<PAGE>
As filed with the Securities and Exchange Commission on October 10, 2000
Registration No. 333-39062 and 333-39062-01
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________________
AMENDMENT NO. 2
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
_______________________
Spiegel Master Trust
(Issuer of the Collateral Certificate)
Spiegel Credit Corporation III
(Originator of the Trusts described herein)
(Exact name of registrant as specified in its charter)
Spiegel Credit Card Master Note Trust
(Issuer of the Notes)
Delaware 36-3976025
(State of Incorporation) (I.R.S. Employer
Identification No.)
400 West 9th Street, Suite 101B
Wilmington, Delaware 19801
(302) 429-7609
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
John R. Steele
Spiegel, Inc.
3500 Lacey Road
Downers Grove, Illinois 60515
(630) 986-8800
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copies to:
Robert F. Hugi Jay A. Lipe
Mayer, Brown & Platt Rooks, Pitts and Poust
190 South LaSalle Street 10 South Wacker Drive
Chicago, Illinois 60603-3441 Suite 2300
(312) 782-0600 Chicago, Illinois 60606
(312) 876-1700
Approximate date of commencement of proposed sale to the public: From time
to time after this Registration Statement becomes effective as determined by
market conditions.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, check the following box.[_]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box.[X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering.[_] ________________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.[_] ________________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box.[_]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
==================================================================================================================
Amount to be Proposed Maximum Proposed Maximum
Title of Each Class of Registered Offering Price Aggregate Amount of
Securities to be Registered Per Unit(1) Offering Price(1) Registration Fee/(3)/
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Asset Backed Notes............. $1,800,000,000 100% $1,800,000,000 $475,200
------------------------------------------------------------------------------------------------------------------
Collateral Certificate/(2)/.... $1,800,000,000 - - -
==================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
(2) No additional consideration will be paid by the purchasers of the Asset
Backed Notes for the Collateral Certificate, which is pledged as security
for the Asset Backed Notes and issued by another trust formed by the
registrant.
(3) $264 has been previously paid.
_______________________
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus supplement and the accompanying prospectus +
+is not complete and may be amended. We may not sell these securities until the+
+registration statement filed with the Securities and Exchange Commission is +
+effective. This prospectus supplement and the accompanying prospectus are not +
+an offer to sell and are not soliciting an offer to buy these securities in +
+any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Subject to Completion, dated __________ ___, 2000
Prospectus Supplement to Prospectus dated ____________ ___, 2000
Spiegel Credit Card Master Note Trust
Issuer
Spiegel Credit Corporation III First Consumers National Bank
Seller Servicer
Series 2000- Asset Backed Notes
Class A Notes Class B Notes Class C Notes
------------- ------------- -------------
Principal amount $ $ $
Interest Rate [One-month LIBOR [One-month LIBOR [One-month LIBOR
plus] [ ]% per plus] [ ]% per plus] [ ]% per
year, payable year, payable year, payable
on monthly the on monthly the on monthly the
15th 15th 15th
Expected principal
payment date 200 200 200
Final maturity date 200 200 200
Price to public $ (or %) $ (or %) $ (or %)
Underwriting $ (or %) $ (or %) $ (or %)
discount
Proceeds to issuer $ (or %) $ (or %) $ (or %)
The notes will be paid from the trust assets consisting primarily of an interest
in receivables in a portfolio of private label revolving credit card accounts
owned by First Consumers National Bank.
We expect to issue your series of notes in book-entry form on or about , 2000.
--------------------------------------------------------------------------------
You should consider carefully the risk factors beginning on page ___ in the
prospectus.
A note is not a deposit and neither the notes nor the underlying accounts or
receivables are insured or guaranteed by the Federal Deposit Insurance
Corporation or any other governmental agency.
The notes are obligations of Spiegel Credit Card Master Note Trust only and are
not obligations of Spiegel Credit Corporation III, First Consumers National Bank
or any other person.
This prospectus supplement may be used to offer and sell the notes only if
accompanied by the prospectus.
--------------------------------------------------------------------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved these notes or determined that this prospectus
supplement or the prospectus is accurate or complete. Any representation to the
contrary is a criminal offense.
Underwriters of the Class A notes
Underwriters of the Class B notes
Underwriters of the Class C notes
, 2000
<PAGE>
Important Notice about Information Presented in this
Prospectus Supplement and the Accompanying Prospectus
We (Spiegel Credit Corporation III) provide information to you about the
notes in two separate documents: (a) the accompanying prospectus, which provides
general information, some of which may not apply to your series of notes, and
(b) this prospectus supplement, which describes the specific terms of your
series of notes.
Whenever the information in this prospectus supplement is more specific
than the information in the accompanying prospectus, you should rely on the
information in this prospectus supplement.
You should rely only on the information provided in this prospectus
supplement and the accompanying prospectus, including the information
incorporated by reference. We have not authorized anyone to provide you with
different information. We are not offering the notes in any state where the
offer is not permitted.
We include cross references in this prospectus supplement and the
accompanying prospectus to captions in these materials where you can find
further related discussions. The following Table of Contents and the Table of
Contents in the accompanying prospectus provide the pages on which these
captions are located.
<PAGE>
Table of Contents
<TABLE>
<CAPTION>
Page
<S> <C>
Summary of Terms................................................ S-1
Structural Summary.............................................. S-3
The Issuer................................................. S-3
Collateral for the Notes................................... S-3
Spiegel Master Trust....................................... S-4
Other Claims on the Receivables............................ S-4
Other Series of Notes...................................... S-4
Outstanding Series of Investor
Certificates.............................................. S-4
The Seller Interest........................................ S-4
Principal Collections...................................... S-6
Subordination......................................... S-6
Spread Account........................................ S-7
Events of Default.......................................... S-8
Optional Redemption........................................ S-8
Tax Status................................................. S-8
ERISA Considerations....................................... S-9
Exchange Listing........................................... S-9
Spiegel Credit Corporation III............................. S-9
Receivables Performance......................................... S-10
Delinquency and Loss Experience............................ S-10
Revenue Experience......................................... S-13
The Trust Portfolio........................................ S-15
Maturity Considerations......................................... S-19
Controlled Accumulation Period............................. S-19
Rapid Amortization Period.................................. S-19
Payment Rates.............................................. S-20
Paired Series.............................................. S-20
Spiegel's Retail Operations..................................... S-21
Eddie Bauer................................................ S-21
Newport News.......................................... S-22
Description of Series Provisions................................ S-22
General.................................................... S-22
Collateral Amount.......................................... S-22
Allocation Percentages..................................... S-23
Interest Payments.......................................... S-24
Principal Payments......................................... S-25
Controlled Accumulation Period............................. S-26
Rapid Amortization Period.................................. S-27
Subordination.............................................. S-27
Application of Finance Charge Collections.................. S-28
Reallocation of Principal Collections...................... S-29
Investor Charge-Offs....................................... S-30
Sharing Provisions......................................... S-31
Principal Accumulation Account............................. S-31
Reserve Account............................................ S-32
Excess Collateral Amount................................... S-34
Spread Account............................................. S-34
Spread Account Distributions............................... S-36
Paired Series.............................................. S-36
Pay Out Events............................................. S-37
Events of Default.......................................... S-38
Servicing Compensation and Payment of
Expenses.............................
Underwriting.................................................... S-39
Glossary of Terms for Prospectus Supplement..................... S-42
Other Securities Issued and Outstanding......................... I-1
Part A..................................................... I-1
Part B..................................................... I-1
</TABLE>
i
<PAGE>
Summary of Terms
--------------------------------------------------------------------------------
Issuer: Spiegel Credit Card Master Note Trust
Seller of Receivables to
Spiegel Master Trust: Spiegel Credit Corporation III
Originator and Servicer: First Consumers National Bank
Indenture Trustee: The Bank of New York
Owner Trustee: Bankers Trust Company
Closing Date: , 2000
Clearance and Settlement: DTC/Clearstream/Euroclear
Minimum Denominations: $1,000
Servicing Fee Rate: 2% per annum
Initial Collateral Amount: $_____________
Excess Collateral Amount: $_____________ (___% of the collateral amount
Primary Assets of the Issuer: An interest in receivables originated in
private label credit card accounts that can
be used to purchase goods and services from
Spiegel Inc.'s retail subsidiaries and to
obtain cash advances on a limited basis
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A Class B Class C
<S> <C> <C> <C>
Principal Amount $ $ $
Percentage of Collateral % % %
Amount
Anticipated Ratings: * Aaa/AAA/AAA A2/A/A Baa2/NA/BBB
(Moody's/Standard &
Poor's/Fitch IBCA)
Credit Enhancement: subordination of subordination of spread account
Class B and Class Class C and and subordination
C and excess excess collateral of excess
collateral amount amount collateral amount
Interest Rate: [One-month [One-month [One-month
LIBOR plus] LIBOR plus] LIBOR plus]
[ ]% per year [ ]% per year [ ]% per year
Interest Accrual Method: [30] [actual]/360 [30] [actual]/360 [30] [actual]/360
Interest Payment Dates: monthly (15th) monthly (15th) monthly (15th)
[Interest Rate Index Reset 2 London business 2 London business 2 London business
Date: days before each days before each days before each
interest payment interest payment interest payment
date date] date]
First Interest Payment Date: , 2000 , 2000 , 2000
Commencement of Accumulation
Period (subject to adjustment): , 200 , 200 , 200
</TABLE>
_______________
* It is a condition to issuance that one of these ratings be obtained and
that the collateral certificate be rated investment grade.
S-2
<PAGE>
Expected Principal Payment , 200 , 200 , 200
Date:
Final Maturity Date: , 200 , 200 , 200
ERISA eligibility: Yes, subject to important considerations
described under "ERISA Considerations" in
the accompanying prospectus. We suggest that
investors consult with their counsel.
Debt for United States Yes, subject to important considerations
Federal Income Tax described under "Federal Income Tax
Purposes: Consequences" in the accompanying
prospectus. We suggest that investors
consult with their tax counsel.
S-3
<PAGE>
Structural Summary
This summary does not contain all of the information that you need to consider
in making your investment decision. You should carefully read this entire
document and the accompanying prospectus before you purchase any notes.
<TABLE>
<S> <C> <C> <C>
------------- -------------- ------------- -------------
First Spiegel Spiegel Spiegel
----------- ----------- ------------ -----------
Consumers Receivables Credit Receivables Master Collateral Credit Card Notes
----------- ----------- -----------
National Corporation Trust Certificate Master Note
Bank III ------------ Trust
------------- -------------- ------------- -------------
Originator Seller Trust Issuer of
and holding Notes
Servicer Receivables
</TABLE>
The Issuer
The notes will be issued by Spiegel Credit Card Master Note Trust, an Illinois
common law trust, under an indenture supplement to an indenture, each between
the issuer and the indenture trustee.
The indenture trustee is The Bank of New York.
Collateral for the Notes
The notes are secured by a beneficial interest in a pool of receivables that
arise under FCNB Preferred Charge accounts, which are private label retail
credit card accounts originated by First Consumers National Bank, a wholly-owned
subsidiary of Spiegel, Inc. Each FCNB Preferred Charge card bears the insignia
of one of three retailers affiliated with Spiegel-- Spiegel Catalog, Eddie Bauer
or Newport News. However, a customer holding any of the three types of FCNB
Preferred Charge cards may use the card to purchase all types of goods or
services offered in catalogs, retail stores and e-commerce sites of any of the
three retailers.
First Consumers National Bank has designated all of the eligible accounts in its
portfolio of private label retail credit card accounts and has transferred the
receivables in those accounts to us, directly or indirectly, under a receivables
purchase agreement. Indirect sales occur when the bank designates accounts that
have outstanding receivables, which receivables the bank previously has sold to
our mutual affiliate Spiegel Acceptance Corporation. Spiegel Acceptance then
sells those outstanding receivables to us. We have, in turn, transferred those
receivables to Spiegel Master Trust. Spiegel Master Trust has issued a
certificate representing an interest in the receivables and the other assets of
Spiegel Master Trust to the issuer, and that certificate serves as collateral
for the notes.
The receivables in Spiegel Master Trust as of _______, 2000 were as follows:
. total receivables: $_________
. principal receivables: $________
. finance charge receivables: $________
S-1
<PAGE>
. total accounts designated to Spiegel Master Trust: ________
In addition, a share of investment earnings from temporary investments of
receivables collections that are held by the trust will be added to the
collateral for your notes.
Spiegel Master Trust
Spiegel Master Trust is a common law trust formed by us under a pooling and
servicing agreement on September 20, 1994. As described above under "--
Collateral for the Notes," we have transferred the credit card receivables
purchased from the bank and Spiegel Acceptance to Spiegel Master Trust under
that pooling and servicing agreement.
The trustee for Spiegel Master Trust is The Bank of New York.
After all outstanding series of investor certificates that have been issued
by Spiegel Master Trust have been retired, we may cause Spiegel Master Trust to
terminate, at which time the receivables will be transferred to the issuer and
held directly by the issuer as collateral for the notes. We refer to the entity
-- either Spiegel Master Trust or the issuer -- that holds the receivables at
any given time as the trust.
Other Claims on the Receivables
Other Series of Notes
Series 2000- is the [___] series of notes issued by the issuer. The issuer may
issue other series of notes from time to time in the future. [A summary of the
outstanding series of notes is in Part A of "Annex I: Other Securities Issued
and Outstanding" included at the end of this prospectus supplement.] Neither
you nor any other noteholder will have the right to consent to the issuance of
future series of notes.
Outstanding Series of Investor Certificates
The certificate issued by Spiegel Master Trust to the issuer will be the
[________] series of investor certificates issued by Spiegel Master Trust. In
addition to the certificate held by the issuer, there will be [____] series of
investor certificates outstanding on the closing date. Each series of investor
certificates represents a beneficial interest in the receivables and the other
trust assets. A summary of the outstanding series of investor certificates is
in [Part B] of "Annex I: Other Securities Issued and Outstanding" included at
the end of this prospectus supplement. Neither you nor any other noteholder
will have the right to consent to the issuance of future series of investor
certificates.
The Seller Interest
We own the interest, called the seller interest, in the receivables and the
other assets of the trust not securing your series or any other series of notes
or investor certificates. The seller interest does not provide credit
enhancement for your series or any other series.
Allocations of Collections and Losses
Your notes represent the right to payments from a portion of the collections on
the receivables. The servicer will also allocate to your notes a portion of
defaulted receivables and would also allocate a portion of the dilution on the
receivables to your series if the servicer failed to comply with its obligation
to compensate the trust for dilution. Dilution means any reduction to the
principal balances of receivables made by the servicer because of merchandise
returns or any other reason except losses or payments.
The portion of collections, defaulted receivables and uncovered dilution
allocated to
S-2
<PAGE>
your series will be based mainly upon the ratio of the amount of collateral for
your series to the sum of the total amount of principal receivables in the trust
and any balance in the trust's excess funding account. The way this ratio is
calculated will vary during each of three periods that will or may apply to your
notes:
. The revolving period, which will begin on the closing date and end when
either of the other two periods begins.
. The controlled accumulation period, which is scheduled to begin on _______,
200_ and end when the notes have been paid in full. However, if a pay out
event occurs before the controlled accumulation period begins, there will be
no controlled accumulation period. If a pay out event occurs during the
controlled accumulation period, the controlled accumulation period will end,
and a rapid amortization period will begin.
. The rapid amortization period, which will only occur if one or more adverse
events, known as pay out events, occurs.
For most purposes, the collateral amount used in determining these ratios will
be reset no less frequently than at the end of each month. However, for
allocations of principal collections during the controlled accumulation period
or the rapid amortization period, the collateral amount at the end of the
revolving period will be used, subject to defined reductions during the
controlled accumulation period.
The collateral amount for your series is:
. the original principal amount of the notes, plus
. an initial excess collateral amount of $ ______, minus
. principal payments on the notes, minus
. reductions in the excess collateral amount that result from reductions in the
required amount of the excess collateral, minus
. the amount of any principal collections reallocated to cover interest and
servicing payments for your series, minus
. your series' share of defaults and uncovered dilution to the extent not
reimbursed from finance charge collections and investment earnings allocated
to your series.
A reduction to the collateral amount because of reallocated principal
collections, defaults or uncovered dilution will be reversed to the extent that
your series has extra finance charge collections and investment earnings in
future periods.
Application of Finance Charge Collections
The issuer will apply your series' share of collections of finance charge
receivables and investment earnings each month in the following order of
priority:
. to pay interest on the Class A notes;
. to pay interest on the Class B notes;
. to pay the servicing fee for your series;
. to pay interest on the Class C notes;
. to cover your series' share of defaults and uncovered dilution;
. to cover reductions in your series' collateral amount resulting from defaults
and uncovered dilution allocated to your series and from reallocated principal
S-3
<PAGE>
collections, in each case that have not been reimbursed;
. to fund, in limited circumstances, a reserve account to cover interest payment
shortfalls for the Series 2000- notes during the accumulation period;
. to make a deposit, if needed, to the spread account for Class C up to the
required spread account amount; and
. to other series that share excess finance charge collections with Series 2000-
__ or to us or our assigns.
Principal Collections
Revolving Period
During the revolving period, no principal will be paid or accumulated in a trust
account for you.
Controlled Accumulation Period
During the controlled accumulation period, your series' share of principal
collections will be deposited in a trust account, up to a specified deposit
amount on each distribution date. On the expected principal payment date,
amounts on deposit in that account will be paid first to the Class A
noteholders, then to the Class B noteholders and then to the Class C
noteholders, in each case until the specified class of notes is paid in full.
Rapid Amortization Period
A rapid amortization period for your series may start if a pay out event occurs.
The pay out events for your series are described below in this summary and under
"Description of Series Provisions -- Pay Out Events" in this prospectus
supplement. During the rapid amortization period, your series' share of
principal collections will be paid monthly first to the Class A noteholders,
then to the Class B noteholders and then to the Class C noteholders, in each
case until the specified class of notes is paid in full.
Reallocation of Principal Collections
During any of the above periods, principal collections allocated to your series
may be reallocated, if necessary, to make required payments of interest on the
Class A notes, the Class B notes and the Class C notes and monthly servicing fee
payments not made from your series' share of finance charge collections,
investment earnings and excess finance charge collections available from other
series that share with your series. This reallocation is one of the ways that
the notes obtain the benefit of subordination, as described in the next section
of this summary. The amount of reallocated principal collections is limited by
the amount of available subordination.
At all times, collections of principal receivables allocated to your series that
are not needed for payments on your series will first be made available to other
series and then be paid to us or our assigns or deposited in the excess funding
account.
Credit Enhancement
Subordination
Credit enhancement for the Class A notes is provided by the subordination of the
Class B notes, the Class C notes and the excess collateral amount.
Credit enhancement for the Class B notes is provided by the subordination of the
Class C notes and the excess collateral amount.
S-4
<PAGE>
Credit enhancement for the Class C notes is provided by the subordination of the
excess collateral amount.
Subordination serves as credit enhancement as follows. The more subordinated, or
junior, classes of notes will not receive payment of interest or principal until
required payments have been made to the more senior classes. As a result,
subordinated classes will absorb any shortfalls in collections or deterioration
in the collateral for the notes prior to senior classes. The excess collateral
amount for your series is subordinated to all of the classes of notes, so it
will absorb shortfalls and collateral deterioration before even the most
subordinated class of notes does.
Spread Account
A spread account will provide credit enhancement for your series, mostly for the
Class C notes. The spread account initially will not be funded. After the Series
2000- notes are issued, deposits into the spread account will be made each month
from finance charge collections allocated to your series and excess finance
charge collections available from other series up to the required spread account
amount as described in this prospectus supplement under "Description of Series
Provisions -- Spread Account." The spread account will be used to make payments
on the Class C notes if collections of receivables available to the Class C
notes are insufficient to make required payments and to offset any potential
reductions in the collateral amount if the excess collateral amount has been
reduced to zero.
On any day following an event of default and an acceleration of the Series 2000-
notes, funds available in the spread account will be used to fund any shortfalls
in amounts owed on the Class C notes, the Class A notes and the Class B notes,
in that order of priority.
Credit enhancement for your series is for your series' benefit only, and you are
not entitled to the benefits of credit enhancement available to other series.
Pay Out Events
The issuer will begin to repay the principal of the notes before the expected
principal payment date if a pay out event occurs. A pay out event will occur if
the finance charge collections on the receivables in the designated accounts are
too low. The minimum amount of collections for any month, referred to as the
base rate, is the sum of the interest payable on the Series 2000- notes for
the related interest period, plus your series' share of the servicing fee for
the related calendar month. If the average net yield for the trust portfolio,
after deducting net defaulted receivables, for any three consecutive calendar
months is less than the average base rate for the same three consecutive
calendar months, a pay out event will occur.
The other pay out events are:
. Our failure to make required payments or deposits or material failure to
perform other obligations, subject to applicable grace periods;
. Material inaccuracies in our representations and warranties;
. The Series 2000- notes are not paid in full on the expected principal payment
date;
. Bankruptcy, insolvency or similar events relating to us or the bank;
. We are unable to transfer receivables to the trust when required;
S-5
<PAGE>
. We do not transfer receivables in additional accounts to the trust within 5
business days after we are required to do so;
. Material defaults of the servicer;
. Spiegel Master Trust or the issuer becomes subject to regulation as an
"investment company" under the Investment Company Act of 1940; or
. An event of default occurs for the Series 2000- notes and their maturity date
is accelerated.
Events of Default
The Series 2000- notes are subject to events of default described under "The
Indenture -- Events of Default; Rights upon Event of Default" in the
accompanying prospectus. These include, among other things, the failure to pay
interest for 35 days after it is due or to pay principal when it is due on the
final maturity date.
In the case of an event of default involving bankruptcy, insolvency or similar
events relating to the issuer, the principal amount of the Series 2000- notes
automatically will become immediately due and payable. If any other event of
default occurs and continues with respect to the Series 2000- notes, the
indenture trustee or holders of more than 50% of the then-outstanding principal
balance of the Series 2000- notes may declare the principal amount of the Series
2000- notes to be immediately due and payable. These declarations may be
rescinded by holders of more than 50% of the then-outstanding principal balance
of the Series 2000- notes if the related event of default has been cured,
subject to the conditions described under "The Indenture -- Events of Default;
Rights upon Event of Default" in the accompanying prospectus.
After an event of default and the acceleration of the Series 2000- notes, funds
allocated to Series 2000- and on deposit in the collection account, the excess
funding account and the other trust accounts will be applied to pay principal of
and interest on the Series 2000- notes to the extent permitted by law. Principal
collections and finance charge collections allocated to Series 2000- will be
applied to make monthly principal and interest payments on the Series 2000-
notes until the earlier of the date those notes are paid in full or the final
maturity date of those notes.
If the Series 2000- notes are accelerated or the issuer fails to pay the
principal of the Series 2000- notes on the final maturity date, subject to the
conditions described in the prospectus under "The Indenture -- Events of
Default; Rights upon Event of Default", the indenture trustee may, if legally
permitted, cause the issuer to sell principal receivables in an amount equal to
the collateral amount for Series 2000- and the related finance charge
receivables.
Optional Redemption
The servicer has the option to purchase your notes when the outstanding
principal amount for your series has been reduced to 10% or less of the initial
principal amount. See "Description of the Notes -- Final Payment of Principal"
in the accompanying prospectus.
Tax Status
Subject to important considerations described under "Federal Income Tax
Consequences" in the accompanying prospectus, Rooks, Pitts and Poust as special
tax counsel to the issuer, is of the opinion that under existing law your Series
2000- notes will be characterized as debt for federal income tax purposes and
that the issuer will not be classified as an association or publicly traded
partnership taxable as a corporation for U.S. Federal income tax
S-6
<PAGE>
purposes. By your acceptance of a Series 2000- note, you will agree to treat
your Series 2000- notes as debt for federal, state and local income and
franchise tax purposes. See "Federal Income Tax Consequences" in the
accompanying prospectus for additional information concerning the application of
federal income tax laws.
ERISA Considerations
Subject to important considerations described under "ERISA Considerations" in
the accompanying prospectus, the Series 2000- notes are eligible for purchase by
persons investing assets of employee benefit plans or individual retirement
accounts. If you are contemplating purchasing the Series 2000- notes on behalf
of or with plan assets of any plan or account, we suggest that you consult with
counsel regarding whether the purchase or holding of the Series 2000- notes
could give rise to a transaction prohibited or not otherwise permissible under
ERISA or Section 4975 of the Internal Revenue Code.
Risk Factors
There are material risks associated with an investment in the Series 2000-
notes and you should consider the matters set forth under "Risk Factors" on
pages __ through __ of the accompanying prospectus.
Ratings
It is a condition to the issuance of your notes that one of the ratings set
forth for each class of Series 2000- notes in the "Summary of Terms" above be
obtained.
Any rating assigned to the notes by a credit rating agency will reflect the
rating agency's assessment solely of the likelihood that noteholders will
receive the payments of interest and principal required to be made under the
terms of the series and will be based primarily on the value of the receivables
in the trust and the credit enhancement provided. The rating is not a
recommendation to purchase, hold or sell any notes. The rating does not
constitute a comment as to the marketability of any notes, any market price or
suitability for a particular investor. Any rating can be changed or withdrawn
by a rating agency at any time.
[Exchange Listing
We will apply to list the Series 2000- notes on the Luxembourg Stock Exchange.
We cannot guarantee that the application for the listing will be accepted.]
Spiegel Credit Corporation III
Our address is 400 West 9/th/ Street, Suite 101B, Wilmington, Delaware 19801.
Our phone number is (302) 429-7609.
S-7
<PAGE>
This prospectus supplement uses defined terms. You can find a glossary of
terms under the caption "Glossary of Terms for Prospectus Supplement" beginning
on page S-__ in this prospectus supplement and under the caption "Glossary of
Terms for Prospectus" beginning on page __ in the accompanying prospectus.
Receivables Performance
The tables below contain performance information for the receivables in the
FCNB Preferred Charge card portfolio for the seven calendar months in the period
ended July 31, 2000 and for the fiscal years ended December 31, 1999, 1998,
1997, 1996 and 1995. The composition of the trust portfolio is expected to
change over time. The actual performance of the receivables in the trust
portfolio may be different from that set forth below.
Delinquency and Loss Experience
The following tables set forth the aggregate delinquency and loss
experience for cardholder payments on the credit card accounts in the FCNB
Preferred Charge card portfolio, consisting of Spiegel Catalog, Eddie Bauer and
Newport News credit card accounts, for each of the five fiscal years in the
period ended December 31, 1999, and for the seven calendar months in the period
ended July 31, 2000.
The delinquency and loss experience primarily reflects the overall credit
quality of the cardholders, the seasoning of the accounts, the success of
various initiatives taken in recent years and general economic conditions. As
indicated in the delinquency and loss tables, delinquency and loss rates have
decreased in recent years. The improvement in these rates is due primarily to:
. the implementation of custom scorecards during 1996, allowing the bank
to better assess credit risk when underwriting new accounts;
. more frequent assignment of lower credit limits to new accounts, with
credit limits being increased for more seasoned accounts based on
consistent payment behavior;
. improved collection techniques, including contacting delinquent
cardholders earlier, using a greater number of collectors and more
frequent outsourcing of pre-charge-off accounts to external
collections agencies; and
. strong economic conditions and overall improved consumer credit
quality.
We cannot assure you that the future delinquency and loss experience for
the receivables will be similar to the historical experience set forth below.
S-8
<PAGE>
The minimum monthly payment requir ed under the accounts and shown on a
cardholder's monthly statement is 1/33 of the outstanding balance, subject to a
floor of $15 or, if less, the total outstanding balance. However, for purposes
of the following delinquency experience table, an account is only considered
delinquent if less than 50% of the minimum monthly payment is received, again
with a floor of $15 or, if less, the total outstanding balance. If a 100% of
minimum monthly payment standard were used in place of the 50% standard
reflected below, total delinquencies of 31 days or more would not have been more
than 11% on December 31, 1998 or 1999 or July 31, 2000. We do not have
sufficient information to calculate delinquency experience using a 100% standard
prior to December 31, 1998.
Delinquency Experience
(Dollars in Thousands)
<TABLE>
<CAPTION>
Seven Months Ended Year Ended December 31,
----------------------------------------------------------
July 31, 2000 1999 1998
-------------------------------- ----------------------------------------------------------
Percentage Percentage Percentage
of Total of Total of Total
Receivables Receivables Receivables Receivables Receivables Receivables
<S> <C> <C> <C> <C> <C> <C>
Receivables Outstanding $1,831,178 $1,640,643 $1,320,793
Receivables Delinquent:
31-60 Days $ 60,922 3.33% $ 46,626 2.60% $ 37,361 2.83%
61-90 Days $ 45,529 2.49% $ 27,867 1.70% $ 22,724 1.72%
91 Days or more $ 85,250 4.66% $ 69,569 4.24% $ 49,404 3.74%
------------ ----- ----------- ---- ----------- ----
Total $ 191,701 10.47% $ 140,062 8.54% $ 109,489 8.29%
============ ===== =========== ==== =========== ====
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------------------------------------------
1997 1996 1995
------------------------------------------------------------------------------------
Percentage Percentage Percentage
of Total of Total of Total
Receivables Receivables Receivables Receivables Receivables Receivables
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Receivables Outstanding $1,371,950 $1,618,430 $1,700,684
Receivables Delinquent:
31-60 Days $ 46,348 3.38% $ 58,389 3.61% $ 57,833 3.40%
61-90 Days $ 27,702 2.02% $ 33,991 2.10% $ 34,229 2.01%
91 Days or more $ 55,979 4.08% $ 64,213 3.97% $ 65,941 3.88%
----------- ---- ----------- ---- ----------- ----
Total $ 130,029 9.48% $ 156,593 9.68% $ 158,003 9.29%
=========== ==== =========== ==== =========== ====
</TABLE>
S-9
<PAGE>
For purposes of the following loss experience table:
. Average receivables outstanding is the average of the receivable
balance during each month for the period indicated.
. Total principal charge-offs are shown on a cash basis for principal
receivables only, before recoveries, and do not include the amount of
any reductions in principal receivables outstanding due to fraud,
returned goods, customer disputes or other miscellaneous credit
adjustments.
. Net principal charge-offs as a percentage of average receivables
outstanding reflected for the seven months ended July 31, 2000 is an
annualized figure.
S-10
<PAGE>
Loss Experience
(Dollars in Thousands)
<TABLE>
<CAPTION>
Seven Months Ended Year Ended December 31,
--------------------------------
July 31, 2000 1999 1998
------------------ ------------ -----------
<S> <C> <C> <C>
Average Receivables Outstanding $1,722,090 $1,379,608 $1,250,371
Total Principal Charge-Offs $ 105,204 $ 134,728 $ 140,930
Recoveries $ 20,030 $ 24,373 $ 23,148
Net Principal Charge-Offs $ 85,174 $ 110,355 $ 117,782
Net Principal Charge-Offs as a percentage of
Average Receivables Outstanding 8.48% 8.00% 9.42%
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------------------
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Average Receivables Outstanding $1,387,447 $1,577,414 $1,461,041
Total Principal Charge-Offs $ 172,994 $ 176,776 $ 108,324
Recoveries $ 18,939 $ 19,391 $ 14,682
Net Principal Charge-Offs $ 154,055 $ 157,385 $ 93,642
Net Principal Charge-Offs as a
percentage of Average
Receivables Outstanding 11.10% 9.98% 6.41%
</TABLE>
S-11
<PAGE>
Revenue Experience
The gross revenues from finance charges, credit card fees and merchant fees
related to accounts in the FCNB Preferred Charge credit card portfolio for each
of the five fiscal years in the period ended December 31, 1999 and for the seven
calendar months in the period ended July 31, 2000 are set forth in the following
table. The historical yield figures reflected in the following table are
calculated on an accrual basis.
For purposes of the following gross portfolio yield table:
. The revenue for the accounts is comprised of monthly periodic finance
charges, merchant fees and credit card fees. These revenues vary for
each account based on the type and volume of activity for each
account. See "The Bank's Credit Card Activities" in the accompanying
prospectus.
. Average receivables outstanding is the average of the receivable
balance during each month for the period indicated.
. The percentages reflected for the seven months ended July 31, 2000 is
an annualized figure.
S-12
<PAGE>
Gross Portfolio Yield
(Dollars in Thousands)
<TABLE>
<CAPTION>
Seven Months Ended Year Ended December 31,
---------------------------------
July 31, 2000 1999 1998
------------------- -------------- ---------------
<S> <C> <C> <C>
Average Receivables $1,722,090 $1,379,608 $1,250,371
Billed Finance Charges, $ 253,582 $ 367,932 $ 332,648
Fees and Merchant Fees
Gross Portfolio Yield 25.24% 26.67% 26.60%
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------------
1997 1996 1995
----------- ------------- ----------------
<S> <C> <C> <C>
Average Receivables $1,387,447 $1,577,414 $1,461,041
Billed Finance Charges, $ 326,510 $ 357,947 $ 324,405
Fees and Merchant
Fees
Gross Portfolio Yield 23.53% 22.69% 22.20%
</TABLE>
S-13
<PAGE>
The Trust Portfolio
As of the beginning of the day on _________, 2000:
. The receivables in the trust portfolio included $________ of principal
receivables and $_________ of finance charge receivables.
. The accounts designated for the trust portfolio had an average
principal receivable balance of $___________ and an average credit
limit of $__________.
. The percentage of the aggregate total receivable balance to the
aggregate total credit limit was _____%.
. The average age of the accounts was approximately _____ months.
. Cardholders whose accounts are designated for the trust portfolio had
billing addresses in all 50 states and the District of Columbia.
The receivables in the trust portfolio are created by purchases of merchandise
and services from Spiegel's retail subsidiaries and by cash advances to
accountholders. During 1999, cash advances accounted for less than 1% of new
principal receivables. Since Spiegel's subsidiaries accept other credit cards,
including American Express, MasterCard, VISA and Discover, the issuer will
depend upon the decisions of customers to use their FCNB Preferred Charge cards
rather than other credit cards or other payment methods in order to generate
additional receivables. The following table sets forth for the periods
indicated the total sales of goods and merchandise by Spiegel's retail
subsidiaries, including Spiegel Catalog, Eddie Bauer and Newport News, and the
percentage of those sales that are charged to the FCNB Preferred Charge cards,
including Spiegel Catalog, Eddie Bauer and Newport News credit cards. The
remaining percentage of sales are either made on a cash basis or were made using
credit cards other than FCNB Preferred Charge cards. There can be no assurance
that the percentage of total sales charged to the FCNB Preferred Charge cards
will be similar to the historical experience set forth below.
S-14
<PAGE>
Usage of FCNB Preferred Charge Cards
<TABLE>
<CAPTION>
Seven Months Ended Year Ended December 31,
-----------------------------------
July 31, 2000 1999 1998
------------------ ------------ -----------
<S> <C> <C> <C>
Total net sales $ 1,516,087 $2,916,455 $2,641,956
Percentage of total net
sales charged to FCNB
Preferred Charge cards 42% 39% 34%
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------------------------------
1997 1996 1995
------------- ---------------- ---------------
<S> <C> <C> <C>
Total net sales $2,835,297 $2,850,555 $2,886,225
Percentage of total net
sales charged to FCNB
Preferred Charge cards 35% 42% 50%
</TABLE>
The following tables summarize the trust portfolio by various criteria as of
the beginning of the day on _________ __, 2000. Because the future composition
of the trust portfolio will change over time, these tables are not indicative of
the composition of the trust portfolio at any subsequent time.
S-15
<PAGE>
Composition by Account Balance
Trust Portfolio
<TABLE>
<CAPTION>
Percentage
Number of Total Percentage
of Number of of Total
Account Balance Range Accounts Accounts Receivables Receivables
--------------------- -------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Credit Balance........................ % $ ( ) ( )%
No Balance............................ 0 0.0
$.01-$ 240.00.........................
$24.01-$600.00........................
$ 600.01-$ 900.00.....................
$ 900.01-$1200.00.....................
$1200.01-$2000.00.....................
$2000.01 or More......................
-------- ----------- ----------- -----------
Total................................ % $ %
======== ========== =========== ==========
</TABLE>
Composition by Credit Limit
Trust Portfolio
<TABLE>
<CAPTION>
Percentage
Number of Total Percentage
of Number of of Total
Credit Limit Range Accounts Accounts Receivables Receivables
------------------ -------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Less than or equal to $500.00......... % $ %
$ 500.01-$1,000.00....................
$1,000.01-$2,000.00...................
$2,000.01-$3,000.00...................
$3,000.01-$4,000.00...................
$4,000.01-$5,000.00...................
$5,000.01-$6,000.00...................
$6,000.01 or More.....................
--------- ---------- ------------ ----------
Total................................ % $ %
========= ========== ============ ==========
</TABLE>
Composition by Period of Delinquency
Trust Portfolio
<TABLE>
<CAPTION>
Percentage
Number of Total Percentage
of Number of of Total
Account Balance Range Accounts Accounts Receivables Receivables
--------------------- -------- --------- ----------- --------------
<S> <C> <C> <C> <C>
Not Delinquent........................ % $ %
Up to 29 Days.........................
30 to 59 Days.........................
60 to 89 Days.........................
90 or More Days.......................
-------- ---------- ------------ ----------
Total................................ % $ %
======== ========== ============ ==========
</TABLE>
S-16
<PAGE>
Composition by Account Age
Trust Portfolio
<TABLE>
<CAPTION>
Percentage of Percentage
Number Total Number of Total
Account Balance Range of Accounts of Accounts Receivables Receivables
--------------------- ----------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
Not More Than 6 Months................ % $ %
Over 6 Months to 12 Months............
Over 12 Months to 24 Months...........
Over 24 Months to 36 Months...........
Over 36 Months to 48 Months...........
Over 48 Months to 60 Months...........
Over 60 Months to 72 Months...........
Over 72 Months........................
---------- ------------ ----------- -----------
Total................................ % $ %
========== ============ ============ ===========
</TABLE>
Geographic Distribution of Accounts
Trust Portfolio
<TABLE>
<CAPTION>
Percentage of Percentage
Number Total Number of Total
Account Age of Accounts of Accounts Receivables Receivables
----------- ----------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
[New York............................. % $ %
California............................
Texas.................................
Florida...............................
Illinois..............................
Pennsylvania..........................
New Jersey............................
Other................................]
----------- ----------- ---------- ------------
Total............................... % $ %
=========== =========== ========== ============
</TABLE>
S-17
<PAGE>
Maturity Considerations
Unless a pay out event occurs, you will not receive payments of
principal until the expected payment date for your notes, which for all classes
is ___________, 200____. We expect the issuer to have sufficient funds to pay
the full principal amount of each class of Series 2000- notes on the expected
principal payment date. However, if a pay out event occurs, principal payments
may begin prior to the expected principal payment date.
Controlled Accumulation Period
During the controlled accumulation period, principal allocated to the
Series 2000- noteholders will accumulate in the principal accumulation account
in an amount calculated to pay the Series 2000- notes in full on the expected
principal payment date. We expect, but cannot assure you, that the amounts
available in the principal accumulation account on the expected principal
payment date will be sufficient to pay in full the outstanding principal amount
of the Series 2000- notes. If these amounts are not available on the expected
principal payment date, a pay out event will occur and the rapid amortization
period will begin.
Rapid Amortization Period
If a pay out event occurs during either the revolving period or the
controlled accumulation period, the rapid amortization period will begin. If a
pay out event occurs during the controlled accumulation period, on the next
distribution date any amount on deposit in the principal funding account will be
paid:
. first to Class A noteholders, up to the outstanding principal
balance of the Class A notes;
. then to Class B noteholders, up to the outstanding principal
balance of the Class B notes; and
. then to Class C noteholders, up to the outstanding principal
balance of the Class C notes.
In addition, if the outstanding principal balance of the notes has not
been paid in full, the issuer will continue to pay principal to the noteholders
on each distribution date during the rapid amortization period until the Series
2000- final maturity date, which is _____________, 200__. Funds available for
this purpose will be distributed first to the Class A noteholders, then to the
Class B noteholders and then to the Class C noteholders, in each case until the
specified class of notes has been paid in full.
S-18
<PAGE>
Payment Rates
The most important factor that will determine whether the issuer has
funds available to repay the Series 2000- notes on the expected principal
payment date and the size of principal payments during a rapid amortization
period is the payment rate on the receivables. The following table sets forth
the highest and lowest cardholder monthly payment rates on the credit card
accounts during any month in the periods shown and the average cardholder
monthly payment rates for all months in the periods shown, in each case
calculated as a percentage of average principal receivables for each month
during the periods shown. Payment rates shown in the table are based on amounts
which would be deemed payments of principal receivables and finance charge
receivables with respect to the accounts, including recoveries on charged-off
accounts.
Cardholder Monthly Payment Rates
Six Months Year Ended December 31,
--------------------------------
Ended
June 30, 2000 1999 1998 1997 1996 1995
------------- ---- ---- ---- ---- ----
Lowest Month............... % % % % % %
Highest Month.............. % % % % % %
Monthly Average............ % % % % % %
We cannot assure you that the cardholder monthly payment rates in the
future will be similar to the historical experience set forth above. In
addition, the amount of collections of receivables may vary from month to month
due to seasonal variations, general economic conditions and payment habits of
individual cardholders.
Paired Series
The issuer may issue another series of notes as a paired series for
Series 2000- . If issued, a paired series may have terms that are different than
the terms of Series 2000- and other series. For example, the pay out events for
the paired series may vary from the pay out events for Series 2000-and may
include pay out events that are unrelated to the status of the issuer or the
servicer, such as pay out events related to the continued availability and
rating of the providers of credit enhancement for the paired series. If a pay
out event occurs with respect to the paired series prior to the payment in full
of the Series 2000- notes, the allocation percentage used to determine your
series' share of principal collections may be reduced, which may delay the final
payment of principal for your series. See "Description of Series Provisions--
Paired Series" in this prospectus supplement.
S-19
<PAGE>
Spiegel's Retail Operations
Spiegel offers merchandise primarily through three subsidiaries --
Spiegel Catalog, Eddie Bauer, Inc. and Newport News, Inc.
Spiegel Catalog
Spiegel Catalog is a leading lifestyle resource for the working woman.
Spiegel Catalog serves its customers by offering an extensive array of
fashionable apparel, home furnishings and other merchandise through its
trademark semi-annual catalog, seasonal and specialty catalogs, and the
spiegel.com e-commerce site. Spiegel Catalog offers overstock, end-of-season and
other merchandise through its Ultimate Outlet stores, predominantly located in
outlet malls, catalogs and the ultimate-outlet.com e-commerce site. Total net
sales were $717 million and $587 million for the fiscal years ended January 1,
2000 and January 2, 1999, respectively. Sales through catalog offerings comprise
approximately 86 percent of total net sales. Spiegel distributed over 129
million catalogs in 1999 and at January 1, 2000 had approximately 3.0 million
active customers who had purchased merchandise within the last 18 months.
Eddie Bauer
Eddie Bauer is a leading specialty retailer serving the active, casual
lifestyle needs of men and women through the sale of high quality private-label
apparel, accessories and home furnishings. Eddie Bauer markets its products
through stores, catalogs and e-commerce sites. Total net sales were $1.8 billion
and $1.7 billion for the years ended January 1, 2000 and January 2, 1999,
respectively. Approximately 74 percent of total net sales for Eddie Bauer are
retail and outlet store sales.
Eddie Bauer's apparel category comprised 86 percent of its total net
sales in 1999. Eddie Bauer presents its active, casual apparel and related
accessories through its trademark Eddie Bauer sportswear stores, catalogs and
the eddiebauer.com and eddiebaueroutlet.com e-commerce sites. The apparel
category includes full seasonal collections of fine quality sportswear and dress
casual, outerwear, footwear and accessories. Eddie Bauer presents its
comfortable, relaxed home furnishings and decor for the bed and bath through its
Eddie Bauer HOME retail stores, catalogs and on its e-commerce sites.
At January 1, 2000, Eddie Bauer operated a total of 532 stores,
consisting of 479 retail stores and 53 outlets. There are 492 stores located in
the United States and 40 stores in Canada. The Eddie Bauer catalog division
distributed 97 million catalogs in 1999 and at January 1, 2000 had approximately
3.4 million active customers who had purchased merchandise within the last 18
months.
S-20
<PAGE>
Newport News
Newport News is a specialty catalog business offering fashionable,
moderately priced women's apparel and home furnishings. Total net sales were
$411 million for the fiscal year ended January 1, 2000, compared to $345 million
for the year ended January 2, 1999. Newport News distributed 212 million
catalogs in 1999 and at January 1, 2000 had approximately 3.9 million active
customers who had purchased merchandise within the last 18 months. In 1999,
Newport News launched an e-commerce site, newport-news.com, to broaden its sales
and marketing reach.
Description of Series Provisions
We have summarized the material terms of the Series 2000- notes below
and under "Description of the Notes" in the accompanying prospectus.
General
The Class A notes, the Class B notes and the Class C notes comprise
the Series 2000- notes and will be issued under the indenture, as supplemented
by the Series 2000- indenture supplement, in each case between the issuer and
the indenture trustee.
The Series 2000- notes will be issued in denominations of $1,000 and
integral multiples of $1,000 and will be available only in book-entry form,
registered in the name of Cede & Co., as nominee of DTC. See "Description of the
Notes -- General," "-- Book-Entry Registration" and "-- Definitive Notes" in the
accompanying prospectus. Payments of interest and principal will be made on each
distribution date on which those amounts are due to the noteholders in whose
names Series 2000-A notes were registered on the related record date, which will
be the last day of the calendar month preceding that distribution date.
[We will apply to list the notes on the Luxembourg Stock Exchange;
however, we cannot assure you that the listing will be obtained. You should
consult with the Luxembourg listing agent for the notes, [Address] Luxembourg,
phone number ( ) , for the status of the listing].
Collateral Amount
Your notes are secured by collateral consisting of an interest in the
receivables. At any time, the principal amount of the collateral for your notes,
which we call the collateral amount, is calculated as follows:
(a) the initial collateral amount, which equals the aggregate initial
principal amount of the notes in your series plus an excess
collateral amount of $_________, less
(b) all previous principal payments made on your series, less
S-21
<PAGE>
(c) reductions in the excess collateral amount that result from
reductions in the required amount of the excess collateral,
less
(d) all unreimbursed reductions to the collateral amount as a result
of defaulted receivables or uncovered dilution allocated to your
series or reallocations of principal collections to cover interest
or the servicing fee for your series.
The collateral amount will also be reduced if we purchase and cancel
notes in your series. We are not permitted to do this if it would reduce the
proportional amount of credit enhancement available for any class of notes. The
collateral amount will also increase or reduce if we increase or reduce the
excess collateral amount as described under "Excess Collateral Amount" below.
The collateral amount cannot be less than zero.
Allocation Percentages
The servicer will allocate among your series, other series of notes
issued and outstanding, outstanding series of investor certificates issued by
Spiegel Master Trust and our unpledged interest in the trust the following
items: collections of finance charge receivables and principal receivables;
defaulted receivables; and any dilution amounts that are not absorbed by our
interest in the trust or reimbursed by the servicer. On any day, the allocation
percentage for your series will be the percentage equivalent--which may not
exceed 100%--of a fraction:
. the numerator of which is the collateral amount measured as of a
specified date, and
. the denominator of which is the greater of:
(a) the sum of the total amount of principal receivables in the
trust and the amount on deposit in the excess funding
account as of the preceding day, and
(b) the sum of the numerators used to calculate the applicable
allocation percentages for all series of notes or investor
certificates outstanding as of the date of determination.
The numerator referred to above will initially be set as of the
closing date. For purposes of allocating finance charge collections and
defaulted receivables at all times, and principal collections during the
revolving period, the numerator will be reset at the end of each calendar month
for allocations during the following calendar month. For purposes of allocations
of principal collections during the controlled accumulation period and the rapid
amortization period, the numerator will be fixed at the end of the revolving
period and will not change thereafter except as follows.
S-22
<PAGE>
The Series 2000- notes are subject to being paired with a future
series. If a pay out event occurs with respect to a series paired with Series
2000- during the controlled accumulation period for Series 2000- , we may, by
written notice delivered to the indenture trustee and the servicer, designate a
different numerator for allocating principal collections to your series,
provided that:
(1) the numerator is not less than the collateral amount as of the
last day of the revolving period for the series paired with Series
2000- , and
(2) we have certified to the indenture trustee that, based on the
facts known to the certifying officer at the time, in our
reasonable belief, the designation will not cause a pay out event
or an event that, after the giving of notice or the lapse of time,
would constitute a pay out event, to occur with respect to the
Series 2000- .
Any reduction in the numerator made as described in the preceding
paragraph will also apply during any rapid amortization period that begins after
the reduction is made.
Interest Payments
The Class A notes will accrue interest from and including the closing
date through but excluding , 2000, and for each following interest
period, at a rate of % per year [above LIBOR for the related interest
period.]
The Class B notes will accrue interest from and including the closing
date through but excluding , 2000, and for each following interest
period, at a rate of % per year [above LIBOR for the related interest
period.]
The Class C notes will accrue interest from and including the closing
date through but excluding , 2000, and for each following interest
period, at a rate of % per year [above LIBOR for the related interest
period.]
Each interest period will begin on and include a distribution date and
end on but exclude the next distribution date. However, the first interest
period will begin on and include the closing date.
[For purposes of determining the interest rates applicable to each
interest period, LIBOR will be determined two London business days before that
interest period begins and will equal the rate for deposits in United States
dollars for a one-month period which appears on the display page currently
designated as "Telerate Page 3750" on the Bridge Telerate Capital Markets
Report, or any other page as may replace that page on that service for the
purpose of displaying comparable rates or price as of 11:00 a.m., London time,
on that date. If that rate does not appear on that display page, the rate for
that date will be determined based on the rates at which deposits in United
States dollars are offered by four major banks, selected by the servicer, at
approximately 11:00 a.m., London time, on that day to prime banks in the London
interbank
S-23
<PAGE>
market for a one-month period. The indenture trustee will request the principal
London office of each of those banks to provide a quotation of its rate. If at
least two quotations are provided, the rate for that date will be the arithmetic
mean of the quotations. If fewer than two quotations are provided, the rate for
that date will be the arithmetic mean of the rates quoted by major banks in New
York City, selected by the servicer, at approximately 11:00 a.m., New York City
time, on that day for loans in United States dollars to leading European banks
for a one-month period.]
[The interest rates applicable to the then current and immediately
preceding interest period may be obtained by telephoning the indenture trustee
at its corporate trust office at [____________].]
Interest on the notes will be calculated on the basis of the [actual
number of days in the related interest period and] a 360-day year [of twelve 30-
day months].
If the issuer does not pay interest as calculated above to any class
when due on a distribution date, the amount not paid will be due on the next
distribution date, together with interest on the overdue amount of regular
monthly interest at the interest rate for the applicable class.
Principal Payments
During the revolving period, no principal payments will be made on
your notes. During the controlled accumulation period and the rapid amortization
period, deposits to the principal accumulation account and principal payments on
the Series 2000- notes will be made on each distribution date from the following
sources:
(a) principal collections allocated to your series based on your
allocation percentage and retained in the collection account
during the prior calendar month, less any amounts required to be
reallocated to cover interest payments on the Series 2000- notes
or servicing fees; plus
(b) any amount on deposit in the excess funding account allocated to
your series on that distribution date; plus
(c) any finance charge collections or other amounts required to be
treated as principal collections in order to cover the share of
defaulted receivables and uncovered dilution amounts allocated to
your series or to reinstate prior reductions to the collateral
amount; plus
(d) any principal collections from other series that are shared with
your series.
S-24
<PAGE>
Controlled Accumulation Period
The controlled accumulation period is scheduled to commence on
____________, 200_ and to last [ ] months. However, the servicer may
elect to extend the revolving period and postpone the controlled accumulation
period, subject to the conditions described under "Description of the Notes--
Suspension and Postponement of Controlled Accumulation Period" in the
accompanying prospectus. The servicer may elect to postpone the controlled
accumulation period only if the number of months needed to fund the principal
accumulation account is less than [ ] months. In no event will the
servicer postpone the beginning of the controlled accumulation period to later
than [__________], 200_.
The servicer may also elect to suspend the controlled accumulation
period, subject to the conditions described under "Description of the Notes--
Suspension and Postponement of Controlled Accumulation Period" in the
accompanying prospectus.
On each distribution date relating to the controlled accumulation
period, the indenture trustee will deposit in the principal accumulation account
an amount equal to the least of:
(1) funds available for this purpose for your series with respect to
that distribution date;
(2) $__________________ or, if the commencement of the controlled
accumulation is postponed, any higher deposit amount as the
servicer may determine is necessary to fully fund the principal
accumulation account, plus any amounts required to be deposited to
the principal accumulation account on prior distribution dates
that have not yet been deposited;
(3) an amount equal to the outstanding principal amount of the notes,
minus the amount on deposit in the principal accumulation account
prior to any deposits on that date; and
(4) the collateral amount.
If the rapid amortization period has not commenced, amounts in the
principal accumulation account will be paid on the expected principal payment
date:
. first to Class A noteholders, up to the outstanding principal
balance of the Class A notes;
. then to Class B noteholders, up to the outstanding principal
balance of the Class B notes; and
. then to Class C noteholders, up to the outstanding principal
balance of the Class C notes.
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During the controlled accumulation period, the portion of funds
available but not required to be deposited in the principal accumulation account
on a distribution date may be applied to make payments to us that will reduce
your excess collateral amount, to the extent that the excess collateral amount
is greater than the required excess collateral amount. Any remaining funds will
be made available to investors in other series as shared principal collections,
be paid to us to purchase additional interests in receivables in order to
maintain the collateral amount or be deposited in the excess funding account if
necessary to maintain the Minimum Seller Amount.
Rapid Amortization Period
On each distribution date relating to the rapid amortization period,
the Class A noteholders will be entitled to receive funds available for
principal payments for Series 2000- for the related calendar month in an amount
up to the outstanding principal balance of the Class A notes.
After payment in full of the outstanding principal balance of the
Class A notes, the Class B noteholders will be entitled to receive, on each
distribution date relating to the rapid amortization period, the remaining
available funds for Series 2000- for the related calendar month in an amount up
to the outstanding principal balance of the Class B notes.
After payment in full of the outstanding principal balance of the
Class B notes, the Class C noteholders will be entitled to receive on each
distribution date relating to the rapid amortization period, the remaining
available funds for Series 2000- for the related calendar month in an amount up
to the outstanding principal balance of the Class C notes.
See "-- Pay Out Events" below for a discussion of events that might
lead to the commencement of the rapid amortization period.
Subordination
The Class B notes are subordinated to the Class A notes. The Class C
notes are subordinated to the Class A notes and the Class B notes. The excess
collateral amount is subordinated to all three classes of notes. Interest
payments will be made on the Class A notes prior to being made on the Class B
notes and the Class C notes. Interest payments will be made on the Class B
notes prior to being made on the Class C notes.
Principal payments on the Class B notes will not begin until the Class
A notes have been paid in full. Principal payments on the Class C notes will
not begin until the Class A notes and the Class B notes have been paid in full.
The collateral amount for your series will be reduced as the
collateral is applied for the benefit of your series, for instance as principal
payments are made on your series. Reductions due to principal payments on a
senior class should not directly cause a loss on junior classes.
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However, the collateral amount can be applied for the benefit of your
series in two other ways:
. by reallocating principal collections to make interest payments
and pay the servicing fee for your series, when finance charge
collections and investment earnings are not sufficient to make
these payments; and
. to absorb your series share of defaulted receivables and any
uncovered dilution amounts, when finance charge collections and
investment earnings are not sufficient to cover these amounts.
If the total amount of these latter two types of reductions exceeds
the excess collateral amount, then the Class C Notes may not be repaid in full.
If the total exceeds the sum of the excess collateral amount and the principal
amount of the Class C Notes, then the Class B Notes may not be repaid in full.
If the total exceeds the sum of the excess collateral amount and the principal
amounts of the Class C and Class B notes, then the Class A notes may not be
repaid in full.
If receivables are sold after an event of default, the net proceeds of
that sale would be paid first to the Class A notes, then to the Class B notes
and finally to the Class C notes, in each case until the outstanding principal
amount of the specified class and all accrued and unpaid interest payable to
that class have been paid in full.
Application of Finance Charge Collections
We refer to your series' share of finance charge collections --
including net investment proceeds transferred from the principal accumulation
account and amounts withdrawn from the reserve account -- and any available
excess finance charge collections from other series, collectively, as finance
charge collections. On each distribution date, the servicer will direct the
indenture trustee to apply your series' share of finance charge collections for
the prior month in the following order:
(1) to pay interest on the Class A notes, including any overdue
interest and additional interest on the overdue interest;
(2) to pay interest on the Class B notes, including any overdue
interest and additional interest on the overdue interest;
(3) if the bank or Spiegel is not the servicer, to pay the servicing
fee for your series for the prior calendar month and any overdue
servicing fee;
(4) to pay interest on the Class C notes, including any overdue
interest and additional interest on the overdue interest;
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(5) an amount equal to your series' share of the defaulted
receivables and uncovered dilution, if any, for the related
calendar month, will be treated as principal collections for the
prior calendar month;
(6) an amount equal to any previously unreimbursed reductions to the
collateral amount on account of defaulted receivables, uncovered
dilution or reallocations of principal collections will be
treated as principal collections for the prior calendar month;
(7) on and after the reserve account funding date, an amount equal to
the excess, if any, of the required reserve account amount over
the amount then on deposit in the reserve account will be
deposited into the reserve account;
(8) an amount equal to the excess, if any, of the required spread
account amount over the amount then on deposit in the spread
account will be deposited into the spread account;
(9) to pay any unpaid servicing fee for your series for the prior
calendar month and any overdue servicing fee to the extent not
paid in accordance with clause (3) above; and
(10) all remaining amounts will constitute excess finance charge
collections and will be available to cover any shortfalls in
finance charge collections for other outstanding series in group
one and, after payment of these shortfalls, the remaining amount
will be paid to us or our assigns.
If your series' share of finance charge collections for any calendar
month is insufficient to pay interest on the Class C notes--including any
overdue interest and additional interest on the overdue interest--when due, a
draw will be made from amounts available in the spread account and will be paid
to the Class C noteholders on the related distribution date.
Reallocation of Principal Collections
If your series share of finance charge collections is not sufficient
to pay interest on the Class A notes, interest on the Class B notes, interest on
the Class C notes or the servicing fee for your series, then principal
collections allocated to more junior classes of notes or the excess collateral
amount will be reallocated to cover these amounts. Any reallocation of principal
collections is a use of the collateral for your notes. Consequently, these uses
will reduce the remaining collateral amount by a corresponding amount. The
amount of principal collections that will be reallocated on any distribution
date will not exceed:
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. the lower of:
. the excess of the amounts needed to pay current, overdue and
additional interest on the Class A notes over the amount of
finance charge collections allocated to your series and available
to cover these amounts; and
. the greater of (1)(a) [ ]% of the initial collateral amount
minus (b) the sum of (i) the amount of unreimbursed investor
charge-offs after giving effect to investor charge-offs for the
related calendar month and (ii) the amount of unreimbursed
reallocated principal collections as of the previous distribution
date and (2) zero; plus
. the lower of:
. the excess of the sum of the amounts needed to pay current,
overdue and additional interest on the Class B notes and the
current and past due servicing fee for your series over the
amount of finance charge collections allocated to your series and
available to cover these amounts; and
. the greater of (1)(a) [ ]% of the initial collateral amount
minus (b) the sum of (i) the amount of unreimbursed investor
charge-offs after giving effect to investor charge-offs for the
related calendar month and (ii) the amount of unreimbursed
reallocated principal collections as of the previous distribution
date and after giving effect to the reallocation of principal
collections to make required interest payments for Class A on the
then-current distribution date and (2) zero; plus
. the lower of:
. the excess of the amounts needed to pay current, overdue and
additional interest on the Class C notes over the amount of
finance charge collections allocated to your series and available
to cover these amounts; and
. the greater of (1)(a) [ ]% of the initial collateral amount
minus (b) the sum of (i) the amount of unreimbursed investor
charge-offs after giving effect to investor charge-offs for the
related calendar month and (ii) the amount of unreimbursed
reallocated principal collections as of the previous distribution
date and after giving effect to the reallocation of principal
collections to make required interest payments for Class A and
Class B and required servicing fee payments on the then-current
distribution date and (2) zero.
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Investor Charge-Offs
The servicer will allocate a portion of defaulted receivables for each
calendar month to your series based on the allocation percentage for your
series. The allocation percentage is described under "--Allocation Percentages"
above.
Dilution will also be allocated to your series in the circumstances
described in "Defaulted Receivables; Dilution; Investor Charge-Offs" in the
accompanying prospectus. If dilution is allocated among series, your series'
share of dilution will equal:
. dilution to be allocated to all series, times
. a fraction,
. the numerator of which is your series' allocation percentage for
purposes of allocating finance charge collections, as described
under "--Allocation Percentages" above, and
. the denominator of which is the sum of the allocation percentages
used by all outstanding series for purposes of allocating finance
charge collections
On each distribution date, if the sum of the defaulted receivables and
dilution allocated to your series is greater than finance charge collections
used to cover those amounts, then the collateral amount will be reduced by the
amount of the excess.
Any reductions in the collateral amount on account of defaulted receivables
and uncovered dilution will be reinstated to the extent that finance charge
collections are available for that purpose on any subsequent distribution date.
Sharing Provisions
Your series is in group one for purposes of sharing excess finance charge
collections. Your series will share excess finance charge collections with other
series of notes in group one and other series of investor certificates in group
one for Spiegel Master Trust. See "Description of the Notes -- Shared Excess
Finance Charge Collections" in the accompanying prospectus.
Your series is a principal sharing series. See "Description of the Notes --
Shared Principal Collections; Excess Funding Account" in the accompanying
prospectus.
Principal Accumulation Account
The indenture trustee will establish and maintain a segregated trust
account held for the benefit of the noteholders to serve as the principal
accumulation account. During the controlled accumulation period, the indenture
trustee at the direction of the servicer will make deposits to
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the principal accumulation account as described under "-- Principal Payments" in
this prospectus supplement.
Funds on deposit in the principal accumulation account will be invested to
the following distribution date by the indenture trustee at the direction of the
servicer in highly rated liquid investments that meet the criteria described in
the indenture supplement. Investment earnings, net of investment losses and
expenses, on funds on deposit in the principal accumulation account will be
deposited in the collection account and treated as finance charge collections
available to your series for the related interest period. If, for any
distribution date, these net investment earnings are less than the sum of:
(a) the product of (i) the balance of the principal accumulation account,
up to the outstanding principal balance of the Class A notes, on the
record date immediately preceding that distribution date, (ii) the
Class A note interest rate for the related interest period and (iii)
the number of days in the related interest period divided by 360, plus
(b) the product of (i) the balance of the principal accumulation account
in excess of the outstanding principal balance of the Class A notes,
up to the outstanding principal balance of the Class B notes, in each
case on the record date immediately preceding that distribution date,
(ii) the Class B note interest rate for the related interest period
and (iii) the number of days in the related interest period divided by
360, plus
(c) the product of (i) the balance of the principal accumulation account
in excess of the outstanding principal balance of the Class A and
Class B notes on the record date immediately preceding that
distribution date, (ii) the Class C note interest rate for the related
interest period and (iii) the number of days in the related interest
period divided by 360,
then the indenture trustee will withdraw the shortfall, to the extent required
and available, from the reserve account and deposit it in the collection account
for use as finance charge collections that are available to your series.
Reserve Account
The indenture trustee will establish and maintain a segregated trust
account held for the benefit of the noteholders to serve as the reserve account.
The reserve account is established to assist with the distribution of interest
on the notes during the controlled accumulation period and on the first
distribution date with respect to the rapid amortization period. On each
distribution date from and after the reserve account funding date, but prior to
the termination of the reserve account, the indenture trustee, will apply
finance charge collections allocated to your series to increase the amount on
deposit in the reserve account to the extent the amount on deposit in the
reserve account is less than the required reserve account amount.
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The reserve account funding date will be the distribution date with respect
to the calendar month which commences no later than [_____] months prior to the
commencement of the controlled accumulation period, or an earlier date as the
servicer may determine.
The required reserve account amount for any distribution date on or after
the reserve account funding date will be equal to (a) [___]% of the outstanding
principal balance of the Series 2000- notes or (b) any other amount designated
by us; except that we may only designate a lesser amount if each rating agency
confirms that the designation will not impair its rating of any outstanding
series or class and we will certify to the indenture trustee that, based on the
facts known to the certifying officer at the time, in our reasonable belief, the
designation will not cause a pay out event to occur for Series 2000- .
On each distribution date, after giving effect to any deposit to be made
to, and any withdrawal to be made from, the reserve account on that distribution
date, the indenture trustee will withdraw from the reserve account an amount
equal to the excess, if any, of the amount on deposit in the reserve account
over the required reserve account amount, will deposit the excess in the spread
account to the extent that funds available in the spread account are less than
the required spread account amount and will distribute any remaining excess to
us or our assigns. Any amounts withdrawn from the reserve account and
distributed to us or our assigns will not be available for distribution to the
noteholders.
All amounts on deposit in the reserve account on any distribution date--
after giving effect to any deposits to, or withdrawals from, the reserve account
to be made on that distribution date--will be invested to the following
distribution date by the indenture trustee, at the direction of the servicer, in
highly rated liquid investments that meet the criteria described in the
indenture supplement. The interest and other investment income, net of losses
and investment expenses, earned on these investments will be either retained in
the reserve account to the extent the amount on deposit is less than the
required reserve account amount or deposited in the collection account and
treated as finance charge collections available to your series.
On or before each distribution date with respect to the controlled
accumulation period and on or before the first distribution date with respect to
the rapid amortization period, the indenture trustee will withdraw from the
reserve account and deposit in the collection account an amount equal to the
least of:
(1) the amount then on deposit in the reserve account with respect to that
distribution date; and
(2) the amount of the shortfall described under "--Principal Accumulation
Account" above.
Amounts withdrawn from the reserve account on any distribution date will be
included as finance charge collections available to your series for that
distribution date.
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The reserve account will be terminated upon the earliest to occur of:
(1) the first distribution date for the rapid amortization period;
(2) the expected principal payment date; and
(3) the termination of the trust.
Upon the termination of the reserve account, all amounts on deposit in the
reserve account, after giving effect to any withdrawal from the reserve account
on that date, will be deposited in the spread account to the extent that funds
available in the spread account are less than the required spread account amount
and any remaining amounts will be distributed to us or our assigns. Any amounts
withdrawn from the reserve account and distributed to us or our assigns will not
be available for distribution to the noteholders.
Excess Collateral Amount
An excess collateral amount provides credit enhancement for your series.
The initial excess collateral amount will be $[_______], which equals [____]% of
the initial collateral amount.
The excess collateral amount may be decreased by payments to us during the
controlled accumulation period to the extent that it exceeds the required
amount. See "Description of Series Provisions--Principal Payments--Controlled
Accumulation Period" in this prospectus supplement and under "Credit
Enhancement--Excess Collateral Amount" in the accompanying prospectus.
The required excess collateral amount for your series on any day is
currently equal to [____]% of the total collateral amount on that day. However,
a percentage lower than [___]% may be used to calculate the required excess
collateral amount in the future if each rating agency we designate for the
Series 2000- notes confirms that the use of a lower percentage will not impair
its ratings of the notes. In addition:
(a) except as provided in clause (c), the required excess collateral
amount will never be less than 3% of the initial collateral amount,
(b) except as provided in clause (c), the required excess collateral
amount will not reduce during a rapid amortization period, and
(c) the required excess collateral amount will never exceed the aggregate
outstanding principal amount of the notes.
The issuer will be required to increase the excess collateral amount by
[2]% if the number of new accounts automatically designated as trust accounts
during any twelve-month
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period, minus any accounts removed during that twelve-month period, is greater
than 20% of the number of accounts as of the first day of that twelve-month
period, unless the issuer first obtains written confirmation from the rating
agencies then rating any class of the Series 2000- notes that the action will
not impair their rating of any class of the Series 2000- notes.
Spread Account
The indenture trustee will establish and maintain as a segregated account
held as security primarily for the benefit of the Class C noteholders to serve
as the spread account. Amounts on deposit in the spread account will be used as
described below under "--Spread Account Distributions."
The spread account initially will not be funded, but will be funded up to
the required spread account amount on each distribution date from finance charge
collections allocated to your series to the extent available for that purpose.
The required spread account amount will be determined on each distribution
date as follows:
. Prior to an event of default and acceleration of your notes, the
required spread account amount for any date of determination will be
equal to the product of (a) the spread account percentage determined
in accordance with the table below for that date of determination and
(b) the initial collateral amount, but will not exceed the outstanding
principal balance of the Class C notes minus the excess, if any, of
the principal accumulation account balance over the sum of the
outstanding principal balances of the Class A notes and the Class B
notes on that date of determination.
The spread account percentage will be determined as follows:
<TABLE>
<CAPTION>
If the Quarterly Excess Spread Percentage is then, the spread account
greater than or equal to: and less than: Percentage will equal:
---------------------------- -------------------- -------------------------
<S> <C> <C>
[--]% -- 0
[--]% [--]% [--]%
[--]% [--]% [--]%
[--]% [--]% [--]%
-- [--]% [--]%
</TABLE>
. After an event of default and acceleration of your notes, the required
spread account amount for any distribution date will be equal to the
outstanding principal amount of your series of notes.
After the spread account percentage has been increased above zero as
specified in the table above, it will remain at the specified percentage until:
. further increased to a higher required percentage as specified above,
or
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. the third consecutive distribution date on which the Quarterly Excess
Spread Percentage has increased to a level above that for the then
current spread account percentage, in which case the spread account
percentage will be decreased to the appropriate percentage as
specified above (or, if the Excess Spread Percentage is greater than
or equal to [ ]%, the spread account percentage will be zero and the
required spread account amount will be zero).
However, if a pay out event with respect to Series 2000- has occurred, the
spread account percentage will equal [--]% and may not be subsequently reduced.
Funds on deposit in the spread account will be invested, at the direction
of the servicer, in highly rated liquid investments that meet the criteria
described in the indenture supplement. Investment earnings, net of losses and
investment expenses, will, except as otherwise indicated in this prospectus
supplement, not be deposited into the spread account and will be paid to the
holders of the seller certificates. However, after an event of default relating
to your series of notes, these investment earnings will be available for payment
to holders of the Class C notes.
Spread Account Distributions
On each distribution date, funds on deposit in the spread account,
including investment earnings, will be applied in the following order of
priority:
(1) if the interest to be paid on the Class C notes exceeds the amount
allocated to pay that interest, to fund any shortfall in the payment
of interest on the Class C notes;
(2) if the excess collateral amount previously has been reduced to zero,
or will be reduced to zero because of (a) the reallocation of
principal collections or (b) the allocation of defaults or uncovered
dilution to your series on the then-current distribution date, to
cover any potential reductions in the collateral amount that would
occur after the reduction of the excess collateral amount to zero; and
(3) to reimburse any prior reductions in the collateral amount that have
not been reimbursed, other than reductions to the excess collateral
amount.
On the Series 2000- final maturity date, funds available in the spread
account, after giving effect to any withdrawals to be made as discussed in the
preceding paragraph, will be used to fund any shortfall in the payment of the
outstanding principal balance of the Class C notes. On any day following an
event of default and an acceleration of the notes, funds available in the spread
account will be used to fund any shortfalls in amounts owed on the Class C
notes, the Class A notes and the Class B notes, in that order of priority.
Funds on deposit in the spread account on any distribution date, after
giving effect to all withdrawals from and deposits to the spread account, in
excess of the Required Spread Account
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Amount will be paid to the holders of the seller certificates. On the date on
which all amounts due to the noteholders from the spread account have been paid
in full, all amounts, if any, then remaining in the spread account will be
distributed to the holders of the seller certificates.
Paired Series
Your series may be paired with one or more other series issued at a later
time once the controlled accumulation period for your series begins. We call
each of these later issued series a paired series. See "Description of the
Notes --Paired Series" in the accompanying prospectus. The issuance of the
paired series will be subject to the conditions described under "Description of
the Notes --New Issuances" in the accompanying prospectus.
We cannot guarantee that the terms of any paired series will not have an
impact on the calculation of the allocation percentage used to allocate
principal collections to your series or the timing or amount of payments
received by you as a Series 2000- noteholder. In particular, the numerator for
the allocation percentage used to allocate principal collections to your series
may be reduced upon the occurrence of a pay out event for a paired series, but
not below the collateral amount as of the last day of the revolving period for
the paired series. The extent to which the timing or amount of payments received
by you may be affected will depend on many factors, only one of which is a
change in the calculation of the allocation percentage.
Pay Out Events
A pay out event will occur for the Series 2000- notes upon the occurrence
of any of the following events:
(a) our failure (i) to make any payment or deposit on the date
required to be made under the transfer and servicing agreement, the
indenture or the Series 2000- indenture supplement within the applicable
grace period which shall not exceed 5 days or (ii) to observe or perform in
any material respect any of our other covenants or agreements set forth in
the transfer and servicing agreement, the indenture or the Series 2000-
indenture supplement, which failure has a material adverse effect on the
Series 2000- noteholders and which continues unremedied for a period of 60
days after written notice of the failure, requiring the same to be
remedied;
(b) any representation or warranty made by us in the transfer and
servicing agreement or the pooling and servicing agreement or any
information required to be given by us to identify the accounts proves to
have been incorrect in any material respect when made or delivered and
which continues to be incorrect in any material respect for a period of 60
days after written notice of the failure, requiring the same to be
remedied, and as a result of which the interests of the noteholders are
materially and adversely affected and continue to be materially and
adversely affected for the designated period; except that a pay out event
described in this subparagraph (b) will not occur if we have
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accepted reassignment of the related receivable or all related receivables,
if applicable, within the designated period;
(c) our failure to convey receivables in additional accounts to the
trust within 5 business days after we are required to do so;
(d) any servicer default occurs;
(e) the average of the Portfolio Yields for any 3 consecutive
calendar months is less than the average of the Base Rates for the same
calendar months;
(f) sufficient funds are not available to pay in full the outstanding
principal balance of the Series 2000- notes on the expected principal
payment date;
(g) specified bankruptcy, insolvency, liquidation, conservatorship,
receivership or similar events relating to us or the bank;
(h) we are unable for any reason to transfer receivables to the
trust;
(i) Spiegel Master Trust or the issuer becomes subject to regulation
as an "investment company" within the meaning of the Investment Company Act
of 1940, as amended; or
(j) an event of default for Series 2000- and an acceleration of the
maturity of the Series 2000- notes occurs under the indenture.
In the case of any event described in clause (a), (b) or (d) above, a pay
out event will be deemed to have occurred with respect to the notes only if,
after any applicable grace period, either the indenture trustee or the Series
2000- noteholders evidencing interests aggregating more than 50% of the
aggregate unpaid principal amount of the Series 2000- notes, by written notice
to us, the servicer and, if notice is given by the Series 2000- noteholders, the
indenture trustee, declare that a pay out event has occurred with respect to the
Series 2000- notes as of the date of the notice.
In the case of any event described in clause (g), (h) or (i), a pay out
event with respect to all series then outstanding, and in the case of any event
described in clause (c), (e), (f) or (j), a pay out event with respect to only
the Series 2000- notes, will occur without any notice or other action on the
part of the indenture trustee or the Series 2000- noteholders immediately upon
the occurrence of the event.
On the business day immediately before the date on which a pay out event is
deemed to have occurred, the rapid amortization period will begin.
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See "Description of the Notes -- Pay Out Events" in the accompanying
prospectus for an additional discussion of the consequences of insolvency,
conservatorship or receivership events related to us.
Events of Default
The events of default for Series 2000- , as well as the rights and remedies
available to the indenture trustee and the Series 2000- noteholders when an
event of default occurs, are described under "The Indenture--Events of Default;
Rights Upon Event of Default" in the accompanying prospectus.
In the case of an event of default involving bankruptcy, insolvency or
similar events relating to the issuer, the principal amount of the Series 2000-
notes automatically will be deemed to be immediately due and payable. If any
other event of default for Series 2000- occurs, the indenture trustee or the
holders of a majority of the then-outstanding principal balance of the Series
2000- notes may declare the Series 2000- notes to be immediately due and
payable. If the Series 2000- notes are accelerated, you may receive principal
prior to the expected principal payment date for your class of notes.
Servicing Compensation and Payment of Expenses
The servicing fee rate for your series is 2% per annum. Your series' share
of the servicing fee for each month will be calculated as described under
"Description of the Notes--Servicing Compensation and Payment of Expenses" in
the accompanying prospectus. However, the monthly servicing fee allocable to
your series for the first distribution date will equal $[______].
Underwriting
Subject to the terms and conditions set forth in an underwriting agreement
between us and the underwriters named below, we have agreed to sell to the
underwriters, and each of the underwriters has severally agreed to purchase, the
principal amount of the notes set forth opposite its name:
Principal Amount of
Class A Underwriters Class A Notes
-------------------- ---------------------
$
-----------
Total............................... $
.................................... ============
Principal Amount of
Class B Underwriters Class B Notes
-------------------- ---------------------
$
-----------
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Total................................ $
============
Principal Amount of
Class C Underwriters Class C Notes
-------------------- -------------------
$
------------
Total................................ $
============
In the underwriting agreement, the underwriters of each class of notes have
agreed, subject to the terms and conditions set forth in that agreement, to
purchase all of the notes in that class offered by this prospectus supplement if
any of the notes in that class are purchased.
The underwriters of each class of notes have advised us that they propose
initially to offer the notes in that class to the public at the prices set forth
in this prospectus supplement, and to dealers chosen by the underwriters at the
prices set forth in this prospectus supplement less a concession not in excess
of the percentages set forth in the following table. The underwriters of each
class of notes and those dealers may reallow a concession not in excess of the
percentages set forth in the following table. After the initial public offering
of the notes, the public offering prices and the concessions referred to in this
paragraph may be changed.
Class A Class B Class C
Notes Notes Notes
Concessions................. % % %
Reallowances................ % % %
The underwriters will be compensated as set forth in the following table:
Underwriters' Amount
Discounts and per $1,000
Commissions of Principal Total Amount
--------------- -------------- --------------
Class A Notes % $ $
Class B Notes % $ $
Class C Notes % $ $
--------------
Total Class A, Class B
and Class C Notes $
==============
Each underwriter has represented and agreed that:
S-39
<PAGE>
(a) it has complied and will comply with all applicable provisions of the
Financial Services Act 1986 with respect to anything done by it in
relation to the notes in, from or otherwise involving the United
Kingdom;
(b) it has only issued or passed on and will only issue or pass on in the
United Kingdom any document received by it in connection with the
issue or sale of the notes to a person who is of a kind described in
Article 11(3) of the Financial Services Act 1986 (Investment
Advertisements) (Exemptions) Order 1996 or is a person to whom that
document may otherwise lawfully be issued or passed on;
(c) if it is an authorized person under Chapter III of part I of the
Financial Services Act 1986, it has only promoted and will only
promote (as that term is defined in Regulation 1.02(2) of the
Financial Services (Promotion of Unregulated Schemes) Regulations
1991) to any person in the United Kingdom the scheme described in this
prospectus supplement and the accompanying prospectus if that person
is of a kind described either in Section 76(2) of the Financial
Services Act 1986 or in Regulation 1.04 of the Financial Services
(Promotion of Unregulated Schemes) Regulations 1991; and
(d) it is a person of a kind described in Article 11(3) of the Financial
Services Act 1986 (Investment Advertisements) (Exemptions) Order 1996.
We will indemnify the underwriters against the liabilities specified in the
underwriting agreement, including liabilities under the Securities Act, or will
contribute to payments the underwriters may be required to make in connection
with those liabilities.
The underwriters may engage in over-allotment transactions, stabilizing
transactions, syndicate covering transactions and penalty bids with respect to
the notes in accordance with Regulation M under the Exchange Act. Over-allotment
transactions involve syndicate sales in excess of the offering size, which
creates a syndicate short position. The underwriters do not have an
"overallotment" option to purchase additional notes in the offering, so
syndicate sales in excess of the offering size will result in a naked short
position. The underwriters must close out any naked short position through
syndicate covering transactions in which the underwriters purchase notes in the
open market. A naked short position is more likely to be created if the
underwriters are concerned that there may be downward pressure on the price of
the notes in the open market after pricing that would adversely affect investors
who purchase in the offering. Stabilizing transactions permit bids to purchase
the notes so long as the stabilizing bids do not exceed a specified maximum.
Penalty bids permit the underwriters to reclaim a selling concession from a
syndicate member when the notes originally sold by that syndicate member are
purchased in a syndicate covering transaction. Over-allotment transactions,
stabilizing transactions, syndicate covering transactions and penalty bids may
have the effect of raising or maintaining the market price of the notes or
preventing or retarding a decline in the market price of the notes. As a result,
the price of the notes may be higher than the price that might otherwise exist
in the open market. Neither we nor the underwriters represent that the
underwriters will
S-40
<PAGE>
engage in any of these transactions or that those transactions, once commenced,
will not be discontinued without notice at any time.
In the ordinary course of their respective businesses, the underwriters and
their respective affiliates have engaged and may in the future engage in
investment banking or commercial banking transactions with us and our
affiliates.
S-41
<PAGE>
Glossary of Terms for Prospectus Supplement
"Base Rate" means, with respect to any calendar month, the annualized
percentage equivalent of a fraction:
. the numerator of which is the sum of (a) the interest due on the
Series 2000- notes and (b) the product of (i) the monthly servicing
fee rate for your series and (ii) the outstanding principal amount of
the Series 2000- notes, less amounts, if any, on deposit in the
principal accumulation account, each for the following distribution
date; and
. the denominator of which is the outstanding principal balance of
the Series 2000- notes as of the last day of that calendar month.
"Excess Spread Percentage" means, for any distribution date, the amount, if
any, by which the Portfolio Yield for the prior calendar month exceeds the Base
Rate for the prior calendar month. However, the Excess Spread Percentage for the
first distribution date will be calculated for the period from the closing date
through the end of the calendar month preceding the first distribution date.
"Portfolio Yield" means, with respect to any calendar month, the annualized
percentage equivalent of a fraction:
. the numerator of which is the amount of finance charge collections
allocated to your series, minus the amount of defaulted receivables
allocated to your series for that calendar month; and
. the denominator of which is the collateral amount as of the close of
business on the last day of that calendar month.
"Quarterly Excess Spread Percentage" means, for any distribution date, the
percentage determined as follows:
For the [Month 1]
2000 The Excess Spread Percentage for the [Month 1]
distribution date: 2000 distribution date
For the [Month 2]
2000 The sum of the Excess Spread Percentage for the
distribution date: [Month 1] 2000 distribution date, plus the Excess
Spread Percentage for the [Month 2] 2000
distribution date
-------------------------------------------
2
S-42
<PAGE>
For each following
distribution date: The sum of the Excess Spread Percentages for the
then-current distribution date and the two prior
distribution dates
------------------------------------------------
3
S-43
<PAGE>
Annex I
Other Securities Issued and Outstanding
The principal characteristics of the other outstanding series of notes
previously issued by the issuer and the outstanding series of investor
certificates issued by Spiegel Master Trust are set forth in Part A and Part B,
respectively, of the table below. All of the outstanding series of notes and
investor certificates are in group one. For more specific information with
respect to any series of notes or investor certificates, any prospective
investor should contact Spiegel Credit Corporation III at (302) 429-7609.
Spiegel Credit Corporation III will provide, without charge, to any prospective
purchaser of the notes, a copy of the disclosure documents for any previous
publicly-issued series of notes or investor certificates.
<TABLE>
<S> <C>
Part A
[I. Series 2000-
Initial Class A collateral amount..................................................................... $
Initial Class B collateral amount..................................................................... $
Initial Class C collateral amount..................................................................... $
Class A interest rate......................................................... [one-month LIBOR plus] % per annum
Class B interest rate......................................................... [one-month LIBOR plus] % per annum
Class C interest rate......................................................... [one-month LIBOR plus] % per annum
[Controlled Accumulation Amount........................................................................ $ ]
[Expected principal payment date.............................................. [ ] distribution date]
Annual servicing fee percentage................................................................... 2.0% per annum
[Enhancement for the Class A notes........................................ Subordination of Class B and Class C notes]
[Enhancement for the Class B notes.................................................... Subordination of Class C notes]
[Enhancement for the Class C notes.............................................................. spread account]
Series 2000- termination date.................................................... [ ] distribution date
Series Issuance Date............................................................................ , 2000]
Part B
Series 1994-B
Initial Class A Investor Amount.................................................................... $123,000,000.00
Initial Class B Investor Amount.................................................................... $27,000,000
Initial Class C-1 Investor Amount.................................................................. $30,840,000
Initial Class C-2 Investor Amount.................................................................. $12,330,000
Class A Certificate Rate........................................................................... 8.15% per annum
Class B Certificate Rate........................................................................... 8.35% per annum
Class C-1 Certificate Rate......................................................................... 0% per annum
Class C-2 Certificate Rate......................................................................... 0% per annum
Controlled Distribution Amount........................................................... $10,250,000.00 per month
Class A Expected Payment Date............................................................ June 2000 distribution date
Annual servicing fee percentage.................................................................... 2.0% per annum
Enhancement for the Class A certificates........................... Subordination of Class B and Class C certificates
Enhancement for the Class B certificates...................................... Subordination of Class C certificates
Series 1994-B termination date........................................................... June 2004 distribution date
</TABLE>
I-1
<PAGE>
<TABLE>
<S> <C>
Series Issuance Date................................................................................. December 13, 1994
Series 1995-A
Initial Class A Investor Amount........................................................................ $289,000,000
Initial Class B Investor Amount........................................................................ $61,000,000
Initial Class C-1 Investor Amount...................................................................... $67,120,000
Initial Class C-2 Investor Amount...................................................................... $28,440,000
Class A interest rate.................................................................................. 7.50% per annum
Class B interest rate.................................................................................. 7.75% per annum
Class C-1 interest rate.................................... Floating rate generally based upon commercial paper rates
Class C-2 interest rate.................................... Floating rate generally based upon commercial paper rates
Controlled Distribution Amount............................................................... $24,083,334.00 per month
Class A Expected Payment Date......................................................... September 2000 distribution date
Annual servicing fee percentage....................................................................... 2.0% per annum
Enhancement for the Class A certificates........................... Subordination of Class B and Class C certificates
Enhancement for the Class B certificates...................................... Subordination of Class C certificates
Series 1995-A termination date..................................................... September 2004 distribution date
Series Issuance Date................................................................................... March 16, 1995
Series 1999-A
Initial Class A Investor Amount........................................................................ $99,000,000
Initial Class B Investor Amount........................................................................ $34,783,784
Maximum Class A Investor Amount........................................................................ $350,000,000
Maximum Class B Investor Amount........................................................................ $122,972,973
Class A interest rate....................................... Floating rate generally based upon commercial paper rates
Class B interest rate....................................... Floating rate generally based upon commercial paper rates
Scheduled Pay Out Commencement Date.................................................. December 2000 Distribution Date
Paired Series............................................................................... Series 1994-B and 1995-A
Annual servicing fee percentage....................................................................... 2.0% per annum
Enhancement for the Class A certificates....................... Subordination of Class B certificates, spread account
Series 1999-A termination date............................................................ July 2006 distribution date
Series Issuance Date............................................................................... November 15, 1999
Series 1999-B
Initial Class A Investor Amount........................................................................ $0
Initial Class B Investor Amount........................................................................ $0
Maximum Class A Investor Amount........................................................................ $750,000,000
Maximum Class B Investor Amount........................................................................ $187,500,000
Class A interest rate....................................... Floating rate generally based upon commercial paper rates
Class B interest rate........................................................................... non-interest bearing
Scheduled Pay Out Commencement Date......................................... last day of December 2002 Monthly Period
Annual servicing fee percentage......................................................................... 2.0% per annum
Enhancement for the Class A certificates....................................... Subordination of Class B certificates
Series 1999-B termination date.................................... 36 months after the earlier of the commencement of
the Controlled Amortization Period or a Rapid Amortization period
Series Issuance Date................................................................................... December 9, 1999
</TABLE>
I-2
<PAGE>
The information in this prospectus is not complete and may be amended. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and is not soliciting an offer to buy these securities
in any state where the offer or sale is not permitted.
Subject to Completion, dated ____________ __, 2000
Prospectus
Spiegel Credit Card Master Note Trust
Issuer
Spiegel Credit Corporation III
Seller
First Consumers National Bank
Servicer
Asset Backed Notes
The Issuer --
. may periodically issue asset backed notes in one or more series
with one or more classes; and
. will have a direct or indirect interest in --
. receivables in a portfolio of private label retail revolving
credit card accounts owned by First Consumers National Bank;
. payments due on those receivables; and
. other property described in this prospectus and in the
accompanying prospectus supplement.
The Notes --
. will be paid only from the trust assets;
. offered with this prospectus will be rated in one of the four
highest rating categories by at least one nationally recognized
rating organization;
. may have one or more forms of credit enhancement; and
. will be issued as part of a designated series which may include
one or more classes of notes.
--------------------------------------------------------------------------------
You should consider carefully the risk factors beginning on page ____ in
this prospectus.
A note is not a deposit and neither the notes nor the underlying accounts or
receivables are insured or guaranteed by the Federal Deposit Insurance
Corporation or any other governmental agency.
The notes are obligations of Spiegel Credit Card Master Note Trust only and
are not obligations of First Consumers National Bank, Spiegel Credit
Corporation III or any other person.
This prospectus may be used to offer and sell notes of a series only if
accompanied by the prospectus supplement for that series.
--------------------------------------------------------------------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved these notes or determined that this prospectus is
accurate or complete. Any representation to the contrary is a criminal
offense.
_____________, 2000
<PAGE>
Important Notice about Information Presented in this
Prospectus and the Accompanying Prospectus Supplement
We provide information to you about the notes in two separate documents:
(a) this prospectus, which provides general information, some of which may not
apply to your series of notes, and (b) the accompanying prospectus supplement,
which describes the specific terms of your series of notes, including:
. the terms, including interest rates, for each class;
. the timing of interest and principal payments;
. information about the receivables;
. information about credit enhancement, if any, for each class;
. the ratings for each class being offered; and
. the method for selling the notes.
If the terms of your series of notes vary between this prospectus and the
accompanying prospectus supplement, you should rely on the information in the
prospectus supplement.
You should rely only on the information provided in this prospectus and the
accompanying prospectus supplement, including the information incorporated by
reference. We have not authorized anyone to provide you with different
information. We are not offering the notes in any state where the offer is not
permitted.
We include cross references in this prospectus and the accompanying
prospectus supplement to captions in these materials where you can find further
related discussions. The following Table of Contents and the Table of Contents
in the accompanying prospectus supplement provide the pages on which these
captions are located.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Summary: Overview of Transactions........................................................................... 1
Risk Factors................................................................................................ 2
It may not be possible to find an investor to purchase your notes...................................... 2
Some liens would be given priority over your notes which could cause delayed or reduced payments....... 2
If a conservator or receiver were appointed for First Consumers National Bank, or if we or Spiegel
Acceptance became a debtor in a bankruptcy case, delays or reductions in payment of your notes
could occur............................................................................................ 3
The account owner may change the terms and conditions of the accounts in a way
that reduces collections............................................................................... 5
Changes to consumer protection laws may impede collection efforts or reduce collections................ 5
Limited remedies for breaches of representations could reduce or delay payments........................ 5
Payment patterns of receivables could reduce collections............................................... 6
Allocations of charged-off receivables or uncovered dilution could reduce payments to you.............. 6
Subordinated classes bear losses before senior classes................................................. 7
Recharacterization of principal receivables would reduce principal receivables and may require
addition of new receivables............................................................................ 7
The note interest rate and the receivables interest rate may re-set at different times,
resulting in reduced or early payments to you.......................................................... 8
The trust is dependent on Spiegel's retail subsidiaries to generate new receivables.................... 8
Use of private label cards by customers of Spiegel's retail subsidiaries may decline................... 9
Important Parties........................................................................................... 10
The Issuer............................................................................................. 10
Spiegel Master Trust................................................................................... 10
Spiegel, Inc. and its Retail Subsidiaries.............................................................. 11
First Consumers National Bank.......................................................................... 11
Spiegel Credit Corporation III......................................................................... 12
Spiegel Acceptance Corporation......................................................................... 12
The Bank's Credit Card Activities........................................................................... 12
General................................................................................................ 12
Credit Granting Procedure.............................................................................. 12
Billing and Payments................................................................................... 14
Delinquency and Collections............................................................................ 15
Customer Service and Account Management................................................................ 16
Description of First Data Resources.................................................................... 17
The Trust Portfolio......................................................................................... 17
Use of Proceeds............................................................................................. 19
Description of the Notes.................................................................................... 19
General................................................................................................ 20
Book-Entry Registration................................................................................ 21
Definitive Notes....................................................................................... 25
Interest Payments...................................................................................... 26
Principal Payments..................................................................................... 27
Suspension and Postponement of Controlled Accumulation Period.......................................... 28
Transfer and Assignment of Receivables................................................................. 30
New Issuances of Notes................................................................................. 30
Representations and Warranties......................................................................... 32
Addition of Trust Assets............................................................................... 33
Removal of Accounts.................................................................................... 35
Collection and Other Servicing Procedures.............................................................. 35
Discount Option........................................................................................ 36
Trust Accounts......................................................................................... 36
Funding Period......................................................................................... 37
Application of Collections............................................................................. 38
Shared Excess Finance Charge Collections............................................................... 39
Shared Principal Collections; Excess Funding Account................................................... 39
Defaulted Receivables; Dilution; Investor Charge-Offs.................................................. 40
Defeasance............................................................................................. 41
Final Payment of Principal............................................................................. 41
Paired Series.......................................................................................... 42
Pay Out Events......................................................................................... 43
Servicing Compensation and Payment of Expenses......................................................... 44
Matters Regarding the Seller and the Servicer.......................................................... 44
Servicer Default....................................................................................... 47
Reports to Noteholders................................................................................. 50
Evidence as to Compliance.............................................................................. 51
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Amendments...................................................................................... 52
The Indenture........................................................................................ 53
Events of Default; Rights upon Event of Default................................................. 53
Covenants....................................................................................... 57
Modification of the Indenture................................................................... 59
Annual Compliance Statement..................................................................... 61
Indenture Trustee's Annual Report............................................................... 61
List of Noteholders............................................................................. 61
Satisfaction and Discharge of Indenture......................................................... 62
The Indenture Trustee........................................................................... 62
Matters Regarding the Administrator............................................................. 62
Pooling and Servicing Agreement...................................................................... 62
New Issuances of Investor Certificates.......................................................... 62
Amendments...................................................................................... 63
Credit Enhancement................................................................................... 64
General......................................................................................... 64
Excess Collateral Amount........................................................................ 65
Subordination................................................................................... 66
Letter of Credit................................................................................ 66
Cash Collateral Guaranty or Account............................................................. 67
Surety Bond or Insurance Policy................................................................. 67
Spread Account.................................................................................. 67
Reserve Account................................................................................. 67
Description of the Receivables Purchase Agreement.................................................... 68
Sale of Receivables............................................................................. 68
Representations and Warranties.................................................................. 69
Covenants....................................................................................... 69
Amendments...................................................................................... 70
Termination..................................................................................... 70
Note Ratings......................................................................................... 70
Material Legal Aspects of the Receivables............................................................ 71
Transfer of Receivables......................................................................... 71
Conservatorship, Receivership and Bankruptcy.................................................... 72
Consumer Protection Laws........................................................................ 75
Federal Income Tax Consequences...................................................................... 75
General......................................................................................... 75
Tax Classification of the Issuer and the Notes.................................................. 76
Consequences to Holders of the Offered Notes.................................................... 77
State and Local Tax Consequences................................................................ 80
ERISA Considerations................................................................................. 80
Plan of Distribution................................................................................. 82
Reports to Noteholders............................................................................... 82
Where You Can Find More Information.................................................................. 83
Annex I.............................................................................................. 87
Global Clearance, Settlement and Tax Documentation Procedures................................... 87
</TABLE>
ii
<PAGE>
Summary: Overview of Transactions
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
First Spiegel Spiegel
Consumers Credit Collateral Credit Card
National Receivables Corporation Receivables Certificate Master Note Notes
Bank III Trust
</TABLE>
Each series of notes will be issued by Spiegel Credit Card Master Note Trust and
will include one or more classes of notes, representing debt of the issuer. Each
series and class may differ as to timing and priority of distributions,
allocations of losses, interest rates, amount of distributions in respect of
principal or interest and credit enhancement. We, Spiegel Credit Corporation
III, will disclose the details of these timing, priority and other matters in a
prospectus supplement.
Initially, the primary asset of the issuer will be an investor certificate
issued by Spiegel Master Trust to us and transferred to the issuer under a
transfer and servicing agreement. It represents a beneficial interest in the
assets of Spiegel Master Trust. Spiegel Master Trust owns primarily credit card
receivables arising in private label retail revolving credit card accounts.
First Consumers National Bank is the originator of the credit card receivables.
It has designated all eligible accounts from its portfolio of private label
retail credit card accounts and has transferred the receivables in those
accounts to us, directly or indirectly, under a receivables purchase agreement.
Indirect sales occur when the bank designates accounts that have outstanding
receivables, which receivables the bank previously has sold to our mutual
affiliate Spiegel Acceptance Corporation. Spiegel Acceptance then sells those
outstanding receivables to us. We have, in turn, transferred those credit card
receivables to Spiegel Master Trust under a pooling and servicing agreement. The
bank will continue to own the accounts that are designated to the trust. After
all outstanding series of investor certificates that have been issued by Spiegel
Master Trust have been retired, we may cause Spiegel Master Trust to terminate,
at which time the receivables will be transferred to the issuer and held
directly by the issuer. We refer to the entity -- either Spiegel Master Trust or
the issuer -- that holds the receivables at any given time as the trust.
The notes will represent the right to payments from a portion of collections on
the credit card receivables held by the trust. All new receivables generated in
the accounts will be automatically transferred to the trust. The total amount of
receivables held by the trust will fluctuate daily as new receivables are
generated and payments are received on existing receivables.
The bank continues to service the receivables that are transferred to the trust
and will act as the issuer's administrator.
The Bank of New York is the trustee for Spiegel Master Trust. The Bank of New
York will also act as indenture trustee for the issuer. The issuer will grant a
security interest in its assets --including the collateral certificate or, if
Spiegel Master Trust has terminated, the receivables -- to the indenture trustee
for the benefit of the noteholders.
1
<PAGE>
Risk Factors
The following is a summary of the principal risk factors that apply to an
investment in the notes. You should consider the following risk factors and any
risk factors in the accompanying prospectus supplement before deciding whether
to purchase the notes.
It may not be possible to find an investor to purchase your notes.
The underwriters may assist in resales of the notes but they are not
required to do so. A secondary market for any notes may not develop. If a
secondary market does develop, it might not continue or it might not be
sufficiently liquid to allow you to resell any of your notes.
Some liens would be given priority over your notes which could cause delayed or
reduced payments.
We, the bank and Spiegel Acceptance account for the transfer of the
receivables as a sale. Even so, a court could conclude that we, Spiegel
Acceptance or the bank owns the receivables and that the trust holds only a
security interest. Even if a court would reach that conclusion, however, the
indenture trustee will have a first-priority perfected security interest, either
directly or through Spiegel Master Trust.
If a court were to conclude that the trust has only a security interest, a
tax or governmental lien or other lien imposed under applicable state or federal
law without consent on the property of the person that owns the receivables
arising before receivables come into existence may be senior to the trust's
interest in the receivables. Additionally, if a receiver or conservator were
appointed for the bank, the fees and expenses of the receiver or conservator
might be paid from the receivables before the trust receives any payments on the
receivables. In addition, the trust may not have a first-priority perfected
security interest in collections commingled and used for the benefit of the
servicer if (a) insolvency proceedings were commenced by or against the servicer
or (b) a ten-day period were to elapse after receipt by the servicer of
collections that have been commingled with other funds. If any of these events
were to occur, payments to you could be delayed or reduced. See "Material Legal
Aspects of the
2
<PAGE>
Receivables -- Transfer of Receivables" and "Description of the Notes --
Representations and Warranties" in this prospectus.
If a conservator or receiver were appointed for First Consumers National Bank,
or if we or Spiegel Acceptance became a debtor in a bankruptcy case, delays or
reductions in payment of your notes could occur.
If the bank were to become insolvent, the FDIC could act as conservator or
receiver for the bank. In that role, the FDIC would have broad powers to
repudiate contracts to which the bank was party if the FDIC determined that the
contracts were burdensome and that repudiation would promote the orderly
administration of the bank's affairs. In addition, no agreement that tended to
diminish or defeat the FDIC's interest in an asset acquired from the bank would
be enforceable against the FDIC unless the agreement meets legal requirements.
One of those requirements is that the agreement would have to have been executed
by the bank contemporaneously with the bank's acquisition of the asset.
The FDIC has adopted a rule stating that the FDIC shall not use its
repudiation power to reclaim, recover or recharacterize as property of an FDIC-
insured bank any financial assets transferred by the bank in connection with a
securitization transaction. The same rule states that the FDIC shall not seek to
avoid an otherwise legally enforceable securitization agreement solely because
the agreement does not satisfy the contemporaneous execution requirement.
Although the FDIC has the power to repeal or amend its own rules, the
securitization rule states that any repeal or amendment of that rule will not
apply to any transfers of financial assets made in connection with a
securitization that was in effect before the repeal or modification.
We have structured the issuance of the notes with the intention that the
direct or indirect transfers of the receivables from the bank to us will have
the benefit of this rule. If the FDIC were to assert that the transfers of
receivables do not have the benefit of the rule, however, payments of principal
and interest on your notes could be delayed and, if the FDIC were successful,
possibly reduced. Furthermore, if the FDIC's assertion were successful, the
FDIC could--
3
<PAGE>
. require the indenture trustee to go through the administrative claims
procedure established by the FDIC in order to obtain payments on the
notes;
. obtain a stay of any actions by the indenture trustee to enforce
against the bank the receivables purchase agreement or the purchase
agreement between Spiegel Acceptance and the bank; or
. repudiate the receivables purchase agreement and limit our claims to
our "actual direct compensatory damages," (as defined in the statute
that governs the FDIC's authority and actions as a receiver or
conservator).
If the FDIC were to take any of these actions and were successful, the
amount payable to you could be lower than the outstanding principal and accrued
interest on the notes, thus resulting in losses to you.
We are a wholly-owned, bankruptcy remote subsidiary of Spiegel. Our
certificate of incorporation limits the nature of our business and restricts our
ability to commence a voluntary case under the bankruptcy code without the
unanimous consent of our board of directors.
If, however, we or Spiegel Acceptance became a debtor in a bankruptcy case,
and if Spiegel Acceptance's transfer of the receivables to us or our transfer of
the receivables to the trust were construed as the grant of a security interest
to secure a borrowing, your payments of outstanding principal and interest could
be delayed and possibly reduced. In addition, if we, Spiegel or Spiegel
Acceptance were to become a debtor in a bankruptcy case and our assets and
liabilities were substantively consolidated with those of Spiegel or Spiegel
Acceptance, your payments of outstanding principal and interest could be delayed
and possibly reduced.
If a conservator or receiver were appointed for the bank, or if we or
Spiegel Acceptance were to become a debtor in a bankruptcy case, an early
payment of principal on all outstanding series could result. Under the terms of
the agreement that governs the transfer of the receivables from us to the trust,
new principal receivables would not be transferred to the trust. However, the
4
<PAGE>
bankruptcy court, the conservator or the receiver may have the power, regardless
of the terms of that agreement, to prevent the early payment of principal or to
require new principal receivables to continue being transferred.
In addition, a conservator or receiver for the servicer may have the power
to prevent either the indenture trustee or the noteholders from appointing a new
servicer.
See "Material Legal Aspects of the Receivables -- Conservatorship,
Receivership and Bankruptcy" in this prospectus.
The account owner may change the terms and conditions of the accounts in a way
that reduces collections.
As owner of the accounts, the bank retains the right to change various
account terms, including finance charges, other fees and the required monthly
minimum payment. These changes may be voluntary on the part of the bank or may
be forced by law or market conditions. Changes in interest and fees could
decrease the effective yield on the accounts and this could result in an early
payment of principal of your notes. Changes could also cause a reduction in the
credit ratings on your notes.
Changes to consumer protection laws may impede collection efforts or reduce
collections.
Federal and state consumer protection laws regulate the creation and
enforcement of consumer loans, including credit card accounts and receivables.
Changes or additions to those regulations could make it more difficult for the
servicer of the receivables to collect payments on the receivables or reduce the
finance charges and other fees that the originator can charge on credit card
account balances, resulting in reduced collections.
Receivables that do not comply with consumer protection laws may not be
valid or enforceable under their terms against the obligors on those
receivables.
If a cardholder sought protection under federal or state bankruptcy or
debtor relief laws, a court could reduce or discharge completely the
cardholder's obligations to repay amounts due on its account and, as a result,
the related receivables would be
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written off as uncollectible. See "Material Legal Aspects of the Receivables --
Consumer Protection Laws" in this prospectus.
Limited remedies for breaches of representations could reduce or delay payments.
When we transfer the receivables to the trust, we make representations and
warranties relating to the validity and enforceability of the receivables
arising under the accounts designated to the trust, and as to the perfection and
priority of the indenture trustee's interest in the receivables. However, none
of the trustee for Spiegel Master Trust, the owner trustee or the indenture
trustee will make any examination of the receivables or the related assets to
determine the presence of defects, compliance with the representations and
warranties or for any other purpose.
A representation or warranty relating to the receivables may be violated if
the related obligors have defenses to payment or offset rights, or our creditors
or creditors of the bank claim rights to the trust assets. If a representation
or warranty is violated, we may have an opportunity to cure the violation. If we
are unable to cure the violation within the specified time period or if there is
no right to cure the violation, we must accept reassignment of the receivables
affected by the violation. These reassignments are the only remedy for breaches
of representations and warranties, even if your damages exceed your share of the
reassignment price. See "Description of the Notes --Representations and
Warranties" in this prospectus.
Payment patterns of receivables could reduce collections.
The receivables transferred to the trust may be paid at any time. We cannot
assure the creation of additional receivables in the accounts designated to the
trust or that any particular pattern of cardholder payments will occur. A
significant decline in the amount of new receivables generated could result in
the occurrence of a pay out event for one or more series and the commencement of
the rapid amortization period for each of those series. If a pay out event
occurs, you could receive payment of principal sooner than expected. The bank's
ability to compete in the current industry environment will affect its ability
to generate new receivables and might also affect payment patterns on the
receivables. In addition, changes in finance charges can alter the monthly
payment rates of cardholders. A significant decrease in
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monthly payment rates could slow the return or accumulation of principal during
an amortization period or accumulation period. See "Maturity Considerations" in
the accompanying prospectus supplement.
Allocations of charged-off receivables or uncovered dilution could reduce
payments to you.
The servicer will write off the receivables arising in accounts designated
to the trust if the receivables become uncollectible. Your series will be
allocated a portion of these charged-off receivables. See "Description of Series
Provisions -- Allocation Percentages" and "The Bank's Credit Card Portfolio --
Delinquency and Loss Experience" in the accompanying prospectus supplement.
Unlike charged-off receivables, reductions in the receivables due to returns of
merchandise, unauthorized charges and the like, called dilution, are typically
absorbed by reductions in our interest in the trust or reimbursed by us through
cash deposits to the excess funding account and are not intended to be allocated
to investors. However, to the extent our interest is insufficient to cover
dilution for any calendar month and we then default in our obligation to
compensate the trust for these reductions, your series will be allocated a
portion of the uncovered dilution. If the amount of charged-off receivables and
any uncovered dilution allocated to your series of notes exceeds the amount of
funds available to reimburse those amounts, you may not receive the full amount
of principal and interest due to you. See "Description of Series Provisions --
Application of Collections" and "-- Investor Charge-Offs" in the accompanying
prospectus supplement.
Subordinated classes bear losses before senior classes.
One or more classes of notes in a series may be subordinated to one or more
senior classes of notes in the same series. Principal allocations to the
subordinated class or classes may not begin until each of the more senior
classes has been paid in full. Additionally, if collections of finance charge
receivables allocated to a series are insufficient to cover amounts due for that
series' senior notes or to reimburse for that series' share of charged-off
receivables, the collateral amount for the series might be reduced. This would
reduce the amount of finance charge collections available to the subordinated
notes in future periods
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and could cause a possible delay or reduction in principal and interest payments
on the subordinated notes.
Recharacterization of principal receivables would reduce principal receivables
and may require addition of new receivables.
As described under "Description of the Notes -- Discount Option," we may
designate a percentage of the receivables that would otherwise be treated as
principal receivables to be treated as finance charge receivables. This
designation should decrease the likelihood of a pay out event occurring as a
result of a reduction of the average net portfolio yield for a given period.
However, this designation will also reduce the aggregate amount of principal
receivables, which may increase the likelihood that the seller will be required
to add receivables to the trust. If we were unable to add receivables and could
not make a sufficient cash deposit into the excess funding account, one or more
series of notes, including your series, could go into rapid amortization.
The note interest rate and the receivables interest rate may re-set at different
times, resulting in reduced or early payments to you.
The accounts currently have finance charges assessed at a variable rate. A
series of notes may bear interest either at a fixed rate or at a floating rate
based on a different index. If the interest rate charged on the accounts
declines, collections of finance charge receivables may be reduced without a
corresponding reduction in the amounts of interest payable on your notes and
other amounts required to be paid out of collections of finance charge
receivables. If the interest rate on the accounts declines or the interest rate
on a series increases, this could decrease the spread, or difference, between
collections of finance charge receivables and those collections allocated to
make interest payments on your notes. This would increase the risk of early
repayment of your notes, as well as the risk that there may not be sufficient
collections to make all required payments on your notes.
The trust is dependent on Spiegel's retail subsidiaries to generate new
receivables.
Because FCNB Preferred Charge accounts can be used for purchases of
merchandise and services only from Spiegel's retail subsidiaries, the trust is
completely dependent upon Spiegel's
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retail subsidiaries for the generation of receivables. Currently, Spiegel's
primary retail subsidiaries are Spiegel Catalog, Inc., Eddie Bauer, Inc. and
Newport News, Inc. The business of catalog and retail store marketing of
merchandise and services is highly competitive. Although Spiegel is one of the
largest retail catalog merchandisers in the United States, it and its retail
subsidiaries have several major competitors on a national level and many
competitors with their retail stores. Many considerations enter into the
competition for the consumer's patronage, including price, quality, style,
service, product mix, convenience and credit availability and terms. We cannot
guarantee that Spiegel's retail subsidiaries will continue to generate
receivables at the same rate as in prior years. See "The Bank's Credit Card
Activities--Spiegel."
Use of private label cards by customers of Spiegel's retail subsidiaries may
decline.
Because Spiegel's retail subsidiaries accept other credit cards in addition
to the FCNB Preferred Charge, including American Express, MasterCard, Discover
and VISA, not all sales on credit by Spiegel's retail subsidiaries will generate
receivables that will be transferred to the trust. In addition, the bank issues
MasterCard and VISA credit cards, some of which are issued to holders of FCNB
Preferred Charge accounts. No receivables arising under those MasterCard and
VISA credit card accounts are currently being transferred to the trust. We
cannot guarantee that the FCNB Preferred Charge accounts will continue to
maintain their current percentage of Spiegel Catalog, Eddie Bauer and Newport
News sales against competition from other credit sources. See "The Bank's Credit
Card Activities--Spiegel."
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This prospectus uses defined terms. You can find a glossary of terms under
the caption "Glossary of Terms for Prospectus" beginning on page ____ in this
prospectus.
Important Parties
The Issuer
The issuer of your notes will be Spiegel Credit Card Master Note Trust. The
issuer is a common law trust created under the laws of the State of Illinois. It
is operated under a trust agreement, dated as of [_________], 2000, between us
and Bankers Trust Company, as owner trustee.
The activities of the issuer are limited to:
. acquiring, owning and managing the trust assets and the proceeds of
those assets;
. issuing and making payments on the notes; and
. engaging in related activities.
The issuer's principal offices are in New York, in care of Bankers Trust
Company, as owner trustee, at the following address: 4 Albany Street, 10/th/
Floor, New York, New York 10006, Attention: Structured Finance Group.
We will pay the fees of the owner trustee and will reimburse it for various
liabilities and expenses.
Spiegel Master Trust
The notes are secured by a beneficial interest in a pool of receivables
that arise under private label retail credit card accounts owned by the bank and
designated by the bank as trust accounts. The receivables are currently held by
Spiegel Master Trust, an Illinois common law trust formed by us in September
1994 to securitize a portion of the bank's private label credit card
receivables. Spiegel Master Trust is operated under a pooling and servicing
agreement, amended and restated in December 1994, among us, as seller, the bank,
as servicer, and The Bank of New York, as trustee.
Spiegel Master Trust has issued a collateral certificate to us that
represents a beneficial interest in the receivables. We have transferred this
collateral certificate to the issuer under a transfer and servicing agreement
among us, as seller, the bank, as servicer, and the issuer. The other
outstanding series of investor certificates issued by Spiegel Master Trust and
the notes are referred to in this prospectus, collectively, as the securities
and the holders of those securities are referred to as the securityholders.
After all the outstanding series of investor certificates issued
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by Spiegel Master Trust are retired, we may cause Spiegel Master Trust to
terminate, at which time the receivables will be transferred to the issuer under
the transfer and servicing agreement and held directly by the issuer.
Spiegel, Inc. and its Retail Subsidiaries
Though not a party to the agreements governing the notes, the trust, the
issuer or the accounts, Spiegel is our parent and the parent of First Consumers
National Bank and Spiegel Acceptance. The receivables arise from sales by the
retail operations of Spiegel's subsidiaries and limited cash advances. Spiegel
is a leading international specialty retailer that offers merchandise through
its subsidiaries, including Eddie Bauer, Inc., Newport News, Inc. and Spiegel
Catalog, Inc. Spiegel's retail subsidiaries distribute apparel, household
furnishings and other merchandise through catalogs, Internet sites and retail
stores.
Spiegel and its predecessors date from 1865. Spiegel has operated as a
catalog merchandiser since 1905 and was incorporated in Delaware in 1965. In
1988, Spiegel acquired Eddie Bauer. In August 1993, Spiegel acquired
substantially all of the assets of Newport News, which was formerly named New
Hampton, Inc. until 1995.
The retail businesses of Spiegel Catalog, Eddie Bauer and Newport News are
described under "Spiegel's Retail Operations" in the accompanying prospectus
supplement.
First Consumers National Bank
First Consumers National Bank is headquartered in Beaverton, Oregon, which
is a suburb of Portland. The bank was organized as a national banking
association on December 12, 1988, and operates as a "credit card bank." The bank
was acquired by Spiegel on November 1, 1990. As a credit card bank, the banks
activities are limited primarily to the issuance of credit cards, including
MasterCard and VISA credit cards, as well as the bank's private label credit
card, the FCNB Preferred Charge card. A portion of the bank's portfolio of
private label credit card accounts are designated as trust accounts. The bank
continues to service the receivables that are transferred to the trustee.
The bank, in its capacity as administrator under the administration
agreement, dated as of [_________], 2000, between the administrator and the
issuer, will provide the notices and perform on behalf of the issuer other
administrative obligations required by the transfer and servicing agreement, the
indenture and the indenture supplement for each series, and will be compensated
for acting as the administrator.
The bank is regulated, supervised, and examined by the Office of the
Comptroller of the Currency.
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Spiegel Credit Corporation III
We--Spiegel Credit Corporation III--were incorporated in Delaware on
September 13, 1994, and are a wholly-owned, direct subsidiary of Spiegel, Inc.
We were organized for the limited purpose of purchasing, holding, owning and
transferring receivables and related activities.
Spiegel Acceptance Corporation
Spiegel Acceptance was incorporated in Delaware on November 26, 1965. It
purchases all receivables arising in FCNB Preferred Charge accounts other than
those that have been charged-off and those required to be sold to us or other
parties.
The Bank's Credit Card Activities
General
Each of Spiegel Catalog, Eddie Bauer and Newport News offers a FCNB
Preferred Charge card that bears its company insignia. However, a customer
holding any of three types of FCNB Preferred Charge cards may use his or her
FCNB Preferred Charge card to purchase all types of goods or services offered in
catalogs, retail stores and e-commerce sites of the three retailers. For
example, an FCNB Preferred Charge card bearing the insignia of Eddie Bauer may
be used to purchase merchandise from Spiegel Catalog or Newport News.
Credit Granting Procedure
FCNB Preferred Charge accounts are generated on a non-pre-approved basis
through:
. an instant credit program at all retail locations,
. an instant credit program offered to catalog customers when placing a
telephone order, and
. account applications made available in Spiegel Catalog, Eddie Bauer
and Newport News catalogs,
FCNB Preferred Charge accounts are generated on a pre-approved basis
through applications made available in direct mail solicitations by Spiegel
Catalog, Eddie Bauer and Newport News.
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Pre-approved
Pre-approved accounts constitute the majority of new account originations.
FCNB obtains lists of prospective candidates for pre-approved offers from one of
several list brokers and major credit bureaus. These lists are prescreened
based on the bank's proprietary scoring models to develop a refined list of pre-
approved prospects. The bank then compares this refined list of pre-approved
prospects against its own database, and excludes customers who, among other
things:
. have an existing account with the bank,
. are in bankruptcy,
. have a history of fraud,
. have judgments or liens against them, and
. are deceased
Credit limits on pre-approved offers range from $250 to $3,300. The
initial credit lines are based on the information contained in the credit bureau
report obtained when the applicant responds to the offer.
Non-Pre-approved
Application data for customers applying for the FCNB Preferred Charge Card
at retail locations is entered directly into the FDR system by salespeople.
FCNB credit personnel enter application data for customers applying for credit
over the telephone. When account applications are mailed to FCNB, they are
reviewed for completeness and processed in the same manner as instant credit
applications.
All non-pre-approved applications are processed through an empirically
derived, statistically validated scoring model. A credit report is obtained for
each non-pre-approved application. Credit limits are assigned based on the
credit score obtained from one of the major credit bureaus and range from $250
to $3,300.
The bank's internal scoring models for both pre-approved and non-pre-
approved accounts were developed based on historical data from the bank's
account base and by identifying distinguishing characteristics on customer
payment behavior. The models were revised in 1996 to capture diversified trends
within each merchant portfolio. For example, customers of Eddie Bauer
traditionally have a higher average income than customers of Spiegel and Newport
News. The new models should more accurately predict losses for a given credit
score and will be periodically re-validated for predictability every six to
twelve months. The predictive nature of the models will be evaluated based on
the actual performance of accounts
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versus the predicted performance at origination. Each of the models evaluates a
variety of factors. Although the relative importance of these factors varies
among models, the following factors currently contribute the most to the credit
score:
. performance with other creditors,
. number of references on credit file,
. length of time on credit file,
. utilization of credit lines with other creditors,
. types of trade lines,
. total amount of available credit,
. recent inquiries into credit file, and
. payment performance on other trade lines.
A small portion of total applications processed through the internal
scoring model are routed by the system for manual verification handling. These
applications are so routed due to credit bureau alert messages, name or address
variations between applications and credit reports or an existing credit line
from the bank listed on the report. Only applications meeting the final credit
score requirement are referred for verification procedures. Once applications
are referred, they are approved only upon successful verification of the
information in question.
Generally, all approvals are automated, except for requested credit limits
on non-pre-approved applications in excess of $3,300. The Senior Vice
President/Credit Operations Manager is authorized to approve limits ranging from
$7,591 to $25,000. Limits in excess of $25,000 and up to $50,000 must be
approved by the Executive Vice President/Director of Operations. Limits in
excess of $50,000 must be approved by the bank's board of directors.
New purchases for existing accounts must fall within the authorized credit
limit plus an approval buffer determined by behavior scores and a set of
strategies, collectively referred to as "adaptive control software." All
existing account authorizations are approved if the account is in good credit
standing and the resulting balance is within the credit limit and the approval
buffer. The vast majority of existing account authorizations are handled by the
bank's system logic without manual interruption.
Each accountholder is subject to an agreement governing the terms and
conditions of the account. Each of these agreements permits the bank to change
or terminate any terms, conditions, services or features of the account,
including increasing or decreasing finance charges, other charges or minimum
payments.
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The bank may change its credit standards or screening criteria and methods
at any time.
Billing and Payments
The bank assesses finance charges on an account based upon the average
daily balance outstanding on the account during a monthly billing cycle. If a
payment is not received by the payment due date, a finance charge is imposed on
all purchases from the date of the transaction to the date of repayment. A
finance charge is imposed on each cash advance from the day that advance is
made. The finance charge is currently assessed at an annual variable percentage
rate subject to a floor of 22.6% for purchases made with Spiegel Catalog and
Newport News cards and 18.9% for purchases made with Eddie Bauer cards. The
finance charge is applied to the average daily balance, which is the sum of the
daily unpaid balances of purchases and cash advances, finance charges and fees
on each day of the cycle divided by the number of days in the cycle. Daily
unpaid balances are determined by deducting payments and credits and by adding
new purchases, cash advances and other charges, in each case, as of the date of
the transaction. A $.50 minimum finance charge is imposed for any billing cycle
in which a finance charge of less than $.50 would otherwise be imposed.
Accountholders are given a grace period averaging 30 days from the closing date
of the cycle to the payment due date. If the entire balance on the account is
paid during the grace period, a finance charge is not imposed.
Subject to applicable laws, accountholders are charged $29.00 if a check is
dishonored and a late charge of up to $25.00 each month the required payment is
not received within 10 days after the payment due date. The bank does not impose
overlimit fees, annual fees or other transaction-related service fees.
Currently accountholders must make a minimum monthly payment equal to
approximately 1/33 of the account balance, but not less than $15.00. The bank
considers an account delinquent if less than 50.0% of the minimum monthly
payment is received for any month. Payments by accountholders are applied first
to finance charges and other charges or fees, and then to purchases in the order
made, then to cash advances in the order made.
From time to time the bank offers optional payment plans in connection with
an account. These options allow the accountholder to defer regular monthly
payments or delay the billing of the account for specific purchases. Under a
deferred payment option, the accountholder has the right not to make monthly
payments for a specified period of time. However, the accountholder will have
to pay regular finance charges during the period of deferral. Under a delayed
billing option, purchases are not billed to the account until the end of the
delayed billing period. As a result, the purchases are not reflected on the
account until billed and the accountholder does not pay finance charges for
these purchases during the delayed billing period.
Delinquency and Collections
The bank operates collection centers located in Beaverton, Oregon and
Trevose, Pennsylvania. Generally the Trevose collection center services
accounts with a billing address
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in the eastern half of the United States, with the remaining accounts serviced
from the Beaverton collection center. Both collection centers are capable of
collecting on accounts with any billing address and delinquent accounts can be
routed to either site in the case of heavy call volume or a natural disaster at
one collection center.
The bank classifies an account as delinquent when the minimum payment due
on the account is not received by the payment due date specified in the
cardholder's billing statement. The bank collections staff is segregated into
five separate collection departments, each of which is made up of six queues
based on severity of delinquency. The collections staff initiates collection
efforts as early as the third day of delinquency if no contact has been made
through the autodialer as discussed below. Accounts are placed in the
collection office at various levels of delinquency, with all accounts being
placed no later than 60 days after the first payment is missed. The majority of
accounts are placed within the first 30 days of a missed payment. The bank uses
behavioral scoring of all accounts to adjust its collection efforts based on the
potential risk of an account and the dollars at risk. Collection efforts
escalate in intensity as an account cycles into a more advanced delinquency
category.
The bank's collection strategy begins with an early delinquency calling
program using state of the art technology that includes predictive dialing for
accounts that are up to two payments past due. Statement messaging and
automatic letter dunning are also used on delinquent accounts up to two payments
past due. Accounts which are placed in the collections office are assigned to
specific members of the bank collections staff for accelerated collection
efforts, including demands for balance in full, correspondence from one or more
of the national credit bureaus describing the impact that the delinquent credit
obligation has on the cardholder's credit history and preparatory actions to
place accounts with attorneys for legal action. Additionally, beginning in
1999, the bank outsources a portion of pre-charge-off accounts to external
collection agencies for resolution.
Additional purchases are not permitted to be charged to accounts which are
two or more payments past due.
The bank recognizes losses six months from the date due on the last
"current" billing statement. Losses are recognized earlier upon notification
that a customer has filed bankruptcy. If a compromise settlement is reached and
a payment for less than the balance is accepted as payment in full, the
deficiency amount is charged off. The bank will automatically re-age delinquent
accounts which pay three consecutive minimum or greater monthly payments to a
current status.
The bank outsources collections for charged-off accounts to third party
collection agents based on where the defaulted accountholder resides. Once
outsourced to a third party collector, the charged-off account may be sent to a
second or third additional collection agency until resolution. All collection
agencies are reviewed by the bank on a six month audit cycle and the results of
the agencies in each region are compared against each other.
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The bank's credit evaluation, servicing and charge-off policies and
collections practices may change at any time as dictated by the bank's business
judgment and applicable law.
Customer Service and Account Management
The bank's customer service department handles all credit related issues
pertaining to the accounts, while Spiegel maintains a separate customer service
group to address any customer service issues with respect to merchandise. An
automated voice response unit at the bank's headquarters in Beaverton handles a
substantial percentage of incoming calls and enables accountholders to receive
account information 24 hours a day, including balance, payment and credit
information, and request documents without having to speak with a customer
service representative.
The bank will review accounts for potential credit line increases every
three to six months. All credit line increases are automated except as
described under "--Credit Granting Procedures" above. Using adaptive control
software, the bank is able to identify accountholders who have demonstrated good
payment history and high usage patterns with the bank. The amount of the credit
line increases depends on the score assigned by the adaptive control software
and available credit bureau information.
Description of First Data Resources
First Data Resources, Inc. provides new account processing, account
management, billing and new card production for the bank. The bank believes
that its relationship with First Data Resources allows it to achieve operational
efficiencies while remaining flexible enough to handle additional growth. If
First Data Resources were to fail to perform its services for the bank or become
insolvent, delays in processing could occur, and the replacement of the services
First Data Resources currently provides to the bank could be time consuming.
First Data Resources provides computer data processing services primarily
to the bankcard industry. First Data Resources is a subsidiary of First Data
Corp.
The Trust Portfolio
We refer to the accounts that have been designated as trust accounts as the
trust portfolio. References to the trustee in this prospectus will refer to (a)
The Bank of New York, as trustee of Spiegel Master Trust under the pooling and
servicing agreement for so long as Spiegel Master Trust holds the receivables,
or (b) The Bank of New York, as indenture trustee, if the issuer holds the
receivables.
In addition to the receivables in the trust portfolio, the notes will be
secured by:
. all proceeds of these receivables and related recoveries;
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. all proceeds of any credit insurance policies relating to these
receivables;
. all monies on deposit in specified trust accounts or investments made
with these monies, including any earned investment proceeds if the
prospectus supplement for your series of notes so indicates;
. proceeds of any credit enhancement or derivative contracts, consisting
of interest rate swaps, currency swaps, credit swaps, interest rate
caps or bankruptcy options, which are instruments under which a
counterparty assumes the risk of an increase in bankruptcies in
exchange for payment, as described in the prospectus supplement for
your series of notes.
Receivables in the trust consist of:
. principal receivables, which are amounts charged by trust account
cardholders for goods and services and cash advances; and
. finance charge receivables, which are periodic finance charges and
other amounts charged to trust accounts, including late fees.
We currently designate all newly created eligible FCNB Preferred Charge
accounts to the trust as they arise and we expect to continue to do so.
However, our right to automatically add all additional eligible FCNB Preferred
Charge accounts to the trust as they arise is subject to the quantitative
limitations described in "Description of the Notes--Addition of Trust Assets" in
this prospectus. We may also elect to stop designating all new accounts to the
trust. If we do so, we have the right, and in some cases the obligation, to
designate from time to time additional eligible accounts to the trust portfolio
and to convey to the trust all receivables in those additional accounts, whether
those receivables are then existing or thereafter created. The bank has a
corresponding obligation to transfer those receivables to us, either directly or
indirectly through Spiegel Acceptance, so that we can satisfy our obligations to
transfer receivables to the trust.
The accounts must be Eligible Accounts as of the date we designate them as
additional accounts. Once these accounts are designated, only the receivables
arising under these accounts, and not the accounts themselves, are sold. In
addition, as of the date on which any new receivables are created, the bank will
represent and warrant to us and we in turn will represent and warrant to the
trust that the receivables conveyed to the trust on that day are Eligible
Receivables. However, we cannot guarantee that all the accounts will continue
to meet the applicable eligibility requirements throughout the life of the
trust.
Under some circumstances, we may also designate that some accounts will no
longer be trust accounts, and the receivables originated under these accounts
will be removed from the trust. Throughout the term of the trust, the trust
portfolio will consist of receivables originated in
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the initial accounts plus receivables originated in any additional accounts and
minus receivables originated in any removed accounts.
We can designate accounts to the trust that are different from the current
accounts, if the rating agencies for each outstanding series of securities
confirm that doing so will not impair their ratings of any outstanding
securities. These additional accounts may include private label credit card
accounts offered by the bank for additional retailers that may or may not be
affiliated with Spiegel, as well as MasterCard and VISA credit card accounts.
In any case, there can be no assurance that additional accounts will be of the
same credit quality as the initial accounts. Moreover, additional accounts may
contain receivables which consist of fees, charges and amounts which are
different from the fees, charges and amounts described in this prospectus.
Additional accounts may also have different credit guidelines, balances and
ages. Consequently, there can be no assurance that the accounts will continue
to have the characteristics described in this prospectus as additional accounts
are added. In addition, if we designate additional accounts with lower periodic
finance charges, that may have the effect of reducing the portfolio yield.
The prospectus supplement relating to each series of notes will provide the
following information about the trust portfolio as of the date specified:
. the amount of principal receivables;
. the amount of finance charge receivables;
. the range and average of principal balances of the accounts;
. the range and average of credit limits of the accounts;
. the range and average of ages of the accounts;
. the geographic distribution of the accounts; and
. delinquency statistics relating to the accounts.
Use of Proceeds
We will receive the net proceeds from the sale of each series of notes
offered by this prospectus and will use those proceeds (a) to retire existing
series of investor certificates, and (b) to make payments to Spiegel Acceptance
in connection with its participation interest in the Seller Amount.
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Description of the Notes
The issuer will issue one or more series of notes under a master indenture
and an indenture supplement entered into by the issuer and the indenture
trustee. The following summaries describe all material provisions common to
each series of notes. The accompanying prospectus supplement gives you all of
the additional material terms specific to the notes of your series. The
summaries are qualified by all of the provisions of the transfer and servicing
agreement, the indenture and the related indenture supplement and the pooling
and servicing agreement. We have filed a copy of the pooling and servicing
agreement for Spiegel Master Trust and a form of each of the transfer and
servicing agreement, the indenture and an indenture supplement with the SEC as
exhibits to the registration statement relating to the notes.
General
The notes will be secured by and paid from the assets of the issuer. The
amount of collateral allocated for any series of notes, called its collateral
amount, will be specified in the related prospectus supplement. Each series of
notes will be allocated collections of principal receivables and finance
receivables based on its allocation percentage, which will be based on the
collateral amount for that series and will be calculated as described in the
related prospectus supplement.
Each series of notes may consist of one or more classes, one or more of
which may be senior notes and one or more of which may be subordinated notes.
Each class of a series will evidence the right to receive a specified portion of
each distribution of principal or interest or both. Each class of a series may
differ from other classes in some aspects, including:
. amounts allocated to principal payments;
. maturity date;
. interest rate; and
. availability and amount of enhancement.
We will have the right to receive all cash flows from the assets of the
trust not required to make payments on the securities or to make payments to
credit enhancement providers for any series of securities. Our interest is
called the seller interest and is an amount equal to the Seller Amount.
During the revolving period, the amount of collateral for a series will
remain constant unless reduced on account of:
. defaulted receivables or dilution; or
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. reallocation of principal collections to cover shortfalls in the payment
of interest or other specified amounts to be paid from finance charge
collections.
See "-- Defaulted Receivables; Dilution; Investor Charge-Offs" in this
prospectus. The amount of principal receivables in the trust, however, will
vary each day as new principal receivables are created and others are paid. The
Seller Amount will fluctuate each day to reflect the changes in the amount of
the principal receivables in the trust. When a series is amortizing, the
collateral amount of that series will decline as customer payments of principal
receivables are collected and distributed, or accumulated for distribution, to
the noteholders. As a result, the Seller Amount will generally increase to
reflect reductions in the collateral amount for that series and will also change
to reflect the variations in the amount of principal receivables in the trust.
The Seller Amount may also be reduced as the result of new issuances by the
issuer, see "-- New Issuances" in this prospectus, or new issuances of investor
certificates by Spiegel Master Trust, see "Pooling and Servicing Agreement --
New Issuances of Investor Certificates" in this prospectus.
Generally, notes offered under this prospectus and the accompanying
prospectus supplement:
. will be represented by notes registered in the name of a DTC nominee;
. will be available for purchase in minimum denominations of $1,000 and
multiples of $1,000 in excess of that amount; and
. will be available for purchase in book-entry form only.
The accompanying prospectus supplement will specify if your notes have
different characteristics from those listed above.
DTC has informed us that its nominee will be Cede & Co. Accordingly, Cede &
Co. is expected to be the holder of record of each series of notes. As an owner
of beneficial interests in the notes, you will generally not be entitled to a
definitive note representing your interest in the issued notes because you will
own notes through a book-entry record maintained by DTC. References in this
prospectus and the accompanying prospectus supplement to distributions, reports,
notices and statements to noteholders refer to DTC or Cede & Co., as registered
holder of the notes, for distribution to you in accordance with DTC procedures.
All references in this prospectus and the accompanying prospectus supplement to
actions by noteholders shall refer to actions taken by DTC upon instructions
from DTC Participants.
The accompanying prospectus supplement may state that application will be
made to list your series or class of notes on the Luxembourg Stock Exchange or
another exchange.
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Book-Entry Registration
Following is a description of the form your notes will take. We also
describe how your notes may be transferred and how payments will be made to you.
The information in this section concerning DTC and DTC's book-entry
system has been provided by DTC. We have not independently verified the
accuracy of this information.
You may hold your notes through DTC in the U.S., Clearstream or
Euroclear in Europe or in any other manner described in the accompanying
prospectus supplement. You may hold your notes directly with one of these
systems if you are a participant in the system, or indirectly through
organizations which are participants.
Cede & Co., as nominee for DTC, will hold the global notes.
Clearstream and Euroclear will hold omnibus positions on behalf of the
Clearstream customers and the Euroclear Participants, respectively, through
customers' securities accounts in Clearstream's and Euroclear's names on the
books of their respective depositaries, which in turn will hold those positions
in customers' securities accounts in the depositaries' names on the books of
DTC.
DTC is a limited-purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code, and a
"clearing agency" registered under the provisions of Section 17A of the
Securities Exchange Act of 1934. DTC was created to hold securities for its
participants and facilitate the clearance and settlement of securities
transactions between participants through electronic book-entry changes in
accounts of participants, thereby eliminating the need for physical movement of
certificates. Participants include securities brokers and dealers, banks, trust
companies and clearing corporations and may include other organizations.
Participants also may include the underwriters of any series. Indirect access
to the DTC system also is available to others, including banks, brokers, dealers
and trust companies, as indirect participants, that clear through or maintain a
custodial relationship with a participant, either directly or indirectly.
Transfers between DTC participants will occur in accordance with DTC
rules. Transfers between Clearstream customers and Euroclear participants will
occur in the ordinary way in accordance with their applicable rules and
operating procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly or indirectly through Clearstream
customers or Euroclear participants, on the other, will be effected through DTC
in accordance with DTC rules on behalf of the relevant European international
clearing system by its depositary; however, those cross-market transactions will
require delivery of instructions to the relevant European international clearing
system by the counterparty in that system in accordance with its rules and
procedures and within its established deadlines, which will be based on European
time. The relevant European international clearing system will, if the
transaction meets its settlement requirements, deliver
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instructions to its depositary to take action to effect final settlement on its
behalf by delivering or receiving securities in DTC, and making or receiving
payment in accordance with normal procedures for same-day funds settlement
applicable to DTC. Clearstream customers and Euroclear participants may not
deliver instructions directly to Clearstream's and Euroclear's the depositories.
Because of time-zone differences, credits of securities in Clearstream
or Euroclear as a result of a transaction with a Participant will be made during
the subsequent securities settlement processing, dated the business day
following the DTC settlement date, and those credits or any transactions in
those securities settled during that processing will be reported to the relevant
Clearstream customer or Euroclear participant on that business day. Cash
received in Clearstream or Euroclear as a result of sales of securities by or
through a Clearstream customer or a Euroclear participant to a DTC participant
will be received with value on the DTC settlement date but will be available in
the relevant Clearstream or Euroclear cash account only as of the business day
following settlement in DTC.
Note owners that are not participants or indirect participants but
desire to purchase, sell or otherwise transfer ownership of, or other interest
in, notes may do so only through participants and indirect participants. In
addition, note owners will receive all distributions of principal of and
interest on the notes from the indenture trustee through the participants who in
turn will receive them from DTC. Under a book-entry format, note owners may
experience some delay in their receipt of payments, since payments will be
forwarded by the indenture trustee to Cede & Co., as nominee for DTC. DTC will
forward those payments to its participants, which thereafter will forward them
to indirect participants or note owners. It is anticipated that the only
"noteholder" will be Cede & Co., as nominee of DTC. Note owners will not be
recognized by the indenture trustee as noteholders, as that term is used in the
indenture, and note owners will only be permitted to exercise the rights of
noteholders indirectly through the participants who in turn will exercise the
rights of noteholders through DTC.
Under the rules, regulations and procedures creating and affecting DTC
and its operations, DTC is required to make book-entry transfers among
participants on whose behalf it acts with respect to the notes and is required
to receive and transmit distributions of principal and interest on the notes.
Participants and indirect participants with which note owners have accounts with
respect to the notes similarly are required to make book-entry transfers and
receive and transmit those payments on behalf of their respective note owners.
Accordingly, although note owners will not possess notes, note owners will
receive payments and will be able to transfer their interests.
Because DTC can only act on behalf of participants, who in turn act on
behalf of indirect participants and certain banks, the ability of a note owner
to pledge notes to persons or entities that do not participate in the DTC
system, or otherwise take actions in respect of those notes, may be limited due
to the lack of a physical certificate for those notes.
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DTC has advised the seller that it will take any action permitted to
be taken by a noteholder under the indenture only at the direction of one or
more participants to whose account with DTC the notes are credited.
Additionally, DTC has advised us that it will take those actions with respect to
specified percentages of the collateral amount only at the direction of and on
behalf of participants whose holdings include interests that satisfy those
specified percentages. DTC may take conflicting actions with respect to other
interests to the extent that those actions are taken on behalf of participants
whose holdings include those interests.
Clearstream is incorporated under the laws of Luxembourg. Clearstream
holds securities for its customers and facilitates the clearance and settlement
of securities transactions between Clearstream customers through electronic
book-entry changes in accounts of Clearstream customers, thereby eliminating the
need for physical movement of notes. Transactions may be settled in Clearstream
in any of 36 currencies, including United States dollars. Clearstream provides
to its Clearstream customers, among other things, services for safekeeping,
administration, clearance and settlement of internationally traded securities
and securities lending and borrowing. Clearstream also deals with domestic
securities markets in over 30 countries through established depository and
custodial relationships. Clearstream is registered as a bank in Luxembourg, and
therefore is subject to regulation by the Commission de Surveillance du Secteur
Financier, which supervises Luxembourg banks. Clearstream's customers are
world-wide financial institutions, including underwriters, securities brokers
and dealers, banks, trust companies and clearing corporations, among others, and
may include the underwriters of any series of notes. Clearstream's U.S.
customers are limited to securities brokers and dealers and banks. Currently,
Clearstream has approximately 2,000 customers located in over 80 countries,
including all major European countries, Canada and the United States. Indirect
access to Clearstream is also available to other institutions that clear through
or maintain a custodial relationship with an account holder of Clearstream.
Clearstream has established an electronic bridge with Morgan Guaranty Trust
Company of New York as the operator of the Euroclear System in Brussels to
facilitate settlement of trades between Clearstream and Euroclear.
Euroclear was created in 1968 to hold securities for participants of
the Euroclear System and to clear and settle transactions between Euroclear
participants through simultaneous electronic book-entry delivery against
payment, thereby eliminating the need for physical movement of notes and any
risk from lack of simultaneous transfers of securities and cash. Transactions
may now be settled in any of 27 currencies, including United States dollars.
The Euroclear System includes various other services, including securities
lending and borrowing and interfaces with domestic markets in several countries
generally similar to the arrangements for cross-market transfers with DTC
described above. The Euroclear System is operated by Morgan Guaranty Trust
Company of New York, Brussels, Belgium office as the Euroclear operator, under
contract with Euroclear Clearance System, S.C., a Belgian cooperative
corporation. All operations are conducted by the Euroclear operator, and all
Euroclear securities clearance accounts and Euroclear cash accounts are accounts
with the Euroclear operator, not the cooperative. The cooperative establishes
policy for the Euroclear System on behalf of Euroclear participants. Euroclear
participants include central banks and other banks, securities brokers and
dealers and other professional financial intermediaries and may include the
underwriters of any
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series of notes. Indirect access to the Euroclear System is also available to
other firms that clear through or maintain a custodial relationship with a
Euroclear participant, either directly or indirectly.
The Euroclear operator is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. As such, it
is regulated and examined by the Board of Governors of the Federal Reserve
System and the New York State Banking Department, as well as the Belgian Banking
Commission.
Securities clearance accounts and cash accounts with the Euroclear
operator are governed by the Terms and Conditions Governing Use of Euroclear and
the related Operating Procedures of the Euroclear System and applicable Belgian
law. These rules and laws govern transfers of securities and cash within the
Euroclear System, withdrawal of securities and cash from the Euroclear System,
and receipts of payments with respect to securities in the Euroclear System.
All securities in the Euroclear System are held on a fungible basis without
attribution of specific certificates to specific securities clearance accounts.
The Euroclear operator acts under these rules and laws only on behalf of
Euroclear participants and has no record of or relationship with persons holding
through Euroclear participants.
Distributions with respect to notes held through Clearstream or
Euroclear will be credited to the cash accounts of Clearstream customers or
Euroclear participants in accordance with the relevant system's rules and
procedures, to the extent received by its depositary. Those distributions will
be subject to tax reporting in accordance with relevant United States tax laws
and regulations. See "Federal Income Tax Consequences" in this prospectus.
Clearstream or the Euroclear operator, as the case may be, will take any other
action permitted to be taken by a noteholder under the indenture on behalf of a
Clearstream customer or Euroclear participant only in accordance with its
relevant rules and procedures and subject to its depositary's ability to effect
those actions on its behalf through DTC.
Although DTC, Clearstream and Euroclear have agreed to the foregoing
procedures in order to facilitate transfers of notes among participants of DTC,
Clearstream and Euroclear, they are under no obligation to perform or continue
to perform those procedures and those procedures may be discontinued at any
time.
Definitive Notes
Notes that are initially cleared through DTC will be issued in
definitive, fully registered, certificated form to note owners or their
nominees, rather than to DTC or its nominee, only if:
. the issuer advises the indenture trustee in writing that DTC is
no longer willing or able to discharge properly its
responsibilities as depository with respect to that series or
class of notes, and the indenture trustee or the issuer is unable
to locate a qualified successor;
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. the issuer, at its option, advises the indenture trustee in writing
that it elects to terminate the book-entry system through DTC with
respect to that series or class of notes; or
. after the occurrence of a servicer default, note owners representing
not less than 50%--or another percentage specified in the accompanying
prospectus supplement--of the collateral amount advise the indenture
trustee and DTC through participants in writing that the continuation
of a book-entry system through DTC or a successor to DTC is no longer
in the best interest of the note owners.
If any of these events occur, DTC must notify all participants of the
availability through DTC of definitive notes. Upon surrender by DTC of the
definitive instrument representing the notes and instructions for re-
registration, the issuer will execute and the indenture trustee will
authenticate the notes as definitive notes, and thereafter the indenture trustee
will recognize the registered holders of those definitive notes as noteholders
under the indenture.
Distribution of principal and interest on the notes will be made by the
indenture trustee directly to holders of definitive notes in accordance with the
procedures set forth in this prospectus and in the indenture. Interest payments
and any principal payments on each distribution date will be made to holders in
whose names the definitive notes were registered at the close of business on the
related record date. Distributions will be made by check mailed to the address
of the noteholders as it appears on the register maintained by the indenture
trustee. However, the final payment on any note--whether definitive notes or the
notes registered in the name of Cede & Co. representing the notes--will be made
only upon presentation and surrender of that note at the office or agency
specified in the notice of final distribution to noteholders. The indenture
trustee will provide this notice to registered noteholders not later than the
fifth day of the month of the final distributions.
Definitive notes will be transferable and exchangeable at the offices of
the transfer agent and registrar, which will initially be the indenture trustee.
No service charge will be imposed for any registration of transfer or exchange,
but the issuer and transfer agent and registrar may require payment of a sum
sufficient to cover any tax or other governmental charge imposed in connection
with the transfer or exchange. The transfer agent and registrar will not be
required to register the transfer or exchange of definitive notes for a period
of twenty days preceding the due date for any payment on those definitive notes.
Interest Payments
Your class of notes will pay interest on the dates and at the interest rate
specified in the accompanying prospectus supplement. The interest rate on any
note may be a fixed, floating or any other type of rate as specified in the
accompanying prospectus supplement. If your notes bear interest at a floating or
variable rate, the accompanying prospectus supplement will describe how that
rate is calculated.
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Interest payments or deposits on any distribution date will be funded from:
. collections of finance charge receivables allocated to the series
during the preceding monthly period or periods;
. investment earnings, if any, on any funds held in trust accounts;
. any credit enhancement or derivative instrument, to the extent
described in the accompanying prospectus supplement; and
. collections of principal receivables treated as collections of finance
charge receivables as described under "-- Discount Option," to the
extent described in the accompanying prospectus supplement.
If interest payments will be made less frequently than monthly, an interest
funding account may be established to accumulate the required interest amount.
If a series has more than one class of notes, that series may have more than one
interest funding account.
Principal Payments
Each series will begin with a revolving period during which no principal
payments will be made to the noteholders of that series.
The revolving period for each series will be scheduled to end on or no
later than a specified date, at which time a new period will begin during which
principal collections available to that series will be set aside on daily basis
to repay the series. That new period is called an amortization period if partial
principal payments are made each month and an accumulation period if the
available principal is accumulated for a series over one or more months to pay
off a class in full. If the amount paid or accumulated each month is limited to
some specified figure then the period is called a controlled amortization period
or controlled accumulation period.
However, each series will also be subject to pay out events, which could
cause the revolving period to end earlier than scheduled or could terminate an
existing amortization period or accumulation period. Upon a pay out event, a
rapid amortization period will begin, during which available principal will be
distributed monthly and will not be subject to any controlled amount or
accumulation provision. Finally, a series with an accumulation period may
specify some adverse events as accumulation events, rather than pay out events,
resulting in an early start to an accumulation period or removing any limitation
based on a controlled accumulation amount.
Principal payments for any series or the related class will be funded from
collections of principal receivables allocated to that series or class and from
other sources specified in the accompanying prospectus supplement. In the case
of a series with more than one class of notes,
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the noteholders of one or more classes may receive payments of principal at
different times. The accompanying prospectus supplement will describe the
manner, timing and priority of payments of principal to noteholders of each
class.
Funds on deposit in any principal accumulation account for a series may be
subject to a guaranteed rate agreement or guaranteed investment contract or
other arrangement specified in the accompanying prospectus supplement intended
to assure a minimum rate of return on the investment of those funds. In order to
enhance the likelihood of the payment in full of the principal amount of a
series or a related class of notes at the end of an accumulation period, that
series or class of notes may be subject to a principal guaranty or other similar
arrangement specified in the accompanying prospectus supplement.
Suspension and Postponement of Controlled Accumulation Period
The prospectus supplement for any series having a controlled accumulation
period will specify the date on which that period is scheduled to commence and
the scheduled length of that period. However, if specified in the prospectus
supplement for any series, upon notice to the indenture trustee, the servicer
may extend the revolving period and postpone the controlled accumulation period,
or may elect to suspend the controlled accumulation, subject to the conditions
described in the third following paragraph and any other conditions described in
the related prospectus supplement.
On each determination date until the controlled accumulation period begins
for any series, the servicer will review the amount of expected principal
collections and determine the number of months expected to be required to fully
fund the principal accumulation account by the related expected principal
payment date for each class of notes in that series. If the number of months
needed to fully fund the principal accumulation account by the related expected
principal payment date for each class is less than the number of months in the
scheduled controlled accumulation period, the servicer may then elect to
postpone the controlled accumulation period. In making its decision, the
servicer is required to assume that the principal payment rate will be no
greater than the lowest monthly principal payment rate for the prior 12 months
and will consider the amount of principal expected to be allocable to
noteholders of all other series and certificateholders of all other series of
investor certificates issued by Spiegel Master Trust, which are expected to be
amortizing or accumulating principal during the controlled accumulation period
for that series. In no case will the controlled accumulation period for any
series be reduced to less than one month.
The method for determining the number of months required to fully fund the
principal accumulation account may be changed if each rating agency confirms
that the change will not impair its rating of any outstanding series or class.
If specified in the prospectus supplement for any series having a
controlled accumulation period, the servicer may also elect to suspend the
controlled accumulation period if it:
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. obtains a qualified maturity agreement in which a Qualified
Institution agrees to deposit in the related principal accumulation
account on the expected principal payment date for each class of notes
of that series an amount equal to the outstanding principal amount of
those notes as of their respective expected principal payment date;
and
. delivers an opinion of counsel to the indenture trustee to the effect
that the qualified maturity agreement is enforceable against the
provider of that agreement.
The servicer will pledge to the indenture trustee for the benefit of the
noteholders of the related series, all right, title and interest in any
qualified maturity agreement.
If the servicer obtains a qualified maturity agreement, the servicer will
cause the provider of that agreement to deposit in the principal accumulation
account for the related series or class on or before its expected principal
payment date an amount equal to the outstanding principal amount of that series
or class. However, on the expected principal payment date for any series or
class, we may instead elect to fund all or a portion of the required deposit
from either the proceeds of a new series or collections of principal receivables
and other amounts allocated to that series or class for that purpose.
A qualified maturity agreement for any series or class will terminate at
the close of business on the related expected principal payment date. However,
(1) the servicer may terminate a qualified maturity agreement earlier than
the expected principal payment date if:
(a) the servicer obtains a substitute qualified maturity agreement,
(b) the institution providing the qualified maturity agreement ceases
to be a Qualified Institution and the servicer is unable to
obtain a substitute qualified maturity agreement; or
(c) a pay out event occurs for the related series; and
(2) the servicer may terminate a qualified maturity agreement prior to the
later of:
(a) the date on which the controlled accumulation period was
scheduled to begin, before giving effect to the suspension of the
controlled accumulation period,
(b) and the date to which the commencement of the controlled
accumulation period may be postponed, as determined on the
determination date preceding the termination of the qualified
maturity agreement.
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If the institution providing a qualified maturity agreement ceases to be a
Qualified Institution, the servicer will use its best efforts to obtain a
substitute qualified maturity agreement, unless the servicer elects to terminate
the qualified maturity agreement and is not required to obtain a substitute
qualified maturity agreement for any of the reasons described in the preceding
paragraph.
If a qualified maturity agreement is terminated prior to the earlier of the
expected principal payment date for the related series or class and the
commencement of the rapid amortization period for that series and the servicer
does not obtain a substitute qualified maturity agreement, the controlled
accumulation period will begin on the latest of:
. the date on which the controlled accumulation period was scheduled to
begin, before giving effect to the suspension of the controlled
accumulation period;
. at the servicer's election, the date to which the controlled
accumulation period may be postponed, as determined on the
determination date preceding the termination of the qualified maturity
agreement; and
. the first day of the calendar month following the termination of the
qualified maturity agreement.
Transfer and Assignment of Receivables
The bank has transferred and assigned to us, either directly or indirectly
through Spiegel Acceptance, and we have, in turn, transferred and assigned to
the trust, the receivables in the accounts designated as accounts of the trust
and future receivables created in these accounts.
We, Spiegel Acceptance and the bank have indicated and, in connection with
each future transfer of receivables to the trust, will indicate in our computer
files or books and records that the receivables have been conveyed to the trust.
In addition, we and the bank have provided or caused to be provided to the
trustee and the owner trustee computer files or microfiche lists, containing a
true and complete list showing each account, identified by account number and by
total outstanding balance on the date of transfer. Neither the bank nor we will
deliver to the trustee or the owner trustee any other records or agreements
relating to the accounts or the receivables, except in connection with additions
or removals of accounts. Except as stated in this paragraph, the records and
agreements relating to the accounts and the receivables maintained by the bank
are not and will not be segregated from other documents and agreements relating
to other credit card accounts and receivables and are not and will not be
stamped or marked to reflect the transfers described in this paragraph, but our
computer records and the bank's computer records are and will be required to be
marked to evidence these transfers. We, Spiegel Acceptance and the bank have
filed in all appropriate jurisdictions Uniform Commercial Code financing
statements with respect to the receivables meeting the requirements of
applicable law. See "Risk Factors -- Some liens would be given priority over
your notes which could cause
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delayed or reduced payments" and "Material Legal Aspects of the Receivables" in
this prospectus.
New Issuances of Notes
We may cause the owner trustee, on behalf of the issuer, to issue one or
more new series of notes. We will define all principal terms of each new series
in an indenture supplement. Each series issued may have terms and enhancements
that are different than those for any other series. Upon the issuance of an
additional series of notes, neither we nor any of the servicer, the indenture
trustee or the issuer will be required or will intend to obtain the consent of
any noteholder of any other series previously issued by the issuer. We may offer
any series under a prospectus or other disclosure document in transactions
either registered under the Securities Act or exempt from registration under the
Securities Act directly, through one or more other underwriters or placement
agents, in fixed-price offerings or in negotiated transactions or
otherwise.
Unless Spiegel Master Trust has been terminated, the interests of all
series of notes in the receivables and the other trust assets will be evidenced
by a single global certificate held by the issuer. A new collateral certificate
will be deemed to be issued and evidenced by the global certificate upon the
issuance of each series of notes.
No new series may be issued unless we satisfy various conditions, including
that:
(1) each rating agency confirms that the new issuance will not impair its
rating of any outstanding series or class;
(2) the servicer certifies that, based on the facts known to the
certifying officer, the new issuance will not:
(a) cause a pay out event or an event of default; or
(b) materially and adversely affect the amount or timing of payments
to be made to the noteholders of any series or class;
(3) after giving effect to the new issuance, (i) the Aggregate Principal
Balance is not less than the Minimum Aggregate Principal Receivables
and (ii) the Seller Amount is not less than the Minimum Seller
Amount;
(4) we deliver an opinion of counsel to the effect that, for federal
income tax purposes:
(a) the issuance will not adversely affect the tax characterization
as debt of notes of any outstanding series or class that were
characterized as debt at the time of their issuance;
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(b) the new issuance will not cause the issuer to be deemed to be an
association or publicly traded partnership taxable as a
corporation; and
(c) the new issuance will not cause or constitute an event in which
gain or loss would be recognized by any noteholder; and
(5) unless Spiegel Master Trust has been terminated, all of the conditions
required for it to issue a new series of investor certificates are
satisfied, as described under "Pooling and Servicing Agreement -- New
Issuances of Investor Certificates."
Representations and Warranties
As of the date each receivable is transferred to the trust, we represent to
the trust that:
(1) each receivable is an Eligible Receivable;
(2) each receivable has been transferred to the trust free and clear of
any liens, other than liens permitted by the pooling and servicing
agreement and the transfer and servicing agreement, and in compliance
with all applicable laws;
(3) all required governmental approvals in connection with the transfer of
each receivable to the trust have been obtained and remain in full
force and effect; and
(4) the trust has all right, title and interest in each receivable or has
a first priority perfected security interest in that receivable.
If any of these representations is not true with respect to any receivable
as of the date that receivable is transferred to the trust, we are required to
accept reassignment of the affected receivable. Except with respect to the
breach of the representation set forth in clause (2) above, before accepting
reassignment, we will be permitted 60 days to cure the breach or a longer period
not to exceed 120 days agreed to by the trustee. If, with respect to any
receivable, there has been a breach of the representation set forth in clause
(2) above, we will be obligated to immediately accept retransfer of that
receivable.
We will accept retransfer of a receivable by directing the servicer to
deduct the principal amount of the ineligible receivable from the Seller Amount.
If this would reduce the Seller Amount below the Minimum Seller Amount, we will
make a cash deposit in the excess funding account in the amount by which the
Seller Amount would have been reduced below the Minimum Seller Amount. Any
deduction or deposit is considered a repayment in full of the ineligible
receivable.
We will also make representations and warranties to the trust as to
enforceability against us of the agreement that governs the transfer of the
receivables to the trust -- either the pooling and servicing agreement or the
transfer and servicing agreement -- and the effectiveness of that
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agreement as an absolute assignment of, or a grant of a security interest in,
the receivables. If any of these representations and warranties is false, then
either (1) the trustee or (2) securityholders representing more than 50% of the
then-outstanding principal amount of all outstanding series of securities may
direct us to accept retransfer of the entire trust portfolio within 60 days
after notice is given or within a longer period, not to exceed 120 days, as may
be specified in the notice.
The reassignment price would equal the aggregate outstanding principal
amounts for all series of securities, in each case as of the distribution date
on which the reassignment is scheduled to be made, plus accrued and unpaid
interest on the securities through the distribution date, plus any other amounts
specified in any prospectus supplement.
Reassignment of any affected receivables or the entire trust portfolio to
us, as the case may be, is the sole remedy respecting any breach of the
representations and warranties described in clauses (1) through (4) above.
Addition of Trust Assets
We may, at our option, designate additional accounts to the trust, the
receivables in which will be sold and assigned to the trust. As described above
under "The Trust Portfolio," we currently designate all new Eligible Accounts to
the trust upon their establishment, and we expect to continue to do so. We are
permitted to continue to automatically designate all new Eligible Accounts as
they arise, so long as the number of accounts that we designate in this manner
does not exceed the following limits:
(1) The new accounts designated during any calendar year minus any
accounts removed during that twelve-month period may not exceed:
. 20% of the number of accounts as of the first day of that
calendar year; or
. if specified in the prospectus supplement for any series, 30% of
the number of accounts as of the first day of that calendar year,
subject to the satisfaction of any conditions specified in that
prospectus supplement; and
(2) For any calendar quarter, the new accounts designated during that
calendar quarter minus any accounts removed during that calendar
quarter may not exceed 15% of the number of accounts as of the first
day of that calendar quarter.
We may exceed these limitations if each rating agency confirms that doing
so will not impair its rating of any outstanding series or class of securities.
In addition, we will be required to designate additional accounts, to the
extent available:
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. to maintain an aggregate amount of principal receivables in the trust,
so that, during any period of thirty consecutive days, the average
aggregate amount of principal receivables in the trust is not less
than the Minimum Aggregate Principal Receivables averaged for the same
period; and
. to maintain the Seller Amount so that during any period of thirty
consecutive days, the Seller Amount averaged over that period equals
or exceeds the Minimum Seller Amount averaged for the same
period.
When we transfer receivables in additional accounts to the trust in our
discretion, we must satisfy several conditions, including:
. each rating agency and each credit enhancement provider must receive
prior notice of each addition;
. we must certify that any additional accounts are Eligible Accounts and
that:
. no selection procedures adverse to the securityholders were used
in selecting the additional accounts;
. as of the addition date, we are not insolvent and would not
become insolvent by the addition of the accounts; and
. the transfer of the additional receivables constitutes a valid
transfer to the trust of all our right, title and interest in the
receivables in the additional accounts or the grant to the trust
of a first priority perfected security interest in those
receivables; and
. we must deliver an opinion of counsel with respect to the perfection
of the transfer and related matters.
In addition to the periodic reports otherwise required to be filed by the
servicer with the SEC in accordance with the Securities Exchange Act of 1934, we
will file a Report on Form 8-K with respect to any addition to the trust of
receivables in additional accounts that would have a material effect on the
composition of the trust assets.
Defaulted accounts that have been charged-off as uncollectible in
accordance with the servicer's credit card guidelines and the servicer's
customary and usual policies and procedures for servicing revolving credit card
receivables will not be included in any account addition. See "--Defaulted
Receivables; Dilution; Investor Charge-Offs" in this prospectus. In addition,
less than 20% of the receivables in the trust portfolio, by outstanding
principal balance, will be 30 or more days delinquent immediately following any
account addition. For purposes of determining whether less than 20% of the
receivables in the trust portfolio are delinquent immediately
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following any account addition, an account will be considered delinquent if less
than 100% of the minimum monthly payment is received for any month.
Removal of Accounts
We also have the right to remove accounts from the list of designated
accounts and to require the reassignment to us of all receivables in the removed
accounts, whether the receivables already exist or arise after the designation.
However, we may not designate removed accounts more than once during any
calendar month. Our right to remove accounts is subject to the satisfaction of
several conditions, including that:
(1) if the accounts to be removed have outstanding receivables, each
rating agency confirms that the removal will not impair its rating of
any outstanding series or class of securities;
(2) we certify that:
(a) individual accounts or administratively convenient groups of
accounts, such as billing cycles, were chosen for removal
randomly or at any rate not on a basis intended to select
particular accounts or groups of accounts for removal for any
reason other than administrative convenience, and no selection
procedures adverse to the securityholders were used in selecting
the removed accounts;
(b) in our reasonable belief, the removal will not cause a pay out
event, or an event that with notice or lapse of time or both,
would constitute a pay out event to occur; and
(c) as of the removal date, we are not insolvent and have no
intention of seeking protection under any federal or state
bankruptcy or debtor relief laws;
(3) at any time that Spiegel Master Trust holds the receivables, the
removal will not cause the Seller Amount to be less than 105% of the
Minimum Seller Amount or, if the Minimum Seller Amount is zero, 5% of
the Minimum Aggregate Principal Receivables, in each case after giving
effect to the removal;
(4) at any time the issuer holds the receivables, the removal will not
cause the Seller Amount to be less than the Minimum Seller Amount; and
(5) the removal will not cause the aggregate amount of principal
receivables in the trust to be less than the Minimum Aggregate
Principal Receivables.
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Collection and Other Servicing Procedures
The servicer will be responsible for servicing and administering the
receivables in the trust portfolio in accordance with the servicer's policies
and procedures for servicing credit card receivables comparable to the
receivables in the trust portfolio. The servicer will be required to maintain
fidelity bond coverage insuring against losses through wrongdoing of its
officers and employees who are involved in the servicing of credit card
receivables covering those actions and in an amount that the servicer believes
to be reasonable.
Discount Option
We have the option to reclassify a percentage of collections of principal
receivables in the trust portfolio as collections of finance charge receivables.
If we do so, the reclassified percentage of collections of principal receivables
for the trust portfolio for each monthly period will be considered collections
of finance charge receivables and will be allocated with all other collections
of finance charge receivables in the trust portfolio.
We may exercise this option in order to compensate for a decline in the
portfolio yield, but only if there would be sufficient principal receivables to
allow for that discounting. Exercise of this option would result in a larger
amount of collections of finance charge receivables and a smaller amount of
collections of principal receivables. By doing so, we would reduce the
likelihood that a pay out event would occur as a result of a decreased portfolio
yield and, at the same time, would increase the likelihood that we will have to
add principal receivables to the trust. We may not exercise our option to
reclassify collections of principal receivables as collections of finance charge
receivables if we reasonably believe that doing so would cause a pay out event,
or any event that with notice or lapse of time or both, would constitute a pay
out event for any series of securities.
In addition, we may exercise this option only if each rating agency
confirms that doing so will not impair its rating of any outstanding series or
class of securities.
Trust Accounts
The servicer has established and maintains a collection account in the name
of the trustee, for the benefit of the securityholders, which is a non-interest
bearing segregated corporate trust account. The servicer has also established
and maintains an excess funding account in the name of the trustee, for the
benefit of the securityholders, which is a segregated corporate trust account
maintained with a securities intermediary. Both the collection account and the
excess funding account must be maintained at a Qualified Institution.
The funds on deposit in these accounts may only be invested, at the
direction of the servicer, in highly rated liquid investments that meet the
criteria described in the indenture or the related indenture supplement for that
series.
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The indenture trustee, acting as the initial paying agent--or any entity
then acting as paying agent--will have the revocable power to withdraw funds
from the collection account and the excess funding account for the purpose of
making payments to the noteholders of any series under the related indenture
supplement.
Funding Period
On the closing date for any series of notes, the total amount of principal
receivables in the trust available to that series may be less than the total
principal amount of the notes of that series. If this occurs, the initial
collateral amount for that series of notes will be less than the principal
amount of that series of notes. In this case, the related prospectus supplement
will set forth the terms of the funding period, which is the period from that
series' closing date to the earlier of:
. the date that series' collateral amount equals the principal amount of
that series of notes; and
. the date specified in the related prospectus supplement, which will be
no later than one year after that series' closing date.
During the funding period, the portion of the collateral amount not
invested in receivables will be maintained in a prefunding account," which is a
trust account established with the indenture trustee for the benefit of the
noteholders of that series. On the closing date for that series of notes, this
amount may be up to 100% of the principal balance of that series of notes. The
collateral amount for that series will increase as new receivables are
transferred to the trust or as the collateral amounts of other outstanding
series of securities are reduced. The collateral amount may decrease due to
investor charge-offs allocated to the series.
During the funding period, funds on deposit in the prefunding account will
be paid to us as the collateral amount increases. If the collateral amount for
that series is not increased so that it equals the principal balance of the
notes of that series by the end of the funding period, any amount remaining in
the prefunding account will be repaid to noteholders.
The prospectus supplement for a series with a funding period will set
forth:
. the series' initial collateral amount;
. the series' full collateral amount, which is the initial principal
balance of the series of notes plus any initial excess collateral
amount;
. the date on which the series' collateral amount is expected to equal
the full collateral amount;
. the date by which the funding period will end; and
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. what other events, if any, will occur if the end of the funding period
is reached before the full collateral amount is funded.
The servicer will file a Current Report on Form 8-K with the SEC following
the termination of the funding period containing updated trust portfolio
information.
Application of Collections
The servicer must deposit into the collection account, no later than two
business days after processing, all payments made on receivables in the trust
portfolio. However, the servicer will be able to make these deposits on a
monthly or other periodic basis if:
(1) the bank remains the servicer and no servicer default has occurred and
is continuing; and
(2) either
(a) (i) the servicer provides to the trustee a letter of credit or
other arrangement covering risk of collection of the
servicer; and
(ii) written confirmation is received from each rating agency
that the arrangement will not impair its rating of any
outstanding series or class of securities; or
(b) the servicer has and maintains a certificate of deposit or short-
term deposit rating of at least A-1+ by Standard & Poor's and P-1
by Moody's and has deposit insurance as required by law and by
the FDIC, unless any rating agency then rating any class or
series of securities, has notified the servicer that making
monthly deposits will impair its rating of any outstanding series
or class of securities.
For purposes of allocating collections on a daily basis, the servicer may
estimate the portion of collections on the entire Spiegel private label credit
card portfolio that is allocable to the trust portfolio. The servicer may also
estimate for each business day the amount of collections that are attributable
to finance charge receivables and principal receivables. The servicer may change
the method for determining the amount of collections that are attributable to
the trust portfolio and the allocation of those collections as finance charge
collections or principal collections from time to time to more accurately
reflect the amounts being collected in respect of the principal receivables and
finance charge receivables in the trust portfolio. However, the servicer must
give each rating agency written notice of any change in its method for
estimating the amount of collections from the entire Spiegel private label
credit card portfolio that are allocable to the trust portfolio.
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The servicer will also deposit into the collection account on the business
day before each distribution date, the excess of (i) all of the recoveries by
the servicer during the preceding calendar month on receivables that have
previously been charged-off as uncollectible over (ii) the aggregate amount of
receivables in accounts that have been charged-off as uncollectible during that
calendar month. The servicer will treat these net recoveries as collections of
finance charge receivables.
The servicer will then allocate all collections of finance charge
receivables and principal receivables among each series of securities and the
Seller Amount based on the respective allocation percentages for each series and
the seller allocation percentage. The seller allocation percentage at any time
will equal 100% minus the total of the applicable allocation percentages for all
outstanding series. The seller allocation percentage of finance charge
collections will be paid to us or our assigns. The seller allocation percentage
of principal collections will first be deposited in the excess funding account
to the extent required to maintain the Minimum Seller Amount or treated as
shared principal collections to the extent needed to cover principal shortfalls,
as described below under "-- Shared Principal Collections; Excess Funding
Account," and any remaining principal collections will then be paid to us or our
assigns. The collections allocated to each series will be retained in the
collection account or applied as described in the related prospectus
supplement.
Shared Excess Finance Charge Collections
If a series is identified in the prospectus supplement for that series as
included in a group, collections of finance charge receivables allocated to that
series in excess of the amount needed to make deposits or payments for the
benefit of that series may be shared with other series of securities that have
been designated for inclusion in the same group. The servicer will allocate the
aggregate of the excess finance charge collections for all series in the same
group to cover any payments required to be made out of finance charge
collections for any series in that group that have not been covered out of the
finance charge collections allocable to those series. If the finance charge
shortfalls exceed the excess finance charge collections for any group for any
calendar month, excess finance charge collections will be allocated pro rata
among the applicable series based on the relative amounts of finance charge
shortfalls.
Shared Principal Collections; Excess Funding Account
Each series of notes will share excess principal collections with each
other series of securities unless the related prospectus supplement excludes
that series from this sharing arrangement. If a principal sharing series--
including any series of investor certificates designated as a principal sharing
series--is allocated principal in excess of the amount needed for deposits or
distributions of principal collections, that excess will be shared with other
principal sharing series. The servicer will allocate the aggregate of:
. the shared principal collections for all principal sharing series,
plus
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. all principal collections allocated to the Seller Amount that are not
required to be deposited in the excess funding account to maintain the
Minimum Seller Amount as described below,
to cover any scheduled or permitted principal distributions to securityholders
and deposits to principal accumulation accounts, if any, for any series that
have not been covered out of the collections of principal receivables allocable
to those series. Shared principal collections will not be used to cover investor
charge-offs for any series of securities. If principal collections for one
series are shared with another series, the collateral amount or invested amount
for the series from which collections were shared will not be reduced.
If the principal shortfalls exceed the amount of shared principal
collections for any calendar month, shared principal collections for all series
will be allocated pro rata among the applicable series based on the relative
amounts of principal shortfalls. If shared principal collections exceed
principal shortfalls, the balance will be paid to us or our assigns or deposited
in the excess funding account under the circumstances described in the following
paragraph.
On each business day on which the Seller Amount is less than the Minimum
Seller Amount, the servicer will deposit collections of principal receivables
allocable to us or our assigns, as described in "--Application of Collections"
above, and excess shared principal collections, into the excess funding account
until the Seller Amount equals the Required Seller Amount. Funds on deposit in
the excess funding account will be withdrawn and paid to us to the extent that
on each day the Seller Amount exceeds the Minimum Seller Amount. In addition,
when any series of securities is in an amortization period or accumulation
period, the principal balance in the excess funding account will be applied like
shared principal collections.
Investment earnings on amounts on deposit in the excess funding account
will be treated as finance charge collections and allocated to each series of
securities based on the respective allocation percentages for each series.
Defaulted Receivables; Dilution; Investor Charge-Offs
Receivables in any account will be charged-off as uncollectible in
accordance with the servicer's credit card guidelines and the servicer's
customary and usual policies and procedures for servicing revolving credit card
receivables and other revolving credit account receivables comparable to the
receivables. The servicer's current policy is to charge off the receivables in
an account when that account becomes 180 days delinquent. On the date on which
an account is charged-off, the trust will automatically be deemed to transfer
all receivables in the charged-off account to us and the charged-off account
will cease to be a trust account.
Each series will be allocated a portion of the excess, if any, of (i)
defaulted receivables for each calendar month over (ii) all of the recoveries
received during that calendar month, as specified in the accompanying prospectus
supplement. For this purpose, defaulted receivables
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for any monthly period are principal receivables that were charged-off as
uncollectible in that monthly period.
Unlike defaulted receivables, dilution, which includes reductions in
principal receivables as a result of returns, unauthorized charges and the like,
is not intended to be allocated to investors. Instead, these reductions are
applied to reduce our interest in the trust, and to the extent they would reduce
our interest in the trust below the Minimum Seller Amount, we are required to
deposit the amount of the reduction into the trust's collection account and the
deposited amount will be treated as principal collections. However, if we
default in our obligation to make a payment to cover dilution, then a portion of
any resulting shortfall in receivables will be allocated to your series as
specified in the accompanying prospectus supplement.
On each distribution date, if the sum of the defaulted receivables and any
dilution allocated to any series is greater than the finance charge collections
and other funds available to cover those amounts as described in the related
prospectus supplement, then the collateral amount for that series will be
reduced by the amount of the excess. Any reductions in the collateral amount for
any series on account of defaulted receivables and dilution will be reinstated
to the extent that finance charge collections and other amounts on deposit in
the collection account are available for that purpose on any subsequent
distribution date as described in the related prospectus.
Defeasance
If so specified in the prospectus supplement relating to a series, the
issuer may, at our direction, terminate its substantive obligations in respect
of that series or the trust by depositing with the indenture trustee, from
amounts representing, or acquired with, collections of receivables, money or
eligible investments sufficient to make all remaining scheduled interest and
principal payments on that series on the dates scheduled for those payments and
to pay all amounts owing to any credit enhancement provider with respect to that
series or all outstanding series, as the case may be, if that action would not
result in a pay out event for any series. Prior to its first exercise of its
right to substitute money or eligible investments for receivables, the issuer
will deliver to the indenture trustee an opinion of counsel to the effect that:
. for federal income tax purposes, the deposit and termination of
obligations will not cause the trust, or any portion of the trust, to
be deemed to be an association or publicly traded partnership taxable
as a corporation; and
. the deposit and termination of obligations will not result in the
trust being required to register as an "investment company" within the
meaning of the Investment Company Act of 1940, as amended.
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Final Payment of Principal
For each series, the servicer has the option to purchase the notes at any
time after the remaining outstanding principal amount of that series is 10% or
less of the initial principal amount of that series. The purchase price will
equal:
. the outstanding principal amount of the notes of that series, plus
. any accrued and unpaid interest through the day preceding the
distribution date on which the repurchase occurs or, if the repurchase
occurs on any other date, through the day preceding the distribution
date immediately following the repurchase date.
For any series of notes, the related prospectus supplement may specify
additional conditions to the servicer's purchase option.
Each prospectus supplement will specify the final maturity date for the
related series of notes, which will generally be a date falling substantially
later than the expected principal payment date. For any series, the failure to
pay principal in full not later than the final maturity date will be an event of
default and the indenture trustee or holders of a specified percentage of the
notes of that series will have the rights described under "The Indenture --
Events of Default; Rights upon Event of Default" in this prospectus.
Paired Series
The prospectus supplement for a series of notes will specify whether that
series may be paired with a previously or later issued series so that a decrease
in the collateral amount of the previously issued series results in a
corresponding increase in the collateral amount of the later issued series. In
general, a series may be issued as a paired series so the trust can fund the
amount by which the previously issued series either has amortized or has
accumulated funds for a principal payment.
The later issued series will either be prefunded with an initial deposit to
a prefunding account in an amount up to the initial principal balance of the
previously issued series or will have a variable principal amount.
During the controlled amortization period or controlled accumulation period
for any series that is paired with a later issued series, as principal payments
are made on that previously issued series or deposits are made to the principal
accumulation account for that previously issued series, as applicable,
(a) in the case of a prefunded paired series, an equal amount of funds on
deposit in any prefunding account for that prefunded paired series
will be released, which funds will be distributed to us;
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(b) in the case of a paired series having a variable principal amount, an
interest in that variable paired series in an equal or lesser amount
may be sold by the issuer, and the proceeds from the issuance will be
distributed to us;
(c) and, in either case, the collateral amount of the later issued series
will increase by up to a corresponding amount.
If a pay out event occurs for the previously issued series or its paired
series when the previously issued series is amortizing, the allocation
percentage for the allocation of collections of principal receivables for the
previously issued series may be reset to a lower percentage as described in the
prospectus supplement for that series and the period over which it will amortize
may be lengthened as a result. The extent to which the period over which it
amortizes is lengthened will depend on many factors, only one of which is the
reduction of its allocation percentage. For a discussion of these factors, see
"Risk Factors -- Issuance of additional series by the trust may affect the
timing of payments to you" in this prospectus and "Maturity Considerations" in
the accompanying prospectus supplement.
Pay Out Events
The revolving period for your series of notes will continue through the
date specified in the accompanying prospectus supplement unless a pay out event
occurs prior to that date. A pay out event occurs with respect to all series
issued by the issuer upon the occurrence of any of the following events:
(a) bankruptcy, insolvency, liquidation, conservatorship, receivership or
similar events relating to us or the bank;
(b) we are unable for any reason to transfer receivables to the trust; or
(c) Spiegel Master Trust or the issuer becomes subject to regulation as an
"investment company" within the meaning of the Investment Company Act
of 1940.
In addition, a pay out event may occur with respect to any series upon the
occurrence of any other event specified in the accompanying prospectus
supplement. On the date on which a pay out event is deemed to have occurred, the
rapid amortization period or, if so specified in the accompanying prospectus
supplement, the early accumulation period will commence. If, because of the
occurrence of a pay out event, the rapid amortization period begins earlier than
the scheduled commencement of an amortization period or prior to an expected
principal payment date, noteholders will begin receiving distributions of
principal earlier than they otherwise would have, which may shorten the average
life of the notes.
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In addition to the consequences of a pay out event discussed above, unless
otherwise specified in the accompanying prospectus supplement, if bankruptcy,
insolvency or similar proceedings under the Bankruptcy Code or similar laws
occur with respect to us, on the day of that event we will immediately cease to
transfer principal receivables to the trust and promptly give notice to the
trustee for Spiegel Master Trust, the indenture trustee and the owner trustee of
this event. Any principal receivables transferred to the trust prior to the
event, as well as collections on those principal receivables and finance charge
receivables accrued at any time with respect to those principal receivables,
will continue to be part of the trust assets. Unless Spiegel Master Trust has
terminated and the issuer holds the receivables directly, upon the occurrence of
an event of this type, the trustee for Spiegel Master Trust will sell the
receivables held by Spiegel Master Trust in a commercially reasonable manner and
on commercially reasonable terms. However, the holders of 50% of the unpaid
principal amount of any series of securities may prevent the sale by giving the
trustee other instructions within 90 days of publication of notice of the event.
The proceeds of that sale or liquidation will be applied to payments on the
outstanding series of securities as specified above in "-- Application of
Collections" and in the accompanying prospectus supplement.
If the only pay out event to occur is either our insolvency or the
commencement of a bankruptcy case by or against us, the bankruptcy court may
have the power to require the continued transfer of principal receivables to the
trust. See "Risk Factors -- If a conservator or receiver were appointed for
First Consumers National Bank, or if we or Spiegel Acceptance became a debtor in
a bankruptcy case, delays or reductions in payment of your notes could occur" in
this prospectus.
Servicing Compensation and Payment of Expenses
The servicer receives a fee for its servicing activities and reimbursement
of expenses incurred in administering the issuer. The share of the servicing fee
allocable to each series of notes for any distribution date will be equal to
one-twelfth of the product of (a) the servicing fee rate specified in the
related prospectus supplement and (b) (i) the collateral amount for that series
as of the last day of the calendar period preceding that distribution date,
minus (ii) for any series during an accumulation period, the amount on deposit
in the principal funding account for that series as of the last day of the
calendar month preceding that distribution date, minus (iii) the product of the
amount, if any, on deposit in the excess funding account as of the last day of
the calendar month preceding that distribution date and the allocation
percentage for that series with respect to finance charge collections for that
calendar month.
The servicer will pay from its servicing compensation expenses of servicing
the receivables, including payment of the fees and disbursements of the
indenture trustee, the trustee for Spiegel Master Trust, the owner trustee and
independent certified public accountants and other fees which are not expressly
stated in the transfer and servicing agreement, the indenture, any indenture
supplement or the pooling and servicing agreement for Spiegel Master Trust to be
payable by the issuer or the securityholders, other than federal, state and
local income and franchise taxes, if any, of the issuer or Spiegel Master Trust.
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Each series' servicing fee is payable each period from collections of
finance charge receivables allocated to the series. Neither the issuer nor the
noteholders are responsible for any servicing fee allocable to the Seller
Amount.
Matters Regarding the Seller and the Servicer
The servicer may not resign from its obligations and duties, except upon a
determination that:
. performance of its duties is no longer permissible under applicable
law, as evidenced by an opinion of counsel to that effect delivered to
the trustee; and
. there is no reasonable action that the servicer could take to make the
performance of its duties permissible under applicable law.
If within 120 days of the determination that the servicer is no longer
permitted to act as servicer, the indenture trustee is unable to appoint a
successor, then the indenture trustee will act as servicer. If the indenture
trustee is unable to act as servicer, it will petition an appropriate court to
appoint an eligible successor.
The servicer's resignation will not become effective until the indenture
trustee or another successor has assumed the servicer's obligations and duties.
The servicer may delegate any of its servicing duties to any entity, including
Spiegel, that agrees to conduct those duties in accordance with the charge
account guidelines for the bank. However, the servicer's delegation of its
duties will not relieve it of its liability and responsibility with respect to
the delegated duties.
The servicer will indemnify Spiegel Master Trust, the issuer, the owner
trustee, the trustee for Spiegel Master Trust and the indenture trustee for any
losses suffered as a result of (a) actions or omissions arising out of the
activities of Spiegel Master Trust, the issuer, the owner trustee, the trustee
for Spiegel Master Trust and the indenture trustee under the pooling and
servicing agreement and the transfer and servicing agreement, including its
actions or omissions as servicer or (b) the administration by the owner trustee
of the issuer, except in each case, for losses resulting from the fraud, gross
negligence or breach of fiduciary duty by the owner trustee, the trustee for
Spiegel Master Trust or the indenture trustee, as applicable. The indemnity also
does not include:
. any liabilities, costs or expenses of Spiegel Master Trust or the
issuer arising from any action taken by the trustee for Spiegel Master
Trust or the indenture trustee at the direction of the
securityholders;
. any losses, liabilities, expenses, damages or injuries that are
incurred by any noteholder in the capacity of an investor, including
losses incurred as a result of the performance of the receivables; and
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. any federal, state or local income or franchise taxes or any other tax
imposed on or measured by income or any penalties under any related
tax laws required to be paid by Spiegel Master Trust, the issuer or
any securityholder.
Neither the servicer nor any of its directors, officers, employees or
agents will be under any other liability to the Spiegel Master Trust, the
issuer, the owner trustee, the indenture trustee, the trustee for Spiegel Master
Trust, the securityholders, any credit enhancement provider or any other person
for any action taken, or for refraining from taking any action, in good faith
under the pooling and servicing agreement or the transfer and servicing
agreement. However, none of them will be protected against any liability
resulting from willful wrongdoing, bad faith or gross negligence in the
performance of its duties or by reason of its willful misconduct under the
pooling and servicing agreement or the transfer and servicing agreement. In
addition, the servicer is not under any obligation to appear in, prosecute or
defend any legal action which is not incidental to its servicing
responsibilities under the pooling and servicing agreement and the transfer and
servicing agreement and which in its opinion may expose it to any expense or
liability.
Neither we nor any of our directors, officers, employees, incorporators or
agents will be liable to Spiegel Master Trust, the issuer, the owner trustee,
the indenture trustee, the trustee for Spiegel Master Trust, the
securityholders, any credit enhancement provider or any other person for any
action taken, or for refraining from taking any action, in good faith under the
pooling and servicing agreement or the transfer and servicing agreement.
However, neither we nor any of the foregoing persons will be protected against
any liability resulting from willful wrongdoing, bad faith or gross negligence
in the performance of its duties or by reason of its willful misconduct under
the pooling and servicing agreement or the transfer and servicing agreement.
The trust agreement provides that we may transfer our interest in all or a
portion of our beneficial interest in the issuer by exchanging the ownership
certificate representing our interest in the issuer for a newly issued ownership
certificate representing our remaining interest and a second ownership
certificate representing the transferred interest. The terms of the ownership
certificate representing the transferred interest must be defined in a
supplement to the trust agreement. Before a new ownership certificate is issued,
the following must occur:
(1) each rating agency confirms that the exchange will not impair its
rating of any outstanding series or class of notes;
(2) we certify to the owner trustee and the indenture trustee that, based
on the facts known to the certifying officer, the new issuance will
not:
(a) cause a pay out event or an event of default; or
(b) materially and adversely affect the amount or timing of payments
to be made to the noteholders of any series or class;
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(3) after giving effect to the exchange, the total amount of principal
receivables exceeds the Minimum Aggregate Principal Receivables;
(4) we deliver an opinion of counsel to the effect that, for federal
income tax purposes:
(a) the exchange will not adversely affect the tax characterization
as debt of notes of any outstanding series or class that were
characterized as debt at the time of their issuance;
(b) the exchange will not cause the issuer to be deemed to be an
association or publicly traded partnership taxable as a
corporation; and
(c) the exchange will not cause or constitute an event in which gain
or loss would be recognized by any noteholder.
No ownership certificate may be transferred or exchanged unless an opinion
of the type described in clause (4) above is delivered to the owner trustee and
the indenture trustee regarding the exchange.
We or the servicer may consolidate with, merge into, or sell our or its
respective businesses to, another entity, in accordance with the pooling and
servicing agreement and the transfer and servicing agreement on the following
conditions:
(1) the entity, if other than us or the servicer, as applicable, formed by
the consolidation or merger or that acquires our property or assets or
the servicer's property or assets, as the case may be:
(a) is organized under the laws of the United States or any one of
its states;
(b) expressly assumes, by a supplemental agreement, to perform every
covenant and obligation of us or the servicer, as applicable;
(2) delivery to the trustee for Spiegel Master Trust, the indenture
trustee and each credit enhancement provider, of an officer's
certificate and an opinion of counsel stating that the merger,
consolidation or transfer and the related supplemental agreement
comply with the pooling and servicing agreement and the transfer and
servicing agreement and that all conditions precedent relating to the
applicable transaction have been complied with and, in the case of the
opinion of counsel, the related supplemental agreement is legal, valid
and binding with respect to us or the servicer, as applicable; and
(3) delivery of notice of the applicable transaction to each rating
agency.
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Servicer Default
Each of the following events constitutes a servicer default:
(1) failure by the servicer to make any payment, transfer or deposit, or
to give instructions or to give notice to the trustee to do so, on the
required date under the pooling and servicing agreement, any series
supplement to the pooling and servicing agreement with respect to a
series of investor certificates, the transfer and servicing agreement,
the indenture or any indenture supplement, in each case on or before
the date occurring 5 business days after the date that payment,
transfer or deposit or that instruction or notice is required to be
made or given under the applicable document;
(2) failure on the part of the servicer to observe or perform in any
material respect any of its other covenants or agreements if the
failure:
(a) has a material adverse effect on the securityholders;
(b) continues unremedied for a period of 60 days after notice to (i)
the servicer by the trustee for Spiegel Master Trust, the owner
trustee or the indenture trustee, (ii) the servicer, the owner
trustee and the indenture trustee by noteholders of 50% or more
of the then-outstanding principal amount of the notes of any
adversely affected series or (iii) the servicer and the trustee
for Spiegel Master Trust by investor certificateholders of 50% or
more of the then-outstanding principal amount of the investor
certificates of any adversely affected series; or
(3) the servicer assigns or delegates its duties, except as specifically
permitted under the pooling and servicing agreement and the transfer
and servicing agreement;
(4) any representation, warranty or certification made by the servicer in
the pooling and servicing agreement or the transfer and servicing
agreement, or in any certificate delivered in accordance with either
agreement, proves to have been incorrect when made if it:
(a) has a material adverse effect on the rights of the
securityholders of any series;
(b) continues to be incorrect and to have a material adverse effect
on those securityholders for a period of 60 days after notice to
(i) the servicer by the trustee for Spiegel Master Trust, the
owner trustee or the indenture trustee, (ii) the servicer, the
owner trustee and the indenture trustee by noteholders of 50% or
more of the then-outstanding principal amount of the notes of any
adversely affected series or (iii) the servicer and the
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trustee for Spiegel Master Trust by investor Certificateholders
of 50% or more of the then-outstanding principal amount of the
investor certificates of any adversely affected series, or if the
failure cannot be cured within the applicable 60-day period due
to causes beyond the control of the servicer, if the servicer
fails to proceed promptly to cure the failure with diligence and
continuity;
(5) specific bankruptcy, insolvency, liquidation, conservatorship,
receivership or similar events relating to the servicer; or
(6) any other event specified in the accompanying prospectus supplement.
If a servicer default occurs, for as long as it has not been remedied, the
trustee or securityholders representing a majority of the then-outstanding
principal amount of all outstanding series of securities may give notice to the
servicer, the owner trustee and, if notice is given by the securityholders, the
trustee for Spiegel Master Trust and the indenture trustee, terminating all of
the rights and obligations of the servicer under the pooling and servicing
agreement and the transfer and servicing agreement and the trustee may appoint a
new servicer. The trustee will as promptly as possible appoint an eligible
successor to the servicer. If no successor has been appointed or has accepted
the appointment by the time the servicer ceases to act as servicer, the trustee
will automatically become the successor. If the trustee is unable to obtain
bids from eligible servicers within 60 days of notice of termination of the
servicer and the servicer delivers a certificate of an authorized officer to the
effect that it cannot in good faith cure the servicer default which gave rise to
a transfer of servicing, and if the trustee is legally unable to act as
successor, then the trustee will offer us the right to accept retransfer of all
of the receivables. However, if our long-term unsecured debt obligations are
not rated at least Baa-3 by Moody's and BBB- by Standard & Poor's at the time of
the proposed retransfer, no retransfer will occur unless we have delivered an
opinion of counsel reasonably acceptable to the trustee that the retransfer
would not constitute a fraudulent conveyance by us.
The retransfer price to be received by each series of notes will be equal
to the higher of:
(1) the outstanding principal balance of the notes of that series, plus
accrued interest at the applicable interest rate, through the date of
retransfer; and
(2) the average bid price quoted by two recognized dealers for a similar
security rated in the highest rating category by Moody's and Standard
& Poor's and having a remaining maturity similar to the remaining
maturity of those notes.
The securityholders of 50% or more of the then-outstanding principal amount
of the securities of any series affected by any default by the servicer or us in
the performance of its or our obligations under the pooling and servicing
agreement and the transfer and servicing agreement may waive, on behalf of all
securityholders, that default unless the default relates to a failure to make
any required deposits or payments with respect to any series. In addition, no
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waiver by the securityholders will affect the rights of any credit enhancement
providers for any series.
Our rights and obligations under the pooling and servicing agreement and
the transfer and servicing agreement will be unaffected by any change in
servicer.
If a conservator or receiver is appointed for the servicer, the conservator
or receiver may have the power to prevent either the trustee or the
securityholders from appointing a successor servicer.
Reports to Noteholders
Noteholders of each series issued by the issuer will receive reports with
information on the series and the trust. The paying agent will forward to each
noteholder of record a report, prepared by the servicer, for its series on the
distribution dates for that series. The report will contain the information
specified in the related prospectus supplement. If a series has multiple
classes, information will be provided for each class, as specified in the
related prospectus supplement.
Periodic information to noteholders generally will include:
. the total amount distributed;
. the amount of principal and interest for distribution;
. collections of principal receivables and finance charge receivables
allocated to the series;
. the aggregate amount of principal receivables, the collateral amount and
the collateral amount as a percentage of the aggregate amount of the
principal receivables in the trust portfolio;
. the aggregate outstanding balance of accounts broken out by delinquency
status;
. the aggregate defaults and dilution allocated to the series;
. the amount of reductions, if any, to the collateral amount due to
defaulted receivables and dilution allocated to the series and any
reimbursements of previous reductions to the collateral amount;
. the monthly servicing fee for that series;
. the amount available under the credit enhancement, if any, for the
series or each class of the series;
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. the "pool factor," which is the ratio of the current collateral amount
to the initial collateral amount;
. the Base Rate and Portfolio Yield, each as defined in the accompanying
prospectus supplement for the series;
. if the series or a class of the series bears interest at a floating or
variable rate, information relating to that rate;
. for any distribution date during a funding period, the remaining
balance in the prefunding account; and
. for the first distribution date that is on or immediately following
the end of a funding period, the amount of any remaining balance in
the prefunding account that has not been used to fund the purchase of
receivables and is being paid as principal on the notes.
By January 31 of each calendar year, the paying agent will also provide to
each person who at any time during the preceding calendar year was a noteholder
of record a statement, prepared by the servicer, containing the type of
information presented in the periodic reports, aggregated for that calendar year
or the portion of that calendar year that the person was a noteholder, together
with other information that is customarily provided to holders of debt, to
assist noteholders in preparing their United States tax returns.
Evidence as to Compliance
The pooling and servicing agreement and the transfer and servicing
agreement provide that on or before April 30 of each calendar year, the servicer
will have a firm of independent certified public accountants furnish a report
showing that, for the prior calendar year:
. the accounting firm has applied the procedures required by those
agreements to the documents and records relating to the servicing of
the accounts, compared the information contained in the servicer's
certificates delivered during the prior calendar year with those
documents and records, and that based upon those procedures, no
matters came to the attention of that accounting firm that caused them
to believe that servicing was not conducted in compliance with
specified sections of the pooling and servicing agreement and the
transfer and servicing agreement, and
. the accounting firm has compared specified amounts set forth in the
periodic reports prepared by the servicer for the prior calendar year
with the servicer's computer reports and that, in the accounting
firm's opinion, the amounts are in agreement, except for any
discrepancies they consider immaterial or that are otherwise
disclosed.
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The pooling and servicing agreement and the transfer and servicing
agreement also provide that by April 30 of each calendar year, the servicer will
deliver to the trustee for Spiegel Master Trust, the owner trustee, the
indenture trustee, each credit enhancement provider and each rating agency a
certificate of an authorized officer to the effect that the servicer has fully
performed its obligations under the pooling and servicing agreement and the
transfer and servicing agreement during the preceding year, or, if there has
been a default in the performance of any of its obligations, specifying the
nature and status of the default.
Amendments
The transfer and servicing agreement may be amended by us, the servicer and
the owner trustee, without the consent of the indenture trustee or the
noteholders of any series, on the following conditions:
(1) we deliver to the owner trustee and the indenture trustee a
certificate of an authorized officer stating that, in our reasonable
belief, the amendment will not:
(a) result in the occurrence of a pay out event or an event of
default; or
(b) materially and adversely affect the amount or timing of
distributions to be made to noteholders of any series or class;
and
(2) each rating agency confirms that the amendment will not impair its
rating of any outstanding series or class of notes.
The transfer and servicing agreement may also be amended by us, the
servicer and the owner trustee at our direction, without the consent of the
indenture trustee, the noteholders of any series or the credit enhancement
providers for any series to add, modify or eliminate any provisions necessary or
advisable in order to enable the issuer or any portion of the issuer to (i)
qualify as, and to permit an election to be made for the issuer to be treated
as, a "financial asset securitization investment trust" under the Internal
Revenue Code and (ii) avoid the imposition of state or local income or franchise
taxes on the issuer's property or its income. However, we may not amend the
transfer and servicing agreement as described in this paragraph unless each
rating agency confirms that the amendment will not impair its rating of any
outstanding series or class of notes. In addition, the amendment must not
affect the rights, duties or obligations of the indenture trustee or the owner
trustee under the transfer and servicing agreement.
The amendments that we may make without the consent of the noteholders of
any series or the credit enhancement providers for any series may include the
addition or sale of receivables in the trust portfolio.
The transfer and servicing agreement may also be amended by us, the
servicer and the owner trustee with the consent of noteholders representing more
than 50% of the then-
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outstanding principal balance of the notes of each series adversely affected by
the amendment, except that no amendment may occur if it:
(1) reduces the amount of, or delays the timing of:
(a) any distributions to be made to noteholders of any series or
deposits of amounts to be distributed; or
(b) the amount available under any credit enhancement,
in each case, without the consent of each affected noteholder;
(2) changes the manner of calculating the interests of any noteholder
without the consent of each affected noteholder;
(3) reduces the percentage of the outstanding principal balance of the
notes required to consent to any amendment, without the consent of
each affected noteholder; or
(4) adversely affects the rating of any series or class by each rating
agency, without the consent of noteholders representing more than 50%
of the then-outstanding principal balance of the notes of each
affected series or class.
For purposes of clause (1) above, changes in pay out events or events of
default that decrease the likelihood of the occurrence of those events will not
be considered delays in the timing of distributions.
The Indenture
We have summarized the material terms of the indenture below. The summary
is not complete and is qualified in its entirety by reference to the indenture.
Events of Default; Rights upon Event of Default
An event of default will occur under the indenture for any series of notes
upon the occurrence of any of the following events:
(1) the issuer fails to pay principal when it becomes due and payable on
the final maturity date for that series of notes;
(2) the issuer fails to pay interest when it becomes due and payable and
the default continues for a period of 35 days;
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(3) bankruptcy, insolvency, conservatorship, receivership, liquidation or
similar events relating to the issuer; or
(4) the issuer fails to observe or perform covenants or agreements made in
the indenture, and:
(a) the failure continues, or is not cured, for 60 days after notice
to the issuer by the indenture trustee or to the issuer and the
indenture trustee by noteholders representing 25% or more of the
then-outstanding principal amount of all outstanding series of
notes; and
(b) as a result, the interests of the noteholders are materially and
adversely affected, and continue to be materially and adversely
affected during the 60-day period.
An event of default will not occur if the issuer fails to pay the full
principal amount of a note on its expected principal payment date.
An event of default with respect to one series of notes will not
necessarily be an event of default with respect to any other series of notes.
If an event of default referred to in clause (1), (2) or (4) above occurs
and is continuing with respect to any series of notes, the indenture trustee or
noteholders holding more than 50% of the then-outstanding principal balance of
the notes of the affected series may declare the principal of the notes of that
series to be immediately due and payable. If an event of default referred to in
clause (3) above occurs and is continuing, the unpaid principal and interest due
on the notes automatically will be deemed to be declared due and payable.
Before a judgment or decree for payment of the money due has been obtained by
the indenture trustee, noteholders holding more than 50% of the then-outstanding
principal balance of the notes of that series may rescind the declaration of
acceleration of maturity if:
(a) the issuer has paid or deposited with the indenture trustee all
principal and interest due on the Notes and all other amounts
that would then be due if the event of default giving rise to the
acceleration had not occurred, including all amounts then payable
to the indenture trustee; and
(b) all events of default have been cured or waived.
If an event of default occurs, the indenture trustee will be under no
obligation to exercise any of the rights or powers under the indenture if
requested or directed by any of the holders of the notes of the affected series
if the indenture trustee reasonably believes it will not be adequately
indemnified against the costs, expenses and liabilities which might be incurred
by it in complying with that request. Subject to those provisions for
indemnification and those limitations contained in the indenture, noteholders
holding more than 50% of the then-
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outstanding principal balance of the notes of the affected series will have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the indenture trustee if an event of default has occurred
and is continuing. Prior to the acceleration of the maturity of the notes of the
affected series, the noteholders holding more than 50% of the then-outstanding
principal balance of the notes of the affected series may also waive any default
with respect to the notes, except a default in the payment of principal or
interest or a default relating to a covenant or provision of the indenture that
cannot be modified without the waiver or consent of all noteholders of the
affected series.
After acceleration of a series of notes, principal collections and finance
charge collections allocated to those notes will be applied to make monthly
principal and interest payments on the notes until the earlier of the date the
notes are paid in full or the final maturity date of the notes. Funds in the
collection account, the excess funding account and the other trust accounts for
an accelerated series of notes will be applied immediately to pay principal of
and interest on those notes.
Upon acceleration of the maturity of a series of notes following an event
of default, the indenture trustee will have a lien on the collateral for those
notes for its unpaid fees and expenses that ranks senior to the lien of those
notes on the collateral.
In general, the indenture trustee will enforce the rights and remedies of
the holders of accelerated notes. However, noteholders will have the right to
institute any proceeding with respect to the indenture if the following
conditions are met:
. the noteholder gives the indenture trustee written notice of a
continuing event of default;
. the noteholders of at least 25% of the collateral amount of the
affected series make a written request of the indenture trustee to
institute a proceeding as indenture trustee;
. the noteholders offer reasonable indemnification to the indenture
trustee against the costs, expenses and liabilities of instituting a
proceeding;
. the indenture trustee has not instituted a proceeding within 60 days
after receipt of the request and offer of indemnification; and
. the indenture trustee has not received from noteholders holding more
than 50% of the then-outstanding principal balance of the notes of
that series a direction inconsistent with the request.
Each holder of a note will have an absolute and unconditional right to
receive payment of the principal of and interest in respect of that note as
principal and interest become due and
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payable, and to institute suit for the enforcement of any payment of principal
and interest then due and payable and those rights may not be impaired without
the consent of that noteholder.
If any series of notes has been accelerated following an event of default,
and the indenture trustee has not received any valid directions from those
noteholders, the indenture trustee may elect to continue to hold the portion of
the trust assets that secures those notes and apply distributions on the trust
assets to make payments on those notes to the extent funds are available.
Subject to the provisions of the indenture relating to the duties of the
indenture trustee, if any series of notes has been accelerated following an
event of default, the indenture trustee may:
. institute proceedings in its own name for the collection of all
amounts then payable on the notes of the affected series; or
. take any other appropriate action to protect and enforce the rights
and remedies of the indenture trustee and the noteholders of the
affected series.
Subject to the conditions described in the following sentence, the
indenture trustee also may cause the trust to sell principal receivables in an
amount equal to the collateral amount for the series of accelerated notes and
the related finance charge receivables. One of the following conditions must be
satisfied for the indenture trustee to exercise this remedy:
. receipt by the indenture trustee of the consent of all noteholders of
the affected series;
. determination by the indenture trustee that any proceeds from
exercising the remedy will be sufficient to discharge in full all
principal and interest due on the accelerated notes, and the indenture
trustee obtains the consent of noteholders holding more than 50% of
the then-outstanding principal balance of the affected series; or
. determination by the indenture trustee that the assets may not
continue to provide sufficient funds for the payment of principal of
and interest on those notes as they would have become due if the notes
had not been accelerated, and the indenture trustee obtains the
consent of noteholders holding at least 66 2/3% of the then-
outstanding principal balance of each class of the notes of the
affected series.
The indenture trustee and the noteholders will covenant that they will not
at any time institute against the issuer, Spiegel Master Trust or us any
bankruptcy, reorganization or other proceeding under any federal or state
bankruptcy or similar law.
None of us, the administrator, the owner trustee, the indenture trustee,
the servicer, the bank or Spiegel Master Trust, nor any holder of an ownership
interest in the issuer, nor any of
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their respective owners, beneficiaries, agents, officers, directors, employees,
successors or assigns shall, in the absence of an express agreement to the
contrary, be personally liable for the payment of the principal of or interest
on the notes or for the agreements of the issuer contained in the indenture.
The notes will represent obligations solely of the issuer, and the notes will
not be insured or guaranteed by us, the servicer, the administrator, the owner
trustee, the indenture trustee, the bank or any other person or entity.
Covenants
The indenture provides that the issuer may not consolidate with, merge into
or sell its business to, another entity, unless:
(1) the entity, if other than the issuer, formed by or surviving the
consolidation or merger or that acquires the issuer's business:
(a) is organized under the laws of the United States or any one of
its states;
(b) is not subject to regulation as an "investment company" under the
Investment Company Act of 1940;
(c) expressly assumes, by supplemental indenture, the issuer's
obligation to make due and punctual payments upon the notes and
the performance of every covenant of the issuer under the
indenture; and
(d) in the case of a sale of the issuer's business, expressly agrees,
by supplemental indenture that (i) all right, title and interest
so conveyed or transferred by the issuer will be subject and
subordinate to the rights of the noteholders and (ii) it will
make all filings with the Securities and Exchange Commission
required by the Securities Exchange Act of 1934 in connection
with the notes;
(2) no pay out event or event of default will exist immediately after the
merger, consolidation or sale;
(3) each rating agency confirms that the transaction will not impair its
rating of any outstanding series or class of notes;
(4) the issuer will have received an opinion of counsel to the effect that
the transaction will not have any material adverse tax consequences to
any noteholders, and for federal income tax purposes:
(a) the transaction will not adversely affect the tax
characterization as debt of notes of any outstanding series or
class that were characterized as debt at the time of their
issuance;
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(b) the transaction will not cause the issuer to be deemed to be an
association or publicly traded partnership taxable as a
corporation; and
(c) the transaction will not cause or constitute an event in which
gain or loss would be recognized by a noteholder;
(5) any action necessary to maintain the lien and security interest
created by the indenture will have been taken; and
(6) the issuer has delivered to the indenture trustee an opinion of
counsel and officer's certificate each stating that the consolidation,
merger or sale satisfies all requirements under the indenture and that
the supplemental indenture is duly authorized, executed and delivered
and is valid, binding and enforceable.
As long as the notes are outstanding, the issuer will not, among other
things:
. except as expressly permitted by the indenture, the transfer and
servicing agreement or related documents, sell, transfer, exchange or
otherwise dispose of any of the assets of the issuer that secure the
notes;
. claim any credit on or make any deduction from payments in respect of
the principal of and interest on the notes--other than amounts
withheld under the Internal Revenue Code or applicable state law--or
assert any claim against any present or former noteholders because of
the payment of taxes levied or assessed upon the assets of the issuer
that secure the notes;
. voluntarily dissolve or liquidate in whole or in part; or
. permit (A) the validity or effectiveness of the indenture or the lien
under the indenture to be impaired, or permit any person to be
released from any covenants or obligations with respect to the notes
under the indenture except as may be expressly permitted by the
indenture, (B) any lien or other claim of a third party to be created
with respect to the assets of the issuer, or (C) the lien of the
indenture not to constitute a valid first priority perfected security
interest in the assets of the issuer that secure the notes.
The issuer may not engage in any activity other than as specified under
"The Issuer" in this prospectus. The issuer will not incur, assume or guarantee
any indebtedness other than indebtedness under the notes and the indenture.
Modification of the Indenture
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The issuer and the indenture trustee may, without the consent of any
noteholders but with prior written notice to each rating agency, enter into one
or more supplemental indentures for any of the following purposes:
. to correct or enhance the description of any property subject to the
lien of the indenture, or to take any action that will enhance the
indenture trustee's lien under the indenture, or to add to the
property pledged to secure the notes;
. to reflect the agreement of another person to assume the role of the
issuer;
. to add to the covenants of the issuer, for the benefit of the
noteholders, or to surrender any right or power of the issuer;
. to transfer or pledge any property to the indenture trustee;
. to cure any ambiguity, to correct or supplement any provision in the
indenture or in any supplemental indenture that may be inconsistent
with any other provision in the indenture or in any supplemental
indenture as long as that action would not adversely affect the
interests of the noteholders;
. to appoint a successor to the indenture trustee with respect to the
notes and to add to or change any of the provisions of the indenture
to allow more than one indenture trustee to act under the indenture;
. to modify, eliminate or add to the provisions of the indenture as
necessary to qualify the indenture under the Trust Indenture Act of
1939, or any similar federal statute later enacted;
. to permit the issuance of one or more new series of notes under the
indenture; or
. to terminate any interest rate swap agreement or other credit
enhancement in accordance with the related indenture supplement.
The issuer and the indenture trustee may also, without the consent of any
noteholders, enter into one or more supplemental indentures to amend the
indenture, upon:
(1) receipt of written confirmation from each rating agency that the
action will not impair its rating of any outstanding series or class
of notes;
(2) our certification to the effect that, in the reasonable belief of the
certifying officer, the action will not (i) cause a pay out event or
an event of default or (ii) materially and adversely affect the amount
or timing of payments to be made to the noteholders of any series or
class; and
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(3) delivery of an opinion of counsel to each rating agency to the effect
that for federal income tax purposes:
(a) the action will not adversely affect the tax characterization as
debt of notes of any outstanding series or class that were
characterized as debt at the time of their issuance;
(b) the action will not cause the issuer to be deemed to be an
association or publicly traded partnership taxable as a
corporation; and
(c) the action will not cause or constitute an event in which gain or
loss would be recognized by a noteholder.
The issuer and the indenture trustee may also, without the consent of the
noteholders of any series or the credit enhancement providers for any series,
enter into one or more supplemental indentures to add, modify or eliminate any
provisions necessary or advisable in order to enable the issuer or any portion
of the issuer to (i) qualify as, and to permit an election to be made for the
issuer to be treated as, a "financial asset securitization investment trust"
under the Internal Revenue Code and (ii) to avoid the imposition of state or
local income or franchise taxes on the issuer's property or its income. Prior
to any amendment described in this paragraph, each rating agency must confirm
that the amendment will not impair its rating of any outstanding series or class
of notes. In addition, no amendment described in this paragraph may affect the
rights, duties or obligations of the indenture trustee or the owner trustee
under the indenture.
The issuer and the indenture trustee will not, without prior notice to each
rating agency and the consent of each noteholder affected, enter into any
supplemental indenture to:
. change the date of payment of any installment of principal of or
interest on any note or reduce the principal amount of a note, the
note interest rate or the redemption price of the note or change any
place of payment where, or the currency in which, any note is payable;
. impair the right to institute suit for the enforcement of specified
payment provisions of the indenture;
. reduce the percentage of the aggregate principal amount of the notes
of any series, whose consent is required (a) for execution of any
supplemental indenture or (b) for any waiver of compliance with
specified provisions of the indenture or of some defaults under the
indenture and their consequences provided in the indenture;
. reduce the percentage of the aggregate outstanding amount of the notes
required to direct the indenture trustee to sell or liquidate the
trust assets if the proceeds of
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the sale would be insufficient to pay the principal amount and
interest due on those notes;
. decrease the percentage of the aggregate principal amount of the notes
required to amend the sections of the indenture that specify the
percentage of the principal amount of the notes of a series necessary
to amend the indenture or other related agreements;
. modify provisions of the indenture prohibiting the voting of notes
held by the issuer, any other party obligated on the notes, the bank,
or any of their affiliates; or
. permit the creation of any lien superior or equal to the lien of the
indenture with respect to any of the collateral for any notes or,
except as otherwise permitted or contemplated in the indenture,
terminate the lien of the indenture on the collateral or deprive any
noteholder of the security provided by the lien of the indenture.
The issuer and the indenture trustee may otherwise, with receipt of written
confirmation from each rating agency that the action will not impair its rating
of any outstanding series or class and with the consent of noteholders holding
more than 50% of the then-outstanding principal balance of the notes of each
series adversely affected, enter into one or more supplemental indentures to add
provisions to or change in any manner or eliminate any provision of the
indenture or to change the rights of the noteholders under the indenture.
Annual Compliance Statement
The issuer will be required to present to the indenture trustee each year a
written statement as to the performance of its obligations under the indenture.
Indenture Trustee's Annual Report
The indenture trustee will be required to mail to the noteholders each year
a brief report relating to its eligibility and qualification to continue as
indenture trustee under the indenture, the property and funds physically held by
the indenture trustee and any action it took that materially affects the notes
and that has not been previously reported.
List of Noteholders
Upon the issuance of definitive notes, three or more holders of the notes
who have each owned a note for at least six months may obtain access to the list
of noteholders the indenture trustee maintains for the purpose of communicating
with other noteholders. The indenture trustee may elect not to allow the
requesting noteholders access to the list of noteholders if it agrees to mail
the requested communication or proxy, on behalf and at the expense of the
requesting noteholders, to all noteholders of record.
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Satisfaction and Discharge of Indenture
The indenture will be discharged with respect to the notes upon the
delivery to the indenture trustee for cancellation of all the notes or, with
specific limitations, upon deposit with the indenture trustee of funds
sufficient for the payment in full of all the notes.
The Indenture Trustee
The indenture trustee may resign at any time. The administrator may also
remove the indenture trustee if it ceases to be eligible to continue as an
indenture trustee under the indenture or if the indenture trustee becomes
insolvent or otherwise becomes legally unable to act as indenture trustee. In
either case, the administrator will then be obligated to appoint a successor
indenture trustee for your series. If an event of default occurs under the
indenture, under the Trust Indenture Act of 1939, the indenture trustee may be
deemed to have a conflict of interest and be required to resign as indenture
trustee for one or more classes of each series of notes. In that case, a
successor indenture trustee will be appointed for one or more of those classes
of notes and may provide for rights of senior noteholders to consent to or
direct actions by the indenture trustee which are different from those of
subordinated noteholders. Any resignation or removal of the indenture trustee
and appointment of a successor indenture trustee for any class or series of
notes will not become effective until the successor indenture trustee accepts
its appointment.
Matters Regarding the Administrator
The administrator will, to the extent provided in the administration
agreement, provide the notices and perform on behalf of the issuer other
administrative obligations required by the indenture.
Pooling and Servicing Agreement
We have summarized the terms of the pooling and servicing agreement that
are material to noteholders in this prospectus. The summary is not complete and
is qualified in its entirety by reference to the pooling and servicing
agreement.
New Issuances of Investor Certificates
The pooling and servicing agreement provides that, in any one or more
series supplements to the pooling and servicing agreement, we may direct the
trustee for Spiegel Master Trust to issue one or more new series of investor
certificates and may define all principal terms of those series. A series
supplement may only modify or amend the terms of the pooling and servicing
agreement as applied to the new series. There is no limit to the number of new
issuances we may cause under the pooling and servicing agreement.
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No new series may be issued unless we satisfy various conditions, including
that:
(1) each rating agency confirms that the issuance of the new series will
not impair its rating of any outstanding series or class of
securities;
(2) we certify that, after giving effect to the issuance of the new
series:
(i) we would not be required to add additional accounts; and
(ii) the Seller Amount would exceed the Minimum Seller Amount;
and
(3) each person who previously delivered the federal income tax opinions
in connection with the issuance of any existing series of securities
reissues those opinions and confirms that the issuance of the new
series will not affect those opinions.
Amendments
The pooling and servicing agreement and any series supplement to the
pooling and servicing agreement may be amended by us, the servicer and the
trustee for Spiegel Master Trust, without the consent of certificateholders of
any series, to cure any ambiguity, to correct or supplement any provisions which
may be inconsistent with any other provisions of the pooling and servicing
agreement or to add any other provisions which would not be inconsistent with
the pooling and servicing agreement if the amendment would not adversely effect
the interests of the certificateholders in any material respect and we deliver
an opinion of counsel to that effect to the rating agencies.
The amendments that we may make without the consent of the
certificateholders of any series or the credit enhancement providers for any
series may include the addition or sale of receivables in the trust portfolio.
The pooling and servicing agreement may also be amended by us, the servicer
and the trustee for Spiegel Master Trust with the consent of certificateholders
representing at least 50% of the then-outstanding principal balance of the
investor certificates of all series adversely affected by the amendment. Even
with consent, no amendment may occur if it:
(1) reduces the amount of, or delays the timing of any distributions to be
made to certificateholders of any series without the consent of each
affected certificateholder;
(2) changes the manner of calculating the invested amounts and allocation
percentages for any series or changes the manner of allocating
defaulted receivables to any series without the consent of each
affected certificateholder; or
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(3) reduces the percentage of undivided interests the holders of which are
required to consent to any amendment, without the consent of each
affected noteholder.
Credit Enhancement
General
For any series, credit enhancement may be provided with respect to one or
more of the related classes. Credit enhancement may be in the form of setting
the collateral amount for that series at an amount greater than the initial
principal amount of the notes in that series, the subordination of one or more
classes of the notes of that series, a letter of credit, the establishment of a
cash collateral guaranty or account, a surety bond, an insurance policy, a
spread account, a reserve account, the use of cross support features or another
method of credit enhancement described in the accompanying prospectus
supplement, or any combination of these. If so specified in the accompanying
prospectus supplement, any form of credit enhancement may be structured so as to
be drawn upon by more than one class to the extent described in that
accompanying prospectus supplement. Any credit enhancement that constitutes a
guarantee of the applicable notes will be separately registered under the
Securities Act unless exempt from registration under the Securities Act.
In the prospectus supplement for each series, we will describe the amount
and the material terms of the related credit enhancement. Often, the credit
enhancement will not provide protection against all risks of loss and will not
guarantee repayment of the entire principal balance of the notes and interest
thereon. If losses occur which exceed the amount covered by the credit
enhancement or which are not covered by the credit enhancement, noteholders will
bear their allocable share of deficiencies.
If credit enhancement is provided with respect to a series, the
accompanying prospectus supplement will include a description of:
. the amount payable under that credit enhancement;
. any conditions to payment not described here;
. the conditions, if any, under which the amount payable under that
credit enhancement may be reduced and under which that credit
enhancement may be terminated or replaced; and
. any material provision of any agreement relating to that credit
enhancement.
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The accompanying prospectus supplement may also set forth additional
information with respect to any credit enhancement provider, including:
. a brief description of its principal business activities;
. its principal place of business, place of incorporation and the
jurisdiction under which it is chartered or licensed to do business;
. if applicable, the identity of regulatory agencies which exercise
primary jurisdiction over the conduct of its business; and
. its total assets, and its stockholders' or policy holders' surplus, if
applicable, and other appropriate financial information as of the date
specified in the prospectus supplement.
If so specified in the accompanying prospectus supplement, credit
enhancement with respect to a series may be available to pay principal of the
notes of that series following the occurrence of one or more pay out events with
respect to that series. In this event, the credit enhancement provider will have
an interest in the cash flows in respect of the receivables to the extent
described in that prospectus supplement.
Excess Collateral Amount
If specified in the accompanying prospectus supplement, support for a
series may be provided by an excess collateral amount. The excess collateral
amount for any series will equal the collateral amount for that series, minus
the aggregate outstanding principal amount of the notes of that series, after
giving effect to all other reductions through the date of determination. Because
the collateral amount of a series having an excess collateral amount will be
higher than the outstanding principal amount of the notes of that series, a
greater amount of finance charge collections and principal collections will be
allocated to that series. In addition, losses from defaulted receivables and
uncovered dilution amounts allocated to that series will first reduce the excess
collateral amount before reducing the principal amount ultimately paid on the
notes. The excess collateral amount for any series will be reduced by the amount
of reallocated principal collections applied to make payments for that
series.
If your series is supported by an excess collateral amount, the
accompanying prospectus supplement will specify the required excess collateral
amount for your series. The required excess collateral amount for any series may
be decreased at any time with the consent of the rating agencies then rating
that series. During the controlled accumulation period or controlled
amortization period for a series, the portion of funds available but not
required to be deposited to the principal accumulation account or to make
principal payments to noteholders, as the case may be, on any distribution date
may be applied to make payments to us that will reduce the excess collateral
amount for that series, but only to the extent that the excess collateral amount
exceeds the required excess collateral amount.
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The excess collateral amount for a series may also be increased under the
circumstances described in the related prospectus supplement.
Subordination
If so specified in the accompanying prospectus supplement, one or more
classes of any series will be subordinated as described in the accompanying
prospectus supplement to the extent necessary to fund payments with respect to
the senior notes. The rights of the holders of these subordinated notes to
receive distributions of principal and/or interest on any distribution date for
that series will be subordinate in right and priority to the rights of the
holders of senior notes, but only to the extent set forth in the accompanying
prospectus supplement. If so specified in the accompanying prospectus
supplement, subordination may apply only in the event that a specified type of
loss is not covered by another credit enhancement.
The accompanying prospectus supplement will also set forth information
concerning:
. the amount of subordination of a class or classes of subordinated
notes in a series;
. the circumstances in which that subordination will be applicable;
. the manner, if any, in which the amount of subordination will decrease
over time; and
. the conditions under which amounts available from payments that would
otherwise be made to holders of those subordinated notes will be
distributed to holders of senior notes.
If collections of receivables otherwise distributable to holders of a
subordinated class of a series will be used as support for a class of another
series, the accompanying prospectus supplement will specify the manner and
conditions for applying that cross-support feature.
Letter of Credit
If so specified in the accompanying prospectus supplement, support for a
series or one or more of the related classes will be provided by one or more
letters of credit. A letter of credit may provide limited protection against
some losses in addition to or in lieu of other credit enhancement. The issuer of
the letter of credit, will be obligated to honor demands with respect to that
letter of credit, to the extent of the amount available thereunder, to provide
funds under the circumstances and subject to any conditions as are specified in
the accompanying prospectus supplement.
The maximum liability of the issuer of a letter of credit under its letter
of credit will generally be an amount equal to a percentage specified in the
accompanying prospectus supplement of the initial collateral amount of a series
or a class of that series. The maximum
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amount available at any time to be paid under a letter of credit will be set
forth in the accompanying prospectus supplement.
Cash Collateral Guaranty or Account
If so specified in the accompanying prospectus supplement, support for a
series or one or more of the related classes will be provided by a cash
collateral guaranty, secured by the deposit of cash or permitted investments in
a cash collateral account, reserved for the beneficiaries of the cash collateral
guaranty or by a cash collateral account alone. The amount available from the
cash collateral guaranty or the cash collateral account will be the lesser of
amounts on deposit in the cash collateral account and an amount specified in the
accompanying prospectus supplement. The accompanying prospectus supplement will
set forth the circumstances under which payments are made to beneficiaries of
the cash collateral guaranty from the cash collateral account or from the cash
collateral account directly.
Surety Bond or Insurance Policy
If so specified in the accompanying prospectus supplement, insurance with
respect to a series or one or more of the related classes will be provided by
one or more insurance companies and will guarantee, with respect to one or more
classes of the related series, distributions of interest or principal in the
manner and amount specified in the accompanying prospectus supplement.
If so specified in the accompanying prospectus supplement, a surety bond
will be purchased for the benefit of the holders of any series or class of that
series to assure distributions of interest or principal with respect to that
series or class of notes in the manner and amount specified in the accompanying
prospectus supplement.
If an insurance policy or a surety bond is provided for any series or
class, the provider of the insurance policy or surety bond will be permitted to
exercise the voting rights of the noteholders of the applicable series or class
to the extent described in the prospectus supplement for that series. For
example, if specified in the related prospectus supplement, the provider of the
insurance policy or surety bond, rather than the noteholders of that series, may
have the sole right to:
. consent to amendments to the indenture, the pooling and servicing
agreement, the transfer and servicing agreement or any other
document applicable to that series;
. if an event of default occurs, accelerate the notes of that
series or direct the trustee to exercise any remedy available to
the noteholders; or
. waive any event of default for that series.
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Spread Account
If so specified in the accompanying prospectus supplement, support for a
series or one or more of the related classes will be provided by the periodic
deposit of all or a portion of available excess cash flow from the trust assets
into a spread account intended to assist with subsequent distribution of
interest and principal on the notes of that class or series in the manner
specified in the accompanying prospectus supplement.
Reserve Account
If so specified in the accompanying prospectus supplement, support for a
series or one or more of the related classes or any related enhancement will be
provided by a reserve account. The reserve account may be funded, to the extent
provided in the accompanying prospectus supplement, by an initial cash deposit,
the retention of a portion of periodic distributions of principal or interest or
both otherwise payable to one or more classes of notes, including the
subordinated notes, or the provision of a letter of credit, guarantee, insurance
policy or other form of credit or any combination of these arrangements. The
reserve account will be established to assist with the subsequent distribution
of principal or interest on the notes of that series or the related class or any
other amount owing on any related enhancement in the manner provided in the
accompanying prospectus supplement.
Description of the Receivables Purchase Agreement
The following is a summary of the material terms of the receivables
purchase agreement entered into by the bank, Spiegel Acceptance and us. The
summary is qualified in its entirety by reference to the receivables purchase
agreement. This receivables purchase agreement is filed as an exhibit to the
registration statement of which this prospectus is a part.
Sale of Receivables
Under the receivables purchase agreement, the bank and Spiegel Acceptance
sold and, in the future, may sell to us all of their right, title and interest
in and to (i) all of the receivables existing in the initial accounts as of the
initial cut-off date and in additional accounts as of the related addition dates
and (ii) recoveries allocable to those receivables and other related property.
All Eligible Receivables arising in the initial accounts had been
previously transferred by the bank to Spiegel Acceptance prior to the formation
of Spiegel Master Trust. Concurrently with the formation of Spiegel Master
Trust, those receivables were transferred to us under the receivables purchase
agreement. Since then, all Eligible Receivables arising in the initial accounts
have been transferred directly from the bank to us.
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In addition, under an operating agreement between the bank and Spiegel
Acceptance, Spiegel Acceptance has agreed to purchase and the bank has agreed to
sell, on an ongoing basis, receivables arising in the FCNB Preferred Charge
accounts, other than receivables that have been charged-off and receivables that
the bank is obligated to transfer to the trust or other third-parties.
Therefore, prior to the designation of any account in the Spiegel private label
portfolio to the trust portfolio, the bank will sell the receivables in that
account to Spiegel Acceptance. Upon designation of additional accounts to the
trust portfolio, either the bank, or, if the bank has transferred the
receivables in those accounts to Spiegel Acceptance, Spiegel Acceptance will
transfer all receivables in the designated additional accounts to us on the
addition date. However, after the applicable addition date, receivables in all
designated additional accounts will be transferred directly from the bank to us.
In connection with the sale of receivables to us, the bank and Spiegel
Acceptance will each indicate in their files that those receivables have been
sold to us for further transfer to the trust. The records and agreements
relating to the accounts and receivables for the trust portfolio may not be
segregated by the bank, Spiegel Acceptance or us from other documents and
agreements relating to other credit accounts and receivables. We, Spiegel
Acceptance and the bank will each file UCC financing statements meeting the
requirements of applicable law in each of the jurisdictions necessary to perfect
the ownership or security interest of the trust in those receivables. See "Risk
Factors -- Some liens would be given priority over your notes which would cause
delayed or reduced payments" and "Material Legal Aspects of the Receivables" in
this prospectus.
Representations and Warranties
In the receivables purchase agreement, each of the bank and Spiegel
Acceptance represents and warrants as to itself to us to the effect that, among
other things, as of the date of the receivables purchase agreement and, with
respect to any receivables transferred by it in any designated additional
accounts, as of the related addition date, it is duly organized and in good
standing and has the authority to consummate the transactions contemplated by
the receivables purchase agreement. In the receivables purchase agreement, each
of the bank and Spiegel Acceptance additionally represents and warrants that any
receivable transferred by it under the receivables purchase agreement is an
Eligible Receivable as of the applicable cut-off date for that receivable. In
the event of a breach of any representation and warranty set forth in the
receivables purchase agreement which results in the requirement that we accept
retransfer of an ineligible receivable under the pooling and servicing agreement
or the transfer and servicing agreement, then the bank or Spiegel Acceptance, as
the case may be, will repurchase that ineligible receivable on the date of the
retransfer. The purchase price for the ineligible receivables will be the
principal amount of those receivables plus applicable finance charges.
In the receivables purchase agreement, each of the bank and Spiegel
Acceptance also represents and warrants that, among other things, as of the date
of the receivables purchase agreement and, with respect to itself and any
receivables transferred by it in any designated additional accounts, as of each
addition date (a) the receivables purchase agreement constitutes a
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valid and binding obligation of the bank or Spiegel Acceptance, as the case may
be, and (b) the receivables purchase agreement constitutes a valid sale to us of
all right, title and interest of the bank or Spiegel Acceptance, as the case may
be, in and to the receivables then-existing and thereafter created in the
accounts and in the proceeds of the accounts free and clear of any liens other
than liens permitted under the receivables purchase agreement. If the breach of
any of the representations or warranties described in this paragraph results in
our obligation under the pooling and servicing agreement or the transfer and
servicing agreement to accept retransfer of the receivables, the bank or Spiegel
Acceptance, as the case may be, will repurchase the receivables retransferred to
us, for an amount of cash at least equal to the amount of cash we are required
to deposit under the pooling and servicing agreement or the transfer and
servicing agreement in connection with the retransfer.
Covenants
In the receivables purchase agreement, the bank covenants that it will
comply with and perform its obligations under the charge agreements relating to
the accounts and its policies and procedures relating to the accounts unless the
failure to do so would not have a material adverse effect on the rights of the
trustee and the rights of the securityholders. The bank may change the terms and
provisions of the charge agreements or policies and procedures in any respect,
including the calculation of the amount, or the timing of, charge-offs, so long
as any changes made are also made to comparable accounts in the Spiegel private
label credit card portfolio.
The bank also covenants that it will not reduce the finance charges and
other fees on the accounts, if as a result of the reduction, its reasonable
expectation of the Portfolio Yield as of the time of the reduction would be less
than the highest of the base rates of all outstanding series, except as required
by law or as is consistent with the pooling and servicing agreement and the
transfer and servicing agreement and as the bank deems advisable for its private
label program based on a good faith assessment of various factors impacting the
use of its private label credit cards.
Amendments
The receivables purchase agreement(s) may be amended without the consent of
the noteholders. No amendment, however, may, as evidenced by an opinion of
counsel reasonably acceptable to the rating agencies, adversely affect in any
material respect the interests of the securityholders.
Termination
The receivables purchase agreement will terminate immediately after the
trust terminates. In addition, if a receiver or conservator is appointed for the
bank or either we or Spiegel Acceptance becomes a debtor in a bankruptcy case or
other specified liquidation, bankruptcy, insolvency or similar events occur or
the bank or Spiegel Acceptance becomes unable for any
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reason to transfer receivables to us in accordance with the receivables purchase
agreement, we will immediately cease to purchase receivables under the
receivables purchase agreement.
Note Ratings
Any rating of the notes by a rating agency will indicate:
. its view on the likelihood that noteholders will receive required
interest and principal payments; and
. its evaluation of the receivables and the availability of any credit
enhancement for the notes.
Among the things a rating will not indicate are:
. the likelihood that principal payments will be paid on a scheduled
date;
. the likelihood that a pay out event will occur;
. the likelihood that a U.S. withholding tax will be imposed on non-U.S.
noteholders;
. the marketability of the notes;
. the market price of the notes; or
. whether the notes are an appropriate investment for any purchaser.
A rating will not be a recommendation to buy, sell or hold the notes. A
rating may be lowered or withdrawn at any time by a rating agency.
We will request a rating of the notes offered by this prospectus and the
accompanying prospectus supplement from at least one rating agency. Rating
agencies other than those requested could assign a rating to the notes and, if
so, that rating could be lower than any rating assigned by a rating agency
chosen by us. Except as otherwise expressly stated, any reference in this
prospectus or the accompanying prospectus supplement to a rating agency refers
to a rating agency selected by us to rate the securities issued by the issuer or
Spiegel Master Trust.
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Material Legal Aspects of the Receivables
Transfer of Receivables
Each of the bank and Spiegel Acceptance in the receivables purchase
agreement will represent and warrant that its transfer of receivables
constitutes a valid sale and assignment of all of its right, title and interest
in and to the receivables. In the pooling and servicing agreement and the
transfer and servicing agreement, we will represent and warrant that our
transfer of receivables constitutes a valid sale and assignment of all of our
right, title and interest in and to the receivables, except for the Seller
Amount, or creates in favor of the issuer a valid first-priority perfected
security interest in our rights in the receivables in existence at the time that
the trust is formed or at the time that receivables in additional accounts are
transferred, as the case may be, and a valid first-priority perfected security
interest in our rights in the receivables arising in accounts already designated
for the trust portfolio on and after their creation, in each case until
termination of the trust. For a discussion of the issuer's rights arising from
these representations and warranties not being satisfied, see "Description of
the Notes -- Representations and Warranties" in this prospectus.
We will represent in the pooling and servicing agreement and the transfer
and servicing agreement, and the bank and Spiegel Acceptance will represent in
the receivables purchase agreement that the receivables are "accounts" or
"general intangibles" for purposes of the UCC. Both the sale of accounts and the
transfer of accounts as security for an obligation are subject to the provisions
of Article 9 of the UCC. In addition, a transfer of general intangibles as
security for an obligation is subject to the provisions of Article 9 of the UCC.
Therefore, we, the bank and Spiegel Acceptance will file appropriate UCC
financing statements to perfect the respective transferee's security interest in
the receivables.
There are limited circumstances in which prior or subsequent transferees of
receivables coming into existence after a series closing date could have an
interest in those receivables with priority over the trust's interest. Under the
receivables purchase agreement, however, each of the bank and Spiegel Acceptance
will represent and warrant, as to itself and the receivables transferred by it,
that it has transferred the receivables to us free and clear of the lien of any
third party other than the indenture trustee. In addition, each of the bank and
Spiegel Acceptance will covenant that it will not sell, pledge, assign, transfer
or grant any lien on any receivable or any interest in any receivable other than
to us or the indenture trustee. Similarly, under the pooling and servicing
agreement and the transfer and servicing agreement, we will represent and
warrant that we have transferred the receivables to the trust free and clear of
the lien of any third party other than the indenture trustee, and we will
covenant that we will not sell, pledge, assign, transfer, or grant any lien on
any receivable or any interest in any receivable other than to the trust.
Nevertheless, a tax, governmental or other nonconsensual lien on our or the
property of the bank or Spiegel Acceptance arising prior to the time a
receivable comes into existence may have priority over the interest of the trust
in that receivable. Furthermore, if the FDIC were appointed as a receiver or
conservator of the bank, administrative expenses of the receiver or conservator
may have priority over the interest of the trust in the receivables.
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If the servicer has satisfied the conditions discussed in "Description of
the Notes--Application of Collections" in this prospectus, the servicer will be
permitted to make deposits of collections on a monthly or other periodic basis.
In that event, cash collections held by the servicer may be commingled and used
for the benefit of the servicer prior to each distribution date and, in the
event of the insolvency of the servicer or the lapse of a ten-day period after
receipt by the servicer of collections that have been commingled with other
funds, the trust may not have a first-priority perfected security interest in
those collections. In that event, the amount payable to you could be lower than
the outstanding principal and accrued interest on the notes, thus resulting in
losses to you.
Conservatorship, Receivership and Bankruptcy
The bank is chartered as a national banking association and is regulated
and supervised principally by the Office of the Comptroller of the Currency,
which is required to appoint the FDIC as conservator or receiver for the bank if
specified events occur relating to the bank's financial condition or the
propriety of its actions. In addition, the FDIC could appoint itself as
conservator or receiver for the bank.
In its role as conservator or receiver, the FDIC would have broad powers to
repudiate contracts to which the bank was party if the FDIC determined that the
contracts were burdensome and that repudiation would promote the orderly
administration of the bank's affairs. In addition, no agreement that tended to
diminish or defeat the FDIC's interest in an asset acquired from the bank would
be enforceable against the FDIC unless the agreement were to meet certain legal
requirements. One of those requirements is that the agreement would have to have
been executed by the bank contemporaneously with the bank's acquisition of the
asset.
The FDIC has adopted a rule stating that the FDIC shall not use its
repudiation power to reclaim, recover or recharacterize as property of an FDIC-
insured bank any financial assets transferred by the bank in connection with a
securitization transaction. The same rule states that the FDIC shall not seek to
avoid an otherwise legally enforceable securitization agreement solely because
the agreement does not satisfy the contemporaneous execution requirement.
Although the FDIC has the power to repeal or amend its own rules, the
securitization rule states that any repeal or amendment of that rule will not
apply to any transfers of financial assets made in connection with a
securitization that was in effect before the repeal or modification.
We have structured the issuance of the notes with the intention that the
direct or indirect transfers of the receivables from the bank to us would have
the benefit of this rule. Nevertheless, if the FDIC were to assert that the
transfers do not have the benefit of the rule, or were to require the indenture
trustee to go through the administrative claims procedure established by the
FDIC in order to obtain payments on the notes, or were to request a stay of any
actions by the indenture trustee to enforce the receivables purchase agreement
or the purchase agreement between the bank and Spiegel Acceptance against the
bank, delays in payments on outstanding series of notes could occur.
Furthermore, if the FDIC's assertions were successful, possible reductions in
the amount of those payments could occur.
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In addition, regardless of the terms of the indenture, the FDIC as
conservator or receiver for the bank may have the power to prevent the
commencement of a rapid amortization period, to prevent or limit the early
liquidation of the receivables and termination of the trust, or to require the
continued transfer of new principal receivables. Regardless of the instructions
of those authorized to direct the indenture trustee's action, moreover, the FDIC
as conservator or receiver for the bank may have the power to require the early
liquidation of the receivables, to require the early termination of the trust
and the retirement of the notes, or to prohibit or limit the continued transfer
of new principal receivables.
In the event of the conservatorship or receivership of the servicer, the
conservator or receiver may have the power to prevent either the indenture
trustee or the noteholders from appointing a successor servicer. See
"Description of the Notes -- Servicer Default" in this prospectus.
We and Spiegel Acceptance treat the initial transfer of receivables in the
initial accounts to us, as well as Spiegel Acceptance's supplemental conveyance
of receivables in additional accounts, as absolute conveyances and not pledges
of those receivables. After these sales the receivables are not part of Spiegel
Acceptance's bankruptcy estate and therefore should not be available to Spiegel
Acceptance's creditors. However, if a bankruptcy trustee for Spiegel or Spiegel
Acceptance, Spiegel or Spiegel Acceptance as debtor-in-possession or a creditor
of Spiegel or Spiegel Acceptance were to take the view that our assets and
liabilities should be substantively consolidated with either Spiegel and/or
Spiegel Acceptance or that the transfer of the receivables from Spiegel
Acceptance to us should be characterized as a pledge of those receivables, then
delays in payments on the notes and possible reductions in the amount of those
payments could result.
Our organizational documents and corporate structure have been designed so
that (i) the filing of a voluntary or involuntary petition for relief by or
against us under the Bankruptcy Code and (ii) the substantive consolidation of
our assets and liabilities with those of Spiegel or Spiegel Acceptance is
unlikely. We are a separate, limited purpose corporation, and our certificate of
incorporation contains limitations on the nature of our business and
restrictions on our ability to commence a voluntary case or proceeding under the
Bankruptcy Code or similar laws without the prior unanimous consent of all of
our directors. In addition, the indenture trustee will covenant in the indenture
and the trustee for Spiegel Master Trust has covenanted in the pooling and
servicing agreement that it will not at any time institute against us any
bankruptcy, insolvency or similar proceedings under the Bankruptcy Code or
similar laws. Nevertheless, if we were to become a debtor in a bankruptcy case
and if a bankruptcy trustee or one of our creditors or we as debtor-in-
possession were to take the position that the transfer of the receivables by us
to the trust should be characterized as a pledge of those receivables, or if our
assets and liabilities were substantively consolidated with those of an entity
in bankruptcy, then delays in payments on the notes and possible reductions in
the amount of those payments could result.
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If bankruptcy, insolvency or similar proceedings under the Bankruptcy Code
or similar laws occur with respect to us, we will promptly notify the indenture
trustee and a pay out event will occur with respect to each series. Under the
pooling and servicing agreement and the transfer and servicing agreement, newly
created receivables will not be transferred to the trust on and after any of
these bankruptcy or insolvency related events. Any principal receivables
transferred to the trust prior to the event, as well as collections on those
principal receivables and finance charge receivables accrued at any time with
respect to those principal receivables, will continue to be part of the trust
assets and will be applied as specified above in "Description of the Notes --
Application of Collections" and in the accompanying prospectus supplement.
A conservator or receiver or a bankruptcy court, however, may have the
power to delay application of collections or to require the continued transfer
of principal receivables to the trust. See "Risk Factors -- If a conservator or
receiver were appointed for First Consumers National Bank, or if we became a
debtor in a bankruptcy case, delays or reductions in payment of your notes could
occur" in this prospectus.
Consumer Protection Laws
The relationship of the consumer and the provider of consumer credit is
extensively regulated by federal and state consumer protection laws. With
respect to credit accounts issued by the bank, the most significant federal laws
include the Federal Truth-in-Lending, Equal Credit Opportunity, Fair Credit
Reporting and Fair Debt Collection Practices Acts. These statutes impose various
disclosure requirements either before or when an account is opened, or both, and
at the end of monthly billing cycles, and, in addition, limit account holder
liability for unauthorized use, prohibit various discriminatory practices in
extending credit and regulate practices followed in collections. In addition,
account holders are entitled under these laws to have payments and credits
applied to the revolving credit account promptly and to request prompt
resolution of billing errors. Congress and the states may enact new laws and
amendments to existing laws to regulate further the consumer revolving credit
industry. The trust may be liable for violations of consumer protection laws
that apply to the receivables, either as assignee from us with respect to
obligations arising before transfer of the receivables to the trust or as the
party directly responsible for obligations arising after the transfer. In
addition, an account holder may be entitled to assert those violations by way of
set-off against the obligation to pay the amount of receivables owing. All
receivables that were not created in compliance in all material respects with
the requirements of consumer protection laws, if the noncompliance has a
material adverse effect on the noteholders' interest therein, will be reassigned
to us. The servicer has also agreed in the pooling and servicing agreement and
the transfer and servicing agreement to indemnify the trust, among other things,
for any liability arising from those types of violations. For a discussion of
the trust's rights if the receivables were not created in compliance in all
material respects with applicable laws, see "Description of the Notes --
Representations and Warranties" in this prospectus.
Application of federal and state bankruptcy and debtor relief laws would
affect the interests of the noteholders if those laws result in any receivables
being charged-off as
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uncollectible. See "Description of the Notes -- Defaulted Receivables; Rebates
and Fraudulent Charges Investor Charge-Offs" in this prospectus.
Federal Income Tax Consequences
General
The following summary describes the material United States federal income
tax consequences of the purchase, ownership and disposition of the notes.
Additional federal income tax considerations relevant to a particular series may
be set forth in the accompanying prospectus supplement. The following summary
has been prepared and reviewed by Rooks, Pitts and Poust as special tax counsel
to the Issuer. The summary is based on the Internal Revenue Code of 1986, as
amended as of the date hereof, and existing final, temporary and proposed
Treasury regulations, revenue rulings and judicial decisions, all of which are
subject to prospective and retroactive changes. The summary is addressed only to
original purchases of the notes, deals only with notes held as capital assets
within the meaning of Section 1221 of the Internal Revenue Code and, except as
specifically set forth below, does not address tax consequences of holding notes
that may be relevant to investors in light of their own investment circumstances
or their special tax situations, for example:
. banks and thrifts,
. insurance companies,
. regulated investment companies,
. dealers in securities,
. holders that will hold the offered notes as a position in a "straddle"
for tax purposes or as a part of a "synthetic security," "conversion
transaction" or other integrated investment comprised of the offered
notes, and one or more other investments,
. trusts and estates, and
. pass-through entities, the equity holders of which are any of the
foregoing.
Further, this discussion does not address alternative minimum tax
consequences or any tax consequences to holders of interests in a noteholder.
Special tax counsel to the issuer is of the opinion that the following summary
of federal income tax consequences is correct in all material respects. An
opinion of special tax counsel to the issuer, however, is not binding on the
Internal Revenue Service or the courts, and no ruling on any of the issues
discussed below will be sought from the IRS. In addition, no transaction closely
comparable to the purchase of the
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notes has been the subject of any Treasury Regulation, revenue ruling or
judicial decision. Accordingly, we suggest that persons considering the purchase
of notes consult their own tax advisors with regard to the United States federal
income tax consequences of an investment in the notes and the application of
United States federal income tax laws, as well as the laws of any state, local
or foreign taxing jurisdictions, to their particular situations.
Tax Classification of the Issuer and the Notes
Treatment of the Issuer as an Entity, Not Subject to Tax. Special tax
counsel to the issuer is of the opinion that, although no transaction closely
comparable to that contemplated herein has been the subject of any Treasury
Regulation, revenue ruling or judicial decision, the trust will not be
classified as an association or as a publicly traded partnership taxable as a
corporation for federal income tax purposes. As a result, special tax counsel to
the issuer is of the opinion that the issuer will not be subject to federal
income tax. However, as discussed above, this opinion is not binding on the IRS
and no assurance can be given that this classification will prevail.
The precise tax classification of the issuer for federal income tax
purposes is not certain. It might be viewed as merely holding assets on our
behalf as collateral for notes issued by the us. On the other hand, the issuer
could be viewed as a separate entity for tax purposes issuing its own notes.
This distinction may have a significant tax effect on particular noteholders as
stated below under "Possible Alternative Classifications."
Treatment of the Notes as Debt. Special tax counsel to the issuer is of the
opinion that, although no transaction closely comparable to that contemplated
herein has been the subject of any Treasury regulation, revenue ruling or
judicial decision, the notes will be characterized as debt for United States
federal income tax purposes. The issuer agrees by entering into the Indenture,
and the noteholders agree by their purchase and holding of notes, to treat the
notes as debt for United States federal income tax purposes.
Possible Alternative Classifications. If, contrary to the opinion of
special tax counsel to the issuer, the IRS successfully asserted that a series
or class of notes did not represent debt for United States federal income tax
purposes, those notes might be treated as equity interests in the issuer or some
other entity for United States federal income tax purposes. If so treated,
investors could be treated for United States federal income tax purposes either
as partners in a partnership or, alternatively, as shareholders in a taxable
corporation. Treatment of a noteholder as a partner could have adverse tax
consequences to certain holders; for example, income to foreign persons
generally would be subject to United States tax and United States tax return
filing and withholding requirements, and individual holders might be subject to
limitations on their ability to deduct their share of partnership expenses. If
notes instead were treated as corporate stock, the taxable corporation would not
be able to reduce its taxable income by deductions for interest expense on notes
recharacterized as equity, and any increase in the corporate tax imposed with
respect to the taxable corporation could materially reduce cash available to
make payments on the notes; further, noteholders might not be entitled to any
dividends received deduction in respect of payments of interest on notes treated
as dividends. In addition, even if the notes are
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treated as debt, the issuer is also able to issue other securities which may be
treated as debt or as equity interests in the issuer. The issuance of additional
securities requires the delivery of a new opinion of counsel generally to the
effect that the new issuance will not cause the issuer to become taxable as a
separate entity for federal income tax purposes; however, the new opinion would
not bind the IRS, and the issuer could become taxable as a corporation as a
result of the new issuance, potentially diminishing cash available to make
payments on the notes. We suggest that prospective investors consult with their
own tax advisors with regard to the consequences of each of the possible
alternative characterizations to them in their particular circumstances. The
following discussion assumes that the classifications of the notes as debt is
correct.
Consequences to Holders of the Offered Notes
Interest and Original Issue Discount. In general, stated interest on a note
will be includible in gross income as it accrues or is received in accordance
with a noteholder's usual method of tax accounting. If a class of notes is
issued with original issue discount, the provisions of Sections 1271 through
1273 and 1275 of the Code will apply to those notes. Under those provisions, a
holder of a note issued with original issue discount--including a cash basis
holder--generally would be required to include the original issue discount on a
note in income for federal income tax purposes on a constant yield basis,
resulting in the inclusion of original issue discount in income in advance of
the receipt of cash attributable to that income. In general, a note will be
treated as having original issue discount to the extent that its "stated
redemption price" exceeds its "issue price," if that excess equals or exceeds
0.25 percent multiplied by the weighted average life of the note, determined by
taking into account the number of complete years following issuance until
payment is made for each partial principal payment. Under Section 1272(a)(6) of
the Internal Revenue Code, special provisions apply to debt instruments on which
payments may be accelerated due to prepayments of other obligations securing
those debt instruments. However, no regulations have been issued interpreting
those provisions, and the manner in which those provisions would apply to the
notes is unclear, but the application of Section 1272(a)(6) could affect the
rate of accrual of original issue discount and could have other consequences to
holders of the notes. Additionally, the IRS could take the position based on
Treasury regulations that none of the interest payable on a note is
"unconditionally payable" and hence that all of the interest payable on the note
should be included in the note's stated redemption price at maturity. If
sustained, that treatment should not significantly affect tax liabilities for
most holders of the notes, but we suggest that prospective noteholders consult
their own tax advisors concerning the impact to them in their particular
circumstances. The issuer intends to take the position that interest on the
notes constitutes "qualified stated interest" and that the above consequences do
not apply.
Disposition of the Notes: Defeasance. Upon the sale, exchange or retirement
of a note, the holder of the note generally will recognize taxable gain or loss
in an amount equal to the difference between (a) the amount realized on the
disposition, other than that part of the amount attributable to accrued interest
and (b) the holder's adjusted tax basis in the note. A taxable exchange of a
note could also occur as a result of our substitution of money or investments
for
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the receivables in the trust portfolio. See "Description of the Notes --
Defeasance" in this prospectus. The holder's adjusted tax basis in the note
generally will equal the cost of the note to that holder, increased by any
original issue discount previously included in income by that holder with
respect to the note, and decreased by the amount of any payments of principal or
original issue discount previously received by that holder with respect to its
note. Any related gain or loss generally will be capital gain or loss, and will
be long-term capital gain or loss if at the time of sale the note has been held
for more than one year.
Foreign Holders. Under United States federal income tax law now in effect,
payments of interest by the issuer to a holder of a note who, as to the United
States, is a nonresident alien individual or a foreign corporation (a "foreign
person") will be considered "portfolio interest," and will not be subject to
United States federal income tax and withholding tax provided:
. the interest is not effectively connected with the conduct of a trade
or business within the United States by the foreign person and,
. the foreign person is not, for United States federal income tax
purposes, actually or constructively a "10 percent shareholder" of us
or the issuer, a "controlled foreign corporation" with respect to
which we or the issuer is a "related person" within the meaning of the
Internal Revenue Code, or a bank extending credit under a loan
agreement entered into in the ordinary course of its trade or
business, and,
. the foreign person provides the person who is otherwise required to
withhold United States tax with respect to the notes with an
appropriate statement, on IRS Form W-8 or a new Form W-8BEN and signed
under penalties of perjury, certifying that the beneficial owner of
the note is a foreign person and providing the foreign person's name
and address.
If a note is held through a securities clearing organization or other
financial institutions, as is expected to be the case unless definitive notes
are issued, the organization or institution may provide the relevant signed
statement generally to the withholding agent. In that case, however, the signed
statement generally must be accompanied by an IRS Form W-8 or new Form W-8BEN
provided by the foreign person that owns the note. If the interest paid to the
foreign person is not portfolio interest, then it will be subject to United
States federal income and withholding tax at a rate of 30%, unless reduced or
eliminated by an applicable tax treaty or the interest is effectively connected
with the conduct of a trade or business within the United States and, in either
case, the appropriate statement has been provided. The new form referred to
above in this paragraph is included in the U.S. Treasury Department's recently
issued final Treasury Regulations, which revised some of the procedures whereby
a foreign person may establish an exemption from withholding generally beginning
January 1, 2001. We suggest that foreign persons consult their tax advisors
concerning the impact to them, if any, of those revised procedures.
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Any capital gain realized on the sale, redemption, retirement or other
taxable disposition of a note by a foreign person will be exempt from United
States federal income tax and withholding tax, provided that (i) the gain is not
effectively connected with the conduct of a trade or business in the United
States by the foreign person, and (ii) in the case of an individual foreign
person, the individual is not present in the United States for 183 days or more
in the taxable year.
Backup Withholding. Payments of principal and interest, as well as payments
of proceeds from the sale, retirement or disposition of a note, may be subject
to "backup withholding" tax under Section 3406 of the Internal Revenue Code at a
rate of 31% if a recipient of those payments fails to furnish to the payor
required identifying information. Any amounts deducted and withheld would be
allowed as a credit against the recipient's United States federal income tax if
appropriate proof is provided under rules established by the IRS. Furthermore,
penalties may be imposed by the IRS on a recipient of payments that is required
to supply information but does not do so in the proper manner. Backup
withholding will not apply with respect to payments made to exempt recipients,
such as corporations and financial institutions. Holders of the notes are urged
to consult their tax advisors regarding their qualification for exemption from
backup withholding and the procedure for obtaining an exemption.
The United States federal income tax discussion set forth above may not be
applicable depending upon a holder's particular tax situation, and does not
purport to address the issues described with the degree of specificity that
would be provided by a taxpayer's own tax advisor. We suggest that prospective
purchasers consult their own tax advisors with respect to the tax consequences
to them of the purchase, ownership and disposition of the notes and the possible
effects of changes in federal tax laws.
State and Local Tax Consequences
The discussion above does not address the taxation of the trust or the tax
consequences of the purchase, ownership or disposition of an interest in the
notes under any state or local tax law. We suggest that each investor consult
its own tax adviser regarding state and local tax consequences.
ERISA Considerations
The prospectus supplement for each series of notes will specify whether the
notes offered by that prospectus supplement are eligible for purchase by
employee benefit plans. Subject to the considerations discussed below, unless
otherwise specified in the accompanying prospectus supplement the notes offered
under this registration statement are eligible for purchase by employee benefit
plans.
Section 406 of the Employee Retirement Income Security Act of 1974, as
amended and Section 4975 of the Internal Revenue Code prohibit a pension,
profit-sharing or other employee
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benefit plan, as well as an individual retirement account or Keogh plan, from
engaging in specified transactions with persons that are "parties in interest"
under ERISA or "disqualified persons" under the Internal Revenue Code with
respect to these benefit plans. A violation of these "prohibited transaction"
rules may result in an excise tax or other penalties and liabilities under ERISA
and the Internal Revenue Code for these persons. Title I of ERISA also requires
that fiduciaries of a benefit plan subject to ERISA make investments that are
prudent, diversified (unless clearly prudent not to do so), and in accordance
with governing plan documents.
Some transactions involving the purchase, holding or transfer of the notes
might be deemed to constitute prohibited transactions under ERISA and the
Internal Revenue Code if assets of the trust were deemed to be assets of a
benefit plan. Under a regulation issued by the United States Department of
Labor, the assets of the trust would be treated as plan assets of a benefit plan
for the purposes of ERISA and the Internal Revenue Code only if the benefit plan
acquires an "equity interest" in the trust and none of the exceptions contained
in the regulation is applicable. An equity interest is defined under the
regulation as an interest in an entity other than an instrument which is treated
as indebtedness under applicable local law and which has no substantial equity
features. Although there can be no assurances in this regard, it appears that,
at the time of their initial issuance, the notes should be treated as debt
without substantial equity features for purposes of the regulation. The debt
characterization of the notes could change after their initial issuance if the
trust incurs losses.
However, without regard to whether the notes are treated as an equity
interest for these purposes, the acquisition or holding of the notes by or on
behalf of a benefit plan could be considered to give rise to a prohibited
transaction if we, the issuer, the owner trustee, the servicer, the
administrator or the indenture trustee, is or becomes a party in interest or a
disqualified person with respect to these benefit plans. In that case, various
exemptions from the prohibited transaction rules could be applicable depending
on the type and circumstances of the plan fiduciary making the decision to
acquire a note. Included among these exemptions are:
. Prohibited Transaction Class Exemption 96-23, regarding transactions
effected by "in-house asset managers";
. Prohibited Transaction Class Exemption 90-1, regarding investments by
insurance company pooled separate accounts;
. Prohibited Transaction Class Exemption 95-60, regarding transactions
effected by "insurance company general accounts";
. Prohibited Transaction Class Exemption 91-38, regarding investments by
bank collective investment funds; and
. Prohibited Transaction Class Exemption 84-14, regarding transactions
effected by "qualified professional asset managers."
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By your acquisition of a note, you will be deemed to represent and warrant
that your purchase and holding of the note will not result in a non-exempt
prohibited transaction under ERISA or the Internal Revenue Code.
Employee benefit plans that are governmental plans, as defined in Section
3(32) of ERISA, and certain church plans, as defined in Section 3(33) of ERISA,
are not subject to ERISA requirements, but may be subject to state or other
federal law requirements which may impose restrictions similar to those under
ERISA and the Internal Revenue Code discussed above.
If you are a plan fiduciary considering the purchase of any of the notes,
you should consult your tax and legal advisors regarding whether the assets of
the trust would be considered plan assets, the possibility of exemptive relief
from the prohibited transaction rules and other issues and their potential
consequences.
Plan of Distribution
Subject to the terms and conditions set forth in an underwriting agreement
to be entered into with respect to each series of notes, we will cause the notes
to be sold by the issuer to each of the underwriters named in that underwriting
agreement and in the accompanying prospectus supplement, and each of those
underwriters will severally agree to purchase from the issuer, the principal
amount of notes set forth in that underwriting agreement and in the accompanying
prospectus supplement, subject to proportional adjustment on the terms and
conditions set forth in the related underwriting agreement in the event of an
increase or decrease in the aggregate amount of notes offered by this prospectus
and by the accompanying prospectus supplement.
In each underwriting agreement, the several underwriters will agree,
subject to the terms and conditions set forth in that underwriting agreement, to
purchase all the notes offered by this prospectus and by the accompanying
prospectus supplement if any of those notes are purchased. In the event of a
default by any underwriter, each underwriting agreement will provide that, in
specified circumstances, purchase commitments of the nondefaulting underwriters
may be increased or the underwriting agreement may be terminated.
Each prospectus supplement will set forth the price at which each series of
notes or class being offered initially will be offered to the public and any
concessions that may be offered to dealers participating in the offering of
those notes. After the initial public offering, the public offering price and
those concessions may be changed.
Each underwriting agreement will provide that the seller will indemnify the
related underwriters against specified liabilities, including liabilities under
the Securities Act of 1933, as amended.
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The place and time of delivery for any series of notes in respect of which
this prospectus is delivered will be set forth in the accompanying prospectus
supplement.
Reports to Noteholders
The servicer will prepare monthly and annual reports that will contain
information about the issuer. The financial information contained in the reports
will not be prepared in accordance with generally accepted accounting
principles. Unless and until definitive notes are issued, the reports will be
sent to Cede & Co. which is the nominee of The Depository Trust Company and the
registered holder of the notes. No financial reports will be sent to you. See
"Description of the Notes -- Book-Entry Registration," " -- Reports to
Noteholders" and " -- Evidence as to Compliance" in this prospectus.
Where You Can Find More Information
We filed a registration statement relating to the notes with the SEC. This
prospectus is part of the registration statement, but the registration statement
includes additional information.
The servicer will file with the SEC all required annual, monthly and
special SEC reports and other information about the trust.
You may read and copy any reports, statements or other information we file
at the SEC's public reference room in Washington, D.C. You can request copies of
these documents, upon payment of a duplicating fee, by writing to the SEC.
Please call the SEC at (800) SEC-0330 for further information on the operation
of the public reference rooms. Our SEC filings are also available to the public
on the SEC Internet site (http://www.sec.gov.).
The SEC allows us to "incorporate by reference" information we file with
it, which means that we can disclose important information to you by referring
you to those documents. The information incorporated by reference is considered
to be part of this prospectus. Information that we file later with the SEC will
be filed under the name of Spiegel Credit Corporation III and will automatically
update the information in this prospectus. In all cases, you should rely on the
later information over different information included in this prospectus or the
accompanying prospectus supplement. We incorporate by reference any future
annual, monthly and special SEC reports and proxy materials filed by or on
behalf of the issuer and Spiegel Master Trust until we terminate our offering of
the notes.
As a recipient of this prospectus, you may request a copy of any document
we incorporate by reference, except exhibits to the documents--unless the
exhibits are specifically incorporated by reference-- at no cost, by writing or
calling us at: [____________________], [______________________], Attention:
[__________], Telephone: (____) _______.
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Glossary of Terms for Prospectus
"Aggregate Principal Balance" means, on any date, the sum of (a) the total
amount of principal receivables, (b) the amount on deposit in the excess funding
account, after excluding any investment earnings and (c) the amount of principal
collections on deposit in the collection account, after excluding any investment
earnings, in each case as of that date.
"Eligible Account" means an account:
. that is payable in United States dollars;
. the cardholder of which has provided, as his or her most recent
billing address, an address located in the United States or its
territories or possessions;
. that the servicer has not finally determined to be counterfeit or
fraudulent;
. that does not have any receivables that have been charged off as
uncollectible by the servicer in accordance with its charge account
guidelines or its customary and usual servicing procedures;
. that was originated by the bank or us in the ordinary course of
business;
. as to which we have good title, and which has not been sold or pledged
to any other party ; and
. that does not have receivables that have been sold or pledged to any
other party other than us under the receivables purchase agreement.
"Eligible Receivable" means each receivable:
. that has arisen under an Eligible Account;
. that was created in compliance, in all material respects, with all
requirements of law applicable to the bank or us and under the terms
of a credit card agreement which complies in all material respects
with all requirements of law applicable to the bank or us;
. for which all consents, licenses, approvals or authorizations of, or
registrations with, any governmental authority required to be obtained
or given by the bank or us in connection with the creation of the
receivable or the execution, delivery and performance by the bank of
the related credit card agreement have been duly obtained or given and
are in full force and effect as of the date of the creation of that
receivable;
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. as to which, either we or the trust will have good title free and
clear of all liens and security interests, other than any lien for
municipal or other local taxes if those taxes are not then due and
payable or if we are then contesting the validity of those taxes in
good faith by appropriate proceedings and we have set aside on our
books adequate reserves with respect to those taxes;
. that is the legal, valid and binding payment obligation of the related
cardholder, enforceable against that cardholder in accordance with its
terms, subject to permitted bankruptcy- and equity-related exceptions;
. that constitutes either an "account" or a "general intangible" or
"chattel paper" under Article 9 of the Uniform Commercial Code;
. that, at the time of transfer to the trust, has not been waived or
modified except as permitted by the bank's charge account guidelines
and which waiver or modification has been reflected in the servicer's
computer files;
. that, at the time of transfer to the trust, is not subject to any
right of recission, setoff, counterclaim or defense, including usury,
that would require that receivable to be charged off in accordance
with the bank's charge account guidelines, other than some bankruptcy-
and equity- related defenses; and
. as to which we and the bank have satisfied all obligations required to
be satisfied at the time it is transferred to the trust.
"Minimum Aggregate Principal Receivables" means, at any time, an amount
equal to the sum of the numerators used to calculate the allocation percentages
with respect to principal collections for all outstanding series of
securities.
"Minimum Seller Amount" will be calculated as follows:
<TABLE>
<S> <C>
(i) the weighted average (by times (ii) the aggregate of the collateral
collateral and invested amounts) and invested amounts of all
of the Minimum Seller outstanding series of
Percentages for all outstanding securities
series of securities
</TABLE>
"Minimum Seller Percentage" means, for any series of securities, the amount
specified in the prospectus supplement for that series, or if not specified in
the related prospectus supplement, 0%.
85
<PAGE>
"Qualified Institution" means a depository institution or trust company,
which may include the trustee, that:
(1) is organized under the laws of the United States or any one of its
states;
(2) has FDIC deposit insurance; and
(3) has:
. a rating of its certificates of deposit, short-term deposits
or commercial paper of at least P-1 and A-1+ from Moody's
and Standard & Poor's, respectively, or
. a rating of its long-term unsecured debt obligations of at
least Aa2 from Moody's or AAA from Standard & Poor's.
"Seller Amount" means, on any date, the difference between:
(1) The sum of
<TABLE>
<S> <C> <C> <C>
(i) the total amount of principal (ii) the excess funding
receivables in the trust portfolio and and account balance,
principal collections held in the excluding investment
collection account for distribution to earnings, at the end of the
any series of securities, in each case immediately prior day
at the end of the immediately prior
day
</TABLE>
minus
(2) the aggregate of the collateral amounts of all outstanding series of
notes and the outstanding invested amounts of all outstanding series
of investor certificates issued by Spiegel Master Trust other than the
collateral certificate.
86
<PAGE>
Annex I
Global Clearance, Settlement and Tax Documentation Procedures
Except in certain limited circumstances, the globally offered Spiegel
Credit Card Master Note Trust Asset Backed Notes (the "global securities") to be
issued in series from time to time will be available only in book-entry form.
Investors in the global securities may hold those global securities through any
of The Depository Trust Company, Clearstream or Euroclear. The global securities
will be tradable as home market instruments in both the European and U.S.
domestic markets. Initial settlement and all secondary trades will settle in
same-day funds.
Secondary market trading between investors holding global securities
through Clearstream and Euroclear will be conducted in the ordinary way in
accordance with their normal rules and operating procedures and in accordance
with conventional eurobond practice--i.e., seven calendar day settlement.
Secondary market trading between investors holding global securities
through DTC will be conducted according to the rules and procedures applicable
to U.S. corporate debt obligations.
Secondary cross-market trading between Clearstream or Euroclear and DTC
participants holding notes will be effected on a delivery-against-payment basis
through the respective depositories of Clearstream and Euroclear, in that
capacity, and as DTC participants.
Non-U.S. holders of global securities will be subject to U.S. withholding
taxes unless those holders meet certain requirements and deliver appropriate
U.S. tax documents to the securities clearing organizations or their
participants.
Initial Settlement
All global securities will be held in book-entry form by DTC in the name of
Cede & Co. as nominee of DTC. Investors' interests in the global securities will
be represented through financial institutions acting on their behalf as direct
and indirect participants in DTC. As a result, Clearstream and Euroclear will
hold positions on behalf of their participants through their respective
depositories, which in turn will hold those positions in accounts as DTC
participants.
Investors electing to hold their global securities through DTC (other than
through accounts at Clearstream or Euroclear) will follow the settlement
practices applicable to U.S. corporate debt obligations. Investor securities
custody accounts will be credited with their holdings against payment in same-
day funds on the settlement date.
Investors electing to hold their global securities through Clearstream or
Euroclear accounts will follow the settlement procedures applicable to
conventional eurobonds in registered form. Global securities will be credited to
the securities custody accounts on the settlement date against payment for value
on the settlement date.
87
<PAGE>
Secondary Market Trading
Because the purchaser determines the place of delivery, it is important to
establish at the time of the trade where both the purchaser's and seller's
accounts are located to ensure that settlement can be made on the desired value
date.
Trading between DTC Participants. Secondary market trading between DTC
participants --other than Citibank, N.A. and Morgan Guaranty Trust Company of
New York as depositories for Clearstream and Euroclear, respectively--will be
settled using the procedures applicable to U.S. corporate debt obligations in
same-day funds.
Trading between Clearstream customers and/or Euroclear participants.
Secondary market trading between Clearstream customers or Euroclear participants
will be settled using the procedures applicable to conventional eurobonds in
same-day funds.
Trading between DTC seller and Clearstream customer or Euroclear purchaser.
When global securities are to be transferred from the account of a DTC
participant--other than Citibank and Morgan as depositories for Clearstream and
Euroclear, respectively--to the account of a Clearstream customer or a Euroclear
participant, the purchaser must send instructions to Clearstream prior to
settlement date 12:30. Clearstream or Euroclear, as the case may be, will
instruct Citibank or Morgan, respectively, to receive the global securities for
payment. Payment will then be made by Citibank or Morgan, as the case may be, to
the DTC participant's account against delivery of the global securities. After
settlement has been completed, the global securities will be credited to the
respective clearing system and by the clearing system, in accordance with its
usual procedures, to the Clearstream customer's or Euroclear participant's
account. Credit for the global securities will appear the next day (European
time) and the cash debit will be back-valued to, and the interest on the global
securities will accrue from, the value date, which would be the preceding day
when settlement occurred in New York. If settlement is not completed on the
intended value date (i.e., the trade fails), the Clearstream or Euroclear cash
debit will be valued instead as of the actual settlement date.
Clearstream customers and Euroclear participants will need to make
available to the respective clearing systems the funds necessary to process
same-day funds settlement. The most direct means of doing so is to pre-position
funds for settlement, either from cash on hand or existing lines of credit, as
they would for any settlement occurring within Clearstream or Euroclear. Under
this approach, they may take on credit exposure to Clearstream or Euroclear
until the global securities are credited to their accounts one day later.
As an alternative, if Clearstream or Euroclear has extended a line of
credit to them, Clearstream customers or Euroclear participants can elect not to
pre-position funds and allow that credit line to be drawn upon the finance
settlement. Under this procedure, Clearstream customers or Euroclear
participants purchasing global securities would incur overdraft charges for one
day, assuming they cleared the overdraft when the global securities were
credited to their
88
<PAGE>
accounts. However, interest on the global securities would accrue from the value
date Therefore, in many cases the investment income on the global securities
earned during that one-day period may substantially reduce or offset the amount
of such overdraft charges, although this result will depend on each Clearstream
customer's or Euroclear participant's particular cost of funds.
Since the settlement is taking place during New York business hours, DTC
participants can employ their usual procedures for sending global securities to
Citibank or Morgan for the benefit of Clearstream customers or Euroclear
participants. The sale proceeds will be available to the DTC seller on the
settlement date. Thus, to the DTC participant a cross-market transaction will
settle no differently from a trade between two DTC participants.
Trading between Clearstream or Euroclear seller and DTC purchaser. Due to
time zone differences in their favor, Clearstream customers and Euroclear
participants may employ their customary procedures for transactions in which
global securities are to be transferred by the respective clearing system,
through Citibank or Morgan, to another DTC participant. The seller will send
instructions to Clearstream before settlement date 12:30. In these cases,
Clearstream or Euroclear will instruct Citibank or Morgan, as appropriate, to
credit the global securities to the DTC participant's account against payment.
The payment will then be reflected in the account of the Clearstream customer or
Euroclear participant the following day, and receipt of the cash proceeds in the
Clearstream customer's or Euroclear participant's account would be back-valued
to the value date, which would be the preceding day, when settlement occurred in
New York. If the Clearstream customer or Euroclear participant has a line of
credit with its respective clearing system and elects to draw on such line of
credit in anticipation of receipt of the sale proceeds in its account, the back-
valuation may substantially reduce or offset any overdraft charges incurred over
that one-day period. If settlement is not completed on the intended value date
(i.e., the trade fails), receipt of the cash proceeds in the Clearstream
customer's or Euroclear participant's account would instead be valued as of the
actual settlement date.
Certain U.S. Federal Income Tax Documentation Requirements
A beneficial owner of global securities holding securities through
Clearstream, Euroclear or through DTC--if the holder has an address outside the
U.S.--will be subject to the 30% U.S. withholding tax that generally applies to
payments of interest including original issue discount on registered debt issued
by U.S. Persons, unless, under currently applicable law, (i) each clearing
system, bank or other financial institution that holds customers' securities in
the ordinary course of its trade or business in the chain of intermediaries
between the beneficial owner and the U.S. entity required to withhold tax
complies with applicable certification requirements and (ii) the beneficial
owner takes one of the following steps to obtain an exemption or reduced tax
rate:
Exception for non-U.S. Persons (Form W-8 or new Form W-8BEN). Beneficial
owners of notes that are non-U.S. Persons generally can obtain a complete
exemption from the withholding
89
<PAGE>
tax by filing a signed Form W-8--Certificate of Foreign Status. If the
information shown on Form W-8 changes, a new Form W-8 must be filed within 30
days of the change.
Exemption for non-U.S. Persons with effectively connected income (Form 4224
or new Form W-8ECI). A non-U.S. Person, including a non-U.S. corporation or bank
with a U.S. branch, for which the interest income is effectively connected with
its conduct of a trade or business in the United States, can obtain an exemption
from the withholding tax by filing Form 4224--Exemption from Withholding of Tax
on Income Effectively Connected with the Conduct of a Trade or Business in the
United States.
Exemption or reduced rate for non-U.S. Persons resident in treaty,
countries (Form 1001 or new Form W-8BEN). Non-U.S. Persons that are note owners
residing in a country that has a tax treaty with the United States can obtain an
exemption or reduced tax rate depending on the treaty terms by filing Form
1001--Ownership, Exemption or Reduced Rate Certificate. If the treaty provides
only for a reduced rate, withholding tax will be imposed at that rate unless the
filer alternatively files Form W-8. Form 1001 may be filed by the note owner or
his agent.
Exemption for U.S. Persons (Form W-9). U.S. Persons can obtain a complete
exemption from the withholding tax by filing Form W-9--Payer's Request for
Taxpayer Identification Number and Certification).
U.S. Federal Income Tax Reporting Procedure. The note owner of a global
security or, in the case of a Form 1001 or a Form 4224 filer, his agent, files
by submitting the appropriate form to the person through whom it holds. This is
the clearing agency, in the case of persons holding directly on the books of the
clearing agency. Form W-8 and Form 1001 are effective for three calendar years
and Form 4224 is effective for one calendar year.
A new Form W-8BEN, if furnished with a taxpayer identification number, will
remain in effect until the status of the beneficial owner changes, or a change
in circumstances makes any information on the form incorrect. A new Form W-8BEN,
if furnished without a taxpayer identification number, and a new Form W-8ECI
will remain in effect for a period starting on the date the form is signed and
ending on the last day of the third succeeding calender year, unless a change in
circumstances makes any information on the form incorrect.
The term "U.S. Person" means (i) a citizen or resident of the United
States, (ii) a corporation or partnership organized in or under the laws of the
United States, any state thereof, or any political subdivision of either
(including the District of Columbia), or (iii) an estate or trust the income of
which is includible in gross income for United States tax purposes regardless of
its source. This summary does not deal with all aspects of U.S. Federal income
tax withholding that may be relevant to foreign holders of the global
securities. We suggest that investors consult their own tax advisors for
specific tax advice concerning their holding and disposing of the global
securities. Further, the U.S. Treasury Department recently finalized new
regulations that revise some aspects of the current system for withholding on
amounts paid to foreign persons, including the substitution of Form W-8BEN in
place of Form W-8. Under these regulations,
90
<PAGE>
interest or original issue discount paid to a nonresident alien would continue
to be exempt from U.S. withholding taxes, including backup withholding, provided
that the holder complies with the new certification procedures.
91
<PAGE>
================================================================================
Spiegel Credit Card Master Note Trust
Issuer
Spiegel Credit Corporation III
Seller
First Consumers National Bank
Originator of the Trust
Series 2000-__
$
Class A [Floating Rate] [___]% Asset Backed Notes
$
Class B [Floating Rate] [___]% Asset Backed Notes
$
Class C [Floating Rate] [___]% Asset Backed Notes
_________
PROSPECTUS SUPPLEMENT
_________
Underwriters of the Class A Notes
Underwriters of the Class B Notes
Underwriters of the Class C Notes
You should rely on the information contained or incorporated by reference in
this prospectus supplement and the accompanying prospectus. We have not
authorized anyone to provide you with different information.
We are not offering the notes in any state where the offer is not permitted.
We do not claim the accuracy of the information in this prospectus supplement
and the accompanying prospectus as of any date other than the dates stated on
their respective covers.
Dealers will deliver a prospectus supplement and prospectus when acting as
underwriters of the notes and with respect to their unsold allotments or
subscriptions. In addition, all dealers selling the notes will deliver a
prospectus supplement and prospectus until _________, 2000.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
Estimated expenses in connection with the offering of the Securities
being registered herein are as follows:
<TABLE>
<S> <C>
Registration Statement fee........................... $ 475,200 */
Legal fees and expenses.............................. 540,000 **/
Accounting fees and expenses......................... 150,000 **/
Rating agency fees................................... 780,000 **/
Trustee fees and expenses............................ 75,000 **/
Blue Sky expenses.................................... 20,000 **/
Printing and engraving............................... 150,000 **/
Miscellaneous........................................ 90,000 **/
----------
Total........ $2,280,200 **/
==========
</TABLE>
____________________
* Actual.
** Estimated.
Item 15. Indemnification of Directors and Officers.
Section 145 of the General Corporation Law of the State of Delaware (the
"Delaware Law") empowers a Delaware corporation to indemnify any persons who
are, or are threatened to be made, parties to any threatened, pending or
completed legal action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of such
corporation), by reason of the fact that such person was an officer or director
of such corporation, or is or was serving at the request of such corporation as
a director, officer, employee or agent of another corporation or enterprise. The
indemnity may include expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding, provided that such officer
acted in good faith and in a manner he or she reasonably believed to be in or
not opposed to the corporation's best interests, and, for criminal proceedings,
had no reasonable cause to believe his or her conduct was illegal. A Delaware
corporation may indemnify officers and directors against expenses (including
attorneys' fees) in connection with the defense or settlement of an action by or
in the right of the corporation under the same conditions, except that no
indemnification is permitted without judicial approval if the officer or
director is adjudged to be liable to the corporation. Where an officer or
director is successful on the merits or otherwise in the defense of any action
referred to above, the corporation must indemnify him or her against the
expenses which such officer or director actually and reasonably incurred.
The Certificate of Incorporation of Spiegel Credit Corporation III (the
"Corporation") provides for indemnification of the directors of the company to
the full extent permitted by applicable law.
The bylaws of the Company include the following provisions:
ARTICLE XI
Indemnification of Officers, Directors,
Employees and Agents; Insurance
(a) The Corporation shall indemnify subject to the
requirements of Subsection (d) any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the
Corporation) by reason of the fact that he is or was a director,
officer, employee or agent of the Corporation, or is or was serving at
the request of the Corporation as a director, officer, employee,
fiduciary or agent of another corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise, against expenses
(including attorney's fees), judgments, fines, penalties, taxes and
amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding if he acted in good
faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the Corporation, and, with respect
<PAGE>
to any criminal action or proceeding, had no reasonable cause to believe
his conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction, or upon a plea of
nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner
which he reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action
or proceeding, had reasonable cause to believe that his conduct was
unlawful.
(b) The Corporation shall indemnify subject to the requirements
of Subsection (d) any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action or suit
by or in the right of the Corporation to procure a judgment in its favor
by reason of the fact that he is or was a director, officer, employee or
agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee, fiduciary or agent of
another corporation, partnership, joint venture, trust, employee benefit
plan or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense
or settlement of such action or suit if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best
interests of the Corporation and except that no indemnification shall be
made in respect of any claim, issue or matter as to which such person
shall have been adjudged to be liable to the Corporation unless and only
to the extent that the Court of Chancery or the court in which such
action or suit was brought shall determine upon application that,
despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled
to indemnity for such expenses which the Court of Chancery or such other
court shall deem proper.
(c) To the extent that a director, officer, employee or agent of
the Corporation, or a director, officer, employee, fiduciary or agent of
any other enterprise serving at the request of the Corporation, has been
successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in Subsections (a) and (b), or in defense of any
claim, issue or matter therein, the Corporation shall indemnify him
against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith.
(d) Any indemnification under Subsections (a) and (b) (unless
ordered by a court) shall be made by the Corporation only as authorized
in the specific case upon a determination that indemnification of the
director, officer, employee, fiduciary or agent is proper in the
circumstances because he has met the applicable standard of conduct set
forth in Subsections (a) and (b). Such determination shall be made (1)
by the board of directors by a majority vote of a quorum consisting of
directors who were not parties to such action, suit or proceeding, or
(2) if such quorum is not obtainable, or, even if obtainable a quorum of
disinterested directors so directs, by independent legal counsel in a
written opinion, or (3) by the stockholders.
(e) Expenses incurred by a director, officer, employee,
fiduciary or agent in defending a civil or criminal action, suit or
proceeding may be paid by the Corporation in advance of the final
disposition of such action, suit or proceeding as authorized by the
Board of Directors in the specific case upon receipt of an undertaking
by or on behalf of the director, officer, employee, fiduciary or agent
to repay such amount if it shall ultimately be determined that he is not
entitled to be indemnified by the Corporation as authorized in this
Section.
(d) The indemnification and advancement of expenses provided by,
or granted pursuant to, the other Subsections of this Section shall not
limit the Corporation from providing any other indemnification permitted
by law nor shall it be deemed exclusive of any other rights to which
those seeking indemnification or advancement of expenses may be entitled
under any by-law, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his official capacity and
as to action in another capacity while holding such office.
(g) The provisions of this Section shall be applicable to all
actions, suits or proceedings pending at the time or commenced after the
adoption of this Section, whether arising from acts or omissions to act
occurring, or based on claims asserted, before or after the adoption of
this Section. A finding that any provision of this Section is invalid or
of limited application shall not affect any other provision of this
Section nor shall a finding that any portion of any provision of this
Section is invalid or of limited application affect the balance of such
provision.
(h) The Corporation shall have power to purchase and maintain
insurance on behalf of any person who is or was a director, officer,
employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, employee, fiduciary
or agent of another corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise against any liability asserted
against him and incurred by him in any such capacity, or arising out of
his status as such, whether or not the Corporation would have the power
to indemnify him against such liability under the provisions of this
Section.
II-2
<PAGE>
(i) All terms contained in this Section shall have the meaning
given to them by Section 145 of the Delaware General Corporation Law.
(j) The indemnification and advancement of expenses provided by,
or granted pursuant to, this Section shall continue as to a person who
has ceased to be a director, officer, employee or agent and shall inure
to the benefit of the heirs, executors and administrators of such a
person.
Directors and officers of the Corporation are entitled to the benefits
of directors' and officers' insurance obtained by Spiegel for itself and its
subsidiaries which insures directors and officers of the registrants against
wrongful acts as a director or officer, including civil liabilities pursuant to
the Securities Act of 1933.
Item 16. Exhibits.
1.1 --Form of Underwriting Agreement
3.1 --Certificate of Incorporation of Spiegel Credit Corporation III*
3.2 --By-laws of Spiegel Credit Corporation III*
4.1 --Form of Master Indenture
4.2 --Form of Indenture Supplement
4.3 --Form of Transfer and Servicing Agreement*
4.4 --Form of Trust Agreement of Spiegel Credit Card Master Note Trust*
4.5 --Form of Administration Agreement*
4.6 --Amended and Restated Pooling and Servicing Agreement*
4.7 --Amendment No. 1 to Amended and Restated Pooling and Servicing
Agreement*
4.8 --Amendment No. 2 to Amended and Restated Pooling and Servicing
Agreement*
4.9 --Receivables Purchase Agreement*
4.10 --Amendment No. 1 to Receivables Purchase Agreement*
4.11 --Amendment No. 2 to Receivables Purchase Agreement*
4.12 --Form of Collateral Series Supplement, including form of
Collateral Certificate*
4.13 --Form of Notes
5.1 --Opinion of Rooks, Pitts and Poust with respect to legality
8.1 --Opinion of Rooks, Pitts and Poust with respect to tax matters
23.1 --Consent of Rooks, Pitts and Poust (included in Exhibits 5.1 and
8.1)
24.1 --Powers of Attorney (included on page II-5)*
25.1 --Form T-1 Statement of Eligibility and Qualification under the
Trust Indenture Act of 1939, as amended, of BNY Midwest Trust
Company, as indenture trustee under the Indenture**
____________________
* Previously filed
** To be filed in accordance with Section 305(b)(2) of the Trust Indenture Act
of 1939.
Item 17. Undertakings
(a) As to Rule 415: The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made of the securities registered hereby, a post-effective amendment to
this registration statement;
II-3
<PAGE>
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933, as amended;
(ii) to reflect in the prospectus any facts or events arising after
the effective date of this registration statement (or the most recent
post-effective amendment hereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in this
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar volume of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering
range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement;
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in this registration statement or
any material change to such information in this registration statement;
provided, however, that the undertakings set forth in clauses (i) and (ii) above
do not apply if the information required to be included in a post-effective
amendment by those clauses is contained in periodic reports filed with or
furnished to the Commission by the registrant pursuant to Section 13 or Section
15(d) of the Securities Exchange Act of 1934, as amended, that are incorporated
by reference in this registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination
of the offering.
(b) As to documents subsequently filed that are incorporated by reference:
The undersigned registrant hereby undertakes that, for purposes of determining
any liability under the Securities Act of 1933, as amended, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934, as amended, that is incorporated by reference
in this registration statement shall be deemed to be a new registration
statement relating to the securities offered herein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(c) As to indemnification: Insofar as indemnification for liabilities
arising under the Securities Act of 1933, as amended, may be permitted to
directors, officers and controlling persons of the registrant pursuant to the
provisions described in Item 15 herein, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act of
1933, as amended, and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1933, as amended, and will be governed by the final adjudication of such
issue.
(d) As to qualification of Trust Indentures under Trust Indenture Act of
1939 for delayed offerings:
The undersigned registrant hereby undertakes to file an application for the
purpose of determining the eligibility of the trustee to act under subsection
(a) of Section 310 of the Trust Indenture Act in accordance with the rules and
regulations prescribed by the Commission under Section 305(b) of the Act.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3, reasonably believes that the security
rating requirement for the asset-backed securities being registered on this form
will be met by the time of the sale and has duly caused this Amendment No. 2 to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Chicago, Illinois, on the date of
October 6, 2000.
SPIEGEL CREDIT CORPORATION III,
as Co-Registrant
By: /s/ James W. Sievers
---------------------------------------
James W. Sievers
President
SPIEGEL MASTER TRUST,
as Co-Registrant
By: SPIEGEL CREDIT CORPORATION III,
as originator of Spiegel Master Trust
By: /s/ James W. Sievers
--------------------------------------
James W. Sievers
President
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 2 to the Registration Statement has been signed on October 6, 2000 by the
following persons in the capacities indicated.
Signature Title
--------- -----
/s/ James W. Sievers President and Director
-------------------------------- (Principal Executive Officer)
James W. Sievers
/s/ Michael R. Moran* Vice President, Secretary and Director
-------------------------------- (Principal Financial Officer)
Michael R. Moran
/s/ John R. Steele* Treasurer and Director
-------------------------------- (Principal Accounting Officer)
John R. Steele
/s/ Mark W. Weisbard* Director
--------------------------------
Mark W. Weisbard
/s/ Ian M. Sherman* Director
--------------------------------
Ian M. Sherman
*By: /s/ James W. Sievers
----------------------------
Name: James W. Sievers
Title: Attorney-In-Fact
________________________________
* Note: Powers of Attorney appointing James W. Sievers and John R. Steele, and
either of them acting singly, to sign any and all amendments to this
Registration Statement were previously filed with the Securities and
Exchange Commission.
II-5
