In general, stated interest on a note
will be includible in gross income as it accrues or is received in accordance
with an noteholder's usual method of tax accounting. If a class of notes is
issued with original issue discount, the provisions of Sections 1271 through
1273 and 1275 of the Internal Revenue Code will apply to those notes. Under
those provisions, a holder of a note issued with original issue discount--
including a cash basis holder--generally would be required to include the
original issue discount on a note in income for federal income tax purposes on
a constant yield basis, resulting in the inclusion of original issue discount
in income in advance of the receipt of cash attributable to that income. In
general, a note will be treated as having original issue discount to the extent
that its "stated redemption price" exceeds its "issue price," if that excess
equals or exceeds 0.25 percent multiplied by the weighted average life of the
note, determined by taking into account the number of complete years following
issuance until payment is made for each partial principal payment. Under
Section 1272(a)(6) of the Internal Revenue Code, special provisions apply to
debt instruments on which payments may be accelerated due to prepayments of
other obligations securing those debt instruments. However, no regulations have
been issued interpreting those provisions, and the manner in which those
provisions would apply to the notes is unclear, but the application of Section
1272(a)(6) could affect the rate of accrual of original issue discount and
could have other consequences to holders of the notes. Additionally, the IRS
could take the position based on Treasury regulations that none of the interest
payable on a note is "unconditionally payable" and hence that all of the
interest payable on the note should be included in the note's stated redemption
price at maturity. If sustained, that treatment should not significantly affect
tax liabilities for most holders of the notes, but we suggest that prospective
noteholders consult their own tax advisors concerning the impact to them in
their particular circumstances. The issuer intends to take the position that
interest on the notes constitutes "qualified stated interest" and that the
above consequences do not apply.
Disposition of the Notes: Defeasance. Upon the sale, exchange or retirement
of a note, the holder of the note generally will recognize taxable gain or loss
in an amount equal to the difference between (a) the amount realized on the
disposition, other than that part of the amount attributable to accrued
interest and (b) the holder's adjusted tax basis in the note. A taxable
exchange of a note could also occur as a result of our substitution of money or
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investments for the receivables in the trust portfolio. See "Description of the
Notes-- Defeasance" in this prospectus. The holder's adjusted tax basis in the
note generally will equal the cost of the note to that holder, increased by any
original issue discount previously included in income by that holder with
respect to the note, and decreased by the amount of any payments of principal
or original issue discount previously received by that holder with respect to
its note. Any related gain or loss generally will be capital gain or loss, and
will be long-term capital gain or loss if at the time of sale the note has been
held for more than one year.
Foreign Holders. Under United States federal income tax law now in effect,
payments of interest by the issuer to a holder of a note who, as to the United
States, is a nonresident alien individual or a foreign corporation (a "foreign
person") will be considered "portfolio interest," and will not be subject to
United States federal income tax and withholding tax provided:
. the interest is not effectively connected with the conduct of a trade or
business within the United States by the foreign person and,
. the foreign person is not, for United States federal income tax
purposes, actually or constructively a "10 percent shareholder" of us or
the issuer, a "controlled foreign corporation" with respect to which we
or the issuer is a "related person" within the meaning of the Internal
Revenue Code, or a bank extending credit under a loan agreement entered
into in the ordinary course of its trade or business, and,
. the foreign person provides the person who is otherwise required to
withhold United States tax with respect to the notes with an appropriate
statement, on IRS Form W-8 or a new Form W-8BEN and signed under
penalties of perjury, certifying that the beneficial owner of the note
is a foreign person and providing the foreign person's name and address.
If a note is held through a securities clearing organization or other
financial institution, as is expected to be the case unless definitive notes
are issued, the organization or institution may provide the relevant signed
statement generally to the withholding agent. In that case, however, the signed
statement generally must be accompanied by an IRS Form W-8 or new Form W-8BEN
provided by the foreign person that owns the note. If the interest paid to the
foreign person is not portfolio interest, then it will be subject to United
States federal income and withholding tax at a rate of 30%, unless reduced or
eliminated by an applicable tax treaty or the interest is effectively connected
with the conduct of a trade or business within the United States and, in either
case, the appropriate statement has been provided. The new form referred to
above in this paragraph is included in the U.S. Treasury Department's recently
issued final Treasury Regulations, which revised some of the procedures whereby
a foreign person may establish an exemption from withholding generally
beginning January 1, 2001. We suggest that foreign persons consult their tax
advisors concerning the impact to them, if any, of those revised procedures.
Any capital gain realized on the sale, redemption, retirement or other
taxable disposition of a note by a foreign person will be exempt from United
States federal income tax and
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withholding tax, provided that (i) the gain is not effectively connected with
the conduct of a trade or business in the United States by the foreign person,
and (ii) in the case of an individual foreign person, the individual is not
present in the United States for 183 days or more in the taxable year.
Backup Withholding. Payments of principal and interest, as well as payments
of proceeds from the sale, retirement or disposition of a note, may be subject
to "backup withholding" tax under Section 3406 of the Internal Revenue Code at
a rate of 31% if a recipient of those payments fails to furnish to the payor
required identifying information. Any amounts deducted and withheld would be
allowed as a credit against the recipient's United States federal income tax if
appropriate proof is provided under rules established by the IRS. Furthermore,
penalties may be imposed by the IRS on a recipient of payments that is required
to supply information but does not do so in the proper manner. Backup
withholding will not apply with respect to payments made to exempt recipients,
such as corporations and financial institutions. Holders of the notes are urged
to consult their tax advisors regarding their qualification for exemption from
backup withholding and the procedure for obtaining an exemption.
The United States federal income tax discussion set forth above may not be
applicable depending upon a holder's particular tax situation, and does not
purport to address the issues described with the degree of specificity that
would be provided by a taxpayer's own tax advisor. We suggest that prospective
purchasers consult their own tax advisors with respect to the tax consequences
to them of the purchase, ownership and disposition of the notes and the
possible effects of changes in federal tax laws.
State and Local Tax Consequences
The discussion above does not address the taxation of the trust or the tax
consequences of the purchase, ownership or disposition of an interest in the
notes under any state or local tax law. We suggest that each investor consult
its own tax adviser regarding state and local tax consequences.
ERISA CONSIDERATIONS
The prospectus supplement for each series of notes will specify whether the
notes offered by that prospectus supplement are eligible for purchase by
employee benefit plans. Subject to the considerations discussed below, unless
otherwise specified in the accompanying prospectus supplement the notes offered
under this registration statement are eligible for purchase by employee benefit
plans.
Section 406 of the Employee Retirement Income Security Act of 1974, as
amended and Section 4975 of the Internal Revenue Code prohibit a pension,
profit-sharing or other employee benefit plan, as well as an individual
retirement account or Keogh plan, from engaging in specified transactions with
persons that are "parties in interest" under ERISA or "disqualified persons"
under the Internal Revenue Code with respect to these benefit plans.
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A violation of these "prohibited transaction" rules may result in an excise tax
or other penalties and liabilities under ERISA and the Internal Revenue Code
for these persons. Title I of ERISA also requires that fiduciaries of a benefit
plan subject to ERISA make investments that are prudent, diversified (unless
clearly prudent not to do so), and in accordance with governing plan documents.
Some transactions involving the purchase, holding or transfer of the notes
might be deemed to constitute prohibited transactions under ERISA and the
Internal Revenue Code if assets of the trust were deemed to be assets of a
benefit plan. Under a regulation issued by the United States Department of
Labor, the assets of the trust would be treated as plan assets of a benefit
plan for the purposes of ERISA and the Internal Revenue Code only if the
benefit plan acquires an "equity interest" in the trust and none of the
exceptions contained in the regulation is applicable. An equity interest is
defined under the regulation as an interest in an entity other than an
instrument which is treated as indebtedness under applicable local law and
which has no substantial equity features. Although there can be no assurances
in this regard, it appears that, at the time of their initial issuance, the
notes should be treated as debt without substantial equity features for
purposes of the regulation. The debt characterization of the notes could change
after their initial issuance if the trust incurs losses.
However, without regard to whether the notes are treated as an equity
interest for these purposes, the acquisition or holding of the notes by or on
behalf of a benefit plan could be considered to give rise to a prohibited
transaction if we, the issuer, the owner trustee, the servicer, the
administrator or the indenture trustee, is or becomes a party in interest or a
disqualified person with respect to these benefit plans. In that case, various
exemptions from the prohibited transaction rules could be applicable depending
on the type and circumstances of the plan fiduciary making the decision to
acquire a note. Included among these exemptions are:
. Prohibited Transaction Class Exemption 96-23, regarding transactions
effected by "in-house asset managers";
. Prohibited Transaction Class Exemption 90-1, regarding investments by
insurance company pooled separate accounts;
. Prohibited Transaction Class Exemption 95-60, regarding transactions
effected by "insurance company general accounts";
. Prohibited Transaction Class Exemption 91-38, regarding investments by
bank collective investment funds; and
. Prohibited Transaction Class Exemption 84-14, regarding transactions
effected by "qualified professional asset managers."
By your acquisition of a note, you will be deemed to represent and warrant
that your purchase and holding of the note will not result in a non-exempt
prohibited transaction under ERISA or the Internal Revenue Code.
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Employee benefit plans that are governmental plans, as defined in Section
3(32) of ERISA, and certain church plans, as defined in Section 3(33) of ERISA,
are not subject to ERISA requirements, but may be subject to state or other
federal law requirements which may impose restrictions similar to those under
ERISA and the Internal Revenue Code discussed above.
If you are a plan fiduciary considering the purchase of any of the notes,
you should consult your tax and legal advisors regarding whether the assets of
the trust would be considered plan assets, the possibility of exemptive relief
from the prohibited transaction rules and other issues and their potential
consequences.
PLAN OF DISTRIBUTION
Subject to the terms and conditions set forth in an underwriting agreement
to be entered into with respect to each series of notes, we will cause the
notes to be sold by the issuer to each of the underwriters named in that
underwriting agreement and in the accompanying prospectus supplement, and each
of those underwriters will severally agree to purchase from the issuer, the
principal amount of notes set forth in that underwriting agreement and in the
accompanying prospectus supplement, subject to proportional adjustment on the
terms and conditions set forth in the related underwriting agreement in the
event of an increase or decrease in the aggregate amount of notes offered by
this prospectus and by the accompanying prospectus supplement.
In each underwriting agreement, the several underwriters will agree,
subject to the terms and conditions set forth in that underwriting agreement,
to purchase all the notes offered by this prospectus and by the accompanying
prospectus supplement if any of those notes are purchased. In the event of a
default by any underwriter, each underwriting agreement will provide that, in
specified circumstances, purchase commitments of the nondefaulting underwriters
may be increased or the underwriting agreement may be terminated.
Each prospectus supplement will set forth the price at which each series of
notes or class being offered initially will be offered to the public and any
concessions that may be offered to dealers participating in the offering of
those notes. After the initial public offering, the public offering price and
those concessions may be changed.
Each underwriting agreement will provide that we will indemnify the related
underwriters against specified liabilities, including liabilities under the
Securities Act of 1933, as amended.
The place and time of delivery for any series of notes in respect of which
this prospectus is delivered will be set forth in the accompanying prospectus
supplement.
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REPORTS TO NOTEHOLDERS
The servicer will prepare monthly and annual reports that will contain
information about the issuer. The financial information contained in the
reports will not be prepared in accordance with generally accepted accounting
principles. Unless and until definitive notes are issued, the reports will be
sent to Cede & Co. which is the nominee of The Depository Trust Company and the
registered holder of the notes. No financial reports will be sent to you. See
"Description of the Notes--Book-Entry Registration," "--Reports to Noteholders"
and "--Evidence as to Compliance" in this prospectus.
WHERE YOU CAN FIND MORE INFORMATION
We filed a registration statement relating to the notes with the SEC. This
prospectus is part of the registration statement, but the registration
statement includes additional information.
The servicer will file with the SEC all required annual, monthly and
special SEC reports and other information about the trust.
You may read and copy any reports, statements or other information we file
at the SEC's public reference room in Washington, D.C. You can request copies
of these documents, upon payment of a duplicating fee, by writing to the SEC.
Please call the SEC at (800) SEC-0330 for further information on the operation
of the public reference rooms. Our SEC filings are also available to the public
on the SEC Internet site (http://www.sec.gov.).
The SEC allows us to "incorporate by reference" information we file with
it, which means that we can disclose important information to you by referring
you to those documents. The information incorporated by reference is considered
to be part of this prospectus. Information that we file later with the SEC will
be filed under the name of Spiegel Credit Corporation III and will
automatically update the information in this prospectus. In all cases, you
should rely on the later information over different information included in
this prospectus or the accompanying prospectus supplement. We incorporate by
reference any future annual, monthly and special SEC reports and proxy
materials filed by or on behalf of the issuer and Spiegel Master Trust until we
terminate our offering of the notes.
As a recipient of this prospectus, you may request a copy of any document
we incorporate by reference, except exhibits to the documents--unless the
exhibits are specifically incorporated by reference--at no cost, by writing or
calling us at: Spiegel Credit Corporation III, 400 West 9th Street, Suite 101B,
Wilmington, Delaware, Telephone: (302) 429-7609.
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GLOSSARY OF TERMS FOR PROSPECTUS
"Aggregate Principal Balance" means, on any date, the sum of (a) the total
amount of principal receivables, (b) the amount on deposit in the excess
funding account, after excluding any investment earnings and (c) the amount of
principal collections on deposit in the collection account, after excluding
any investment earnings, in each case as of that date.
"Eligible Account" means an account:
. that is payable in United States dollars;
. the cardholder of which has provided, as his or her initial billing
address, an address located in the United States or its territories or
possessions;
. that the servicer has not finally determined to be counterfeit or
fraudulent;
. that does not have any receivables that have been charged off as
uncollectible by the servicer in accordance with its charge account
guidelines or its customary and usual servicing procedures;
. that was originated by the bank in the ordinary course of business,
unless each rating agency confirms that the designation of the account
would not impair its rating of any outstanding series or class of
securities;
. as to which we have good title, and which has not been sold or pledged
to any other party; and
. that does not have receivables that have been sold or pledged to any
other party other than us under the receivables purchase agreement.
"Eligible Institution" means:
(a) a depository institution, which may include the owner trustee or
the indenture trustee, that:
(i) is organized under the laws of the United States or any one of
its states,
(ii) has FDIC deposit insurance, and
(iii) has a long-term unsecured debt rating or a certificate of
deposit rating acceptable to the rating agencies; or
(b) any other institution acceptable to the rating agencies, which may
include the servicer.
"Eligible Receivable" means each receivable:
. that has arisen under an Eligible Account;
. that was created in compliance, in all material respects, with all
requirements of law applicable to the bank or Spiegel and under the
terms of a credit card agreement which complies in all material respects
with all requirements of law applicable to the bank;
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. for which all consents, licenses, approvals or authorizations of, or
registrations with, any governmental authority required to be obtained
or given by the bank or us in connection with the creation of the
receivable or the execution, delivery and performance by the bank of the
related credit card agreement have been duly obtained or given and are
in full force and effect as of the date of the creation of that
receivable;
. as to which, at the time of transfer to the trust, we have good title
free and clear of all liens and security interests arising under or
through the bank, us or our affiliates, other than any lien for
municipal or other local taxes if those taxes are not then due and
payable or if we are then contesting the validity of those taxes in good
faith by appropriate proceedings and we have set aside on our books
adequate reserves with respect to those taxes;
. that is the legal, valid and binding payment obligation of the related
cardholder, enforceable against that cardholder in accordance with its
terms, subject to permitted bankruptcy- and equity-related exceptions;
. that constitutes either an "account" or a "general intangible" or
"chattel paper" under Article 9 of the Uniform Commercial Code as in
effect in the State of Illinois;
. that, at the time of transfer to the trust, has not been waived or
modified except as permitted by the bank's charge account guidelines and
which waiver or modification has been reflected in the servicer's
computer files;
. that, at the time of transfer to the trust, is not, to our knowledge or
the servicer's knowledge, subject to any right of recission, setoff,
counterclaim or defense, including usury, that would require that
receivable to be charged off in accordance with the bank's charge
account guidelines, other than some bankruptcy- and equity-related
defenses;
. as to which we and the bank have satisfied all obligations required to
be satisfied at the time it is transferred to the trust;
. with respect to receivables transferred to the issuer after the
termination of Spiegel Master Trust, in which all of our right, title
and interest has been validly transferred and assigned to the issuer or
in which a valid first priority perfected security interest has been
granted to the issuer; and
. with respect to receivables transferred to the issuer after the
termination of Spiegel Master Trust, as to which, at the time of
transfer of that receivable to the issuer, we have not taken any action
that would impair the rights of the issuer or the noteholders.
"Minimum Aggregate Principal Balance" means, on any date of determination,
the greater of (a) the sum of the collateral amounts of all series outstanding
on the date of determination, plus the Minimum Seller Amount and (b) the sum of
the numerators used to calculate the allocation percentages for principal
collections for all outstanding series of securities on that date of
determination.
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"Minimum Seller Amount" will be calculated as follows:
(i) the weighted average times (ii) the aggregate of the
(by collateral and collateral and
investor amounts) of investor amounts of
the Minimum Seller all outstanding series
Percentages for all of securities
outstanding series of
securities
"Minimum Seller Percentage" means, for any series of securities, the
amount specified in the prospectus supplement for that series, or if not
specified in the related prospectus supplement, 0%.
"Qualified Account" means either:
(a) a non-interest bearing segregated account established with an
Eligible Institution; or
(b) a non-interest bearing segregated trust account with the corporate
trust department of a depository institution that:
(1) is organized under the laws of the United States or any one of
its states,
(2) acts as trustee for funds deposited in the account, and
(3) has a credit rating from each rating agency in one of its
generic credit rating categories that signifies investment grade.
"Seller Amount" means, on any date, the difference between:
(1) the Aggregate Principal Balance
minus
(2) the aggregate of the collateral amounts of all outstanding series
of notes and the outstanding investor amounts of all outstanding series of
investor certificates issued by Spiegel Master Trust other than the
collateral certificate.
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Annex I
GLOBAL CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES
Except in certain limited circumstances, the globally offered Spiegel
Credit Card Master Note Trust Asset Backed Notes (the "global securities") to
be issued in series from time to time will be available only in book-entry
form. Investors in the global securities may hold those global securities
through any of The Depository Trust Company, Clearstream or Euroclear. The
global securities will be tradable as home market instruments in both the
European and U.S. domestic markets. Initial settlement and all secondary trades
will settle in same-day funds.
Secondary market trading between investors holding global securities
through Clearstream and Euroclear will be conducted in the ordinary way in
accordance with their normal rules and operating procedures and in accordance
with conventional eurobond practice--i.e., seven calendar day settlement.
Secondary market trading between investors holding global securities
through DTC will be conducted according to the rules and procedures applicable
to U.S. corporate debt obligations.
Secondary cross-market trading between Clearstream or Euroclear and DTC
participants holding notes will be effected on a delivery-against-payment basis
through the respective depositaries of Clearstream and Euroclear, in that
capacity, and as DTC participants.
Non-U.S. holders of global securities will be subject to U.S. withholding
taxes unless those holders meet certain requirements and deliver appropriate
U.S. tax documents to the securities clearing organizations or their
participants.
Initial Settlement
All global securities will be held in book-entry form by DTC in the name of
Cede & Co. as nominee of DTC. Investors' interests in the global securities
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 participants through their respective
depositaries, which in turn will hold those positions in accounts as DTC
participants.
Investors electing to hold their global securities through DTC (other than
through accounts at Clearstream or Euroclear) will follow the settlement
practices applicable to U.S. corporate debt obligations. Investor securities
custody accounts will be credited with their holdings against payment in same-
day funds on the settlement date.
Investors electing to hold their global securities through Clearstream or
Euroclear accounts will follow the settlement procedures applicable to
conventional eurobonds in
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registered form. Global securities will be credited to the securities custody
accounts on the settlement date against payment for value on the settlement
date.
Secondary Market Trading
Because the purchaser determines the place of delivery, it is important to
establish at the time of the trade where both the purchaser's and seller's
accounts are located to ensure that settlement can be made on the desired value
date.
Trading between DTC Participants. Secondary market trading between DTC
participants--other than Citibank, N.A. and Morgan Guaranty Trust Company of
New York as depositaries for Clearstream and Euroclear, respectively--will be
settled using the procedures applicable to U.S. corporate debt obligations in
same-day funds.
Trading between Clearstream customers and/or Euroclear participants.
Secondary market trading between Clearstream customers or Euroclear
participants will be settled using the procedures applicable to conventional
eurobonds in same-day funds.
Trading between DTC seller and Clearstream customer or Euroclear purchaser.
When global securities are to be transferred from the account of a DTC
participant--other than Citibank and Morgan as depositaries for Clearstream and
Euroclear, respectively--to the account of a Clearstream customer or a
Euroclear participant, the purchaser must send instructions to Clearstream
prior to settlement date 12:30. Clearstream or Euroclear, as the case may be,
will instruct Citibank or Morgan, respectively, to receive the global
securities for payment. Payment will then be made by Citibank or Morgan, as the
case may be, to the DTC participant's account against delivery of the global
securities. After settlement has been completed, the global securities will be
credited to the respective clearing system and by the clearing system, in
accordance with its usual procedures, to the Clearstream customer's or
Euroclear participant's account. Credit for the global securities will appear
the next day (European time) and the cash debit will be back-valued to, and the
interest on the global 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 (i.e., the trade fails), the Clearstream
or Euroclear cash debit will be valued instead as of the actual settlement
date.
Clearstream customers and Euroclear participants will need to make
available to the respective clearing systems the funds necessary to process
same-day funds settlement. The most direct means of doing so is to pre-position
funds for settlement, either from cash on hand or existing lines of credit, as
they would for any settlement occurring within Clearstream or Euroclear. Under
this approach, they may take on credit exposure to Clearstream or Euroclear
until the global 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
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that credit line to be drawn upon the finance settlement. Under this procedure,
Clearstream customers or Euroclear participants purchasing global securities
would incur overdraft charges for one day, assuming they cleared the overdraft
when the global securities were credited to their accounts. However, interest
on the global securities would accrue from the value date. Therefore, in many
cases the investment income on the global securities earned during that one-day
period may substantially reduce or offset the amount of such 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 employ their usual procedures for sending global securities to
Citibank or Morgan for the benefit of Clearstream customers or Euroclear
participants. The sale proceeds will be available to the DTC seller on the
settlement date. Thus, to the DTC participant a cross-market transaction will
settle no differently from 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 employ their customary procedures for transactions in which
global securities are to be transferred by the respective clearing system,
through Citibank or Morgan, to another DTC participant. The seller will send
instructions to Clearstream before settlement date 12:30. In these cases,
Clearstream or Euroclear will instruct Citibank or Morgan, as appropriate, to
credit the global securities to the DTC participant's account against payment.
The payment will then be reflected in the account of the Clearstream customer
or Euroclear participant the following day, and receipt of the cash proceeds in
the Clearstream customer's or Euroclear participant's account would be back-
valued to the value date, which would be the preceding day, when settlement
occurred in New York. If the Clearstream customer or Euroclear participant has
a line of credit with its respective clearing system and elects to draw on such
line of credit in anticipation of receipt of the sale proceeds in its account,
the back-valuation may substantially reduce or offset any overdraft charges
incurred over that one-day period. If settlement is not completed on the
intended value date (i.e., the trade fails), receipt of the cash proceeds in
the Clearstream customer's or Euroclear participant's account would instead be
valued as of the actual settlement date.
Certain U.S. Federal Income Tax Documentation Requirements
A beneficial owner of global securities holding securities through
Clearstream, Euroclear or through DTC--if the holder has an address outside the
U.S.--will be subject to the 30% U.S. withholding tax that generally applies to
payments of interest including original issue discount on registered debt
issued by U.S. Persons, unless, under currently applicable law, (i) each
clearing system, bank or other financial institution that holds customers'
securities in the ordinary course of its trade or business in the chain of
intermediaries between the beneficial owner and the U.S. entity required to
withhold tax complies with applicable certification requirements and (ii) the
beneficial owner takes one of the following steps to obtain an exemption or
reduced tax rate:
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Exception for non-U.S. Persons (Form W-8 or new Form W-8BEN). Beneficial
owners of notes that are non-U.S. Persons generally can obtain a complete
exemption from the withholding tax by filing a signed Form W-8--Certificate of
Foreign Status. If the information shown on Form W-8 changes, a new Form W-8
must be filed within 30 days of the change.
Exemption for non-U.S. Persons with effectively connected income (Form 4224
or new Form W-8ECI). A non-U.S. Person, including a non-U.S. corporation or
bank with a U.S. branch, for which the interest income is effectively connected
with its conduct of a trade or business in the United States, can obtain an
exemption from the withholding tax by filing Form 4224--Exemption from
Withholding of Tax on Income Effectively Connected with the Conduct of a Trade
or Business in the United States.
Exemption or reduced rate for non-U.S. Persons resident in treaty countries
(Form 1001 or new Form W-8BEN). Non-U.S. Persons that are note owners residing
in a country that has a tax treaty with the United States can obtain an
exemption or reduced tax rate depending on the treaty terms by filing Form
1001--Ownership, Exemption or Reduced Rate Certificate. If the treaty provides
only for a reduced rate, withholding tax will be imposed at that rate unless
the filer alternatively files Form W-8. Form 1001 may be filed by the note
owner or his agent.
Exemption for U.S. Persons (Form W-9). U.S. Persons can obtain a complete
exemption from the withholding tax by filing Form W-9--Payer's Request for
Taxpayer Identification Number and Certification).
U.S. Federal Income Tax Reporting Procedure. The note owner of a global
security or, in the case of a Form 1001 or a Form 4224 filer, his agent, files
by submitting the appropriate form to the person through whom it holds. This is
the clearing agency, in the case of persons holding directly on the books of
the clearing agency. Form W-8 and Form 1001 are effective for three calendar
years and Form 4224 is effective for one calendar year.
A new Form W-8BEN, if furnished with a taxpayer identification number, will
remain in effect until the status of the beneficial owner changes, or a change
in circumstances makes any information on the form incorrect. A new Form W-
8BEN, if furnished without a taxpayer identification number, and a new Form
W-8ECI will remain in effect for a period starting on the date the form is
signed and ending on the last day of the third succeeding calender year, unless
a change in circumstances makes any information on the form incorrect.
The term "U.S. Person" means (i) a citizen or resident of the United
States, (ii) a corporation or partnership organized in or under the laws of the
United States, any state thereof, or any political subdivision of either
(including the District of Columbia), or (iii) an estate or trust the income of
which is includible in gross income for United States tax purposes regardless
of its source. This summary does not deal with all aspects of U.S. Federal
income tax withholding that may be relevant to foreign holders of the global
securities. We suggest that investors consult their own tax advisors for
specific tax advice
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concerning their holding and disposing of the global securities. Further, the
U.S. Treasury Department recently finalized new regulations that revise some
aspects of the current system for withholding on amounts paid to foreign
persons, including the substitution of Form W-8BEN in place of Form W-8. Under
these regulations, interest or original issue discount paid to a nonresident
alien would continue to be exempt from U.S. withholding taxes, including backup
withholding, provided that the holder complies with the new certification
procedures.
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Spiegel Credit Card Master Note Trust
Issuer
Spiegel Credit Corporation III
Seller
First Consumers National Bank
Servicer
$600,000,000
Series 2000-A Asset Backed Notes
----------------
PROSPECTUS SUPPLEMENT
----------------
Underwriters of the Notes
Banc of America Securities LLC
Deutsche Banc Alex. Brown
J.P. Morgan & Co.
ABN AMRO Incorporated
HSBC
You should rely only on the information contained or incorporated by
reference in this prospectus supplement and the accompanying prospectus. We
have not authorized anyone to provide you with different information.
We are not offering the notes in any state where the offer is not
permitted.
We do not claim the accuracy of the information in this prospectus
supplement and the accompanying prospectus as of any date other than the dates
stated on their respective covers.
Dealers will deliver a prospectus supplement and prospectus when acting as
underwriters of the notes and with respect to their unsold allotments or
subscriptions. In addition, all dealers selling the notes will deliver a
prospectus supplement and prospectus until March 8, 2001.
