<PAGE>
EXHIBIT 4.2
SPIEGEL CREDIT CARD MASTER NOTE TRUST
Issuer
and
THE BANK OF NEW YORK
Indenture Trustee
SERIES 2000-A INDENTURE SUPPLEMENT
Dated as of December 1, 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I Creation of the Series 2000-A Notes................................................ 1
Section 1.1 Designation......................................................... 1
ARTICLE II Definitions........................................................................ 2
Section 2.1 Definitions......................................................... 2
ARTICLE III Servicing Fee...................................................................... 12
Section 3.1 Servicing Compensation.............................................. 12
ARTICLE IV Rights of Series 2000-A Noteholdersand Allocation and
Application of Collections......................................................... 13
Section 4.1 Collections and Allocations......................................... 13
Section 4.2 Determination of Monthly Interest................................... 15
Section 4.3 Determination of Monthly Principal.................................. 16
Section 4.4 Application of Available Finance Charge
Collections and Available Principal Collections..................... 16
Section 4.5 Investor Charge-Offs................................................ 19
Section 4.6 Reallocated Principal Collections................................... 19
Section 4.7 Excess Finance Charge Collections................................... 19
Section 4.8 Shared Principal Collections........................................ 20
Section 4.9 Principal Accumulation Account...................................... 20
Section 4.10 Reserve Account..................................................... 22
Section 4.11 [Reserved].......................................................... 24
Section 4.12 Determination of LIBOR.............................................. 24
Section 4.13 Investment Instructions............................................. 25
Section 4.14 Controlled Accumulation Period...................................... 25
Section 4.15 Suspension of Controlled Accumulation Period........................ 25
Section 4.16 Insurance Policies.................................................. 27
Section 4.17 Swap................................................................ 28
ARTICLE V Delivery of Series 2000-A Notes; Distributions; Reports to
Series 2000-A Noteholders.......................................................... 28
Section 5.1 Delivery and Payment for the Series 2000-A Notes.................... 28
Section 5.2 Distributions....................................................... 29
Section 5.3 Reports and Statements to Series 2000-A Noteholders................. 29
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
ARTICLE VI Series 2000-A Pay Out Events and Events of Default................................... 30
Section 6.1 Series 2000-A Pay Out Events........................................ 30
Section 6.2 Series 2000-A Events of Default..................................... 32
Section 6.3 Declarations of Default............................................. 33
ARTICLE VII Redemption of Series 2000-A Notes; Final Distributions;
Series Termination................................................................... 33
Section 7.1 Optional Redemption of Series 2000-A Notes; Final Distributions..... 33
Section 7.2 Series Termination.................................................. 34
ARTICLE VIII Miscellaneous Provisions............................................................. 34
Section 8.1 Ratification of Indenture; Amendments............................... 34
Section 8.2 Form of Delivery of the Series 2000-A Notes......................... 35
Section 8.3 Counterparts........................................................ 35
Section 8.4 GOVERNING LAW....................................................... 35
Section 8.5 Limitation of Liability............................................. 35
Section 8.6 Rights of the Indenture Trustee..................................... 35
Section 8.7 Third Party Beneficiary............................................. 35
</TABLE>
ii
<PAGE>
EXHIBITS
EXHIBIT A FORM OF CLASS A NOTE
EXHIBIT B FORM OF MONTHLY PAYMENT INSTRUCTIONS AND NOTIFICATION TO THE
INDENTURE TRUSTEE
EXHIBIT C FORM OF MONTHLY STATEMENT
EXHIBIT D FORM OF MONTHLY SERVICER'S CERTIFICATE
EXHIBIT E FORM OF SWAP
EXHIBIT F INSURANCE AGREEMENT DEFINITIONS
EXHIBIT G SECTION 2.05 OF INSURANCE AGREEMENT (SPREAD ACCOUNT)
EXHIBIT H SECTION 5.01 OF INSURANCE AGREEMENT (INSURANCE AGREEMENT PAY OUT
EVENTS)
iii
<PAGE>
SERIES 2000-A INDENTURE SUPPLEMENT, dated as of December 1, 2000 (the
"Indenture Supplement"), between SPIEGEL CREDIT CARD MASTER NOTE TRUST, a
--------------------
trust organized and existing under the laws of the State of Illinois
(herein, the "Issuer" or the "Trust"), and THE BANK OF NEW YORK, a banking
------ -----
corporation organized and existing under the laws of the State of New York,
not in its individual capacity, but solely as indenture trustee (herein,
together with its successors in the trusts thereunder as provided in the
Master Indenture referred to below, the "Indenture Trustee") under the
-----------------
Master Indenture, dated as of December 1, 2000 (the "Indenture") between
---------
the Issuer and the Indenture Trustee (the Indenture, together with this
Indenture Supplement, the "Agreement").
---------
Pursuant to Section 2.12 of the Indenture, the Seller may direct the
------------
Issuer to issue one or more Series of Notes. The Principal Terms of this
Series are set forth in this Indenture Supplement to the Indenture.
ARTICLE I
Creation of the Series 2000-A Notes
-----------------------------------
Section 1.1ab Designation.
-----------
(a) There is hereby created and designated a Series of Notes to be
issued pursuant to the Indenture and this Indenture Supplement to be known
as "Spiegel Credit Card Master Note Trust, Series 2000-A" or the "Series
---------------------------------------------------- ------
2000-A Notes." The Series 2000-A Notes shall be issued in a single Class,
------------
known as the "Class A Series 2000-A Floating Rate Asset Backed Notes."
------------------------------------------------------
(b) Series 2000-A shall be included in Group One and shall be a
Principal Sharing Series. Series 2000-A shall be an Excess Allocation
Series with respect to Group One only. Series 2000-A shall not be
subordinated to any other Series.
(c) If any term or provision contained herein shall conflict with or
be inconsistent with any term or provision contained in the Indenture, the
terms and provisions of this Indenture Supplement shall be controlling. All
capitalized terms not otherwise defined herein are defined in the
Indenture. The definitions of all capitalized terms defined herein by
reference to the respective definitions of those terms in the Insurance
Agreement can be found in Exhibit F. Each capitalized term defined herein
---------
shall relate only to the Series 2000-A Notes and no other Series of Notes
issued by the Issuer.
1
<PAGE>
ARTICLE II
Definitions
-----------
Section 2.1ab Definitions.
-----------
(a) Whenever used in this Indenture Supplement, the following words
and phrases shall have the following meanings, and the definitions of such
terms are applicable to the singular as well as the plural forms of such
terms and the masculine as well as the feminine and neuter genders of such
terms.
"Accumulation Period Factor" means, for any Monthly Period, a
--------------------------
fraction, the numerator of which is equal to the sum of the Initial
Collateral Amounts of all outstanding Series, and the denominator of which
is equal to the sum of (a) the Initial Collateral Amount, (b) the Initial
Collateral Amounts of all outstanding Series (other than Series 2000-A)
which are not expected to be in their revolving periods, and (c) the
Initial Collateral Amounts of all other outstanding Series which are not
allocating Shared Principal Collections to other Series and are in their
revolving periods; provided, however, that this definition may be changed
-------- -------
at anytime if the Rating Agency Condition is satisfied.
"Accumulation Period Length" is defined in subsection 4.14.
-------------------------- ---------------
"Accumulation Shortfall" means: (a) for the first Monthly Period
----------------------
during the Controlled Accumulation Period, zero; and (b) thereafter, for
any Monthly Period during the Controlled Accumulation Period, the excess,
if any, of the Controlled Deposit Amount for the previous Monthly Period
over the amount deposited into the Principal Accumulation Account pursuant
to subsection 4.4(c)(i) for the previous Monthly Period.
--------------------
"Additional Excess Interest" is defined in Section 4.2.
-------------------------- -----------
"Additional Interest" is defined in Section 4.2.
------------------- -----------
"Allocation Percentage" means, on any date of determination, the
---------------------
percentage equivalent of a fraction:
(a) the numerator of which shall be the Collateral Amount,
determined:
(i) for Principal Collections during the Revolving Period
and for Finance Charge Collections and Default Amounts at any
time, at the end of the last day of the prior Monthly Period (or,
in the case of the monthly Period in which the Closing Date
occurs, on the Closing Date); provided, however, that if the
-------- -------
Rapid Amortization Period is extended past the Series 2000-A
Final Maturity Date as a result of there being amounts owed to
the Insurer or the Counterparty, then
2
<PAGE>
during that extended period the numerator for Finance Charge
Collections and Default Amounts shall equal the numerator in
effect for the last Monthly Period prior to the Series 2000-A
Final Maturity Date;
(ii) for Principal Collections during the Rapid Amortization
Period and the Controlled Accumulation Period, on the last day of
the Revolving Period; provided, however, that if Series 2000-A is
-------- -------
paired with a Paired Series and a Rapid Amortization Period
commences for such Paired Series, the Seller may, by written
notice to the Indenture Trustee, the Servicer and the Rating
Agency, but only after satisfying the Rating Agency Condition,
designate a different numerator for such fraction, which
numerator shall not be less than the Collateral Amount as of the
last day of the Revolving Period for the Paired Series; and
(b) denominator of which shall be the greater of (x) the
Aggregate Principal Balance at the end of the Business Day preceding
such date of determination and (y) the sum of the numerators used to
calculate the Allocation Percentages for allocations with respect to
Finance Charge Collections, Principal Collections or Default Amounts,
as applicable, for all outstanding Series on such date of
determination.
"Available Finance Charge Collections" means, for any Monthly Period,
------------------------------------
an amount equal to the sum of (a) the Investor Finance Charge Collections
for such Monthly Period, plus (b) any Net Swap Receipt for the related
Distribution Date, plus (c) the Excess Finance Charge Collections allocated
to Series 2000-A for such Monthly Period, plus (d) Principal Accumulation
Investment Proceeds, if any, with respect to the related Distribution Date,
plus (e) amounts, if any, to be withdrawn from the Reserve Account which
will be deposited into the Collection Account on the related Distribution
Date to be treated as Available Finance Charge Collections pursuant to
subsection 4.10(d).
-----------------
"Available Principal Collections" means, for any Monthly Period, an
-------------------------------
amount equal to the sum of (a) the Investor Principal Collections for such
Monthly Period minus (b) the amount of Reallocated Principal Collections
with respect to such Monthly Period which pursuant to Section 4.6 are
-----------
required to be applied on the related Distribution Date, plus (c) any
Shared Principal Collections with respect to other Principal Sharing Series
(including any amounts on deposit in the Excess Funding Account that are
allocated to Series 2000-A pursuant to the Agreement for application as
Shared Principal Collections), plus (d) the aggregate amount to be treated
as Available Principal Collections pursuant to subsections 4.4(a)(iii),
-----------------------
(iv) and (viii) for the related Distribution Date.
---- ------
"Available Reserve Account Amount" means, for any Distribution Date,
--------------------------------
the lesser of (a) the amount on deposit in the Reserve Account on such date
(after taking
3
<PAGE>
into account any interest and earnings retained in the Reserve Account
pursuant to subsection 4.10(b) on such date, but before giving effect to
------------------
any deposit made or to be made pursuant to subsection 4.4(a)(vi) to the
---------------------
Reserve Account on such date) and (b) the Required Reserve Account Amount.
"Available Spread Account Amount" is defined in the Insurance
-------------------------------
Agreement.
"Base Rate" is defined in the Insurance Agreement.
---------
"Class A Noteholder" means the Person in whose name a Class A Note is
------------------
registered in the Note Register.
"Class A Notes" means any one of the Notes executed by the Issuer and
-------------
authenticated by or on behalf of the Indenture Trustee, substantially in
the form of Exhibit A.
---------
"Closing Date" means December 19, 2000.
------------
"Collateral Amount" means, as of any date of determination, an amount
-----------------
equal to the result of (a) the Initial Collateral Amount, minus (b) the
amount of principal previously paid to the Series 2000-A Noteholders, minus
(c) the balance on deposit in the Principal Accumulation Account, minus (d)
the aggregate reductions to the Collateral Amount made pursuant to Section
-------
4.4(c) on or prior to such date of determination, minus (e) the excess, if
------
any, of the aggregate amount of Investor Charge-Offs and Reallocated
Principal Collections over the reimbursements of such amounts pursuant to
subsection 4.4(a)(iv) prior to such date.
---------------------
"Control Transfer Event" means either of the following events: (a) the
----------------------
Insurer shall fail to timely make any payment required to be made by it
pursuant to any Policy or otherwise default in any of its obligations under
the Insurance Agreement; or (b) the Insurer shall (i) become insolvent,
(ii) fail to pay its debts generally as they become due, (iii) voluntarily
seek, consent to, or acquiesce in the benefit or benefits of any Debtor
Relief Law, or (iv) become a party to (or be made the subject of) any
proceeding provided for by any Debtor Relief Law, other than as a creditor
or claimant, and, in the event such proceeding is involuntary, the petition
instituting same is not dismissed within 60 days after its filing.
"Controlled Accumulation Amount" means, for any Distribution Date with
------------------------------
respect to the Controlled Accumulation Period, $50,000,000; provided,
--------
however, that if the Accumulation Period Length is determined to be less
-------
than 12 months pursuant to Section 4.14 or 4.15, the Controlled
------------ ----
Accumulation Amount for each Distribution Date with respect to the
Controlled Accumulation Period will be equal to (i) the product of (x) the
aggregate initial principal amount of the Series 2000-A Notes and (y) the
Accumulation Period Factor for such Monthly Period divided by (ii) the
Required Accumulation Factor Number.
4
<PAGE>
"Controlled Accumulation Period" means, unless a Pay Out Event shall
------------------------------
have occurred prior thereto, the period commencing at the opening of
business on November 1, 2004 or such later date as is determined in
accordance with Section 4.14 and 4.15, and ending on the first to occur of
------------ ----
(a) the commencement of the Rapid Amortization Period, (b) the payment in
full of the Note Principal Balance and (c) the Series 2000-A Final Maturity
Date.
"Controlled Deposit Amount" means, for any Distribution Date with
-------------------------
respect to the Controlled Accumulation Period, an amount equal to the sum
of the Controlled Accumulation Amount for such Distribution Date and any
existing Accumulation Shortfall.
"Counterparty" means Bank of America, N.A. or the counterparty under
------------
any replacement interest rate swap obtained pursuant to Section 4.17.
------------
"Covered Amount" means an amount, determined as of each Distribution
--------------
Date for any Interest Period, equal to the sum of (a) the product of (i) a
fraction, the numerator of which is the actual number of days in such
Interest Period and the denominator of which is 360, times (ii) the Note
Interest Rate in effect with respect to such Interest Period, times (iii)
the aggregate amount on deposit in the Principal Accumulation Account as of
the Record Date preceding such Distribution Date.
"Default Amount Rate" is defined in the Insurance Agreement.
-------------------
"Default Estimate" means, for any Monthly Period, an amount equal to
----------------
the product of (i) 1.5, multiplied by (ii) the arithmetic mean of the
Investor Default Amounts for the prior three Monthly Periods. For this
purpose, the October, November and December 2000 Investor Default Amounts
shall be deemed to have equaled $6,500,000.
"Deficiency Amount" means (a) for any Distribution Date other than the
-----------------
Series 2000-A Final Maturity Date, the excess of the amounts payable
pursuant to Sections 4.4(a)(i) and (ii) for such Distribution Date over the
------------------ ----
Available Finance Charge Collections, Reallocated Principal Collections and
Available Spread Account Amount that are available to cover such amounts,
and (b) for the Series 2000-A Final Maturity Date, the sum of (i) the
amount determined pursuant to clause (a) for the Series 2000-A Final
----------
Maturity Date and (ii) the excess of the Note Principal Balance over the
Available Principal Collections and Available Spread Account Amount that
are available to cover such amount.
"Distribution Date" means January 16, 2001 and the 15th day of each
-----------------
calendar month thereafter, or if such 15th day is not a Business Day, the
next succeeding Business Day.
"Enhancement Provider" means each of the Insurer and the Counterparty.
--------------------
5
<PAGE>
"Excess Collateral Amount" means, at any time, the result of the
------------------------
Collateral Amount, plus the Principal Accumulation Account Balance, minus
the Note Principal Balance.
"Excess Interest" means, for any Distribution Date falling after the
---------------
Expected Principal Distribution Date, the excess if any of (a) the amount
of Monthly Interest that would have been payable on that Distribution Date
if not for the proviso to the definition of "Note Interest Rate" over (b)
the amount of Monthly Interest actually payable on that Distribution Date.
"Excess Interest Shortfall" is defined in Section 4.2.
------------------------- -----------
"Excess Spread Percentage" is defined in the Insurance Agreement.
------------------------
"Expected Principal Distribution Date" means the November 2005
------------------------------------
Distribution Date.
"Finance Charge Shortfall" is defined in Section 4.7.
------------------------ -----------
"Group One" means Series 2000-A, the outstanding Series under the
---------
Pooling and Servicing Agreement (other than Series represented by the
Collateral Certificate) and each other Series hereafter specified in the
related Indenture Supplement to be included in Group One.
"Initial Collateral Amount" means the sum of (a) $670,400,000, which
-------------------------
equals the sum of (i) the initial principal amount of the Series 2000-A
Notes plus (ii) the Initial Excess Collateral Amount (excluding the
Supplemental Enhancement), plus (b) the Supplemental Enhancement.
"Initial Excess Collateral Amount" means, at any time, the sum of (a)
--------------------------------
$70,400,000, plus (b) the Supplemental Enhancement.
"Insurance Agreement" means the Insurance and Reimbursement Agreement
-------------------
dated as of the Closing Date between the Seller, the Servicer, Spiegel,
Spiegel Acceptance Corporation, the Issuer, the Indenture Trustee and the
Insurer.
"Insured Obligation" means, with respect to any Policy, the "Insured
------------------
Obligation" as defined in such Policy.
"Insurer" means MBIA Insurance Corporation, a New York stock insurance
-------
corporation.
"Interest Period" means, for any Distribution Date, the period from
---------------
and including the Distribution Date immediately preceding such Distribution
Date (or, in the case of the first Distribution Date, from and including
the Closing Date) to but excluding such Distribution Date.
6
<PAGE>
"Interest Shortfall" is defined in Section 4.2.
------------------ -----------
"Investor Charge-Offs" is defined in Section 4.5.
-------------------- -----------
"Investor Default Amount" means, for any Distribution Date, an amount equal
-----------------------
to the product of (a) the Default Amount for the related Monthly Period and (b)
the Floating Allocation Percentage for such Monthly Period.
"Investor Finance Charge Collections" means, for any Monthly Period, an
-----------------------------------
amount equal to the aggregate amount of Finance Charge Collections (including
Net Recoveries treated as Finance Charge Collections) retained or deposited in
the Finance Charge Subaccount for Series 2000-A pursuant to subsection 4.1(b)(i)
--------------------
for such Monthly Period.
"Investor Percentage" means, for any Monthly Period, the Allocation
-------------------
Percentage.
"Investor Principal Collections" means, for any Monthly Period, the
------------------------------
aggregate amount of Principal Collections retained or deposited in the Principal
Collections Subaccount for Series 2000-A pursuant to subsection 4.1(b)(ii) for
---------------------
such Monthly Period.
"Investor Uncovered Dilution Amount" means, for any Distribution Date, an
----------------------------------
amount equal to the Series Share of shortfalls in Deposit Obligations that is
allocated to Series 2000-A pursuant to Section 8.4(h) of the Indenture.
--------------
"LIBOR" means, for any Interest Period, the London interbank offered rate
-----
for one-month United States dollar deposits determined by the Indenture Trustee
for each Interest Period in accordance with the provisions of Section 4.12.
------------
"LIBOR Determination Date" means the second London Banking Day prior to the
------------------------
commencement of each Interest Period.
"London Banking Day" means any day on which commercial banks are open for
------------------
general business (including dealings in foreign exchange and foreign currency
deposits) in London, England.
"Minimum Seller Percentage" means zero for Series 2000-A.
-------------------------
"Monthly Insurance Premium" means the Premium (as defined in the Premium
-------------------------
and Fee Letter) for any Monthly Period.
"Monthly Interest" is defined in Section 4.2.
---------------- -----------
"Monthly Principal" means the monthly principal distributable in respect of
-----------------
the Notes as calculated in accordance with Section 4.3.
-----------
7
<PAGE>
"Monthly Principal Reallocation Amount" means, for any Monthly Period, an
-------------------------------------
amount equal to the lower of:
(a) the Required Amount; and
(b) the Excess Collateral Amount (after giving effect to Investor
Charge-Offs for the related Monthly Period).
"Monthly Servicing Fee" is defined in subsection 3.1(a).
--------------------- -----------------
"Net Interest Obligation" means, for any Distribution Date: (a) if there is
-----------------------
a Net Swap Payment due on that Distribution Date, the sum of the Net Swap
Payment and the Monthly Interest for that Distribution Date; (b) if there is a
Net Swap Receipt due on that Distribution Date, the result of the Monthly
Interest for that Distribution Date minus the Net Swap Receipt; and (c) if the
Swap has terminated for any reason, the Monthly Interest for that Distribution
Date.
"Net Swap Payment" means any net amount payable by the Issuer under the
----------------
Swap as a result of LIBOR being less than the Swap Rate. For the avoidance of
doubt, (i) Net Swap Payments do not include early termination payments or
payment of breakage or other miscellaneous costs, and (ii) for any Distribution
Date, the Monthly Interest, less the Net Swap Receipt, if any, plus, the Net
Swap Payment , if any, will never exceed what Monthly Interest would have been
if the Note Interest Rate were 6.51%.
"Net Swap Receipt" means any net amount payable by the Counterparty as a
----------------
result of LIBOR being greater than the Swap Rate. For the avoidance of doubt,
Net Swap Receipts do not include early termination payments.
"Note Initial Principal Balance" means $600,000,000.
------------------------------
"Note Interest Rate" means a per annum rate of 0.30% in excess of LIBOR as
------------------
determined on the LIBOR Determination Date for the applicable Interest Period;
provided that for each Interest Period commencing after the Expected Principal
--------
Distribution Date, the Note Interest Rate shall equal the lesser of (a) the
amount described above and (b) 7.5% per annum.
"Note Principal Balance" means, on any date of determination, an amount
----------------------
equal to (a) the Note Initial Principal Balance, minus (b) the aggregate amount
of principal payments made to the Class A Noteholders on or prior to such date.
"Percentage Allocation" is defined in subsection 4.1(b)(ii)(y).
--------------------- ------------------------
"Policy" means the Financial Guaranty Insurance Policy No. 33927(1) or the
------
Financial Guaranty Insurance Policy No. 33927(2), each issued by MBIA Insurance
Corporation pursuant to the Insurance Agreement, and, collectively, referred to
herein as the "Policies."
8
<PAGE>
"Portfolio Adjusted Yield" means, for any Distribution Date, the average of
------------------------
the percentages obtained for each of the three preceding Monthly Periods by
subtracting the Base Rate and the Default Amount Rate for each such Monthly
Period from the Portfolio Yield for each such Monthly Period.
"Portfolio Yield" is defined in the Insurance Agreement.
---------------
"Premium and Fee Letter" is defined in the Insurance Agreement.
----------------------
"Principal Accumulation Account" shall have the meaning set forth in
------------------------------
subsection 4.9(a).
-----------------
"Principal Accumulation Account Balance" means, for any date of
--------------------------------------
determination, the principal amount, if any, on deposit in the Principal
Accumulation Account on such date of determination.
"Principal Accumulation Investment Proceeds" means, with respect to each
------------------------------------------
Distribution Date, the investment earnings on funds in the Principal
Accumulation Account (net of investment expenses and losses) for the period from
and including the immediately preceding Distribution Date to but excluding such
Distribution Date.
"Principal Shortfall" is defined in subsection 4.8(a).
------------------- -----------------
"Qualified Maturity Agreement" means an agreement, meeting the requirements
----------------------------
described in the definition of "Qualified Maturity Agreement" set forth in the
Policies, whereby an Eligible Institution agrees to make a deposit into the
Principal Accumulation Account on the Expected Principal Distribution Date in an
amount equal to the Note Principal Balance on such date; provided that for
purposes of this definition, references in the definition of "Eligible
Institution" to ratings of "A-1+" and "AAA" by Standard & Poor's shall be
modified to require ratings of "A-1" and "A+" from Standard & Poor's.
"Rapid Amortization Period" means the period commencing on the Business Day
-------------------------
immediately preceding the day on which a Pay Out Event with respect to Series
2000-A is deemed to have occurred, and ending on the first to occur of (i) the
payment in full of the Collateral Amount and (ii) the Series 2000-A Final
Maturity Date; provided, that if any amounts are owing to the Insurer under the
--------
Insurance Agreement or the Counterparty under the Swap at the Series 2000-A
Final Maturity Date, the Rapid Amortization Period shall continue, solely for
purposes of repaying such amounts, but in no event shall the Rapid Amortization
Period continue after the earliest of (x) the date on which no further amounts
are owed to the Insurer under the Insurance Agreement and the Counterparty under
the Swap, (y) the November 2010 Distribution Date and (z) the date on which the
Collateral Amount has been reduced to zero.
"Rating Agency" means each of Fitch, Moody's and Standard & Poor's.
-------------
9
<PAGE>
"Rating Agency Condition" means, with respect to Series 2000-A, the Rating
-----------------------
Agency Condition, as defined in the Insurance Agreement.
"Reallocated Principal Collections" means, for any Distribution Date,
---------------------------------
Investor Principal Collections applied in accordance with Section 4.6 in an
-----------
amount not to exceed the Monthly Principal Reallocation Amount for the related
Monthly Period.
"Reassignment Amount" means, for any Distribution Date, after giving effect
-------------------
to any deposits and distributions otherwise to be made on such Distribution
Date, the sum of (i) the outstanding principal balance of the Series 2000-A
Notes on such Distribution Date, plus (ii) Monthly Interest for such
Distribution Date and any Monthly Interest previously due but not distributed to
the Series 2000-A Noteholders, plus (iii) the amount of Additional Interest, if
any, for such Distribution Date and any Additional Interest previously due but
not distributed to the Series 2000-A Noteholders on a prior Distribution Date.
"Reference Banks" means four major banks in the London interbank market
---------------
selected by the Servicer or the Counterparty as calculation agent under the
Swap.
"Reimbursement Amounts" is defined in the Insurance Agreement.
---------------------
"Required Accumulation Factor Number" shall be equal to a fraction, rounded
-----------------------------------
upwards to the nearest whole number, the numerator of which is one and the
denominator of which is equal to the lowest monthly principal payment rate on
the Accounts, expressed as a decimal, for the 12 months preceding the date of
such calculation; provided, however, that this definition may be changed at any
-------- -------
time if the Rating Agency Condition is satisfied.
"Required Amount" is defined in the Insurance Agreement.
---------------
"Required Excess Collateral Amount" is defined in the Insurance Agreement.
---------------------------------
"Required Reserve Account Amount" means, for any Distribution Date on or
-------------------------------
after the Reserve Account Funding Date, an amount equal to (a) 0.5% of the Note
Principal Balance or (b) any other amount designated by the Seller; provided,
--------
however, that if such designation is of a lesser amount, the Seller shall (i)
-------
provide the Servicer and the Indenture Trustee with evidence that the Rating
Agency Condition shall have been satisfied and (ii) deliver to the Indenture
Trustee a certificate of an Authorized Officer to the effect that, based on the
facts known to such officer at such time, in the reasonable belief of the
Seller, such designation will not cause a Pay Out Event or an event that, after
the giving of notice or the lapse of time, would cause a Pay Out Event to occur
with respect to Series 2000-A.
"Reserve Account" is defined in subsection 4.10(a).
--------------- ------------------
10
<PAGE>
"Reserve Account Funding Date" means the Distribution Date designated by
----------------------------
the Servicer which occurs not later than the earliest of (a) the Distribution
Date with respect to the Monthly Period which commences 3 months prior to the
commencement of the Controlled Accumulation Period; (b) the first Distribution
Date for which the Portfolio Adjusted Yield is less than 2%, but in such event
the Reserve Account Funding Date shall not be required to occur earlier than the
Distribution Date with respect to the Monthly Period which commences 12 months
prior to the commencement of the Controlled Accumulation Period; (c) the first
Distribution Date for which the Portfolio Adjusted Yield is less than 3%, but in
such event the Reserve Account Funding Date shall not be required to occur
earlier than the Distribution Date with respect to the Monthly Period which
commences 6 months prior to the commencement of the Controlled Accumulation
Period; and (d) the first Distribution Date for which the Portfolio Adjusted
Yield is less than 4%, but in such event the Reserve Account Funding Date shall
not be required to occur earlier than the Distribution Date with respect to the
Monthly Period which commences 4 months prior to the commencement of the
Controlled Accumulation Period.
"Reserve Account Surplus" means, as of any Distribution Date following the
-----------------------
Reserve Account Funding Date, the amount, if any, by which the amount on deposit
in the Reserve Account exceeds the Required Reserve Account Amount.
"Reserve Draw Amount" means, with respect to each Distribution Date
-------------------
relating to the Controlled Accumulation Period or the first Distribution Date
relating to the Rapid Amortization Period, the amount, if any, by which the
Principal Accumulation Investment Proceeds for such Distribution Date are less
than the Covered Amount determined as of such Distribution Date.
"Revolving Period" means the period beginning on the Closing Date and
----------------
ending on the earlier of the close of business on the day immediately preceding
the day the Controlled Accumulation Period commences or the Rapid Amortization
Period commences.
"Series 2000-A" means the Series of Notes the terms of which are specified
-------------
in this Indenture Supplement.
"Series 2000-A Final Maturity Date" means the earlier to occur of (a) the
---------------------------------
Distribution Date on which the Note Principal Balance is paid in full and (b)
the November 2010 Distribution Date.
"Series 2000-A Note" means a Class A Note.
------------------
"Series 2000-A Noteholder" means a Class A Noteholder.
------------------------
"Series 2000-A Pay Out Event" is defined in Section 6.1.
--------------------------- -----------
"Series Servicing Fee Percentage" means 2% per annum.
-------------------------------
11
<PAGE>
"Spread Account" means the segregated trust account required to be
--------------
established pursuant to Section 2.05 of the Insurance Agreement, which section
is set forth in its entirety in Exhibit G.
---------
"Supplemental Enhancement" is defined in the Insurance Agreement.
------------------------
"Surplus Collateral Amount" means, at any time, the excess, if any, of the
-------------------------
Excess Collateral Amount over the sum of the Required Excess Collateral Amount
and the Supplemental Enhancement.
"Swap" means an interest rate swap agreement between the Owner Trustee, on
----
behalf of the Trust, and the Counterparty substantially in the form of Exhibit E
---------
to this Indenture Supplement, or such other form as shall have satisfied the
Rating Agency Condition.
"Swap Rate" means 6.21% per annum.
---------
"Telerate Page 3750" means the display page currently so designated on the
------------------
Bridge Telerate Capital Markets Report (or such other page as may replace that
page in that service for the purpose of displaying comparable rates or prices).
(b) Each capitalized term defined herein shall relate to the Series 2000-A
Notes and no other Series of Notes issued by the Trust, unless the context
otherwise requires. All capitalized terms used herein and not otherwise defined
herein have the meanings ascribed to them in the Indenture or the Transfer and
Servicing Agreement. In the event that any term or provision contained herein
shall conflict with or be inconsistent with any term or provision contained in
the Indenture or the Transfer and Servicing Agreement, the terms and provisions
of this Indenture Supplement shall govern.
(c) The interpretive rules specified in Section 1.2 of the Master
-----------
Indenture also apply to this Indenture Supplement.
ARTICLE III
Servicing Fee
-------------
Section 3.1 Servicing Compensation. The share of the Servicing Fee
----------------------
allocable to Series 2000-A for any Distribution Date (the "Monthly Servicing
-----------------
Fee") shall be equal to one-twelfth of the product of (a) the Series Servicing
---
Fee Percentage and (b) (i) the Collateral Amount as of the last day of the
Monthly Period preceding such 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 Monthly Period preceding such Distribution Date and the Allocation
Percentage for Finance Charge Collections with respect to such Monthly Period;
provided, however, that with respect to the first Distribution Date, the Monthly
-------- -------
Servicing Fee shall be equal to $484,178.00. The remainder of the Servicing Fee
shall be paid by the Holders of the
12
<PAGE>
Seller Interest or the noteholders of other Series (as provided in the related
Indenture Supplements) and in no event shall the Trust, the Indenture Trustee or
the Series 2000-A Noteholders be liable for the share of the Servicing Fee to be
paid by the Holders of the Seller Interest or the noteholders of any other
Series. To the extent that the Monthly Servicing Fee is not paid in full
pursuant to the preceding provisions of this Section 3.1 and Section 4.4, it
----------- -----------
shall be paid by the Holders of the Seller Interest.
ARTICLE IV
Rights of Series 2000-A Noteholders
and Allocation and Application of Collections
---------------------------------------------
Section 4.1 Collections and Allocations.
---------------------------
(a) Allocations. Finance Charge Collections, Principal Collections and
-----------
Defaulted Receivables allocated to Series 2000-A pursuant to Article VIII of the
------------
Indenture shall be allocated and distributed as set forth in this Article.
(b) Allocations to the Series 2000-A Noteholders. The Servicer shall,
--------------------------------------------
prior to the close of business on any Deposit Date, allocate to the Series
2000-A Noteholders the following amounts as set forth below:
(i) Allocations of Finance Charge Collections. The Servicer shall
-----------------------------------------
allocate to the Series 2000-A Noteholders and transfer to the Finance
Charge Subaccount for application as provided herein an amount equal to the
product of (A) the Allocation Percentage and (B) the aggregate Finance
Charge Collections deposited in the Collection Account on such Deposit
Date; provided, however, that with respect to the portion of each Monthly
-------- -------
Period falling in the Revolving Period or the Controlled Accumulation
Period, such allocation shall be transferred to the Finance Charge
Subaccount only until such time as the amount transferred to the Finance
Change Subaccount pursuant to this subsection during that Monthly Period
equals the sum of (1) the Net Interest Obligation for the Distribution Date
relating to the current Monthly Period, (2) at any time that FCNB is not
the Servicer, the Monthly Servicing Fee payable on the Distribution Date
relating to the current Monthly Period and all accrued and unpaid Investor
Monthly Servicing Fees with respect to any prior Monthly Periods, (3) the
Default Estimate for that Monthly Period and (4) the Monthly Insurance
Premium with respect to that Monthly Period; provided further, however,
-------- ------- -------
that notwithstanding the foregoing proviso, (1) the entire Allocation
-------
Percentage of Finance Charge Collections shall be transferred to the
Finance Charge Subaccount on a daily basis if (x) the Excess Spread
Percentage for the preceding Monthly Period is less than 3.00%, or (y) the
Available Spread Account Amount is less than the Required Spread Account
Amount; and (2) subject to Section 8.4(a) of the Indenture, on each
--------------
Determination Date, the Servicer shall deposit in the
13
<PAGE>
Finance Charge Subaccount any amounts not retained on a daily basis
pursuant to the preceding proviso. Any portion of such allocation not
-------
required to be transferred to the Finance Charge Subaccount pursuant to the
preceding sentence shall be (x) first, deposited in the Excess Funding
Account to the extent that the Seller Amount is less than the Minimum
Seller Amount and (y) thereafter paid to the Holders of the Seller
Interest.
(ii) Allocations of Principal Collections. The Servicer shall allocate
------------------------------------
to the Series 2000-A Noteholders the following amounts as set forth below:
(x) Allocations During the Revolving Period. During the
---------------------------------------
Revolving Period an amount equal to the product of the Allocation
Percentage and the aggregate amount of Principal Collections deposited
in the Collection Account on such Deposit Date, shall be allocated to
the Series 2000-A Noteholders and shall be first, if any other
Principal Sharing Series is outstanding and in its amortization period
or accumulation period, retained in the Collection Account for
application, to the extent necessary, as Shared Principal Collections
to other Principal Sharing Series on the related Distribution Date,
second deposited in the Excess Funding Account to the extent necessary
so that the Seller Amount is not less than the Minimum Seller Amount
and third paid to the Holders of the Seller Interest.
(y) Allocations During the Controlled Accumulation Period.
-----------------------------------------------------
During the Controlled Accumulation Period an amount equal to the
product of (I) the Allocation Percentage and (II) the aggregate amount
of Principal Collections deposited in the Collection Account on such
Deposit Date (the product for any such date is hereinafter referred to
as a "Percentage Allocation") shall be allocated to the Series 2000-A
---------------------
Noteholders and transferred to the Principal Collections Subaccount
until applied as provided herein; provided, however, that if the sum
-------- -------
of such Percentage Allocation and all preceding Percentage Allocations
with respect to the same Monthly Period exceeds the Controlled Deposit
Amount during the Controlled Accumulation Period for the related
Distribution Date, then such excess shall not be treated as a
Percentage Allocation and shall be first, if any other Principal
Sharing Series is outstanding and in its amortization period or
accumulation period, transferred to the Principal Collections
Subaccount for application, to the extent necessary, as Shared
Principal Collections to other Principal Sharing Series on the related
Distribution Date, second deposited in the Excess Funding Account to
the extent necessary so that the Seller Amount is not less than the
Minimum Seller Amount and third paid to the Holders of the Seller
Interest.
14
<PAGE>
(z) Allocations During the Rapid Amortization Period. During
------------------------------------------------
the Rapid Amortization Period, an amount equal to the product of (I)
the Allocation Percentage and (II) the aggregate amount of Principal
Collections deposited in the Collection Account on such Deposit Date,
shall be allocated to the Series 2000-A Noteholders and transferred to
the Principal Collections Subaccount until applied as provided herein;
provided, however, that after the date on which an amount of such
-------- -------
Collections equal to the Note Principal Balance plus any amounts owing
to the Counterparty under the Swap and the Insurer under the Insurance
Agreement has been deposited into the Collection Account and allocated
to the Series 2000-A Noteholders, such amount shall be first, if any
other Principal Sharing Series is outstanding and in its amortization
period or accumulation period, transferred to the Principal
Collections Subaccount for application, to the extent necessary, as
Shared Principal Collections to other Principal Sharing Series on the
related Distribution Date, second deposited in the Excess Funding
Account to the extent necessary so that the Seller Amount is not less
than the Minimum Seller Amount and third paid to the Holders of the
Seller Interest.
Section 4.2 Determination of Monthly Interest. The amount of monthly
---------------------------------
interest ("Monthly Interest") distributable from the Collection Account with
----------------
respect to the Class A Notes on any Distribution Date shall be an amount equal
to the product of (i) (A) a fraction, the numerator of which is the actual
number of days in the related Interest Period and the denominator of which is
360, times (B) the Note Interest Rate in effect with respect to the related
Interest Period and (ii) the Note Principal Balance as of the close of business
on the last day of the preceding Monthly Period (or, with respect to the initial
Distribution Date, the Note Initial Principal Balance).
On the Determination Date preceding each Distribution Date, the Servicer
shall determine the excess, if any (the "Interest Shortfall"), of (x) the
------------------
Monthly Interest for such Distribution Date over (y) the aggregate amount of
funds allocated and available to pay such Monthly Interest on such Distribution
Date. If the Interest Shortfall for any Distribution Date is greater than zero
and the Insurer fails to pay such Interest Shortfall in accordance with the
terms of the related Policy, on each subsequent Distribution Date until such
Interest Shortfall is fully paid, an additional amount ("Additional Interest")
-------------------
equal to the product of (i) (A) a fraction, the numerator of which is the actual
number of days in the related Interest Period and the denominator of which is
360, times (B) the Note Interest Rate in effect with respect to the related
Interest Period and (ii) such Interest Shortfall (or the portion thereof which
has not been paid to the Class A Noteholders) shall be payable as provided
herein with respect to the Class A Notes. Notwithstanding anything to the
contrary herein, Additional Interest shall be payable or distributed to the
Class A Noteholders only to the extent permitted by applicable law.
15
<PAGE>
In addition, on the Determination Date preceding each Distribution Date
falling after the Expected Principal Distribution Date on which there is any
Excess Interest, the Servicer shall determine the excess, if any (the "Excess
------
Interest Shortfall"), of (x) the Excess Interest for such Distribution Date over
------------------
(y) the aggregate amount of funds allocated and available to pay such Excess
Interest on such Distribution Date. If the Excess Interest Shortfall for any
Distribution Date is greater than zero, on each subsequent Distribution Date
until such Excess Interest Shortfall is fully paid, an additional amount
("Additional Excess Interest") equal to the product of (i) (A) a fraction, the
--------------------------
numerator of which is the actual number of days in the related Interest Period
and the denominator of which is 360, times (B) the Note Interest Rate in effect
with respect to the related Interest Period and (ii) such Excess Interest
Shortfall (or the portion thereof which has not been paid to the Class A
Noteholders) shall be payable as provided herein with respect to the Class A
Notes. Notwithstanding anything to the contrary herein, Additional Excess
Interest shall be payable or distributed to the Class A Noteholders only to the
extent permitted by applicable law.
Section 4.3 Determination of Monthly Principal. The amount of monthly
----------------------------------
principal distributable from the Collection Account with respect to the Notes on
each Distribution Date (the "Monthly Principal"), beginning with the
-----------------
Distribution Date in the month following the month in which the Controlled
Accumulation Period or, if earlier, the Rapid Amortization Period, begins, shall
be equal to the least of (i) the Available Principal Collections on deposit in
the Collection Account with respect to such Distribution Date, (ii) for each
Distribution Date with respect to the Controlled Accumulation Period, the
Controlled Deposit Amount for such Distribution Date, (iii) the Note Principal
Balance, minus any amount already on deposit in the Principal Accumulation
Account on such Distribution Date and (iv) the Collateral Amount (after taking
into account any adjustments to be made pursuant to Sections 4.5 and 4.6) prior
------------ ---
to any deposit into the Principal Accumulation Account on such Distribution
Date.
Section 4.4 Application of Available Finance Charge Collections and
-------------------------------------------------------
Available Principal Collections. The Servicer shall apply, or shall cause the
-------------------------------
Indenture Trustee to apply by written instruction to the Indenture Trustee, on
each Distribution Date, Available Finance Charge Collections and Available
Principal Collections on deposit in the Collection Account with respect to such
Distribution Date to make the following distributions:
(a) On each Distribution Date, an amount equal to the Available Finance
Charge Collections with respect to such Distribution Date will be distributed or
deposited in the following priority:
(i) on a pari passu basis (A) an amount equal to Monthly Interest for
such Distribution Date, plus the amount of any Monthly Interest previously
due but not distributed to Class A Noteholders on a prior Distribution
Date, plus the amount of any Additional Interest for such
16
<PAGE>
Distribution Date, plus the amount of any Monthly Interest previously due but
not distributed to Class A Noteholders on a prior Distribution Date, plus the
amount of any Additional Interest for such Distribution Date, plus the amount of
any Additional Interest previously due but not distributed to Class A
Noteholders on a prior Distribution Date, shall be distributed to the Paying
Agent for payment to Class A Noteholders on such Distribution Date and (B) any
Net Swap Payment for that Distribution Date shall be distributed to the
Counterparty;
(ii) if neither FCNB nor any affiliate of the Seller is the Servicer, an
amount equal to the Monthly Servicing Fee for such Distribution Date, plus the
amount of any Monthly Servicing Fee previously due but not distributed to the
Servicer on a prior Distribution Date, shall be distributed to the Servicer;
(iii) an amount equal to the Investor Default Amount and any Investor
Uncovered Dilution Amount for such Distribution Date shall be treated as a
portion of Available Principal Collections for such Distribution Date;
(iv) an amount equal to the sum of the aggregate amount of Investor
Charge-Offs and the amount of Reallocated Principal Collections which have not
been previously reimbursed pursuant to this subsection (iv) shall be treated as
---------------
a portion of Available Principal Collections for such Distribution Date;
(v) an amount equal to the Monthly Insurance Premium for the related
Monthly Period and any unpaid Monthly Insurance Premiums for prior Monthly
Periods shall be paid to the Insurer;
(vi) on each Distribution Date from and after the Reserve Account Funding
Date, but prior to the date on which the Reserve Account terminates as described
in subsection 4.10(f), an amount up to the excess, if any, of the Required
------------------
Reserve Account Amount over the Available Reserve Account Amount shall be
deposited into the Reserve Account;
(vii) an amount equal to the amounts required to be deposited in the
Spread Account pursuant to Section 2.05(f) of the Insurance Agreement shall be
deposited into the Spread Account as provided in Section 2.05(f) of the
Insurance Agreement;
(viii) during the Rapid Amortization Period, any amount remaining shall be
applied as Available Principal Collections for such Distribution Date to the
extent that the other Available Principal Collections (excluding any amounts
drawn under the Policies) are not sufficient to repay the Class A Notes in full;
(ix) an amount equal to any Reimbursement Amounts and interest thereon
owed under the Insurance Agreement shall be paid to the Insurer;
17
<PAGE>
(x) an amount equal to any other amounts owing to the Insurer
under the Insurance Agreement shall be paid to the Insurer;
(xi) after the Expected Principal Distribution Date, an amount
equal to any Excess Interest for such Distribution Date, plus any unpaid
Excess Interest from prior Distribution Dates, plus any Additional Excess
Interest shall be distributed to the Paying Agent for payment to Class A
Noteholders on such Distribution Date;
(xii) an amount equal to any early termination payments or other
miscellaneous payments owed to the Counterparty under the Swap shall be
paid to the Counterparty;
(xiii) any Monthly Servicing Fee for such Distribution Date or prior
Distribution Dates not paid pursuant to subsection 4.4(a)(ii) (unless such
---------------------
amount has been netted against deposits to the Collection Account in
accordance with Section 8.4 of the Indenture) shall be distributed to the
-----------
Servicer; and
(xiv) the balance, if any, will constitute a portion of Excess
Finance Charge Collections for such Distribution Date and first will be
available for allocation to other Series in Group One, second deposited in
the Excess Funding Account to the extent necessary so that the Seller
Amount is not less than the Minimum Seller Amount and third paid to the
Holders of the Seller Interest as described in Section 8.6 of the
-----------
Indenture.
(b) On each Distribution Date with respect to the Revolving Period, an
amount equal to the Available Principal Collections deposited in the Collection
Account for the related Monthly Period shall be treated as Shared Principal
Collections and applied in accordance with Section 8.5 of the Indenture.
-----------
(c) On each Distribution Date with respect to the Controlled Accumulation
Period or the Rapid Amortization Period, an amount equal to the Available
Principal Collections deposited in the Collection Account for the related
Monthly Period shall be distributed or deposited in the following order of
priority:
(i) during the Controlled Accumulation Period, an amount equal to
the Monthly Principal for such Distribution Date shall be deposited into
the Principal Accumulation Account, and any remaining Available Principal
Collections shall be treated as Shared Principal Collections and applied in
accordance with Section 8.5 of the Indenture; and
-----------
(ii) during the Rapid Amortization Period, an amount equal to the
Monthly Principal for such Distribution Date shall be distributed to the
Paying Agent for payment to the Class A Noteholders on such Distribution
Date until the Note Principal Balance has been paid in full, and any
remaining Available Principal Collections shall be treated as Shared
18
<PAGE>
Principal Collections and applied in accordance with Section 8.5 of the
-----------
Indenture.
As of any Distribution Date on which any Available Principal Collections
are treated as Shared Principal Collections as provided above, the Collateral
Amount shall be reduced by an amount equal to the lesser of (x) the amount of
Available Principal Collections applied as Shared Principal Collections and (y)
the Surplus Collateral Amount.
(d) On the earlier to occur of (i) the first Distribution Date with
respect to the Rapid Amortization Period and (ii) the Expected Principal
Distribution the Indenture Trustee, acting in accordance with instructions from
the Servicer, shall withdraw from the Principal Accumulation Account and
distribute to the Paying Agent for payment to the Class A Noteholders the
amounts deposited into the Principal Accumulation Account pursuant to subsection
----------
4.4(c)(i).
---------
Section 4.5 Investor Charge-Offs . On each Determination Date, the
--------------------
Servicer shall calculate the Investor Default Amount and any Investor Uncovered
Dilution Amount for the related Distribution Date. If, on any Distribution Date,
the sum of the Investor Default Amount and any Investor Uncovered Dilution
Amount for such Distribution Date exceeds the amount of Available Finance Charge
Collections allocated with respect thereto pursuant to subsection 4.4(a)(iii)
----------------------
with respect to such Distribution Date, the Collateral Amount will be reduced
(but not below zero) by the amount of such excess (such reduction, an "Investor
--------
Charge-Off").
----------
Section 4.6 Reallocated Principal Collections. On each Distribution Date,
---------------------------------
the Servicer shall apply, or shall instruct the Indenture Trustee in writing to
apply, Reallocated Principal Collections with respect to such Distribution Date,
to fund any deficiency pursuant to and in the priority set forth in subsections
-----------
4.4(a)(i), (ii), (v), (ix), (x) and (xii); provided that in no event will
--------- ---- --- ---- --- -----
Reallocated Principal Collections be applied pursuant to subsections 4.4(a)(v),
---------------------
(ix), (x) and (xii) until the Series 2000-A Final Maturity Date. On each
-------------------
Distribution Date, the Collateral Amount shall be reduced by the amount of
Reallocated Principal Collections for such Distribution Date.
Section 4.7 Excess Finance Charge Collections. Series 2000-A shall be an
---------------------------------
Excess Allocation Series with respect to Group One only. For this purpose, each
outstanding series of certificates issued by Spiegel Master Trust (other than
series represented by the Collateral Certificate) shall be deemed to be a Series
in Group One. Subject to Section 8.6 of the Indenture, Excess Finance Charge
-----------
Collections with respect to the Excess Allocation Series in Group One for any
Distribution Date will be allocated to Series 2000-A in an amount equal to the
product of (x) the aggregate amount of Excess Finance Charge Collections with
respect to all the Excess Allocation Series in Group One for such Distribution
Date and (y) a fraction, the numerator of which is the Finance Charge Shortfall
for Series 2000-A for such
19
<PAGE>
Distribution Date and the denominator of which is the aggregate amount of
Finance Charge Shortfalls for all the Excess Allocation Series in Group One for
such Distribution Date. The "Finance Charge Shortfall" for Series 2000-A for any
------------------------
Distribution Date will be equal to the excess, if any, of (a) the full amount
required to be paid, without duplication, pursuant to subsections 4.4(a)(i)
---------------------
through (xiii) on such Distribution Date over (b) the Available Finance Charge
-----
Collections with respect to such Distribution Date (excluding any portion
thereof attributable to Excess Finance Charge Collections).
Section 4.8 Shared Principal Collections. Subject to Section 8.5 of the
---------------------------- -----------
Indenture, Shared Principal Collections for any Distribution Date will be
allocated to Series 2000-A in an amount equal to the product of (x) the
aggregate amount of Shared Principal Collections with respect to all Principal
Sharing Series for such Distribution Date and (y) a fraction, the numerator of
which is the Principal Shortfall for Series 2000-A for such Distribution Date
and the denominator of which is the aggregate amount of Principal Shortfalls for
all the Series which are Principal Sharing Series for such Distribution Date.
For this purpose, each outstanding series of certificates issued by Spiegel
Master Trust (other than series represented by the Collateral Certificate) shall
be deemed to be a Principal Sharing Series. The "Principal Shortfall" for Series
-------------------
2000-A will be equal to (a) for any Distribution Date with respect to the
Revolving Period, zero, (b) for any Distribution Date with respect to the
Controlled Accumulation Period, the excess, if any, of the Controlled Deposit
Amount with respect to such Distribution Date over the amount of Available
Principal Collections for such Distribution Date (excluding any portion thereof
attributable to Shared Principal Collections), and (c) for any Distribution Date
with respect to the Rapid Amortization Period, the excess, if any, of the Note
Principal Balance (less the balance in the Principal Accumulation Account) over
the amount of Available Principal Collections for such Distribution Date
(excluding any portion thereof attributable to Shared Principal Collections).
Section 4.9 Principal Accumulation Account.
------------------------------
(a) The Indenture Trustee shall establish and maintain with an Eligible
Institution, which may be the Indenture Trustee in the name of the Trust, on
behalf of the Trust, for the benefit of the Series 2000-A Noteholders, a non-
interest bearing segregated trust account with the corporate trust department of
such Eligible Institution (the "Principal Accumulation Account"), bearing a
------------------------------
designation clearly indicating that the funds deposited therein are held for the
benefit of the Series 2000-A Noteholders. The Indenture Trustee shall possess
all right, title and interest in all funds on deposit from time to time in the
Principal Accumulation Account and in all proceeds thereof. The Principal
Accumulation Account shall be under the sole dominion and control of the
Indenture Trustee for the benefit of the Series 2000-A Noteholders. If at any
time the institution holding the Principal Accumulation Account ceases to be an
Eligible Institution, the Servicer shall notify the Indenture Trustee in
writing, and the Indenture Trustee upon being notified (or the Servicer on its
behalf) shall, within ten (10) Business Days, establish a new Principal
20
<PAGE>
Accumulation Account meeting the conditions specified above with an Eligible
Institution, and shall transfer any cash or any investments to such new
Principal Accumulation Account. The Indenture Trustee, at the written direction
of the Servicer, shall (i) make withdrawals from the Principal Accumulation
Account from time to time, in the amounts and for the purposes set forth in this
Indenture Supplement, and (ii) on each Distribution Date (from and after the
commencement of the Controlled Accumulation Period) prior to the termination of
the Principal Accumulation Account, make deposits into the Principal
Accumulation Account in the amounts specified in, and otherwise in accordance
with, subsection 4.4(c)(i).
--------------------
(b) Funds on deposit in the Principal Accumulation Account shall be
invested at the written direction of the Servicer by the Indenture Trustee in
Permitted Investments. Funds on deposit in the Principal Accumulation Account on
any Distribution Date, after giving effect to any withdrawals from the Principal
Accumulation Account on such Distribution Date, shall be invested in such
investments that will mature so that such funds will be available for withdrawal
on or prior to the following Distribution Date.
The Indenture Trustee shall hold such of the Permitted Investments as
consists of instruments, deposit accounts, negotiable documents, money, goods,
letters of credit, and advices of credit in the State of New York and/or
Illinois. The Indenture Trustee shall hold such of the Permitted Investments as
constitutes investment property through a securities intermediary, which
securities intermediary shall agree with the Indenture Trustee that (a) such
investment property shall at all times be credited to a securities account of
the Indenture Trustee, (b) such securities intermediary shall treat the
Indenture Trustee as entitled to exercise the rights that comprise each
financial asset credited to such securities account, (c) all property credited
to such securities account shall be treated as a financial asset, (d) such
securities intermediary shall comply with entitlement orders originated by the
Indenture Trustee without the further consent of any other person or entity, (e)
such securities intermediary will not agree with any person or entity other than
the Indenture Trustee to comply with entitlement orders originated by such other
person or entity, (f) such securities accounts and the property credited thereto
shall not be subject to any lien, security interest or right of set-off in favor
of such securities intermediary or anyone claiming through it (other than the
Indenture Trustee), and (g) such agreement shall be governed by the laws of the
State of Illinois. Terms used in the preceding sentence that are defined in the
New York UCC and not otherwise defined herein shall have the meaning set forth
in the New York UCC.
On each Distribution Date with respect to the Controlled Accumulation
Period and on the first Distribution Date with respect to the Rapid Amortization
Period, the Indenture Trustee, acting at the Servicer's written direction given
on or before such Distribution Date, shall transfer from the Principal
Accumulation Account to the Collection Account the Principal Accumulation
Investment Proceeds on deposit in the Principal Accumulation Account for
application as Available Finance Charge Collections in accordance with Section
-------
4.4.
---
21
<PAGE>
Principal Accumulation Investment Proceeds (including reinvested interest)
shall not be considered part of the amounts on deposit in the Principal
Accumulation Account for purposes of this Indenture Supplement.
Section 4.10 Reserve Account.
---------------
(a) The Indenture Trustee shall establish and maintain with an Eligible
Institution, which may be the Indenture Trustee in the name of the Trust, on
behalf of the Trust, for the benefit of the Series 2000-A Noteholders, a non-
interest bearing segregated trust account with the corporate trust department of
such Eligible Institution (the "Reserve Account"), bearing a designation clearly
---------------
indicating that the funds deposited therein are held for the benefit of the
Series 2000-A Noteholders. The Indenture Trustee shall possess all right, title
and interest in all funds on deposit from time to time in the Reserve Account
and in all proceeds thereof. The Reserve Account shall be under the sole
dominion and control of the Indenture Trustee for the benefit of the Series
2000-A Noteholders. If at any time the institution holding the Reserve Account
ceases to be an Eligible Institution, the Servicer shall notify the Indenture
Trustee in writing, and the Indenture Trustee upon being notified (or the
Servicer on its behalf) shall, within ten (10) Business Days, establish a new
Reserve Account meeting the conditions specified above with an Eligible
Institution, and shall transfer any cash or any investments to such new Reserve
Account. The Indenture Trustee, at the written direction of the Servicer, shall
(i) make withdrawals from the Reserve Account from time to time in an amount up
to the Available Reserve Account Amount at such time, for the purposes set forth
in this Indenture Supplement, and (ii) on each Distribution Date (from and after
the Reserve Account Funding Date) prior to termination of the Reserve Account,
make a deposit into the Reserve Account in the amount specified in, and
otherwise in accordance with, subsection 4.4(a)(vi).
---------------------
(b) Funds on deposit in the Reserve Account shall be invested at the
written direction of the Servicer by the Indenture Trustee in Permitted
Investments. Funds on deposit in the Reserve Account on any Distribution Date,
after giving effect to any withdrawals from the Reserve Account on such
Distribution Date, shall be invested in such investments that will mature so
that such funds will be available for withdrawal on or prior to the following
Distribution Date.
The Indenture Trustee shall hold such of the Permitted Investments as
consists of instruments, deposit accounts, negotiable documents, money, goods,
letters of credit, and advices of credit in the State of New York. The Indenture
Trustee shall hold such of the Permitted Investments as constitutes investment
property through a securities intermediary, which securities intermediary shall
agree with the Indenture Trustee that (a) such investment property shall at all
times be credited to a securities account of the Indenture Trustee, (b) such
securities intermediary shall treat the Indenture Trustee as entitled to
exercise the rights that comprise each financial asset credited to such
securities account, (c) all property credited to such securities account shall
be treated as a financial asset, (d) such
22
<PAGE>
securities intermediary shall comply with entitlement orders originated by the
Indenture Trustee without the further consent of any other person or entity, (e)
such securities intermediary will not agree with any person or entity other than
the Indenture Trustee to comply with entitlement orders originated by such other
person or entity, (f) such securities accounts and the property credited thereto
shall not be subject to any lien, security interest, or right of set-off in
favor of such securities intermediary or anyone claiming through it (other than
the Indenture Trustee), and (g) such agreement shall be governed by the laws of
the State of New York. Terms used in the preceding sentence that are defined in
the New York UCC and not otherwise defined herein shall have the meaning set
forth in the New York UCC.
On each Distribution Date, all interest and earnings (net of losses and
investment expenses) accrued since the preceding Distribution Date on funds on
deposit in the Reserve Account shall be retained in the Reserve Account (to the
extent that the Available Reserve Account Amount is less than the Required
Reserve Account Amount) and the balance, if any, shall be deposited into the
Collection Account and included in Available Finance Charge Collections for such
Distribution Date. For purposes of determining the availability of funds or the
balance in the Reserve Account for any reason under this Indenture Supplement,
except as otherwise provided in the preceding sentence, investment earnings on
such funds shall be deemed not to be available or on deposit.
(c) 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 Servicer shall calculate the Reserve Draw
Amount; provided, however, that such amount will be reduced to the extent that
-------- -------
funds otherwise would be available for deposit in the Reserve Account under
Section 4.4(a)(vi) with respect to such Distribution Date.
------------------
(d) If for any Distribution Date the Reserve Draw Amount is greater than
zero, the Reserve Draw Amount, up to the Available Reserve Account Amount, shall
be withdrawn from the Reserve Account on such Distribution Date by the Indenture
Trustee (acting in accordance with the written instructions of the Servicer) and
deposited into the Collection Account for application as Available Finance
Charge Collections for such Distribution Date.
(e) If the Reserve Account Surplus on any Distribution Date, after giving
effect to all deposits to and withdrawals from the Reserve Account with respect
to such Distribution Date, is greater than zero, the Indenture Trustee, acting
in accordance with the written instructions of the Servicer, shall withdraw from
the Reserve Account an amount equal to such Reserve Account Surplus and (i)
deposit such amounts in the Spread Account, to the extent that funds on deposit
in the Spread Account are less than the Required Spread Account Amount, and (ii)
distribute any such amounts remaining after application pursuant to subsection
----------
4.10(e)(i) to the holders of the Seller Interest.
----------
23
<PAGE>
(f) Upon the earliest to occur of (i) the termination of the Trust
pursuant to Article VIII of the Trust Agreement, (ii) the first Distribution
------------
Date relating to the Rapid Amortization Period and (iii) the Expected Principal
Distribution Date, the Indenture Trustee, acting in accordance with the
instructions of the Servicer, after the prior payment of all amounts owing to
the Series 2000-A Noteholders that are payable from the Reserve Account as
provided herein, shall withdraw from the Reserve Account all amounts, if any, on
deposit in the Reserve Account and (i) deposit such amounts in the Spread
Account, to the extent that funds on deposit in the Spread Account are less than
the Required Spread Account Amount, and (ii) distribute any such amounts
remaining after application pursuant to subsection 4.10(f)(i) to the holders of
---------------------
the Seller Interest. The Reserve Account shall thereafter be deemed to have
terminated for purposes of this Indenture Supplement. Funds on deposit in the
Reserve Account at any time that the Controlled Accumulation Period is suspended
pursuant to Section 4.15, shall remain on deposit until applied in accordance
------------
with subsection 4.10(d), (e) or (f).
------------------------------
Section 4.11 [Reserved].
----------
Section 4.12 Determination of LIBOR.
----------------------
(a) On each LIBOR Determination Date in respect of an Interest Period,
the Indenture Trustee, utilizing the services of the Counterparty as calculation
agent under the Swap (or the Servicer if the Swap is terminated), shall
determine LIBOR on the basis of the rate for deposits in United States dollars
for a one-month period which appears on Telerate Page 3750 as of 11:00 a.m.,
London time, on such date. If such rate does not appear on Telerate Page 3750,
the rate for that Interest Period shall be determined on the basis of the rates
at which deposits in United States dollars are offered by the Reference Banks 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 shall request the
principal London office of each of the Reference Banks to provide a quotation of
its rate. If at least two (2) such quotations are provided, the rate for that
Interest Period shall be the arithmetic mean of the quotations. If fewer than
two (2) quotations are provided as requested, 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 Counterparty or, if the Swap is terminated, 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.
(b) The Note Interest Rate applicable to the then current and the
immediately preceding Interest Periods may be obtained by telephoning the
Indenture Trustee at its corporate trust office at (312) 827-8500 or such other
telephone number as shall be designated by the Indenture Trustee for such
purpose by prior written notice by the Indenture Trustee to each Series 2000-A
Noteholder from time to time.
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<PAGE>
(c) On each LIBOR Determination Date, the Indenture Trustee shall send to
the Servicer by facsimile transmission, notification of LIBOR for the following
Interest Period.
Section 4.13 Investment Instructions. Any investment instructions required
-----------------------
to be given to the Indenture Trustee pursuant to the terms hereof must be given
to the Indenture Trustee no later than 11:00 a.m., New York City time, on the
date such investment is to be made. In the event the Indenture Trustee receives
such investment instruction later than such time, the Indenture Trustee may, but
shall have no obligation to, make such investment. In the event the Indenture
Trustee is unable to make an investment required in an investment instruction
received by the Indenture Trustee after 11:00 a.m., New York City time, on such
day, such investment shall be made by the Indenture Trustee on the next
succeeding Business Day. In no event shall the Indenture Trustee be liable for
any investment not made pursuant to investment instructions received after 11:00
a.m., New York City time, on the day such investment is requested to be made.
Section 4.14 Controlled Accumulation Period. The Controlled Accumulation
------------------------------
Period is scheduled to commence at the opening of business November 1, 2004.
However, if the Accumulation Period Length (determined as described below) is
less than 12 months, the date on which the Controlled Accumulation Period
actually commences will be delayed to the first Business Day of the month that
is the number of whole months prior to the Expected Principal Distribution Date
at least equal to the Accumulation Period Length and, as a result, the number of
Monthly Periods in the Controlled Accumulation Period will at least equal the
Accumulation Period Length. On the Determination Date immediately preceding the
October 2004 Distribution Date, and each Determination Date thereafter until the
Controlled Accumulation Period begins, the Servicer will determine the
"Accumulation Period Length" which will equal the number of whole months such
--------------------------
that the sum of the Accumulation Period Factors for each month during such
period will be equal to or greater than the Required Accumulation Factor Number;
provided, however, that the Accumulation Period Length will not be determined to
-------- -------
be less than one month; provided further, however, that the determination of the
-------- ------- -------
Accumulation Period Length may be changed at any time if the Rating Agency
Condition is satisfied.
Section 4.15 Suspension of Controlled Accumulation Period. (a) The Issuer
--------------------------------------------
may, in its sole discretion, elect to suspend the commencement of the Controlled
Accumulation Period. The commencement of the Controlled Accumulation Period
shall be suspended upon delivery by the Issuer to the Indenture Trustee of (i)
an Officer's Certificate stating that the Issuer has elected to suspend the
commencement of the Controlled Accumulation Period and that all conditions
precedent to such suspension set forth in this Section 4.15 have been satisfied,
------------
(ii) a copy of an executed Qualified Maturity Agreement and (iii) an Opinion of
Counsel addressed to the Indenture Trustee as to the due authorization,
execution and delivery and the validity and enforceability of such Qualified
Maturity Agreement. The
25
<PAGE>
Issuer does hereby transfer, assign, set-over, and otherwise convey to the
Indenture Trustee for the benefit of the Class A Noteholders, without recourse,
all of its rights under any Qualified Maturity Agreement obtained in accordance
with this Section 4.15 and all proceeds thereof. Such property shall constitute
------------
part of the Trust Estate for all purposes of the Indenture. The foregoing
transfer, assignment, set-over and conveyance does not constitute and is not
intended to result in a creation or an assumption by the Indenture Trustee or
any Noteholder of any obligation of the Issuer or any other Person in connection
with a Qualified Maturity Agreement or under any agreement or instrument
relating thereto.
The Indenture Trustee hereby acknowledges its acceptance, to the extent
validly transferred, assigned, set-over or otherwise conveyed to the Indenture
Trustee, for the benefit of the Class A Noteholders, of all of the rights
previously held by the Issuer under any Qualified Maturity Agreement obtained by
the Issuer and all proceeds thereof, and declares that it shall hold such rights
upon the trust set forth herein and in the Agreement, and subject to the terms
hereof and thereof, for the benefit of the Class A Noteholders.
(b) The Issuer shall cause the provider of each Qualified Maturity
Agreement to deposit into the Principal Accumulation Account on or before the
Expected Principal Distribution Date an amount equal to the aggregate
outstanding principal balance of the Class A Notes on such Distribution Date;
provided, however, that the Issuer may instead elect to fund all or a portion of
-------- -------
such deposit with the proceeds of the issuance of a new Series or with the
Available Principal Collections with respect to such Distribution Date; and
provided, further, that the Issuer shall in no event cause or permit the
-------- -------
provider of any Qualified Maturity Agreement to fund under such Qualified
Maturity Agreement unless there are sufficient funds on deposit in the
Collection Account allocated to make required payments pursuant to Sections
--------
4.4(a)(i) and (ii) for any Distribution Date falling on or after the funding
--------- ----
under such Qualified Maturity Agreement. The amount deposited shall be applied
on the Expected Principal Distribution Date pursuant to Section 4.4(d) as if the
--------------
commencement of the Controlled Accumulation Period had not been suspended.
(c) Each Qualified Maturity Agreement shall terminate at the close of
business on the Expected Principal Distribution Date; provided, however, that
-------- -------
the Issuer may terminate a Qualified Maturity Agreement prior to such
Distribution Date, with notice to each Rating Agency, if (i) the Available
Reserve Account Amount equals the Required Reserve Account Amount and (ii) one
of the following events occurs: (A) the Issuer obtains a substitute Qualified
Maturity Agreement, (B) the provider of the Qualified Maturity Agreement ceases
to qualify as an Eligible Institution and the Issuer is unable to obtain a
substitute Qualified Maturity Agreement or (C) a Pay Out Event occurs. In
addition, the Issuer may terminate a Qualified Maturity Agreement prior to the
later of (i) 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 pursuant
26
<PAGE>
to Section 4.15 (as determined on the Determination Date preceding the date
------------
of such termination), in which case the commencement of the Controlled
Accumulation Period shall be determined as if the Issuer had not elected to
suspend such commencement. In the event that the provider of a Qualified
Maturity Agreement ceases to qualify as an Eligible Institution, the Issuer
shall use its best efforts to obtain a substitute Qualified Maturity
Agreement.
(d) If a Qualified Maturity Agreement is terminated prior to the
earlier of the Expected Principal Distribution Date and the commencement of
the Rapid Amortization Period and the Issuer does not obtain a substitute
Qualified Maturity Agreement, the Controlled Accumulation Period shall
commence on the latest of (i) November 1, 2004, (ii) at the election of the
Issuer, the date to which the commencement of the Controlled Accumulation
Period may be postponed pursuant to Section 4.13 (as determined on the date
------------
of such termination) and (iii) the first day of the Monthly Period
following the date of such termination.
Section 4.16 Insurance Policies. On the Closing Date, the Issuer shall
------------------
enter into the Insurance Agreement, pursuant to which the Policies will be
issued for the benefit of the Series 2000-A Noteholders and the
Counterparty.
(b) Prior to 12:00 noon, New York City time, on the third Business
Day preceding each Distribution Date, the Servicer shall determine whether
there will be a Deficiency Amount on the following Distribution Date. If
the Servicer determines that there will be a Deficiency Amount on the
following Distribution Date, the Servicer shall complete the notice in the
form set forth as an exhibit to the related Policy (the "Notice") and
submit such Notice in accordance with the related Policy to the Insurer no
later than 3:00 p.m., New York time, on such Business Day, as a claim for
an Insured Obligation in an amount equal to such Deficiency Amount. The
Insurer shall remit or cause to be remitted to the Trustee such Deficiency
Amount in accordance with the terms of the related Policy.
(c) The Indenture Trustee shall (i) receive as attorney-in-fact of
the applicable owners an Insured Obligation from the Insurer and (ii)
distribute the same to (a) the Class A Noteholders as provided in
subsections 5.2(a) and (b) and, to the extent that such amounts relate to
------------------ ---
Monthly Interest or principal of the Class A Notes, respectively, and (b)
the Counterparty or the Servicer to the extent that such amounts relate to
Net Swap Payments or Monthly Servicing Fees, respectively. Any and all
Insured Obligations disbursed by the Indenture Trustee from claims made
under the Policies shall not be considered payment by the Issuer with
respect to the Class A Notes or other applicable obligations, nor shall
such payments discharge the obligation of the Issuer with respect to the
Class A Notes or other obligations, and the Insurer shall become the owner
of such unpaid amounts due from the Issuer in respect of Insured
Obligations.
27
<PAGE>
If on any Distribution Date, the Indenture Trustee or the Servicer
determines that the Insurer has paid more under any Policy than is required
by the terms hereof, the Indenture Trustee shall promptly return such
excess to the Insurer.
The Indenture Trustee shall keep a complete and accurate record of the
amount of the Insured Obligations paid. The Insurer shall have the right to
inspect such record during normal business hours upon prior notice to the
Indenture Trustee.
(d) So long as no Control Transfer Event shall have occurred and be
continuing, the Insurer shall be deemed to be the sole Holder of the Series
2000-A Notes for the purpose of exercising voting rights and the giving of
any consents, approvals, instructions, directions, declarations and notices
relating to the Series 2000-A 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.
Section 4.17 Swap. (a) On or prior to the Closing Date, the Owner
----
Trustee shall, on behalf of the Issuer, enter into the Swap with the
Counterparty for the benefit of the Noteholders. The aggregate notional
amount under the Swap shall, at any time, be equal to the Note Principal
Balance at such time. Net Swap Receipts and early termination payments
payable by the Counterparty shall be deposited by the Indenture Trustee in
the Collection Account on the day received and treated as Available Finance
Charge Collections. On any Distribution Date when there shall be a Net Swap
Payment, such Net Swap Payments shall be paid as provided in Section
-------
4.4(a)(i). On any Distribution Date when there shall be an early
---------
termination payment or any other miscellaneous payment payable by the
Issuer to the Counterparty, such amount shall be paid as provided in
Section 4.4(a)(xii).
-------------------
(b) Each Swap shall be in substantially the same form as the initial
Swap attached hereto as Exhibit E.
---------
(c) The Servicer may, upon satisfaction of the Rating Agency
Condition, and, when required under the terms of the existing Swap, shall,
obtain a replacement Swap.
ARTICLE V
Delivery of Series 2000-A Notes;
Distributions; Reports to Series 2000-A Noteholders
---------------------------------------------------
Section 5.1 Delivery and Payment for the Series 2000-A Notes.
------------------------------------------------
The Issuer shall execute and issue, and the Indenture Trustee shall
authenticate, the Series 2000-A Notes in accordance with Section 2.3 of the
-----------
Indenture. The Indenture Trustee shall deliver the Series 2000-A Notes to
or upon the written order of the Trust when so authenticated.
28
<PAGE>
Section 5.2 Distributions.
-------------
(a) On each Distribution Date, the Paying Agent shall distribute to
each Class A Noteholder of record on the related Record Date (other than as
provided in Section 11.2 of the Indenture) such Class A Noteholder's pro
------------
rata share of the amounts held by the Paying Agent that are allocated and
available on such Distribution Date to pay interest on the Class A Notes
pursuant to this Indenture Supplement, including amounts made available as
a result of any draw on the Policies.
(b) On each Distribution Date, the Paying Agent shall distribute to
each Class A Noteholder of record on the related Record Date such Class A
Noteholder's pro rata share of the amounts held by the Paying Agent that
are allocated and available on such Distribution Date to pay principal of
the Class A Notes pursuant to this Indenture Supplement, including amounts
made available as a result of any draw on the Policies.
(c) The distributions to be made pursuant to this Section 5.2 are
-----------
subject to the provisions of Sections 2.6, 6.1 and 7.1 of the Transfer and
------------ --- ---
Servicing Agreement, Section 11.2 of the Indenture and Section 7.1 of this
------------ -----------
Indenture Supplement.
(d) Except as provided in Section 11.2 of the Indenture with respect
------------
to a final distribution, distributions to Series 2000-A Noteholders
hereunder shall be made by (i) check mailed to each Series 2000-A
Noteholder (at such Noteholder's address as it appears in the Note
Register), except that for any Series 2000-A Notes registered in the name
of the nominee of a Clearing Agency, such distribution shall be made by
wire transfer of immediately available funds and (ii) without presentation
or surrender of any Series 2000-A Note or the making of any notation
thereon.
Section 5.3 Reports and Statements to Series 2000-A Noteholders.
---------------------------------------------------
(a) On each Distribution Date, the Paying Agent, on behalf of the
Indenture Trustee, shall forward to each Series 2000-A Noteholder a
statement substantially in the form of Exhibit C prepared by the Servicer.
---------
(b) Not later than the second Business Day preceding each
Distribution Date, the Servicer shall deliver to the Owner Trustee, the
Indenture Trustee, the Paying Agent, the Insurer, the Counterparty and each
Rating Agency (i) a statement substantially in the form of Exhibit C
---------
prepared by the Servicer and (ii) a certificate of an Authorized Officer
substantially in the form of Exhibit D; provided that the Servicer may
--------- --------
amend the form of Exhibit C and Exhibit D, from time to time, with the
--------- ---------
prior written consent of the Indenture Trustee.
29
<PAGE>
(c) A copy of each statement or certificate provided pursuant to
paragraph (a) or (b) may be obtained by any Series 2000-A Noteholder by a
request in writing to the Servicer.
(d) On or before January 31 of each calendar year, beginning with
January 31, 2002, the Paying Agent, on behalf of the Indenture Trustee,
shall furnish or cause to be furnished to each Person who at any time
during the preceding calendar year was a Series 2000-A Noteholder, a
statement prepared by the Servicer containing the information which is
required to be contained in the statement to Series 2000-A Noteholders, as
set forth in paragraph (a) above, aggregated for such calendar year or the
applicable portion thereof during which such Person was a Series 2000-A
Noteholder, together with other information as is required to be provided
by an issuer of indebtedness under the Code. Such obligation of the Paying
Agent shall be deemed to have been satisfied to the extent that
substantially comparable information shall be provided by the Servicer
pursuant to any requirements of the Code as from time to time in effect.
ARTICLE VI
Series 2000-A Pay Out Events and Events of Default
--------------------------------------------------
Section 6.1 Series 2000-A Pay Out Events. If any one of the following
----------------------------
events shall occur with respect to the Series 2000-A Notes:
(a) failure on the part of the Seller (i) to make any payment or
deposit required to be made by the Seller by the terms of the Transfer and
Servicing Agreement, the Indenture or this Indenture Supplement on or
before the date occurring five (5) Business Days after the date such
payment or deposit is required to be made therein or herein or (ii) duly to
observe or perform in any material respect any other covenants or
agreements of the Seller set forth in the Transfer and Servicing Agreement,
the Indenture or this Indenture Supplement, which failure has a material
adverse effect on the Series 2000-A Noteholders and which continues
unremedied for a period of forty-five (45) days after the date on which
written notice of such failure, requiring the same to be remedied, shall
have been given to the Seller by the Indenture Trustee, or to the Seller
and the Indenture Trustee by any Holder of the Series 2000-A Notes;
(b) any representation or warranty made by the Seller in the Transfer
and Servicing Agreement or, prior to the SMT Termination Date, the Pooling
and Servicing Agreement, or any information contained in a computer file or
microfiche list required to be delivered by the Seller pursuant to Section
2.1 or subsection 2.6(c) of the Transfer and Servicing Agreement or Section
-------
2.1 or subsection 2.6(c) of the Pooling and Servicing Agreement shall prove
--- -----------------
to have been incorrect in any material respect when made or when delivered,
which continues to be incorrect in any material respect for a period of
forty-five (45) days after the date on which written
30
<PAGE>
notice of such failure, requiring the same to be remedied, shall have been
given to the Seller by the Indenture Trustee, or to the Seller and the
Indenture Trustee by any Holder of the Series 2000-A Notes and as a result
of which the interests of the Series 2000-A Noteholders are materially and
adversely affected for such period; provided, however, that a Series 2000-A
-------- -------
Pay Out Event pursuant to this subsection 6.1(b) shall not be deemed to
-----------------
have occurred hereunder if the Seller has accepted reassignment of the
related Receivable, or all of such Receivables, if applicable, during such
period in accordance with the provisions of the Transfer and Servicing
Agreement or the Pooling and Servicing Agreement;
(c) a failure by the Seller to convey Receivables in Additional
Accounts to the Trust within ten (10) days after the day on which it is
required to convey such Receivables pursuant to subsection 2.6(a) of the
Transfer and Servicing Agreement or subsection 2.6(a) of the Pooling and
Servicing Agreement;
(d) any Servicer Default shall occur;
(e) the average of the Portfolio Yields for any three consecutive
Monthly Periods is reduced to a rate which is less than the sum of the
average of the Base Rates for such period and the average of the Default
Amount Rates for such period;
(f) the Note Principal Balance shall not be paid in full on the
Expected Principal Distribution Date;
(g) prior to the SMT Termination Date, a Trust Pay Out Event shall
occur under (and as defined in) the Pooling and Servicing Agreement;
(h) any draw shall be made on any Policy in accordance with the terms
thereof; or
(i) Insurer shall declare a Pay Out Event in accordance with Section
-------
5.01 of the Insurance Agreement (which section is set forth in its entirety
----
in Exhibit H) at any time prior to a Control Transfer Event; or
---------
(j) the Counterparty shall fail to make any net payment required to
be made by it under the Swap, and such failure is not cured within five
Business Days, or the Swap shall terminate (other than in accordance with a
replacement of the Swap in accordance with Section 4.7(c)) prior to the
--------------
Expected Principal Distribution Date;
(k) without limiting the foregoing, the occurrence of an Event of
Default with respect to Series 2000-A; or
(l) the occurrence of an Insolvency Event relating to the Insurer;
then, in the case of any event described in subsection (a), (b), (d) or
-------------- --- ---
(i), after the applicable grace period, if any, set forth in such
---
subparagraphs, either the Indenture Trustee or the Holders of Series 2000-A
Notes evidencing more than 50% of the
31
<PAGE>
aggregate unpaid principal amount of Series 2000-A Notes by notice then
given in writing to the Seller and the Servicer (and to the Indenture
Trustee if given by the Series 2000-A Noteholders) may declare that a
"Series Pay Out Event" with respect to Series 2000-A (a "Series 2000-A Pay
-----------------
Out Event") has occurred as of the date of such notice, and, in the case of
---------
any event described in subsection (c), (e), (f), (g), (h), (j), (k) or (l),
-------------- --- --- --- --- --- --- ---
a Series 2000-A Pay Out Event shall 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 such event.
Section 6.2 Series 2000-A Events of Default. (a) For so long as no
-------------------------------
Control Transfer Event has occurred, the Events of Default for Series 2000-
A shall include, in addition to the Events of Default specified in the
Indenture, any one of the following events (whatever the reason for such
Event of Default and whether it shall be voluntary or involuntary or be
effected by operation of law or pursuant to any judgment, decree or order
of any court or any order, rule or regulation of any administrative or
governmental body):
(i) default in the payment of interest on the Series 2000-A
Notes when the same becomes due and payable, and such default shall
continue for a period of twenty-eight (28) days;
(ii) default in the observance or performance of any covenant or
agreement of the Issuer made in the Indenture made in respect of the
Series 2000-A Notes (other than a covenant or agreement, a default in
the observance or performance of which is elsewhere in this Section
-------
6.2 or in Section 5.2 of the Indenture specifically dealt with) (all
--- -----------
of such covenants and agreements in the Indenture which are not
expressly stated to be for the benefit of a particular Series being
deemed to be in respect of the Notes of Series 2000-A for this
purpose) in any material respect and such default shall continue or
not be cured for a period of forty-five (45) days after there shall
have been given, by registered or certified mail, return receipt
requested to the Issuer and the Indenture Trustee by the Insurer, a
written notice specifying such default and requiring it to be remedied
and stating that such notice is a "Notice of Default" hereunder; or
-----------------
(iii) any Servicer Default.
(b) If an Event of Default for Series 2000-A shall have occurred and
be continuing and the Series 2000-A Notes have been accelerated pursuant to
Section 5.3, so long as no Control Transfer Event has occurred, the Insurer
-----------
shall have the right, but not the obligation, to (i) exercise the rights of
the Series 2000-A Noteholders described in Section 5.5 of the Indenture,
-----------
and (ii) to pay all or any portion of the outstanding principal balance of
the Series 2000-A Notes prior to the Series 2000-A Final Maturity Date.
Following the occurrence of an Event of Default for Series 2000-A, the
Indenture Trustee shall continue to submit claims under the
32
<PAGE>
Policies as necessary to enable the Issuer to continue to make payments on
each Distribution Date in accordance with the terms of this Indenture
Supplement.
Section 6.3 Declarations of Default. So long as no Control Transfer
-----------------------
Event shall have occurred and be continuing, neither the Indenture Trustee
nor the Class A Noteholders may declare an Event of Default with respect to
the Series 2000-A Notes. So long as no Control Transfer Event shall have
occurred and be continuing, an Event of Default with respect to the Series
2000-A Notes shall occur only upon delivery by the Insurer to the Indenture
Trustee of notice of the occurrence of an Event of Default.
ARTICLE VII
Redemption of Series 2000-A Notes; Final Distributions; Series Termination
--------------------------------------------------------------------------
Section 7.1 Optional Redemption of Series 2000-A Notes; Final
-------------------------------------------------
Distributions.
--------------
(a) On any day occurring on or after the date on which the
outstanding principal balance of the Series 2000-A Notes is reduced to 10%
or less of the initial outstanding principal balance of Series 2000-A
Notes, the Servicer shall have the option to redeem the Series 2000-A
Notes, at a purchase price equal to (i) if such day is a Distribution Date,
the Reassignment Amount for such Distribution Date or (ii) if such day is
not a Distribution Date, the Reassignment Amount for the Distribution Date
following such day; provided that all amounts due and owing to the Insurer
pursuant to the Insurance Agreement shall have been paid to the Insurer.
(b) The Issuer shall give the Servicer and the Indenture Trustee at
least thirty (30) days prior written notice of the date on which the Issuer
intends to exercise such optional redemption. Not later than 12:00 noon,
New York City time, on such day the Issuer shall deposit into the
Collection Account in immediately available funds the excess of the
Reassignment Amount over the amount, if any, on deposit in the Principal
Accumulation Account. Such redemption option is subject to payment in full
of the Reassignment Amount. Following such deposit into the Collection
Account in accordance with the foregoing, the Collateral Amount for Series
2000-A shall be reduced to zero and the Series 2000-A Noteholders shall
have no further security interest in the Receivables. The Reassignment
Amount shall be distributed as set forth in subsection 7.1(d).
-----------------
(c) (i) The amount to be paid by the Seller with respect to Series
2000-A in connection with a reassignment of Receivables to the Seller
pursuant to Section 2.4(e) of the Transfer and Servicing Agreement shall
--------------
equal the Reassignment Amount for the first Distribution Date following the
Monthly Period in which the reassignment obligation arises under the
Transfer and Servicing Agreement.
33
<PAGE>
(ii) The amount to be paid by the Seller with respect to Series 2000-A
in connection with a repurchase of the Notes pursuant to Section 7.1 of the
-----------
Transfer and Servicing Agreement shall equal the Reassignment Amount for
the Distribution Date of such repurchase.
(d) With respect to the Reassignment Amount deposited into the
Collection Account pursuant to Section 7.1, the Indenture Trustee shall, in
-----------
accordance with the written direction of the Servicer, not later than 12:00
noon, New York City time, on the related Distribution Date, make deposits
or distributions of the following amounts (in the priority set forth below
and, in each case, after giving effect to any deposits and distributions
otherwise to be made on such date) in immediately available funds: (i) (x)
the Note Principal Balance on such Distribution Date will be distributed to
the Paying Agent for payment to the Class A Noteholders and (y) an amount
equal to the sum of (A) Monthly Interest for such Distribution Date, (B)
any Monthly Interest previously due but not distributed to the Class A
Noteholders on a prior Distribution Date and (C) the amount of Additional
Interest, if any, for such Distribution Date and any Additional Interest
previously due but not distributed to the Class A Noteholders on any prior
Distribution Date, will be distributed to the Paying Agent for payment to
the Class A Noteholders, (ii) any unpaid Monthly Insurance Premiums,
Reimbursement Amounts, interest thereon and other amounts payable to the
Insurer under the Insurance Agreement will be distributed to the Insurer
(iii) any amounts owed to the Counterparty under the Swap shall be
distributed to the Counterparty and (iv) any excess shall be released to
the Issuer.
(e) Notwithstanding anything to the contrary in this Indenture
Supplement, the Indenture or the Transfer and Servicing Agreement, all
amounts distributed to the Paying Agent pursuant to subsection 7.1(d) for
-----------------
payment to the Series 2000-A Noteholders shall be deemed distributed in
full to the Series 2000-A Noteholders on the date on which such funds are
distributed to the Paying Agent pursuant to this Section 7.1 and shall be
-----------
deemed to be a final distribution pursuant to Section 11.2 of the
------------
Indenture.
Section 7.2 Series Termination. On the Series 2000-A Final Maturity
------------------
Date, the right of the Series 2000-A Noteholders to receive payments from
the Issuer will be limited solely to the right to receive payments pursuant
to Section 5.5 of the Indenture.
-----------
ARTICLE VIII
Miscellaneous Provisions
------------------------
Section 8.1 Ratification of Indenture; Amendments. As supplemented by
-------------------------------------
this Indenture Supplement, the Indenture is in all respects ratified and
confirmed and the Indenture as so supplemented by this Indenture Supplement
shall be read, taken and construed as one and the same instrument. This
Indenture Supplement may be
34
<PAGE>
amended only by a Supplemental Indenture entered in accordance with the
terms of Section 10.1 or 10.2 of the Indenture. For purposes of the
------------ ----
application of Section 10.2 to any amendment of this Indenture Supplement,
------------
only the vote of the Series 2000-A Noteholders shall be required.
Section 8.2 Form of Delivery of the Series 2000-A Notes. The Series
-------------------------------------------
2000-A Notes shall be Book-Entry Notes and shall be delivered as Registered
Notes as provided in Section 2.1 of the Indenture.
-----------
Section 8.3 Counterparts. This Indenture Supplement may be executed in
------------
two or more counterparts, and by different parties on separate
counterparts, each of which shall be an original, but all of which shall
constitute one and the same instrument.
Section 8.4 GOVERNING LAW. THIS INDENTURE SUPPLEMENT SHALL BE
-------------
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS, WITHOUT
REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS
AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE
WITH SUCH LAWS, PROVIDED, HOWEVER, THAT THE DUTIES AND OBLIGATIONS OF THE
INDENTURE TRUSTEE SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS.
Section 8.5 Limitation of Liability. Notwithstanding any other
-----------------------
provision herein or elsewhere, this Agreement has been executed and
delivered by Bankers Trust Company, not in its individual capacity, but
solely in its capacity as Owner Trustee of the Trust, in no event shall
Bankers Trust Company in its individual capacity have any liability in
respect of the representations, warranties, or obligations of the Trust
hereunder or under any other document, as to all of which recourse shall be
had solely to the assets of the Trust, and for all purposes of this
Agreement and each other document, the Owner Trustee (as such or in its
individual capacity) shall be subject to, and entitled to the benefits of,
the terms and provisions of the Trust Agreement.
Section 8.6 Rights of the Indenture Trustee. The Indenture Trustee
-------------------------------
shall have herein the same rights, protections, indemnities and immunities
as specified in the Master Indenture.
Section 8.7 Third Party Beneficiary. This Indenture Supplement and
-----------------------
the Indenture will inure to the benefit of the Insurer.
Section 8.8 Inconsistency. In the event of any inconsistency between
-------------
(a) the provisions of the Insurance Agreement set forth in Exhibits F, G
---------- -
and H and (b) the Insurance Agreement, the provisions of the Insurance
-
Agreement shall prevail.
[SIGNATURE PAGES FOLLOW]
35
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this Indenture Supplement
to be duly executed and delivered by their respective duly authorized officers
on the day and year first above written.
SPIEGEL CREDIT CARD MASTER NOTE
TRUST, as Issuer
By: BANKERS TRUST COMPANY,
not in its individual capacity
but solely as Owner Trustee
/s/ Eileen M. Hughes
Name:------------------------------
Title: Vice President
THE BANK OF NEW YORK,
as Indenture Trustee
/s/ Cassandra Shedd
Name:------------------------------
Title: Assistant Treasurer
Signature page to
Indenture Supplement
36
<PAGE>
Acknowledged and Accepted:
FIRST CONSUMERS NATIONAL BANK,
as Servicer
/s/ John R. Steele
Name:------------------------------
Title: Treasurer
Acknowledged and Accepted:
SPIEGEL CREDIT CORPORATION III,
as Seller
/s/ John R. Steele
Name:------------------------------
Title: Treasurer
Signature page to
Indenture Supplement
37
<PAGE>
EXHIBIT A
FORM OF CLASS A FLOATING RATE ASSET BACKED NOTE
UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO
SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
THE HOLDER OF THIS NOTE BY ITS ACCEPTANCE HEREOF COVENANTS AND AGREES THAT
IT WILL NOT AT ANY TIME INSTITUTE AGAINST THE ISSUER OR THE SELLER, OR JOIN IN
INSTITUTING AGAINST THE ISSUER OR THE SELLER, ANY BANKRUPTCY, REORGANIZATION,
ARRANGEMENT, INSOLVENCY OR LIQUIDATION PROCEEDINGS, OR OTHER PROCEEDINGS UNDER
ANY UNITED STATES FEDERAL OR STATE BANKRUPTCY OR SIMILAR LAW.
THE HOLDER OF THIS CLASS A NOTE, BY ACCEPTANCE OF THIS NOTE, AND EACH
HOLDER OF A BENEFICIAL INTEREST THEREIN, AGREE TO TREAT THE CLASS A NOTES AS
INDEBTEDNESS OF THE ISSUER FOR APPLICABLE FEDERAL, STATE, AND LOCAL INCOME AND
FRANCHISE TAX LAW AND FOR PURPOSES OF ANY OTHER TAX IMPOSED ON, OR MEASURED BY,
INCOME.
Exhibit A-1 (Page 1)
<PAGE>
INITIAL OUTSTANDING PRINCIPAL BALANCE REGISTERED $______________*
No. R- ____________________ CUSIP NO.
-------------
SPIEGEL CREDIT CARD MASTER NOTE TRUST SERIES 2000-A
CLASS A FLOATING RATE ASSET BACKED NOTE
Spiegel Credit Card Master Note Trust (herein referred to as the "Issuer"
or the "Trust"), an Illinois common law trust governed by a Trust Agreement
dated as of December 1, 2000, for value received, hereby promises to pay to Cede
& Co., or registered assigns, subject to the following provisions, the principal
sum of __________________________________ DOLLARS, or such greater or lesser
amount as determined in accordance with the Indenture, on the Series 2000-A
Final Maturity Date (which is the earlier to occur of (a) the Distribution Date
on which the Note Principal Balance is paid in full and (b) the ___________
Distribution Date), except as otherwise provided below or in the Indenture. The
Issuer will pay interest on the unpaid principal amount of this Note at the Note
Interest Rate on each Distribution Date until the principal amount of this Note
is paid in full. Interest on this Note will accrue for each Distribution Date
from and including the most recent Distribution Date on which interest has been
paid to but excluding such Distribution Date or, for the initial Distribution
Date, from and including the Closing Date to but excluding such Distribution
Date. Interest will be computed on the basis of a 360-day year and the actual
number of days elapsed. Principal of this Note shall be paid in the manner
specified on the reverse hereof.
The principal of and interest on this Note are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts.
Reference is made to the further provisions of this Note set forth on the
reverse hereof, which shall have the same effect as though fully set forth on
the face of this Note.
Unless the certificate of authentication hereon has been executed by or on
behalf of the Indenture Trustee, by manual signature, this Note shall not be
entitled to any benefit under the Indenture or the Indenture Supplement referred
to on the reverse hereof, or be valid for any purpose.
________________________
* Denominations of $1,000 and integral multiples of $1,000 in excess
thereof.
Exhibit A-1 (Page 2)
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this Class A Note to be duly
executed.
SPIEGEL CREDIT CARD MASTER NOTE TRUST,
as Issuer
By: Bankers Trust Company, not in its individual
capacity but solely as Owner Trustee under
the Trust Agreement
By: ______________________________________________
Name:
Title:
Dated:_________,_____
Exhibit A-1 (Page 3)
<PAGE>
INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Class A Notes described in the within-mentioned Indenture.
The Bank of New York
By:_________________________________________
Authorized Signatory
Exhibit A-1 (Page 4)
<PAGE>
SPIEGEL CREDIT CARD MASTER NOTE TRUST SERIES 2000-A
CLASS A FLOATING RATE ASSET BACKED NOTE
Summary of Terms and Conditions
This Class A Note is one of a duly authorized issue of Notes of the Issuer,
designated as Spiegel Credit Card Master Note Trust, Series 2000-A (the "SERIES
2000-A NOTES"), issued under a Master Indenture dated as of December 1, 2000
(the "MASTER INDENTURE"), between the Issuer and The Bank of New York, as
indenture trustee (the "INDENTURE TRUSTEE"), as supplemented by the Indenture
Supplement dated as of December 1, 2000 (the "INDENTURE SUPPLEMENT"), and
representing the right to receive certain payments from the Issuer. The term
"Indenture," unless the context otherwise requires, refers to the Master
Indenture as supplemented by the Indenture Supplement. The Notes are subject to
all of the terms of the Indenture. All terms used in this Note that are defined
in the Indenture shall have the meanings assigned to them in or pursuant to the
Indenture. In the event of any conflict or inconsistency between the Indenture
and this Note, the Indenture shall control.
The Noteholder, by its acceptance of this Note, agrees that it will look
solely to the property of the Trust allocated to the payment of this Note for
payment hereunder and that the Indenture Trustee is not liable to the
Noteholders for any amount payable under the Note or the Indenture or, except as
expressly provided in the Indenture, subject to any liability under the
Indenture.
This Note does not purport to summarize the Indenture and reference is made
to the Indenture for the interests, rights and limitations of rights, benefits,
obligations and duties evidenced thereby, and the rights, duties and immunities
of the Indenture Trustee.
The Note Initial Principal Balance is $______________. The Note Principal
Balance on any date of determination will be an amount equal to (a) the Note
Initial Principal Balance, minus (b) the aggregate amount of principal payments
made to the Class A Noteholders on or prior to such date.
The Expected Principal Distribution Date is the ____________ Distribution
Date, but principal with respect to the Class A Notes may be paid earlier or
later under certain circumstances described in the Indenture. If for one or
more months during the Controlled Accumulation Period there are not sufficient
funds to deposit into the Principal Funding Account the Controlled Deposit
Amount, then to the extent that excess funds are not available on subsequent
Distribution Dates with respect to the Controlled Accumulation Period to make up
for such shortfalls, the final payment of principal of the Notes will occur
later than the Expected Principal Distribution Date. Payments of principal of
the Notes shall be payable in accordance with the provisions of the Indenture.
Subject to the terms and conditions of the Indenture, the Seller may, from
time to time, direct the Owner Trustee, on behalf of the Trust, to issue one or
more new Series of Notes.
Exhibit A-1 (Page 5)
<PAGE>
On each Distribution Date, the Paying Agent shall distribute to each Class
A Noteholder of record on the related Record Date (except for the final payment
in respect of this Class A Note) such Class A Noteholder's pro rata share of the
amounts held by the Paying Agent that are allocated and available on such
Distribution Date to pay interest and principal on the Class A Notes pursuant to
the Indenture Supplement. Except as provided in the Indenture with respect to a
final payment, payments to Series 2000-A Noteholders shall be made by (i) check
mailed to each Series 2000-A Noteholder (at such Noteholder's address as it
appears in the Note Register), except that with respect to any Series 2000-A
Notes registered in the name of the nominee of a Clearing Agency, such payment
shall be made in immediately available funds and (ii) without presentation or
surrender of any Series 2000-A Note or the making of any notation thereon. Final
payment of this Class A Note will be made only upon presentation and surrender
of this Class A Note at the office or agency specified in the notice of final
payment delivered by the Indenture Trustee to the Series 2000-A Noteholders in
accordance with the Indenture.
On any day occurring on or after the date on which the outstanding
principal balance of the Series 2000-A Notes is reduced to 10% or less of the
initial outstanding principal balance of the Series 2000-A Notes, the Servicer
shall have the option to redeem the Series 2000-A Notes, at a purchase price
equal to (i) if such day is a Distribution Date, the Reassignment Amount for
such Distribution Date or (ii) if such day is not a Distribution Date, the
Reassignment Amount for the Distribution Date following such day.
THIS CLASS A NOTE DOES NOT REPRESENT AN OBLIGATION OF, OR AN INTEREST IN,
THE SELLER, THE ISSUER, FIRST CONSUMERS NATIONAL BANK, OR ANY AFFILIATE OF ANY
OF THEM AND IS NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY OR INSTRUMENTALITY.
Each Noteholder, by accepting a Note, hereby covenants and agrees that it
will not at any time institute against the Issuer or the Seller, or join in
instituting against the Issuer or the Seller, any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings, or other proceedings under
any United States federal or state bankruptcy or similar law.
Except as otherwise provided in the Indenture Supplement, the Class A Notes
are issuable only in minimum denominations of $1,000 and integral multiples of
$1,000. The transfer of this Class A Note shall be registered in the Note
Register upon surrender of this Class A Note for registration of transfer at any
office or agency maintained by the Transfer Agent and Registrar accompanied by a
written instrument of transfer, in a form satisfactory to the Indenture Trustee
or the Transfer Agent and Registrar, duly executed by the Class A Noteholder or
such Class A Noteholder's attorney, and duly authorized in writing with such
signature guaranteed, and thereupon one or more new Class A Notes in any
authorized denominations of like aggregate principal amount will be issued to
the designated transferee or transferees.
As provided in the Indenture and subject to certain limitations therein set
forth, Class A Notes are exchangeable for new Class A Notes in any authorized
denominations and of like
Exhibit A-1 (Page 6)
<PAGE>
aggregate principal amount, upon surrender of such Notes to be exchanged at the
office or agency of the Transfer Agent and Registrar. No service charge may be
imposed for any such exchange but the Issuer or Transfer Agent and Registrar may
require payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in connection therewith.
The Issuer, the Seller, the Indenture Trustee and any agent of the Issuer,
the Seller or the Indenture Trustee shall treat the person in whose name this
Class A Note is registered as the owner hereof for all purposes, and neither the
Issuer, the Seller, the Indenture Trustee nor any agent of the Issuer, the
Seller or the Indenture Trustee shall be affected by notice to the contrary.
THIS CLASS A NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF ILLINOIS, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE
OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS.
Exhibit A-1 (Page 7)
<PAGE>
ASSIGNMENT
Social Security or other identifying number of assignee _______________________
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto _________________________________ (name and address of assignee) the within
certificate and all rights thereunder, and hereby irrevocably constitutes and
appoints _____________________ attorney, to transfer said certificate on the
books kept for registration thereof, with full power of substitution in the
premises.
Dated:_____________ _________________________________**
Signature Guaranteed:
_______________________
** The signature to this assignment must correspond with the name of the
registered owner as it appears on the face of the within Note in every
particular, without alteration, enlargement or any change whatsoever.
Exhibit A-2 (Page 1)
<PAGE>
(Multicurrency--Cross Border)
ISDA(R)
International Swap Dealers Association. Inc.
MASTER AGREEMENT
dated as of December 19, 2000
-------------------
BANK OF AMERICA, N.A. and Spiegel Credit Card Master Note Trust
--------------------------------- --------------------------------------
have entered and/or anticipate entering into one or more transactions (each a
"Transaction") that are or will be governed by this Master Agreement, which
includes the schedule (the "Schedule"), and the documents and other confirming
evidence (each a "Confirmation") exchanged between the parties confirming those
Transactions.
Accordingly, the parties agree as follows:--
1. Interpretation
(a) Definitions. The terms defined in Section 14 and in the Schedule will have
the meanings therein specified for the purpose of this Master Agreement.
(b) Inconsistency. In the event of any inconsistency between the provisions of
the Schedule and the other provisions of this Master Agreement, the Schedule
will prevail. In the event of any inconsistency between the provisions of any
Confirmation and this Master Agreement (including the Schedule), such
Confirmation will prevail for the purpose of the relevant Transaction.
(c) Single Agreement. All Transactions are entered into in reliance on the fact
that this Master Agreement and all Confirmations form a single agreement between
the parties (collectively referred to as this "Agreement"), and the parties
would not otherwise enter into any Transactions.
2. Obligations
(a) General Conditions.
(i) Each party will make each payment or delivery specified in each
Confirmation to be made by it, subject to the other provisions of
this Agreement.
(ii) Payments under this Agreement will be made on the due date for value
on that date in the place of the account specified in the relevant
Confirmation or otherwise pursuant to this Agreement, in freely
transferable funds and in the manner customary for payments in the
required currency. Where settlement is by delivery (that is, other
than by payment), such delivery will be made for receipt on the due
date in the manner customary for the relevant obligation unless
otherwise specified in the relevant Confirmation or elsewhere in this
Agreement.
(iii) Each obligation of each party under Section 2(a)(i) is subject to (1)
the condition precedent that no Event of Default or Potential Event
of Default with respect to the other party has occurred and is
continuing, (2) the condition precedent that no Early Termination
Date in respect of the relevant Transaction has occurred or been
effectively designated and (3) each other applicable condition
precedent specified in this Agreement.
Copyright(C)1992 by International Swap Dealers Association, Inc.
<PAGE>
(b) Change of Account. Either party may change its account for receiving a
payment or delivery by giving notice to the other party at least five Local
Business Days prior to the scheduled date for the payment or delivery to which
such change applies unless such other party gives timely notice of a reasonable
objection to such change.
(c) Netting. If on any date amounts would otherwise be payable:--
(i) in the same currency; and
(ii) in respect of the same Transaction,
by each party to the other, then, on such date, each party's obligation to make
payment of any such amount will be automatically satisfied and discharged and,
if the aggregate amount that would otherwise have been payable by one party
exceeds the aggregate amount that would otherwise have been payable by the other
party, replaced by an obligation upon the party by whom the larger aggregate
amount would have been payable to pay to the other party the excess of the
larger aggregate amount over the smaller aggregate amount.
The parties may elect in respect of two or more Transactions that a net amount
will be determined in respect of all amounts payable on the same date in the
same currency in respect of such Transactions, regardless of whether such
amounts are payable in respect of the same Transaction. The election may be made
in the Schedule or a Confirmation by specifying that subparagraph (ii) above
will not apply to the Transactions identified as being subject to the election,
together with the starting date (in which case subparagraph (ii) above will not,
or will cease to, apply to such Transactions from such date). This election may
be made separately for different groups of Transactions and will apply
separately to each pairing of Offices through which the parties make and receive
payments or deliveries.
(d) Deduction or Withholding for Tax.
(i) Gross-Up. All payments under this Agreement will be made without any
deduction or withholding for or on account of any Tax unless such deduction
or withholding is required by any applicable law, as modified by the
practice of any relevant governmental revenue authority, then in effect. If
a party is so required to deduct or withhold, then that party ("X") will:--
(1) promptly notify the other party ("Y") of such requirement;
(2) pay to the relevant authorities the full amount required to
be deducted or withheld (including the full amount required to be
deducted or withheld from any additional amount paid by X to Y
under this Section 2(d)) promptly upon the earlier of determining
that such deduction or withholding is required or receiving
notice that such amount has been assessed against Y;
(3) promptly forward to Y an official receipt (or a certified
copy), or other documentation reasonably acceptable to Y,
evidencing such payment to such authorities; and
(4) if such Tax is an Indemnifiable Tax, pay to Y, in addition
to the payment to which Y is otherwise entitled under this
Agreement, such additional amount as is necessary to ensure that
the net amount actually received by Y (free and clear of
Indemnifiable Taxes, whether assessed against X or Y) will equal
the full amount Y would have received had no such deduction or
withholding been required. However, X will not be required to pay
any additional amount to Y to the extent that it would not be
required to be paid but for:--
(A) the failure by Y to comply with or perform any
agreement contained in Section 4(a)(i), 4(a)(iii) or 4(d);
or
(B) the failure of a representation made by Y pursuant to
Section 3(f) to be accurate and true unless such failure
would not have occurred but for (I) any action taken by a
taxing authority, or brought in a court of competent
jurisdiction, on or after the date on which a Transaction is
entered into (regardless of whether such action is taken or
brought with respect to a party to this Agreement) or (II) a
Change in Tax Law.
2
<PAGE>
(ii) Liability. If:--
(1) X is required by any applicable law, as modified by the
practice of any relevant governmental revenue authority, to make
any deduction or withholding in respect of which X would not be
required to pay an additional amount to Y under Section
2(d)(i)(4);
(2) X does not so deduct or withhold; and
(3) a liability resulting from such Tax is assessed directly
against X,
then, except to the extent Y has satisfied or then satisfies the liability
resulting from such Tax, Y will promptly pay to X the amount of such
liability (including any related liability for interest, but including any
related liability for penalties only if Y has failed to comply with or
perform any agreement contained in Section 4(a)(i), 4(a)(iii) or 4(d)).
(e) Default Interest; Other Amounts. Prior to the occurrence or effective
designation of an Early Termination Date in respect of the relevant Transaction,
a party that defaults in the performance of any payment obligation will, to the
extent permitted by law and subject to Section 6(c), be required to pay interest
(before as well as after judgment) on the overdue amount to the other party on
demand in the same currency as such overdue amount, for the period from (and
including) the original due date for payment to (but excluding) the date of
actual payment, at the Default Rate. Such interest will be calculated on the
basis of daily compounding and the actual number of days elapsed. If, prior to
the occurrence or effective designation of an Early Termination Date in respect
of the relevant Transaction, a party defaults in the performance of any
obligation required to be settled by delivery, it will compensate the other
party on demand if and to the extent provided for in the relevant Confirmation
or elsewhere in this Agreement.
3. Representations
Each party represents to the other party (which representations will be deemed
to be repeated by each party on each date on which a Transaction is entered into
and, in the case of the representations in Section 3(f), at all times until the
termination of this Agreement) that:--
(a) Basic Representations.
(i) Status. It is duly organised and validly existing under the laws of
the jurisdiction of its organisation or incorporation and, if relevant
under such laws, in good standing;
(ii) Powers. It has the power to execute this Agreement and any other
documentation relating to this Agreement to which it is a party, to deliver
this Agreement and any other documentation relating to this Agreement that
it is required by this Agreement to deliver and to perform its obligations
under this Agreement and any obligations it has under any Credit Support
Document to which it is a party and has taken all necessary action to
authorise such execution, delivery and performance;
(iii) No Violation or Conflict. Such execution, delivery and performance do
not violate or conflict with any law applicable to it, any provision of its
constitutional documents, any order or judgment of any court or other
agency of government applicable to it or any of its assets or any
contractual restriction binding on or affecting it or any of its assets;
(iv) Consents. All governmental and other consents that are required to
have been obtained by it with respect to this Agreement or any Credit
Support Document to which it is a party have been obtained and are in full
force and effect and all conditions of any such consents have been complied
with; and
(v) Obligations Binding. Its obligations under this Agreement and any
Credit Support Document to which it is a party constitute its legal, valid
and binding obligations, enforceable in accordance with their respective
terms (subject to applicable bankruptcy, reorganisation, insolvency,
moratorium or similar laws affecting creditors' rights generally and
subject, as to enforceability, to equitable principles of general
application (regardless of whether enforcement is sought in a proceeding in
equity or at law)).
3
<PAGE>
(b) Absence of Certain Events. No Event of Default or Potential Event of
Default or, to its knowledge, Termination Event with respect to it has occurred
and is continuing and no such event or circumstance would occur as a result of
its entering into or performing its obligations under this Agreement or any
Credit Support Document to which it is a party.
(c) Absence of Litigation. There is not pending or, to its knowledge,
threatened against it or any of its Affiliates any action, suit or proceeding at
law or in equity or before any court, tribunal, governmental body, agency or
official or any arbitrator that is likely to affect the legality, validity or
enforceability against it of this Agreement or any Credit Support Document to
which it is a party or its ability to perform its obligations under this
Agreement or such Credit Support Document.
(d) Accuracy of Specified Information. All applicable information that is
furnished in writing by or on behalf of it to the other party and is identified
for the purpose of this Section 3(d) in the Schedule is, as of the date of the
information, true, accurate and complete in every material respect.
(e) Payer Tax Representation. Each representation specified in the Schedule as
being made by it for the purpose of this Section 3(e) is accurate and true.
(f) Payee Tax Representations. Each representation specified in the Schedule as
being made by it for the purpose of this Section 3(f) is accurate and true.
4. Agreements
Each party agrees with the other that, so long as either party has or may have
any obligation under this Agreement or under any Credit Support Document to
which it is a party:--
(a) Furnish Specified Information. It will deliver to the other party or, in
certain cases under subparagraph (iii) below, to such government or taxing
authority as the other party reasonably directs:--
(i) any forms, documents or certificates relating to taxation specified
in the Schedule or any Confirmation;
(ii) any other documents specified in the Schedule or any Confirmation;
and
(iii) upon reasonable demand by such other party, any form or document that
may be required or reasonably requested in writing in order to allow such
other party or its Credit Support Provider to make a payment under this
Agreement or any applicable Credit Support Document without any deduction
or withholding for or on account of any Tax or with such deduction or
withholding at a reduced rate (so long as the completion, execution or
submission of such form or document would not materially prejudice the
legal or commercial position of the party in receipt of such demand), with
any such form or document to be accurate and completed in a manner
reasonably satisfactory to such other party and to be executed and to be
delivered with any reasonably required certification,
in each case by the date specified in the Schedule or such Confirmation or, if
none is specified, as soon as reasonably practicable.
(b) Maintain Authorisations. It will use all reasonable efforts to maintain in
full force and effect all consents of any governmental or other authority that
are required to be obtained by it with respect to this Agreement or any Credit
Support Document to which it is a party and will use all reasonable efforts to
obtain any that may become necessary in the future.
(c) Comply with Laws. It will comply in all material respects with all
applicable laws and orders to which it may be subject if failure so to comply
would materially impair its ability to perform its obligations under this
Agreement or any Credit Support Document to which it is a party.
(d) Tax Agreement. It will give notice of any failure of a representation made
by it under Section 3(f) to be accurate and true promptly upon learning of such
failure.
(e) Payment of Stamp Tax. Subject to Section 11, it will pay any Stamp Tax
levied or imposed upon it or in respect of its execution or performance of this
Agreement by a jurisdiction in which it is incorporated,
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organised, managed and controlled, or considered to have its seat, or in which a
branch or office through which it is acting for the purpose of this Agreement is
located ("Stamp Tax Jurisdiction") and will indemnify the other party against
any Stamp Tax levied or imposed upon the other party or in respect of the other
party's execution or performance of this Agreement by any such Stamp Tax
Jurisdiction which is not also a Stamp Tax Jurisdiction with respect to the
other party.
5. Events of Default and Termination Events
(a) Events of Default. The occurrence at any time with respect to a party or,
if applicable, any Credit Support Provider of such party or any Specified Entity
of such party of any of the following events constitutes an event of default (an
"Event of Default") with respect to such party:--
(i) Failure to Pay or Deliver. Failure by the party to make, when due,
any payment under this Agreement or delivery under Section 2(a)(i) or 2(e)
required to be made by it if such failure is not remedied on or before the
third Local Business Day after notice of such failure is given to the
party;
(ii) Breach of Agreement. Failure by the party to comply with or perform
any agreement or obligation (other than an obligation to make any payment
under this Agreement or delivery under Section 2(a)(i) or 2(e) or to give
notice of a Termination Event or any agreement or obligation under Section
4(a)(i), 4(a)(iii) or 4(d)) to be complied with or performed by the party
in accordance with this Agreement if such failure is not remedied on or
before the thirtieth day after notice of such failure is given to the
party;
(iii) Credit Support Default.
(1) Failure by the party or any Credit Support Provider of such party
to comply with or perform any agreement or obligation to be complied
with or performed by it in accordance with any Credit Support
Document if such failure is continuing after any applicable grace
period has elapsed;
(2) the expiration or termination of such Credit Support Document or
the failing or ceasing of such Credit Support Document to be in full
force and effect for the purpose of this Agreement (in either case
other than in accordance with its terms) prior to the satisfaction of
all obligations of such party under each Transaction to which such
Credit Support Document relates without the written consent of the
other party; or
(3) the party or such Credit Support Provider disaffirms, disclaims,
repudiates or rejects, in whole or in part, or challenges the
validity of, such Credit Support Document;
(iv) Misrepresentation. A representation (other than a representation
under Section 3(e) or (f)) made or repeated or deemed to have been made or
repeated by the party or any Credit Support Provider of such party in this
Agreement or any Credit Support Document proves to have been incorrect or
misleading in any material respect when made or repeated or deemed to have
been made or repeated;
(v) Default under Specified Transaction. The party, any Credit Support
Provider of such party or any applicable Specified Entity of such party (1)
defaults under a Specified Transaction and, after giving effect to any
applicable notice requirement or grace period, there occurs a liquidation
of, an acceleration of obligations under, or an early termination of, that
Specified Transaction, (2) defaults, after giving effect to any applicable
notice requirement or grace period, in making any payment or delivery due
on the last payment, delivery or exchange date of, or any payment on early
termination of, a Specified Transaction (or such default continues for at
least three Local Business Days if there is no applicable notice
requirement or grace period) or (3) disaffirms, disclaims, repudiates or
rejects, in whole or in part, a Specified Transaction (or such action is
taken by any person or entity appointed or empowered to operate it or act
on its behalf);
(vi) Cross Default. If "Cross Default" is specified in the Schedule as
applying to the party, the occurrence or existence of (1) a default, event
of default or other similar condition or event (however
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described) in respect of such party, any Credit Support Provider of such
party or any applicable Specified Entity of such party under one or more
agreements or instruments relating to Specified Indebtedness of any of them
(individually or collectively) in an aggregate amount of not less than the
applicable Threshold Amount (as specified in the Schedule) which has
resulted in such Specified Indebtedness becoming, or becoming capable at
such time of being declared, due and payable under such agreements or
instruments, before it would otherwise have been due and payable or (2) a
default by such party, such Credit Support Provider or such Specified
Entity (individually or collectively) in making one or more payments on the
due date thereof in an aggregate amount of not less than the applicable
Threshold Amount under such agreements or instruments (after giving effect
to any applicable notice requirement or grace period);
(vii) Bankruptcy. The party, any Credit Support Provider of such party or
any applicable Specified Entity of such party:--
(1) is dissolved (other than pursuant to a consolidation,
amalgamation or merger); (2) becomes insolvent or is unable to pay
its debts or fails or admits in writing its inability generally to
pay its debts as they become due; (3) makes a general assignment,
arrangement or composition with or for the benefit of its creditors;
(4) institutes or has instituted against it a proceeding seeking a
judgment of insolvency or bankruptcy or any other relief under any
bankruptcy or insolvency law or other similar law affecting
creditors' rights, or a petition is presented for its winding-up or
liquidation, and, in the case of any such proceeding or petition
instituted or presented against it, such proceeding or petition (A)
results in a judgment of insolvency or bankruptcy or the entry of an
order for relief or the making of an order for its winding-up or
liquidation or (B) is not dismissed, discharged, stayed or
restrained in each case within 30 days of the institution or
presentation thereof; (5) has a resolution passed for its winding-
up, official management or liquidation (other than pursuant to a
consolidation, amalgamation or merger); (6) seeks or becomes subject
to the appointment of an administrator, provisional liquidator,
conservator, receiver, trustee, custodian or other similar official
for it or for all or substantially all its assets; (7) has a secured
party take possession of all or substantially all its assets or has
a distress, execution, attachment, sequestration or other legal
process levied, enforced or sued on or against all or substantially
all its assets and such secured party maintains possession, or any
such process is not dismissed, discharged, stayed or restrained, in
each case within 30 days thereafter; (8) causes or is subject to any
event with respect to it which, under the applicable laws of any
jurisdiction, has an analogous effect to any of the events specified
in clauses (1) to (7) (inclusive); or (9) takes any action in
furtherance of, or indicating its consent to, approval of, or
acquiescence in, any of the foregoing acts; or
(viii) Merger Without Assumption. The party or any Credit Support Provider
of such party consolidates or amalgamates with, or merges with or into, or
transfers all or substantially all its assets to, another entity and, at
the time of such consolidation, amalgamation, merger or transfer:--
(1) the resulting, surviving or transferee entity fails to assume
all the obligations of such party or such Credit Support Provider
under this Agreement or any Credit Support Document to which it or
its predecessor was a party by operation of law or pursuant to an
agreement reasonably satisfactory to the other party to this
Agreement; or
(2) the benefits of any Credit Support Document fail to extend
(without the consent of the other party) to the performance by such
resulting, surviving or transferee entity of its obligations under
this Agreement.
(b) Termination Events. The occurrence at any time with respect to a party or,
if applicable, any Credit Support Provider of such party or any Specified Entity
of such party of any event specified below constitutes an Illegality if the
event is specified in (i) below, a Tax Event if the event is specified in (ii)
below or a Tax Event upon Merger if the event is specified in (iii) below, and,
if specified to be applicable, a Credit Event
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Upon Merger if the event is specified pursuant to (iv) below or an Additional
Termination Event if the event is specified pursuant to (v) below:--
(i) Illegality. Due to the adoption of, or any change in, any
applicable law after the date on which a Transaction is entered into,
or due to the promulgation of, or any change in, the interpretation by
any court, tribunal or regulatory authority with competent jurisdiction
of any applicable law after such date, it becomes unlawful (other than
as a result of a breach by the party of Section 4(b)) for such party
(which will be the Affected Party):--
(1) to perform any absolute or contingent obligation to make a
payment or delivery or to receive a payment or delivery in
respect of such Transaction or to comply with any other material
provision of this Agreement relating to such Transaction; or
(2) to perform, or for any Credit Support Provider of such party
to perform, any contingent or other obligation which the party
(or such Credit Support Provider) has under any Credit Support
Document relating to such Transaction;
(ii) Tax Event. Due to (x) any action taken by a taxing authority, or
brought in a court of competent jurisdiction, on or after the date on
which a Transaction is entered into (regardless of whether such action
is taken or brought with respect to a party to this Agreement) or (y) a
Change in Tax Law, the party (which will be the Affected Party) will,
or there is a substantial likelihood that it will, on the next
succeeding Scheduled Payment Date (1) be required to pay to the other
party an additional amount in respect of an Indemnifiable Tax under
Section 2(d)(i)(4) (except in respect of interest under Section 2(e),
6(d)(ii) or 6(e)) or (2) receive a payment from which an amount is
required to be deducted or withheld for or on account of a Tax (except
in respect of interest under Section 2(e), 6(d)(ii) or 6(e)) and no
additional amount is required to be paid in respect of such Tax under
Section 2(d)(i)(4) (other than by reason of Section 2(d)(i)(4)(A) or
(B));
(iii) Tax Event Upon Merger. The party (the "Burdened Party") on the
next succeeding Scheduled Payment Date will either (1) be required to
pay an additional amount in respect of an Indemnifiable Tax under
Section 2(d)(i)(4) (except in respect of interest under Section 2(e),
6(d)(ii) or 6(e)) or (2) receive a payment from which an amount has
been deducted or withheld for or on account of any Indemnifiable Tax in
respect of which the other party is not required to pay an additional
amount (other than by reason of Section 2(d)(i)(4)(A) or (B)), in
either case as a result of a party consolidating or amalgamating with,
or merging with or into, or transferring all or substantially all its
assets to, another entity (which will be the Affected Party) where such
action does not constitute an event described in Section 5(a)(viii);
(iv) Credit Event Upon Merger. If "Credit Event Upon Merger" is
specified in the Schedule as applying to the party, such party ("X"),
any Credit Support Provider of X or any applicable Specified Entity of
X consolidates or amalgamates with, or merges with or into, or
transfers all or substantially all its assets to, another entity and
such action does not constitute an event described in Section
5(a)(viii) but the creditworthiness of the resulting, surviving or
transferee entity is materially weaker than that of X, such Credit
Support Provider or such Specified Entity, as the case may be,
immediately prior to such action (and, in such event, X or its
successor or transferee, as appropriate, will be the Affected Party);
or
(v) Additional Termination Event. If any "Additional Termination
Event" is specified in the Schedule or any Confirmation as applying,
the occurrence of such event (and, in such event, the Affected Party or
Affected Parties shall be as specified for such Additional Termination
Event in the Schedule or such Confirmation).
(c) Event of Default and Illegality. If an event or circumstance which
would otherwise constitute or give rise to an Event of Default also constitutes
an Illegality, it will be treated as an Illegality and will not constitute an
Event of Default.
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6. Early Termination
(a) Right to Terminate Following Event of Default. If at any time an Event
of Default with respect to a party (the "Defaulting Party") has occurred and is
then continuing, the other party (the "Non-defaulting Party") may, by not more
than 20 days notice to the Defaulting Party specifying the relevant Event of
Default, designate a day not earlier than the day such notice is effective as an
Early Termination Date in respect of all outstanding Transactions. If, however,
"Automatic Early Termination" is specified in the Schedule as applying to a
party, then an Early Termination Date in respect of all outstanding Transactions
will occur immediately upon the occurrence with respect to such party of an
Event of Default specified in Section 5(a)(vii)(l), (3), (5), (6) or, to the
extent analogous thereto, (8), and as of the time immediately preceding the
institution of the relevant proceeding or the presentation of the relevant
petition upon the occurrence with respect to such party of an Event of Default
specified in Section 5(a)(vii)(4) or, to the extent analogous thereto, (8).
(b) Right to Terminate Following Termination Event.
(i) Notice. If a Termination Event occurs, an Affected Party will,
promptly upon becoming aware of it, notify the other party, specifying
the nature of that Termination Event and each Affected Transaction and
will also give such other information about that Termination Event as
the other party may reasonably require.
(ii) Transfer to Avoid Termination Event. If either an Illegality
under Section 5(b)(i)(l) or a Tax Event occurs and there is only one
Affected Party, or if a Tax Event Upon Merger occurs and the Burdened
Party is the Affected Party, the Affected Party will, as a condition to
its right to designate an Early Termination Date under Section
6(b)(iv), use all reasonable efforts (which will not require such party
to incur a loss, excluding immaterial, incidental expenses) to transfer
within 20 days after it gives notice under Section 6(b)(i) all its
rights and obligations under this Agreement in respect of the Affected
Transactions to another of its Offices or Affiliates so that such
Termination Event ceases to exist.
If the Affected Party is not able to make such a transfer it will give
notice to the other party to that effect within such 20 day period,
whereupon the other party may effect such a transfer within 30 days
after notice is given under Section 6(b)(i).
Any such transfer by a party under this Section 6(b)(ii) will be
subject to and conditional upon the prior written consent of the other
party, which consent will not be withheld if such other party's
policies in effect at such time would permit it to enter into
transactions with the transferee on the terms proposed.
(iii) Two Affected Parties. If an Illegality under Section 5(b)(i)(1)
or a Tax Event occurs and there are two Affected Parties, each party
will use all reasonable efforts to reach agreement within 30 days after
notice thereof is given under Section 6(b)(i) on action to avoid that
Termination Event.
(iv) Right to Terminate. If:--
(1) a transfer under Section 6(b)(ii) or an agreement under
Section 6(b)(iii), as the case may be, has not been effected with
respect to all Affected Transactions within 30 days after an
Affected Party gives notice under Section 6(b)(i); or
(2) an Illegality under Section 5(b)(i)(2), a Credit Event Upon
Merger or an Additional Termination Event occurs, or a Tax Event
Upon Merger occurs and the Burdened Party is not the Affected
Party,
either party in the case of an Illegality, the Burdened Party in the
case of a Tax Event Upon Merger, any Affected Party in the case of a
Tax Event or an Additional Termination Event if there is more than one
Affected Party, or the party which is not the Affected Party in the
case of a Credit Event Upon Merger or an Additional Termination Event
if there is only one Affected Party may, by not more than 20 days
notice to the other party and provided that the relevant Termination
Event is then
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continuing, designate a day not earlier than the day such notice is
effective as an Early Termination Date in respect of all Affected
Transactions.
(c) Effect of Designation.
(i) If notice designating an Early Termination Date is given under
Section 6(a) or (b), the Early Termination Date will occur on the date
so designated, whether or not the relevant Event of Default or
Termination Event is then continuing.
(ii) Upon the occurrence or effective designation of an Early
Termination Date, no further payments or deliveries under Section
2(a)(i) or 2(e) in respect of the Terminated Transactions will be
required to be made, but without prejudice to the other provisions of
this Agreement. The amount if any, payable in respect of an Early
Termination Date shall be determined pursuant to Section 6(e).
(d) Calculations.
(i) Statement. On or as soon as reasonably practicable following the
occurrence of an Early Termination Date, each party will make the
calculations on its part, if any, contemplated by Section 6(e) and will
provide to the other party a statement (1) showing, in reasonable
detail, such calculations (including all relevant quotations and
specifying any amount payable under Section 6(e)) and (2) giving
details of the relevant account to which any amount payable to it is to
be paid. In the absence of written confirmation from the source of a
quotation obtained in determining a Market Quotation, the records of
the party obtaining such quotation will be conclusive evidence of the
existence and accuracy of such quotation.
(ii) Payment Date. An amount calculated as being due in respect of any
Early Termination Date under Section 6(e) will be payable on the day
that notice of the amount payable is effective (in the case of an Early
Termination Date which is designated or occurs as a result of an Event
of Default) and on the day which is two Local Business Days after the
day on which notice of the amount payable is effective (in the case of
an Early Termination Date which is designated as a result of a
Termination Event). Such amount will be paid together with (to the
extent permitted under applicable law) interest thereon (before as well
as after judgment) in the Termination Currency, from (and including)
the relevant Early Termination Date to (but excluding) the date such
amount is paid, at the Applicable Rate. Such interest will be
calculated on the basis of daily compounding and the actual number of
days elapsed.
(e) Payments on Early Termination. If an Early Termination Date occurs. the
following provisions shall apply based on the parties' election in the Schedule
of a payment measure, either "Market Quotation" or "Loss", and a payment method,
either the "First Method" or the "Second Method". If the parties fail to
designate a payment measure or payment method in the Schedule, it will be deemed
that "Market Quotation" or the "Second Method", as the case may be, shall apply.
The amount, if any, payable in respect of an Early Termination Date and
determined pursuant to this Section will be subject to any Set-off.
(i) Events of Default. If the Early Termination Date results from an
Event of Default:--
(1) First Method and Market Quotation. If the First Method and
Market Quotation apply, the Defaulting Party will pay to the Non-
defaulting Party the excess, if a positive number, of (A) the sum
of the Settlement Amount (determined by the Non-defaulting Party)
in respect of the Terminated Transactions and the Termination
Currency Equivalent of the Unpaid Amounts owing to the Non-
defaulting Party over (B) the Termination Currency Equivalent of
the Unpaid Amounts owing to the Defaulting Party.
(2) First Method and Loss. If the First Method and Loss apply, the
Defaulting Party will pay to the Non-defaulting Party, if a
positive number, the Non-defaulting Party's Loss in respect of
this Agreement.
(3) Second Method and Market Quotation. If the Second Method and
Market Quotation apply, an amount will be payable equal to (A) the
sum of the Settlement Amount (determined by the
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Non-defaulting Party) in respect of the Terminated Transactions
and the Termination Currency Equivalent of the Unpaid Amounts
owing to the Non-defaulting Party less (B) the Termination
Currency Equivalent of the Unpaid Amounts owing to the Defaulting
Party. If that amount is a positive number, the Defaulting Party
will pay it to the Non-defaulting Party; if it is a negative
number, the Non-defaulting Party will pay the absolute value of
that amount to the Defaulting Party.
(4) Second Method and Loss. If the Second Method and Loss apply,
an amount will be payable equal to the Non-defaulting Party's Loss
in respect of this Agreement. If that amount is a positive number,
the Defaulting Party will pay it to the Non-defaulting Party; if
it is a negative number, the Non-defaulting Party will pay the
absolute value of that amount to the Defaulting Party.
(ii) Termination Events. If the Early Termination Date results from
a Termination Event:--
(1) One Affected Party. If there is one Affected Party, the
amount payable will be determined in accordance with Section
6(e)(i)(3), if Market Quotation applies, or Section
6(e)(i)(4), if Loss applies, except that, in either case,
references to the Defaulting Party and to the Non-defaulting
Party will be deemed to be references to the Affected Party
and the party which is not the Affected Party, respectively,
and, if Loss applies and fewer than all the Transactions are
being terminated, Loss shall be calculated in respect of all
Terminated Transactions.
(2) Two Affected Parties. If there are two Affected Parties:--
(A) if Market Quotation applies, each party will determine
a Settlement Amount in respect of the Terminated
Transactions, and an amount will be payable equal to (I)
the sum of (a) one-half of the difference between the
Settlement Amount of the party with the higher Settlement
Amount ("X") and the Settlement Amount of the party with
the lower Settlement Amount ("Y") and (b) the Termination
Currency Equivalent of the Unpaid Amounts owing to X less
(II) the Termination Currency Equivalent of the Unpaid
Amounts owing to Y; and
(B) if Loss applies, each party will determine its Loss in
respect of this Agreement (or, if fewer than all the
Transactions are being terminated, in respect of all
Terminated Transactions) and an amount will be payable
equal to one-half of the difference between the Loss of
the party with the higher Loss ("X") and the Loss of the
party with the lower Loss ("Y").
If the amount payable is a positive number, Y will pay it to
X; if it is a negative number, X will pay the absolute value
of that amount to Y.
(iii) Adjustment for Bankruptcy. In circumstances where an Early
Termination Date occurs because "Automatic Early Termination" applies
in respect of a party, the amount determined under this Section 6(e)
will be subject to such adjustments as are appropriate and permitted by
law to reflect any payments or deliveries made by one party to the
other under this Agreement (and retained by such other party) during
the period from the relevant Early Termination Date to the date for
payment determined under Section 6(d)(ii).
(iv) Pre-Estimate. The parties agree that if Market Quotation applies
an amount recoverable under this Section 6(e) is a reasonable
pre-estimate of loss and not a penalty. Such amount is payable for the
loss of bargain and the loss of protection against future risks and
except as otherwise provided in this Agreement neither party will be
entitled to recover any additional damages as a consequence of such
losses.
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7. Transfer
Subject to Section 6(b)(ii), neither this Agreement nor any interest or
obligation in or under this Agreement may be transferred (whether by way of
security or otherwise) by either party without the prior written consent of the
other party, except that:--
(a) a party may make such a transfer of this Agreement pursuant to a
consolidation or amalgamation with, or merger with or into, or transfer of all
or substantially all its assets to, another entity (but without prejudice to any
other right or remedy under this Agreement); and
(b) a party may make such a transfer of all or any part of its interest in
any amount payable to it from a Defaulting Party under Section 6(e).
Any purported transfer that is not in compliance with this Section will be void.
8. Contractual Currency
(a) Payment in the Contractual Currency. Each payment under this Agreement
will be made in the relevant currency specified in this Agreement for that
payment (the "Contractual Currency"). To the extent permitted by applicable law,
any obligation to make payments under this Agreement in the Contractual Currency
will not be discharged or satisfied by any tender in any currency other than the
Contractual Currency, except to the extent such tender results in the actual
receipt by the party to which payment is owed, acting in a reasonable manner and
in good faith in converting the currency so tendered into this Contractual
Currency, of the full amount in the Contractual Currency of all amounts payable
in respect of this Agreement. If for any reason the amount in the Contractual
Currency so received falls short of the amount in the Contractual Currency
payable in respect of this Agreement, the party required to make the payment
will, to the extent permitted by applicable law, immediately pay such additional
amount in the Contractual Currency as may be necessary to compensate for the
shortfall. If for any reason the amount in the Contractual Currency so received
exceeds the amount in the Contractual Currency payable in respect of this
Agreement, the party receiving the payment will refund promptly the amount of
such excess.
(b) Judgments. To the extent permitted by applicable law, if any judgment or
order expressed in a currency other than the Contractual Currency is rendered
(i) for the payment of any amount owing in respect of this Agreement, (ii) for
the payment of any amount relating to any early termination in respect of this
Agreement or (iii) in respect of a judgment or order of another court for the
payment of any amount described in (i) or (ii) above, the party seeking
recovery, after recovery in full of the aggregate amount to which such party is
entitled pursuant to the judgment or order, will be entitled to receive
immediately from the other party the amount of any shortfall of the Contractual
Currency received by such party as a consequence of sums paid in such other
currency and will refund promptly to the other party any excess of the
Contractual Currency received by such party as a consequence of sums paid in
such other currency if such shortfall or such excess arises or results from any
variation between the rate of exchange at which the Contractual Currency is
converted into the currency of the judgment or order for the purposes of such
judgment or order and the rate of exchange at which such party is able, acting
in a reasonable manner and in good faith in converting the currency received
into the Contractual Currency, to purchase the Contractual Currency with the
amount of the currency of the judgment or order actually received by such party.
The term "rate of exchange" includes, without limitation, any premiums and costs
of exchange payable in connection with the purchase of or conversion into the
Contractual Currency.
(c) Separate Indemnities. To the extent permitted by applicable law, these
indemnities constitute separate and independent obligations from the other
obligations in this Agreement, will be enforceable as separate and independent
causes of action, will apply notwithstanding any indulgence granted by the party
to which any payment is owed and will not be affected by judgment being obtained
or claim or proof being made for any other sums payable in respect of this
Agreement.
(d) Evidence of Loss. For the purpose of this Section 8, it will be
sufficient for a party to demonstrate that it would have suffered a loss had an
actual exchange or purchase been made.
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9. Miscellaneous
(a) Entire Agreement. This Agreement constitutes the entire agreement and
understanding of the parties with respect to its subject matter and supersedes
all oral communication and prior writings with respect thereto.
(b) Amendments. No amendment, modification or waiver in respect of this
Agreement will be effective unless in writing (including a writing evidenced by
a facsimile transmission) and executed by each of the parties or confirmed by an
exchange of telexes or electronic messages on an electronic messaging system.
(c) Survival of Obligations. Without prejudice to Sections 2(a)(iii) and
6(c)(ii), the obligations of the parties under this Agreement will survive the
termination of any Transaction.
(d) Remedies Cumulative. Except as provided in this Agreement, the rights,
powers, remedies and privileges provided in this Agreement are cumulative and
not exclusive of any rights, powers, remedies and privileges provided by law.
(e) Counterparts and Confirmations.
(i) This Agreement (and each amendment, modification and waiver in
respect of it) may be executed and delivered in counterparts (including
by facsimile transmission), each of which will be deemed an original.
(ii) The parties intend that they are legally bound by the terms of each
Transaction from the moment they agree to those terms (whether orally or
otherwise). A Confirmation shall be entered into as soon as practicable
and may be executed and delivered in counterparts (including by facsimile
transmission) or be created by an exchange of telexes or by an exchange
of electronic messages on an electronic messaging system, which in each
case will be sufficient for all purposes to evidence a binding supplement
to this Agreement. The parties will specify therein or through another
effective means that any such counterpart, telex or electronic message
constitutes a Confirmation.
(f) No Waiver of Rights. A failure or delay in exercising any right, power or
privilege in respect of this Agreement will not be presumed to operate as a
waiver, and a single or partial exercise of any right, power or privilege will
not be presumed to preclude any subsequent or further exercise, of that right,
power or privilege or the exercise of any other right, power or privilege.
(g) Headings. The headings used in this Agreement are for convenience of
reference only and are not to affect the construction of or to be taken into
consideration in interpreting this Agreement.
10. Offices; Multibranch Parties
(a) If Section 10(a) is specified in the Schedule as applying, each party
that enters into a Transaction through an Office other than its head or home
office represents to the other party that, notwithstanding the place of booking
office or jurisdiction of incorporation or organisation of such party, the
obligations of such party are the same as if it had entered into the Transaction
through its head or home office. This representation will be deemed to be
repeated by such party on each date on which a Transaction is entered into.
(b) Neither party may change the Office through which it makes and receives
payments or deliveries for the purpose of a Transaction without the prior
written consent of the other party.
(c) If a party is specified as a Multibranch Party in the Schedule, such
Multibranch Party may make and receive payments or deliveries under any
Transaction through any Office listed in the Schedule, and the Office through
which it makes and receives payments or deliveries with respect to a Transaction
will be specified in the relevant Confirmation.
11. Expenses
A Defaulting Party will, on demand, indemnify and hold harmless the other party
for and against all reasonable out-of-pocket expenses, including legal fees and
Stamp Tax, incurred by such other party by reason of the enforcement and
protection of its rights under this Agreement or any Credit Support Document
12
<PAGE>
to which the Defaulting Party is a party or by reason of the early termination
of any Transaction, including, but not limited to, costs of collection.
12. Notices
(a) Effectiveness. Any notice or other communication in respect of this
Agreement may be given in any manner set forth below (except that a notice or
other communication under Section 5 or 6 may not be given by facsimile
transmission or electronic messaging system) to the address or number or in
accordance with the electronic messaging system details provided (see the
Schedule) and will be deemed effective as indicated:--
(i) if in writing and delivered in person or by courier, on the date it
is delivered;
(ii) if sent by telex, on the date the recipient's answerback is
received;
(iii) if sent by facsimile transmission, on the date that transmission is
received by a responsible employee of the recipient in legible form (it
being agreed that the burden of proving receipt will be on the sender and
will not be met by a transmission report generated by the sender's
facsimile machine);
(iv) if sent by certified or registered mail (airmail, if overseas) or
the equivalent (return receipt requested), on the date that mail is
delivered or its delivery is attempted; or
(v) if sent by electronic messaging system, on the date that electronic
message is received,
unless the date of that delivery (or attempted delivery) or that receipt, as
applicable, is not a Local Business Day or that communication is delivered (or
attempted) or received, as applicable, after the close of business on a Local
Business Day, in which case that communication shall be deemed given and
effective on the first following day that is a Local Business Day.
(b) Change of Addresses. Either party may by notice to the other change the
address, telex or facsimile number or electronic messaging system details at
which notices or other communications are to be given to it.
13. Governing Law and Jurisdiction
(a) Governing Law. This Agreement will be governed by and construed in
accordance with the law specified in the Schedule.
(b) Jurisdiction. With respect to any suit, action or proceedings relating to
this Agreement ("Proceedings"), each party irrevocably:--
(i) submits to the jurisdiction of the English courts, if this Agreement
is expressed to be governed by English law, or to the non-exclusive
jurisdiction of the courts of the State of New York and the United States
District Court located in the Borough of Manhattan in New York City, if
this Agreement is expressed to be governed by the laws of the State of
New York; and
(ii) waives any objection which it may have at any time to the laying of
venue of any Proceedings brought in any such court, waives any claim that
such Proceedings have been brought in an inconvenient forum and further
waives the right to object, with respect to such Proceedings, that such
court does not have any jurisdiction over such party.
Nothing in this Agreement precludes either party from bringing Proceedings in
any other jurisdiction (outside, if this Agreement is expressed to be governed
by English law, the Contracting States, as defined in Section 1(3) of the Civil
Jurisdiction and Judgments Act 1982 or any modification, extension or
re-enactment thereof for the time being in force) nor will the bringing of
Proceedings in any one or more jurisdictions preclude the bringing of
Proceedings in any other jurisdiction.
(c) Service of Process. Each party irrevocably appoints the Process Agent (if
any) specified opposite its name in the Schedule to receive, for it and on its
behalf, service of process in any Proceedings. If for any
13
<PAGE>
reason any party's Process Agent is unable to act as such, such party will
promptly notify the other party and within 30 days appoint a substitute process
agent acceptable to the other party. The parties irrevocably consent to service
of process given in the manner provided for notices in Section 12. Nothing in
this Agreement will affect the right of either party to serve process in any
other manner permitted by law.
(d) Waiver of Immunities. Each party irrevocably waives, to the fullest extent
permitted by applicable law, with respect to itself and its revenues and assets
(irrespective of their use or intended use), all immunity on the grounds of
sovereignty or other similar grounds from (i) suit, (ii) jurisdiction of any
court, (iii) relief by way of injunction, order for specific performance or for
recovery of property, (iv) attachment of its assets (whether before or after
judgment) and (v) execution or enforcement of any judgment to which it or its
revenues or assets might otherwise be entitled in any Proceedings in the courts
of any jurisdiction and irrevocably agrees, to the extent permitted by
applicable law, that it will not claim any such immunity in any Proceedings.
14. Definitions
As used in this Agreement:--
"Additional Termination Event" has the meaning specified in Section 5(b).
"Affected Party" has the meaning specified in Section 5(b).
"Affected Transactions" means (a) with respect to any Termination Event
consisting of an Illegality, Tax Event or Tax Event Upon Merger, all
Transactions affected by the occurrence of such Termination Event and (b) with
respect to any other Termination Event, all Transactions.
"Affiliate" means, subject to the Schedule, in relation to any person, any
entity controlled, directly or indirectly, by the person, any entity that
controls, directly or indirectly, the person or any entity directly or
indirectly under common control with the person. For this purpose, "control" of
any entity or person means ownership of a majority of the voting power of the
entity or person.
"Applicable Rate" means:--
(a) in respect of obligations payable or deliverable (or which would have been
but for Section 2(a)(iii)) by a Defaulting Party, the Default Rate;
(b) in respect of an obligation to pay an amount under Section 6(e) of either
party from and after the date (determined in accordance with Section 6(d)(ii))
on which that amount is payable, the Default Rate;
(c) in respect of all other obligations payable or deliverable (or which would
have been but for Section 2(a)(iii)) by a Non-defaulting Party, the Non-default
Rate; and
(d) in all other cases, the Termination Rate.
"Burdened Party" has the meaning specified in Section 5(b).
"Change in Tax Law" means the enactment, promulgation, execution or ratification
of, or any change in or amendment to, any law (or in the application or official
interpretation of any law) that occurs on or after the date on which the
relevant Transaction is entered into.
"consent" includes a consent, approval, action, authorisation, exemption,
notice, filing, registration or exchange control consent.
"Credit Event Upon Merger" has the meaning specified in Section 5(b).
"Credit Support Document" means any agreement or instrument that is specified as
such in this Agreement.
"Credit Support Provider" has the meaning specified in the Schedule.
"Default Rate" means a rate per annum equal to the cost (without proof or
evidence of any actual cost) to the relevant payee (as certified by it) if it
were to fund or of funding the relevant amount plus 1% per annum.
14
<PAGE>
"Defaulting Party" has the meaning specified in Section 6(a).
"Early Termination Date" means the date determined in accordance with Section
6(a) or 6(b)(iv).
"Event of Default" has the meaning specified in Section 5(a) and, if applicable,
in the Schedule.
"Illegality" has the meaning specified in Section 5(b).
"Indemnifiable Tax" means any Tax other than a Tax that would not be imposed in
respect of a payment under this Agreement but for a present or former connection
between the jurisdiction of the government or taxation authority imposing such
Tax and the recipient of such payment or a person related to such recipient
(including, without limitation, a connection arising from such recipient or
related person being or having been a citizen or resident of such jurisdiction,
or being or having been organised, present or engaged in a trade or business in
such jurisdiction, or having or having had a permanent establishment or fixed
place of business in such jurisdiction, but excluding a connection arising
solely from such recipient or related person having executed, delivered,
performed its obligations or received a payment under, or enforced, this
Agreement or a Credit Support Document).
"law" includes any treaty, law, rule or regulation (as modified, in the case of
tax matters, by the practice of any relevant governmental revenue authority) and
"lawful" and "unlawful" will be construed accordingly.
"Local Business Day" means, subject to the Schedule, a day on which commercial
banks are open for business (including dealings in foreign exchange and foreign
currency deposits) (a) in relation to any obligation under Section 2(a)(i), in
the place(s) specified in the relevant Confirmation or, if not so specified, as
otherwise agreed by the parties in writing or determined pursuant to provisions
contained, or incorporated by reference, in this Agreement, (b) in relation to
any other payment, in the place where the relevant account is located and, if
different, in the principal financial centre, if any, of the currency of such
payment, (c) in relation to any notice or other communication, including notice
contemplated under Section 5(a)(i), in the city specified in the address for
notice provided by the recipient and, in the case of a notice contemplated by
Section 2(b), in the place where the relevant new account is to be located and
(d) in relation to Section 5(a)(v)(2), in the relevant locations for performance
with respect to such Specified Transaction.
"Loss" means, with respect to this Agreement or one or more Terminated
Transactions, as the case may be, and a party, the Termination Currency
Equivalent of an amount that party reasonably determines in good faith to be its
total losses and costs (or gain, in which case expressed as a negative number)
in connection with this Agreement or that Terminated Transaction or group of
Terminated Transactions, as the case may be, including any loss of bargain, cost
of funding or, at the election of such party but without duplication, loss or
cost incurred as a result of its terminating, liquidating, obtaining or
reestablishing any hedge or related trading position (or any gain resulting from
any of them). Loss includes losses and costs (or gains) in respect of any
payment or delivery required to have been made (assuming satisfaction of each
applicable condition precedent) on or before the relevant Early Termination Date
and not made, except, so as to avoid duplication, if Section 6(e)(i)(1) or (3)
or 6(e)(ii)(2)(A) applies. Loss does not include a party's legal fees and
out-of-pocket expenses referred to under Section 11. A party will determine its
Loss as of the relevant Early Termination Date, or, if that is not reasonably
practicable, as of the earliest date thereafter as is reasonably practicable. A
party may (but need not) determine its Loss by reference to quotations of
relevant rates or prices from one or more leading dealers in the relevant
markets.
"Market Quotation" means, with respect to one or more Terminated Transactions
and a party making the determination, an amount determined on the basis of
quotations from Reference Market-makers. Each quotation will be for an amount,
if any, that would be paid to such party (expressed as a negative number) or by
such party (expressed as a positive number) in consideration of an agreement
between such party (taking into account any existing Credit Support Document
with respect to the obligations of such party) and the quoting Reference
Market-maker to enter into a transaction (the "Replacement Transaction") that
would have the effect of preserving for such party the economic equivalent of
any payment or delivery (whether the underlying obligation was absolute or
contingent and assuming the satisfaction of each applicable condition precedent)
by the parties under Section 2(a)(i) in respect of such Terminated Transaction
or group of Terminated Transactions that would, but for the occurrence of the
relevant Early Termination Date, have
15
<PAGE>
been required after that date. For this purpose, Unpaid Amounts in respect of
the Terminated Transaction or group of Terminated Transactions are to be
excluded but, without limitation, any payment or delivery that would, but for
the relevant Early Termination Date, have been required (assuming satisfaction
of each applicable condition precedent) after that Early Termination Date is to
be included. The Replacement Transaction would be subject to such documentation
as such party and the Reference Market-maker may, in good faith, agree. The
party making the determination (or its agent) will request each Reference
Market-maker to provide its quotation to the extent reasonably practicable as of
the same day and time (without regard to different time zones) on or as soon as
reasonably practicable after the relevant Early Termination Date. The day and
time as of which those quotations are to be obtained will be selected in good
faith by the party obliged to make a determination under Section 6(e), and, if
each party is so obliged, after consultation with the other. If more than three
quotations are provided, the Market Quotation will be the arithmetic mean of the
quotations, without regard to the quotations having the highest and lowest
values. If exactly three such quotations are provided, the Market Quotation will
be the quotation remaining after disregarding the highest and lowest quotations.
For this purpose, if more than one quotation has the same highest value or
lowest value, then one of such quotations shall be disregarded. If fewer than
three quotations are provided, it will be deemed that the Market Quotation in
respect of such Terminated Transaction or group of Terminated Transactions
cannot be determined.
"Non-default Rate" means a rate per annum equal to the cost (without proof or
evidence of any actual cost) to the Non-defaulting Party (as certified by it) if
it were to fund the relevant amount.
"Non-defaulting Party" has the meaning specified in Section 6(a).
"Office" means a branch or office of a party, which may be such party's head or
home office.
"Potential Event of Default" means any event which, with the giving of notice or
the lapse of time or both, would constitute an Event of Default.
"Reference Market-makers" means four leading dealers in the relevant market
selected by the party determining a Market Quotation in good faith (a) from
among dealers of the highest credit standing which satisfy all the criteria that
such party applies generally at the time in deciding whether to offer or to make
an extension of credit and (b) to the extent practicable, from among such
dealers having an office in the same city.
"Relevant Jurisdiction" means, with respect to a party, the jurisdictions (a) in
which the party is incorporated, organised, managed and controlled or considered
to have its seat, (b) where an Office through which the party is acting for
purposes of this Agreement is located, (c) in which the party executes this
Agreement and (d) in relation to any payment, from or through which such payment
is made.
"Scheduled Payment Date" means a date on which a payment or delivery is to be
made under Section 2(a)(i) with respect to a Transaction.
"Set-off" means set-off, offset, combination of accounts, right of retention or
withholding or similar right or requirement to which the payer of an amount
under Section 6 is entitled or subject (whether arising under this Agreement,
another contract, applicable law or otherwise) that is exercised by, or imposed
on, such payer.
"Settlement Amount" means, with respect to a party and any Early Termination
Date, the sum of:--
(a) the Termination Currency Equivalent of the Market Quotations (whether
positive or negative) for each Terminated Transaction or group of Terminated
Transactions for which a Market Quotation is determined; and
(b) such party's Loss (whether positive or negative and without reference
to any Unpaid Amounts) for each Terminated Transaction or group of Terminated
Transactions for which a Market Quotation cannot be determined or would not (in
the reasonable belief of the party making the determination) produce a
commercially reasonable result.
"Specified Entity" has the meaning specified in the Schedule.
16
<PAGE>
"Specified Indebtedness" means, subject to the Schedule, any obligation (whether
present or future, contingent or otherwise, as principal or surety or otherwise)
in respect of borrowed money.
"Specified Transaction" means, subject to the Schedule, (a) any transaction
(including an agreement with respect thereto) now existing or hereafter entered
into between one party to this Agreement (or any Credit Support Provider of such
party or any applicable Specified Entity of such party) and the other party to
this Agreement (or any Credit Support Provider of such other party or any
applicable Specified Entity of such other party) which is a rate swap
transaction, basis swap, forward rate transaction, commodity swap, commodity
option, equity or equity index swap, equity or equity index option, bond option,
interest rate option, foreign exchange transaction, cap transaction, floor
transaction, collar transaction, currency swap transaction, cross-currency rate
swap transaction, currency option or any other similar transaction (including
any option with respect to any of these transactions), (b) any combination of
these transactions and (c) any other transaction identified as a Specified
Transaction in this Agreement or the relevant confirmation.
"Stamp Tax" means any stamp, registration, documentation or similar tax.
"Tax" means any present or future tax, levy, impost, duty, charge, assessment or
fee of any nature (including interest, penalties and additions thereto) that is
imposed by any government or other taxing authority in respect of any payment
under this Agreement other than a stamp, registration, documentation or similar
tax.
"Tax Event" has the meaning specified in Section 5(b).
"Tax Event Upon Merger" has the meaning specified in Section 5(b).
"Terminated Transactions" means with respect to any Early Termination Date (a)
if resulting from a Termination Event, all Affected Transactions and (b) if
resulting from an Event of Default, all Transactions (in either case) in effect
immediately before the effectiveness of the notice designating that Early
Termination Date (or, if "Automatic Early Termination" applies, immediately
before that Early Termination Date).
"Termination Currency" has the meaning specified in the Schedule.
"Termination Currency Equivalent" means, in respect of any amount denominated in
the Termination Currency, such Termination Currency amount and, in respect of
any amount denominated in a currency other than the Termination Currency (the
"Other Currency"), the amount in the Termination Currency determined by the
party making the relevant determination as being required to purchase such
amount of such Other Currency as at the relevant Early Termination Date, or, if
the relevant Market Quotation or Loss (as the case may be), is determined as of
a later date, that later date, with the Termination Currency at the rate equal
to the spot exchange rate of the foreign exchange agent (selected as provided
below) for the purchase of such Other Currency with the Termination Currency at
or about 11:00 a.m. (in the city in which such foreign exchange agent is
located) on such date as would be customary for the determination of such a rate
for the purchase of such Other Currency for value on the relevant Early
Termination Date or that later date. The foreign exchange agent will, if only
one party is obliged to make a determination under Section 6(e), be selected in
good faith by that party and otherwise will be agreed by the parties.
"Termination Event" means an Illegality, a Tax Event or a Tax Event Upon Merger
or, if specified to be applicable, a Credit Event Upon Merger or an Additional
Termination Event.
"Termination Rate" means a rate per annum equal to the arithmetic mean of the
cost (without proof or evidence of any actual cost) to each party (as certified
by such party) if it were to fund or of funding such amounts.
"Unpaid Amounts" owing to any party means, with respect to an Early Termination
Date, the aggregate of (a) in respect of all Terminated Transactions, the
amounts that became payable (or that would have become payable but for Section
2(a)(iii)) to such party under Section 2(a)(i) on or prior to such Early
Termination Date and which remain unpaid as at such Early Termination Date and
(b) in respect of each Terminated Transaction, for each obligation under Section
2(a)(i) which was (or would have been but for Section 2(a)(iii)) required to be
settled by delivery to such party on or prior to such Early Termination Date and
which has not been so settled as at such Early Termination Date, an amount equal
to the fair market
17
<PAGE>
value of that which was (or would have been) required to be delivered as of the
originally scheduled date for delivery, in each case together with (to the
extent permitted under applicable law) interest, in the currency of such
amounts, from (and including) the date such amounts or obligations were or would
have been required to have been paid or performed to (but excluding) such Early
Termination Date, at the Applicable Rate. Such amounts of interest will be
calculated on the basis of daily compounding and the actual number of days
elapsed. The fair market value of any obligation referred to in clause (b) above
shall be reasonably determined by the party obliged to make the determination
under Section 6(e) or, if each party is so obliged, it shall be the average of
the Termination Currency Equivalents of the fair market values reasonably
determined by both parties.
IN WITNESS WHEREOF the parties have executed this document on the respective
dates specified below with effect from the date specified on the first page of
this document.
Bank of America, N.A. Spiegel Credit Card Master Note Trust
---------------------------------- -------------------------------------
(Name of Party) (Name of Party)
By: Bankers Trust Company, not in its
individual capacity, but solely as
owner trustee
By: By:
------------------------------- ---------------------------------
Name: Name:
Title: Title:
Date: Date:
18
<PAGE>
Execution Version
(Multicurrency--Cross Border)
ISDA (R)
International Swap Dealers Association, Inc.
SCHEDULE
to the
Master Agreement
dated as of December 19, 2000
between BANK OF AMERICA, N.A. and SPIEGEL CREDIT CARD MASTER
NOTE TRUST
("Party A") ("Party B")
PART 1: Termination Provisions
----------------------
(a) "Indenture" means the Master Indenture dated as of December 1, 2000,
between Spiegel Credit Master Note Trust, as Issuer, and The Bank of New
York, as Indenture Trustee, as supplemented by the Series 2000-A Indenture
Supplement dated as of December 1, 2000, between Spiegel Credit Card Master
Note Trust, as the Issuer or the Trust, and The Bank of New York, as the
Indenture Trustee, in each case, as amended, modified, supplemented,
restated or replaced from time to time.
(b) "Specified Entity" means in relation to Party A for the purpose of:-
Section 5(a)(v) (Default under Specified Transaction), none;
Section 5(a)(vi) (Cross Default), none;
Section 5(a)(vii) (Bankruptcy), none; and
Section 5(b)(iv) (Credit Event Upon Merger), none;
in relation to Party B for the purpose of:-
Section 5(a)(v) (Default under Specified Transaction) none;
Section 5(a)(vi) (Cross Default), none;
Section 5(a)(vii) (Bankruptcy), none; and
Section 5(b)(iv) (Credit Event Upon Merger), none.
(c) "Specified Transaction" will have the meaning specified in Section 14.
1
<PAGE>
(d) The "Breach of Agreement" provisions of Section 5(a)(ii), the
"Misrepresentation" provisions of Section 5(a)(iv), and the "Default under
Specified Transactions" provisions of Section 5(a)(v) will not apply to Party B.
The "Cross Default" provisions of Section 5(a)(vi) will not apply to Party A or
Party B.
(e) The "Credit Event Upon Merger" provisions of Section 5(b)(iv)
will not apply to Party A
will not apply to Party B.
(f) The "Automatic Early Termination" provision of Section 6(a)
will not apply to Party A
will not apply to Party B.
(g) Payments on Early Termination. For the purpose of Section 6(e):
(i) Market Quotation will apply.
(ii) The Second Method will apply.
(h) "Termination Currency" means United States Dollars.
(i) Additional Termination Event; Redemption of the Secured Notes.
(a) Party B shall, as provided in the Indenture, direct the
Indenture Trustee to notify Party A if notice is given pursuant to
the Indenture of a redemption by Party B of all of the Notes (any
such occurrence, a "Redemption Event").
(b) If a Redemption Event occurs it shall be an Additional
Termination Event for which Party B shall be the sole Affected
Party and each Transaction shall be terminated in full.
(c) If a Redemption Event is to occur, an Early Termination Date
in respect of each Transaction shall be deemed to occur on the
Distribution Date in respect of such Redemption Event. Any
Settlement Amount payable in respect of such Redemption Event shall
be paid, in the case of Party A, on the date of such Early
Termination Date and, in the case of Party B, on the next
Distribution Date to the extent provided in the Indenture.
(j) Unauthorized Amendments. Party B shall deliver to Party A a copy of any
proposed Supplemental Indenture.
(k) Downgrade of Party A. If a Ratings Event (as defined below) shall occur and
be continuing with respect to Party A, then Party A shall, within 5 Local
Business Days of such Ratings Event, (A) give notice to Party B of the
occurrence of such Ratings Event, and (B) use reasonable efforts to
transfer Party A's rights and obligations under the Agreement and all
Confirmations to another party, subject to satisfaction of the Rating
Agency Condition (as defined below), and at the cost of Party A. Unless
such a transfer by Party A has occurred within 20 Local Business Days after
the occurrence of a Ratings Event, Party B shall demand that Party A post
Eligible Collateral on a mark-to-market basis, to secure Party B's
exposure, if any, to Party A, and such Eligible
2
<PAGE>
Collateral shall be provided in accordance with a Credit Support Annex to
be attached hereto and made a part hereof within 10 Local Business Days of
Party B's demand therefor. The Eligible Collateral to be posted and the
Credit Support Annex to be executed and delivered shall be subject to the
Rating Agency Condition. Notwithstanding the addition of the Credit Support
Annex and the posting of Eligible Collateral, Party A shall continue to use
reasonable efforts to transfer its rights and obligations to an acceptable
third party; provided, however, that Party A's obligations to find a
transferee and to post Eligible Collateral under such Credit Support Annex
shall remain in effect only for so long as a Ratings Event is continuing
with respect to Party A. For the purpose of this Part 1(k), a "Ratings
Event" shall occur with respect to Party A if the long-term and short-term
senior unsecured deposit ratings of Party A cease to be at least A+ and A-1
by Standard & Poor's Ratings Service or any successor thereto ("S&P"), at
least A1 and P-1 by Moody's Investors Service, Inc. or any successor
thereto ("Moody's"), or at least A+ and F-1 by Fitch Ratings, Inc. or any
successor thereto ("Fitch"), to the extent such obligations are rated by
S&P, Moody's or Fitch. "Rating Agency Condition" has the meaning specified
in the Indenture defined in Part 1(a) of this Schedule.
The failure by Party A to post Eligible Collateral in accordance herewith
shall constitute an Event of Default with Party A as the Defaulting Party.
PART 2: Tax Representations
-------------------
(a) Payer Tax Representations. For the purpose of Section 3(e) of this
Agreement, Party A and Party B will make the following representation:-
It is not required by any applicable law, as modified by the practice of
any relevant governmental revenue authority of any Relevant Jurisdiction to
make any deduction or withholding for or on account of any Tax from any
payment (other than interest under Section 2(e), 6(d)(ii) or 6(e) of this
Agreement) to be made by it to the other party under this Agreement. In
making this representation, it may rely on (x) the accuracy of any
representations made by the other party pursuant to Section 3(f) of this
Agreement, (y) the satisfaction of the agreement contained in Section
4(a)(i) or 4(a)(iii) of this Agreement and the accuracy and effectiveness
of any document provided by the other party pursuant to Section 4(a)(i) or
4(a)(iii) of this Agreement and (z) the satisfaction of the agreement of
the other party contained in Section 4(d) of this Agreement, provided that
it shall not be a breach of this representation where reliance is placed on
clause (y) and the other party does not deliver a form or document under
Section 4(a)(iii) by reason of material prejudice to its legal or
commercial position.
(b) Payee Tax Representations. For the purpose of Section 3(f) of this
Agreement, Party A and Party B will make the following representations
specified below, if any:- none
PART 3: Agreement to Deliver Documents
------------------------------
For the purpose of Section 4(a)(i) and (ii) of this Agreement, each party agrees
to deliver the following documents:
(a) Tax forms, documents or certificates to be delivered are:
3
<PAGE>
<TABLE>
<CAPTION>
Party Form/Document/Certificate Date by which to be delivered
required to
deliver
document
----------- ---------------------------- --------------------------------
<S> <C> <C>
Party A and Any form, document or Upon request
Party B certificate as may be
requested pursuant to Section
4(a)(iii) of this Agreement.
</TABLE>
(b) Other documents to be delivered are:-
<TABLE>
<CAPTION>
Party Form/Document/Certificate Date by Covered by
required to which to be Section 3(d)
deliver delivered Representation
document
------------- ------------------------------------ ----------------- ------------------------
<S> <C> <C> <C>
Party B Annual Report of Party B and of As soon as Yes
Credit Support containing audited available and in
financial statements certified by any event within
independent certified public 120 days after the
accountants and preparedin accordance end of each fiscal
with generally accepted accounting year of Party B
principles in the country in whic such and of the Credit
party and such Credit SupportProvider Support Provider
is organized
Party B Monthly Reports of Party B and As soon as Yes
quarterly unaudited financial available and in
statements of any Credit Support any event within
Provider thereof containing financial 30 days after the
statements of such party's fiscal end of each fiscal
quarter prepared in accordance with quarter of Party B
generally accepted accounting and of the Credit
principles in the country in which Support Provider
such Credit Support Provider is
organized
Party B A duly executed copy of the Credit At or within No
Support Document specified in Part 4 thirty days after
of the Schedule or in any Confirmation execution hereof
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
Party Form/Document/Certificate Date by Covered by
required to which to be Section 3(d)
deliver delivered Representation
document
------------- -------------------------------------- ----------------- ------------------------
<S> <C> <C> <C>
Party A and Certified copies of all corporate Upon execution and Yes
Party B authorizations and any other documents delivery of this
with respect to the execution, delivery Agreement
and performance of this Agreement and the
Indenture; legal opinion from in-house counsel
for MBIA with respect to enforceability of Policy
and related matters
Party A and Certificate of authority and specimen Upon execution and Yes
Party B signatures of individuals executing delivery of this
this Agreement, any Credit Support Agreement and
Document and any Confirmations thereafter upon
request of the
other party
</TABLE>
PART 4: Miscellaneous
-------------
(a) Address for Notices. For the purpose of Section 12(a) of this Agreement:-
Address for notice or communications to Party A:
Bank of America, N.A.
Sears Tower
233 South Wacker Drive, Suite 2800
Chicago, IL 60606
Attention: Swap Operations
Telex No.: 49663210 Answerback: NATIONSBANK CHA
Reuters Dealing Code: NBCH
with a copy to:
Bank of America, N.A.
100 N. Tryon St., NC1-007-13-01
Charlotte, North Carolina 28255
Attention: Capital Markets Documentation
(Telex No.: 9663210; Answerback: NATIONSBK CHA)
Facsimile No.: 704-386-4113
Address for financial statements to Party A:
5
<PAGE>
Bank of America, N.A.
231 South LaSalle Street
Chicago, IL 60604
Attention: Bridget A. Garavalia
Telephone No.: 312-828-1259
Facsimile No.: 312-828-6269
Address for notice or communications to Party B:
Spiegel Credit Card Master Note Trust
c/o Bankers Trust Company
Four Albany Street, 10/th/ Floor
New York, NY 10006
Attention: Corporate Trust & Agency Services
Telephone No.: 212-250-6323
Facsimile No.: 212-250-6439
With a copy to:
John R. Steele, Treasurer
Spiegel, Inc.
3500 Lacey Road
Downers Grove, IL 60515-5432
Telephone No.: 630-769-3250
Facsimile No.: 630-769-3750
(b) Process Agent. For the purpose of Section 13(c):
Party A appoints as its Process Agent: Not applicable.
Party B appoints as its Process Agent: Not applicable.
(c) Offices. The provisions of Section 10(a) will apply to this Agreement.
(d) Multibranch Party. For the purpose of Section 10 of this Agreement:-
Party A is not a Multibranch Party.
Party B is not a Multibranch Party.
(e) Calculation Agent. The Calculation Agent is Party A.
(f) Credit Support Document. Details of any Credit Support Document:-
Each of the following, as amended, supplemented, modified, renewed,
replaced, consolidated, substituted or extended from time to time, is a
"Credit Support Document":
Indenture; Financial Guaranty Insurance Policy No. 33927(2) (the
"Policy") issued by MBIA Insurance Corporation ("MBIA") on December 19,
2000, to the Indenture Trustee as beneficiary. The Policy shall be a
Credit Support Document solely with respect to net Fixed Amounts
payable
6
<PAGE>
by Party B, and shall not be available to support, and may not be drawn
on in respect of, any amounts due from Party B under Section 6(e) or
any other provision of the Agreement.
Party B agrees that the security interests in collateral granted to
Party A under the Indenture in respect of Series 2000-A shall secure
the obligations of Party B to Party A under this Agreement.
(g) Credit Support Provider.
Credit Support Provider means in relation to Party A: Not applicable.
Credit Support Provider means in relation to Party B: MBIA
(h) Governing Law. This Agreement will be governed by and construed in
accordance with the laws of the State of New York (without reference to
its conflict of laws doctrine, other than Section 5-1401 of the General
Obligations Law).
(i) Netting of Payments. All amounts payable on the same date, in the same
currency and in respect of the same Transaction shall be netted in
accordance with Section 2(c) of this Agreement. The election contained
in the last paragraph of Section 2(c) of this Agreement shall not apply
for the purposes of this Agreement.
(j) "Affiliate" will have the meaning specified in Section 14 of this
Agreement.
PART 5: Other Provisions
----------------
(a) Additional Agreements. Party A agrees that it shall not enter a
transaction of the type referred to in 5(a)(viii) (Merger Without
Assumption) where the resulting, surviving or transferee entity fails
to assume all of the obligations of Party A hereunder.
(b) Delivery of Confirmations. For each Transaction entered into hereunder,
Party A shall promptly send to Party B a Confirmation via facsimile
transmission. Party B agrees to respond to such Confirmation within two
(2) Local Business Days, either confirming agreement thereto or
requesting a correction of any error(s) contained therein. Failure by
Party A to send a Confirmation or of Party B to respond within such
period shall not affect the validity or enforceability of such
Transaction. Absent manifest error, there shall be a presumption that
the terms contained in such Confirmation are the terms of the
Transaction.
(c) Recording of Conversations. Each party to this Agreement acknowledges
and agrees to the tape recording of conversations between trading and
marketing personnel of the parties to this Agreement whether by one or
other or both of the parties or their agents, and that any such tape
recordings may be submitted in evidence in any Proceedings relating to
the Agreement.
(d) Furnishing Specified Information. Section 4(a)(iii) is hereby amended
by inserting "promptly upon the earlier of (i)" in lieu of the word
"upon" at the beginning thereof and inserting "or (ii) such party
learning that the form or document is required" before the word "any"
on the first line thereof.
7
<PAGE>
(e) Notice by Facsimile Transmission. Section 12(a) is hereby amended by
inserting the words "2(b)," between the word "Section" and the number
"5" and inserting the words "or 13(c)" between the number "6" and the
word "may" in the second line thereof.
(f) Section 3(a) of this Agreement is amended by (i) deleting the word
"and" at the end of clause (iv); (ii) deleting the period at the end of
clause (v) and inserting therein "; and " ; and (iii) by inserting the
following additional representation:
"(vi) Eligible Swap Participant. It is an 'eligible swap
participant' as defined under the regulations of the Commodity
Futures Trading Commission, currently at 17 CFR Section
35.1(b)(2)."
(g) Section 3 is revised so as to add the following Section (g) at the end
thereof:
"(g) Relationship Between Parties. Each party represents to the
other party and will be deemed to represent to the other party
on the date on which it enters into a Transaction that (absent
a written agreement between the parties that expressly imposes
affirmative obligations to the contrary for that
Transaction):-
(i) Non-Reliance. It is acting for its own account, and
it has made its own independent decisions to enter
into that Transaction and as to whether that
Transaction is appropriate or proper for it based
upon its own judgment and upon advice from such
advisors as it has deemed necessary. It is not
relying on any communication (written or oral) of the
other party as investment advice or as a
recommendation to enter into that Transaction; it
being understood that information and explanations
related to the terms and conditions of a Transaction
shall not be considered investment advice or a
recommendation to enter into that Transaction.
Further, such party has not received from the other
party any assurance or guarantee as to the expected
results of that Transaction.
(ii) Evaluation and Understanding. It is capable of
evaluating and understanding (on its own behalf or
through independent professional advice), and
understands and accepts, the terms, conditions and
risks of that Transaction. It is also capable of
assuming, and assumes, the financial and other risks
of that Transaction.
(iii) Status of Parties. The other party is not acting as
an agent, fiduciary or advisor for it in respect of
that Transaction."
(h) Waiver of Right to Trial by Jury. EACH PARTY HEREBY IRREVOCABLY WAIVES
ANY AND ALL RIGHTS TO TRIAL BY JURY WITH RESPECT TO ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY
TRANSACTION CONTEMPLATED HEREBY.
(i) [Reserved.]
(j) Provisions Relating to MBIA:
(a) The parties agree that MBIA shall be a third party beneficiary of
this Agreement and shall have the right to enforce this Agreement
against Party A.
8
<PAGE>
(b) Any notices required to be given by Party B may be given by or at
the direction of the Trustee on Party B's behalf. All notices required
to be given to Party B by Party A shall also be given to the Indenture
Trustee, as defined in Part 1(a), and MBIA, and any such notice not so
given to both the Indenture Trustee and MBIA shall be ineffective
unless receipt of such notice is waived by the party to whom it should
have been given but was not given. Any requirement contained herein for
obtaining the consent or agreement of MBIA shall not apply so long as a
Control Transfer Event (as defined in the Indenture) has occurred and
is continuing.
(c) No action or consent permitted or required to be taken or given
by Party B under this Agreement (other than the performance by Party B
of its payment obligations hereunder) shall be effective without the
prior written consent of MBIA so long as no Control Transfer Event has
occurred and is continuing. If a Control Transfer Event has occurred
and is continuing, any provision giving MBIA the right to direct,
appoint or consent to, approve of, or take any action (or waive any
right to take action) under this Agreement, shall be inoperative and
any such consent or approval shall be deemed to have been given for the
purpose of such provisions.
(d) The rights of MBIA under this Part 5(j) shall terminate upon the
later to occur of (x) the termination date of the Policy and (y) the
day which is one year and one day after the date on which all amounts
have been paid to MBIA under the Insurance Agreement.
(k) Non-Petition. Party A hereby agrees that it will not, prior to the date
which is one year and one day after all Series 2000-A Notes issued by
Party B pursuant to the Indenture have been paid in full, acquiesce,
petition or otherwise invoke or cause Party B to invoke the process of
any court or governmental authority for the purpose of commencing or
sustaining a case against Party B under any federal or state
bankruptcy, insolvency or similar law or for the purpose of appointing
a receiver, liquidator, assignee, trustee, custodian, sequestrator or
other similar official for Party B or any substantial part of the
property of Party B, or for the purpose of ordering the winding up or
liquidation of the affairs of Party B. Nothing herein shall prevent
Party A from participating in any such proceeding once commenced.
(l) Limited Recourse. The obligations of Party B under this Agreement are
limited recourse obligations of Party B, payable solely from the Trust
Estate (as such term is defined in the Indenture), subject to and in
accordance with the terms of the Indenture, and, following realization
of the Trust Estate, any claims of Party A against Party B shall be
extinguished. No recourse shall be had for the payment of any amount
owing in respect of this Agreement against the trustee, or any officer,
member, director, employee, security holder or incorporator thereof
(each, an "Affiliated Person") of Party B or its successors or assigns
for any amounts payable under this Agreement. It is understood that the
foregoing provisions shall not (i) prevent recourse to the Trust Estate
for the sums due or to become due under any security, instrument or
agreement which is part of the Trust Estate (subject to the priority of
payments set forth in the Indenture), (ii) constitute a waiver, release
or discharge of any obligation of Party B arising under this Agreement
until the Trust Estate have been realized and the proceeds applied in
accordance with the Indenture, whereupon any outstanding obligation of
Party B under this Agreement shall be extinguished, or (iii) prevent
recourse by the Indenture Trustee on behalf of Party A to MBIA, as the
Credit Support Provider in respect of Party B, to the extent set forth
in the related Credit Support Document.
9
<PAGE>
(m) Transfer. Section 7 of the Agreement is supplemented by the additional
requirement that any transfer or assignment by Party A of its
obligations under the Agreement (including any Confirmation), and any
amendments to the Agreement (including any Confirmation), shall be
subject to the Rating Agency Condition. Party A consents to the pledge
and assignment by Party B of its rights and obligations hereunder and
under any Transaction to the Indenture Trustee pursuant to the
Indenture.
(n) Events of Default. (i) Section 5(a)(i) of the Agreement is amended by
substituting the following therefor: "Failure by the party to make,
when due, any payment under this Agreement or delivery under Section
2(a)(i) or 2(e) required to be made by it within five days of the date
due under this Agreement and, upon at least one Business Days' prior
notice to the other party."
10
<PAGE>
Accepted and agreed:
BANK OF AMERICA, N.A. SPIEGEL CREDIT CARD MASTER NOTE TRUST
By Bankers Trust Company, not in its
individual capacity, but solely as
Owner Trustee
By: .............................. By: .............................
Name: Roger H. Heintzelman Name:
Title: Vice President Title:
11
<PAGE>
CONFIRMATION FOR U.S. DOLLAR INTEREST RATE SWAP
TRANSACTION UNDER 1992 MASTER AGREEMENT
Date: December 19, 2000 Our ref: 3222555
To: Spiegel Credit Card Master Note Trust From: Bank of America, N.A.
c/o Bankers Trust Company Sears Tower
Four Albany Street, 10/th/ Floor 233 South Wacker Drive,
New York, NY 10006 Suite 2800
Attn: Corporate Trust & Agency Services Chicago, IL 60606
Fax No: 212-250-6439 Contact: Global Derivative
Tel No: 212-250-6323 Operations
Fax No: (312) 234 3603
Tel No: (312) 234 2732
Dear Sir/Madam,
The purpose of this letter agreement is to confirm the terms and
conditions of the Transaction entered into between Spiegel Credit Card Master
Note Trust and Bank of America, N.A. (each a "party" and together "the parties")
on the Trade Date specified below (the "Transaction"). This letter agreement
constitutes a "Confirmation" as referred to in the ISDA Master Agreement
specified in paragraph 1 below (the "Agreement").
The definitions and provisions contained in the 1991 ISDA Definitions,
as amended by the 1998 Supplement thereto (each as published by the
International Swaps and Derivatives Association, Inc., the "Definitions") are
incorporated into this Confirmation. In the event of any inconsistency between
the Definitions and this Confirmation, this Confirmation will govern.
Capitalized terms used herein and not otherwise defined have the meanings set
forth in the Definitions or the Indenture referred to below under "Credit
Support Documents."
1. This Confirmation supplements, forms part of, and is subject to, the
ISDA Master Agreement (including the Schedule thereto) dated as of December 19,
2000, as amended and supplemented from time to time (the "Agreement"), between
the parties. All provisions contained in the Agreement govern this Confirmation
except as expressly modified below.
In this Confirmation "Party A" means Bank of America, N.A. and "Party
B" means Spiegel Credit Card Master Note Trust, Series 2000-A.
2. The terms of the particular Transaction to which this Confirmation
relates are as follows:
Notional Amount: USD600,000,000
Trade Date: December 19, 2000
Effective Date: December 19, 2000
Termination Date: November 15, 2005, subject to adjustment in
accordance with the Modified Following
Business Day Convention, subject to early
termination in accordance with the terms of
the Agreement
Page 1 of 4
30
<PAGE>
Fixed Amounts:
Fixed Rate Payer: Party B
Fixed Rate Payer Payment Dates: The 15/th/ of each month commencing
January 15, 2001 and ending on the
Termination Date, subject to
adjustment in accordance with the
Modified Following Business Day
Convention
Fixed Rate: 6.21% per annum
Fixed Rate Day Count Fraction: Actual/360
Floating Amounts:
Floating Rate Payer: Party A
Floating Rate Payer Payment The 15/th/ of each month commencing
Dates: January 15, 2001 and ending on the
Termination Date, subject to
adjustment in accordance with the
Modified Following Business Day
Convention.
Floating Rate for initial
Calculation Period: 6.695% per annum
Floating Rate Option: USD-LIBOR-BBA
Designated Maturity: 1 Month
Spread: None
Floating Rate Day Count Actual/360
Fraction:
Reset Dates: First day of each Calculation Period
Business Days: New York, London, Portland, Oregon,
and Chicago, Illinois
Calculation Agent: Party A
3. Additional Amounts Upon Partial Termination
On any Payment Date during the Rapid Amortization Period or otherwise,
where as a result of payments of principal on the Series 2000-A Notes on such
Payment Date, the Notional Amount would exceed the Outstanding Amount of the
Series 2000-A Notes (as defined in the Indenture), the parties hereto shall
treat the portion of this Transaction represented by such excess as terminated
on such Payment Date (a "Terminated Transaction"). Party A shall calculate the
Market Quotation for the Terminated Transaction as set forth below.
"Market Quotation" means, with respect to a Terminated Transaction, an
amount determined on the basis of quotations from Reference Market-makers. Each
quotation will be for an amount, if any, that would be paid to Party A
(expressed as a negative number) or by Party A (expressed as a positive number)
in consideration of an agreement between Party A and the quoting Reference
Market-maker to enter into such Terminated Transaction (with the same fixed and
floating payment
Page 2 of 4
31
<PAGE>
rates and remaining term as this Transaction) on the relevant Payment Date.
Party A will request each Reference Market-maker to provide its quotation to the
extent reasonably practicable as of the same day and time (without regard to
different time zones) on or as soon as reasonably practicable prior to the
relevant Payment Date. The day and time as of which those quotations are to be
obtained will be selected in good faith by Party A. If more than three
quotations are provided, the Market Quotation will be the arithmetic mean of the
quotations, without regard to the quotations having the highest and lowest
values. If exactly three such quotations are provided, the Market Quotation will
be the quotation remaining after disregarding the highest and lowest quotations.
For this purpose, if more than one quotation has the same highest value or
lowest value, then one of such quotations shall be disregarded. If fewer than
three quotations are provided, Party A will determine the Market Quotation in
good faith. Notwithstanding the foregoing, Party A shall be the sole Reference
Market-maker unless: (a) the reduction in the Notional Amount of the Transaction
is equal to or greater than $50 million on such Payment Date, and (b) the
Servicer or the Indenture Trustee requests that quotations from Reference
Market-makers other than Party A are utilized.
If the amount so determined by Party A in respect of a Terminated
Transaction is positive, Party B shall owe such amount to Party A, which shall
be payable (with interest thereon accruing from such Payment Date and calculated
at the Fixed Rate) on the next Distribution Date to the extent provided in the
Indenture. If such amount is negative, Party A shall owe such amount to Party B,
which shall be payable (with interest accruing from such Payment Date and
calculated at the Floating Rate) on the November 15, 2005 Payment Date, net of
any amounts payable by Party B to Party A.
4. Credit Support Documents: With respect to Party B, (a)
the Indenture, dated as of
December 1, 2000, as
supplemented by the
Supplemental Indenture, dated
as of December 19, 2000 (as so
supplemented, the "Indenture"),
between Party B and The Bank of
New York, as indenture trustee,
and (b) solely with respect to
net Fixed Amounts payable by
Party B, and not with respect
to any amount due under Section
6(e) or any other provision of
the Agreement, the Financial
Guaranty Insurance Policy,
dated as of December 19, 2000,
issued by MBIA
5. Account Details:
Account for payments to Party A: Name: Bank of America
City: New York
ABA# 026009593
ATTN: BOFAUS3N
Name: Bank of America, NA
City: Charlotte
Acct: 6550219386
Attn: Rate Derivative
Settlements
Account for payments to Party B: The Bank of New York
ABA #021000018
Name: Spiegel Credit Card
Master Note Trust
Collection Account
Acct: 341802
Page 3 of 4
32
<PAGE>
6. Offices:
The Office of Party A for this
Transaction is:
Charlotte, NC
The Office of Party B for this
Transaction is:
New York
Please confirm that the foregoing correctly sets forth
the terms and conditions of our agreement by responding
within three (3) Business Days by returning via
telecopier an executed copy of this Confirmation to the
attention of Global Derivative Operations (fax no. (312)
234 3603).
Failure to respond within such period shall not affect the validity or
enforceability of this Transaction, and shall be deemed to be an affirmation of
the terms and conditions contained herein, absent manifest error.
Bank of America, N.A. Accepted and confirmed as of the date first
written:
Spiegel Credit Card Master Note Trust,
By:________________________ By Bankers Trust Company, not in its individual
capacity, but solely as Owner Trustee
Name:
Title:
By:_____________________________
Name and Title:
Page 4 of 4
33
<PAGE>
EXHIBIT F
---------
INSURANCE AGREEMENT DEFINITIONS
-------------------------------
"Available Spread Account Amount" means for any Distribution Date, an
-------------------------------
amount equal to the lesser of (a) the amount on deposit in the Spread Account
(exclusive of Investment Earnings, unless and until the occurrence of an Event
of Default with respect to Series 2000-A and acceleration of the maturity of the
Series 2000-A Notes pursuant to Section 5.3 of the Indenture) on such date
-----------
(before giving effect to any deposit to, or withdrawal from, the Spread Account
made or to be made with respect to such date), and (b) the Required Spread
Account Amount for such Distribution Date.
"Average Excess Spread Percentage" means, for any Distribution Date,
--------------------------------
the percentage determined as follows:
For the January 16, 2001 Distribution Date, the Modified
Excess Spread Percentage;
For the February 15, 2001 Distribution Date, the sum of the
Modified Excess Spread Percentage and the Excess Spread Percentage for
the calendar month of January 2001, divided by two (2);
For the March 2001 Distribution Date, the sum of the Modified
Excess Spread Percentage, the Excess Spread Percentage with respect to
the calendar month of January 2001 and the Excess Spread Percentage
with respect to the calendar month of February 2001, divided by three
(3); and
For each following Distribution Date, the sum of the Excess
Spread Percentages for the three (3) prior calendar months, divided by
three (3).
"Bank" means, on any day, the Eligible Institution holding the Spread
----
Account pursuant to Section 2.05 hereof.
"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
Monthly Interest due on the Notes, (b) the Monthly Servicing Fee for the Notes,
(c) any Net Swap Payment due from the Issuer, and (d) the Premium, each as of
the following Distribution Date; and the denominator of which is the Collateral
Amount as of the first day of that calendar month.
"Condition Precedent Documents" means:
-----------------------------
(i) the Insurance Agreement;
<PAGE>
(ii) the Transfer and Servicing Agreement
(iii) the Master Indenture;
(iv) the Series 2000-A Indenture Supplement;
(v) the Receivables Purchase Agreement dated September 20,
1994 among the Seller, FCNB and Spiegel Acceptance;
(vi) the Trust Agreement;
(vii) the Administration Agreement;
(viii) the Pooling and Servicing Agreement;
(ix) the Collateral Series Supplement and Exhibit B thereto,
the form of Trust Receivables Purchase Agreement;
(x) the Underwriting Agreement;
(xi) the Indemnification Agreement;
(xii) the Premium and Fee Letter;
(xiii) the Swap; and
(xiv) the Spread Account Letter.
"Default Amount Rate" means with respect to any calendar month the
-------------------
annualized percentage equivalent of a fraction, the numerator of which is the
Investor Default Amount for that calendar month; and the denominator of which is
the Collateral Amount as of the first day of that calendar month.
"Dilution" means non-cash adjustments and non-charge off adjustments to
--------
the Receivables made from time to time by the Servicer as a consequence of (but
not limited to) merchandise returns, late charge waivers, and billing
adjustments.
"Dilution Rate" means on any Distribution Date the percentage
-------------
equivalent of a fraction (a) the numerator of which is equal to the Dilution for
the 3 calendar months preceding such Distribution Date, and (b) the denominator
of which is the sum of the Aggregate Principal Receivables as of the end of each
of those three calendar months.
"Excess Spread Percentage" means, for any calendar month, the result of
------------------------
(a) the Portfolio Yield for that calendar month minus (b) the Base Rate for that
calendar month, minus (c) the
2
<PAGE>
Default Amount Rate for that calendar month.
"Indemnification Agreement" means the Indemnification Agreement, dated
-------------------------
as of December 19, 2000 among the Insurer, the Seller, Spiegel and Banc of
America Securities LLC, as representative (the "Representative") of Deutsche
--------------
Bank Securities Inc., J.P. Morgan Securities Inc., ABN AMRO Incorporated and
HSBC Securities (USA) Inc., as underwriters (together with the Representative,
the "Underwriters").
------------
"Insurance Agreement Event of Default" means an Event of Default
------------------------------------
described in Section 6.2 of the Series 2000-A Indenture Supplement.
"Investment Earnings" means, for any Distribution Date, all interest
-------------------
and earnings on Permitted Investments included in the Spread Account (net of
losses and investment expenses) during the period commencing on and including
the Distribution Date immediately proceeding such distribution Date and ending
on but excluding such Distribution Date.
"Maximum Commitment Amount" means $600,000,000.
-------------------------
"Modified Excess Spread Percentage" means 8.75%.
---------------------------------
"Otto Interests" means (a) Werner Otto of Hamburg, Germany, his spouse
--------------
and any of his lineal descendants and their respective spouses (collectively,
the "Otto Family", any Subsidiary of any members of the Otto Family, and any
personal representative, trustee or other fiduciary acting in respect of the
estate of any member of the Otto Family, and (b) any trust which is solely for
the benefit of one or more members of the Otto Family (whether or not any member
of the Otto Family is a trustee of such trust) or principally for the benefit of
one or more members of the Otto Family (provided that a member of the Otto
Family is a trustee of such trust); and "Subsidiary" of a Person shall for the
purposes of this definition mean (i) any corporation of which more than 50% of
the outstanding securities having ordinary voting power shall at the time be
owned or controlled, directly or indirectly, by such Person or by one or more of
its Subsidiaries or by such Person and one or more of its Subsidiaries, or (ii)
any partnership, association, joint venture, limited liability company or
similar business organization of which more than 50% of the ownership interests
having ordinary voting power shall at the time be so owned or controlled.
"Person" means an individual, a partnership, a corporation, a business
------
trust, a joint stock company, a trust, an unincorporated association, a joint
venture, a Governmental Authority or another entity of whatever nature.
"Portfolio Yield" means, with respect to any calendar month, the
---------------
annualized percentage equivalent of a fraction: (a) the numerator of which is
equal to the amount of (i) Investor Finance Charge Collections with respect to
such calendar month plus (ii) any Net Swap Receipt for the following
Distribution Date, plus (iii) the Principal Accumulation Investment Proceeds
deposited into the Collection Account on the Distribution Date following such
calendar month, plus (iv) the amount of the Reserve Draw Amount (up to the
Available Reserve Account
3
<PAGE>
Amount) plus any amounts of interest and earnings described in Section 4.10 of
the Series 2000-A Indenture Supplement, each deposited into the Collection
Account on the Distribution Date following such calendar month, plus (v) Excess
Finance Charge Collections that are allocated to Series 2000-A with respect to
such calendar month, such sum to be calculated on a cash basis, and (b) the
denominator of which is the Collateral Amount as of the first day of such
calendar month.
"Premium and Fee Letter " means the letter dated the Closing Date from
----------------------
the Insurer to the Seller setting forth the payment arrangement for the premium
on the Policy and certain fees and expenses related to payment arrangements.
"Rating Agency Condition" means with respect to any action or series of
-----------------------
related actions or proposed transaction or series of related proposed
transactions affecting Series 2000-A, that each Rating Agency shall have
notified Seller and the Indenture Trustee in writing that such action or series
of related actions or the consummation of such proposed transactions or series
of related transactions will not result in a reduction or withdrawal of (i) the
rating of the Series 2000-A Notes or (ii) the Shadow Rating.
"Required Amount" means, for any Distribution Date, an amount equal to
---------------
the excess of the sum of the amounts described in subsections 4.4(a)(i) and
---------------------
4.4(a)(ii) of the Series 2000-A Indenture Supplement over the Available Finance
----------
Charge Collections applied to pay such amounts pursuant to subsection 4.4(a) of
-----------------
the Series 2000-A Indenture Supplement; provided, that if the Rapid Amortization
--------
Period is extended past the Series 2000-A Final Maturity Date as a result of
there being amounts owed to the Insurer under this Agreement or the Series
2000-A Indenture Supplement or the Counterparty under the Swap, then for any
Distribution Date falling on or after the Series 2000-A Final Maturity Date, the
Required Amount shall mean any such amounts owed to the Insurer and/or the
Counterparty that remain outstanding, and such amounts shall also be included in
the Required Amount on the Series 2000-A Final Maturity Date to the extent that
Reallocated Principal Collections remain available to cover such amounts after
all other components of the Required Amount have been paid in full or Available
Spread Account Amount remains for that purpose after the other components of the
Required Amount and the Note Principal Balance have been paid in full.
"Required Excess Collateral Amount" means, with respect to any
---------------------------------
Distribution Date, 10.5% of the Collateral Amount on such Distribution Date;
provided that, (A) except as provided in (C) below, the Required Excess
-------------
Collateral Amount will never be less than 3% of the Initial Collateral Amount;
(B) except as provided in (C) below, the Required Excess Collateral Amount will
not decrease during a Rapid Amortization Period, and (C) the Required Excess
Collateral Amount will never be greater than the Note Principal Balance minus
the Principal Accumulation Account Balance.
"Required Spread Account Amount" means (a) on the Closing Date, the
------------------------------
Spread Account Deposit, (b) on each Distribution Date prior to a Pay Out Event,
an amount equal to the lesser of (x) the product of (i) the Spread Account
Percentage for that Distribution Date and (ii) the Maximum Commitment Amount,
and (y) the Note Principal Balance on such Distribution Date,
4
<PAGE>
minus the Principal Accumulation Account Balance on the relevant determination
date; and (c) on each Distribution Date after a Pay Out Event or on which a Pay
Out Event has occurred, the Note Principal Balance on such Distribution Date.
"Shadow Rating" means rating of the Notes at BBB/Baa2 by the Rating
-------------
Agencies, without giving effect to the Policy.
"Spread Account" means the segregated trust account required to be
--------------
established pursuant to Section 2.05 hereof.
"Spread Account Deposit" means 1% of the Note Initial Principal
----------------------
Balance.
"Spread Account Deficiency" means the excess, if any, of the Required
-------------------------
Spread Account Amount over the Available Spread Account Amount.
"Spread Account Letter" means the letter from the Bank addressed to the
---------------------
Insurer, dated the Closing Date, substantially in the form of Exhibit C to the
Insurance Agreement.
"Spread Account Percentage" means on each Distribution Date:
-------------------------
(i) if the Average Excess Spread Percentage for
such Distribution Date is greater than 5.5%, 2.0% ("level 1");
(ii) if the Average Excess Spread Percentage for
such Distribution Date is less than or equal to 5.5%, but is greater than 5.0%,
4.5% ("level 2");
(iii) if the Average Excess Spread Percentage for
the such Distribution Date is less than or equal to 5.0%, but is greater than
4.5%, 5.5% ("level 3");
(iv) if the Average Excess Spread Percentage for
such Distribution Date is less than or equal to 4.5%, but is greater than 3.5%,
7.0% ("level 4"); and
(v) if the Average Excess Spread Percentage for
such Distribution Date is less than or equal to 3.5%, 10.0% ("level 5");
provided, however, that, if the Spread Account Percentage is greater
-----------------
than 2.0%, the Spread Account Percentage will remain constant until (a)
it is required to be increased pursuant to (ii) through (v) above, or
(b) the Average Excess Spread Percentage has exceeded the percentage
specified as the upper bound of the range of Average Excess Spread
Percentages specified for such Spread Account Percentage for three
consecutive Distribution Dates, in which case the Spread Account
Percentage will be decreased on the third consecutive Distribution Date
as required in (i) through (v) above, provided that the Spread Account
-------------
Percentage on any Distribution Date may in no event be reduced by more
than one level below the Spread Account Percentage on the immediately
preceding Distribution
5
<PAGE>
Date.
"Subsidiary" means as to any Person, a corporation or entity of which
----------
shares of stock or other equity interests having ordinary voting power (other
than stock or other equity interests having such power only by reason of the
happening of a contingency) to elect a majority of the board of directors or
other managers of such corporation or entity are (a) at the time owned, or (b)
the management of which is otherwise controlled, directly or indirectly, through
one or more intermediaries, by such Person.
"Supplemental Enhancement" means, with respect to any Distribution
------------------------
Date, the product of the Supplemental Enhancement Percentage and the Collateral
Amount on such Distribution Date.
"Supplemental Enhancement Percentage" means on any Distribution Date a
-----------------------------------
percentage equivalent of a fraction the numerator of which is the aggregate
amount of Receivables aged over 180 days on a contractual delinquency basis as
of the last day of the calendar month preceding such Distribution Date, and the
denominator of which is the Aggregate Receivables as of the last day of the
calendar month preceding such Distribution Date.
"Trust Receivables Purchase Agreement" means the Receivables Purchase
------------------------------------
Agreement to be entered into between the Seller, as buyer, and FCNB and Spiegel
Acceptance, as Seller, in the form attached as Exhibit B to the Collateral
Series Supplement.
6
<PAGE>
EXHIBIT G
---------
SECTION 2.05 OF INSURANCE AGREEMENT (SPREAD ACCOUNT)
----------------------------------------------------
SECTION 2.05 The Spread Account.
------------------
(a) On or prior to the Closing Date, the Servicer shall cause to be
established in the name of the Noteholders and the Insurer an account (the
"Spread Account") at an Eligible Institution. Unless the Insurer otherwise
agrees, the Spread Account shall be a fully segregated trust account at the
corporate trust department of the Eligible Institution. The Insurer hereby
gives its consent to permit the Spread Account to be maintained as a trust
account at the Indenture Trustee. The Spread Account will be in the name of the
Insurer and under the control of the Insurer. The Spread Account will be
entitled "MBIA Insurance Corporation pursuant to the Insurance and Reimbursement
Agreement among MBIA Insurance Corporation, Spiegel Credit Corporation III,
First Consumers National Bank, Spiegel, Inc., Spiegel Acceptance Corporation,
Spiegel Credit Card Master Note Trust and The Bank of New York, as Indenture
Trustee, dated as of December 19, 2000". The Issuer hereby irrevocably
instructs the Bank to pay amounts on deposit in the Spread Account as provided
in Sections 2.05(d), (e) and (j) hereof.
(b) The Insurer hereby revocably appoints the Servicer, which
appointment the Servicer hereby accepts, to act on behalf of the Insurer for
investing all cash at any time on deposit in the Spread Account. The Insurer
hereby directs the Indenture Trustee, at the direction of the Servicer, to
invest all cash at any time on deposit in the Spread Account in Permitted
Investments that mature not later than the Business Day preceding the next
Distribution Date. Each such instruction shall designate specific investments
and shall certify that the investments so specified constitute Permitted
Investments, mature at the time required and are otherwise permitted hereby.
All such investments shall be made in the name of the Bank as agent for the
Insurer and the Series 2000-A Noteholders, and held by the Bank, or its nominee,
for the benefit of the Insurer and the Series 2000-A Noteholders. The Bank
shall not be liable for any loss incurred in connection with any investment in
the Spread Account, except for losses with respect to investments in any
investment issued or guaranteed by the Bank. In the event the Bank ceases to be
an Eligible Institution, the Insurer shall direct the Servicer to establish a
new Spread Account (and transfer any balance and investments then in the Spread
Account to such new Spread Account) within three days of such direction at an
Eligible Institution specified by the Insurer.
(c) On each Distribution Date (but subject to subsections 2.05(d) and
2.05(e)), the Investment Earnings, if any, accrued since the preceding
Distribution Date on funds on deposit in the Spread Account shall be paid to the
holders of the Seller Interest by the Indenture Trustee upon written direction
of the Servicer. For purposes of determining the availability of funds or the
balance in the Spread Account for any reason under this Insurance Agreement or
the Series 2000-A Indenture Supplement (subject to subsections 2.05(d) and
2.05(e)), all Investment Earnings shall be deemed not to be available or on
deposit; provided that after the maturity of the
<PAGE>
Series 2000-A Notes has been accelerated as a result of an Event of Default, all
Investment Earnings shall be added to the balance on deposit in the Spread
Account and treated like the rest of the Available Spread Account Amount.
Spiegel Acceptance will report for federal, state and local income tax purposes
the income, if any, represented by the Spread Account and may not assign,
transfer or otherwise convey its rights under this Insurance Agreement to
receive any amounts from the Spread Account, except that Investment Earnings and
excess funds will be paid to Spiegel Acceptance as set forth in this subsection
2.05(c) and subsection 2.05(j).
(d) If, on any Distribution Date, the sum of the Available Finance
Charge Collections and the Reallocated Principal Collections is less than the
Required Amount, the Indenture Trustee, at the written direction of the
Servicer, shall withdraw from the Spread Account the amount of such deficiency
up to the Available Spread Account Amount and, if the Available Spread Account
Amount is less than such deficiency, Investment Earnings credited to the Spread
Account, and deposit such amount in the Collection Account for application to
the unpaid components of the Required Amount in the priority in which such items
are listed in Section 4.4(a) of the Series 2000-A Indenture Supplement.
(e) On the Series 2000-A Final Maturity Date, the Indenture Trustee
at the written direction of the Servicer shall withdraw from the Spread Account
an amount equal to the lesser of (i) the Note Principal Balance (after any
payments to be made pursuant to subsection 4.4(c) of the Series 2000-A Indenture
Supplement) and (ii) the Available Spread Account Amount and, if the Available
Spread Account Amount is not sufficient to reduce the Note Principal Balance to
zero, Investment Earnings credited to the Spread Account up to the amount
required to reduce the Note Principal Balance to zero, and the Indenture Trustee
upon the written direction of the Servicer or the Servicer shall deposit such
amounts into the Collection Account for distribution to the Series 2000-A
Noteholders in accordance with subsection 5.2(e) of the Series 2000-A Indenture
Supplement.
(f) If on any Distribution Date, after giving effect to all
withdrawals from the Spread Account, the Available Spread Account Amount is less
than the Required Spread Account Amount then in effect, Available Finance Charge
Collections shall be deposited into the Spread Account under the circumstances
set forth in subsection 4.4(a)(viii) of the Series 2000-A Indenture Supplement
up to the amount of the Spread Account Deficiency.
(g) Upon delivery of a Notice for Payment under the Policy, the
Indenture Trustee or the Servicer on its behalf shall immediately deliver
written notice, in the form of Exhibit A to the Policy, to the Bank, and the
Bank shall, immediately upon receipt thereof and upon receipt of the required
funds from the Insurer, cause payments required to be made by the Insurer under
such Notice for Payment to be satisfied by depositing the amount into the Spread
Account in accordance with the Policy and by debiting the Spread Account and
crediting the accounts specified in such notice, to the extent of any funds then
on deposit in the Spread Account. Such payment will be made by the Bank without
any further direction or notice from the Insurer. The Indenture Trustee shall
deliver to the Insurer a statement with respect to such payment in the form of
Exhibit B hereto in addition to a Notice for Payment. The Insurer shall
2
<PAGE>
deliver to the Bank such documentation as such institution may reasonably deem
necessary to effectuate the terms of this Section 2.05(e).
(h) In the event that, notwithstanding the terms and conditions
hereof and the intention of the parties to the contrary, the Issuer, the
Indenture Trustee, the Seller, the Servicer or Spiegel Acceptance is deemed to
have any rights or interest in or to any funds on deposit in the Spread Account,
other than the right of Spiegel Acceptance to receive Investment Earnings and
payments of amounts in excess of the applicable Spread Account Amount and
amounts pursuant to subsection 2.05(j) hereof, then, and in any such event, each
of the Issuer, the Indenture Trustee, the Seller, the Servicer and Spiegel
Acceptance hereby agrees that this Insurance Agreement constitutes a grant to
the Insurer, as of the date hereof, of a security interest in the Spread
Account, all funds on deposit therein, all investments made from time to time
with the funds so deposited therein, and all proceeds of such investments to
secure any and all rights to payment and reimbursement that now exist or may
hereafter arise in favor of the Insurer under this Insurance Agreement, the
Policy and/or the Indemnification Agreement, and each such Person hereby
pledges, assigns, sets over, and otherwise transfers to the Insurer any and all
of its respective right, title and interest in and to the Spread Account, any
amounts on deposit from time to time therein, all investments made from time to
time with the funds so deposited therein, and all proceeds of such investments;
and each such Person hereby agrees to such pledge and assignment, and all
necessary action on the part of each such Person has been taken as may be
required to perfect the security interest of the Insurer in the Spread Account,
all amounts from time to time on deposit therein as of the date hereof, all
investments made from time to time with the funds so deposited therein, and all
proceeds of such investments. Each of the Issuer, the Indenture Trustee, the
Seller, the Servicer and Spiegel Acceptance agrees to promptly, from time to
time, at the sole expense of the Seller, execute and deliver all instruments and
documents, and at the request of the Insurer, take all action, that may be
reasonably necessary or desirable, in order to perfect and protect the security
interest granted to the Insurer pursuant to this Section 2.05(g) or to enable
the Insurer to exercise and enforce its rights and remedies with respect to the
assets of the Spread Account. The Insurer is hereby authorized to file one or
more financing or continuation statements, and amendments thereto, relating to
all or any part of the assets of the Spread Account.
(i) The Indenture Trustee shall hold such of the Permitted
Investments as consist of instruments, deposit accounts, negotiable documents,
money, goods, letters of credit, and advices of credit in the State of New York.
The Indenture Trustee shall hold such of the Permitted Investments as
constitutes investment property through a securities intermediary, which
securities intermediary shall agree with the Indenture Trustee that (a) such
investment property shall at all times be credited to a securities account of
the Indenture Trustee, (b) such securities intermediary shall treat the
Indenture Trustee as entitled to exercise the rights that comprise each
financial asset credited to such securities account, (c) all property credited
to such securities account shall be treated as a financial asset, (d) such
securities intermediary shall comply with entitlement orders originated by the
Indenture Trustee without the further consent of any other person or entity, (e)
such securities intermediary will not agree with any person or entity other than
the Indenture Trustee to comply with entitlement orders originated by such other
person or entity, (f) such securities accounts and the property credited thereto
shall not be
3
<PAGE>
subject to any lien, security interest, or right of set-off in favor of such
securities intermediary or anyone claiming through it (other than the Indenture
Trustee), and (g) such agreement shall be governed by the laws of the State of
New York. Terms used in the preceding sentence that are defined in the New York
UCC and not otherwise defined herein shall have the meaning set forth in the New
York UCC.
(j) Ninety days after (A) the payment in full to the Noteholders of
all amounts payable with respect to the Notes, or (B) the date of funding under
any Qualified Maturity Agreement, and the payment in full of the Reimbursement
Amount and all other amounts payable to the Insurer or the Counterparty, the
Insurer shall direct that any amounts remaining in the Spread Account shall be
released to Spiegel Acceptance; provided, however, that, if any Insolvency Event
occurs with respect to any of the Issuer, the Seller, FCNB or any material
Subsidiary of Spiegel (collectively, the "Potential Preference Parties") during
the period described above, then all funds shall remain on deposit in the Spread
Account until the date that all applicable limitation periods with respect to
all applicable preferential transfer or other payment avoidance statutes
relating to any of the Potential Preference Parties have expired and if no
proceeding at law or in equity is commenced during any such period based upon
any such statute, all such amounts remaining on deposit in the Spread Account
shall be released at the end of all such periods to the Seller; provided,
further, however, that if any such proceeding is commenced during any applicable
limitation period, all funds on deposit in the Spread Account shall remain on
deposit therein until the date on which there is a final determination by a
court of competent jurisdiction as to whether any payment or payments made
pursuant to the Transfer and Servicing Agreement, the Series 2000-A Indenture
Supplement, the Indemnification Agreement or this Insurance Agreement is
recoverable from either the Insurer or the Noteholders. If such a court
determines that a payment is so recoverable, all funds on deposit in the Spread
Account shall remain on deposit in the Spread Account and shall be applied to
the payment of any and all such claims that the Insurer may be required to pay.
If such a court determines that such payment is not recoverable, all funds on
deposit in the Spread Account shall be released to Spiegel Acceptance. The
foregoing notwithstanding, if (i) amounts payable with respect to the Notes have
been fully paid to the Noteholders and (ii) the Reimbursement Amount and all
other amounts payable to the Insurer under this Insurance Agreement and all
amounts payable to the Counterparty have been paid in full, (iii) no Insolvency
Event has occurred with respect to the Potential Preference Parties, and (iv)
(A) FCNB is rated at least BBB and Baa2 by S&P and Moody's, respectively, (B)
the Insurer shall have received a favorable opinion or opinions, satisfactory in
form and substance to the Insurer, from counsel to the Seller, the Servicer and
FCNB, to the effect that in the event that an Insolvency Event were to occur
with respect to the Potential Preference Parties, no payment pursuant to the
Transfer and Servicing Agreement, the Series 2000-A Indenture Supplement, the
Indemnification Agreement or this Insurance Agreement would be recoverable from
either the Insurer, or the Noteholders, and such other matters as the Insurer
may reasonably request; or (C) the Insurer, in its sole discretion, elects to
pay the contents of the Spread Account to Spiegel Acceptance, then, and in any
such event, the Insurer shall pay or cause to be paid all remaining amounts in
the Spread Account to Spiegel Acceptance.
4
<PAGE>
EXHIBIT H
---------
SECTION 5.01 OF INSURANCE AGREEMENT
(INSURANCE AGREEMENT PAY OUT EVENTS)
SECTION 5.0 Insurance Agreement Pay Out Events. The occurrence of any
one of the following shall constitute an Insurance Agreement Pay Out Event:
(a) the occurrence of a Pay Out Event as defined in Section 6.1 of
the Series 2000-A Indenture Supplement or Section 5.1 of the Indenture;
(b) the occurrence of any of the following events:
(i) failure on the part of the Servicer duly to observe or
perform in any material respect any other covenants or agreements of the
Servicer set forth in the Transfer and Servicing Agreement which has a material
adverse effect on the Noteholders, which continues unremedied for a period of 45
days after the date on which written notice of such failure requiring the same
to be remedied shall have been given to the Servicer by the Indenture Trustee
and/or the SMT Trustee, or to the Servicer and the Indenture Trustee by the
Noteholders holding not less than 10% of the outstanding principal amount of any
Series adversely affected thereby, or prior to the SMT Termination Date, the
Servicer and the SMT Trustee by Investor Certificateholders of 50% or more of
the then-outstanding principal amount of the Investor Certificates of any
adversely affected Series and continues to materially adversely affect such
Noteholders or such Investor Certificateholders for such period; or the
Servicer's delegation of its duties under this Agreement except as permitted by
Section 5.7 of the Transfer and Servicing Agreement;
(ii) any representation, warranty or certification made by
the Servicer in the Transfer and Servicing Agreement or in any certificate
delivered pursuant to the Transfer and Servicing Agreement shall prove to have
been incorrect when made, which has a material adverse effect on the Noteholders
and which continues to be incorrect in any material respect for a period of 45
days after the date on which written notice of such failure requiring the same
to be remedied shall have been given to the Servicer by the Indenture Trustee
and/or the SMT Trustee, or to the Servicer and the Indenture Trustee by
Noteholders holding not less than 10% of the outstanding principal amount of any
Series adversely affected thereby, or prior to the SMT Termination Date, the
Servicer and the SMT Trustee by Investor Certificateholders of 50% or more of
the then-outstanding principal amount of the Investor Certificates of any
adversely affected Series and continues to materially adversely affect such
Noteholders for such period, or if such failure cannot be cured within such 45
days period owing to causes beyond the control of the Servicer, if the Servicer
shall failure to proceed promptly to cure the same and prosecute the curing of
such failure with diligence and continuity;
<PAGE>
(iii) the Servicer shall (i) become insolvent, (ii) fail to pay
its debts generally as they become due, (iii) voluntarily seek, consent to, or
acquiesce in the benefit or benefits of any Debtor Relief Law, or (iv) become a
party to (or be made the subject of ) any proceeding provided for by any Debtor
Relief Law, other than as a creditor or claimant, and, in the event such
proceeding is involuntary, the petition instituting same is not dismissed within
45 days after its filing; or
(iv) the Servicer fails to maintain a sub-servicing agreement
with First Data Resources Inc. in the form of the Service Agreement dated
September 9, 1998 between First Data Resources Inc. and Servicer or another sub-
servicer acceptable to the Insurer;
(c) the insolvency of a material Subsidiary of Spiegel;
(d) failure of the Otto Interests to own, directly or indirectly,
free and clear of all liens at least 67% of the ownership interest in Spiegel;
(e) failure on the part of Seller, Servicer or Spiegel to observe or
perform in any material respect any of the covenants or agreements of Seller,
Servicer or Spiegel set forth in the Insurance Agreement or breach of any
representation, warranty or certification made by Seller, Servicer or Spiegel in
the Insurance Agreement which continues unremedied for 45 days or such shorter
period specified herein after the date on which written notice of such failure
or breach requiring the same to be remedied shall have been given to the
Servicer , the Seller or Spiegel (and if to the Seller or Spiegel, also to the
Servicer) by the Insurer, provided that:
(i) failure by the Seller or Servicer to pay any amount due to
the Insurer hereunder shall be remedied within five (5) days after such amount
was due to be paid or deposited in accordance with the Insurance Agreement; and
(ii) failure by the Seller to comply with Section 4.02(g)(i)
shall be remedied within ten (10) days of the Seller receiving notice from the
Insurer requiring such remedy;
(f) the Dilution Rate exceeds 8.5%;
(g) the Servicer fails to remain "Well Capitalized", as defined by 12
U.S.C. 1831 and the regulations of the Federal Deposit Insurance Corporation
adopted thereunder, provided that Servicer does not cure such default within
thirty (30) days following the earlier of (a) the date on which any officer of
the Servicer has knowledge of such failure to remain Well Capitalized and (b)
the date the Servicer is notified by (i) any Governmental Authority of its
failure to remain Well Capitalized, so long as the Servicer demonstrates to the
Insurer, at the Insurer's sole discretion, that the Servicer can reasonably cure
such violation within thirty (30) days or (ii) any Governmental Authority,
including the Federal Deposit Insurance Corporation or any other Governmental
Authority with regulatory powers over the Servicer, shall take any mandatory or
discretionary supervisory action against the Servicer, including, without
limitation, by cease and desist order, memorandum of understanding, capital
directive or directive to take prompt corrective action, which action in the
reasonable opinion of MBIA could have a material
<PAGE>
adverse effect on (A) the business, operations, property, financial conditions
or prospects of the Servicer or (B) the ability of the Servicer to perform its
obligations under any Condition Precedent Documents to which it is a party;
(h) the occurrence of an Insurance Agreement Event of Default.
