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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-A
FOR REGISTRATION OF CERTAIN CLASSES OF SECURITIES
PURSUANT TO SECTION 12(b) OR (g) OF THE
SECURITIES EXCHANGE ACT OF 1934
DAYTON HUDSON RECEIVABLES CORPORATION
(Exact name of registrant as specified in its charter)
Minnesota 41-1812153
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(State of Incorporation (I.R.S. Employer Identification No.)
or organization)
80 South Eighth Street
14th Floor, Suite 1401
Minneapolis, Minnesota 55402
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(Address of principal (Zip Code)
executive offices)
SECURITIES TO BE REGISTERED PURSUANT TO
SECTION 12(b) OF THE ACT:
Name of each exchange
Title of each class on which each class is to
to be so registered be registered
- ------------------- -------------------
None None
SECURITIES TO BE REGISTERED PURSUANT TO
SECTION 12(g) OF THE ACT:
6.25% Class A Asset Backed Certificates, Series 1997-1
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(Title of Class)
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Item 1. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED.
Item 1 is answered by reference to the "Description of the
Certificates" on pages 38 to 54 of the Prospectus dated October 3,
1997 and by reference to the "Description of Class A Certificates" on
pages S-29 to S-50 of the Prospectus Supplement dated October 8, 1997,
filed as Exhibits 11 and 12, respectively, to this Registration
Statement. Copies of the pages hereby incorporated by reference in
response to this Item 1 are attached hereto as Exhibit 13 (Prospectus
pages) and Exhibit 14 (Prospectus Supplement pages).
Item 2. EXHIBITS.
Exhibit 1 Specimen copy of 6.25% Class A Asset Backed Certificate,
Series 1997-1.
Exhibit 2 Copy of the Pooling and Servicing Agreement, dated as of
September 13, 1995 among Dayton Hudson Receivables
Corporation, as transferor, Retailers National Bank, as
servicer, and Norwest Bank Minnesota, National
Association, as trustee (the "Pooling and Servicing
Agreement").
Exhibit 3 Addendum to Pooling and Servicing Agreement, dated as of
August 28, 1996 among Dayton Hudson Receivables
Corporation, as transferor, Retailers National Bank, as
servicer, and Norwest Bank Minnesota, National
Association, as trustee.
Exhibit 4 Second Amendment to the Pooling and Servicing Agreement,
dated as of September 19, 1997 among Dayton Hudson
Receivables Corporation, as transferor, Retailers National
Bank, as servicer, and Norwest Bank Minnesota, National
Association, as trustee.
Exhibit 5 Copy of the Series 1997-1 Supplement, dated as of October
8, 1997 to the Pooling and Servicing Agreement among
Dayton Hudson Receivables Corporation, as transferor,
Retailers National Bank, as servicer, and Norwest Bank
Minnesota, National Association, as trustee.
Exhibit 6 Copy of the Bank Receivables Purchase Agreement, dated as
of September 13, 1995 between Retailers National Bank, as
seller, and Dayton Hudson Capital Corporation, as
purchaser.
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Exhibit 7 Addendum to Bank Receivables Purchase Agreement, dated as
of August 28, 1996 between Retailers National Bank and
Dayton Hudson Capital Corporation.
Exhibit 8 Copy of the Receivables Purchase Agreement, dated as of
September 13, 1995 between Dayton Hudson Capital
Corporation, as seller, and Dayton Hudson Receivables
Corporation, as purchaser.
Exhibit 9 Addendum to Receivables Purchase Agreement, dated as of
August 28, 1996 between Dayton Hudson Capital Corporation
and Dayton Hudson Receivables Corporation.
Exhibit 10 Copy of the Underwriting Agreement, dated as of October 8,
1997 among Salomon Brothers Inc. as representative of the
underwriters, Dayton Hudson Receivables Corporation and
Dayton Hudson Corporation.
Exhibit 11 Prospectus dated October 3, 1997 relating to the sale of
the 6.25% Class A Asset Backed Certificates, Series 1997-1
(the "Prospectus").
Exhibit 12 Prospectus Supplement dated October 8, 1997 relating to
the sale of the 6.25% Class A Asset Backed Certificates,
Series 1997-1 (the "Prospectus Supplement").
Exhibit 13 Pages 38 to 54 of the Prospectus.
Exhibit 14 Pages S-29 to S-50 of the Prospectus Supplement.
SIGNATURE
Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the registrant has duly caused this Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized.
DAYTON HUDSON RECEIVABLES CORPORATION
(Registrant)
Dated: January 16, 1998 By: /s/ Stephen C. Kowalke
Name: Stephen C. Kowalke
Title: Vice President and Treasurer
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EXHIBIT INDEX
Exhibit No. Description Page
- ----------- ----------- ----
1 Specimen copy of 6.25% Class A Asset Backed 6
Certificate, Series 1997-1.
2 Copy of the Pooling and Servicing Agreement, *
dated as of September 13, 1995 among Dayton Hudson
Receivables Corporation, as transferor, Retailers
National Bank, as servicer, and Norwest Bank
Minnesota, National Association, as trustee (the
"Pooling and Servicing Agreement") (Incorporated by
reference to Exhibit 4.1 to Dayton Hudson Receivables
Corporation's Current Report on Form 8-K, filed on
September 26, 1995).
3 Addendum to Pooling and Servicing Agreement, dated as 12
of August 28, 1996 among Dayton Hudson Receivables
Corporation, as transferor, Retailers National Bank, as
servicer, and Norwest Bank Minnesota, National
Association, as trustee.
4 Second Amendment to the Pooling and Servicing Agreement, 14
dated as of September 19, 1997 among Dayton Hudson
Receivables Corporation, as transferor, Retailers National
Bank, as servicer, and Norwest Bank Minnesota, National
Association, as trustee.
5 Copy of the Series 1997-1 Supplement, dated as of *
October 8, 1997 to the Pooling and Servicing Agreement
among Dayton Hudson Receivables Corporation, as transferor,
Retailers National Bank, as servicer, and Norwest Bank
Minnesota, National Association, as trustee (Incorporated
by reference to Exhibit 4.3 to Dayton Hudson Receivables
Corporation's Current Report on Form 8-K, filed on
December 8, 1997).
6 Copy of the Bank Receivables Purchase Agreement, dated *
as of September 13, 1995 between Retailers National Bank,
as seller, and Dayton Hudson Capital Corporation, as
purchaser (Incorporated by reference to Exhibit 10.1 to
Dayton Hudson Receivables Corporation's Form S-3
Registration Statement, registration no. 33-92956).
4
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7 Addendum to Bank Receivables Purchase Agreement, dated 18
as of August 28, 1996 between Retailers National Bank and
Dayton Hudson Capital Corporation.
8 Copy of the Receivables Purchase Agreement, dated as of *
September 13, 1995 between Dayton Hudson Capital
Corporation, as seller, and Dayton Hudson Receivables
Corporation, as purchaser (Incorporated by reference to
Exhibit 10.2 to Dayton Hudson Receivables Corporation's
Form S-3 Registration Statement, registration no.
33-92956).
9 Addendum to Receivables Purchase Agreement, dated as 20
of August 28, 1996 between Dayton Hudson Capital
Corporation and Dayton Hudson Receivables Corporation.
10 Copy of the Underwriting Agreement, dated as of 22
October 8, 1997 among Salomon Brothers Inc. as
representative of the underwriters, Dayton Hudson
Receivables Corporation and Dayton Hudson Corporation.
11 Prospectus (the "Prospectus") dated October 3, 1997 *
relating to the sale of the 6.25% Class A Asset Backed
Certificates, Series 1997-1 (Incorporated by reference
to Dayton Hudson Receivables Corporation's Form
S-3 Registration Statement, registration no. 33-92956).
12 Prospectus Supplement (the "Prospectus Supplement") *
dated October 8, 1997 relating to the sale of the 6.25%
Class A Asset Backed Certificates, Series 1997-1
(Incorporated by reference to Dayton Hudson Receivables
Corporation's Form S-3 Registration Statement,
registration no. 33-92956).
13 Pages 38 to 54 of the Prospectus. 59
14 Pages S-29 to S-50 of the Prospectus Supplement. 76
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* Previously filed
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REGISTERED $200,000,000
No. R-1 CUSIP NO. 23975NAB8
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK
CORPORATION ("DTC"), TO THE TRUSTEE OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO.
OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO.
OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO.
HAS AN INTEREST HEREIN.
DAYTON HUDSON CREDIT CARD MASTER TRUST
SERIES 1997-1
6.25% CLASS A ASSET BACKED CERTIFICATE
Evidencing an undivided interest in a trust, the corpus of which consists of
receivables generated from time to time in the ordinary course of business from
a portfolio of consumer open end credit card accounts generated or to be
generated by Retailers National Bank ("RNB" or the "Servicer") and other assets
and interests constituting the Trust under the Agreement described below.
(Not an interest in or a recourse obligation of Dayton Hudson
Receivables Corporation, Dayton Hudson Capital Corporation or RNB or any
affiliate of any of them.)
This certifies that CEDE & CO. (the "Certificateholder") is the
registered owner of a fractional undivided interest in the Dayton Hudson Credit
Card
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Master Trust (the "Trust") issued pursuant to the Pooling and Servicing
Agreement, dated as of September 13, 1995 (the "Pooling and Servicing
Agreement"; such term to include any amendment thereto) by and between Dayton
Hudson Receivables Corporation, as Transferor (the "Transferor"), RNB, as the
Servicer, and Norwest Bank Minnesota, National Association, as Trustee (the
"Trustee"), and the Series 1997-1 Supplement, dated as of October 15, 1997 (the
"Series 1997-1 Supplement"), among the Transferor, the Servicer and the Trustee.
The Pooling and Servicing Agreement, as supplemented by the Series 1997-1
Supplement, is herein referred to as the "Agreement". The corpus of the Trust
consists of all of the Transferor's right, title and interest in, to and under
the Trust Assets (as defined in the Agreement).
This Certificate does not purport to summarize the Agreement and
reference is made to that Agreement for information with respect to the
interests, rights, benefits, obligations, proceeds, and duties evidenced hereby
and the rights, duties and obligations of the Trustee. To the extent not
defined herein, the capitalized terms used herein have the meanings ascribed to
them in the Agreement. This Certificate is one of a class of Certificates
entitled "Dayton Hudson Credit Card Master Trust $400,000,000 6.25% Class A
Asset Backed Certificates, Series 1997-1" (the "Class A Certificates"), each of
which represents a fractional undivided interest in the Trust, and is issued
under and is subject to the terms, provisions and conditions of the Agreement,
to which Agreement, as amended from time to time, the Certificateholder by
virtue of the acceptance hereof assents and by which the Certificateholder is
bound.
The Transferor has structured the Agreement, the Class A Certificates
and the "Dayton Hudson Credit Card Master Trust $122,875,817 Class B Asset
Backed Certificates, Series 1997-1" (the "Class B Certificates") with the
intention that the Class A Certificates will qualify under applicable tax law as
debt, and both the Transferor and each holder of a Class A Certificate (a "Class
A Certificateholder") or any interest therein by acceptance of its Certificate
or any interest therein, agrees to treat the Class A Certificates for purposes
of federal, state and local income or franchise taxes and any other tax imposed
on or measured by income, as debt.
2
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No principal will be payable to the Class A Certificateholders until
the first Distribution Date in the Amortization Period.
Each Class A Certificate represents the right to receive interest at
the rate of 6.25% per annum (such rate, as in effect from time to time, the
"Class A Certificate Rate"). Interest on the Class A Certificates will accrue
from the Closing Date and will be distributed on November 25, 1997, and on the
25th day of each month thereafter, or if such day is not a business day, on the
next succeeding business day (each, a "Distribution Date"), in an amount equal
to one-twelfth of the product of (a) the Class A Certificate Rate and (b) the
outstanding principal balance of the Class A Certificates as of the last day of
the preceding Monthly Period (or in the case of the first Distribution Date, the
initial Class A Invested Amount).
Principal is scheduled to be paid in full on the October 2002
Distribution Date for the Class A Certificates, but may be paid earlier or later
in certain circumstances. Unpaid principal, together with interest, will be
payable monthly to Class A Certificateholders following the Class A Expected
Final Payment Date to the extent principal has not been paid in full on the
Class A Expected Final Payment Date. However, no payments of principal or
interest will be made on the Series 1997-1 Certificates after the Series 1997-1
Termination Date, regardless of whether principal and interest have been paid in
full with respect thereto. Interest will be distributed to the Class A
Certificateholders monthly on each Distribution Date prior to the Series
Termination Date. Interest for any Distribution Date will include accrued
interest at the Class A Certificate Rate from and including the preceding
Distribution Date or, in the case of the first Distribution Date from and
including the Closing Date, to but excluding such Distribution Date. Interest
for any Distribution Date due but not paid on any Distribution Date will be due
on the next succeeding Distribution Date together with, to the extent permitted
by applicable law, additional interest on such amount at the Class A Certificate
Rate plus 2% per annum.
In general, payments of principal with respect to the Class A
Certificates are limited to the Class A Invested Amount, which may be less than
the unpaid prin-
3
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cipal balance of the Class A Certificates. The Class A Expected Final Payment
Date is the October 2002 Distribution Date, but principal with respect to the
Class A Certificates may be paid earlier or later under certain circumstances
described in the Agreement and the Series 1997-1 Supplement. If for one or more
months during the Accumulation Period there are not sufficient funds to pay the
Controlled Deposit Amount, then to the extent that excess funds are not
available on subsequent Distribution Dates with respect to the Accumulation
Period to make up for such shortfalls, the final payment of principal of the
Class A Certificates will occur later than the Class A Expected Final Payment
Date.
Unless the certificate of authentication hereon has been executed by
or on behalf of the Trustee, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement, or be valid for any purpose.
4
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IN WITNESS WHEREOF, the Transferor has caused this Certificate to be
duly executed under its official seal.
DAYTON HUDSON RECEIVABLES
CORPORATION
By: /s/ Stephen C. Kowalke
--------------------------
Name: Stephen C. Kowalke
Title: Vice President and Treasurer
Dated: October 15, 1997
<PAGE>
CERTIFICATE OF AUTHENTICATION
This is one of the Class A Certificates referred to in the
within-mentioned Pooling and Servicing Agreement.
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
By: /s/ Michael W.G. Bjorgan
------------------------
Name: Michael W.G. Bjorgan
Title: Corporate Trust Officer
<PAGE>
ADDENDUM TO POOLING AND SERVICING AGREEMENT
AND SERIES 1995-1 SUPPLEMENT
THIS ADDENDUM TO POOLING AND SERVICING AGREEMENT AND SERIES 1995-1 SUPPLEMENT
(this "ADDENDUM"), dated as of August 28, 1996, is among DAYTON HUDSON
RECEIVABLES CORPORATION, a Minnesota corporation ("DHRC'), as Transferor,
RETAILERS NATIONAL BANK, as Servicer, and NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Trustee.
WITNESSETH:
WHEREAS, the parties hereto are parties to a Pooling and Servicing
Agreement and to the Series 1995-1 Supplement thereto (collectively, the
"ORIGINAL AGREEMENTS"), each of which is dated as of September 13, 1995 and is
governed by Delaware law; and
WHEREAS, the parties hereto desire to confirm their intention that the
Original Agreements be governed by Delaware law and desire to confirm certain
agreements between themselves in connection therewith;
NOW, THEREFORE, the parties hereto hereby irrevocably and unconditionally
agree as follows:
1. Solely in respect of the Original Agreements (as modified by this
Addendum and as further amended, modified or supplemented from time to time
(collectively, the "AGREEMENTS")) and the transactions and other matters
contemplated thereby or relating thereto, each of the parties hereto hereby
irrevocably and unconditionally agrees (a) to be subject to the jurisdiction of
the courts of the State of Delaware and of the federal courts sitting in the
State of Delaware, and (b)(i) to the extent such party is not otherwise subject
to service of process in the State of Delaware, to appoint and maintain an agent
in the State of Delaware as such party's agent for acceptance of legal process,
and (ii) that service of process may also be made on such party by prepaid
certified mail with a proof of mailing receipt validated by the United States
Postal Service constituting evidence of valid service, and that service made
pursuant to (b)(i) or (ii) above shall have the same legal force and effect as
if served upon such party personally within the State of Delaware. For purposes
of implementing the parties' foregoing agreement to appoint and maintain an
agent for service of process in the State of Delaware solely in respect of the
Agreements and the transactions and other matters contemplated thereby or
relating thereto, each such party that has not as of the date hereof already
duly appointed such an agent does hereby appoint RL&F Service Corp., One Rodney
Square, 10th Floor, Wilmington, Delaware 19801, as such agent.
2. This Addendum shall be construed in accordance with the laws of the
State of Delaware, without reference to its conflict of laws provisions, and the
obligations, rights and remedies of the parties hereunder shall be determined in
accordance with such laws.
<PAGE>
3. This Addendum may be executed in two or more counterparts (and by the
different parties on separate counterparts), each of which shall be an original,
but all of which together shall constitute one and the same instrument.
4. As modified hereby, the Original Agreements are hereby ratified,
approved and confirmed in every respect, and shall remain in full force and
effect.
IN WITNESS WHEREOF, the parties hereto have caused this Addendum to be duly
executed by their respective officers as of the day and year first above
written.
DAYTON HUDSON RECEIVABLES CORPORATION,
as Transferor
By: /s/ Stephen Kowalke
---------------------------------------
Name: Stephen Kowalke
Title: VP & Treasurer
RETAILERS NATIONAL BANK, as Servicer
By: /s/ Stephen Kowalke
---------------------------------------
Name: Stephen Kowalke
Title: Asst. Treasurer
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Trustee
By:
---------------------------------------
Name:
Title:
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SECOND AMENDMENT TO
THE POOLING AND SERVICING AGREEMENT
SECOND AMENDMENT TO POOLING AND SERVICING AGREEMENT dated as of
September 19, 1997 (this "Amendment"), among DAYTON HUDSON RECEIVABLES
CORPORATION, as Transferor, RETAILERS NATIONAL BANK, as Servicer and NORWEST
BANK MINNESOTA, NATIONAL ASSOCIATION, as Trustee (the "Trustee") of the Dayton
Hudson Credit Card Master Trust (the "Trust").
WHEREAS, the Transferor, the Servicer and the Trustee have heretofore
executed and delivered a Pooling and Servicing Agreement dated as of September
13, 1995 (as amended and supplemented through the date hereof, the "Pooling and
Servicing Agreement"), between the Transferor, the Servicer and the Trustee;
WHEREAS, Section 13.1(a) of the Pooling and Servicing Agreement
provides that the Transferor, the Servicer and the Trustee without the consent
of the Investor Certificateholders may amend the Pooling and Servicing Agreement
from time to time, including changing in any manner any of the provisions of the
Agreement, provided that (x) the Transferor shall have delivered to the Trustee
an Officer's Certificate to the effect that the Transferor reasonably believes
that such action shall not adversely affect in any material respect the
interests of any Investor Certificateholder, (y) the Rating Agency Condition
shall have been satisfied with respect to any such amendment and (z) a Tax
Opinion is delivered in connection with any such amendment;
WHEREAS, the Trustee has received each of the items specified above;
WHEREAS, all other conditions precedent to the execution of this
Amendment have been complied with; and
NOW, THEREFORE, the Transferor, the Servicer and the Trustee are
executing and delivering this Amendment in order to amend the provisions of the
Pooling and Servicing Agreement in the manner set forth below.
Capitalized terms used but not defined herein shall have the meanings
assigned to them in the Pooling and Servicing Agreement.
<PAGE>
SECTION 1.1 DEFINITIONS. Section 1.1 of the Pooling and Servicing
Agreement is hereby amended by deleting the definition of "Automatic Additional
Account" and substituting therefor the following definition:
"AUTOMATIC ADDITIONAL ACCOUNT" shall mean each open end
credit card account established pursuant to a Credit Card
Agreement coming into existence (i) after the Trust Cut-Off Date
and prior to the earlier of the Automatic Addition Termination
Date or an Automatic Addition Suspension Date and (ii) following
an Automatic Addition Suspension Date and after a Restart Date
and prior to a subsequent Automatic Addition Suspension Date or
any Automatic Addition Termination Date; PROVIDED HOWEVER with
respect to any accounts initially originated by parties other
than Retailers National Bank and its successors or assigns and/or
any transferees of Accounts from Retailers National Bank, such
accounts shall be deemed to be Automatic Additional Accounts only
upon satisfaction of the Rating Agency Condition.
SECTION 2.1 ADDITIONS OF ACCOUNTS. Section 2.9(d)(ii) of the Pooling
and Servicing Agreement is hereby amended by deleting subsection (I) thereof and
substituting therefor the following paragraph:
the arithmetic average for the three Monthly Periods preceding
the then current Monthly Period, of the annualized percentage
equivalent of a fraction for each respective Monthly Period, the
numerator of which is equal to the Defaulted Amount for the
respective Monthly Period and the denominator of which is equal
to the aggregate Principal Receivables as of the first day of the
respective Monthly Period, is less than 10.50%;
SECTION 3.1 RATIFICATION OF POOLING AND SERVICING AGREEMENT. As
amended by this Amendment, the Pooling and Servicing Agreement is in all
respects ratified and confirmed, and the Pooling and Servicing Agreement, as so
amended by this Amendment, shall be read, taken and construed as one and the
same instrument.
2
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SECTION 4.1 SEVERABILITY. If any one or more of the agreements,
provisions or terms or portions of this Amendment shall be for any reason
whatsoever held invalid, then such agreements, provisions or terms or portions
thereof shall be deemed severable from the remaining agreements, provisions or
terms of this Amendment and shall in no way affect the validity or
enforceability of the other provisions or portions of this Amendment.
SECTION 5.1 COUNTERPARTS. This Amendment may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
SECTION 6.1 GOVERNING LAW. THIS AMENDMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
3
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IN WITNESS WHEREOF, the Servicer, the Transferor and the Trustee have
caused this Amendment to be executed by their respective officers, thereunto
duly authorized, as of the day and year first above written.
DAYTON HUDSON RECEIVABLES
CORPORATION,
as Transferor
By: /s/ Stephen Kowalke
-----------------------------------
Name: Stephen Kowalke
Title: VP & Treasurer
RETAILERS NATIONAL BANK,
as Servicer
By: /s/ T. Scully
-----------------------------------
Name: T. Scully
Title: Secretary
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION,
as Trustee
By: /s/ Michael W. G. Bjorgan
-----------------------------------
Name: Michael W. G. Bjorgan
Title: Corporate Trust Officer
<PAGE>
ADDENDUM TO BANK RECEIVABLES
PURCHASE AGREEMENT
THIS ADDENDUM TO BANK RECEIVABLES PURCHASE AGREEMENT (this "ADDENDUM"), dated as
of August 28, 1996, is between RETAILERS NATIONAL BANK, a national banking
association, and DAYTON HUDSON CAPITAL CORPORATION, a Minnesota corporation.
WITNESSETH:
WHEREAS, the parties hereto are parties to a Bank Receivables Purchase
Agreement dated as of September 13, 1995 (the "ORIGINAL AGREEMENT") which is
governed by Delaware law; and
WHEREAS, the parties hereto desire to confirm their intention that the
Original Agreement be governed by Delaware law and desire to confirm certain
agreements between themselves in connection therewith;
NOW, THEREFORE, the parties hereto hereby irrevocably and unconditionally
agree as follows:
1. Solely in respect of the Original Agreement as modified by this
Addendum and as further amended, modified or supplemented from time to time
(collectively, the "AGREEMENT") and the transactions and other matters
contemplated thereby or relating thereto, each of the parties hereto hereby
irrevocably and unconditionally agrees (a) to be subject to the jurisdiction of
the courts of the State of Delaware and of the federal courts sitting in the
State of Delaware, and (b)(i) to the extent such party is not otherwise subject
to service of process in the State of Delaware, to appoint and maintain an agent
in the State of Delaware as such party's agent for acceptance of legal process,
and (ii) that service of process may also be made on such party by prepaid
certified mail with a proof of mailing receipt validated by the United States
Postal Service constituting evidence of valid service, and that service made
pursuant to (b)(i) or (ii) above shall have the same legal force and effect as
if served upon such party personally within the State of Delaware. For purposes
of implementing the parties' foregoing agreement to appoint and maintain an
agent for service of process in the State of Delaware solely in respect of the
Agreement and the transactions and other matters contemplated thereby or
relating thereto, each such party that has not as of the date hereof already
duly appointed such an agent does hereby appoint RL&F Service Corp., One Rodney
Square, 10th Floor, Wilmington, Delaware 19801, as such agent.
2. This Addendum shall be construed in accordance with the laws of the
State of Delaware, without reference to its conflict of laws provisions, and the
obligations, rights and remedies of the parties hereunder shall be determined in
accordance with such laws.
<PAGE>
3. This Addendum may be executed in two or more counterparts (and by the
different parties on separate counterparts), each of which shall be an original,
but all of which together shall constitute one and the same instrument.
4. As modified hereby, the Original Agreement is hereby ratified,
approved and confirmed in every respect, and shall remain in full force and
effect.
IN WITNESS WHEREOF, the parties hereto have caused this Addendum to be duly
executed by their respective officers as of the day and year first above
written.
RETAILERS NATIONAL BANK
By: /s/ Stephen C. Kowalke
-------------------------------
Name: Stephen C. Kowalke
Title: Assistant Treasurer
DAYTON HUDSON CAPITAL CORPORATION
By: /s/ Stephen C. Kowalke
-------------------------------
Name: Stephen C. Kowalke
Title: Treasurer
-2-
<PAGE>
ADDENDUM TO RECEIVABLES
PURCHASE AGREEMENT
THIS ADDENDUM TO RECEIVABLES PURCHASE AGREEMENT (this "ADDENDUM"), dated as of
August 28, 1996, is between DAYTON HUDSON CAPITAL CORPORATION, a Minnesota
corporation, and DAYTON HUDSON RECEIVABLES CORPORATION, a Minnesota corporation.
WITNESSETH:
WHEREAS, the parties hereto are parties to a Receivables Purchase Agreement
dated as of September 13, 1995 (the "ORIGINAL AGREEMENT") which is governed by
Delaware law; and
WHEREAS, the parties hereto desire to confirm their intention that the
Original Agreement be governed by Delaware law and desire to confirm certain
agreements between themselves in connection therewith;
NOW, THEREFORE, the parties hereto hereby irrevocably and unconditionally
agree as follows:
1. Solely in respect of the Original Agreement (as modified by this
Addendum and as further amended, modified or supplemented from time to time
(collectively, the "AGREEMENT")) and the transactions and other matters
contemplated thereby or relating thereto, each of the parties hereto hereby
irrevocably and unconditionally agrees (a) to be subject to the jurisdiction of
the courts of the State of Delaware and of the federal courts sitting in the
State of Delaware, and (b)(i) to the extent such party is not otherwise subject
to service of process in the State of Delaware, to appoint and maintain an agent
in the State of Delaware as such party's agent for acceptance of legal process,
and (ii) that service of process may also be made on such party by prepaid
certified mail with a proof of mailing receipt validated by the United States
Postal Service constituting evidence of valid service, and that service made
pursuant to (b)(i) or (ii) above shall have the same legal force and effect as
if served upon such party personally within the State of Delaware. For purposes
of implementing the parties' foregoing agreement to appoint and maintain an
agent for service of process in the State of Delaware solely in respect of the
Agreement and the transactions and other matters contemplated thereby or
relating thereto, each such party that has not as of the date hereof already
duly appointed such an agent does hereby appoint RL&F Service Corp., One Rodney
Square, 10th Floor, Wilmington, Delaware 19801, as such agent.
2. This Addendum shall be construed in accordance with the laws of the
State of Delaware, without reference to its conflict of laws provisions, and the
obligations, rights and remedies of the parties hereunder shall be determined in
accordance with such laws.
<PAGE>
3. This Addendum may be executed in two or more counterparts (and by the
different parties on separate counterparts), each of which shall be an original,
but all of which together shall constitute one and the same instrument.
4. As modified hereby, the Original Agreement is hereby ratified,
approved and confirmed in every respect, and shall remain in full force and
effect.
IN WITNESS WHEREOF, the parties hereto have caused this Addendum to be duly
executed by their respective officers as of the day and year first above
written.
DAYTON HUDSON CAPITAL CORPORATION
By: /s/ Stephen C. Kowalke
-----------------------------------
Name: Stephen C. Kowalke
Title: Treasurer
DAYTON HUDSON RECEIVABLES CORPORATION
By: /s/ Stephen C. Kowalke
-----------------------------------
Name: Stephen C. Kowalke
Title: Vice President & Treasurer
-2-
<PAGE>
DAYTON HUDSON CREDIT CARD MASTER TRUST
SERIES 1997-1
$400,000,000 6.25% Class A Asset Backed
Certificates, Series 1997-1
UNDERWRITING AGREEMENT
October 8, 1997
SALOMON BROTHERS INC
As Representative of the Several Underwriters
Seven World Trade Center
New York, NY 10048
Ladies and Gentlemen:
1. INTRODUCTORY. Retailers National Bank, a national banking
association ("RNB"), from time to time sells, transfers and conveys receivables
(the "Receivables") generated from time to time in a portfolio of consumer open
end credit card accounts and other rights to Dayton Hudson Capital Corporation,
a Minnesota corporation ("DHCC"). DHCC from time to time sells, transfers and
conveys the Receivables and other rights to Dayton Hudson Receivables
Corporation, a Minnesota corporation (the "Transferor"). The Transferor from
time to time transfers the Receivables to the Dayton Hudson Credit Card Master
Trust (the "Trust"), and the Transferor and Dayton Hudson Corporation, a
Minnesota corporation (the "Company"), propose to cause the Trust to issue to
the Transferor $400,000,000 principal amount of 6.25% Class A Asset Backed
Certificates, Series 1997-1 (the "Certificates"), which the Transferor proposes
to sell to the Underwriters pursuant to the terms hereof, and $122,875,817
principal amount of non interest bearing Class B Asset Backed Certificates,
Series 1997-1 (the "Class B Certificates"), which the Transferor intends to
retain. The Receivables are and will be (i) conveyed to DHCC by RNB pursuant to
the Bank Receivables Purchase Agreement, dated as of
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September 13, 1995, as amended (the "Bank Receivables Purchase Agreement")
between RNB and DHCC, (ii) conveyed to the Transferor by DHCC pursuant to the
Receivables Purchase Agreement, dated as of September 13, 1995, as amended (the
"Receivables Purchase Agreement") between DHCC and the Transferor and (iii)
transferred from the Transferor to the Trust pursuant to (a) a Pooling and
Servicing Agreement among the Transferor, RNB, as Servicer, and Norwest Bank
Minnesota, National Association, as Trustee, dated as of September 13, 1995, as
amended (the "Pooling and Servicing Agreement") and (b) the Series 1997-1
Supplement to the Pooling and Servicing Agreement, to be dated as of October 15,
1997 (the "Supplement"), among the Transferor, the Servicer and the Trustee.
Each Certificate represents a specified percentage undivided interest in the
Trust.
This Underwriting Agreement shall hereinafter be referred to as this
"Agreement." This Agreement, the Bank Receivables Purchase Agreement, the
Receivables Purchase Agreement, the Pooling and Servicing Agreement and the
Supplement shall collectively hereinafter be referred to as the "Basic
Documents." Capitalized terms used but not defined herein have the meanings
assigned thereto in the Pooling and Servicing Agreement and the Supplement. The
Transferor and the Company hereby agree with the several Underwriters named in
Schedule A hereto ("Underwriters") as follows:
2. REPRESENTATIONS AND WARRANTIES OF THE TRANSFEROR AND THE COMPANY.
The Transferor and the Company hereby jointly and severally represent and
warrant to, and agree with, the several Underwriters that:
(a) A registration statement on Form S-3 (No. 33-92956) relating
to the Certificates, including a form of prospectus, has been filed with
the Securities and Exchange Commission ("Commission") and either (i) has
been declared effective under the Securities Act of 1933 ("Act") and is not
proposed to be amended or (ii) is proposed to be amended by amendment or
post-effective amendment. If such registration statement (the "initial
registration statement") has been declared effective, either (i) an
additional registration statement (the "additional registration statement")
relating to the Certificates may have been filed with the Commission
pursuant to Rule 462(b) ("Rule 462(b)") under the Act and, if so filed, has
become effective upon filing pursuant to such Rule and the Certificates all
have been duly registered under the Act pursuant to the
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<PAGE>
initial registration statement and, if applicable, the additional
registration statement or (ii) such an additional registration statement is
proposed to be filed with the Commission pursuant to Rule 462(b) and will
become effective upon filing pursuant to such Rule and upon such filing the
Certificates will all have been duly registered under the Act pursuant to
the initial registration statement and such additional registration
statement. If the Transferor does not propose to amend the initial
registration statement or, if an additional registration statement has been
filed and the Transferor does not propose to amend it and if any
post-effective amendment to either such registration statement has been
filed with the Commission prior to the execution and delivery of this
Agreement, the most recent amendment (if any) to each such registration
statement has been declared effective by the Commission or has become
effective upon filing pursuant to Rule 462(c) ("Rule 462(c)") under the Act
or, in the case of the additional registration statement, Rule 462(b). For
purposes of this Agreement, "Effective Time" with respect to the initial
registration statement or, if filed prior to the execution and delivery of
this Agreement, the additional registration statement means (i) if the
Transferor has advised Salomon Brothers Inc ("Salomon Brothers") as
representative of the Underwriters (the "Representative"), that it does not
propose to amend such registration statement, the date and time as of which
such registration statement, or the most recent post-effective amendment
thereto (if any) filed prior to the execution and delivery of this
Agreement, was declared effective by the Commission or has become effective
upon filing pursuant to Rule 462(c), or (ii) if the Transferor has advised
the Representative that it proposes to file an amendment or post-effective
amendment to such registration statement, the date and time as of which
such registration statement, as amended by such amendment or post-effective
amendment, as the case may be, is declared effective by the Commission. If
an additional registration statement has not been filed prior to the
execution and delivery of this Agreement but the Transferor has advised the
Representative that it proposes to file one, "Effective Time" with respect
to such additional registration statement means the date and
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time as of which such registration statement is filed and becomes effective
pursuant to Rule 462(b). "Effective Date" with respect to the initial
registration statement or the additional registration statement (if any)
means the date of the Effective Time thereof. The initial registration
statement, as amended at its Effective Time, including all material
incorporated by reference therein, including all information contained in
the additional registration statement (if any) and deemed to be a part of
the initial registration statement as of the Effective Time of the
additional registration statement pursuant to the General Instructions of
the Form on which it is filed and including all information (if any) deemed
to be a part of the initial registration statement as of its Effective Time
pursuant to Rule 430A(b) ("Rule 430A(b)") under the Act, is hereinafter
referred to as the "Initial Registration Statement." The additional
registration statement, as amended at its Effective Time, including the
contents of the initial registration statement incorporated by reference
therein and including all information (if any) deemed to be a part of the
additional registration statement as of its Effective Time pursuant to Rule
430A(b), is hereinafter referred to as the "Additional Registration
Statement." The Initial Registration Statement and the Additional
Registration Statement are hereinafter referred to collectively as the
"Registration Statements" and individually as a "Registration Statement."
The form of prospectus relating to the Certificates, as first filed with
the Commission pursuant to and in accordance with Rule 424(b) ("Rule
424(b)") under the Act or (if no such filing is required) as included in a
Registration Statement, including all material incorporated by reference in
such prospectus, is hereinafter referred to as the "Prospectus." No
document has been or will be prepared or distributed in reliance on Rule
434 under the Act.
(b) If the Effective Time of the Initial Registration Statement
is prior to the execution and delivery of this Agreement: (i) on the
Effective Date of the Initial Registration Statement, the Initial
Registration Statement conformed in all material respects to the
requirements of the Act and
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<PAGE>
the rules and regulations of the Commission (the "Rules and Regulations")
and did not include any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make
the statements therein not misleading, (ii) on the Effective Date of the
Additional Registration Statement (if any), each Registration Statement
conformed, or will conform, in all respects to the requirements of the Act
and the Rules and Regulations and did not include, or will not include, any
untrue statement of a material fact and did not omit, or will not omit, to
state any material fact required to be stated therein or necessary to make
the statements therein not misleading, and (iii) on the date of this
Agreement, the Initial Registration Statement and, if the Effective Time of
the Additional Registration Statement is prior to the execution and
delivery of this Agreement, the Additional Registration Statement each
conforms, and at the time of filing of the Prospectus pursuant to Rule
424(b) or (if no such filing is required) at the Effective Date of the
Additional Registration Statement in which the Prospectus is included, each
Registration Statement and the Prospectus conforms or will conform, in all
material respects to the requirements of the Act and the Rules and
Regulations, and neither of such documents includes, or will include, any
untrue statement of a material fact or omits, or will omit, to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading. If the Effective Time of the Initial
Registration Statement is subsequent to the execution and delivery of this
Agreement: on the Effective Date of the Initial Registration Statement,
the Initial Registration Statement and the Prospectus will conform in all
material respects to the requirements of the Act and the Rules and
Regulations, and neither of such documents will include any untrue
statement of a material fact or will omit to state any material fact
required to be stated therein or necessary to make the statements therein
not misleading, and no Additional Registration Statement has been or will
be filed. The preceding two sentences do not apply to statements in or
omissions from a Registration Statement or the Prospectus based upon
written information furnished to
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<PAGE>
the Transferor or the Company by any Underwriter through the Representative
specifically for use therein, it being understood and agreed that the only
such information is that described as such in Section 7(b).
(c) Each of the Transferor and the Company has been duly
incorporated and is an existing corporation in good standing under the laws
of the State of Minnesota, with power and authority (corporate and other)
to own its properties and conduct its business as described in the
Prospectus; and each of the Transferor and the Company is duly qualified to
do business as a foreign corporation in good standing in all other
jurisdictions in which its ownership or lease of property or the conduct of
its business requires such qualification and where the failure to so
qualify might permanently impair title to property material to its
operation or its right to enforce a material contract against others or
expose it to substantial liability in such jurisdiction.
(d) No consent, approval, authorization, or order of, or filing
with, any governmental agency or body or any court is required for the
consummation by the Transferor or the Company of the transactions
contemplated by this Agreement in connection with the issuance and sale of
the Certificates, except such as have been obtained and made under the Act,
such as may be required under state securities laws.
(e) Neither the Transferor nor the Company is in violation of its
Articles of Incorporation or Bylaws or in default in the performance or
observance of any obligation, agreement, covenant or condition contained in
any agreement or instrument to which it is a party or by which it or its
properties are bound which would have a material adverse effect on the
transactions contemplated in the Basic Documents. The execution, delivery
and performance of the Basic Documents and the issuance and sale of the
Certificates and compliance with the terms and provisions thereof will not
result in a material breach or violation of any of the terms and provisions
of, or constitute a default under, any stat-
6
<PAGE>
ute, any rule, regulation or order of any governmental agency or body or
any court, domestic or foreign, having jurisdiction over the Transferor or
the Company or any subsidiary of either of them or any of their properties,
or any material agreement or instrument to which the Transferor or the
Company or any such subsidiary is a party or by which the Transferor or the
Company or any such subsidiary is bound or to which any of the properties
of the Transferor or the Company or any such subsidiary is subject, or the
Articles of Incorporation or Bylaws of the Transferor or the Company or any
such subsidiary, and the Transferor has full power and authority to
authorize, issue and sell the Certificates as contemplated by this
Agreement and each of the Transferor and the Company has full power and
authority to enter into the Basic Documents to which it is a party.
(f) As of the Closing Date, the representations and warranties of
the Transferor in the Basic Documents to which it is a party will be true
and correct.
(g) This Agreement has been duly authorized, executed and
delivered by the Transferor and the Company.
(h) The Transferor has authorized the conveyance of the
Receivables to the Trust, and the Transferor has authorized the Trust to
issue and sell the Certificates.
(i) The Company has delivered to you complete and correct copies
of its Form 10-Q for the first two quarters of 1997 and its Form 10-K for
1996. Except as set forth in or contemplated in the Registration Statement
and the Prospectus, there has been no material adverse change, nor any
development or event involving a prospective material adverse change, in
the condition (financial or other) of either the Transferor or the Company
or the credit card business of the Company or its Affiliates since the date
of the information provided pursuant to the preceding sentence.
(j) Any taxes, fees and other governmen-
7
<PAGE>
tal charges due and payable from or by the Transferor or the Company in
connection with the execution, delivery and performance of the Basic
Documents and the Certificates and any other agreements contemplated
therein shall have been paid or will be paid by the Transferor or the
Company, as the case may be, at or prior to the Closing Date to the extent
then due.
3. PURCHASE, SALE AND DELIVERY OF CERTIFICATES. On the basis of the
representations, warranties and agreements herein contained, but subject to the
terms and conditions herein set forth, the Transferor agrees to sell to the
Underwriters, and the Underwriters agree, severally and not jointly, to purchase
from the Transferor, at a purchase price of 99.48553% of the principal amount
thereof, the respective principal amounts of Certificates set forth opposite the
names of the Underwriters in Schedule A hereto.
The Transferor will deliver against payment of the purchase price the
Certificates in the form of one or more permanent global securities in
definitive form (the "Global Certificates") deposited with the Trustee as
custodian for The Depository Trust Company ("DTC") and registered in the name of
Cede & Co., as nominee for DTC. Interests in any permanent global securities
will be held only in book-entry form through DTC, except in the limited
circumstances described in the Prospectus. Payment for the Certificates shall
be made by the Underwriters in Federal (same day) funds by wire transfer to an
account previously designated to Salomon Brothers by the Transferor or the
Company at 10:00 a.m. (New York time), on October 15, 1997, or at such other
time not later than seven full business days thereafter as Salomon Brothers and
the Transferor determine, such time being herein referred to as the "Closing
Date," against delivery to the Trustee as custodian for DTC of the Global
Certificates representing all of the Certificates. For purposes of Rule 15c6-1
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), the
Closing Date (if later than the otherwise applicable settlement date) shall be
the settlement date for payment of funds and delivery of the Certificates. The
Global Certificates will be made available for checking at the above offices of
Skadden, Arps, Slate, Meagher & Flom LLP, 919 Third Avenue, New York, New York,
at least 24 hours prior to the Closing
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Date.
4. OFFERING BY UNDERWRITERS. It is understood that the several
Underwriters propose to offer the Certificates for sale to the public (which may
include selected dealers) as set forth in the Prospectus.
5. CERTAIN AGREEMENTS OF THE TRANSFEROR AND THE COMPANY. The
Transferor and the Company jointly and severally covenant and agree with the
several Underwriters that:
(a) If the Effective Time of the Initial Registration Statement
is prior to the execution and delivery of this Agreement, the Transferor
will file the Prospectus with the Commission pursuant to Rule 424(b)(1) (or
if applicable, and if insisted to by the Underwriters pursuant to Rule
424(b)(4)) not later than the Commission's close of business on the second
business day following the earlier of (A) the date of determination of the
offering price or (B) the date the Prospectus is first used after
effectiveness in connection with a public offering or sale.
The Transferor will advise the Representative promptly of any such filing
pursuant to Rule 424(b). If the Effective Time of the Initial Registration
Statement is prior to the execution and delivery of this Agreement and an
additional registration statement is necessary to register a portion of the
Certificates under the Act but the Effective Time thereof has not occurred
as of such execution and delivery, the Transferor will file the additional
registration statement or, if filed, will file a post-effective amendment
thereto with the Commission pursuant to and in accordance with Rule 462(b)
on or prior to 10:00 P.M., New York time, on the date of this Agreement or,
if earlier, on or prior to the time the Prospectus is printed and
distributed to any Underwriter, or will make such filing at such later date
as shall have been consented to by Salomon Brothers.
(b) The Transferor or the Company will advise the Representative
promptly of any proposal to amend or supplement the initial or any
additional
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registration statement as filed or the related prospectus, or the Initial
Registration Statement, the Additional Registration Statement (if any) or
the Prospectus, and will not effect such amendment or supplementation
without the Representative's consent; and the Transferor or the Company
will also advise the Representative promptly of the effectiveness of each
Registration Statement (if its Effective Time is subsequent to the
execution and delivery of this Agreement) and of any amendment or
supplementation of a Registration Statement or the Prospectus and of the
institution by the Commission of any stop order proceeding in respect of a
Registration Statement and each of the Transferor and the Company will use
its best efforts to prevent the issuance of any such stop order and to
obtain as soon as possible its lifting, if issued.
(c) If, at any time when a prospectus relating to the
Certificates is required to be delivered under the Act in connection with
sales by any Underwriter or dealer, any event occurs as a result of which
the Prospectus as then amended or supplemented would include any untrue
statement of a material fact or omit to state any material fact necessary
to make the statements therein, in the light of the circumstances under
which they were made, not misleading, or if it is necessary at any time to
amend the Prospectus to comply with the Act, the Transferor will promptly
notify the Representative of such event and will promptly prepare and file
with the Commission (subject to the Representative's prior review pursuant
to paragraph (b) of this Section 5), at its own expense, an amendment or
supplement which will correct such statement or omission, or an amendment
which will effect such compliance. Neither the Representative's consent
to, nor the Underwriters' delivery of, any such amendment or supplement
shall constitute a waiver of any of the conditions set forth in Section 6.
(d) As soon as practicable, but not later than the Availability
Date (as defined below), the Transferor will cause the Trust to make
generally available to the Certificateholders an earnings statement of the
Trust covering a period of at least 12 months beginning after the Effective
Date of the
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Initial Registration Statement (or, if later, the Effective Date of the
Additional Registration Statement) which will satisfy the provisions of
Section 11(a) of the Act. For the purpose of the preceding sentence,
"Availability Date" means the 45th day after the end of the Trust's fourth
fiscal quarter following the fiscal quarter that includes such Effective
Date, except that, if such fourth fiscal quarter is the last quarter of the
Trust's fiscal year, "Availability Date" means the 90th day after the end
of such fourth fiscal quarter.
(e) The Transferor or the Company will furnish to the Representative
copies of each Registration Statement (two of which will be signed and will
include all exhibits), each related preliminary prospectus, and, so long as
delivery of a prospectus relating to the Certificates is required to be
delivered under the Act in connection with sales by any Underwriter or
dealer, the Prospectus and all amendments and supplements to such
documents, in each case as soon as available and in such quantities as the
Representative requests. The Prospectus shall be so furnished on or prior
to 10:00 A.M., New York time, on the business day following the later of
the execution and delivery of this Agreement or the Effective Time of the
Initial Registration Statement. All other such documents shall be so
furnished as soon as available. The Transferor or the Company will pay the
expenses of printing and distributing to the Underwriters all such
documents.
(f) The Transferor will cooperate in the qualification of the
Certificates for sale and the determination of their eligibility for
investment under the laws of such jurisdictions as the Representative
designates and in the continuation of such qualifications in effect so long
as required for the distribution of the Certificates.
(g) For a period from the date of this Agreement until the
retirement of the Certificates (i) RNB, as Servicer, will furnish to the
Representative and, upon request, to each of the other Underwriters, copies
of each certificate and the annual statements of compliance delivered to
the Trustee pursuant to Article III of the Pooling and
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Servicing Agreement and Section 5.2 of the Supplement and the annual
independent certified public accountant's servicing reports furnished to
the Trustee pursuant to Article III of the Pooling and Servicing Agreement,
by either first-class mail or electronic transfer as soon as practicable
after such statements and reports are furnished to the Trustee, and (ii)
any other periodic certificates or reports as may be delivered to the
Trustee or the Certificateholders under the Pooling and Servicing Agreement
or the Supplement.
(h) So long as any of the Certificates is outstanding, the
Transferor will furnish to the Representative by either first-class mail or
electronic transfer as soon as practicable, copies of all documents (A)
distributed, or caused to be distributed, by the Transferor to
Certificateholders, (B) filed, or caused to be filed, by the Transferor
with the Commission pursuant to the Exchange Act, any order of the
Commission thereunder or pursuant to a "no-action" letter from the staff of
the Commission and (C) from time to time, such other information in the
possession of the Transferor concerning the Trust as the Representative may
reasonably request. The Transferor will register the Certificates under
the Exchange Act within 120 days after the end of the fiscal year of the
Trust during which the offering of the Certificates to the public occurred.
(i) The Transferor will pay all expenses incident to the
performance of its obligations under this Agreement and will reimburse the
Underwriters (if and to the extent incurred by them) for any filing fees
and other expenses (including fees and disbursements of their counsel)
incurred by them in connection with qualification of the Certificates for
sale and determination of their eligibility for investment under the laws
of such jurisdictions as the Representative designates and the printing
of memoranda relating thereto, for any fees charged by investment rating
agencies for the rating of the Certificates, for any travel expenses of the
Transferor's officers and employees and any other expenses of the
Transferor in connection with attending or hosting meetings with
prospective pur-
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chasers of the Certificates and for expenses incurred in distributing
preliminary prospectuses and the Prospectus (including any amendments and
supplements thereto).
(j) To the extent, if any, that the ratings provided with respect
to the Certificates by the Rating Agencies is conditional upon the
furnishing of documents or the taking of any other action by the Transferor
or the Company agreed upon on or prior to the Closing Date, the Transferor
or the Company shall furnish such documents and take any such other action.
(k) The Transferor or the Company shall not, until after the
Closing Date, offer, sell or contract to sell, directly or indirectly, or
file with the Commission a registration statement under the Act relating
to, securities substantially similar to the Certificates.
6. CONDITIONS OF THE OBLIGATIONS OF THE UNDERWRITERS. The obligation
of the several Underwriters to purchase and pay for the Certificates on the
Closing Date will be subject to the accuracy of the representations and
warranties on the part of the Transferor and the Company herein, to the accuracy
of the statements of officers of the Transferor and the Company made pursuant to
the provisions hereof, to the performance by each of the Transferor and the
Company of its obligations hereunder and to the following additional conditions
precedent:
(a) The Representative shall have received a letter, dated the
date of delivery thereof (which, if the Effective Time of the Initial
Registration Statement is prior to the execution and delivery of this
Agreement, shall be on or prior to the date of this Agreement or, if the
Effective Time of the Initial Registration Statement is subsequent to the
execution and delivery of this Agreement, shall be prior to the filing of
the amendment or post-effective amendment to the registration statement to
be filed shortly prior to such Effective Time), of Ernst & Young LLP, in
form and substance satisfactory to the Underwriters and counsel for the
Underwriters, confirming that they are independent public accountants
within the meaning of the Act and
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the applicable published Rules and Regulations thereunder and stating in
effect that (i) they have performed certain specified procedures as a
result of which they determined that certain information of an accounting,
financial or statistical nature (which is limited to accounting, financial
or statistical information derived from the general accounting records of
RNB) set forth in the Registration Statements and the Prospectus (and any
supplements thereto), agrees with the accounting records of RNB, excluding
any questions of legal interpretation, and (ii) they have performed certain
specified procedures with respect to the accounts.
For purposes of this subsection, (i) if the Effective Time of the Initial
Registration Statement is subsequent to the execution and delivery of this
Agreement, "Registration Statements" shall mean the initial registration
statement as proposed to be amended by the amendment or post-effective
amendment to be filed shortly prior to its Effective Time, (ii) if the
Effective Time of the Initial Registration Statement is prior to the
execution and delivery of this Agreement but the Effective Time of the
Additional Registration Statement is subsequent to such execution and
delivery, "Registration Statements" shall mean the Initial Registration
Statement and the additional registration statement as proposed to be filed
or as proposed to be amended by the post-effective amendment to be filed
shortly prior to its Effective Time, and (iii) "Prospectus" shall mean the
prospectus included in the Registration Statements. All financial
statements included in material incorporated by reference into the
Prospectus shall be deemed included in the Registration Statements for
purposes of this subsection.
(b) If the Effective Time of the Initial Registration Statement
is not prior to the execution and delivery of this Agreement, such
Effective Time shall have occurred not later than 10:00 P.M., New York
time, on the date of this Agreement or such later date as shall have been
consented to by the Representative. If the Effective Time of the
Additional Registration Statement (if any) is not prior to the execution
and delivery of this Agreement, such Effective Time shall have occurred not
later
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<PAGE>
than 10:00 P.M., New York time, on the date of this Agreement or, if
earlier, the time the Prospectus is printed and distributed to any
Underwriter, or shall have occurred at such later date as shall have been
consented to by Salomon Brothers. If the Effective Time of the Initial
Registration Statement is prior to the execution and delivery of this
Agreement, the Prospectus shall have been filed with the Commission in
accordance with the Rules and Regulations and Section 5(a) of this
Agreement. Prior to such Closing Date, no stop order suspending the
effectiveness of a Registration Statement shall have been issued and no
proceedings for that purpose shall have been instituted or, to the
knowledge of the Transferor, the Company or the Representative, shall be
contemplated by the Commission.
(c) Subsequent to the execution and delivery of this Agreement,
there shall not have occurred (i) any change, or any development or event
involving a prospective change, in the condition (financial or other),
business, properties or results of operations of any of the Transferor,
DHCC, the Company or RNB or its credit card business which, in the judgment
of a majority in interest of the Underwriters including the Representative,
is material and adverse and makes it impractical or inadvisable to proceed
with completion of the public offering or the sale of and payment for the
Certificates; (ii) any downgrading in the rating of any debt securities of
the Company by any "nationally recognized statistical rating organization"
(as defined for purposes of Rule 436(g) under the Act), or any public
announcement that any such organization has under surveillance or review
its rating of any debt securities of the Company (other than an
announcement with positive implications of a possible upgrading, and no
implication of a possible downgrading, of such rating) if in the judgment
of a majority in interest of the Underwriters including the Representative,
the effect of any such downgrading or public announcement makes it
impractical or inadvisable to proceed with the completion of the public
offering or the sale of and payment for the Certificates; (iii) any
suspension or limitation of trading in securities generally on the New York
Stock Exchange, or any setting of minimum prices for
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trading on such exchange, or any suspension of trading of any securities of
the Transferor or the Company on any exchange or in the over-the-counter
market; (iv) any banking moratorium declared by U.S. Federal or New York
authorities; or (v) any outbreak or escalation of major hostilities in
which the United States is involved, any declaration of war by Congress or
any substantial national or international calamity or emergency if, in the
judgment of a majority in interest of the Underwriters including the
Representative, the effect of any such outbreak, escalation, declaration,
calamity or emergency makes it impractical or inadvisable to proceed with
completion of the public offering or the sale of and payment for the
Certificates.
(d) You shall have received from James T. Hale, General Counsel
for the Transferor, the Company, DHCC and RNB, such opinion or opinions
dated the Closing Date and satisfactory in form and substance to you and
your counsel, substantially to the effect that:
(i) Each of the Transferor, the Company and DHCC has been
duly incorporated and is validly existing and in good standing under the
laws of the State of Minnesota with full corporate power, authority and
legal right to own its properties and conduct its business as such
properties are currently owned and such business is currently conducted, to
execute, deliver and perform its obligations under each of the Basic
Documents to which it is a party and, solely with respect to the
Transferor, to execute and deliver to the Trustee the Certificates pursuant
to the Pooling and Servicing Agreement;
(ii) RNB is a national banking corporation duly organized,
validly existing and in good standing under the laws of the United States,
and has full corporate power, authority and legal right to execute, deliver
and perform its obligations under the Basic Documents to which it is a
party and, in all material respects, to own its properties and conduct its
business as such properties are presently owned and as such business is
presently conducted;
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(iii) Each of the Transferor, the Company, DHCC and RNB is
duly qualified to do business and is in good standing as a foreign
corporation (or is exempt from such requirements), and has obtained all
necessary licenses and approvals in each jurisdiction in which failure to
so qualify or to obtain such licenses and approvals would render any Credit
Card Agreement relating to an Account owned by the Credit Card Originator
or any Receivable transferred to the Trust by the Transferor unenforceable
by the Credit Card Originator, the Transferor, the Servicer or the Trustee
and would have a material adverse effect on the interests of the
Certificateholders under the Pooling and Servicing Agreement or under any
Supplement;
(iv) The Certificates have been duly authorized, executed
and delivered by the Transferor and, when duly authenticated by the Trustee
in accordance with the terms of the Pooling and Servicing Agreement and
delivered to and paid for by the Underwriters in accordance with the terms
of this Agreement, will be validly issued and outstanding and entitled to
the benefits provided by the Pooling and Servicing Agreement;
(v) Each of the Basic Documents to which the applicable
entity is a party has been duly authorized, executed and delivered by the
Transferor, the Company, DHCC and/or the Servicer, as the case may be, and
constitutes the legal, valid and binding agreement of the Transferor, the
Company, DHCC and/or the Servicer, as the case may be, enforceable against
the Transferor, the Company, DHCC and/or the Servicer, as the case may be,
in accordance with its terms, except (x) to the extent that the
enforceability thereof may be limited by (A) bankruptcy, insolvency,
moratorium, receivership, conservatorship, reorganization, moratorium or
other similar laws now or hereafter in effect relating to or affecting the
rights and remedies of creditors generally and the rights of creditors as
the same may be applied in the event of bankruptcy, insolvency,
receivership, reorganization, moratorium or other similar event in respect
of the Transferor, the Company, DHCC and/or the Servicer, (B) general
principles of equity (regardless of whether considered and applied in a
pro-
17
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ceeding in equity or in law) and (C) with respect to the Pooling and
Servicing Agreement and the Supplement, the qualification that certain of
the remedial provisions of the Pooling and Servicing Agreement and the
Supplement may be unenforceable in whole or in part, but the inclusion of
such provisions does not affect the validity of the Pooling and Servicing
Agreement or the Supplement taken as a whole, and the Pooling and Servicing
Agreement and the Supplement, together with applicable law, contain
adequate provisions for the practical realization of the benefits of the
security created thereby; and (y) such counsel expresses no opinion as to
the enforceability of any rights to contribution or indemnification which
are violative of public policy underlying any law, rule or regulation;
(vi) No consent, approval, authorization or order of any
governmental agency or body is required for (A) the execution, delivery and
performance by the Transferor, the Company, DHCC or the Servicer of its
obligations under any of the Basic Documents or the Certificates to which
it is a party, or (B) the issuance or sale of the Certificates, except such
as have been obtained under the Act and as may be required under state
securities or blue sky laws in connection with the purchase and
distribution of the Certificates by the Underwriters;
(vii) None of the execution and delivery of the Basic
Documents or the Certificates by the Transferor, the Company, DHCC and/or
the Servicer, as the case may be, or the performance by the Transferor, the
Company, DHCC and/or the Servicer, as the case may be, of the transactions
therein contemplated or the fulfillment of the terms thereof does or will
result in any violation of any statute or regulation or any order or decree
of any court or governmental authority binding upon the Transferor, the
Company, DHCC or the Servicer or the property of the Transferor, the
Company, DHCC or the Servicer, or conflict with, or result in a breach or
violation of any term or provision of, or result in a default under any of
the terms and provisions of, the charter or by-laws of the Transferor, the
Company, DHCC or the Servicer, or any material indenture,
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loan agreement or other material agreement to which the Transferor, the
Company, or the Servicer is a party or by which any of them is bound;
(viii) There are no proceedings or investigations pending
or, to the best knowledge of such counsel, threatened against the
Transferor, the Company, DHCC or RNB, before any court, regulatory body,
administrative agency, or other tribunal or governmental instrumentality
(i) asserting the invalidity of any of the Basic Documents or the
Certificates, (ii) seeking to prevent the issuance of the Certificates or
the consummation of any of the transactions contemplated by any of the
Basic Documents or the Certificates, (iii) seeking any determination or
ruling that, in the reasonable judgment of such counsel, would materially
and adversely affect the performance by the Transferor of its obligations
under any of the Basic Documents, (iv) seeking any determination or ruling
that would materially and adversely affect the validity or enforceability
of any of the Basic Documents or the Certificates or (v) seeking to affect
adversely the income tax attributes of the Trust under the Federal or
applicable state income or franchise tax systems;
(e) You shall have received from Skadden, Arps, Slate, Meagher &
Flom LLP, special counsel to the Transferor, such opinion or opinions dated the
Closing Date and satisfactory in form and substance to you and your counsel,
substantially to the effect that the Certificates will be treated as
indebtedness for Federal income tax purposes and that the Trust will not be
classified as an association taxable as a corporation.
(f) You shall have received from Davenport, Evans, Hurwitz &
Smith, special South Dakota tax counsel to RNB, such opinion or opinions dated
the Closing Date and satisfactory in form and substance to you and your counsel,
substantially to the effect that, to the extent that the Certificates will be
characterized as debt for Federal income tax purposes, the Certificates will be
characterized as debt for South Dakota income tax purposes, and to the effect
that, to the extent that the Trust will not be subject to tax at the entity
level for Federal income tax purposes, the Trust will not be subject to tax at
the entity level for South Dakota income
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tax purposes.
(g) You shall have received from Faegre & Benson, special
Minnesota tax counsel to the Transferor, such opinion or opinions dated the
Closing Date and satisfactory in form and substance to you and your counsel,
substantially to the effect that when the Certificates are beneficially owned by
a person that is not a member of the Transferor's consolidated group, the
certificates will be characterized as debt for Minnesota income tax purposes and
to the effect that the Trust will not be subject to tax at the entity level.
(h) You shall have received from Skadden, Arps, Slate, Meagher &
Flom LLP, special counsel to the Transferor, such opinion or opinions dated the
Closing Date and satisfactory in form and substance to you and your counsel,
substantially to the effect that:
(i) Each of the Pooling and Servicing Agreement and the
Supplement constitutes the valid and binding obligation of the Transferor,
RNB and the Trustee, enforceable against the Transferor, RNB and the
Trustee in accordance with its terms, except (x) to the extent that the
enforceability thereof may be limited by (a) bankruptcy, insolvency,
receivership, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally and the rights
of creditors as the same may be applied in the event of the bankruptcy,
insolvency, receivership, reorganization, moratorium or other similar event
in respect of the Transferor, RNB or the Trustee, (b) general principles of
equity (regardless of whether enforceability is considered in a proceeding
at law or in equity) and (c) the qualification that certain of the remedial
provisions of the Pooling and Servicing Agreement may be unenforceable in
whole or in part, but the inclusion of such provisions does not affect the
validity of the Pooling and Servicing Agreement taken as a whole, and the
Pooling and Servicing Agreement, together with applicable law, contain
adequate provisions for the practical realization of the benefits of the
security created thereby and (y) such counsel expresses no opinion as to
the enforceability of any rights to contribution or indemnification which
are violative of public
20
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policy underlying any law, rule or regulation;
(ii) The Bank Receivables Purchase Agreement constitutes the
valid and binding obligation of RNB and DHCC, enforceable against RNB and
DHCC in accordance with its terms, except (x) to the extent that the
enforceability thereof may be limited by (a) bankruptcy, insolvency,
receivership, conservatorship, reorganization, moratorium or other similar
laws now or hereafter in effect relating to creditors' rights generally and
the rights of creditors as the same may be applied in the event of the
bankruptcy, insolvency, receivership, conservatorship, reorganization,
moratorium or other similar event in respect of RNB or DHCC and (b) general
principles of equity (regardless of whether enforceability is considered in
a proceeding at law or in equity) and (y) such counsel expresses no opinion
as to the enforceability of any rights to contribution or indemnification
which are violative of public policy underlying any law, rule or
regulation;
(iii) The Receivables Purchase Agreement constitutes the
valid and binding obligation of DHCC and the Transferor, enforceable
against DHCC and the Transferor in accordance with its terms, except (x) to
the extent that the enforceability thereof may be limited by (a)
bankruptcy, insolvency, receivership, reorganization, moratorium or other
similar laws now or hereafter in effect relating to creditors' rights
generally and the rights of creditors as the same may be applied in the
event of the bankruptcy, insolvency, receivership, reorganization,
moratorium or other similar event in respect of DHCC and the Transferor and
(b) general principles of equity (regardless of whether enforceability is
considered in a proceeding at law or in equity) and (y) such counsel
expresses no opinion as to the enforceability of any rights to contribution
or indemnification which are violative of public policy underlying any law,
rule or regulation;
(iv) The Certificates, when executed and authenticated in
accordance with the terms of the Pooling and Servicing Agreement and the
Supplement and delivered to and paid for by the Underwriters pursuant to
this Agreement, will be duly and
21
<PAGE>
validly issued and outstanding and will be entitled to the benefits of the
Pooling and Servicing Agreement and the Supplement;
(v) This Agreement has been duly authorized, executed and
delivered by the Transferor and the Company;
(vi) Neither the execution, delivery or performance by each
of the Transferor, the Company, DHCC or RNB of the Basic Documents to which
it is a party, nor the compliance by each of the Transferor, the Company,
DHCC or RNB, as the case may be, with the terms and provisions thereof or
hereof, will contravene any provision of any applicable law;
(vii) Based on such counsel's review of applicable laws, no
governmental approval, which has not been obtained or taken and is not in
full force and effect, is required to authorize or is required in
connection with the execution, delivery or performance by each of the
Transferor, the Company, DHCC or RNB, of the Basic Documents to which it is
a party;
(viii) The Certificates and the Basic Documents conform in
all material respects to the descriptions thereof contained in the
Prospectus;
(ix) The Pooling and Servicing Agreement is not required to
be qualified under the Trust Indenture Act of 1939, as amended, and the
Trust is not required to be registered under the Investment Company Act of
1940, as amended (the "1940 Act");
(x) The statements in the Prospectus under the heading
"Certain Legal Aspects of the Receivables," to the extent that they
constitute matters of law or legal conclusions with respect thereto, have
been reviewed by such counsel and are correct in all material respects;
(xi) The Initial Registration Statement has become
effective under the Act, the Additional Registration Statement (if any) was
filed and became effective under the Act, and the Prospectus Supplement has
been filed with the Commission pursu-
22
<PAGE>
ant to Rule 424(b) thereunder, no stop order suspending the effectiveness
of a Registration Statement has been issued and no proceeding for that
purpose has been instituted or threatened; and
(xii) Each of the Registration Statements, as of their
effective dates, and the Prospectus, as of its date, appeared on its face
to be appropriately responsive in all material respects to the requirements
of the Act and the General Rules and Regulations under the Act, except that
in each case such counsel expresses no opinion as to the financial data
included therein or excluded therefrom or the exhibits to a Registration
Statement, and such counsel does not assume any responsibility for the
accuracy, completeness or fairness of the statements contained in a
Registration Statement and the Prospectus.
Such opinion shall also state that such counsel has participated
in conferences with officers and representatives of the Transferor, the Company,
DHCC and RNB, counsel for the Transferor, the Company, DHCC and RNB,
representatives of the independent accountants of the Transferor, the Company,
DHCC and RNB, and the Underwriters at which the contents of the Prospectus and
related matters were discussed and, although such counsel need not pass upon,
and need not assume any responsibility for, the accuracy, completeness or
fairness of the statements contained in the Prospectus and shall have made no
independent check or verification thereof, except for those made under the
caption "Certain Legal Aspects of the Receivables" to the extent set forth in
paragraph (x) above, on the basis of the foregoing, no facts shall have come to
such counsel's attention that shall have led such counsel to believe that the
Prospectus, as of its date or the date of its opinion, contained an untrue
statement of a material fact or omitted to state a material fact necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading, except that such counsel need not express an
opinion or belief with respect to the financial statements, schedules and other
financial information included in such Prospectus or excluded therefrom.
(i) You shall have received from Daven-
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<PAGE>
port, Evans, Hurwitz & Smith special South Dakota counsel to RNB, such opinion
or opinions dated the Closing Date and satisfactory in form and substance to you
and your counsel, substantially to the effect that:
(i) The security interest created by the Bank Receivables
Purchase Agreement in the Receivables has been perfected under Article 9 of the
Uniform Commercial Code of South Dakota by the proper filing of UCC-1 financing
statements with the appropriate filing offices in South Dakota, and such
security interest is of first priority under Article 9 of the South Dakota
Uniform Commercial Code; and
(ii) The UCC-1 financing statements are in appropriate form
for filing and no other filings or other actions, with respect to DHCC's
interest in the Receivables, are necessary to perfect the interest of DHCC in
the Receivables, and the proceeds thereof, conveyed to DHCC, except that
appropriate continuation statements must be filed in accordance with the
applicable state's requirements.
(j) You shall have received from Faegre & Benson, special
Minnesota counsel to the Transferor and DHCC, such opinion or opinions dated the
Closing Date and satisfactory in form and substance to you and your counsel,
substantially to the effect that:
(i) Each of the security interest created by the
Receivables Purchase Agreement and the security interest created by the Pooling
and Servicing Agreement in the Receivables has been perfected under Article 9 of
the Uniform Commercial Code of Minnesota by the proper filing of UCC-1 financing
statements with the appropriate filing offices in Minnesota, and each such
security interest is of first priority under Article 9 of the Minnesota Uniform
Commercial Code; and
(ii) The UCC-1 financing statements are in appropriate form
for filing and (a) no other filings or other actions, with respect to the
Transferor's interest in the Receivables, are necessary to perfect the interest
of the Transferor in the Receivables, and the proceeds thereof, conveyed to the
Transferor thereunder and (b) no other filings or other actions, with respect to
the Trustee's interest in the
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<PAGE>
Receivables, are necessary to perfect the interest of the Trustee in the
Receivables, and proceeds thereof, against third parties, except, in each case,
that appropriate continuation statements must be filed in accordance with the
applicable state's requirements.
(k) You shall have received from Skadden, Arps, Slate, Meagher &
Flom, special counsel to RNB, DHCC and the Transferor, such opinion or opinions
dated the Closing Date and satisfactory in form and substance to you and your
counsel, substantially to the effect that the Bank Receivables Purchase
Agreement creates in favor of DHCC a security interest under Article 9 of the
Delaware Uniform Commercial Code ("Delaware UCC") in the rights of RNB in the
Receivables, the Receivables Purchase Agreement creates in favor of the
Transferor a security interest under Article 9 of the Delaware UCC in the rights
of DHCC in the Receivables and the Pooling and Servicing Agreement creates in
favor of the Trustee a security interest under Article 9 of the Delaware UCC in
the rights of the Transferor in the Receivables.
(l) You shall have received from Skadden, Arps, Slate, Meagher &
Flom LLP, special counsel to the Transferor, such opinion or opinions dated the
Closing Date and satisfactory in form and substance to you and your counsel,
substantially to the effect that:
(i) In a properly presented and argued case in a
proceeding under Title 11 of the United States Code, 11 U.S.C. Sections 101,
ET SEQ. (the "Bankruptcy Code"), if the matter were properly briefed and
presented to a court, the court would hold that (1) the transfer of the
Receivables by DHCC to the Transferor in the manner set forth in the
Receivables Purchase Agreement would constitute the sale of the Receivables
from DHCC to the Transferor, and (2) in the event that DHCC were to become a
debtor under the Bankruptcy Code, the transfer of Receivables under the
Receivables Purchase Agreement would not, after full consideration of all
relevant factors, be properly characterized as a pledge of the Receivables to
secure a borrowing by DHCC from the Transferor, and accordingly, the
Receivables and the proceeds thereof would not be part of the estate of DHCC
under Section 541 of the Bankruptcy Code in such event, and consequently
Section 362 of the Bankruptcy Code would not be applicable to the Receivables
and the proceeds there-
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of; and
(ii) If DHCC should become a debtor in a case under the
Bankruptcy Code, and the Transferor would not otherwise properly be a debtor in
a case under the Bankruptcy Code, and if the matter were properly briefed and
presented to a court exercising bankruptcy jurisdiction, it would not be a
proper exercise by the court of its equitable discretion to disregard the
separate corporate existence of the Transferor so as to order substantive
consolidation under the Bankruptcy Code of the assets and liabilities of the
Transferor with the bankruptcy estate of DHCC.
(m) You shall have received from Timothy Carlin, Assistant Vice
President and Senior Counsel for Norwest Corporation, parent of the Trustee,
such opinion or opinions dated the Closing Date and satisfactory in form and
substance to you and your counsel, substantially to the effect that:
(i) The Trustee is a national banking association duly
organized, validly existing and in good standing under the Federal laws of
the United States of America;
(ii) The Trustee has all requisite power and authority as a
national banking association to execute and deliver, and to perform its
obligations under the Pooling and Servicing Agreement and the Supplement
and to consummate the transactions contemplated by the Pooling and
Servicing Agreement and the Supplement;
(iii)The Trustee's performance of its obligations under the
Pooling and Servicing Agreement and the execution, delivery and performance
of the Trustee's obligations pursuant to the Supplement by the Trustee does
not conflict with or result in a violation of the Articles of Association
or By-Laws of the Trustee;
(iv) The Pooling and Servicing Agreement and the Supplement
have been duly authorized, executed and delivered by the Trustee; and
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<PAGE>
(v) The Certificates have been duly authenticated by the
Trustee pursuant to the Pooling and Servicing Agreement.
(n) You shall have received a certificate, dated the Closing Date and
satisfactory in form and substance to you and your counsel, of the Chairman,
President or any Vice President and a principal financial or accounting officer
of each of the Transferor, DHCC, RNB and the Company, as applicable, in which
such officers, to the best of their knowledge after reasonable investigation,
shall state that the representations and warranties of the Transferor and the
Company, as the case may be, in this Agreement are true and correct, that each
of the Transferor and the Company has complied with all agreements and satisfied
all conditions on its part to be performed or satisfied hereunder at or prior to
the Closing Date, that the representations and warranties of each of the
Transferor, DHCC, RNB and the Company, as applicable, in the Basic Documents are
true and correct as of the dates specified therein, that no stop order
suspending the effectiveness of a Registration Statement has been issued and no
proceedings for that purpose have been instituted or are contemplated by the
Commission, that, subsequent to the date of the Prospectus, there has been no
material adverse change, nor any development or event involving a prospective
material adverse change, in the condition (financial or other), business,
properties or results of operations of the Transferor, DHCC, RNB or the Company,
as the case may be, or its respective credit card business except as set forth
in or contemplated by the Prospectus or as described in such certificate and
that nothing has come to the attention of the Transferor, DHCC, RNB or the
Company that would lead the Transferor, DHCC, RNB or the Company to believe that
a Registration Statement contains any untrue statement of a material fact or
omits to state any material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
(o) You shall have received evidence satisfactory to you and your
counsel that the Certificates shall be rated "AAA" by Standard & Poor's Ratings
Group and "Aaa" by Moody's Investors Service, Inc.
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<PAGE>
(p) You shall have received a letter, dated such Closing Date and
satisfactory in form and substance to you and your counsel, which meets the
requirements of subsection (a) of this Section, except that the specified date
referred to in such subsection will be a date not more than five days prior to
such Closing Date for the purposes of this subsection (p).
(q) You shall also receive from each counsel rendering an opinion not
otherwise addressed to you a letter dated the Closing Date and satisfactory in
form and substance to you and your counsel, stating that you may rely on the
opinions of such counsel as delivered to Moody's Investors Service, Inc. and
Standard & Poor's Ratings Group in connection with the rating of the
Certificates.
(r) On the Closing Date, $122,875,817 aggregate principal amount of
the Class B Certificates shall have been issued to the Transferor.
(s) All proceedings in connection with the transactions contemplated
by this Agreement and the other Basic Documents and all documents incident
hereto and thereto shall be reasonably satisfactory in form and substance to you
and your counsel, and you and your counsel shall have received such information,
certificates and documents as you and your Counsel may reasonably request.
The Transferor will furnish you with such conformed copies of
such opinions, certificates, letters and documents as you reasonably request.
Salomon Brothers may in its sole discretion waive on behalf of the Underwriters
compliance with any conditions to the obligations of the Underwriters hereunder.
7. INDEMNIFICATION AND CONTRIBUTION. (a) The Transferor and the
Company, will jointly and severally indemnify and hold harmless each Underwriter
against any losses, claims, damages or liabilities, joint or several, to which
such Underwriter may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any untrue statement or alleged untrue statement of any
material fact contained in a Registration Statement, the Prospectus, or
28
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any amendment or supplement thereto, or any related preliminary prospectus, or
arise out of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading and will reimburse each Underwriter for any
legal or other expenses reasonably incurred by such Underwriter in connection
with investigating or defending any such loss, claim, damage, liability or
action as such expenses are incurred; provided, however, that neither the
Transferor nor the Company will be liable in any such case to the extent that
any such loss, claim, damage or liability arises out of or is based upon an
untrue statement or alleged untrue statement in or omission or alleged omission
from any of such documents in reliance upon and in conformity with written
information furnished to the Transferor or the Company by any Underwriter
through the Representative specifically for use therein, it being understood and
agreed that the only such information furnished by any Underwriter consists of
the information described as such in subsection (b) below; and PROVIDED FURTHER,
HOWEVER, that neither the Transferor nor the Company will be liable in any such
case to the extent that any such loss, claim, damage or liability arises out of
or is based upon an untrue statement or alleged untrue statement in or omission
or alleged omission from any preliminary prospectus that was eliminated or
remedied in the Prospectus, if a copy of the Prospectus was not sent or given
with or prior to the written confirmation of the sale of any Certificate to the
person asserting the loss, claim, damage or liability, if required by the Act.
(b) Each Underwriter will severally and not jointly indemnify and hold
harmless the Transferor and the Company against any losses, claims, damages or
liabilities to which the Transferor or the Company may become subject, under the
Act or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact contained in any Registration
Statement, the Prospectus, or any amendment or supplement thereto, or any
related preliminary prospectus, or arise out of or are based upon the omission
or the alleged omission to state therein in a material fact required to be
stated therein or necessary to make the statements therein not misleading, in
each case to the extent, but only to the
29
<PAGE>
extent, that such untrue statement or alleged untrue statement or omission or
alleged omission was made in reliance upon and in conformity with written
information furnished to the Transferor or the Company by such Underwriter
through the Representative specifically for use therein, and will reimburse any
legal or other expenses reasonably incurred by the Transferor or the Company in
connection with investigating or defending any such loss, claim, damage,
liability or action as such expenses are incurred, it being understood and
agreed that the only such information furnished by any Underwriter consists of
the following information in the Prospectus furnished on behalf of each
Underwriter: the last paragraph at the bottom of the cover page concerning the
terms of the offering by the Underwriters, the legend concerning overallotments
and stabilizing on the inside front cover page and the concession and
reallowance figures appearing in the paragraph under the caption "Underwriting".
(c) Promptly after receipt by an indemnified party under this Section
of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under
subsection (a) or (b) above, notify the indemnifying party of the commencement
thereof; but the omission so to notify the indemnifying party will not relieve
it from any liability which it may have to any indemnified party otherwise than
under subsection (a) or (b) above. In case any such action is brought against
any indemnified party and it notifies the indemnifying party of the commencement
thereof, the indemnifying party will be entitled to participate therein and, to
the extent that it may wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel satisfactory to such
indemnified party (who shall not, except with the consent of the indemnified
party, be counsel to the indemnifying party), and after notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof, the indemnifying party will not be liable to such indemnified
party under this Section for any legal or other expenses subsequently incurred
by such indemnified party in connection with the defense thereof other than
reasonable costs of investigation. No indemnifying party shall, without the
prior written consent of the indemnified party, effect any settlement of any
pending or threatened action in respect of which any
30
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indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party unless such settlement includes an
unconditional release of such indemnified party from all liability on any claims
that are the subject matter of such action.
(d) If the indemnification provided for in this Section is unavailable
or insufficient to hold harmless an indemnified party under subsection (a) or
(b) above, then each indemnifying party shall contribute to the amount paid or
payable by such indemnified party as a result of the losses, claims, damages or
liabilities referred to in subsection (a) or (b) above (i) in such proportion as
is appropriate to reflect the relative benefits received by the Transferor and
the Company on the one hand and the Underwriters on the other from the offering
of the Certificates or (ii) if the allocation provided by clause (i) above is
not permitted by applicable law, in such proportion as is appropriate to reflect
not only the relative benefits referred to in clause (i) above but also the
relative fault of the Transferor and/or the Company on the one hand and the
Underwriters on the other in connection with the statements or omissions which
resulted in such losses, claims, damages or liabilities as well as any other
relevant equitable considerations. The relative benefits received by the
Transferor and the Company on the one hand and the Underwriters on the other
shall be deemed to be in the same proportion as the total net proceeds from the
offering (before deducting expenses) received by the Transferor and the Company
bear to the total underwriting discounts and commissions received by the
Underwriters. The relative fault shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the Transferor or the Company on the one hand or by the
Underwriters on the other and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such untrue statement or
omission. The amount paid by an indemnified party as a result of the losses,
claims, damages or liabilities referred to in the first sentence of this
subsection (d) shall be deemed to include any legal or other expenses reasonably
incurred by such indemnified party in connection with investigating or defending
any action or claim
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which is the subject of this subsection (d). Notwithstanding the provisions of
this subsection (d), no Underwriter shall be required to contribute any amount
in excess of the amount by which the total price at which the Certificates
underwritten by it and distributed to the public were offered to the public
exceeds the amount of any damages which such Underwriter has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. The
Underwriters' obligations in this subsection (d) to contribute are several in
proportion to their respective underwriting obligations and not joint.
(e) The obligations of the Transferor and the Company under this
Section shall be in addition to any liability which the Transferor and the
Company may otherwise have and shall extend, upon the same terms and conditions,
to each person, if any, who controls any Underwriter within the meaning of the
Act; and the obligations of the Underwriters under this Section shall be in
addition to any liability which the respective Underwriters may otherwise have
and shall extend, upon the same terms and conditions, to each director of the
Transferor and the Company, to each officer of the Transferor and the Company
who has signed a Registration Statement and to each person, if any, who controls
the Transferor or the Company within the meaning of the Act.
8. DEFAULT OF UNDERWRITERS. If any Underwriter or Underwriters
default in their obligations to purchase Certificates hereunder on the Closing
Date and the aggregate principal amount of Certificates that such defaulting
Underwriter or Underwriters agreed but failed to purchase does not exceed 10% of
the total principal amount of Certificates that the Underwriters are obligated
to purchase on such Closing Date, the Representative may make arrangements
satisfactory to the Transferor for the purchase of such Certificates by other
persons, including any of the Underwriters, but if no such arrangements are made
by such Closing Date, the nondefaulting Underwriters shall be obligated
severally, in proportion to their respective commitments hereunder, to purchase
the Certificates that such defaulting Underwriters
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agreed but failed to purchase on such Closing Date. If any Underwriter or
Underwriters so default and the aggregate principal amount of the Certificates
with respect to which such default or defaults occur exceeds 10% of the total
principal amount of the Certificates that the Underwriters are obligated to
purchase on such Closing Date and arrangements satisfactory to the
Representative and the Transferor for the purchase of such Certificates by other
persons are not made within 36 hours after such default, this Agreement will
terminate without liability on the part of any non-defaulting Underwriter or the
Transferor or the Company, except as provided in Section 9. As used in this
Agreement, the term "Underwriter" includes any person substituted for an
Underwriter under this Section. Nothing herein will relieve a defaulting
Underwriter from liability for its default.
9. SURVIVAL OF CERTAIN REPRESENTATIONS AND OBLIGATIONS. The
respective indemnities, agreements, representations, warranties and other
statements of the Transferor and the Company and of their respective officers
and of the several Underwriters set forth in or made pursuant to this Agreement
will remain in full force and effect, regardless of any investigation, or
statement as to the results thereof, made by or on behalf of any Underwriter,
the Transferor, the Company or any of their respective representatives, officers
or directors or any controlling person, and will survive delivery of and payment
for the Certificates. If this Agreement is terminated pursuant to Section 8 or
if for any reason the purchase of the Certificates by the Underwriters is not
consummated, the Transferor and the Company shall remain responsible for the
expenses to be paid or reimbursed by it pursuant to Section 5 and the respective
obligations of the Transferor and the Company and the Underwriters pursuant to
Section 7 shall remain in effect, and if any Certificates have been purchased
hereunder the representations and warranties in Section 2 and all obligations
under Section 5 shall also remain in effect. If the purchase of the
Certificates by the Underwriters is not consummated for any reason other than
solely because of the termination of this Agreement pursuant to Section 8 or the
occurrence of any event specified in clause (iii), (iv) or (v) of Section 6(c),
the Transferor and the Company, jointly and severally, will reimburse the
Underwriters for all out-of-pocket expenses (including fees and disbursements of
counsel) reasonably incurred by
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<PAGE>
them in connection with the offering of the Certificates.
10. NOTICES. All communications hereunder will be in writing and, if
sent to the Underwriters, will be mailed, delivered or telegraphed and confirmed
to the Representative at Salomon Brothers, Seven World Trade Center, New York,
NY 10048, Attention Brad Gans (facsimile no. 212-783-2274); if sent to the
Transferor, will be mailed, delivered or telegraphed and confirmed to it at
Dayton Hudson Receivables Corporation, 80 South Eighth Street, 14th floor, Suite
1401, Minneapolis, Minnesota 55402, Attention of Treasurer, (facsimile no. (612)
370-6412); and if sent to the Company, will be mailed, delivered or telegraphed
and confirmed to it at Dayton Hudson Corporation, 777 Nicollet Mall,
Minneapolis, Minnesota 55402, Attention of Treasurer (facsimile no. (612)
370-5508); PROVIDED; HOWEVER, that any notice to an Underwriter pursuant to
Section 7 will be mailed, delivered or telegraphed and confirmed to such
Underwriter.
11. SUCCESSORS. This Agreement will inure to the benefit of and be
binding upon the parties hereto and their respective successors and the officers
and directors and controlling persons referred to in Section 7, and no other
person will have any right or obligation hereunder.
12. REPRESENTATIONS OF UNDERWRITERS. The Representative will act for
the several Underwriters in connection with this financing, and any action under
this Agreement taken by the Representative will be binding upon all the
Underwriters. Each of the Underwriters represents and warrants to, and agrees
with, the Transferor that (w) it has only issued or passed on and shall only
issue or pass on in the United Kingdom any document received by it in connection
with the issue of the Certificates to a person who is of a kind described in
Article 11(3) of the Financial Services Act 1986 (Investment Advertisements)
(Exemptions) Order 1996 or who is a person to whom the document may otherwise
lawfully be issued or passed on, (x) it has complied and shall comply with all
applicable provisions of the Financial Services Act 1986 and other applicable
laws and regulations with respect to anything done by it in relation to the
Certificates in, from or otherwise involving the United Kingdom and (y) if that
Underwriter is an authorized person under the Financial Services Act 1986, it
has only promoted and
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shall only promote (as that term is defined in Regulation 1.02 of the Financial
Services (Promotion of Unregulated Schemes) Regulations 1991) to any person in
the United Kingdom the scheme described in the 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.
13. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original but all such
counterparts shall together constitute one and the same Agreement.
14. APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAWS.
The Transferor and the Company hereby submit to the nonexclusive
jurisdiction of the Federal and state courts in the Borough of Manhattan in The
City of New York in any suit or proceeding arising out of or relating to this
Agreement or the transactions contemplated hereby.
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<PAGE>
If the foregoing is in accordance with the Representative's
understanding of our agreement, kindly sign and return to the Transferor and the
Company one of the counterparts hereof, whereupon it will become a binding
agreement between the Transferor, the Company and the several Underwriters in
accordance with its terms.
Very truly yours,
DAYTON HUDSON RECEIVABLES
CORPORATION
By
---------------------------------------
Name:
Title:
DAYTON HUDSON CORPORATION
By
---------------------------------------
Name:
Title:
Acting on behalf of itself
and as the Representative of
the several Underwriters.
SALOMON BROTHERS INC
By
----------------------------
Name:
Title:
36
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SCHEDULE A
Underwriter Principal
----------- Amount of
Certificates
------------
Salomon Brothers Inc . . . . . . . . . . . . . . . . . . $133,400,000
Goldman, Sachs & Co . . . . . . . . . . . . . . . . . . 133,300,000
J.P. Morgan Securities Inc. . . . . . . . . . . . . . . 133,300,000
------------
Total . . . . . . . . . . . . . . . . . . . . $400,000,000
------------
A-1
<PAGE>
DESCRIPTION OF THE CERTIFICATES
The Certificates will be issued in Series. Each Series will represent an
interest in the Trust other than the interests represented by any other Series
of Certificates issued by the Trust (which may include Series offered pursuant
to this Prospectus), any Participations and the Transferor Certificate. Each
Series will be issued pursuant to the Pooling Agreement among the Transferor,
RNB, as Servicer and the Trustee, and a Series Supplement to the Pooling
Agreement. The Prospectus Supplement for each Series will describe any
provisions of the Pooling Agreement relating to such Series which may differ
materially from the Pooling Agreement filed as an exhibit to the Registration
Statement. The following summaries describe certain provisions common to each
Series of Certificates or which may be applicable to any Series of Certificates.
The summaries do not purport to be complete and are subject to, and are
qualified in their entirety by reference to, all of the provisions of the
Pooling Agreement and relevant Series Supplement.
GENERAL
The Certificates of each Series will represent undivided interests in
certain assets of the Trust, including the right to the applicable allocation
percentage of all Cardholder payments on the Receivables.
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For each Series of Certificates, unless otherwise specified in the related
Prospectus Supplement (including such adjustments as may be made for any
pre-funded Series), the Invested Amount on any date will be equal to the Initial
Invested Amount for such Series MINUS the amount of principal paid to the
related Certificateholders prior to such date MINUS the amount of unreimbursed
Investor Charge-Offs with respect to such Series prior to such date and MINUS,
to the extent provided in the related Prospectus Supplement, the amount of any
reduction in the Invested Amount as a result of the purchase by the Transferor
and subsequent cancellation of any Certificates of such Series. If so specified
in the Prospectus Supplement relating to any Series of Certificates, under
certain circumstances the Invested Amount may be further adjusted by the amount
of principal allocated to Certificateholders, the funds on deposit in any
specified account, and any other amount specified in the related Prospectus
Supplement.
Each Series of Certificates may consist of one or more Classes, one or more
of which may be Senior Certificates and one or more of which may be Subordinated
Certificates. Each Class of a Series will evidence the right to receive a
specified portion of each distribution of principal or interest or both. The
Invested Amount with respect to a Series with more than one Class will be
allocated among the Classes as described in the related Prospectus Supplement.
The Certificates of a Class may differ from Certificates of other Classes of the
same Series in, among other things, the amounts allocated to principal payments,
maturity date, Certificate Rate and the availability of Enhancement.
For each Series of Certificates, payments of interest and principal will be
made on Distribution Dates specified in the related Prospectus Supplement to
Certificateholders in whose names the Certificates were registered on the record
dates (each, a "Record Date") specified in the related Prospectus Supplement.
Interest will be distributed to Certificateholders in the amounts, for the
periods and on the dates specified in the related Prospectus Supplement.
The Transferor currently owns the Transferor Certificate. The Transferor
Certificate represents the undivided interest in the Trust not represented by
the Certificates or any Participation issued and outstanding under the Trust or
the rights, if any, of any Enhancement Providers to receive payments from the
Trust. The holder of the Transferor Certificate will have the right to a
percentage (the "Transferor Percentage") of all Collections on the Receivables
in the Trust.
Unless otherwise specified in the related Prospectus Supplement, with
respect to each Series of Certificates, during the Revolving Period, the
Invested Amount will remain constant except under certain limited circumstances.
See "--Defaulted Receivables" for a description of certain circumstances in
which the Invested Amount will be reduced during the Revolving Period. The
amount of Principal Receivables in the Trust, however, will vary each day as new
Principal Receivables are created and others are paid or charged-off. The amount
of the Transferor's Interest will fluctuate each day, therefore, to reflect the
changes in the amount of the Principal Receivables in the Trust. When a Series
is amortizing, the Invested Amount of such Series will generally decline as
payments of principal are distributed to the Certificateholders. As a result,
the Transferor's Interest will generally increase each month during an
Amortization Period for any Series to reflect the reductions in the Invested
Amount of such Series and will also change to reflect the variations in the
amount of Principal Receivables in the Trust. The Transferor's Interest may also
be reduced as the result of the issuance of a new Series.
Unless otherwise specified in the related Prospectus Supplement,
Certificates of each Series initially will be represented by global certificates
registered in the name of the nominee of DTC (together with any successor
depository selected by the Transferor, the "Depository") except as set forth
below. See "--Definitive Certificates." Unless otherwise specified in the
related Prospectus Supplement, with respect to each Series of Certificates,
beneficial interests in the Certificates will be available for purchase in
minimum denominations of $1,000 and integral multiples thereof in book-entry
form only. The Transferor has been informed by DTC that DTC's nominee will be
Cede. No Certificate Owner acquiring an interest in the Certificates will be
entitled to receive a certificate representing such person's interest in the
Certificates unless Definitive Certificates are issued. Unless and until
Definitive Certificates are issued for any
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<PAGE>
Series under the limited circumstances described herein, all references herein
to actions by Certificateholders shall refer to actions taken by DTC upon
instructions from DTC Participants, and all references herein to distributions,
notices, reports and statements to Certificateholders shall refer to
distributions, notices, reports and statements to DTC or Cede, as the registered
holder of the Certificates, as the case may be, for distribution to Certificate
Owners in accordance with DTC procedures. See "--Book-Entry Registration" and
"--Definitive Certificates."
If so specified in the Prospectus Supplement relating to a Series,
application will be made to list the Series of Certificates of such Series, or
all or a portion of any Class thereof, on the Luxembourg Stock Exchange or any
other specified exchange.
BOOK-ENTRY REGISTRATION
Unless otherwise specified in the related Prospectus Supplement, with
respect to each Series of Certificates, Certificateholders may hold their
Certificates through DTC (in the United States) or Cedel or Euroclear (in
Europe) if they are participants of such systems, or indirectly through
organizations that are participants in such systems.
Cede, as nominee for DTC, will be the registered holder of the global
Certificates. No Certificateholder will be entitled to receive a certificate
representing such person's interest in the Certificates. Unless and until
Definitive Certificates are issued under the limited circumstances described
below, all references herein to actions by Certificateholders shall refer to
actions taken by DTC upon instructions from DTC Participants, and all references
herein to distributions, notices, reports and statements to Certificateholders
shall refer to distributions, notices, reports and statements to Cede, as the
registered holder of the Certificates, for distribution to Certificateholders in
accordance with DTC procedures.
Cedel and Euroclear will hold omnibus positions on behalf of the Cedel
Participants and the Euroclear Participants, respectively, through customers'
securities accounts in Cedel's and Euroclear's names on the books of their
respective depositaries (collectively, the "Depositaries") which in turn will
hold such positions in customers' securities accounts in the Depositaries' names
on the books of DTC.
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
holds securities for its participants ("DTC Participants") and facilitates the
clearance and settlement among DTC Participants of securities transactions, such
as transfers and pledges, in deposited securities through electronic book-entry
changes in DTC Participants' accounts, thereby eliminating the need for physical
movement of securities certificates. DTC Participants include securities brokers
and dealers, banks, trust companies, clearing corporations and certain other
organizations. Indirect access to the DTC system is also available to others
such as securities brokers and dealers, banks, and trust companies that clear
through or maintain a custodial relationship with a DTC Participant, either
directly or indirectly ("Indirect Participants"). The rules applicable to DTC
and its Participants are on file with the Commission.
Transfers between DTC Participants will occur in accordance with DTC rules.
Transfers between Cedel Participants and Euroclear Participants will occur in
the ordinary way in accordance with their applicable rules and operating
procedures.
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<PAGE>
Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly or indirectly through Cedel
Participants or Euroclear Participants, on the other, will be effected in DTC in
accordance with DTC rules on behalf of the relevant European international
clearing system by its Depositary; however, such cross-market transactions will
require delivery of instructions to the relevant European international clearing
system by the counterparty in such system in accordance with its rules and
procedures and within its established deadlines (European time). The relevant
European international clearing system will, if the transaction meets its
settlement requirements, deliver instructions to its Depositary to take action
to effect final settlement on its behalf by delivering or receiving securities
in DTC, and making or receiving payment in accordance with normal procedures for
same-day funds settlement applicable to DTC. Cedel Participants and Euroclear
Participants may not deliver instructions directly to the Depositaries.
Because of time-zone differences, credits of securities in Cedel or
Euroclear as a result of a transaction with a DTC Participant will be made
during the subsequent securities settlement processing, dated the Business Day
following the DTC settlement date, and such credits or any transactions in such
securities settled during such processing will be reported to the relevant Cedel
Participant or Euroclear Participant on such Business Day. Cash received in
Cedel or Euroclear as a result of sales of securities by or through a Cedel
Participant or a Euroclear Participant to a DTC Participant will be received
with value on the DTC settlement date but will be available in the relevant
Cedel or Euroclear cash account only as of the Business Day following settlement
in DTC.
Purchases of Certificates under the DTC system must be made by or through
DTC Participants, which will receive a credit for the Certificates on DTC's
records. The ownership interest of each actual Certificate Owner is in turn to
be recorded on the DTC Participants' and Indirect Participants' records.
Certificate Owners will not receive written confirmation from DTC of their
purchase, but Certificate Owners are expected to receive written confirmations
providing details of the transaction, as well as periodic statements of their
holdings, from the DTC Participant or Indirect Participant through which the
Certificate Owner entered into the transaction. Transfers of ownership interests
in the Certificates are to be accomplished by entries made on the books of DTC
Participants acting on behalf of Certificate Owners. Certificate Owners will not
receive certificates representing their ownership interest in Certificates,
except in the event that use of the book-entry system for the Certificates is
discontinued.
To facilitate subsequent transfers, all Certificates deposited by DTC
Participants with DTC are registered in the name of DTC's nominee, Cede. The
deposit of Certificates with DTC and their registration in the name of Cede
effects no change in beneficial ownership. DTC has no knowledge of the actual
Certificate Owners of the Certificates; DTC's records reflect only the identity
of the DTC Participants to whose accounts such Certificates are credited, which
may or may not be the Certificate Owners. The DTC Participants will remain
responsible for keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to DTC Participants,
by DTC Participants to Indirect Participants, and by DTC Participants and
Indirect Participants to Certificate Owners will be governed by arrangements
among them, subject to any statutory or regulatory requirements as may be in
effect from time to time.
Neither DTC nor Cede will consent or vote with respect to Certificates.
Under its usual procedures, DTC mails an omnibus proxy to the issuer as soon as
possible after the record date, which assigns Cede's consenting or voting rights
to those DTC Participants to whose accounts the Certificates are credited on the
record date (identified in a listing attached thereto).
Principal and interest payments on the Certificates will be made to DTC.
DTC's practice is to credit DTC Participants' accounts on the applicable
Distribution Date in accordance with their respective holdings shown on DTC's
records unless DTC has reason to believe that it will not receive payment on
such Distribution Date. Payments by DTC Participants to Certificate Owners will
be governed by standing
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<PAGE>
instructions and customary practices, as is the case with securities held for
the accounts of customers in bearer form or registered in "street name" and will
be the responsibility of such DTC Participant and not of DTC, the Trustee or the
Transferor, subject to any statutory or regulatory requirements as may be in
effect from time to time. Payment of principal and interest to DTC is the
responsibility of the Trustee, disbursement of such payments to DTC Participants
shall be the responsibility of DTC, and disbursement of such payments to
Certificate Owners shall be the responsibility of DTC Participants and Indirect
Participants.
DTC may discontinue providing its services as securities depository with
respect to the Certificates at any time by giving reasonable notice to the
Transferor or the Trustee. Under such circumstances, in the event that a
successor securities depository is not obtained, Definitive Certificates are
required to be printed and delivered. The Transferor may decide to discontinue
use of the system of book-entry transfers through DTC (or a successor securities
depository). In that event, Definitive Certificates will be delivered to
Certificateholders. See "--Definitive Certificates."
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that the Transferor believes to be reliable, but
the Transferor takes no responsibility for the accuracy thereof.
Cedel Bank, societe anonyme ("Cedel") is incorporated under the laws of
Luxembourg as a professional depository. Cedel holds securities for its
participating organizations ("Cedel Participants") and facilitates the clearance
and settlement of securities transactions between Cedel Participants through
electronic book-entry changes in accounts of Cedel Participants, thereby
eliminating the need for physical movement of certificates. Transactions may be
settled in Cedel in any of 36 currencies, including United States dollars. Cedel
provides to its Cedel Participants, among other things, services for
safekeeping, administration, clearance and settlement of internationally traded
securities and securities lending and borrowing. Cedel interfaces with domestic
markets in several countries. As a professional depository, Cedel is subject to
regulation by the Luxembourg Monetary Institute. Cedel Participants are
recognized financial institutions around the world, including underwriters,
securities brokers and dealers, banks, trust companies, clearing corporations
and certain other organizations and may include the underwriters of any Series
of Certificates. Indirect access to Cedel is also available to others, such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a Cedel Participant, either directly or indirectly.
The Euroclear System was created in 1968 to hold securities for participants
of the Euroclear System ("Euroclear Participants") and to clear and settle
transactions between Euroclear Participants through simultaneous electronic
book-entry delivery against payment, thereby eliminating the need for physical
movement of certificates and any risk from lack of simultaneous transfers of
securities and cash. Transactions may now be settled in any of 34 currencies,
including United States dollars. The Euroclear System includes various other
services, including securities lending and borrowing and interfaces with
domestic markets in several countries generally similar to the arrangements for
cross-market transfers with DTC described above. The Euroclear System is
operated by Morgan Guaranty Trust Company of New York, Brussels, Belgium office
(the "Euroclear Operator" or "Euroclear"), under contract with Euroclear
Clearance System, S.C., a Belgian cooperative corporation (the "Cooperative").
All operations are conducted by the Euroclear Operator, and all Euroclear
securities clearance accounts and Euroclear cash accounts are accounts with the
Euroclear Operator, not the Cooperative. The Cooperative establishes policy for
the Euroclear System on behalf of Euroclear Participants. Euroclear Participants
include banks (including central banks), securities brokers and dealers and
other professional financial intermediaries and may include the underwriters of
any Series of Certificates. Indirect access to the Euroclear System is also
available to other firms that clear through or maintain a custodial relationship
with a Euroclear Participant, either directly or indirectly.
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The Euroclear Operator is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. As such, it is
regulated and examined by the Board of Governors of the Federal Reserve System
and the New York State Banking Department, as well as the Belgian Banking
Commission.
Securities clearance accounts and cash accounts with the Euroclear Operator
are governed by the Terms and Conditions Governing Use of Euroclear and the
related Operating Procedures of the Euroclear System and applicable Belgian law
(collectively, the "Terms and Conditions"). The Terms and Conditions govern
transfers of securities and cash within the Euroclear System, withdrawal of
securities and cash from the Euroclear System, and receipts of payments with
respect to securities in the Euroclear System. All securities in the Euroclear
System are held on a fungible basis without attribution of specific certificates
to specific securities clearance accounts. The Euroclear Operator acts under the
Terms and Conditions only on behalf of Euroclear Participants and has no record
of or relationship with persons holding through Euroclear Participants.
Distributions with respect to Certificates held through Cedel or Euroclear
will be credited to the cash accounts of Cedel Participants or Euroclear
Participants in accordance with the relevant system's rules and procedures, to
the extent received by its Depositary. Such distributions will be subject to tax
reporting in accordance with relevant United States tax laws and regulations.
See "Certain U.S. Federal Income Tax Consequences." Cedel or the Euroclear
Operator, as the case may be, will take any other action permitted to be taken
by a Certificateholder under the related Agreement on behalf of a Cedel
Participant or Euroclear Participant only in accordance with its relevant rules
and procedures and subject to its Depositary's ability to effect such actions on
its behalf through DTC.
Although DTC, Cedel and Euroclear have agreed to the foregoing procedures in
order to facilitate transfers of Certificates among participants of DTC, Cedel
and Euroclear, they are under no obligation to perform or continue to perform
such procedures and such procedures may be discontinued at any time.
DEFINITIVE CERTIFICATES
Unless otherwise specified in the related Prospectus Supplement, the
Certificates of each Series will be issued in fully registered, certificated
form to Certificate Owners or their respective nominees ("Definitive
Certificates"), rather than to DTC or its nominee, only if (i) the Transferor
advises the Trustee for such Series in writing that DTC is no longer willing or
able to discharge properly its responsibilities as Depository with respect to
such Series of Certificates, and the Trustee or the Transferor is unable to
locate a qualified successor, (ii) the Transferor, at its option, advises the
Trustee in writing that it elects to terminate the book-entry system through DTC
or (iii) after the occurrence of a Servicer Default, Certificate Owners
representing not less than 50% (or such other percentage specified in the
related Prospectus Supplement) of the aggregate unpaid principal amount of any
Class of Certificates advise the Trustee and DTC through DTC Participants in
writing that the continuation of a book-entry system through DTC (or a successor
thereto) is no longer in the best interest of the Certificate Owners.
Upon the occurrence of any of the events described in the immediately
preceding paragraph, DTC is required to notify all DTC Participants of the
availability through DTC of Definitive Certificates. Upon surrender by DTC of
the definitive certificate representing the Certificates and instructions for
reregistration, the Trustee will issue the Certificates as Definitive
Certificates, and thereafter the Trustee will recognize the holders of such
Definitive Certificates as "Certificateholders" or "Holders" under the Pooling
Agreement and the related Series Supplement.
Distributions of principal and interest on the Certificates will be made by
the Trustee directly to Certificateholders of Definitive Certificates in
accordance with the procedures set forth herein and in the Agreement. Interest
payments and any principal payments on each Distribution Date will be made to
Certificateholders in whose names the Definitive Certificates were registered at
the close of business on
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the related Record Date. Distributions will be made by check mailed to the
address of such Certificateholder as it appears on the register maintained by
the Trustee. The final payment on any Certificate (whether Definitive
Certificates or the Certificates registered in the name of Cede representing the
Certificates), however, will be made only upon presentation and surrender of
such Certificate at the office or agency specified in the notice of final
distribution to Certificateholders. The Trustee will provide such notice to
registered Certificateholders not later than the fifth day of the month of such
final distribution.
Definitive Certificates will be transferable and exchangeable at the offices
of the transfer agent (the "Transfer Agent") and registrar (the "Registrar"),
which shall initially be the Trustee. No service charge will be imposed for any
registration of transfer or exchange, but the Transfer Agent and Registrar may
require payment of a sum sufficient to cover any tax or other governmental
charge imposed in connection therewith. The Transfer Agent and Registrar shall
not be required to register the transfer or exchange of Definitive Certificates
for a period of fifteen days preceding the due date for any payment with respect
to such Definitive Certificates.
INTEREST
For each Series of Certificates and Class thereof, interest will accrue from
the relevant Closing Date on the applicable certificate principal balance (or
other amount specified in the related Prospectus Supplement), at the applicable
Certificate Rate, which may be a fixed, floating or variable rate as specified
in the related Prospectus Supplement. Interest will be distributed to
Certificateholders on the Distribution Dates specified in the related Prospectus
Supplement. Interest payments on any Distribution Date will generally be funded
from collections of Finance Charge Receivables allocated to the
Certificateholders' Interest during the preceding fiscal month of the Transferor
(each, a "Monthly Period") and may be funded from certain investment earnings on
funds held in accounts of the Trust, from any applicable Enhancement, if
necessary, or certain other amounts as specified in the related Prospectus
Supplement. If the Distribution Dates for payment of interest for a Series or
Class occur less frequently than monthly, such collections or other amounts (or
the portion thereof allocable to the Certificateholders' Interest of such Class)
may be deposited in one or more trust accounts (each, an "Interest Funding
Account") pending distribution to the Certificateholders of such Series or
Class, as described in the related Prospectus Supplement. If a Series has more
than one Class of Certificates, each such Class may have a separate Interest
Funding Account. The Prospectus Supplement relating to each Series of
Certificates and each Class thereof will describe the amounts and sources of
interest payments to be made, the Certificate Rate, and, for a Series or Class
thereof bearing interest at a floating or a variable Certificate Rate, the
initial Certificate Rate, the dates and the manner for determining subsequent
Certificate Rates, and the formula, index or other method by which such
Certificate Rates are determined.
PRINCIPAL
Except to the extent specified in the related Prospectus Supplement, during
the Revolving Period for each Series of Certificates (which begins on the
Closing Date relating to such Series and ends on the day before an Amortization
Period begins), no principal payments will be made to the Certificateholders of
such Series. During the Controlled Amortization Period, Principal Amortization
Period or Accumulation Period, as applicable, which will be scheduled to begin
on the date specified or determined as described in the related Prospectus
Supplement, and during the Early Amortization Period, which will begin upon the
occurrence of an Early Amortization Event or, if so specified in the related
Prospectus Supplement, following the Rapid Accumulation Period, principal will
be paid to the Certificateholders in the amounts and on Distribution Dates
specified in the related Prospectus Supplement or will be accumulated in a
Principal Funding Account for later distribution to Certificateholders on the
Expected Final Payment Date in the amounts specified in the related Prospectus
Supplement. Principal payments for any Series or Class thereof will be funded
from Collections of Principal Receivables received during the related Monthly
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Period or periods as specified in the related Prospectus Supplement and
allocated to the Certificateholders' Interest of such Series or Class and from
certain other sources specified in the related Prospectus Supplement. In the
case of a Series with more than one Class of Certificates, the
Certificateholders of one or more Classes may receive payments of principal at
different times. The related Prospectus Supplement will describe the manner,
timing and priority of payments of principal to Certificateholders of each
Class.
Funds on deposit in any Principal Funding Account applicable to a Series may
be subject to a guaranteed rate or investment agreement or other arrangement
specified in the related Prospectus Supplement intended to assure a specified
rate of return on the investment of such funds. In order to enhance the
likelihood of the payment in full of the principal amount of a Series of
Certificates or Class thereof at the end of an Accumulation Period, such Series
of Certificates or Class thereof may be subject to a principal guaranty or other
similar arrangement specified in the related Prospectus Supplement.
DISCOUNT OPTION
Pursuant to the Pooling Agreement the Transferor may designate a specified
fixed or floating percentage (the "Discount Percentage") (initially 0%) of the
amount of Receivables arising in the Accounts on and after the date of such
designation that would otherwise be treated as Principal Receivables to be
treated as Finance Charge Receivables (the "Discount Option Receivables"). The
circumstances under which the Transferor may exercise its option to discount
Principal Receivables may include a time when the Portfolio Yield is declining
and Principal Receivables are available in sufficient quantity to allow for such
discounting. The Transferor may, without notice to or consent of the
Certificateholders, from time to time, increase (subject to the limitations
described below), reduce or eliminate the Discount Percentage for Discount
Option Receivables arising in the Accounts on and after the date of such change.
The Transferor must provide 30 days' prior written notice to the Servicer, the
Trustee and each Rating Agency of any such increase, reduction or elimination,
and such increase, reduction or elimination will become effective on the date
specified therein only if (a) the Transferor has delivered to the Trustee a
certificate of an authorized officer to the effect that, based on the facts
known to such officer at the time, the Transferor reasonably believes that such
increase, reduction or elimination will not at the time of its occurrence cause
an Early Amortization Event, or an event which with notice or the lapse of time
would constitute an Early Amortization Event, to occur with respect to any
Series and (b) if such designation would cause the Discount Percentage to be
greater than 3%, the Transferor, the Servicer and the Trustee shall have
received written notice from each Rating Agency that such increase will not have
a Ratings Effect. On the Date of Processing of any Collections during the time
the Discount Option is in effect, Collections in an amount equal to the product
of (i) a fraction the numerator of which is the amount of Discount Option
Receivables and the denominator of which is the amount of all of the Principal
Receivables (including Discount Option Receivables) at the end of the prior
Monthly Period and (ii) Collections of Principal Receivables, prior to any
reduction for Finance Charge Receivables which are Discount Option Receivables,
received on such Date of Processing, will be deemed Collections of Finance
Charge Receivables and will be applied accordingly. Any such designation would
result in an increase in the amount of Finance Charge Receivables and a
corresponding increase in the Portfolio Yield (as defined in the related
Prospectus Supplement) for each Series and a lower payment rate of Collections
in respect of Principal Receivables than would otherwise occur and therefore the
effect on Certificateholders will be to decrease the likelihood of an Early
Amortization Event based upon a reduction of the average Portfolio Yield for any
designated period to a rate below the average Base Rate (as defined in the
related Prospectus Supplement) for such period while increasing the likelihood
that the Transferor will be required to add Principal Receivables to the Trust
and, because of the reduction in the aggregate amount of Principal Receivables
which, if additional Principal Receivables were not available at such time,
could cause the occurrence of an Early Amortization Event. Unless otherwise
specified, all references herein to Principal Receivables or Finance Charge
Receivables, or Collections with respect thereto, are references to
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such Receivables, or Collections with respect thereto, as defined above after
application of the Discount Percentage.
THE TRANSFEROR CERTIFICATE
The certificate evidencing the Transferor's Interest in the Trust is
referred to as the Transferor Certificate. The Pooling Agreement provides that
the Transferor may exchange a portion of the Transferor Certificate for one or
more certificates representing an interest in the Transferor's Interest (each a
"Supplemental Certificate") for transfer or assignment to a person designated by
the Transferor upon the execution and delivery of a supplement to the Pooling
Agreement (which supplement shall be subject to the amendment provisions of the
Pooling Agreement to the extent that it amends any of the terms of the Pooling
Agreement; see "The Pooling and Servicing Agreement--Amendments"); PROVIDED that
(a) such transfer will not result in a Ratings Effect, (b) the Transferor Amount
(excluding the interest represented by any Supplemental Certificate) shall not
be less than the Required Retained Transferor Amount as of the date of, and
after giving effect to, such exchange and (c) the Transferor shall have
delivered to the Trustee and each Rating Agency a Tax Opinion, dated the date of
such exchange, with respect to the transfer or assignment of such Supplemental
Certificate. Any subsequent transfer or assignment of a Supplemental Certificate
is subject to the conditions set forth in clauses (a) and (c) above.
NEW ISSUANCES
The Pooling Agreement provides that, pursuant to any one or more Series
Supplements, the Transferor may direct the Trustee to issue from time to time
new Series subject to the conditions described below (each such issuance, a "New
Issuance"). Each New Issuance will have the effect of decreasing the Transferor
Amount to the extent of the Invested Amount of such new Series. Under the
Pooling Agreement, the Transferor may designate, with respect to any newly
issued Series: (a) its name or designation; (b) its initial principal amount (or
method for calculating such amount) and its invested amount in the Trust, which
is generally based on the aggregate amount of Principal Receivables in the Trust
allocated to such Series; (c) its certificate rate (or formula for the
determination thereof); (d) the interest payment date or dates (each, an
"Interest Payment Date") and the date or dates from which interest shall accrue;
(e) the method for allocating collections to Certificateholders of such Series;
(f) any bank accounts to be used by such Series and the terms governing the
operation of any such bank accounts; (g) the percentage used to calculate
monthly servicing fees; (h) the provider and terms of any form of Enhancement
with respect thereto; (i) the terms on which the Certificates of such Series may
be repurchased or remarketed to other investors; (j) the Series Termination
Date; (k) the number of Classes of Certificates of such Series, and if such
Series consists of more than one Class, the rights and priorities of each such
Class; (l) the extent to which the Certificates of such Series will be issuable
in temporary or permanent global form (and, in such case, the depositary for
such global certificate or certificates, the terms and conditions, if any, upon
which such global certificate may be exchanged, in whole or in part, for
definitive certificates, and the manner in which any interest payable on a
global certificate will be paid); (m) whether the Certificates of such Series
may be issued in bearer form and any limitations imposed thereon; (n) the
priority of such Series with respect to any other Series; (o) the Group, if any,
in which such Series will be included; and (p) any other relevant terms (all
such terms, the "Principal Terms" of such Series). None of the Transferor, the
Servicer, the Trustee or the Trust is required or intends to obtain the consent
of any Certificateholder of any outstanding Series to issue any additional
Series. The Transferor may offer any Series to the public under a prospectus or
other disclosure document in transactions either registered under the Securities
Act or exempt from registration thereunder directly, through one or more
underwriters or placement agents, in fixed-price offerings or in negotiated
transactions or otherwise. Any such Series may be issued in fully registered or
book-entry form in minimum denominations determined by the Transferor.
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The Pooling Agreement provides that the Transferor may designate Principal
Terms such that each Series has (i) an accumulation period (an "Accumulation
Period") during which time collections of Principal Receivables and certain
other amounts allocable to the Certificateholders' Interest of such Series will
be deposited on each Distribution Date in a trust account which is an Eligible
Deposit Account (a "Principal Funding Account") for the benefit of such
Certificateholders and used to make principal distributions to such
Certificateholders when due or (ii) a Controlled Amortization Period or a
Principal Amortization Period that may have a different length and begin on a
different date than such periods for any other Series. Further, one or more
Series may be in their Accumulation Period, Controlled Amortization Period or
Principal Amortization Period while other Series are not. If specified in the
related Prospectus Supplement, Collections of Principal Receivables otherwise
allocable to a Series that is not amortizing or accumulating principal may be
treated as Shared Principal Collections and reallocated to a Series that is
amortizing or accumulating principal. If specified in the related Prospectus
Supplement, Collections of Principal Receivables and Finance Charge Receivables
otherwise payable to the Transferor may be designated to be paid to the
Certificateholders of the applicable Series. Moreover, each Series may have the
benefits of Enhancement issued by enhancement providers different from the
Enhancement Providers with respect to any other Series. Under the Pooling
Agreement, the Trustee shall hold any such Enhancement only on behalf of the
Certificateholders of the Series to which such Enhancement relates. With respect
to each such Enhancement, the Transferor may deliver a different form of
Enhancement agreement. The Transferor also has the option under the Pooling
Agreement to vary among Series the terms upon which a Series may be repurchased
by the Transferor or remarketed to other investors. There is no limit to the
number of New Issuances the Transferor may cause under the Pooling Agreement.
The Trust will terminate only as provided in the Pooling Agreement. There can be
no assurance that the terms of any Series might not have an impact on the timing
and amount of payments received by a Certificateholder of another Series.
Under the Pooling Agreement and pursuant to a Series Supplement, a New
Issuance may only occur upon the satisfaction of certain conditions provided in
the Pooling Agreement. The obligation of the Trustee to authenticate the
Certificates of such new Series and to execute and deliver the related Series
Supplement is subject to the satisfaction of the following conditions: (a) on or
before the fifth Business Day immediately preceding the date upon which the New
Issuance is to occur, the Transferor shall have given the Trustee, the Servicer
and each Rating Agency written notice of such New Issuance and the date upon
which the New Issuance is to occur; (b) the Transferor shall have delivered to
the Trustee the related Series Supplement, in form satisfactory to the Trustee,
executed by each party to the Pooling Agreement other than the Trustee; (c) the
Transferor shall have delivered to the Trustee the related Enhancement
agreement, if any, executed by the parties to such agreement; (d) the
Transferor, the Servicer, and the Trustee shall have received confirmation from
each Rating Agency that such New Issuance will not result in a Ratings Effect;
(e) the Transferor shall have delivered to the Trustee and certain Enhancement
Providers, if any, a certificate of an authorized officer, dated the date upon
which the New Issuance is to occur, to the effect that the Transferor reasonably
believes that such issuance will not, based on the facts known to such officer
at the time of such certification, cause an Early Amortization Event to occur
with respect to any Series; (f) the Transferor shall have delivered to the
Trustee and each Rating Agency an opinion of counsel acceptable to the Trustee
that for federal income tax purposes: (i) following such New Issuance the Trust
will not be deemed to be an association (or publicly traded partnership) taxable
as a corporation; (ii) such New Issuance will not affect the tax
characterization as debt of Certificates of any outstanding Series or Class that
were properly characterized as debt at the time of their issuance; and (iii)
such New Issuance will not cause or constitute an event in which gain or loss
would be recognized by holders of Certificates characterized as debt at the time
of their issuance (an opinion of counsel to the effect referred to in clauses
(i), (ii) and (iii) with respect to any action is referred to herein as a "Tax
Opinion"); (g) the Transferor Amount (excluding the interest represented by any
Supplemental Certificate) shall not be less than the Required Retained
Transferor Amount as of the date upon which the New Issuance is to occur after
giving effect to such issuance; and (h) any other conditions specified in any
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Series Supplement. Upon satisfaction of the above conditions, the Trustee shall
execute the Series Supplement and issue to the Transferor the Certificates of
such new Series for execution and redelivery to the Trustee for authentication.
The Pooling Agreement provides that, pursuant to any one or more supplements
to the Pooling Agreement (each, a "Participation Supplement"), the Transferor
may direct the Trustee to issue on behalf of the Trust one or more
participations (each, a "Participation"), to be delivered to or upon the order
of the Transferor; PROVIDED that (a) such issuance will not result in a Ratings
Effect, (b) the Transferor Amount (excluding the interest represented by any
Supplemental Certificate) shall not be less than the Required Retained
Transferor Amount as of the date of, and after giving effect to, such issuance
and (c) the Transferor shall have delivered to the Trustee and each Rating
Agency a Tax Opinion, dated the date of such issuance, with respect to such
issuance. Any Participation may be transferred or exchanged only upon
satisfaction of the conditions described in clauses (a) and (c) above.
Notwithstanding the foregoing, on the Closing Date, the Transferor will issue to
RNB a Participation with respect to which the conditions above need not be
specifically satisfied. Each Participation will entitle its holder to a
specified percentage (the "Participation Percentage") of all Collections of
Principal Receivables and Finance Charge Receivables and any other Trust Assets
to the extent specified in the Participation Supplement.
COLLECTION ACCOUNT
The Servicer has established and will maintain in the name of the Trust and
for the benefit of the Certificateholders of each Series, an Eligible Deposit
Account bearing a designation clearly indicating that the funds deposited
therein are held for the benefit of the Certificateholders of each Series (the
"Collection Account"). "Eligible Deposit Account" means either (a) a segregated
account with an Eligible Institution or (b) a segregated trust account with the
corporate trust department of a depository institution organized under the laws
of the United States or any one of the states thereof, including the District of
Columbia (or any domestic branch of a foreign bank), and acting as a trustee for
funds deposited in such account, so long as any of the securities of such
depository institution shall have a credit rating from each Rating Agency in one
of its generic credit rating categories which signifies investment grade.
"Eligible Institution" means (i) a depository institution (which may be the
Trustee) organized under the laws of the United States or any one of the states
thereof which at all times (A) has either (1) a long-term unsecured debt rating
of "A2" or better by Moody's Investors Service, Inc. ("Moody's") or (2) a
certificate of deposit rating of "P-1" by Moody's, (B) has either (1) a
long-term unsecured debt rating of "AAA" by Standard & Poor's Ratings Group, a
division of McGraw Hill Corporation ("Standard & Poor's"), or (2) a certificate
of deposit rating of "A-1+" by Standard & Poor's and (C) is a member of the FDIC
or (ii) any other institution that is acceptable to each Rating Agency. The
Collection Account will initially be maintained with the Trustee. If at any time
the Collection Account ceases to be an Eligible Deposit Account, the Collection
Account shall be moved so that it will again be qualified as an Eligible Deposit
Account. Funds in the Collection Account generally will be invested in (i)
obligations fully guaranteed by the United States of America, (ii) demand
deposits, time deposits or certificates of deposit of depository institutions or
trust companies, the commercial paper, if any, of which has the highest rating
from Moody's and Standard & Poor's, (iii) commercial paper (or other short-term
obligations) having, at the time of the Trust's investment therein, a rating in
the highest rating category from Moody's and Standard & Poor's, (iv) demand
deposits, time deposits and certificates of deposit which are fully insured by
the FDIC, (v) notes or bankers' acceptances issued by any depository institution
or trust company described in (ii) above, (vi) time deposits with an entity, the
commercial paper of which has the highest rating from Moody's and Standard &
Poor's, and (vii) any other investments approved in writing by each Rating
Agency which would not cause the Trust to become an "investment company" within
the meaning of the Investment Company Act of 1940, as amended (collectively,
"Eligible Investments"). Any earnings (net of losses and investment expenses) on
funds in the Collection Account will be treated as collections of Finance Charge
Receivables with respect to the last day of the related Monthly Period. The
Servicer has the revocable power to withdraw funds from the Collection Account
and to instruct the Trustee to make
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withdrawals and payments from the Collection Account for the purpose of carrying
out its duties under the Pooling Agreement and the Series Supplements. Under the
Pooling Agreement, a paying agent (the "Paying Agent") will be appointed. The
Paying Agent shall have the revocable power to withdraw funds from the
Collection Account for the purpose of making distributions to the
Certificateholders. The Paying Agent shall initially be the Trustee.
DEPOSITS IN COLLECTION ACCOUNT
The Servicer will, subject to the limitations described in the related
Prospectus Supplement, deposit all Collections received with respect to the
Receivables in each Monthly Period into the Collection Account not later than
two Business Days after the related Date of Processing, and the Servicer will
make the deposits and payments to the accounts and parties described in the
related Prospectus Supplement on the date of such deposit. If RNB as Servicer
(i) provides to the Trustee a letter of credit covering collection risk of the
Servicer acceptable to each Rating Agency (as evidenced by a letter from each
Rating Agency to the effect that such action will not cause a Ratings Effect) or
(ii) Dayton Hudson has and maintains a commercial paper rating of at least "A-1"
and "P-1" (or their equivalent) by Standard & Poor's and Moody's, respectively,
RNB may use for its own benefit all Collections received with respect to the
Receivables in each Monthly Period until the Business Day preceding the related
Distribution Date. RNB currently has not provided such a letter of credit and
Dayton Hudson does not currently maintain such rating. In the event of the
insolvency or receivership of RNB or, in certain circumstances, the lapse of
certain time periods, the Transferor may not have a perfected security interest
in such Collections. If the Transferor does not have a perfected security
interest in such Collections, the Trust will not have a perfected security
interest in such Collections. The Servicer will only be required to deposit
Collections into the Collection Account up to the aggregate amount of
Collections required to be deposited into an account established for any Series,
or, without duplication, distributed on the related Distribution Date or Payment
Date to Certificateholders of any Series or to the issuer of any Enhancement
pursuant to the terms of any Series Supplement. If at any time prior to such
Distribution Date or Payment Date the amount of Collections deposited in the
Collection Account exceeds the amount required to be so deposited the Servicer
will be permitted to withdraw such excess from the Collection Account.
SHARING OF EXCESS FINANCE CHARGE COLLECTIONS AND EXCESS TRANSFEROR FINANCE
CHARGE COLLECTIONS
If so specified in the related Prospectus Supplement, the Certificateholders
of a Series or any Class thereof may be entitled to receive all or a portion of
Excess Finance Charge Collections with respect to another Series included in the
same group of Series (each, a "Group") to cover any shortfalls with respect to
amounts payable from Collections of Finance Charge Receivables allocable to such
Series or Class. Unless otherwise provided in the related Prospectus Supplement,
with respect to any Series, "Excess Finance Charge Collections" for any Monthly
Period will equal the excess of Collections of Finance Charge Receivables and
certain other amounts allocated to the Certificateholders' Interest of such
Series or Class over the sum of (i) interest accrued for the current month
("Monthly Interest") and overdue Monthly Interest on the Certificates of such
Series or Class, (ii) accrued and unpaid Monthly Servicing Fees (as defined in
the related Prospectus Supplement) with respect to such Series or Class, (iii)
the Investor Defaulted Amount (as defined in the related Prospectus Supplement)
with respect to such Series or Class, (iv) unreimbursed Investor Charge-Offs (as
defined in the related Prospectus Supplement) with respect to such Series or
Class and (v) other amounts specified in the related Prospectus Supplement. Such
Excess Finance Charge Collections will be applied to cover any shortfalls with
respect to amounts payable from collections of Finance Charge Receivables
allocable to any other Series in the same Group, PRO RATA based upon the amount
of the shortfall, if any, with respect to each other Series in such Group. While
any Series offered hereby may be included in a Group, there can be no assurance
that (a) any other Series will be included in such Group or (b) there will be
any Excess Finance Charge Collections with respect to such Group for any Monthly
Period.
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Collections of Finance Charge Receivables allocable to the Transferor's
Interest in excess of the amounts necessary to make required payments with
respect to any Supplemental Certificates and all other amounts otherwise payable
to the Transferor with respect to collections of Finance Charge Receivables
regardless of whether such collections were initially allocated to the
Transferor or any Series (the "Excess Transferor Finance Charge Collections")
will be applied to cover any shortfalls (after giving effect to the application
of Excess Finance Charge Collections) with respect to amounts payable from
Collections of Finance Charge Receivables allocable to each Series designated in
the applicable Series Supplement as being entitled to receive Excess Transferor
Finance Charge Collections, PRO RATA based upon the amount of the shortfall
(after giving effect to the application of Excess Finance Charge Collections),
if any, with respect to each other Series designated in the applicable Series
Supplement as being entitled to receive Excess Transferor Finance Charge
Collections. In all cases, any Excess Transferor Finance Charge Collections
remaining after covering shortfalls with respect to all designated Series will
be treated as Shared Transferor Principal Collections. Excess Transferor Finance
Charge Collections permit coverage of shortfalls with respect to amounts payable
from Collections of Finance Charge Receivables and Excess Finance Charge
Collections allocable to a Series by using Collections of Finance Charge
Receivables which would otherwise be paid to the Transferor.
SHARED PRINCIPAL COLLECTIONS AND TRANSFEROR PRINCIPAL COLLECTIONS
If specified in the related Prospectus Supplement, Collections of Principal
Receivables for any Monthly Period allocated to the Certificateholders' Interest
of any Series will first be used to cover certain amounts described in the
Series Supplement of such Series (including any required distributions to
Certificateholders of such Series). The Servicer will determine the amount of
Collections of Principal Receivables for any Monthly Period (plus certain other
amounts described in the Series Supplement of such Series) allocated to such
Series remaining after covering such required deposits and distributions and any
similar amount remaining for any other Series (collectively, "Shared Principal
Collections"). The Servicer will allocate the Shared Principal Collections plus
amounts specified in any Participation Supplement with respect to any
Participation to be treated as Shared Principal Collections, to cover any
principal distributions to Certificateholders and deposits to Principal Funding
Accounts for any Series that are either scheduled or permitted and that have not
been covered out of the investor principal collections and certain other amounts
for such Series (collectively, "Principal Shortfalls"). If Principal Shortfalls
exceed Shared Principal Collections for any Monthly Period, Shared Principal
Collections will be allocated PRO RATA among the applicable Series based on the
respective Principal Shortfalls of such Series. To the extent that Shared
Principal Collections exceed Principal Shortfalls, the balance will be allocated
to the holder of the Transferor Certificate, PROVIDED that (a) such Shared
Principal Collections will be distributed to the holder of the Transferor
Certificate only to the extent that the Transferor Amount (excluding the
interest represented by any Supplemental Certificate) is greater than the
Required Retained Transferor Amount and (b) in certain circumstances described
below under "--Special Funding Account," such Shared Principal Collections will
be deposited in the Special Funding Account. Any such reallocation of
Collections of Principal Receivables will not result in a reduction in the
Invested Amount of the Series to which such Collections were initially
allocated. There can be no assurance that there will be any Shared Principal
Collections with respect to any Monthly Period.
The Servicer will determine the amount of Collections of Principal
Receivables for any Monthly Period allocated to the Transferor's Interest but
not due to the holder of any Supplemental Certificate and other amounts payable
to the Transferor with respect to Collections of Principal Receivables,
regardless of whether such Collections were initially allocated to the
Transferor or any Series, plus the amount of Excess Transferor Finance Charge
Collections remaining after application to amounts payable from Collections of
Finance Charge Receivables (collectively, "Shared Transferor Principal
Collections"). The Servicer will allocate the Shared Transferor Principal
Collections to cover any Principal Shortfalls that have not been covered out of
the Shared Principal Collections allocated to each Series that has been
designated in the applicable Series Supplement as being entitled to receive
Shared Transferor Principal Collections. If
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Principal Shortfalls remaining after the application of Shared Principal
Collections exceed Shared Transferor Principal Collections for any Monthly
Period, Shared Transferor Principal Collections will be allocated pro rata among
each Series which in accordance with the Series Supplement for such Series is
designated as being entitled to receive Shared Transferor Principal Collections,
based on the respective remaining Principal Shortfalls of such Series. To the
extent that Shared Transferor Principal Collections exceed Principal Shortfalls
remaining after application of Shared Principal Collections, the balance will be
paid to the holder of the Transferor Certificate. Shared Transferor Principal
Collections permit coverage of Principal Shortfalls remaining after the
application of Shared Principal Collections by using Collections that would have
been paid to the Transferor and in certain circumstances may allow the
Accumulation Period Length (as defined in the related Prospectus Supplement) to
be shorter. There can be no assurance that there will be any Shared Transferor
Principal Collections with respect to any Monthly Period.
SPECIAL FUNDING ACCOUNT
The Servicer will establish and maintain in the name of the Trust, for the
benefit of the Certificateholders of all Series a "Special Funding Account"
which shall be an Eligible Deposit Account. At any time during which the
Transferor Amount (excluding the interest represented by any Supplemental
Certificate) would otherwise be less than the Required Retained Transferor
Amount, funds (to the extent available therefor as described herein) otherwise
payable to the Transferor will be deposited in the Special Funding Account on
each Business Day until the Transferor Amount (excluding the interest
represented by any Supplemental Certificate) is at least equal to the Required
Retained Transferor Amount. Funds on deposit in the Special Funding Account will
be withdrawn and paid to the Transferor (or, if provided in the applicable
Supplement, used to make payments to Certificateholders) to the extent that
following such distribution the Transferor Amount (excluding the interest
represented by any Supplemental Certificate) would continue to exceed the
Required Retained Transferor Amount. Such deposits in and withdrawals from the
Special Funding Account may be made on a daily basis.
Funds on deposit in the Special Funding Account will be invested by the
Trustee at the direction of the Servicer in Eligible Investments selected by the
Servicer. On each Distribution Date, all net investment income earned on amounts
in the Special Funding Account since the preceding Distribution Date will be
withdrawn from the Special Funding Account and treated as Collections of Finance
Charge Receivables with respect to such Monthly Period.
PAIRED SERIES
If so provided in the Prospectus Supplement relating to a Series, each such
Series is subject to being paired with another Series (in such case, a "Paired
Series"). The Prospectus Supplement for such Series and the Prospectus
Supplement for the Paired Series will each specify the relationship between the
Series.
FUNDING PERIOD
For any Series of Certificates, the related Prospectus Supplement may
specify that for a period beginning on the Closing Date and ending on a
specified date before the commencement of an Amortization Period or Accumulation
Period with respect to such Series (the "Funding Period"), the aggregate amount
of Principal Receivables in the Trust allocable to such Series may be less than
the aggregate principal amount of the Certificates of such Series and that the
amount of such deficiency (the "Pre-Funding Amount") will be held in a trust
account established with the Trustee for the benefit of the Certificateholders
of such Series (the "Pre-Funding Account") pending the transfer of additional
Receivables to the Trust or pending the reduction of the Invested Amounts of
other Series. The related Prospectus Supplement will specify the Initial
Invested Amount with respect to such Series, the aggregate principal amount of
such Series (the "Full Invested Amount") and the date by which the Invested
Amount is expected to equal the Full Invested Amount. The Invested Amount will
increase as Receivables are delivered to the Trust or as the Invested Amounts of
other Series are reduced. The Invested Amount may also decrease due to Investor
Charge-Offs as provided in the related Prospectus Supplement.
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During the Funding Period, funds on deposit in the Pre-Funding Account for a
Series of Certificates will be withdrawn and paid to the Transferor to the
extent of any increases in the Invested Amount. In the event that the Invested
Amount does not for any reason equal the Full Invested Amount by the end of the
Funding Period, any amount remaining in the Pre-Funding Account and any
additional amounts specified in the related Prospectus Supplement will be
payable to the Certificateholders of such Series in the manner and at such time
as set forth in the related Prospectus Supplement.
If so specified in the related Prospectus Supplement, monies in the
Pre-Funding Account will be invested by the Trustee in Eligible Investments or
will be subject to a guaranteed rate or investment agreement or other similar
arrangement, and, in connection with each Distribution Date during the Funding
Period, investment earnings on funds in the Pre-Funding Account during the
related Monthly Period will be withdrawn from the Pre-Funding Account and
deposited, together with any applicable payment under a guaranteed rate or
investment agreement or other similar arrangement, into the Collection Account
for distribution in respect of interest on the Certificates of the related
Series in the manner specified in the related Prospectus Supplement.
DEFAULTED RECEIVABLES
"Defaulted Receivables" for any date of determination are Principal
Receivables that were charged-off as uncollectible on such day. The "Defaulted
Amount" for any Monthly Period will be an amount (not less than zero) equal to
(a) the amount of Defaulted Receivables for each day in such Monthly Period
minus (b) the sum of (i) the amount of any Defaulted Receivables for which the
Transferor Amount is reduced as a result of the assignment of a principal
balance of zero thereto for purposes of determining the aggregate amount of
Principal Receivables or for which the Servicer becomes obligated to accept
assignment during such Monthly Period, in either case as a result of a breach of
a representation, warranty or covenant contained in the Pooling Agreement
(unless an Insolvency Event has occurred with respect to the Transferor or the
Servicer, in which event the amount of such Defaulted Receivables will not be
added to the sum so subtracted), (ii) the aggregate amount of recoveries
received in such Monthly Period with respect to both Finance Charge Receivables
and Principal Receivables previously charged-off as uncollectible and (iii) the
excess, if any, for the immediately preceding Monthly Period of the sum computed
pursuant to this clause (b) over the amount of Principal Receivables that became
Defaulted Receivables during such Monthly Period. Receivables in any Account
will be charged-off as uncollectible in accordance with the Credit Card
Guidelines and the Servicer's customary and usual policies and procedures for
servicing open end credit card and other open end credit account receivables
comparable to the Receivables. Such policy is currently to charge off the
receivables in an account when that account becomes 180 days delinquent.
DILUTION
If the Servicer adjusts downward the amount of any Principal Receivable
(other than Ineligible Receivables which have been or are to be reassigned to
the Transferor) because of a rebate, refund, counterclaim, defense, error,
fraudulent charge or counterfeit charge to a Cardholder or such Principal
Receivable was created in respect of merchandise which was refused or returned
by a Cardholder or if the Servicer otherwise adjusts downward the amount of any
Principal Receivable without receiving Collections therefor or charging off such
amount as uncollectible, the amount of the Principal Receivables in the Trust
with respect to the Monthly Period in which such adjustment takes place will be
reduced by the amount of the adjustment. Furthermore, in the event that the
exclusion of any such Receivables would cause the Transferor Amount (excluding
the interest represented by any Supplemental Certificate) at such time to be
less than the Required Retained Transferor Amount, the Transferor will be
required to pay an amount equal to such deficiency into the Special Funding
Account.
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EARLY AMORTIZATION EVENTS
Unless otherwise specified in the related Prospectus Supplement, as
described above, the Revolving Period will continue through the date specified
in the related Prospectus Supplement unless an Early Amortization Event occurs
prior to such date. An "Early Amortization Event" with respect to each Series
would occur automatically upon (a) certain insolvency events relating to RNB,
DHCC, the Transferor or any holder of the Transferor Certificate (excluding any
holder of a Supplemental Certificate), (b) the Trust becoming an "investment
company" within the meaning of the Investment Company Act of 1940, as amended,
(c) the Transferor Amount (excluding the interest represented by any
Supplemental Certificate) being less than the Required Retained Transferor
Amount or (d) the Transferor becoming unable for any reason to transfer
Receivables to the Trust. In addition an Early Amortization Event may occur with
respect to any specific Series upon the occurrence of any event specified in the
related Prospectus Supplement. On the date on which an Early Amortization Event
is deemed to have occurred, the Early Amortization Period or, if specified in
the related Prospectus Supplement, the Rapid Accumulation Period, will commence.
If, because of the occurrence of an Early Amortization Event, the Early
Amortization Period or, if specified in the related Prospectus Supplement, the
Rapid Accumulation Period, begins earlier than the scheduled commencement of an
Amortization Period or prior to an Expected Final Payment Date,
Certificateholders may begin receiving distributions of principal earlier than
they otherwise would have, which may shorten the average life of the
Certificates.
DEFEASANCE
The Transferor may, at its option, be discharged from its obligations with
respect to any Series or all outstanding Series (each a "Defeased Series") on
the date that the following conditions shall have been satisfied: (i) the
Transferor shall have deposited with the Trustee, pursuant to an irrevocable
trust agreement in form and substance satisfactory to the Trustee, as trust
funds in trust for making the payments described below, Eligible Investments
which through the scheduled payment of principal and interest in respect thereof
will provide, no later than the due date of payment thereon, a dollar amount
sufficient to pay and discharge all remaining scheduled interest and principal
payments on all outstanding Certificates of the Defeased Series on the dates
scheduled for such payments and any amounts owing to any Enhancement Providers
with respect to the Defeased Series; (ii) prior to any exercise of its right to
substitute Eligible Investments for Receivables, the Transferor shall have
delivered to the Trustee a Tax Opinion with respect to such deposit and
termination of obligations and an opinion of counsel to the effect that such
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; (iii) the Transferor shall have
delivered to the Trustee a certificate of an officer of the Transferor stating
that the Transferor reasonably believes that such deposit and termination of its
obligations will not cause an Early Amortization Event or any event that, with
the giving of notice or the lapse of time, would constitute an Early
Amortization Event to occur with respect to any Series; and (iv) a Ratings
Effect will not occur. Subject to the foregoing, the Transferor may cause
Collections allocated to the Defeased Series and available to purchase
additional Receivables to be applied to purchase Eligible Investments, rather
than additional Receivables.
REPORTS TO CERTIFICATEHOLDERS
No later than the third Business Day prior to each Distribution Date, the
Servicer will forward to the Trustee and each Rating Agency a statement (the
"Monthly Report") prepared by the Servicer setting forth certain information
with respect to the Trust and the Certificates of each Series, including: (a)
the aggregate amount of Principal Receivables and Finance Charge Receivables in
the Trust as of the end of such Monthly Period; (b) the Invested Amount of each
Series and the Invested Amount allocated to each Class thereof; (c) the Floating
Allocation Percentage (as defined in the related Prospectus Supplement) and,
during the Controlled Amortization Period, Principal Amortization Period,
Accumulation Period,
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Rapid Accumulation Period or Early Amortization Period of each Series, the
Principal Allocation Percentage with respect to each Series and each Class
thereof; (d) the amount of Collections of Principal Receivables and Finance
Charge Receivables processed during the related Monthly Period and the portion
thereof allocated to the Certificateholders' Interest of each Series; (e) the
aggregate outstanding balance of Accounts which were 30, 60, 90 and 120 days or
more delinquent as of the end of the billing-cycle end dates occurring during
such Monthly Period; (f) the Defaulted Amount with respect to such Monthly
Period and the portion thereof allocated to the Certificateholders' Interest of
each Series; (g) the amount, if any, of charge-offs with respect to the
Certificateholders' Interest of each Series and the portion allocable to each
Class thereof for such Monthly Period; (h) the Monthly Servicing Fee (as defined
in the related Prospectus Supplement) with respect to such Series for such
Monthly Period; (i) the Portfolio Yield for such Monthly Period; and (j) the
Base Rate for such Monthly Period.
With respect to each Interest Payment Date or Special Payment Date (each, a
"Payment Date"), as the case may be, the Monthly Report with respect to any
Series will include the following additional information with respect to the
other outstanding Series: (a) the total amount distributed; (b) the amount of
such distribution allocable to principal on the Certificates of each Series; (c)
the amount of such distribution allocable to interest on the Certificates of
each Series; and (d) the amount, if any, by which the unpaid principal balance
of the Certificates of each Series exceeds the Invested Amount of such Series as
of the Record Date with respect to such Payment Date. On each Distribution Date
the Trustee will forward to each Certificateholder of record (which is expected
to be Cede, the nominee for DTC) a copy of the Monthly Report. See "--Book-Entry
Registration" for a description of DTC procedures generally. Neither the
Servicer nor the Trustee will be obligated to forward any reports directly to
beneficial owners.
On or before January 31 of each calendar year, the Trustee will furnish (or
cause to be furnished) to each person who at any time during the preceding
calendar year was a Certificateholder of record a statement containing the
information required to be provided by an issuer of indebtedness under the Code
(defined herein) for such preceding calendar year or the applicable portion
thereof during which such person was a Certificateholder, together with such
other customary information as is necessary to enable the Certificateholders to
prepare their tax returns. See "Certain U.S. Federal Income Tax Consequences."
LIST OF CERTIFICATEHOLDERS
At such time, if any, as Definitive Certificates have been issued, upon
written request of any Certificateholder or group of Certificateholders of
record holding Certificates evidencing not less than 10% of the aggregate unpaid
principal amount of the Certificates of a Series or of all outstanding Series,
as the case may be, the Trustee will afford such Certificateholders access
during normal business hours to the current list of Certificateholders of the
Series or all outstanding Series, as the case may be, for purposes of
communicating with other Certificateholders with respect to their rights under
the Pooling Agreement or any Series Supplement or Certificates. See
"--Book-Entry Registration" and "--Definitive Certificates" for a description of
the circumstances under which Definitive Certificates may be issued.
The Pooling Agreement does not provide for any annual or other meetings of
Certificateholders.
ENHANCEMENT
For any Series, Enhancement may be provided with respect to one or more
Classes thereof. Enhancement may be in the form of the subordination of one or
more Classes of the Certificates of such Series, the establishment of any cash
collateral guaranty or account, collateral invested amount, letter of credit,
surety bond, insurance, guaranteed rate agreement, maturity guaranty facility,
tax protection agreement, interest rate swap or cap, spread account, reserve
account, the use of cross-support features or another method of Enhancement
described in the related Prospectus Supplement, or any combination of the
foregoing. If so specified in the related Prospectus Supplement, any form of
Enhancement may be structured so as to be drawn upon by more than one Class to
the extent described therein.
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USE OF PROCEEDS
The net proceeds from the sale of the Series 1997-1 Certificates will be
paid to the Transferor. The Transferor will use such proceeds for general
corporate purposes.
DESCRIPTION OF THE CLASS A CERTIFICATES
GENERAL
The Series 1997-1 Certificates will be issued pursuant to the Pooling
Agreement, and a series supplement thereto (the "Series 1997-1 Supplement")
relating to the Series 1997-1 Certificates, among the Transferor, the Servicer
and the Trustee. The Trustee will provide a copy of the Pooling Agreement
(without exhibits or schedules), including the Series 1997-1 Supplement, to
Series 1997-1 Certificateholders upon written request. The following summary
describes the material terms applicable to the Series 1997-1 Certificates and is
qualified in its entirety by reference to the Pooling Agreement and the Series
1997-1 Supplement.
The Series 1997-1 Certificates will initially be represented by one or more
certificates registered in the name of the nominee of The Depository Trust
Company ("DTC") (together with any successor depository selected by the
Transferor, the "Depository"), except as set forth below. The Series 1997-1
Certificates will be available for purchase in minimum denominations of $1,000
and in integral multiples thereof in book-entry form. The Transferor has been
informed by DTC that DTC's nominee will be Cede & Co. ("Cede"). See "Description
of the Certificates--Book-Entry Registration" and "--Definitive Certificates" in
the Prospectus.
Cede, as nominee for DTC, will hold the global Certificates. Cedel and
Euroclear will hold omnibus positions on behalf of the Cedel Participants and
the Euroclear Participants, respectively, through customers' securities accounts
in Cedel's and Euroclear's names on the books of their respective depositaries
(collectively, the "Depositaries"), which in turn will hold such positions in
customers' securities accounts in the Depositaries' names on the books of DTC.
For additional information regarding clearance and settlement procedures for the
Certificates, see Annex II hereto.
The Series 1997-1 Certificates will evidence undivided interests in the
Trust Assets allocated to the Series 1997-1 Certificateholders' Interest,
representing the right to receive from such Trust Assets funds up to (but not in
excess of) the amounts required to make payments of interest and principal with
respect thereto.
INTEREST
Interest will accrue on the unpaid principal amount of the Class A
Certificates during each Interest Period at the Class A Certificate Rate. Except
as otherwise provided herein, interest will be distributed to the Series 1997-1
Certificateholders monthly on each Distribution Date commencing November 25,
1997 and on each Distribution Date thereafter in an amount equal to the product
of the Class A Certificate Rate and the outstanding principal balance of the
Class A Certificates as of the close of business on the last day of the
preceding Monthly Period. Interest on the Class A Certificates will be
calculated on the basis of a 360-day year of twelve 30-day months, but for
purposes of calculating the interest payable with respect to the first Interest
Period, interest will accrue from and include the Closing Date to and including
November 24, 1997 (assuming that the month of October has 30 days).
Collections of Finance Charge Receivables and certain other amounts
allocable to the Series 1997-1 Certificateholders' Interest will be used to make
interest payments to Series 1997-1 Certificateholders on each Distribution Date.
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"Interest Period" means, with respect to any Distribution Date, a period
from and including the preceding Distribution Date to but excluding such
Distribution Date; PROVIDED, HOWEVER, that the initial Interest Period will
commence on the Closing Date.
PRINCIPAL
During the Revolving Period (which begins on the Closing Date and ends on
the day before either the Accumulation Period or the Early Amortization Period
begins), no principal payments will be made to the Class A Certificateholders.
On each Distribution Date during the Revolving Period, Collections of Principal
Receivables allocable to the Series 1997-1 Certificateholders' Interest, subject
to certain limitations, including the allocation of any Reallocated Class B
Principal Collections with respect to the related Monthly Period to pay the
Class A Required Amount, may be treated as Shared Principal Collections or paid
to the Transferor; PROVIDED, that certain available Collections of Principal
Receivables allocable to the Series 1997-1 Certificateholders' Interest may be
applied to reduce the Class B Invested Amount if each Rating Agency shall have
confirmed that such reduction would not result in a Ratings Effect.
On each Distribution Date during the Accumulation Period, principal in an
amount equal to Class A Principal will be deposited in the Principal Funding
Account for distribution to Class A Certificateholders on the Class A Expected
Final Payment Date. During any Early Amortization Period, an amount equal to
Class A Principal will be paid monthly on each Special Payment Date to the Class
A Certificateholders until the Class A Invested Amount is paid in full. If an
Early Amortization Event occurs during the Accumulation Period, the amount in
the Principal Funding Account will be paid to the Class A Certificateholders on
the first Special Payment Date. See "--Early Amortization Events" for a
discussion of events which might lead to the commencement of an Early
Amortization Period. See "--Application of Collections" for a discussion of the
method by which collections of Principal Receivables are allocated during either
an Accumulation Period or an Early Amortization Period. On each Distribution
Date during the Amortization Period on and after the Distribution Date on which
the Class A Invested Amount is paid in full, the Class B Certificateholders
shall be entitled to receive the Class B Principal.
POSTPONEMENT OF ACCUMULATION PERIOD
Upon written notice to the Trustee, and subject to certain conditions, the
Servicer may elect to postpone the commencement of the Accumulation Period,
thereby extending the length of the Revolving Period. The Servicer may make such
election only if the Accumulation Period Length (determined as described below)
is less than 12 months. On each Determination Date on and after the June 2001
Determination Date but prior to the commencement of the Accumulation Period, the
Servicer will determine the "Accumulation Period Length," which is the number of
months expected to be required to fully fund the Principal Funding Account in an
amount sufficient to pay the entire Class A Invested Amount no later than the
Class A Expected Final Payment Date, based on the assumptions that (a) the
payment rate with respect to Collections of Principal Receivables remains
constant at the lowest level of such payment rate during the twelve preceding
Monthly Periods (or such lower payment rate as the Servicer may select), (b) the
total amount of Principal Receivables in the Trust (and the principal amount on
deposit in the Special Funding Account, if any) remains constant at the level on
such date of determination, (c) no Early Amortization Event with respect to any
Series will subsequently occur, and (d) no additional Series (other than any
Series being issued on such date of determination) will be subsequently issued.
If the Accumulation Period Length is less than 12 months, the Servicer may, at
its option, postpone the commencement of the Accumulation Period such that the
number of months included in the Accumulation Period will equal or exceed the
Accumulation Period Length. The effect of the foregoing calculation is to permit
the reduction of the length of the Accumulation Period based on (a) the
certificateholders' interest of certain other Series, if any, which are
scheduled to be in their revolving periods during the Accumulation Period, (b)
the sharing of Collections allocable to any Participation and the Transferor
Interest and (c) increases in the principal payment rate, if any, occurring
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after the Closing Date. The length of the Accumulation Period will not be less
than one month and any election to shorten the Accumulation Period will be
subject to subsequent lengthening of the Accumulation Period on any subsequent
Determination Date. If the commencement of the Accumulation Period is postponed,
and if an Early Amortization Event occurs after the date originally scheduled as
the commencement of the Accumulation Period, it is probable that Series 1997-1
Certificateholders would receive some of their principal later than if the
Accumulation Period had not been postponed.
SUBORDINATION OF THE CLASS B CERTIFICATES
The Class B Certificateholders' Interest will be subordinated to the extent
necessary to fund payments with respect to the Class A Certificates. To the
extent the Class B Invested Amount is reduced, the percentage of collections of
Finance Charge Receivables allocable to the Class B Certificateholders in
subsequent Monthly Periods will be reduced. Moreover, to the extent the amount
of such reduction in the Class B Invested Amount is not reimbursed, the amount
of principal distributable to the Class B Certificateholders will be reduced.
See "--Allocation Percentages," "--Application of Collections-- Payment of
Interest, Fees and Other Items," "--Application of Collections--EXCESS FINANCE
CHARGE COLLECTIONS" and "--Reallocation of Cash Flows" herein.
If Available Series 1997-1 Finance Charge Collections, Excess Finance Charge
Collections from other Series, if any, allocable to the Series 1997-1
Certificates and Excess Transferor Finance Charge Collections, if any, allocable
to the Series 1997-1 Certificates for any Monthly Period are insufficient to pay
Class A Monthly Interest and any Carryover Class A Interest on the related
Distribution Date, the Class A Investor Defaulted Amount for such Monthly
Period, the Class A Servicing Fee for such Monthly Period, and the Class A
Percentage of the Series 1997-1 Allocation Percentage of the Adjustment Payments
not made on or prior to the related Distribution Date, then Reallocated Class B
Principal Collections will be applied to fund the remaining Class A Required
Amount and the Class B Invested Amount will be reduced by the amount of
Reallocated Class B Principal Collections so used.
If Reallocated Class B Principal Collections available with respect to such
Monthly Period are insufficient to fund the remaining Class A Required Amount,
then a portion of the Class B Invested Amount equal to such insufficiency (but
not in excess of the lesser of the Class A Investor Defaulted Amount for such
Monthly Period and the Class B Invested Amount) will be allocated to the Class A
Certificates to avoid a reduction in the Class A Invested Amount, and the Class
B Invested Amount will thereafter be reimbursed and the Class B Invested Amount
increased, on each Distribution Date by the amount, if any, of Finance Charge
Collections for such Distribution Date allocated and available for such purpose.
See "--Application of Collections--PAYMENT OF INTEREST, FEES AND OTHER ITEMS"
and "--Reallocation of Cash Flows" herein.
TRANSFER OF THE CLASS B CERTIFICATES
The Class A Certificates will have the benefit of the subordination of the
Class B Certificates which will be retained initially by the Transferor. The
Transferor may at any time, without consent of the Class A Certificateholders,
sell or transfer all or a portion of the Class B Certificates and, in connection
with any such sale or transfer, enter into a supplemental agreement with the
Trustee pursuant to which the Transferor may provide that the Class B
Certificates will bear interest at a specified rate, set forth the amount of
monthly interest due to Class B Certificateholders, provide for the payment of
additional amounts with respect to any shortfall of such amount and provide for
such other terms with respect to the Class B Certificates as may be specified
therein, PROVIDED that in each case (i) the Transferor shall have given notice
to the Trustee, the Servicer and the Rating Agencies of the proposed sale or
transfer of the Class B Certificates and such supplemental agreement at least
five Business Days prior to the consummation of such transfer or sale and the
execution of such supplemental agreement; (ii) the Trustee shall have been
notified in writing that such sale or transfer will not result in a Ratings
Effect; (iii) no Early Amortization Event shall have occurred prior to the
proposed sale or transfer or the execution of such
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supplemental agreement; (iv) the Transferor shall have delivered to the Trustee
a certificate of an authorized officer, dated the date of such sale or transfer
and the execution of such supplemental agreement, to the effect that, in the
reasonable belief of the Transferor, such sale or transfer and the effectiveness
of such supplemental agreement will not, based on the facts known to such
officer at the time of such certification, cause an Early Amortization Event to
occur with respect to any Series, including Series 1997-1; and (v) the
Transferor will have delivered a Tax Opinion (as defined in the Prospectus),
dated the date of such sale or transfer, with respect to such action.
DESCRIPTION OF THE CLASS B INVESTED AMOUNT
"Class B Invested Amount" means, when used with respect to any date, an
amount equal to (a) the Class B Initial Invested Amount, MINUS (b) the aggregate
amount of principal payments made to Class B Certificateholders prior to such
date, MINUS (c) the aggregate amount of Class B Investor Charge-Offs for all
prior Distribution Dates, MINUS (d) the aggregate amount of Reallocated Class B
Principal Collections for which the Class B Invested Amount has been reduced for
all prior Distribution Dates, PLUS (e) the sum of any reimbursed Class B
Investor Charge-Offs and Reallocated Class B Principal Collections and PLUS (f)
the amount of any increase in the Class B Invested Amount resulting from the
issuance of Additional Certificates. The Class B Invested Amount may be reduced
during the Revolving Period by distributing Collections of Principal Receivables
to the Class B Certificateholders; PROVIDED that (i) such reduction will not
result in a Ratings Effect and (ii) the Transferor shall have delivered to the
Trustee a certificate of an authorized officer stating that the Transferor
reasonably believes that such reduction will not, based on the facts known to
such officer at the time of such certification, cause an Early Amortization
Event to occur with respect to Series 1997-1.
"Class B Initial Invested Amount" means the aggregate initial principal
amount of the Class B Certificates, which is $122,875,817.
ALLOCATION PERCENTAGES
Pursuant to the Pooling Agreement, the Servicer will allocate daily among
the Series 1997-1 Certificateholders' Interest, the Certificateholders' Interest
for all other Series of Certificates issued and outstanding, the Transferor's
Interest and the interest of the holder of any Participations, all collections
of Finance Charge Receivables and Principal Receivables and the Defaulted Amount
with respect to each Date of Processing (as defined in the Prospectus).
FLOATING ALLOCATION PERCENTAGE. Collections of Finance Charge Receivables
and the Defaulted Amount with respect to any Monthly Period will be allocated to
the Series 1997-1 Certificateholders' Interest based on the Floating Allocation
Percentage. The "Floating Allocation Percentage" means, with respect to any date
of determination, the sum of the Class A Floating Allocation Percentage and
Class B Floating Allocation Percentage on such date.
"Class A Floating Allocation Percentage" means, with respect to any Monthly
Period, the percentage equivalent of a fraction, the numerator of which (x)
during the Revolving Period or the Accumulation Period with respect to
Collections of Finance Charge Receivables and at all times with respect to
Defaulted Amounts, is the Class A Adjusted Invested Amount as of the close of
business on the last day of the immediately preceding Monthly Period and (y)
during the Early Amortization Period with respect to Collections of Finance
Charge Receivables, is the Class A Adjusted Invested Amount as of the close of
business on the last day of the Monthly Period immediately preceding the
occurrence of an Early Amortization Event and the denominator of which is the
greater of (a) the total amount of Principal Receivables in the Trust plus the
amounts on deposit in the Special Funding Account as of the close of business on
such date and (b) when used with respect to Collections of Finance Charge
Receivables, the sum of the numerators with respect to all Classes of all Series
and Participations then outstanding used to calculate the applicable allocation
percentage.
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"Class B Floating Allocation Percentage" means, with respect to any Monthly
Period the percentage equivalent of a fraction, the numerator of which (x)
during the Revolving Period or the Accumulation Period with respect to
Collections of Finance Charge Receivables and at all times with respect to
Defaulted Amounts, is the Class B Invested Amount as of the close of business on
the last day of the immediately preceding Monthly Period and (y) during the
Early Amortization Period with respect to Collections of Finance Charge
Receivables, is the Class B Invested Amount as of the close of business on the
last day of the Monthly Period immediately preceding the occurrence of an Early
Amortization Event and the denominator of which is the greater of (a) the total
amount of Principal Receivables plus the amount on deposit in the Special
Funding Account as of the close of business on such date and (b) when used with
respect to Collections of Finance Charge Receivables, the sum of the numerators
with respect to all Classes of all Series and Participations then outstanding
used to calculate the applicable allocation percentage.
PRINCIPAL ALLOCATION PERCENTAGE. Collections of Principal Receivables will
be allocated to the Series 1997-1 Certificateholders' Interest based on the
Principal Allocation Percentage. Collections of recoveries will be treated as
Collections of Principal Receivables.
"Principal Allocation Percentage" means, with respect to any Monthly Period,
the percentage equivalent of a fraction, the numerator of which is (a) during
the Revolving Period, the Invested Amount as of the last day of the immediately
preceding Monthly Period (or, in the case of the first Monthly Period, the
Closing Date), (b) during the Accumulation Period, the Invested Amount as of the
last day of the Revolving Period; PROVIDED, that during the Accumulation Period
on the date of issuance of a new Series, at the option of the Transferor, such
amount may be reduced to an amount not less than the greater of (x) the Adjusted
Invested Amount on such date and (y) the amount which would result in a
Principal Allocation Percentage which when multiplied by the amount of
Collections of Principal Receivables for the preceding Monthly Period would
equal (I) the Class A Controlled Deposit Amount for such Monthly Period plus 10%
of the Class A Controlled Accumulation Amount or, if such date is on or after
the Class A Expected Final Payment Date and the Class A Invested Amount has been
paid in full, the Class B Invested Amount minus (II) the amount of any Available
Shared Principal Collections with respect to such Monthly Period, and (c) during
the Early Amortization Period, the Invested Amount as of the last day of the
Revolving Period or, if less, the last numerator used to calculate the Principal
Allocation Percentage in the Accumulation Period, if any, and the denominator of
which is the greater of (a)(x) if only one Series is outstanding (i) during the
Revolving Period, the sum of the total amount of Principal Receivables in the
Trust and the principal amount on deposit in the Special Funding Account as of
the last day of the immediately preceding Monthly Period and (ii) during the
Accumulation Period and the Early Amortization Period the sum of the total
amount of Principal Receivables in the Trust and the principal amount on deposit
in the Special Funding Account as of the last day of the Revolving Period and
(y), if more than one Series is outstanding, the sum of the total amount of
Principal Receivables in the Trust and the principal amount on deposit in the
Special Funding Account as of the last day of the immediately preceding Monthly
Period (or, in the case of the first Monthly Period, the Closing Date) and (b)
the sum of the numerators used to calculate the principal allocation percentages
for all Series and Participations outstanding as of the date as to which such
determination is being made; PROVIDED, FURTHER, that such calculations are
subject to adjustment to give effect to additions of Additional Accounts.
"Class B Principal Allocation Percentage" means, with respect to any Monthly
Period, the percentage equivalent of a fraction, the numerator of which is (a)
during the Revolving Period, the Class B Invested Amount as of the last day of
the immediately preceding Monthly Period (or, in the case of the first Monthly
Period, the Closing Date), (b) during the Accumulation Period, the Class B
Invested Amount as of the last day of the Revolving Period and (c) during the
Early Amortization Period, the Class B Invested Amount as of the last day of the
Revolving Period or, if less, the last numerator used to calculate the Class B
Principal Allocation Percentage in the Accumulation Period, if any, and the
denominator of which is the greater of (a)(x) if only one Series is outstanding
(i) during the Revolving Period, the sum of the total
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amount of Principal Receivables in the Trust and the principal amount on deposit
in the Special Funding Account as of the last day of the immediately preceding
Monthly Period and (ii) during the Accumulation Period and the Early
Amortization Period the sum of the total amount of Principal Receivables in the
Trust and the principal amount on deposit in the Special Funding Account as of
the last day of the Revolving Period and (y), if more than one Series is
outstanding, the sum of the total amount of Principal Receivables in the Trust
and the principal amount on deposit in the Special Funding Account as of the
last day of the immediately preceding Monthly Period (or, in the case of the
first Monthly Period, the Closing Date) and (b) the sum of the numerators used
to calculate the principal allocation percentages for all Series and
Participations outstanding as of the date as to which such determination is
being made; PROVIDED, that such calculations are subject to adjustment to give
effect to additions of Additional Accounts.
As used herein, the following terms have the meanings indicated:
"Class A Invested Amount" for any date means an amount equal to (i) the
Class A Initial Invested Amount, MINUS (ii) the aggregate amount of principal
payments made to the Class A Certificateholders prior to such date, MINUS (iii)
the excess, if any, of the aggregate amount of Class A Investor Charge-Offs for
all prior Distribution Dates over the aggregate amount of any reimbursements of
Class A Investor Charge-Offs for all Distribution Dates prior to such date, PLUS
(iv) the amount of any increase in the Class A Invested Amount resulting from
the issuance of Additional Certificates and MINUS (v) the amount of any
reduction in the Class A Invested Amount as a result of the purchase by the
Transferor and subsequent cancellation of Class A Certificates.
"Class A Adjusted Invested Amount" for any Business Day means an amount
equal to the Class A Invested Amount minus the aggregate principal amount on
deposit in the Principal Funding Account on such Business Day.
"Adjusted Invested Amount" for any Business Day means an amount equal to the
Class A Adjusted Invested Amount on such Business Day plus the Class B Invested
Amount on such Business Day.
"Invested Amount" for any date means an amount equal to the sum of the Class
A Invested Amount and the Class B Invested Amount on such date.
"Series Invested Amount" for any date means an amount equal to the sum of
the Class A Adjusted Invested Amount and the Class B Invested Amount on such
date.
APPLICATION OF COLLECTIONS
PAYMENT OF INTEREST, FEES AND OTHER ITEMS. On each Distribution Date, the
Trustee shall allocate and distribute the Available Series 1997-1 Finance Charge
Collections for the related Monthly Period in the following priority:
(i) to pay Class A Monthly Interest and Carryover Class A Interest,
(ii) to pay the Monthly Servicing Fee,
(iii) an amount equal to the aggregate Class A Investor Defaulted Amount
for such Distribution Date will be (a) during the Revolving Period, treated
as Shared Principal Collections and (b) during the Amortization Period, on
and prior to the date on which an amount equal to the Class A Invested
Amount is paid in full or available in the Principal Funding Account for
distribution to the Class A Certificateholders, deposited in the Principal
Funding Account or Collection Account for payment to the Class A
Certificateholders as described in "--PAYMENT OF PRINCIPAL" below,
(iv) an amount equal to the aggregate Class B Investor Defaulted Amount
for such Distribution Date will be (a) during the Revolving Period, treated
as Shared Principal Collections and (b) during the Amortization Period, on
and prior to the date on which an amount equal to the Class A Invested
Amount is paid in full or available in the Principal Funding Account for
distribution to the Class A
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Certificateholders, deposited in the Principal Funding Account or Collection
Account for payment to the Class A Certificateholders as described in
"--PAYMENT OF PRINCIPAL" below, and thereafter, retained in the Collection
Account for distribution to the Class B Certificateholders on such
Distribution Date,
(v) an amount equal to the Series 1997-1 Allocation Percentage of any
Adjustment Payment which the Transferor is required but fails to make
pursuant to the Pooling Agreement will be, (a) during the Revolving Period,
treated as Shared Principal Collections, (b) during the Amortization Period,
on and prior to the day on which an amount equal to the Class A Invested
Amount is paid in full or deposited in the Principal Funding Account,
retained in the Principal Funding Account or Collection Account for payment
to the Class A Certificateholders as described in "--PAYMENT OF PRINCIPAL"
below and (c) on and after the date such payment to the Class A
Certificateholders or retention in the Principal Funding Account for the
benefit of the Class A Certificateholders has been made, distributed to the
Class B Certificateholders to the extent of the Class B Invested Amount,
(vi) an amount equal to the unreimbursed Class A Investor Charge-Offs,
if any, will be applied to reimburse Class A Investor Charge-Offs, such
amount during the Revolving Period to be treated as Shared Principal
Collections, and during the Amortization Period, on and prior to the day on
which an amount equal to the Class A Invested Amount is paid in full or
available in the Principal Funding Account for distribution to the Class A
Certificateholders, to be retained in the Principal Funding Account for
payment to the Class A Certificateholders or paid to the Class A
Certificateholders as described in "--PAYMENT OF PRINCIPAL" below,
(vii) an amount equal to the unreimbursed reductions in the Class B
Invested Amount as a result of Class B Investor Charge-Offs and Reallocated
Class B Principal Collections, if any, will be (a) during the Revolving
Period, treated as Shared Principal Collections and (b) during the
Amortization Period, on and prior to the date on which an amount equal to
the Class A Invested Amount is paid in full or available in the Principal
Funding Account for distribution to the Class A Certificateholders,
deposited in the Principal Funding Account or Collection Account for payment
to the Class A Certificateholders as described in "--PAYMENT OF PRINCIPAL"
below, and thereafter, retained in the Collection Account for distribution
to the Class B Certificateholders,
(viii) to pay Class B Monthly Interest and Carryover Class B Interest,
(ix) on each Distribution Date from and after the Reserve Account
Funding Date, but prior to the date on which the Reserve Account is
terminated, an amount up to the excess, if any, of the Required Reserve
Account Amount over the Available Reserve Account Amount, will be deposited
into the Reserve Account, and
(x) the balance, if any, will constitute Excess Finance Charge
Collections and will be allocated and distributed as described under
"--EXCESS FINANCE CHARGE COLLECTIONS" below.
"Class A Monthly Interest" means, with respect to any Distribution Date, an
amount equal to one-twelfth of the product of (i) the Class A Certificate Rate
and (ii) the outstanding principal balance of the Class A Certificates as of the
close of business on the last day of the preceding Monthly Period; PROVIDED,
HOWEVER, that with respect to the initial Distribution Date, Class A Monthly
Interest will be equal to the product of (i) the Class A Certificate Rate, (ii)
a fraction the numerator of which is 40 and the denominator of which is 360 and
(iii) the Class A Initial Invested Amount.
"Class B Monthly Interest" means, initially, zero. However, the Transferor
may, subsequent to the issuance of the Series 1997-1 Certificates, set an
interest rate for the Class B Certificates without the consent of the Class A
Certificateholders. See "--Transfer of the Class B Certificates" above.
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"Class A Additional Interest" means, with respect to any Distribution Date,
an amount equal to one-twelfth of the product of (i) the excess, if any, of
Class A Monthly Interest with respect to the preceding Distribution Date over
the amount available to be paid to Class A Certificateholders in respect of
interest on such preceding Distribution Date and (ii) the sum of the Class A
Certificate Rate and 2% per annum.
"Class B Additional Interest" means, with respect to any Distribution Date
on and after the setting of an interest rate for the Class B Certificates, an
amount equal to one-twelfth of the product of (i) the excess, if any, of Class B
Monthly Interest with respect to the preceding Distribution Date over the amount
available to be paid to Class B Certificateholders in respect of interest on
such preceding Distribution Date, if applicable and (ii) the sum of the Class B
Certificate Rate and 2% per annum.
"Additional Interest" means, with respect to any Distribution Date, the sum
of the Class A Additional Interest and Class B Additional Interest.
"Carryover Class A Interest" means, with respect to any Distribution Date,
(a) any Class A Monthly Interest due but not paid on any previous Distribution
Date plus (b) any Class A Additional Interest.
"Carryover Class B Interest" means, with respect to any Distribution Date,
(a) any Class B Monthly Interest, if any, due but not paid on any previous
Distribution Date plus (b) any Class B Additional Interest.
"Carryover Interest" means, with respect to any Distribution Date, the sum
of Carryover Class A Interest and Carryover Class B Interest.
"Investor Defaulted Amount" means, with respect to each Distribution Date,
an amount equal to the product of (a) the Floating Allocation Percentage for the
related Monthly Period and (b) the Defaulted Amount for the related Monthly
Period.
"Adjustment Payment" means any payment required to be made by the Transferor
into the Special Funding Account in an amount equal to the downward adjustment
of any Receivable by the Servicer for which Collections have not been received
and for which no charge-off has occurred which causes the Required Retained
Transferor Amount to exceed the Transferor Amount (excluding the interest
represented by any Supplemental Certificate). See "Description of the
Certificates--Dilution" in the Prospectus.
EXCESS FINANCE CHARGE COLLECTIONS. On each Distribution Date, the Trustee,
acting pursuant to the Servicer's instructions, will apply Excess Finance Charge
Collections allocated to Series 1997-1 from other Series issued by the Trust in
Group I FIRST to pay the Required Amount, if any, and SECOND treated as Excess
Transferor Finance Charge Collections.
Excess Finance Charge Collections from Series 1997-1 will be allocated FIRST
to pay Certificateholders of other Series in Group I to the extent of any
shortfalls, SECOND to pay any unpaid expenses or liabilities of the Trust and
THIRD treated as Excess Transferor Finance Charge Collections.
EXCESS TRANSFEROR FINANCE CHARGE COLLECTIONS. On each Distribution Date,
the Trustee, acting pursuant to the Servicer's instructions, will apply Excess
Transferor Finance Charge Collections allocated to Series 1997-1 FIRST to pay
the Required Amount remaining after application of Excess Finance Charge
Collections and SECOND treated as Shared Transferor Principal Collections.
PAYMENT OF PRINCIPAL. On each Distribution Date with respect to the
Revolving Period, the product of (a) the Principal Allocation Percentage and (b)
Collections of Principal Receivables with respect to such Distribution Date may
be treated as Shared Principal Collections and applied as described under "--
Shared Principal Collections"; PROVIDED, that to the extent of a reduction of
the required Class B Invested Amount during the Revolving Period, under certain
circumstances, such amount may be paid to the Class B Certificateholders. See
"--Description of the Class B Invested Amount." On each Distribution Date with
respect to the Accumulation Period, Collections of Principal Receivables
allocable to the
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Class A Certificateholders, in an amount equal to Class A Principal and not to
exceed the Class A Controlled Deposit Amount will be deposited in the Principal
Funding Account for distribution to the Class A Certificateholders on the Class
A Expected Final Payment Date. On each Distribution Date after the Class A
Expected Final Payment Date and, if earlier, following the occurrence of an
Early Amortization Event, the Trustee, acting pursuant to the Servicer's
instructions, will distribute the amount of funds on deposit in the Collection
Account available for payment of principal to the Certificateholders in the
following priority:
(i) to the Class A Certificateholders, an amount equal to Class A
Principal;
(ii) after the Class A Invested Amount has been paid in full, to the
Class B Certificateholders, an amount equal to Class B Principal; and
(iii) an amount equal to the excess, if any, will be treated as Shared
Principal Collections.
On each Distribution Date during the Amortization Period, funds on deposit
in the Special Funding Account distributable to Series 1997-1 will be applied as
follows:
(i) on each Distribution Date until the Class A Invested Amount is paid
in full, to the Class A Certificateholders in an amount equal to the lesser
of the Principal Shortfall for Series 1997-1 and the amount allocated with
respect thereto pursuant to the Pooling Agreement; PROVIDED, HOWEVER, such
amount shall not exceed the Class A Principal after subtracting therefrom
other amounts to be deposited in the Collection Account with respect thereto
as described below in "--Deposits in Collection Account;" and
(ii) on each Distribution Date on and after the Distribution Date on
which the Class A Invested Amount is paid in full, to the Class B
Certificateholders in an amount not to exceed the Class B Invested Amount
after subtracting therefrom other amounts to be deposited in the Collection
Account with respect thereto as described below in "--Deposits in Collection
Account."
"Class A Principal" with respect to any Distribution Date relating to the
Accumulation Period or the Early Amortization Period will equal the sum of (i)
an amount equal to the product of the Principal Allocation Percentage and the
aggregate amount of Collections of Principal Receivables with respect to the
preceding Monthly Period, (ii) any amount on deposit in the Special Funding
Account that is distributable to the Class A Certificates with respect to the
preceding Monthly Period, (iii) the amount, if any, that is allocated to the
Class A Certificates pursuant to clauses (iii), (iv), (v), (vi) and (vii) under
"--PAYMENT OF INTEREST, FEES AND OTHER ITEMS," (iv) the amount of Shared
Principal Collections allocated to the Class A Certificates with respect to the
preceding Monthly Period and (v) the amount of Shared Transferor Principal
Collections allocated to the Class A Certificates with respect to the preceding
Monthly Period; PROVIDED, HOWEVER, (a) with respect to any Distribution Date
during the Accumulation Period, Class A Principal may not exceed the Class A
Controlled Deposit Amount for such Distribution Date; (b) with respect to any
Distribution Date, Class A Principal may not exceed the Class A Adjusted
Invested Amount; and (c) with respect to the Series 1997-1 Termination Date, the
Class A Principal shall be an amount equal to the Class A Adjusted Invested
Amount.
"Class B Principal" with respect to any Distribution Date relating to the
Accumulation Period or the Early Amortization Period, on or after the
Distribution Date on which the Class A Invested Amount is paid in full, will
equal the lesser of: (x) the sum of (i) an amount equal to the product of the
Principal Allocation Percentage of Collections of Principal Receivables
(subtracting from such product the amount of Reallocated Class B Principal
Collections) with respect to the preceding Monthly Period, (ii) any amount on
deposit in the Special Funding Account that is distributable to the Class B
Certificates with respect to the preceding Monthly Period, (iii) the amount, if
any, that is allocated to the Class B Certificates pursuant to clauses (iv), (v)
and (vii) under "--PAYMENT OF INTEREST, FEES AND OTHER ITEMS" with respect to
such Distribution Date, (iv) the amount of Shared Principal Collections
allocated to the Class B Certificates with respect to the preceding Monthly
Period, (v) the amount of Shared Transferor Principal
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Collections allocated to the Class B Certificates with respect to the preceding
Monthly Period, and (vi) the amount, if any, of principal allocable to the Class
A Certificates for the payment of Class A Principal, but remaining after
distributions have been made to Class A Certificateholders and (y) the Class B
Invested Amount, PROVIDED, HOWEVER, that with respect to the Series 1997-1
Termination Date, the Class B Principal shall be an amount equal to the Class B
Invested Amount.
"Class A Controlled Accumulation Amount" means for any Distribution Date
with respect to the Accumulation Period, $33,333,333.34; PROVIDED that if the
commencement of the Accumulation Period is postponed in the manner described in
"--Postponement of Accumulation Period" (i) the Class A Controlled Accumulation
Amount may be greater than the amount stated above and will be determined by the
Servicer in accordance with the Pooling Agreement and (ii) the sum of the Class
A Controlled Accumulation Amounts for all Distribution Dates with respect to
such modified Accumulation Period shall not be less than the Class A Invested
Amount; and PROVIDED, FURTHER, that such amount may be increased as a result of
the issuance of Additional Certificates.
"Class A Controlled Deposit Amount" means, with respect to any Distribution
Date with respect to the Accumulation Period, an amount equal to the Class A
Controlled Accumulation Amount plus the Class A Deficit Controlled Accumulation
Amount for the immediately preceding Distribution Date, if any.
"Class A Deficit Controlled Accumulation Amount" means, on each Distribution
Date with respect to the Accumulation Period, the excess, if any, of the Class A
Controlled Deposit Amount for such Distribution Date over the amount distributed
from the Collection Account as Class A Principal, for such Distribution Date.
During the Revolving Period (which begins on the Closing Date and ends on
the day before an Amortization Period begins), no principal payments will be
made to Class A Certificateholders.
REALLOCATION OF CASH FLOWS
With respect to each Distribution Date, on each Determination Date the
Servicer will determine the Required Amount, if any, and will further determine
the amount of the Class A Required Amount. "Class A Required Amount" means, with
respect to each Distribution Date, an amount equal to the excess, if any, of (x)
the sum of (i) Class A Monthly Interest for the related Monthly Period, and any
Carryover Class A Interest with respect to amounts previously due but not paid
to the Class A Certificateholders on a prior Distribution Date, (ii) the Class A
Servicing Fee for the related Monthly Period, (iii) the Class A Investor
Defaulted Amount and (iv) the Class A Percentage of the Series 1997-1 Allocation
Percentage of the Adjustment Payments not made on or prior to the related
Distribution Date over (y) the Available Series 1997-1 Finance Charge
Collections plus any Excess Finance Charge Collections from other Series and
Excess Transferor Finance Charge Collections allocable to Series 1997-1. "Class
A Percentage" means the percentage equivalent of a fraction the numerator of
which is the Class A Adjusted Invested Amount and the denominator of which is
the sum of the Class A Adjusted Invested Amount and the Class B Invested Amount.
If Available Series 1997-1 Finance Charge Collections and such Excess Finance
Charge Collections and Excess Transferor Finance Charge Collections are
insufficient to pay the Required Amount, collections of Principal Receivables
allocable to the Class B Certificates for the related Monthly Period
("Reallocated Class B Principal Collections") will then be used to fund the
Class A Required Amount. If Reallocated Class B Principal Collections with
respect to the related Monthly Period, are insufficient to fund the Class A
Required Amount for such related Monthly Period, then the Class B Invested
Amount will be reduced by the amount of such excess (but not by more than the
Class A Investor Defaulted Amount for such Distribution Date). If such reduction
would cause the Class B Invested Amount to be a negative number, the Class B
Invested Amount will be reduced to zero, and the Class A Invested Amount will be
reduced by the amount by which the Class B Invested Amount would have been
reduced below zero, but not by more than the excess, if any, of the Class A
Investor Defaulted Amount for such Distribution Date over the amount of
reduction of the Class B Invested Amount with respect to such
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Distribution Date as described above, to fund the Required Amount, which will
have the effect of slowing or reducing the return of principal to the Class A
Certificateholders. In such case, the Class A Certificateholders will bear
directly the credit and other risks associated with their undivided interest in
the Trust.
DEFAULTED RECEIVABLES; INVESTOR CHARGE-OFFS
On each Determination Date, the Servicer will calculate the Investor
Defaulted Amount for the preceding Monthly Period. The term "Investor Defaulted
Amount" means, for any Monthly Period, the product of the Floating Allocation
Percentage with respect to such Monthly Period and the Defaulted Amount for such
Monthly Period. A portion of the Investor Defaulted Amount will be allocated to
the Class A Certificateholders (the "Class A Investor Defaulted Amount") on each
Distribution Date in an amount equal to the product of the Class A Floating
Allocation Percentage applicable during the related Monthly Period and the
Defaulted Amount for such Monthly Period. A portion of the Investor Defaulted
Amount will be allocated to the Class B Certificateholders (the "Class B
Investor Defaulted Amount") in an amount equal to the product of the Class B
Floating Allocation Percentage applicable during the related Monthly Period and
the Defaulted Amount for such Monthly Period. An amount equal to the Class A
Investor Defaulted Amount for each Monthly Period will be paid from the
Available Series 1997-1 Finance Charge Collections, Excess Finance Charge
Collections from other Series allocated to Series 1997-1 and Excess Transferor
Finance Charge Collections allocated to Series 1997-1 and/or from Reallocated
Class B Principal Collections for such Monthly Period, if applicable, and
applied as described above in "--Application of Collections--PAYMENT OF
INTEREST, FEES AND OTHER ITEMS." An amount equal to the Class B Investor
Defaulted Amount for each Monthly Period will be paid from the Available Series
1997-1 Finance Charge Collections, Excess Finance Charge Collections allocated
to Series 1997-1 and Excess Transferor Finance Charge Collections allocated to
Series 1997-1 and applied as described above in " --Application of
Collections--PAYMENT OF INTEREST, FEES AND OTHER ITEMS."
On each Distribution Date, if the Required Amount for such Distribution Date
exceeds the sum of Excess Finance Charge Collections allocable to Series 1997-1,
Excess Transferor Finance Charge Collections allocable to Series 1997-1 and
Reallocated Class B Principal Collections, the Class B Invested Amount will be
reduced by the amount of such excess, but not by more than the Class A Investor
Defaulted Amount for such Distribution Date. If such reduction would cause the
Class B Invested Amount to be a negative number, the Class B Invested Amount
will be reduced to zero, and the Class A Invested Amount will be reduced by the
amount by which the Class B Invested Amount would have been reduced below zero,
but not by more than the excess, if any, of the Class A Investor Defaulted
Amount for such Distribution Date over the amount of the reduction of the Class
B Invested Amount with respect to such Distribution Date as described above (a
"Class A Investor Charge-Off"), which will have the effect of slowing or
reducing the return of principal to the Class A Certificateholders. If the Class
A Invested Amount has been reduced by the amount of any Class A Investor
Charge-Offs, it will thereafter be increased on any Distribution Date (but not
by an amount in excess of the aggregate unreimbursed Class A Investor
Charge-Offs) by the amount of Available Series 1997-1 Finance Charge
Collections, Excess Finance Charge Collections from other Series and Excess
Transferor Finance Charge Collections in each case allocated and available for
such purpose as described under "--Application of Collections--PAYMENT OF
INTEREST, FEES AND OTHER ITEMS" and "--EXCESS FINANCE CHARGE COLLECTIONS."
If on any Distribution Date, the aggregate Investor Defaulted Amount and the
Series 1997-1 Allocation Percentage of unpaid Adjustment Payments for the
preceding Monthly Period exceed the sum of the Available Series 1997-1 Finance
Charge Collections, plus the Excess Finance Charge Collections allocable to
Series 1997-1, plus the Excess Transferor Finance Charge Collections allocable
to Series 1997-1 plus the amount of Reallocated Class B Principal Collections
for such Distribution Date, in each case which are allocated and available to
fund such amount, the Class B Invested Amount will be reduced by such excess,
but not by more than the Class B Investor Defaulted Amount for such Distribution
Date (a "Class B Investor Charge-Off").
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"Series 1997-1 Allocation Percentage" means, on any date of determination,
the percentage equivalent of a fraction, the numerator of which is the Series
Invested Amount and the denominator of which is the sum of the invested amounts
of all then outstanding Series.
DEPOSITS IN COLLECTION ACCOUNT
During the Revolving Period, the Servicer shall, prior to the close of
business on any Date of Processing, allocate (x) to the Series 1997-1
Certificateholders and deposit in the Collection Account (as defined in the
Prospectus) an amount equal to the product of (i) the Floating Allocation
Percentage and (ii) the aggregate amount of Collections of Finance Charge
Receivables on such Date of Processing, PROVIDED, HOWEVER, that, with respect to
each Monthly Period, such amount shall only be deposited until such time as the
amount deposited in the Collection Account equals the sum of Class A Monthly
Interest, Class B Monthly Interest, if any, Carryover Interest, if any, and the
Servicing Fee if RNB is not the Servicer, due on the next Distribution Date, and
(y) to the Series 1997-1 Certificateholders an amount equal to the product of
(A) the Principal Allocation Percentage on such Date of Processing and (B) the
aggregate amount of Collections of Principal Receivables on such Date of
Processing and pay such amount to the holder of the Transferor Certificate;
PROVIDED, HOWEVER, that such amount to be paid to the holder of the Transferor
Certificate on any Date of Processing shall be first, if any other Principal
Sharing Series is outstanding and in its Amortization Period, deposited in the
Collection Account for application, to the extent necessary, as Shared Principal
Collections on the related Distribution Date and second shall be paid to such
holder only if on such Date of Processing the Transferor Amount (excluding the
interest represented by any Supplemental Certificate) is greater than the
Required Retained Transferor Amount (after giving effect to all Principal
Receivables transferred to the Trust on such day) and otherwise shall be
deposited in the Special Funding Account to the extent necessary for the
Transferor Amount (excluding the interest represented by any Supplemental
Certificate) to be at least equal to the Required Retained Transferor Amount;
PROVIDED, FURTHER, that such amounts will be paid to the holder of the
Transferor Certificate subject to the obligation of the Transferor to make an
amount equal to the Reallocated Class B Principal Collections for each Monthly
Period available on the related Distribution Date for application as described
in "--Reallocation of Cash Flows." The daily allocation of Collections of
Finance Charge Receivables and of Principal Receivables will be made based on
estimated amounts as set forth in the Pooling Agreement. On each Determination
Date, with respect to the related Monthly Period, the Servicer will make any
appropriate adjustments to such estimated allocation based on the actual amount
of Collections of Finance Charge Receivables and Principal Receivables for such
Monthly Period. A "Principal Sharing Series" means a Series that, pursuant to
the Supplement therefor, is entitled to receive Shared Principal Collections.
During the Accumulation Period, the Servicer shall, prior to the close of
business on any Date of Processing, allocate (x) to the Series 1997-1
Certificateholders and deposit in the Collection Account an amount equal to the
product of (A) the Floating Allocation Percentage on such Date of Processing and
(B) the aggregate amount of Collections of Finance Charge Receivables on such
Date of Processing, PROVIDED, HOWEVER, that, with respect to each Monthly
Period, such amount shall only be deposited until such time as the amount
deposited in the Collection Account equals the sum of the amount of Class A
Monthly Interest, Class B Monthly Interest, if any, and Carryover Interest, if
any, and the Servicing Fee if RNB is not the Servicer, due on the next
Distribution Date, and (y) prior to the payment in full of the Class A Invested
Amount, to the Series 1997-1 Certificateholders and deposit in the Collection
Account an amount equal to the product of (A) the Principal Allocation
Percentage on such Date of Processing and (B) the aggregate amount of
Collections of Principal Receivables on such Date of Processing (for any such
date, a "Percentage Allocation"); PROVIDED, HOWEVER, that if the sum of such
Percentage Allocations with respect to the same Monthly Period exceeds the Class
A Controlled Deposit Amount for the related Distribution Date, then such excess
shall be first, if any other Principal Sharing Series is outstanding and in its
Amortization Period, deposited in the Collection Account for application, to the
extent necessary, as Shared Principal Collections on the related Distribution
Date and second shall not be treated as a
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Percentage Allocation and shall be paid to the holder of the Transferor
Certificate if the Transferor Amount (excluding the interest represented by any
Supplemental Certificate) on such Date of Processing is greater than the
Required Retained Transferor Amount (after giving effect to all Principal
Receivables transferred to the Trust on such day) and otherwise shall be
deposited in the Special Funding Account. The daily allocation of Collections of
Finance Charge Receivables and of Principal Receivables will be made based on
estimated amounts as set forth in the Pooling Agreement. On each Determination
Date, with respect to the related Monthly Period, the Servicer will make any
appropriate adjustments to such estimated allocation based on the actual amount
of Collections of Finance Charge Receivables and Principal Receivables for such
Monthly Period.
During the Early Amortization Period, the Servicer shall, prior to the close
of business on any Date of Processing, allocate (x) to the Series 1997-1
Certificateholders and deposit in the Collection Account an amount equal to the
product of (A) the Floating Allocation Percentage on such Date of Processing and
(B) the aggregate amount of Collections of Finance Charge Receivables on such
Date of Processing, and (y) to the Series 1997-1 Certificateholders and deposit
in the Collection Account an amount equal to the product of (A) the Principal
Allocation Percentage on such Date of Processing and (B) the aggregate amount of
Collections of Principal Receivables on such Date of Processing; PROVIDED,
HOWEVER, that after the date on which an amount of such Collections equal to the
Invested Amount has been deposited into the Collection Account for payment to
the Series 1997-1 Certificateholders, the amount determined in accordance with
this subparagraph (y) shall be first, if any other Principal Sharing Series is
outstanding and in its Amortization Period, deposited in the Collection Account
for application, to the extent necessary, as Shared Principal Collections on the
related Distribution Date and second shall be paid to the holder of the
Transferor Certificate only if the Transferor Amount (excluding the interest
represented by any Supplemental Certificate) on such Date of Processing is
greater than the Required Retained Transferor Amount (after giving effect to all
Principal Receivables transferred to the Trust on such day) and otherwise shall
be deposited in the Special Funding Account to the extent necessary for the
Transferor Amount (excluding the interest represented by any Supplemental
Certificate) to be at least equal to the Required Retained Transferor Amount.
During the Revolving Period and Accumulation Period, the Servicer shall,
prior to the close of business on any Transfer Date allocate to the Class A
Certificateholders and deposit in the Collection Account an amount equal to the
sum of (I) (A) the lesser of (1) the sum of (a) the product of (x) the Floating
Allocation Percentage with respect to the preceding Monthly Period and (y) the
aggregate amount of Collections of Finance Charge Receivables for the related
Monthly Period, (b) the amount of Excess Finance Charge Collections allocated to
Series 1997-1 for the related Monthly Period and (c) the amount of Excess
Transferor Finance Charge Collections allocated to Series 1997-1 for the related
Monthly Period, and (2) the aggregate of the amounts to be paid on such
Distribution Date as described in clauses (i) through (ix) in "--Application of
Collections--PAYMENT OF INTEREST, FEES AND OTHER ITEMS," less (B) the daily
amounts retained in the Collection Account during such Monthly Period as
described above with respect to the Revolving Period and the Accumulation
Period, respectively, (II) the excess of the amount of Reallocated Class B
Principal Collections over the amount of Collections of Principal Receivables
retained in the Collection Account as described above with respect to the
Revolving Period and Accumulation Period, (III) an amount equal to the PRO RATA
portion allocable to Series 1997-1 of shortfalls in amounts payable from
Collections of Finance Charge Receivables with respect to other Series in Group
I, not to exceed the Excess Finance Charge Collections for the related
Distribution Date, (IV) an amount equal to the amount of Shared Principal
Collections to be applied for the benefit of other Principal Sharing Series from
amounts that were originally allocated to Series 1997-1 not to exceed (a) during
the Revolving Period, the Principal Allocation Percentage of Principal
Collections for the related Monthly Period or (b) during the Accumulation
Period, the Principal Allocation Percentage of Principal Collections for the
related Monthly Period less the amount thereof applied to pay Class A Monthly
Principal on the related Distribution Date and (V) the amount of Shared
Transferor Principal Collections to be applied to
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make payments of Class A Monthly Principal and Class B Monthly Principal on the
related Distribution Date.
On the Closing Date, the Transferor will make a deposit to the Collection
Account in the amount of $1,597,222 to be allocated to the Series 1997-1
Certificates and applied as Available Series 1997-1 Finance Charge Collections.
PRINCIPAL FUNDING ACCOUNT
The Trustee will establish and maintain, or cause to be established and
maintained, an Eligible Deposit Account for the benefit of the Class A
Certificateholders, in the name of the Trustee, on behalf of the Trust, the
"Principal Funding Account." During the Accumulation Period, an amount equal to
Class A Principal (including the amount of any Shared Principal Collections and
Shared Transferor Principal Collections comprising a part thereof) which will
not exceed the Class A Controlled Deposit Amount will be deposited in the
Principal Funding Account on each Distribution Date as provided in
"--Application of Collections;" provided, that if an Early Amortization Event
occurs during the Accumulation Period, the amounts on deposit in the Principal
Funding Account shall be paid to the Class A Certificateholders on the first
Special Payment Date. All amounts deposited into the Principal Funding Account
prior to the Class A Expected Final Payment Date will be invested by the
Transferor (or, at the direction of the Transferor, by the Servicer or the
Trustee on behalf of the Transferor) in certain Eligible Investments. On each
Distribution Date, all investment income earned (net of losses and expenses) on
amounts on deposit in the Principal Funding Account (the "Principal Funding
Investment Proceeds") since the preceding Distribution Date will be withdrawn
from the Principal Funding Account and deposited into the Collection Account to
be applied as Available Series 1997-1 Finance Charge Collections.
RESERVE ACCOUNT
Pursuant to the Series 1997-1 Supplement, the Servicer will establish and
maintain with an Eligible Institution the reserve account as a segregated trust
account held for the benefit of the Certificateholders (the "Reserve Account").
The Reserve Account is established to provide additional available funds from
which to make payments of interest on the Certificates during the Accumulation
Period. On each Transfer Date from and after the Reserve Account Funding Date on
which the Required Reserve Account Amount is greater than zero, but prior to the
termination of the Reserve Account, the Trustee, acting pursuant to the
Servicer's instructions, will apply Finance Charge Collections allocated to the
Series 1997-1 Certificates (to the extent described above under "--Application
of Collections--PAYMENT OF INTEREST, FEES AND OTHER ITEMS") to increase the
amount on deposit in the Reserve Account (to the extent such amount is less than
the Required Reserve Account Amount). The "Reserve Account Funding Date" will be
the date specified by the Transferor for the commencement of the funding of the
Reserve Account. The "Required Reserve Account Amount" for any Distribution Date
on or after the Reserve Account Funding Date will be an amount, if any,
specified by the Transferor.
Provided that the Reserve Account has not terminated as described below, 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 such Distribution Date) will be invested to the following Transfer Date by
the Transferor (or, at the direction of the Transferor, by the Servicer or the
Trustee on behalf of the Transferor) in Eligible Investments. The interest and
other investment income (net of investment expenses and losses) earned on such
investments will be retained in the Reserve Account (to the extent the amount on
deposit is less than the Required Reserve Account Amount) and the balance, if
any, shall be deposited in the Collection Account and treated as Available
Series 1997-1 Finance Charge Collections.
On or before each Transfer Date with respect to the Accumulation Period and
on the first Transfer Date with respect to the Early Amortization Period, a
withdrawal will be made from the Reserve Account, and the amount of such
withdrawal will be deposited in the Collection Account and applied as Available
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Series 1997-1 Finance Charge Collections for such Transfer Date in an amount
equal to the lesser of (a) the Available Reserve Account Amount with respect to
such Transfer Date and (b) the Principal Funding Investment Shortfall with
respect to such Transfer Date. On each Transfer Date, the amount available to be
withdrawn from the Reserve Account (the "Available Reserve Account Amount") will
be equal to the lesser of the amount on deposit in the Reserve Account (before
giving effect to any deposit to be made to the Reserve Account on such Transfer
Date) and the Required Reserve Account Amount for such Transfer Date.
The Reserve Account will be terminated following the earliest to occur of
(a) the termination of the Trust pursuant to the Pooling Agreement, (b) the date
on which the Class A Invested Amount is paid in full and (c) if the Accumulation
Period has not commenced, the occurrence of an Early Amortization Event with
respect to the Certificates or, if the Accumulation Period has commenced, the
earlier of the first Transfer Date with respect to the Early Amortization Period
and the Class A Expected Final Payment Date. Upon the termination of the Reserve
Account, all amounts on deposit therein (after giving effect to any withdrawal
from the Reserve Account on such date as described above) will be applied in
accordance with the priority of payments described herein under "--Application
of Collections--PAYMENT OF INTEREST, FEES AND OTHER ITEMS."
SHARED PRINCIPAL COLLECTIONS
Collections of Principal Receivables for any Monthly Period allocated to the
Series 1997-1 Certificateholders' Interest will first be used to cover certain
amounts described in the Series 1997-1 Supplement (including any required
distributions to Certificateholders of such Series). The Servicer will determine
the amount of Collections of Principal Receivables for any Monthly Period (plus
certain other amounts described in the Series 1997-1 Supplement) allocated to
such Series 1997-1 remaining after covering such required deposits and
distributions and any similar amount remaining for any other Series plus the
amount of any payment received by the Trustee from the holder of any
Participation with respect to the purchase of such participation or any increase
in the principal amount of such a Participation (collectively, "Shared Principal
Collections"). The Servicer will allocate the Shared Principal Collections to
cover any principal distributions to Certificateholders and deposits to
principal funding accounts for any Series that are either scheduled or permitted
and that have not been covered out of the investor principal collections and
certain other amounts for such Series (collectively, "Principal Shortfalls"). If
Principal Shortfalls exceed Shared Principal Collections for any Monthly Period,
Shared Principal Collections will be allocated PRO RATA among the applicable
Series, including Series 1997-1, based on the respective Principal Shortfalls of
such Series. To the extent that Shared Principal Collections exceed Principal
Shortfalls, the balance will be paid to the holder of the Transferor
Certificate, PROVIDED that (a) such Shared Principal Collections will be
distributed to the holder of the Transferor Certificate only to the extent that
the Transferor Amount (excluding the interest represented by any Supplemental
Certificate) is greater than the Required Retained Transferor Amount (see
"--Deposits in Collection Account") and (b) in certain circumstances described
in the Prospectus under "Description of the Certificates--Special Funding
Account," such Shared Principal Collections will be deposited in the Special
Funding Account. Shared Principal Collections permit coverage of Principal
Shortfalls with respect to the Series 1997-1 Certificates by using Collections
of Principal Receivables that are initially allocable to other Series and that
would therefore otherwise be paid to the Transferor and in certain circumstances
may allow the Accumulation Period Length to be shortened. Any such reallocation
of collections of Principal Receivables will not result in a reduction in the
Invested Amount of the Series to which such collections were initially
allocated. There can be no assurance that there will be any Shared Principal
Collections with respect to any Monthly Period.
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SHARING OF EXCESS FINANCE CHARGE COLLECTIONS
Any Series may be included in a Group. Series 1997-1 will be the third
Series in Group I. Group I is currently the only Group in the Trust. Each Series
in Group I will be entitled to share Excess Finance Charge Collections in the
manner, and to the extent, described below with each other Series, if any, in
Group I. The Series Supplement with respect to each Series will specify whether
such Series will be included in a Group. Collections of Finance Charge
Receivables and certain other amounts allocable to the Certificateholders'
Interest of any Series that is included in Group I in excess of the amounts
necessary to make required payments with respect to such Series (including
payments to any related Enhancement Providers) that are payable out of
collections of Finance Charge Receivables (any such excess, the "Excess Finance
Charge Collections") will be applied to cover any shortfalls with respect to
amounts payable from collections of Finance Charge Receivables allocable to any
other Series included in Group I, PRO RATA based upon the amount of the
shortfall, if any, with respect to each other Series in Group I. In all cases,
any Excess Finance Charge Collections remaining after covering shortfalls with
respect to all outstanding Series in a Group will be treated as Excess
Transferor Finance Charge Collections. While any Series offered hereby may be
included in a Group, there can be no assurance that (a) any other Series will be
included in such Group or (b) there will be any Excess Finance Charge
Collections with respect to such Group for any Monthly Period. Excess Finance
Charge Collections permit coverage of shortfalls with respect to amounts payable
from Collections of Finance Charge Receivables allocable to Series 1997-1 by
using Excess Finance Charge Collections from other Series which would otherwise
be paid to the Transferor.
SHARED EXCESS TRANSFEROR FINANCE CHARGE AND TRANSFEROR PRINCIPAL COLLECTIONS
Collections of Finance Charge Receivables allocable to the Transferor's
Interest in excess of the amounts necessary to make required payments with
respect to any Supplemental Certificates and all other amounts otherwise payable
to the Transferor with respect to collections of Finance Charge Receivables
regardless of whether such collections were initially allocated to the
Transferor or any Series (the "Excess Transferor Finance Charge Collections")
will be applied to cover any shortfalls (after giving effect to the application
of Excess Finance Charge Collections) with respect to amounts payable from
Collections of Finance Charge Receivables allocable to each Series designated in
the applicable Series Supplement as being entitled to receive Excess Transferor
Finance Charge Collections, PRO RATA based upon the amount of the shortfall
(after giving effect to the application of Excess Finance Charge Collections),
if any, with respect to each other Series designated in the applicable Series
Supplement as being entitled to receive Excess Transferor Finance Charge
Collections, including Series 1997-1. In all cases, any Excess Transferor
Finance Charge Collections remaining after covering shortfalls with respect to
all designated Series will be treated as Shared Transferor Principal
Collections. Excess Transferor Finance Charge Collections permit coverage of
shortfalls with respect to amounts payable from Collections of Finance Charge
Receivables and Excess Finance Charge Collections allocable to Series 1997-1 by
using Collections of Finance Charge Receivables which would otherwise be paid to
the Transferor.
The Servicer will determine the amount of Collections of Principal
Receivables for any Monthly Period allocated to the Transferor's Interest but
not due to the holder of any Supplemental Certificate and other amounts payable
to the Transferor with respect to Collections of Principal Receivables,
regardless of whether such Collections were initially allocated to the
Transferor or any Series, plus the amount of Excess Transferor Finance Charge
Collections remaining after application to amounts payable from Collections of
Finance Charge Receivables (collectively, "Shared Transferor Principal
Collections"). The Servicer will allocate the Shared Transferor Principal
Collections to cover any Principal Shortfalls that have not been covered out of
the Shared Principal Collections allocated to each Series that has been
designated in the applicable Series Supplement as being entitled to receive
Shared Transferor Principal Collections. If Principal Shortfalls remaining after
the application of Shared Principal Collections exceed Shared Transferor
Principal Collections for any Monthly Period, Shared Transferor Principal
Collections will be
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allocated PRO RATA among each Series which in accordance with the Series
Supplement for such Series is designated as being entitled to receive Shared
Transferor Principal Collections, including Series 1997-1, based on the
respective remaining Principal Shortfalls of such Series. To the extent that
Shared Transferor Principal Collections exceed Principal Shortfalls remaining
after application of Shared Principal Collections, the balance will be paid to
the holder of the Transferor Certificate. Shared Transferor Principal
Collections permit coverage of Principal Shortfalls with respect to the Series
1997-1 Certificates remaining after the application of Shared Principal
Collections by using Collections that would have been paid to the Transferor and
in certain circumstances may allow the Accumulation Period Length to be shorter.
There can be no assurance that there will be any Shared Transferor Principal
Collections with respect to any Monthly Period.
ISSUANCE OF ADDITIONAL CERTIFICATES
The Series 1997-1 Supplement provides, that, from time to time during the
Revolving Period, the Transferor may, subject to certain conditions described
below, cause the Trustee to issue additional Class A Certificates and Class B
Certificates (the "Additional Certificates," and each such issuance, an
"Additional Issuance"). When issued, the Additional Certificates of each Class
will be identical in all respects (except that the principal amount of such
Additional Certificates may be different) to the other outstanding Certificates
of that Class and will be equally and ratably entitled to the benefits of the
Pooling Agreement and the Series 1997-1 Supplement without preference, priority
or distinction.
As a result of an Additional Issuance, the Class A Invested Amount and the
Class B Invested Amount shall be increased PRO RATA. In addition, the Class A
Controlled Accumulation Amount shall be increased proportionally to reflect the
additional principal amount of Class A Certificates represented by the
Additional Certificates.
Additional Certificates may be issued only upon the satisfaction of certain
conditions provided in the Series 1997-1 Supplement, including the following:
(a) on or before the fifth Business Day immediately preceding the date upon
which the Additional Certificates are to be issued, the Transferor will have
given the Trustee, the Servicer and the Rating Agencies notice of such issuance
and the date upon which it is to occur; (b) after giving effect to the
Additional Issuance, the total amount of Principal Receivables will be greater
than or equal to the Required Principal Balance (as defined in the Prospectus);
(c) the Transferor shall have received written notice from each Rating Agency
that such Additional Issuance will not cause a Ratings Effect; (d) the
Transferor shall have delivered to the Trustee a certificate of an authorized
officer to the effect that, in the reasonable belief of the Transferor, such
Additional Issuance will not have a material adverse effect on the Class A
Certificates or Class B Certificates; (e) as of the date of the Additional
Issuance the amount of unreimbursed Class A Investor Charge-Offs and Class B
Investor Charge-Offs, shall be zero; and (f) the Transferor will have delivered
to the Trustee a Tax Opinion in connection with the Additional Issuance.
There are no restrictions on the timing or amount of any Additional
Issuance, PROVIDED that the conditions described above are met. As of the date
of any Additional Issuance, the Class A Initial Invested Amount and the Class B
Initial Invested Amount will be increased to reflect the aggregate face amount
of the Additional Certificates of the respective Classes.
PAIRED SERIES
The Series 1997-1 Certificates may be paired with one or more other Series
(each, a "Paired Series"). Each Paired Series either will be prefunded with an
initial deposit to a prefunding account in an amount up to the initial principal
balance of such Paired Series and primarily from the proceeds of the sale of
such Paired Series or will have a variable principal amount. Any such prefunding
account will be held for the benefit of such Paired Series and not for the
benefit of Series 1997-1 Certificateholders. As principal is paid with respect
to the Series 1997-1 Certificates, either (i) in the case of a prefunded Paired
Series, an
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equal amount of funds on deposit in any prefunding account for such prefunded
Paired Series will be released (which funds will be distributed to the
Transferor) or (ii) in the case of a Paired Series having a variable principal
amount, an interest in such variable Paired Series in an equal or lesser amount
may be sold by the Trust (and the proceeds thereof will be distributed to the
Transferor) and, in either case, the invested amount in the Trust of such Paired
Series will increase by up to a corresponding amount. Upon payment in full of
the Series 1997-1 Certificates, assuming that there have been no unreimbursed
charge-offs with respect to any related Paired Series, the aggregate invested
amount of such related Paired Series will have been increased by an amount up to
an aggregate amount equal to the Series Invested Amount paid to the Series
1997-1 Certificateholders since the issuance of such Paired Series. The issuance
of a Paired Series will be subject to the conditions described under
"Description of the Certificates--New Issuances" in the Prospectus. There can be
no assurance, however, that the terms of any Paired Series might not have an
impact on the timing or amount of payments received by a Series 1997-1
Certificateholder. In particular, the denominator of the Principal Allocation
Percentage may be increased upon the occurrence of an Early Amortization Event
with respect to a Paired Series resulting in a possible reduction of the
percentage of Collections of Principal Receivables allocated to Series 1997-1 if
such event allowed the payment of principal at such time to the Paired Series
and required reliance by Series 1997-1 on clause (b) of the denominator of the
Principal Allocation Percentage for Series 1997-1. See "--Allocation
Percentages--PRINCIPAL ALLOCATION PERCENTAGE." See "Risk Factors--Issuance of
Additional Series; Effect on Timing or Amount of Payments to Certificateholders"
in the Prospectus and "Maturity Considerations" herein and in the Prospectus.
EARLY AMORTIZATION EVENTS
The Revolving Period will continue until the commencement of the
Accumulation Period, which will continue until the Series Invested Amount shall
have been paid in full or the Series 1997-1 Termination Date occurs, unless an
Early Amortization Event occurs prior to such dates. An "Early Amortization
Event" will occur with respect to the Series 1997-1 Certificates upon the
occurrence of any of the following events:
(a) RNB, DHCC, the Transferor or any holder of the Transferor
Certificate shall fail generally to, or admit in writing its inability to,
pay its debts as they become due or makes an assignment for the benefit of
its creditors; or a proceeding shall have been instituted in a court having
jurisdiction in the premises seeking a decree or order for relief in respect
of RNB, DHCC, the Transferor or any holder of the Transferor Certificate in
an involuntary case under any bankruptcy or similar debtor-relief law, or
for the appointment of a receiver, liquidator, assignee, trustee, custodian,
sequestrator, conservator or other similar official for any substantial part
of its property, or for the winding-up or liquidation, dissolution,
reorganization or readjustment of its affairs or similar relief and, if
instituted against the Transferor or any holder of the Transferor
Certificate, any such proceeding shall continue undismissed or unstayed and
in effect, for a period of 60 consecutive days, or any of the actions sought
in such proceeding shall occur; or the commencement by RNB, DHCC, the
Transferor or any holder of the Transferor Certificate, of a voluntary case
under any bankruptcy or similar debtor-relief law, or such entity's seeking,
consenting or acquiescing to the entry of an order for relief in an
involuntary case under any bankruptcy or similar debtor-relief law, or
seeking, consenting or acquiescing to the appointment of or taking
possession by a receiver, liquidator, assignee, trustee, custodian,
sequestrator, conservator or other similar official for any substantial part
of its property, or any general assignment for the benefit of creditors; or
RNB, DHCC, the Transferor or any holder of the Transferor Certificate shall
have taken any corporate action in furtherance of any of the foregoing
actions (each, an "Insolvency Event");
(b) the failure on the part of the Transferor (i) to make any payment or
deposit required to be made by the Transferor under the Pooling Agreement or
the Series 1997-1 Supplement within five Business Days after the day such
payment or deposit is required to be made thereunder; (ii) to
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perform in all material respects the Transferor's covenant not to sell,
pledge, assign or transfer to any person, or grant any unpermitted lien on,
any Receivable, or (iii) to duly observe or perform in any material respect
any covenants or agreements of the Transferor set forth in the Pooling
Agreement or the Series 1997-1 Supplement, which failure has a material
adverse effect on the Series 1997-1 Certificateholders and which continues
unremedied for a period of 60 days after written notice of such failure,
requiring the same to be remedied, shall have been given by the Trustee to
the Transferor or by any Series 1997-1 Certificateholder to the Transferor
and the Trustee;
(c) any representation or warranty made by the Transferor in the Pooling
Agreement or the Series 1997-1 Supplement (i) shall prove to have been
incorrect in any material respect when made, which continues to be incorrect
in any material respect for a period of 60 days after the date on which
written notice of such failure, requiring the same to be remedied, shall
have been given to the Transferor by the Trustee, or to the Transferor and
the Trustee by any Series 1997-1 Certificateholder, and (ii) as a result of
which the interests of the Series 1997-1 Certificateholders are materially
and adversely affected (PROVIDED, HOWEVER, that an Early Amortization Event
shall not be deemed to have occurred if the Transferor has accepted
designation of the related Receivable as an Ineligible Receivable during
such period in accordance with the provisions of the Pooling Agreement);
(d) (i) a failure by DHCC or the Transferor to make an Addition within
five Business Days after the Required Designation Date (as defined in the
Prospectus) or (ii) the Class B Invested Amount is less than 5% of the
Initial Invested Amount;
(e) any Servicer Default (as defined in the Prospectus) shall occur
which would have a material adverse effect on the Series 1997-1
Certificateholders;
(f) the average of the Portfolio Yields for any three consecutive
Monthly Periods is reduced to a rate which is less than the average of the
Base Rates for such three consecutive Monthly Periods;
(g) the Trust shall become an "investment company" within the meaning of
the Investment Company Act of 1940, as amended;
(h) the Transferor shall become unable for any reason to transfer
Receivables to the Trust in accordance with the Pooling Agreement;
(i) the amount on deposit in the Special Funding Account as a percentage
of the sum of the aggregate amount of Principal Receivables plus the amount
on deposit in the Special Funding Account shall equal or exceed 30% on the
last day of three consecutive Monthly Periods; or
(j) the Transferor Amount (excluding the interest represented by any
Supplemental Certificate) is less than the Required Retained Transferor
Amount.
Upon the occurrence of any event described in subparagraph (b), (c) or (e)
after the applicable grace period, if any, set forth in such subparagraphs,
either the Trustee or the holders of Series 1997-1 Certificates evidencing more
than 50% of the Invested Amount of Series 1997-1 Certificates by notice then
given in writing to the Transferor, the Servicer and the Trustee may declare
that an Early Amortization Event has occurred with respect to Series 1997-1 as
of the date of such notice. Upon the occurrence of any event described in
subparagraphs (a), (d), (f), (g), (h), (i) or (j), an Early Amortization Event
shall occur with respect to Series 1997-1 without any notice or other action on
the part of the Trustee immediately upon the occurrence of such event. The Early
Amortization Period will commence on the day on which an Early Amortization
Event occurs. Monthly distributions of principal to the Series 1997-1
Certificateholders will begin on the Distribution Date in the Monthly Period
following the Monthly Period in which such Early Amortization Event occurs (such
Distribution Date and each following Distribution Date with respect to such
Series, a "Special Payment Date"). If, because of the occurrence of an Early
Amortization Event, the Early Amortization Period begins earlier than the
scheduled commencement of an Accumulation Period or prior to the Class A
Expected Final Payment Date, the Class A Certificateholders will begin
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receiving distributions of principal earlier than they otherwise would have and
such distributions will not be subject to the Class A Controlled Deposit Amount.
As a result, the average life of the Class A Certificates may be reduced.
For purposes of the Early Amortization Event described in clause (f) above,
the terms "Base Rate" and "Portfolio Yield" will be defined as follows:
"Base Rate" means, with respect to any Monthly Period, the sum of (i) the
annualized percentage equivalent of a fraction the numerator of which is the sum
of the Class A Monthly Interest and the Class B Monthly Interest for the
Interest Period beginning in such Monthly Period and the denominator of which is
the Invested Amount as of the close of business on the last day of such Monthly
Period and (ii) the annualized percentage equivalent of a fraction the numerator
of which is the Monthly Servicing Fee for such Monthly Period and the
denominator of which is the Invested Amount as of the close of business on the
last day of the preceding Monthly Period.
"Portfolio Yield" means, for the Series 1997-1 Certificates, with respect to
any Monthly Period, the annualized percentage equivalent of a fraction, the
numerator of which is an amount equal to the sum of the aggregate amount of
Available Series 1997-1 Finance Charge Collections for such Monthly Period,
minus the aggregate Investor Defaulted Amount for such Monthly Period and the
Series 1997-1 Allocation Percentage of any Adjustment Payments not made on or
prior to the related Distribution Date, and the denominator of which is the
Invested Amount as of the last day of the preceding Monthly Period.
In addition to the consequences of an Early Amortization Event discussed
above, if an Insolvency Event occurs relating to the Transferor (excluding any
Supplemental Certificate) or an Early Amortization Event as described in clause
(j) above occurs, pursuant to the Pooling Agreement, on the day of such event,
the Transferor will immediately cease to transfer Principal Receivables to the
Trust and will promptly give notice to the Trustee of such event. To the extent
so provided in the applicable Series Supplement, if such event occurs while any
of the Series 1995-1 Certificates or the Series 1996-1 Certificates remain
outstanding, the relationship among the Certificateholders and the holders of
the Transferor Interest will dissolve and, in accordance with the terms of the
Pooling Agreement, within fifteen days of receiving notice of such event, the
Trustee will publish a notice of the occurrence of such event stating that the
Trustee intends to sell, dispose of or otherwise liquidate the Receivables in a
commercially reasonable manner and on commercially reasonable terms. The
proceeds from any such sale, disposition or liquidation of the Receivables will
be deposited in the Collection Account and allocated as described in the Pooling
Agreement and each Series Supplement, including the Series 1997-1 Supplement. If
the sum of (a) the portion of such proceeds allocated to the Certificateholders'
Interest of any Series, including Series 1997-1 and (b) the proceeds of any
collections of the Receivables in the Collection Account allocated to the
Certificateholders' Interest of such Series is not sufficient to pay the
Invested Amount of the Certificates of such Series in full, such
Certificateholders may incur a loss.
If the proceeds of any sale of the Receivables as described above allocated
to the Class A Invested Amount and the proceeds of any Collections on the
Receivables in the Collection Account are not sufficient to pay in full the
remaining amount due on the Class A Certificates, Class A Certificateholders
will suffer a corresponding loss and no such proceeds will be available to the
Class B Certificateholders. See "Certain Legal Aspects of the
Receivables--Certain Matters Relating to Bankruptcy or Receivership" in the
Prospectus.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
The share of the Servicing Fee allocable to the Series 1997-1
Certificateholders with respect to any Distribution Date (the "Monthly Servicing
Fee") shall be equal to one-twelfth of the product of (a) 2.0% (the "Servicing
Fee Rate") and (b) (i) the sum of the Class A Adjusted Invested Amount and the
Class B Invested Amount as of the last day of the Monthly Period second
preceding such Distribution Date, minus (ii) the product of the amount, if any,
on deposit in the Special Funding Account as of the last day of the
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Monthly Period second preceding such Distribution Date and the Floating
Allocation Percentage with respect to such Monthly Period; PROVIDED, HOWEVER,
that with respect to the first Distribution Date, the Monthly Servicing Fee will
be $560,224.
The share of the Monthly Servicing Fee allocable to the Class A
Certificateholders with respect to any Distribution Date (the "Class A Servicing
Fee") shall be equal to the product of (a) the Class A Percentage and (b) the
Monthly Servicing Fee; PROVIDED, HOWEVER, that with respect to the first
Distribution Date, the Class A Servicing Fee will be $428,571. The share of the
Monthly Servicing Fee allocable to the Class B Certificateholders with respect
to any Distribution Date (the "Class B Servicing Fee") shall be equal to the
product of (a) the Class B Percentage and (b) the Monthly Servicing Fee;
PROVIDED, HOWEVER, that with respect to the first Distribution Date, the Class B
Servicing Fee will be $131,653. "Class B Percentage" means a fraction, the
numerator of which is the Class B Invested Amount and the denominator of which
is the sum of the Class A Adjusted Invested Amount and the Class B Invested
Amount. The remainder of the Servicing Fee shall be paid from amounts allocable
to the holder of the Transferor Certificate, holders of Participations or the
Certificateholders of other Series (as provided in the related Series
Supplements) and in no event will the Trust, the Trustee or the Series 1997-1
Certificateholders be directly liable for the share of the Servicing Fee to be
paid from amounts allocable to the holder of the Transferor Certificate, holders
of Participations or the Certificateholders of any other Series. The Class A
Servicing Fee and the Class B Servicing Fee shall be payable to the Servicer
solely to the extent amounts are available for distribution in respect thereof
as described under "--Application of Collections--PAYMENT OF INTEREST, FEES AND
OTHER ITEMS" above.
RECORD DATE
Payments on the Series 1997-1 Certificates will be made as described herein
to the Series 1997-1 Certificateholders in whose names the Certificates were
registered (initially expected to be Cede, as nominee of DTC) at the close of
business on the last Business Day of the calendar month preceding the month in
which such payment occurs (each, a "Record Date"). However, the final payment on
the Series 1997-1 Certificates will be made only upon presentation and surrender
of such Series 1997-1 Certificates. Distributions will be made to DTC in
immediately available funds. See "Description of the Certificates--Book-Entry
Registration" in the Prospectus.
DEFEASANCE
On any date prior to the Early Amortization Period on which the following
conditions have been satisfied: (i) the Transferor has deposited (x) in the
Principal Funding Account an amount equal to the outstanding principal balance
of the Class A Certificates, which amount will be invested in Eligible
Investments and (y) in the Reserve Account, an amount equal to or greater than
the Class A Covered Amount, as estimated by the Transferor, for the period from
the date of the deposit to the Principal Funding Account through the Class A
Expected Final Payment Date; (ii) the Transferor has delivered to the Trustee an
opinion of counsel to the effect that such 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, and an opinion of counsel to the effect that following such deposit
none of the Trust, the Reserve Account or the Principal Funding Account will be
deemed to be an association (or publicly traded partnership) taxable as a
corporation; (iii) the Transferor has delivered to the Trustee a certificate of
an officer of the Transferor stating that the Transferor reasonably believes
that such deposit and termination of its obligations will not constitute an
Early Amortization Event or any event that, with the giving of notice or the
lapse of time, would cause an Early Amortization Event to occur; and (iv) a
Ratings Effect has not occurred; then, the Series 1997-1 Certificates will no
longer be entitled to the security interest of the Trust in the Receivables and,
except those set forth in clause (i) above, other Trust assets ("Defeasance"),
and the percentages applicable to the allocation to the Series 1997-1
Certificateholders of Collections of Principal Receivables, Finance Charge
Receivables and
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Defaulted Receivables will be reduced to zero. Upon the satisfaction of the
foregoing conditions, the Class B Invested Amount will be reduced to zero.
OPTIONAL TERMINATION; FINAL PAYMENT OF PRINCIPAL
The Class A Certificates will be subject to optional repurchase by the
Transferor on any Distribution Date on or after the Distribution Date on which
the Class A Invested Amount is reduced to 10% or less of the Class A Initial
Invested Amount. The purchase price will be equal to the Class A Invested
Amount, plus accrued and unpaid interest on the unpaid principal amount of the
Class A Certificates (and accrued and unpaid interest with respect to interest
amounts that were due but not paid on a prior Distribution Date or Special
Payment Date) through the day preceding the Distribution Date at the applicable
certificate rate. Following any such repurchase, the Class A Certificateholders
will have no further rights with respect to the Receivables. If the Transferor
fails for any reason to deposit the aggregate purchase price for the Class A
Certificateholders' Interest, such repurchase will not occur and payments will
continue to be made to the Class A Certificateholders as described herein.
PURCHASE OF CLASS A CERTIFICATES BY THE TRANSFEROR
The Transferor may, from time to time, but will have no obligation to,
purchase Class A Certificates on the secondary market in accordance with
applicable law and may request the Trustee to cancel such Class A Certificates
and reduce the Class A Invested Amount by a corresponding amount.
SERIES TERMINATION
If on the Distribution Date that is two months prior to the Series 1997-1
Termination Date, the Invested Amount (after giving effect to all changes
therein on such date) exceeds zero, the Servicer will, within the 40-day period
beginning on such date, solicit bids for the sale of certain Principal
Receivables (or, if certain tax opinions are obtained, interests in Principal
Receivables), together in each case with the related Finance Charge Receivables,
in an amount equal to 110% of the Invested Amount on such Series 1997-1
Termination Date (after giving effect to all deposits and distributions required
to be made on the Series 1997-1 Termination Date). The Transferor will be
entitled to participate in, and to receive notice of each bid submitted in
connection with, such bidding process. Upon the expiration of such 40-day
period, the Trustee will determine (a) which bid is the highest cash purchase
offer (the "Highest Bid") and (b) the amount (the "Available Final Distribution
Amount") which otherwise would be available in the Collection Account on the
Series 1997-1 Termination Date for distribution to the Series 1997-1
Certificateholders. The Servicer will sell such Receivables on the Series 1997-1
Termination Date to the bidder who provided the Highest Bid and will deposit the
proceeds of such sale in the Collection Account for allocation (together with
the Available Final Distribution Amount) to the Series 1997-1
Certificateholders' Interest. If the proceeds of such sale, together with the
Available Final Distribution Amount, are less than the Invested Amount plus
accrued and unpaid interest on the Series 1997-1 Certificates, the Series 1997-1
Certificateholders will incur a loss.
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