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METRIS RECEIVABLES, INC.
Transferor
DIRECT MERCHANTS CREDIT CARD BANK, NATIONAL ASSOCIATION
Servicer
and
THE BANK OF NEW YORK (DELAWARE)
Trustee
on behalf of the Series 1998-1 Securityholders
SERIES 1998-1 SUPPLEMENT
Dated as of July 30, 1998
to
AMENDED AND RESTATED
POOLING AND SERVICING AGREEMENT
Dated as of July 30, 1998
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METRIS MASTER TRUST
Variable Funding Trust
Security, Series 1998-1, Class A
$56,376,000 Floating Rate Asset Backed Trust
Securities, Series 1998-1, Class B
$96,645,000 Floating Rate Asset Backed
Collateralized Trust Obligations, Series 1998-1
0% Variable Funding Trust
Securities, Series 1998-1, Class D
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TABLE OF CONTENTS
PAGE
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SECTION 1. Designation . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 2. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 3. Reassignment Terms. . . . . . . . . . . . . . . . . . . . . . .33
SECTION 3A. Conveyance of Interest in Interest
Rate Cap; Cap Proceeds Account. . . . . . . . . . . . . . . . .34
SECTION 4. Delivery and Payment for the Series
1998-1 Securities . . . . . . . . . . . . . . . . . . . . . . .38
SECTION 5. Form of Delivery of Series 1998-1 Securities. . . . . . . . . .38
SECTION 6. Article IV of Agreement . . . . . . . . . . . . . . . . . . . .42
ARTICLE IV RIGHTS OF SECURITYHOLDERS
AND ALLOCATION AND APPLICATION
OF COLLECTIONS . . . . . . . . . . . . . . . . . . . . . .42
SECTION 4.4 Rights of Securityholders . . . . . . . . . . . . . .42
SECTION 4.5 Collections and Allocation; Payments on
Exchangeable Transferor Security. . . . . . . . . . .43
SECTION 4.6 Determination of Interest
for the Series 1998-1
Securities. . . . . . . . . . . . . . . . . . . . . .44
SECTION 4.6A Determination of the
Class A Interest
Adjustment. . . . . . . . . . . . . . . . . . . . . .46
SECTION 4.7 Determination of Principal Amounts. . . . . . . . . .47
SECTION 4.8 Shared Principal
Collections . . . . . . . . . . . . . . . . . . . . .50
SECTION 4.9 Application of Funds. . . . . . . . . . . . . . . . .51
PAGE
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SECTION 4.10 Coverage of Required Amount
for the Series 1998-1
Securities. . . . . . . . . . . . . . . . . . . . . .67
SECTION 4.11 Payment of Interest with respect to Securities. . . .68
SECTION 4.12 Payment of Security
Principal . . . . . . . . . . . . . . . . . . . . . .69
SECTION 4.13 Series Charge-Offs. . . . . . . . . . . . . . . . . .70
SECTION 4.14 Redirected Principal
Collections for the Series
1998-1 Securities . . . . . . . . . . . . . . . . . .71
SECTION 4.15 Determination of LIBOR. . . . . . . . . . . . . . . .72
SECTION 4.16 Payment Reserve Account . . . . . . . . . . . . . . .73
SECTION 4.17 CTO Reserve Account . . . . . . . . . . . . . . . . .74
SECTION 4.18 CTO Defaults and Remedies . . . . . . . . . . . . . .76
SECTION 7. Article V of the Agreement. . . . . . . . . . . . . . . . . . .77
ARTICLE V DISTRIBUTIONS AND REPORTS TO
INVESTOR SECURITYHOLDERS . . . . . . . . . . . . . . . . .77
SECTION 5.1 Distributions . . . . . . . . . . . . . . . . . . . .77
SECTION 5.2 Securityholders' Statement. . . . . . . . . . . . . .79
SECTION 7A. Article VI of the Agreement . . . . . . . . . . . . . . . . . .81
ARTICLE VI THE SECURITIES . . . . . . . . . . . . . . . . . . . . . .81
SECTION 6.15 Additional Class A
Invested Amounts. . . . . . . . . . . . . . . . . . .81
SECTION 6.16 Additional Class D
Invested Amounts. . . . . . . . . . . . . . . . . . .83
SECTION 6.17 Extension . . . . . . . . . . . . . . . . . . . . . .83
SECTION 8. Series 1998-1 Pay Out Events. . . . . . . . . . . . . . . . . .86
PAGE
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SECTION 8A. Class A Pay Down Period . . . . . . . . . . . . . . . . . . . .88
SECTION 9. Series 1998-1 Termination . . . . . . . . . . . . . . . . . . .88
SECTION 9A. Class A Pre-Payment . . . . . . . . . . . . . . . . . . . . . .89
SECTION 10. Legends; Transfer and Exchange; Restrictions on Transfer of
Series 1998-1 Securities; Tax Treatment . . . . . . . . . . . .89
SECTION 11. Ratification of Agreement . . . . . . . . . . . . . . . . . . .97
SECTION 12. Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . .98
SECTION 13. GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . .98
SECTION 14. Instructions in Writing . . . . . . . . . . . . . . . . . . . .98
SECTION 15. Amendments. . . . . . . . . . . . . . . . . . . . . . . . . . .98
SECTION 16. Increased Costs . . . . . . . . . . . . . . . . . . . . . . . .99
SECTION 17. Replacement of Certain Investor Securityholders . . . . . . . 101
SECTION 18. MRI Note. . . . . . . . . . . . . . . . . . . . . . . . . . . 102
EXHIBITS
EXHIBIT A-1 Form of Variable Funding Security
EXHIBIT A-2 Form of Class B Investor Security
EXHIBIT A-3 Form of CTO Investor Security
EXHIBIT A-4 Form of Class D Investor Security
EXHIBIT B [RESERVED]
EXHIBIT C Form of Monthly Securityholders'
Statement
EXHIBIT D Form of 144A Exchange Notice and
Certification
EXHIBIT E Form of Extension Notice
EXHIBIT F Form of Investor Securityholder Election
Notice
EXHIBIT G Form of Clearing System Certificate
EXHIBIT H Form of Member Organization Certificate
EXHIBIT I Form of Regulation S Transfer Certificate
EXHIBIT J Form of Rule 144A Transfer Certificate
SERIES 1998-1 SUPPLEMENT, dated as of July 30, 1998 (this "SERIES
SUPPLEMENT") by and among METRIS RECEIVABLES, INC., a corporation organized and
existing under the laws of the State of Delaware, as Transferor (the
"TRANSFEROR"), DIRECT MERCHANTS CREDIT CARD BANK, NATIONAL ASSOCIATION, a
national banking organization organized under the laws of the United States, as
Servicer (the "SERVICER"), and THE BANK OF NEW YORK (DELAWARE), a Delaware
banking corporation organized and existing under the laws of the State of
Delaware as trustee (together with its successors in trust thereunder as
provided in the Agreement referred to below, the "TRUSTEE"), under the Amended
and Restated Pooling and Servicing Agreement dated as of July 30, 1998 as
amended, supplemented or otherwise modified from time to time (the "AGREEMENT")
among the Transferor, the Servicer and the Trustee.
Section 6.9 of the Agreement provides, among other things, that the
Transferor and the Trustee may at any time and from time to time enter into a
supplement to the Agreement for the purpose of authorizing the issuance by the
Trustee to the Transferor, for execution and redelivery to the Trustee for
authentication, of one or more Series of Securities.
Pursuant to this Series Supplement, the Transferor and the Trustee
shall create a new Series of Investor Securities and shall specify the Principal
Terms thereof.
SECTION 1. DESIGNATION. There is hereby created a Series of Investor
Securities to be issued pursuant to the Agreement and this Series Supplement to
be known generally as the "SERIES 1998-1 SECURITIES." The Series 1998-1
Securities shall be issued in four Classes, which shall be designated generally
as the Variable Funding Trust Security, Series 1998-1, Class A (the "CLASS A
SECURITY"), the Floating Rate Asset Backed Trust Securities, Series 1998-1,
Class B (the "CLASS B SECURITIES"), the Floating Rate Collateralized Trust
Obligations, Series 1998-1 (the "Collateralized Trust Obligations") and the
Variable Funding Trust Security, Series 1998-1, Class D (the "CLASS D
SECURITY").
SECTION 2. DEFINITIONS. In the event that any term or provision
contained herein shall conflict with or
be inconsistent with any provision contained in the Agreement, the terms and
provisions of this Series Supplement shall govern with respect to the Series
1998-1 Securities. All Article, Section or subsection references herein shall
mean Article, Section or subsections of the Agreement, as amended or
supplemented by this Series Supplement, except as otherwise provided herein.
All capitalized terms not otherwise defined herein are defined in the Agreement.
Each capitalized term defined herein shall relate only to the Series 1998-1
Securities and no other Series of Securities issued by the Trust.
"ADDITIONAL CLASS A INVESTED AMOUNTS" shall have the meaning specified
in Section 6.15 of the Agreement.
"ADDITIONAL CLASS D INVESTED AMOUNTS" shall have the meaning specified
in Section 6.16 of the Agreement.
"ADDITIONAL INTEREST" shall mean, at any time of determination, the
sum of Class B Additional Interest and CTO Additional Interest.
"ADJUSTED INVESTED AMOUNT" shall mean, with respect to any date of
determination, an amount equal to the Invested Amount MINUS the Defeasance
Account Balance on such date of determination.
"ADJUSTED PORTFOLIO YIELD" shall mean for the Series 1998-1
Securities, 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 1998-1 Finance Charge Collections
(without giving effect to any portion thereof representing amounts withdrawn
from the Payment Reserve Account) for such Monthly Period, MINUS the aggregate
Series Default Amount for such Monthly Period and the Series 1998-1 Percentage
of any Adjustment Payments which the Transferor is required but fails to make
pursuant to the Agreement for such Monthly Period, and the denominator of which
is the average daily sum of the Class A Invested Amount, the Class B Invested
Amount and the CTO Invested Amount.
"ADMINISTRATION AGREEMENT" shall mean the Administration Agreement,
dated as of July 30, 1998
2
between the Metris Owner Trust and Metris Companies Inc., as the same may from
time to time be amended, restated, modified and in effect.
"ADMINISTRATOR" shall mean Metris Companies Inc. as administrator
under the Administration Agreement.
"AGGREGATE ABC PRINCIPAL AMOUNT" shall mean with respect to any date
of determination an amount equal to the sum of the Class A Outstanding Principal
Amount, the Class B Invested Amount and the CTO Invested Amount, each as of such
date of determination.
"AGGREGATE INTEREST RATE CAPS NOTIONAL AMOUNT" shall mean with respect
to any date of determination an amount equal to the sum of the notional amounts
or equivalent amounts of all outstanding Cap Agreements, Replacement Interest
Rate Caps and Qualified Substitute Arrangements, each as of such date of
determination.
"AMORTIZATION PERIOD" shall mean the period beginning on the day
following the last day of the Revolving Period and ending on the Series 1998-1
Termination Date.
"AMORTIZATION PERIOD COMMENCEMENT DATE" shall mean (i) the earlier of
the first day of the August 2001 Monthly Period and the Pay Out Commencement
Date or (ii) if there is any Extension, the earlier of the date specified as
such in the most recent Extension Notice and the Pay Out Commencement Date.
"AVAILABLE SERIES 1998-1 FINANCE CHARGE COLLECTIONS" shall have the
meaning specified in subsection 4.9(a) of the Agreement.
"BASE RATE" shall mean, as of any Business Day, the sum of (i) the
average of (A) the Class A Interest Rate, (B) the Class B Interest Rate and (C)
the CTO Interest Rate, each of (A), (B) and (C) weighted by the unpaid principal
amount of each respective Class of Securities as of such Business Day, plus (ii)
the product of 2% per annum and the percentage equivalent of a fraction the
numerator of which is the sum of the Adjusted Invested Amount and the
denominator of which is the Invested Amount.
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"CAP AGREEMENTS" shall mean the interest rate cap agreements, between
the Transferor, the Trustee and a Cap Provider, as amended from time to time,
with respect to the Class A Interest Rate, Class B Interest Rate and CTO
Interest Rate, respectively, and any additional interest rate protection
agreement or agreements, entered into between the Transferor, the Trustee and a
Cap Provider, as the same may from time to time be amended, restated, modified
and in effect.
"CAP PROCEEDS ACCOUNT" shall have the meaning specified in subsection
3A(b) of this Series Supplement.
"CAP PROVIDER" shall mean (a)(i) a third party cap provider having a
senior unsecured debt rating of at least "AA" by Standard & Poor's and "Aa2" by
Moody's and (ii) a third party cap provider or its corporate parent having a
short term rating from Standard & Poor's of A-1 or (b) a third party cap
provider or its corporate parent having a rating acceptable to the Rating
Agency.
"CAP RECEIPT AMOUNT" shall mean, with respect to any Business Day the
amount on deposit in the Cap Proceeds Account.
"CAP SETTLEMENT DATE" shall have the meaning specified in subsection
3A(b) of this Series Supplement.
"CARRYOVER CLASS B INTEREST" shall mean (a) any Class B Interest due
but not paid on any previous Distribution Date PLUS (b) any Class B Additional
Interest.
"CARRYOVER CTO INTEREST" shall mean (a) any CTO Interest due but not
paid on any previous Distribution Date PLUS (b) any CTO Additional Interest.
"CLASS A ADJUSTED INVESTED AMOUNT" shall mean, with respect to any
date of determination, an amount equal to the Class A Invested Amount minus the
Defeasance Account Balance on such date of determination.
"CLASS A COSTS" shall mean with respect to any Business Day, (i) the
Series 1998-1 Allocation Percentage of the sum of (x) the Liquidity Bank
Increased Costs (as defined in the Collateral Trust Agreement), and (y) any
amounts described in subsection 5.3(a)(ii)(I)(a) of the Collateral Trust
Agreement, in each case to the extent
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such amount is due and payable and has not previously been paid, and (ii) (a)
the Series 1998-1 Non-Utilized Percentage of any Facility Fees (as defined in
the Liquidity Agreement) accrued from and including the preceding Business Day
to but excluding such Business Day pursuant to Section 2.9 of the Liquidity
Agreement with respect to Unutilized Available Commitments (as defined in the
Liquidity Agreement) plus (b) any such Facility Fees allocated to the Class A
Security which accrued with respect to prior Business Days but have not been
paid pursuant to Section 2.9 of the Liquidity Agreement.
"CLASS A EVENT OF DEFAULT" shall have the meaning specified for the
term "Event of Default" in the Liquidity Agreement.
"CLASS A FLOATING PERCENTAGE" shall mean, with respect to any Business
Day, the percentage equivalent of a fraction, the numerator of which is the
Class A Adjusted Invested Amount on such day after taking into account all
adjustments of the Class A Invested Amount on such day and the denominator of
which is the greater of (a) the sum of the aggregate amount of Principal
Receivables as of the beginning of such Business Day and the amounts on deposit
in the Excess Funding Account as of the beginning of such Business Day after
giving effect to any deposits or withdrawals to be made to the Excess Funding
Account on such Business Day and (b) the sum of the numerators used to calculate
the applicable floating or fixed/floating percentages with respect to all
Classes of all Series then outstanding.
"CLASS A INITIAL INVESTED AMOUNT" shall mean $569,897,083.33.
"CLASS A INTEREST" shall mean the interest distributable in respect of
the Class A Security as calculated in accordance with subsection 4.6(a) of the
Agreement.
"CLASS A INTEREST ADJUSTMENT" shall have the meaning specified in
Section 4.6A of the Agreement.
"CLASS A INTEREST RATE" shall mean with respect to any Business Day, a
per annum interest rate equal to the rate which if multiplied by the Class A
Outstanding Principal Amount as of the close of business on the
5
preceding Business Day would produce, on the basis of a 365- or 366-day year, as
the case may be, an amount equal to the Cost of Funds for the period from and
including the immediately preceding Business Day to but excluding such Business
Day.
"CLASS A INTEREST SHORTFALL" shall have the meaning specified in
subsection 4.6(a) of the Agreement.
"CLASS A INVESTED AMOUNT" shall mean, when used with respect to any
Business Day, an amount equal to (a) the Class A Initial Invested Amount, MINUS
(b) the aggregate amount of principal payments made to Class A Securityholders
through and including such Business Day, MINUS (c) the aggregate amount of Class
A Series Charge-Offs for all prior Distribution Dates, PLUS (d) the sum of the
aggregate amount allocated with respect to Class A Series Charge-Offs and
available on all prior Distribution Dates pursuant to subsection 4.9(a)(vii) of
the Agreement and, with respect to such subsection and pursuant to subsections
4.10(a) and (b) and Section 4.14 of the Agreement, for the purpose of
reinstating amounts reduced pursuant to the foregoing clause (d) PLUS (e) the
aggregate principal amount of any Additional Class A Invested Amounts purchased
pursuant to Section 6.15 of the Agreement.
"CLASS A INVESTOR PERCENTAGE" shall mean, for any Business Day, (a)
with respect to Finance Charge Receivables prior to the commencement of the
Early Amortization Period and Receivables in Defaulted Accounts at any time or
Collections of Principal Receivables during the Revolving Period (except for any
portion of the Revolving Period that occurs during the Class A Pay Down Period),
the Class A Floating Percentage and (b) with respect to Collections of Finance
Charge Receivables during the Early Amortization Period and Collections of
Principal Receivables during the Amortization Period and the Class A Pay Down
Period, the Fixed/Floating Percentage.
"CLASS A MAXIMUM INVESTED AMOUNT" shall mean $600,000,000.
"CLASS A OUTSTANDING PRINCIPAL AMOUNT" shall mean with respect to the
Class A Security, when used with respect to any Business Day, an amount equal to
(a) the
6
initial aggregate principal amount of the Class A Securities, PLUS (b) the
aggregate principal amount of any Additional Class A Invested Amounts purchased
by the Class A Securityholder on or prior to such Business Day pursuant to
Section 6.15 of the Agreement MINUS (c) the aggregate amount of principal
payments made to the Class A Securityholder on or prior to such Business Day.
"CLASS A PAY DOWN PERIOD" shall have the meaning specified in Section
8A of this Series Supplement.
"CLASS A PERCENTAGE" shall mean a fraction the numerator of which is
the Class A Invested Amount and the denominator of which is the sum of the Class
A Invested Amount, the Class B Invested Amount, the CTO Invested Amount and the
Class D Invested Amount.
"CLASS A PRINCIPAL" shall mean the principal distributable in respect
of the Class A Security as calculated in accordance with subsection 4.7(a) of
the Agreement.
"CLASS A REQUIRED AMOUNT" shall mean the amount determined by the
Servicer on each Business Day equal to the excess, if any, of (x) the sum of (i)
the amount described in subsection 4.9(a)(i)(y) for such Business Day, (ii) the
Class A Percentage of the Daily Portion of the Servicing Fee for the then
current Monthly Period, (iii) the Class A Floating Percentage of the Default
Amount, if any, for such Business Day and, to the extent not previously paid,
for any previous Business Day in such Monthly Period, (iv) on each Transfer Date
the Class A Percentage of the Series 1998-1 Percentage of the Adjustment Payment
required to be made by the Transferor but not made on such Transfer Date and (v)
the amount of unreimbursed Class A Series Charge-Offs over (y) the Available
Series 1998-1 Finance Charge Collections plus any Excess Finance Charge
Collections from other Series and any Transferor Finance Charge Collections
allocated with respect to the amounts described in clauses (x)(i) through (v).
"CLASS A SECURITY" shall mean the variable funding security executed
by the Transferor and authenticated by or on behalf of the Trustee,
substantially in the form of Exhibit A-1 hereto.
7
"CLASS A SECURITYHOLDER" shall mean the Person in whose name a Class A
Security is registered in the Security Register.
"CLASS A SECURITYHOLDERS' INTEREST" shall mean the portion of the
Series 1998-1 Securityholders' Interest evidenced by the Class A Security.
"CLASS A SERIES CHARGE-OFFS" shall have the meaning specified in
subsection 4.13(d) of the Agreement.
"CLASS B ADDITIONAL INTEREST" shall have the meaning specified in
subsection 4.6(b) of the Agreement.
"CLASS B DAILY PRINCIPAL AMOUNT" shall have the meaning specified in
subsection 4.9(c)(ii) of the Agreement.
"CLASS B FIXED/FLOATING PERCENTAGE" shall mean for any Business Day
the percentage equivalent of a fraction, the numerator of which is the Class B
Invested Amount at the end of the last day of the Revolving Period and the
denominator of which is the greater of (a) the sum of the aggregate amount of
Principal Receivables and the amount on deposit in the Excess Funding Account as
of the beginning of such Business Day after giving effect to any deposits or
withdrawals to be made to the Excess Funding Account on such Business Day and
(b) the sum of the numerators used to calculate the applicable floating or
fixed/floating percentages with respect to all Classes of all Series then
outstanding.
"CLASS B FLOATING PERCENTAGE" shall mean, with respect to any Business
Day, the percentage equivalent of a fraction, the numerator of which is the
Class B Invested Amount as of the end of the preceding Business Day and the
denominator of which is the greater of (a) the sum of the aggregate amount of
Principal Receivables and the amount on deposit in the Excess Funding Account as
of the beginning of such Business Day afer giving effect to any deposits or
withdrawals to be made to the Excess Funding Account on such Business Day and
(b) the sum of the numerators used to calculate the applicable floating or
fixed/floating percentages with respect to all Classes of all Series then
outstanding.
8
"CLASS B GLOBAL SECURITY" shall mean a Class B Temporary Regulation S
Global Security, a Class B Regulation S Global Security or a Class B Rule 144A
Global Security.
"CLASS B INITIAL INVESTED AMOUNT" shall mean $56,376,000.
"CLASS B INTEREST" shall mean the interest distributable in respect of
the Class B Securities as calculated in accordance with subsection 4.6(b) of the
Agreement.
"CLASS B INTEREST ADJUSTMENT" shall have the meaning specified in
Section 4.6A of the Agreement.
"CLASS B INTEREST RATE" shall mean with respect to each Interest
Accrual Period, a per annum rate 0.45% in excess of LIBOR, as determined on the
related LIBOR Determination Date.
"CLASS B INTEREST SHORTFALL" shall have the meaning specified in
subsection 4.6(b) of the Agreement.
"CLASS B INVESTED AMOUNT" shall mean, when used with respect to any
Business Day, an amount equal to (a) the Class B Initial Invested Amount, MINUS
(b) the aggregate amount of principal payments made to Class B Securityholders
prior to such Business Day, MINUS (c) the aggregate amount of Class B Series
Charge-Offs for all prior Distribution Dates, MINUS (d) the aggregate amount of
Redirected Class B Principal Collections for which neither the Class D Invested
Amount nor the CTO Invested Amount has been reduced for all prior Business Days,
and PLUS (e) the sum of the aggregate amount allocated and available on all
prior Business Days pursuant to subsection 4.9(a)(x) of the Agreement and, with
respect to such subsection and pursuant to subsections 4.10(a) and (b) and
Section 4.14 of the Agreement, for the purpose of reinstating amounts reduced
pursuant to the foregoing clauses (c) and (d).
"CLASS B INVESTOR PERCENTAGE" shall mean, for any Distribution Date,
(a) with respect to Collections of Finance Charge Receivables prior to the
commencement of the Early Amortization Period and Receivables in Defaulted
Accounts at any time or Collections of Principal
9
Receivables during the Revolving Period, the Class B Floating Percentage and (b)
with respect to Collections of Finance Charge Receivables during the Early
Amortization Period and Collections of Principal Receivables during the
Amortization Period, the Fixed/Floating Percentage.
"CLASS B OUTSTANDING PRINCIPAL AMOUNT" shall mean, when used with
respect to any Business Day, an amount equal to (a) the initial aggregate
principal amount of the Class B Securities purchased pursuant to any Class B
Funding Purchase pursuant to Section 4.14(b) of the Agreement, MINUS (b) the
aggregate amount of principal payments made to Class B Securityholders prior to
such Business Day.
"CLASS B PERCENTAGE" shall mean a fraction the numerator of which is
the Class B Invested Amount and the denominator of which is the sum of the Class
A Invested Amount, the Class B Invested Amount and the CTO Invested Amount.
"CLASS B PRINCIPAL" shall mean the principal distributable in respect
of the Class B Securities as calculated in accordance with subsection 4.7(b) of
the Agreement.
"CLASS B PRINCIPAL PAYMENT COMMENCEMENT DATE" shall mean the earlier
of (a) the first Distribution Date in an Amortization Period on which the Class
A Invested Amount equals or is reduced to zero or, if there are no Principal
Collections allocable to the Series 1998-1 Securities remaining after payments
have been made to the Class A Security on such Distribution Date, the
Distribution Date following the Distribution Date on which the Class A Invested
Amount is paid in full and (b) the Distribution Date following a sale or
repurchase of the Receivables as set forth in Section 2.4(e), 9.2, 10.2, 12.1 or
12.2 of the Agreement or Section 3 of this Series Supplement.
"CLASS B REGULATION S GLOBAL SECURITY" shall mean a Class B Security,
sold in an offshore transaction in reliance on Regulation S under the Securities
Act, represented by one or more Global Securities in definitive, fully
registered form without interest coupons, deposited with DTC, as initial
Clearing Agency, or any
10
successor, with the applicable legends set forth in Exhibit A-2 hereto included
in the form of such Class B Security.
"CLASS B REQUIRED AMOUNT" shall mean the amount determined by the
Servicer on each Business Day equal to the excess, if any, of (x) the sum of (i)
the Daily Portion of the Class B Interest for the then current Monthly Period,
(ii) any Carryover Class B Interest previously due but not paid to the Class B
Securityholders on a prior Business Day, (iii) the Class B Percentage of the
Servicing Fee for the then current Monthly Period, (iv) the Class B Floating
Percentage of the Default Amount, if any, for such Business Day and, to the
extent not previously paid, for any previous Business Day in such Monthly
Period, (v) the Class B Percentage of the Series 1998-1 Percentage of the
Adjustment Payment required to be made by the Transferor but not made on the
related Transfer Date and (vi) the unreimbursed amount by which the Class B
Invested Amount has been reduced on prior Business Days pursuant to clauses (c)
and (d) of the definition of Class B Invested Amount over (y) the Available
Series 1998-1 Finance Charge Collections plus any Excess Finance Charge
Collections from other Series and any Transferor Finance Charge Collections
allocated with respect to the amounts described in clauses (x)(i) through (vi).
"CLASS B RULE 144A GLOBAL SECURITY" shall mean a Class B Security,
sold within the United States to U.S. persons that are QIBs, issued in
definitive, fully registered form without interest coupons, in the form of
beneficial interests in one or more Global Securities, deposited with DTC, as
initial Clearing Agency, or any successor, with the applicable legends set forth
in Exhibit A-2 hereto included in the form of such Class B Security.
"CLASS B SECURITIES" shall mean any of the securities executed by the
Transferor and authenticated by or on behalf of the Trustee, substantially in
the form of Exhibit A-2 hereto.
"CLASS B SECURITYHOLDER" shall mean the Person in whose name a Class B
Security is registered in the Security Register.
11
"CLASS B SECURITYHOLDERS' INTEREST" shall mean the portion of the
Series 1998-1 Securityholders' Interest evidenced by the Class B Securities.
"CLASS B SERIES CHARGE-OFFS" shall have the meaning specified in
subsection 4.13(c) of the Agreement.
"CLASS B TEMPORARY REGULATION S GLOBAL SECURITY" shall mean a Class B
Security, sold in an offshore transaction in reliance on Regulation S under the
Securities Act, represented by one or more Global Securities in definitive,
fully registered form without interest coupons, deposited with DTC, as initial
Clearing Agency , or any successor, with the applicable legends set forth in
Exhibit A-2 hereto included in the form of such Class B Security.
"CLASS D DAILY PRINCIPAL" shall have the meaning specified in Section
4.7(d) of the Agreement.
"CLASS D FIXED/FLOATING PERCENTAGE" shall mean for any Business Day
the percentage equivalent of a fraction, the numerator of which is the Class D
Invested Amount at the end of the last day of the Revolving Period and the
denominator of which is the greater of (a) the sum of the aggregate amount of
Principal Receivables and the amount on deposit in the Excess Funding Account as
of the beginning of such Business Day after giving effect to any deposits or
withdrawals to be made to the Excess Funding Account on such Business Day and
(b) the sum of the numerators used to calculate the applicable floating or
fixed/floating percentages with respect to all Classes of all Series then
outstanding.
"CLASS D FLOATING PERCENTAGE" shall mean with respect to any Business
Day the percentage equivalent of a fraction, the numerator of which is the Class
D Invested Amount on such day after taking into account all adjustments of the
Class D Invested Amount on such day and the denominator of which is the greater
of (a) the sum of the aggregate amount of Principal Receivables and the amount
on deposit in the Excess Funding Account as of the beginning of such Business
Day after giving effect to any deposits or withdrawals to be made to the Excess
Funding Account on such Business Day and (b) the sum of the numerators used to
calculate the applicable floating
12
or fixed/floating percentages with respect to all Classes of all Series then
outstanding.
"CLASS D INITIAL INVESTED AMOUNT" shall mean $50,264,000.
"CLASS D INVESTED AMOUNT" shall mean, when used with respect to any
Business Day, an amount equal to (a) the Class D Initial Invested Amount, PLUS
(b) the aggregate principal amount of any Additional Class D Invested Amounts
pursuant to Section 6.16 of the Agreement, MINUS (c) the aggregate amount of
principal payments made to Class D Securityholders prior to such Business Day,
MINUS (d) the aggregate amount of Class D Series Charge-Offs for all prior
Distribution Dates, MINUS (e) the aggregate amount of Redirected Principal
Collections for all prior Business Days, PLUS (f) the sum of the aggregate
amount allocated and available on all prior Business Days pursuant to subsection
4.9(a)(xii) of the Agreement and, with respect to such subsection, pursuant to
subsections 4.10(a) and (b) of the Agreement, for the purpose of reinstating
amounts reduced pursuant to the foregoing clauses (d) and (e).
"CLASS D INVESTOR PERCENTAGE" shall mean, for any Business Day, (a)
with respect to Collections of Finance Charge Receivables prior to the
commencement of the Early Amortization Period and Receivables in Defaulted
Accounts at any time or Collections of Principal Receivables during the
Revolving Period, the Class D Floating Percentage and (b) with respect to
Collections of Finance Charge Receivables during the Early Amortization Period
and Collections of Principal Receivables during the Amortization Period, the
Class D Fixed/Floating Percentage.
"CLASS D MAXIMUM REQUIRED AMOUNT" shall mean $52,349,053.
"CLASS D OUTSTANDING PRINCIPAL AMOUNT" shall mean, when used with
respect to any Business Day, an amount equal to (a) upon the initial issuance of
the Class D Security, the initial amount designated by the Transferor (which
shall not be less than the Stated Class D Amount), PLUS (b) the aggregate
principal amount of any Additional Class D Invested Amounts pursuant to Section
6.16 of the Agreement, MINUS (c) the aggregate amount of
13
principal payments made to Class D Securityholders prior to such Business Day.
"CLASS D PRINCIPAL" shall mean the principal distributable in respect
of the Class D Security as specified in subsection 4.7(d) of the Agreement.
"CLASS D PRINCIPAL PAYMENT COMMENCEMENT DATE" shall mean the earlier
of (a) the first Distribution Date on which the CTO Invested Amount is paid in
full or, if there are no Principal Collections allocable to the Series 1998-1
Securities remaining after payments have been made to the Collateralized Trust
Obligations on such Distribution Date, the Distribution Date following the
Distribution Date on which the CTO Invested Amount is paid in full and (b) the
Distribution Date following a sale or repurchase of the Receivables as set forth
in Sections 2.4(e), 9.2, 10.2, 12.1 and 12.2 of the Agreement and Section 3 of
this Series Supplement.
"CLASS D SECURITY" shall mean any of the securities executed by the
Transferor and authenticated by or on behalf of the Trustee, substantially in
the form of Exhibit A-4 hereto.
"CLASS D SECURITYHOLDER" shall mean the Person in whose name a Class D
Security is registered in the Security Register.
"CLASS D SECURITYHOLDERS' INTEREST" shall mean the portion of the
Series 1998-1 Securityholders' Interest evidenced by the Class D Security.
"CLASS D SERIES CHARGE-OFFS" shall have the meaning specified in
subsection 4.13(a) of the Agreement.
"CLEARING SYSTEM CERTIFICATE" shall mean a certificate in
substantially the form of Exhibit G hereto or such other form of certificate as
shall be satisfactory to the Trustee, the Euroclear Operator and Cedel.
"CLOSING DATE" shall mean the date of initial issuance of Securities
of Series 1998-1.
"COLLATERAL TRUST AGREEMENT" shall mean the Collateral Trust Agreement
dated as of July 30, 1998, between Metris Owner Trust and State Street Bank and
14
Trust Company, as Collateral Trustee, as the same may from time to time be
amended, restated, modified and in effect.
"COLLATERALIZED TRUST OBLIGATIONS" shall mean any of the securities
executed by the Transferor and authenticated by or on behalf of the Trustee,
substantially in the form of Exhibit A-3 hereto.
"COMMERCIAL PAPER" shall mean the promissory notes issued by the
Metris Owner Trust in the commercial paper market pursuant to the Liquidity
Agreement and the Depositary Agreement.
"COST OF FUNDS" shall mean with respect to any day the sum of (a) the
greater of (i) the OT Percentage of the sum of interest on Loans outstanding and
the Interest Component of outstanding Commercial Paper accrued with respect to
such day and (ii) the Administrator's written estimate delivered to the Trustee
on the first Business Day preceding the first day of the then current Monthly
Period, as may be modified from time to time during such Monthly Period, of the
OT Percentage of the average daily amount of interest that will accrue on the
Loans and Commercial Paper during such Monthly Period; PROVIDED, HOWEVER, that
the amount determined pursuant to this clause (a) (ii) shall not exceed on any
day (I) the product of (x) the OT Percentage of the sum of the aggregate
outstanding principal amount of the Loans and the aggregate Principal Component
of the Commercial Paper outstanding on such Business Day after giving effect to
all transactions on such Business Day, (y) the greater of (A) LIBOR prevailing
on such preceding Business Day plus 0.75% and (B) 10% and (z) a fraction the
numerator of which is one and the denominator of which is the actual number of
days in the then current calendar year MINUS (II) the sum of the amount
determined pursuant to clause (b) below and the OT Percentage of the Total
Program Fees for such day, and (b) the OT Percentage of the amount of any
Facility Fees (as defined in the Liquidity Agreement) accrued with respect to
such day pursuant to Section 2.9 of the Liquidity Agreement with respect to
Utilized Available Commitments (as defined in the Liquidity Agreement).
"CTO ADDITIONAL INTEREST" shall have the meaning specified in
subsection 4.6(c) of the Agreement.
15
"CTO DAILY PRINCIPAL AMOUNT" shall have the meaning specified in
subsection 4.9(c)(iii) of the Agreement.
"CTO DEFAULT" shall have the meaning specified in Section 4.18.
"CTO FIXED/FLOATING PERCENTAGE" shall mean for any Business Day the
percentage equivalent of a fraction, the numerator of which is the CTO Invested
Amount at the end of the last day of the Revolving Period and the denominator of
which is the greater of (a) the sum of the aggregate amount of Principal
Receivables and the amount on deposit in the Excess Funding Account as of the
beginning of such Business Day after giving effect to any deposits or
withdrawals to be made to the Excess Funding Account on such Business Day and
(b) the sum of the numerators used to calculate the applicable floating or
fixed/floating percentages with respect to all Classes of all Series then
outstanding.
"CTO FLOATING PERCENTAGE" shall mean, with respect to any Business
Day, the percentage equivalent of a fraction, the numerator of which is the CTO
Invested Amount as of the end of the preceding Business Day and the denominator
of which is the greater of (a) the sum of the aggregate amount of Principal
Receivables and the amount on deposit in the Excess Funding Account as of the
beginning of such Business Day after giving effect to any deposits or
withdrawals to be made to the Excess Funding Account on such Business Day and
(b) the sum of the numerators used to calculate the applicable floating or
fixed/floating percentages with respect to all Classes of all Series then
outstanding.
"CTO FUNDING EVENT" shall mean, following the occurrence of a CTO
Default, a direction by a majority of the CTO Securityholders to increase the
Specified CTO Reserve Amount to the outstanding principal amount of the
Collateralized Trust Obligations.
"CTO GLOBAL SECURITY" shall mean a CTO Temporary Regulation S Global
Security, a CTO Regulation S Global Security or a CTO Rule 144A Global Security.
"CTO INITIAL INVESTED AMOUNT" shall mean $96,645,000.
16
"CTO INTEREST" shall mean the interest distributable in respect of the
Collateralized Trust Obligations as calculated in accordance with subsection
4.6(c) of the Agreement.
"CTO INTEREST ADJUSTMENT" shall have the meaning specified in Section
4.6A of the Agreement.
"CTO INTEREST RATE" shall mean with respect to each Interest Accrual
Period, a per annum rate 0.85% in excess of LIBOR as determined on the related
LIBOR Determination Date.
"CTO INTEREST SHORTFALL" shall have the meaning specified in
subsection 4.6(c) of the Agreement.
"CTO INVESTED AMOUNT" shall mean, when used with respect to any
Business Day, an amount equal to (a) the CTO Initial Invested Amount, MINUS (b)
the aggregate amount of principal payments made to CTO Securityholders prior to
such Business Day, MINUS (c) the aggregate amount of CTO Series Charge-Offs for
all prior Distribution Dates, MINUS (d) the aggregate amount of Redirected Class
B Principal Collections and Redirected CTO Principal Collections for which the
Class D Invested Amount has not been reduced for all prior Business Days and
PLUS (e) the sum of the aggregate amount allocated and available on all prior
Business Days pursuant to subsection 4.9(a)(xi) of the Agreement and, with
respect to such subsection, pursuant to subsections 4.10(a) and (b), Section
4.14 and subsection 4.17(b) of the Agreement, for the purpose of reinstating
amounts reduced pursuant to the foregoing clauses (c) and (d).
"CTO INVESTOR PERCENTAGE" shall mean, for any Distribution Date, (a)
with respect to Collections of Finance Charge Receivables prior to the
commencement of the Early Amortization Period and Receivables in Defaulted
Accounts at any time or Collections of Principal Receivables during the
Revolving Period, the CTO Floating Percentage and (b) with respect to
Collections of Finance Charge Receivables during the Early Amortization Period
and Collections of Principal Receivables during the Amortization Period, the
Fixed/Floating Percentage.
"CTO OUTSTANDING PRINCIPAL AMOUNT" shall mean, when used with respect
to any Business Day, an amount
17
equal to (a) the initial aggregate principal amount of the Collateralized Trust
Obligations, MINUS (b) the aggregate amount of principal payments made to CTO
Securityholders prior to such Business Day.
"CTO PERCENTAGE" shall mean a fraction the numerator of which is the
CTO Invested Amount and the denominator of which is the sum of the Class A
Invested Amount, the Class B Invested Amount and the CTO Invested Amount.
"CTO PRINCIPAL" shall mean the principal distributable in respect of
the Collateralized Trust Obligations as calculated in accordance with subsection
4.7(c) of the Agreement.
"CTO PRINCIPAL PAYMENT COMMENCEMENT DATE" shall mean the earlier of
(a) the first Distribution Date in an Amortization Period on which the Class B
Invested Amount is paid in full or, if there are no Principal Collections
allocable to the Series 1998-1 Securities remaining after payments have been
made to the Class B Securities on such Distribution Date, the Distribution Date
following the Distribution Date on which the Class B Invested Amount is paid in
full and (b) the Distribution Date following a sale or repurchase of the
Receivables as set forth in Sections 2.4(e), 9.2, 10.2, 12.1 or 12.2 of the
Agreement and Section 3 of this Series Supplement.
"CTO REGULATION S GLOBAL SECURITY" shall mean a Collateralized Trust
Obligation, sold in an offshore transaction in reliance on Regulation S under
the Securities Act, represented by one or more Global Securities in definitive,
fully registered form without interest coupons, deposited with DTC, as initial
Clearing Agency, or any successor, with the applicable legends set forth in
Exhibit A-3 hereto included in the form of such Collateralized Trust Obligation.
"CTO REQUIRED AMOUNT" shall mean the amount determined by the Servicer
on each Business Day equal to the excess, if any, of (x) the sum of (i) CTO
Interest for the then current Monthly Period, (ii) any Carryover CTO Interest
previously due but not paid to the CTO Securityholders on a prior Distribution
Date, (iii) the CTO Percentage of the Servicing Fee for the then current Monthly
Period, (iv) the CTO Floating Percentage of the
18
Default Amount, if any, for such Business Day and, to the extent not previously
paid, for any previous Business Day in such Monthly Period, (v) the CTO
Percentage of the Series 1998-1 Percentage of the Adjustment Payment required to
be made by the Transferor but not made on the related Transfer Date and (vi) the
unreimbursed amount by which the CTO Invested Amount has been reduced on prior
Business Days pursuant to clauses (c) and (d) of the definition of CTO Invested
Amount over (y) the Available Series 1998-1 Finance Charge Collections plus any
Excess Finance Charge Collections from other Series and any Transferor Finance
Charge Collections allocated with respect to the amounts described in clauses
(x)(i) through (v).
"CTO RESERVE ACCOUNT" shall have the meaning specified in subsection
4.17(a) of the Agreement.
"CTO RULE 144A GLOBAL SECURITY" shall mean a Collateralized Trust
Obligation, sold within the United States to U.S. persons that are QIBs, issued
in definitive, fully registered form without interest coupons, in the form of
beneficial interests in one or more Global Securities, deposited with DTC, as
initial Clearing Agency, or any successor, with the applicable legends set forth
in Exhibit A-3 hereto included in the form of such Collateralized Trust
Obligation.
"CTO SECURITYHOLDER" shall mean the Person in whose name a
Collateralized Trust Obligation is registered in the Security Register.
"CTO SECURITYHOLDERS' INTEREST" shall mean the portion of the Series
1998-1 Securityholders' Interest evidenced by the Collateralized Trust
Obligation.
"CTO SERIES CHARGE-OFFS" shall have the meaning specified in
subsection 4.13(b) of the Agreement.
"CTO TEMPORARY REGULATION S GLOBAL SECURITY" shall mean a
Collateralized Trust Obligation, sold in an offshore transaction in reliance on
Regulation S under the Securities Act, represented by one or more Global
Securities in definitive, fully registered form without interest coupons,
deposited with DTC, as initial Clearing Agency, or any successor, with the
applicable legends set
19
forth in Exhibit A-3 hereto included in the form of such Collateralized Trust
Obligation.
"DAILY PORTION" shall mean, with respect to any amount determined
pursuant hereto, the product of such amount and a fraction the numerator of
which shall be the number of days from and including the preceding Business Day
to but excluding such Business Day and the denominator of which shall be the
number of days in the then current Monthly Period.
"DEFAULT RECOGNITION DATE" shall mean the last day of each calender
month; provided, however, that with respect to any Monthly Period the "related
Default Recognition Date" shall mean the Default Recognition Date occurring
closest to the last day of such Monthly Period and any amounts allocated or
applied on such Default Recognition Date shall be deemed to apply to the related
Monthly Period.
"DEFAULT RECOGNITION PERCENTAGE" shall mean, with respect to each
Default Recognition Date, the percentage equivalent of a fraction, the numerator
of which is the Weighted Average Adjusted Invested Amount for the related
Monthly Period and the denominator of which is the Weighted Average Principal
Receivables in the Trust for the related Monthly Period.
"DEFEASANCE ACCOUNT" shall have the meaning specified in Section 9A of
this Series Supplement.
"DEFEASANCE ACCOUNT BALANCE" shall mean, with respect to any date of
determination, the principal amount, if any, on deposit in the Defeasance
Account on such date of determination.
"DEPOSITARY" shall mean U.S. Bank Trust National Association, any
successor to the Depositary or such other banking institution as the Metris
Owner Trust shall appoint, with the prior written consent of the Majority
Lenders (as defined in the Liquidity Agreement).
"DEPOSITARY AGREEMENT" shall mean the Depositary Agreement, dated as
of July 30, 1998 between the Metris Owner Trust and the Depositary, as the same
may from time to time be amended, restated, modified and in effect.
20
"DISTRIBUTION DATE" shall mean September 21, 1998, and the twentieth
day of each month thereafter, or if such day is not a Business Day, the next
succeeding Business Day; PROVIDED, HOWEVER, that the final Distribution Date
with respect to the payment of principal and interest shall be the Scheduled
Series 1998-1 Termination Date.
"DTC" shall have the meaning specified in Section 5 of the Agreement.
"EARLY AMORTIZATION PERIOD" shall mean the period beginning on the day
on which a Series 1998-1 Pay Out Event occurs or is deemed to have occurred and
ending on the earlier of (i) the date on which the Class A Invested Amount, the
Class B Invested Amount, the Collateralized Trust Obligations Amount and the
Class D Invested Amount have been paid in full and (ii) the Series 1998-1
Termination Date.
"ELECTION DATE" shall have the meaning specified in subsection 6.17(a)
of the Agreement.
"ELECTION NOTICE" shall have the meaning specified in subsection
6.17(a) of the Agreement.
"ENHANCEMENT" shall mean, with respect to the Class A Security, the
subordination of the Class B Invested Amount, the CTO Invested Amount, and the
Class D Invested Amount, with respect to the Class B Securities, the
subordination of the CTO Invested Amount and the Class D Invested Amount, and
with respect to the CTO Invested Amount, the subordination of the Class D
Invested Amount and the amount, if any, on deposit from time to time in the CTO
Reserve Account.
"EXCESS FINANCE CHARGE COLLECTIONS" shall mean, with respect to any
Business Day, as the context requires, either (x) the amount described in
subsection 4.9(a)(xix) of the Agreement allocated to the Series 1998-1
Securities but available to cover shortfalls in amounts paid from Finance Charge
Collections for other Series, if any, or (y) the aggregate amount of Finance
Charge Collections allocable to other Series in excess of the amounts necessary
to make required payments with respect to such Series, if any, and available to
cover shortfalls with respect to the Series 1998-1 Securities.
21
"EXCESS SPREAD PERCENTAGE" shall mean with respect to any Monthly
Period the excess of the Portfolio Yield for such Monthly Period over the Base
Rate as determined at the close of business on the Distribution Date in such
Monthly Period; PROVIDED, HOWEVER, that with respect to the August 1998 Monthly
Period for purposes of determining the Excess Spread Percentage the Available
Series 1998-1 Finance Charge Collections used in the numerator of Portfolio
Yield shall include the initial deposit of $579,770.10 to the Interest Funding
Account made on the Closing Date pursuant to subsection 4.5(a) of the Agreement.
"EXCHANGE DATE" shall mean the fortieth day after the later of the
commencement of the offering of the Securities of Series 1998-1 and the Closing
Date.
"EXTENSION" shall mean the procedure by which the Investor
Securityholders consent to the extension of the Revolving Period to the new
Amortization Period Commencement Date set forth in the Extension Notice,
pursuant to Section 6.17 of the Agreement.
"EXTENSION DATE" shall mean the last Business Day of the June 2001
Monthly Period or if an Extension has already occurred, the date of the next
Extension Date set forth in the Extension Notice relating to the Extension then
in effect (or, if any such date is not a Business Day, the next preceding
Business Day).
"EXTENSION NOTICE" shall have the meaning specified in subsection
6.17(a) of the Agreement.
"EXTENSION OPINION" shall have the meaning specified in subsection
6.17(a) of the Agreement.
"EXTENSION TAX OPINION" shall have the meaning specified in subsection
6.17(a) of the Agreement.
"FACE AMOUNT" shall mean (i) with respect to Commercial Paper issued
on a discount basis, the face amount stated therein, and (ii) with respect to
Commercial Paper which is interest-bearing, the principal amount of and interest
accrued and to accrue on such Commercial Paper to its stated maturity.
22
"FIXED/FLOATING PERCENTAGE" shall mean for any Business Day the
percentage equivalent of a fraction, the numerator of which is the Invested
Amount at the end of the last day of the Revolving Period and the denominator of
which is the greater of (a) the sum of the aggregate amount of Principal
Receivables and the amount on deposit in the Excess Funding Account as of the
beginning of such Business Day after giving effect to any deposits or
withdrawals to be made to the Excess Funding Account on such Business Day and
(b) the sum of the numerators with respect to all Classes of all Series then
outstanding used to calculate the applicable floating or fixed/floating
percentage; PROVIDED, HOWEVER, that during any Class A Pay Down Period, with
respect to allocations of Collections of Principal Receivables, the numerator
used in the above calculation shall be the Invested Amount as of the day
immediately preceding the commencement of the Class A Pay Down Period; PROVIDED,
FURTHER, that on and after the Pay Out Commencement Date, with respect to
allocations of Collections of Finance Charge Receivables, the numerator used in
the above calculation shall be the Invested Amount as of the day immediately
preceding the Pay Out Commencement Date.
"FLOATING PERCENTAGE" shall mean for any Business Day the sum of the
applicable Class A Floating Percentage, Class B Floating Percentage, CTO
Floating Percentage, and Class D Floating Percentage for such Business Day.
"GLOBAL SECURITY" shall mean the Class B Global Security and the CTO
Global Security.
"INITIAL INVESTED AMOUNT" shall mean $773,285,000.
"INTEREST ACCRUAL PERIOD" shall mean, (a) with respect to the Class A
Security, a Monthly Period, PROVIDED, HOWEVER, that the initial Interest Accrual
Period shall be the period from the Closing Date to and including the last day
of the Monthly Period preceding the initial Distribution Date and, (b) with
respect to the Class B Securities, Collateralized Trust Obligations and Class D
Security, the period beginning on the preceding Distribution Date continuing
through the day preceding such Distribution Date, PROVIDED, HOWEVER, that the
initial Interest Accrual Period shall be the period from
23
the Closing Date to and including the day preceding the initial Distribution
Date; and, with respect to a Distribution Date, the preceding Interest Accrual
Period.
"INTEREST COMPONENT" shall mean, with respect to any Commercial Paper
(i) issued on a discount basis, the portion of the Face Amount of such
Commercial Paper representing the discount incurred in respect thereof and (ii)
issued on an interest-bearing basis, the interest payable on such Commercial
Paper (in each case including the related Commercial Paper dealer fees payable
in connection with the issuance of such Commercial Paper).
"INTEREST RATE CAPS" shall mean the interest rate caps provided
pursuant to Cap Agreements by one or more Cap Providers to the Trustee on behalf
of any of the Securityholders which shall entitle the Trust to receive monthly
payments equal to the product of (i) the positive difference, if any, between
LIBOR in effect for each applicable Interest Accrual Period and [ ]%, (ii)
the notional amount of such interest rate cap and (iii) the actual number of
days in the Interest Period divided by 360.
"INVESTED AMOUNT" shall mean, when used with respect to any Business
Day, an amount equal to the sum of (a) the Class A Invested Amount as of such
Business Day, (b) the Class B Invested Amount as of such Business Day, (c) the
CTO Invested Amount as of such Business Day and (d) the Class D Invested Amount
as of such Business Day; PROVIDED, HOWEVER, that for purposes of determining the
Servicing Fee and the Aggregate Invested Amount, the Invested Amount shall mean
an amount equal to the sum of (a) the Class A Adjusted Invested Amount as of
such Business Day, (b) the Class B Invested Amount as of such Business Day, (c)
the CTO Invested Amount as of such Business Day and (d) the Class D Invested
Amount as of such Business Day.
"INVESTMENT EARNINGS" shall mean, with respect to any Business Day,
the investment earnings on amounts on deposit in (i) the Payment Reserve
Account, deposited in the Collection Account pursuant to subsection 4.16(c),
(ii) the Defeasance Account, deposited in the Collection Account pursuant to
subsection 9A(a) and (iii) the CTO Reserve Account deposited in the Collection
Account pursuant to subsection 4.17(c).
24
"INVESTOR SECURITIES" shall mean the Class A Security, the Class B
Securities, the Collateralized Trust Obligations and the Class D Security.
"INVESTOR SECURITYHOLDER" shall mean the Holder of record of an
Investor Security of Series 1998-1.
"INVESTOR PERCENTAGE" shall mean for any Business Day, (a) with
respect to Collections of Finance Charge Receivables prior to the commencement
of the Early Amortization Period and Receivables in Defaulted Accounts at any
time or Collections of Principal Receivables during the Revolving Period
(except, with respect to the Class A Security, for any portion of the Revolving
Period that occurs during the Class A Pay Down Period), the Floating Percentage
and (b) with respect to Collections of Finance Charge Receivables during the
Early Amortization Period and Collections of Principal Receivables during the
Amortization Period and the Class A Pay Down Period, the Fixed/Floating
Percentage.
"LIBOR" shall mean, for any Interest Accrual Period, the London
interbank offered quotations for one-month Dollar deposits determined by the
Trustee for each Interest Accrual Period in accordance with the provisions of
Section 4.15 of the Agreement.
"LIBOR DETERMINATION DATE" shall mean the second Business Day prior to
the commencement of each Interest Accrual Period; PROVIDED, HOWEVER, that with
respect to the initial Interest Accrual Period, LIBOR Determination Date shall
mean a date selected by the Transferor which shall not be in excess of two
Business Days prior to the date of initial issuance of Securities of the
applicable Class. For purposes of this definition, a Business Day is any day on
which banks in London and New York are open for the transaction of international
business.
"LIQUIDITY AGREEMENT" shall mean the 364-Day Liquidity Agreement and
the 3-Year Liquidity Agreement collectively or individually, as the context
requires.
"LIQUIDITY BANK" shall mean any liquidity bank providing liquidity for
the Commercial Paper from time to time pursuant to the Liquidity Agreement, as
evidenced by
25
its execution thereof, and any successor or assignee liquidity banks under the
Liquidity Agreement.
"LOANS" shall mean any loans made pursuant to the Liquidity Agreement.
"METRIS OWNER TRUST" shall mean the Delaware business trust created
pursuant to the Owner Trust Agreement.
"MINIMUM RETAINED PERCENTAGE" shall mean 2%.
"MINIMUM TRANSFEROR PERCENTAGE" shall mean 0%; PROVIDED, HOWEVER, that
in certain circumstances such percentage may be increased.
"MONTHLY PERIOD" shall have the meaning specified in the Agreement,
except that the first Monthly Period with respect to the Series 1998-1
Securities shall begin on and include the Closing Date and shall end on and
include August 31, 1998.
"MRI NOTE" shall have the meaning specified in Section 18 of this
Series Supplement.
"MRI NOTE REQUIRED AMOUNT" shall have the meaning specified in Section
18 of this Series Supplement.
"NEGATIVE CARRY AMOUNT" shall have the meaning specified in subsection
4.10(a) of the Agreement.
"NET REVOLVING PRINCIPAL COLLECTIONS" shall have the meaning specified
in Section 4.9(b) of the Agreement.
"OT PERCENTAGE" shall mean, on any date of determination, the
percentage equivalent of a fraction the numerator of which is the Class A
Outstanding Principal Amount and the denominator of which is the sum of the
Class A Outstanding Principal Amount and all other outstanding principal amounts
of all other certificates, securities or interests in receivables held by the
Owner Trust then outstanding; PROVIDED, HOWEVER, that if the denominator of the
foregoing fraction is zero, then the OT Percentage shall be zero.
26
"OWNER TRUST AGREEMENT" shall mean the Owner Trust Agreement, dated as
of July 30, 1998, between Metris Receivables, Inc., as Depositor, and Wilmington
Trust Company as Owner Trustee, as the same may from time to time be amended,
restated, modified and in effect.
"PAYING AGENT" shall mean, for the Series 1998-1 Securities, the
Trustee.
"PAYMENT RESERVE ACCOUNT" shall have the meaning specified in
subsection 4.16(a) of the Agreement.
"PAY OUT COMMENCEMENT DATE" shall mean the date on which a Trust Pay
Out Event is deemed to occur pursuant to Section 9.1 of the Agreement or a
Series 1998-1 Pay Out Event is deemed to occur pursuant to Section 8 of this
Series Supplement.
"PERCENTAGE" for each Liquidity Bank shall mean its "Commitment
Percentage" as defined in Section 1.1 of the Liquidity Agreement.
"PORTFOLIO YIELD" shall mean for the Series 1998-1 Securities, 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 1998-1 Finance Charge Collections for such Monthly
Period (not including the amounts on deposit in the Payment Reserve Account, if
any), if any, calculated on a cash basis, MINUS the aggregate Series Default
Amount for such Monthly Period and the Series 1998-1 Percentage of any
Adjustment Payments which the Transferor is required but fails to make pursuant
to the Agreement for such Monthly Period, and the denominator of which is the
average daily Invested Amount.
"PRINCIPAL SHORTFALLS" shall mean on any Business Day (i) prior to the
Amortization Period Commencement Date other than during the Class A Pay Down
Period, zero, (ii) after the Amortization Period Commencement Date, the Invested
Amount of the class then receiving principal payments after the application of
Principal Collections on such Business Day and (iii) during the Class A Pay Down
Period, the Class A Invested Amount after the application of Principal
Collections on such Business Day.
27
"QIB" shall mean a "qualified institutional buyer" within the meaning
of Rule 144A under the Securities Act.
"QUALIFIED SUBSTITUTE ARRANGEMENT" shall have the meaning specified in
Section 3A(d) of this Series Supplement.
"RATING AGENCY" shall mean Standard & Poor's Ratings Group, a division
of XxXxxx-Xxxx, and Xxxxx'x Investors Service, Inc.
"REDIRECTED CLASS B PRINCIPAL COLLECTIONS" shall have the meaning
specified in subsection 4.14(c) of the Agreement.
"REDIRECTED CLASS D PRINCIPAL COLLECTIONS" shall have the meaning
specified in subsection 4.14(a) of the Agreement.
"REDIRECTED CTO PRINCIPAL COLLECTIONS" shall have the meaning
specified in subsection 4.14(b) of the Agreement.
"REDIRECTED PRINCIPAL COLLECTIONS" shall mean the sum of Redirected
Class B Principal Collections, Redirected CTO Principal Collections and
Redirected Class D Principal Collections.
"REFERENCE BANKS" shall mean four major banks in the London interbank
market selected by the Trustee.
"REGULATION S TRANSFER CERTIFICATE" shall mean a certificate
substantially in the form of Exhibit E hereto.
"REPLACEMENT INTEREST RATE CAP" shall mean one or more Interest Rate
Caps, which in combination with all other Interest Rate Caps then in effect,
after giving effect to any planned cancellations of any presently outstanding
Interest Rate Caps satisfies the Transferor's covenant contained in Section 3A
of this Series Supplement to maintain Interest Rate Caps.
"REQUIRED AMOUNT" shall have the meaning specified in Section 4.10 of
the Agreement.
28
"RESERVE ACCOUNT INVESTMENT PROCEEDS" shall mean, with respect to any
Business Day, the sum of the investment earnings on funds on deposit in (i) the
CTO Reserve Account available in accordance with subsection 4.21(c) of the
Agreement on such Business Day and (ii) the Payment Reserve Account available in
accordance with subsection 4.16(c) of the Agreement on such Business Day.
"RESERVE APPLICATION DATE" shall mean the last Business Day of each
Monthly Period and each Determination Date.
"REVOLVING PERIOD" shall mean the period from and including the
Closing Date to, but not including, the Amortization Period Commencement Date.
"REVOLVING PRINCIPAL COLLECTIONS" shall have the meaning specified in
subsection 4.9(b) of the Agreement.
"RULE 144A TRANSFER CERTIFICATE" shall mean a certificate
substantially in the form of Exhibit F hereto.
"SCHEDULED SERIES 1998-1 TERMINATION DATE" shall mean August 20, 2005,
unless a different date shall be set forth in any Extension Notice.
"SECURITIES PURCHASE AGREEMENT" shall mean the Securities Purchase
Agreement, dated as of July 30, 1998, between the Transferor and Chase
Securities Inc., as the same may from time to time be amended, restated,
modified and in effect.
"SERIES CHARGE-OFFS" shall mean the sum of Class A Series Charge-Offs,
Class B Series Charge-Offs, CTO Series Charge-Offs and Class D Series
Charge-Offs.
"SERIES DEFAULT AMOUNT" shall mean (i) on any Business Day other than
a Default Recognition Date, an amount equal to the product of (a) the Floating
Percentage applicable on such Business Day and (b) the aggregate Default Amount
identified since the prior reporting date and (ii) on any Default Recognition
Date, an amount equal to the product of (a) the Default Recognition Percentage
applicable on such Default Recognition Date and (b) the
29
Default Amount with respect to such Default Recognition Date.
"SERIES 1998-1" shall mean the Series of the Metris Master Trust
represented by the Series 1998-1 Securities.
"SERIES 1998-1 ALLOCATION PERCENTAGE" shall mean, on any date of
determination, the percentage equivalent of a fraction the numerator of which is
the Class A Maximum Invested Amount and the denominator of which is the sum of
the Class A Maximum Invested Amount and the other maximum invested amounts
relating to all other certificates, securities or interests in collateral held
by the Metris Owner Trust.
"SERIES 1998-1 NON-UTILIZED PERCENTAGE" shall mean, on any date of
determination, the percentage equivalent of a fraction the numerator of which is
the Class A Maximum Invested Amount minus the Class A Outstanding Principal
Amount and the denominator of which is the sum of (i) the Class A Maximum
Invested Amount minus the Class A Outstanding Principal Amount PLUS (ii) the
other maximum invested amounts relating to all other certificates, securities or
interests in collateral held by the Metris Owner Trust MINUS the invested
amounts or principal amounts relating to all other series or interests in
collateral held by the Metris Owner Trust.
"SERIES 1998-1 PAY OUT EVENT" shall have the meaning specified in
Section 8 of this Series Supplement.
"SERIES 1998-1 PERCENTAGE" shall mean, on any date of determination,
the percentage equivalent of a fraction the numerator of which is the Invested
Amount and the denominator of which is the sum of the Invested Amounts relating
to all other Series then outstanding.
"SERIES 1998-1 SECURITIES" shall mean the Class A Security, the Class
B Securities, the Collateralized Trust Obligations and the Class D Security.
"SERIES 1998-1 SECURITYHOLDER" shall mean the holder of record of any
Series 1998-1 Security.
30
"SERIES 1998-1 SECURITYHOLDERS' INTEREST" shall have the meaning
specified in Section 4.4 of the Agreement.
"SERIES 1998-1 TERMINATION DATE" shall mean the earlier to occur of
(i) the day after the Distribution Date on which the Series 1998-1 Securities
are paid in full, or (ii) the Scheduled Series 1998-1 Termination Date.
"SERIES SERVICING FEE PERCENTAGE" shall mean 2.00% per annum.
"SERVICING FEE" shall mean for any Business Day, an amount equal to
the product of (i) a fraction the numerator of which is the actual number of
days from but excluding the next preceding Business Day to and including such
Business Day and the denominator of which is 365 or 366, as the case may be,
(ii) the applicable Series Servicing Fee Percentage and (iii) the Invested
Amount on such Business Day after giving effect to all transactions on such
Business Day.
"SHARED PRINCIPAL COLLECTIONS" shall mean, as the context requires,
either (a) the amount allocated to the Series 1998-1 Securities which, in
accordance with subsections 4.9(b), 4.9(c)(v), and 4.9(e)(ii) of the Agreement,
may be applied in accordance with Section 4.3(d) of the Agreement or (b) the
amounts allocated to the investor securities of other Series which the
applicable Series Supplements for such Series specify are to be treated as
"Shared Principal Collections" and which may be applied to cover Principal
Shortfalls with respect to the Series 1998-1 Securities.
"SPECIFIED CTO RESERVE AMOUNT" shall mean, (i) with respect to each
Determination Date (a) if the Excess Spread Percentage is greater than 4.50%,
zero and (b) if the Excess Spread Percentage for the preceding Monthly Period is
less than or equal to 4.50%, 2.50% of the Initial Invested Amount and (ii) on
any date of determination following a CTO Funding Event, in the circumstances
specified in Section 4.19 of this Series Supplement, the Specified CTO Reserve
Amount will be equal to the CTO Outstanding Principal Amount.
"STATED CLASS D AMOUNT" shall mean on any date of determination the
greater of (i) zero and (ii) a
31
number rounded to the nearest dollar obtained by multiplying the sum of the
Class A Adjusted Invested Amount, the Class B Invested Amount and the CTO
Invested Amount by a fraction the numerator of which is 6.5 and the denominator
of which is 93.5; PROVIDED, HOWEVER, that in no event shall the Stated Class D
Amount exceed the Class D Maximum Required Amount; PROVIDED FURTHER that during
any Early Amortization Period or Class A Pay Down Period the Stated Class D
Amount shall be equal to the Stated Class D Amount immediately preceding the
commencement of the Early Amortization Period or Class A Pay Down Period; and
PROVIDED FURTHER, that on and after the Amortization Period Commencement Date,
the Stated Class D Amount shall not be less than 3% (or such lesser percentage
specified by Transferor which shall not be less than zero if the Trustee shall
have received written confirmation from each Rating Agency that the reduction of
such percentage shall not cause such Rating Agency to lower or withdraw its then
current rating of the Class A Securities or the Class B Securities) of the
Invested Amount on the last day of the Revolving Period.
"TARGETED HOLDER" shall mean (i) each holder of a right to receive
interest or principal with respect to investor securities (or other interests in
the Trust), including the Class A Securities, other than securities (or other
such interests) with respect to which an opinion is rendered that such
securities (or other such interests) will be treated as debt for Federal income
tax purposes and (ii) any holder of a right to receive any amount in respect of
the Transferor Interest; provided, that any person holding more than one
interest each of which would cause such person to be a Targeted Holder shall be
treated as a single Targeted Holder.
"TERMINATION PAYMENT DATE" shall mean the earlier of the first
Distribution Date following the liquidation or sale of the Receivables as a
result of an Insolvency Event and the occurrence of the Scheduled Series 1998-1
Termination Date.
"364-DAY LIQUIDITY AGREEMENT" shall mean the Liquidity Agreement,
dated as of July 30, 1998, by and among the Metris Owner Trust, the several
banks signatory thereto, and The Chase Manhattan Bank, as Administrative Agent,
as the same may from time to time be amended, restated, modified and in effect.
32
"3-YEAR LIQUIDITY AGREEMENT" shall mean the Liquidity Agreement, dated
as of July 30, 1998, by and among the Metris Owner Trust, the several banks
signatory thereto, and The Chase Manhattan Bank, as Administrative Agent, as the
same may from time to time be amended, restated, modified and in effect.
"TOTAL PROGRAM FEES" shall mean with respect to any day, recurring
fees payable to the Collateral Trustee (as defined in the Liquidity Agreement),
the Owner Trustee (as defined in the Liquidity Agreement), the Administrative
Agent (as defined in the Liquidity Agreement) and the Depositary and Basic
Administration Fees (as defined in the Collateral Trust Agreement) that arise or
accrue on such day.
"TRANSFEROR FINANCE CHARGE COLLECTIONS" shall mean on any Business Day
the product of (a) the Finance Charge Collections for such Business Day, (b) the
Transferor Percentage and (c) the Series 1998-1 Percentage.
"TRANSFEROR RETAINED FINANCE CHARGE COLLECTIONS" shall mean with
respect to each Business Day other than a Default Recognition Date, the amount
specified in subsection 4.9(a)(xvii).
"TRANSFEROR RETAINED SECURITIES" shall mean investor securities of any
Series, including the Class D Security, which the Transferor retains, but only
to the extent that and for so long as the Transferor is the Holder of such
Securities.
"WEIGHTED AVERAGE ADJUSTED INVESTED AMOUNT" shall mean with respect to
any Monthly Period the weighted average Adjusted Invested Amount based on the
Adjusted Invested Amount outstanding on each Business Day after giving effect to
all transactions on such Business Day from but excluding the Default Recognition
Date related to the preceding Monthly Period to and including the Default
Recognition Date with respect to such Monthly Period.
"WEIGHTED AVERAGE PRINCIPAL RECEIVABLES" shall mean with respect to
any Monthly Period the weighted average sum of the total amount of Principal
Receivables and the amount on deposit in the Excess Funding Account on each
Business Day after giving effect to all transac-
33
tions on such Business Day from but excluding the Default Recognition Date
related to the preceding Monthly Period to and including the Default Recognition
Date with respect to such Monthly Period.
SECTION 3. REASSIGNMENT TERMS. The Series 1998-1 Securities shall be
subject to termination by the Transferor at its option, in accordance with the
terms specified in subsection 12.2(a) of the Agreement, on any Distribution Date
on or after the Distribution Date on which the sum of the Class A Invested
Amount, the Class B Invested Amount and the CTO Invested Amount is reduced to an
amount less than or equal to 10% of the sum of the highest Class A Invested
Amount, Class B Invested Amount and CTO Invested Amount during the Revolving
Period. The deposit required in connection with any such termination and final
distribution shall be equal to the sum of the Class A Invested Amount, the Class
B Invested Amount and the CTO Invested Amount plus accrued and unpaid interest
on the Series 1998-1 Securities through the day prior to the Distribution Date
on which the final distribution occurs.
SECTION 3A. CONVEYANCE OF INTEREST IN INTEREST RATE CAP; CAP PROCEEDS
ACCOUNT. (a) The Transferor hereby covenants and agrees that, on or prior to
the issuance of any of the Collateralized Trust Obligations, it shall obtain and
at all times prior to the close of business on the Series 1998-1 Termination
Date maintain one or more Interest Rate Caps whose notional amounts singly or
taken as a group equal or exceed the Aggregate ABC Principal Amount. The
Transferor hereby assigns, sets-over, conveys, pledges and grants a security
interest and lien (free and clear of all other Liens) to the Trustee for the
benefit of the Series 1998-1 Securityholders, in all of the Transferor's right,
title and interest now existing or hereafter arising in and to the Cap
Agreements and the Interest Rate Caps arising thereunder, together with the Cap
Proceeds Account and all other proceeds thereof, as collateral security for the
benefit of the Series 1998-1 Securityholders. The Transferor hereby further
agrees to execute all such instruments, documents and financing statements and
take all such further action requested by the Trustee to evidence and perfect
the assignment of the Cap Agreements and the Interest Rate Caps pursuant to this
Section 3A. The Transferor agrees that each Interest Rate Cap shall
34
provide for payments to the Trustee and that the Trust's interest in respect of
such payments shall be deposited into the Cap Proceeds Account.
(b) The Trustee, for the benefit of the Series 1998-1
Securityholders, shall establish and maintain with a Qualified Institution,
which may be the Trustee, in the name of the Trustee, on behalf of the
Securityholders, a certain segregated trust account (the "CAP PROCEEDS
ACCOUNT"). All amounts paid pursuant to the Interest Rate Caps or any Qualified
Substitute Arrangement on any Business Day (a "CAP SETTLEMENT DATE") shall be
deposited in the Cap Proceeds Account. Any amounts paid pursuant to the
Interest Rate Caps or any Qualified Substitute Arrangement on the Transfer Date
in any Monthly Period shall be treated for all purposes herein, including
application in accordance with Section 4.9 of the Agreement, as if they had been
received on the last Business Day of the preceding Monthly Period. Funds in the
Cap Proceeds Account shall be invested at the direction of the Servicer, in Cash
Equivalents with maturities not later than the next succeeding Business Day.
Any earnings on such invested funds shall be deposited and held in the Cap
Proceeds Account and applied in the same manner and priority as payments
pursuant to the Interest Rate Caps.
(c) In the event that the Cap Provider defaults in its obligation to
make a payment to the Trustee under one or more Cap Agreements on any Cap
Settlement Date, the Trustee shall make a demand on such Cap Provider, or any
guarantor, if applicable, demanding payment by 12:30 p.m., New York time, on
such date. The Trustee shall give notice to the Securityholders upon the
continuing failure by any Cap Provider to perform its obligation during the two
Business Days following a demand made by the Trustee on such Cap Provider, and
shall take such action with respect to such continuing failure directed to be
taken by the Securityholders.
(d) In the event that the Cap Provider is downgraded below the rating
required by a Rating Agency, then within 30 days after receiving notice of such
decline in the creditworthiness of the Cap Provider as determined by the Rating
Agency, either (x) the Cap Provider, with the prior written confirmation of the
Rating Agency that such arrangement will not result in
35
the reduction or withdrawal of the rating of the Class A Security, the Class B
Securities or the Collateralized Trust Obligations, will enter into an
arrangement the purpose of which shall be to assure performance by the Cap
Provider of its obligations under the Interest Rate Cap; or (y) the Servicer
shall at its option either (i) with the prior written confirmation of the Rating
Agency that such action will not result in a reduction or withdrawal of the
rating of the Class A Security, the Class B Securities or the Collateralized
Trust Obligations, cause the Cap Provider to pledge securities in the manner
provided by applicable law which shall be held by the Trustee or its agent free
and clear of the Lien of any third party, in a manner conferring on the Trustee
a perfected first Lien in such securities securing the Cap Provider's
performance of its obligations under the applicable Interest Rate Cap, or (ii)
provided that a Replacement Interest Rate Cap or Qualified Substitute
Arrangement meeting the requirements of Section 3A(e) has been obtained, direct
the Trustee (A) to provide written notice to the Cap Provider of its intention
to terminate the applicable Interest Rate Cap within such 30-day period and (B)
to terminate the applicable Interest Rate Cap within such 30-day period, to
request the payment to it of all amounts due to the Trust under the applicable
Interest Rate Cap through the termination date and to deposit any such amounts
so received, on the day of receipt, to the Cap Proceeds Account for the benefit
of the Securityholders, or (iii) establish any other arrangement (including an
arrangement or arrangements in addition to or in substitution for any prior
arrangement made in accordance with the provisions of this Section 3A(d))
satisfactory to the Rating Agency such that the Rating Agency will not reduce or
withdraw the rating of the Class A Security, the Class B Securities or the
Collateralized Trust Obligations (a "QUALIFIED SUBSTITUTE ARRANGEMENT");
PROVIDED, HOWEVER, that in the event at any time any alternative arrangement
established pursuant to clause (x) or (y)(i) or (y)(iii) above shall cease to be
satisfactory to the Rating Agency then the provisions of this Section 3A(d)
shall again be applied and in connection therewith the 30-day period referred to
above shall commence on the date the Servicer receives notice of such cessation
or termination, as the case may be.
(e) Unless an alternative arrangement pursuant to clause (x) or
(y)(i) of Section 3A(d) is being estab-
36
lished, the Servicer shall use its best efforts to obtain a Replacement Interest
Rate Cap or Qualified Substitute Arrangement meeting the requirements of this
Section 3A(e) during the 30-day period referred to in Section 3A(d). The
Trustee shall not terminate the Interest Rate Cap unless, prior to the
expiration of the 30-day period referred to in said Section 3A(d), the Servicer
delivers to the Trustee (i) a Replacement Interest Rate Cap or Qualified
Substitute Arrangement, (ii) to the extent applicable, an Opinion of Counsel as
to the due authorization, execution and delivery and validity and enforceability
of such Replacement Interest Rate Cap or Qualified Substitute Arrangement, as
the case may be, and (iii) a letter from the Rating Agency confirming that the
termination of the Interest Rate Cap and its replacement with such Replacement
Interest Rate Cap or Qualified Substitute Arrangement will not adversely affect
its rating of the Class A Security, the Class B Securities or the Collateralized
Trust Obligations.
(f) The Servicer shall notify the Trustee and the Rating Agency within
five Business Days after obtaining knowledge that the senior unsecured debt
rating of the Cap Provider has been withdrawn or reduced by Standard & Poor's or
Moody's.
(g) Notwithstanding the foregoing, the Servicer may at any time
obtain a Replacement Interest Rate Cap, provided that the Servicer delivers to
the Trustee (i) an Opinion of Counsel as to the due authorization, execution and
delivery and validity and enforceability of such Replacement Interest Rate Cap
and (ii) a letter from the Rating Agency confirming that the termination of the
then current Interest Rate Cap and its replacement with such Replacement
Interest Rate Cap will not adversely affect its rating of the Class A
Securities, the Class B Securities or the Collateralized Trust Obligations.
(h) The Trustee hereby appoints the Administrator to perform the
duties of the calculation agent under the Interest Rate Cap and the Servicer
accepts such appointment.
(i) The Trustee, on behalf of the Securityholders, upon notification
from the Servicer
37
shall, sell all or a portion of the Interest Rate Caps subject to the following
conditions having been met:
(x) the Aggregate Interest Rate Caps Notional Amount after
giving effect to such sale shall equal or exceed the Aggregate ABC Principal
Amount as of the date of such sale after giving effect to all payments and
allocations made pursuant to this Agreement;
(y) such sale will not result in a downgrading or withdrawal of
the then current rating on any class of the Securities by the Rating Agencies;
and
(z) the minimum notional amount denomination of any Interest
Rate Cap to be sold is $500,000.
The Servicer shall have the duty of obtaining a fair market value
price for the sale of the Trust's rights under any Interest Rate Cap, notifying
the Trustee of prospective purchasers and bids, and selecting the purchaser of
such Interest Rate Cap. The Trustee upon receipt of the purchase price in the
Collection Account shall execute all documentation necessary to effect the
transfer of the Trust's rights under the Interest Rate Cap and to release the
Lien of the Trustee on the Interest Rate Cap and proceeds thereof.
Funds deposited in the Collection Account in respect of the sale of
all or a portion of an Interest Rate Cap shall be applied as Principal
Collections allocable to Series 1998-1 and shall be applied on the next
Distribution Date in accordance with subsections 4.7(a), (b) and (c) and 4.9(b),
(c) and (e).
SECTION 4. DELIVERY AND PAYMENT FOR THE SERIES 1998-1 SECURITIES.
The Transferor shall execute and deliver the Series 1998-1 Securities to the
Trustee for authentication in accordance with Section 6.1 of the Agreement. The
Trustee shall deliver the Series 1998-1 Securities to or upon the order of the
Transferor when authenticated in accordance with Section 6.2 of the Agreement.
SECTION 5. FORM OF DELIVERY OF SERIES 1998-1 SECURITIES;
DENOMINATIONS; DEPOSITARY. (a) The Class B Securities and the Collateralized
Trust Obligations shall be delivered as Book-Entry Securities as provided in
38
Sections 6.1 and 6.10 of the Agreement. The Class B Securities shall be issued
in minimum denominations of $1,000 and integral multiples thereof. The
Collateralized Trust Obligations shall be issued in minimum denominations of
$100,000 and integral multiples of $1,000 in excess thereof. The Class A
Security and the Class D Security shall be delivered as Registered Securities as
provided in Section 6.1 of the Agreement.
(b) The Depositary for Series 1998-1 shall be DTC and the Class B
Securities and the Collateralized Trust Obligations shall be initially
registered in the name of Cede & Co., its nominee and will initially be held by
the Trustee as custodian for DTC.
(c) The Transferor shall execute and the Trustee shall authenticate
(i) one or more Class B Temporary Regulation S Global Securities, (ii) one or
more Class B Regulation S Global Securities, (iii) one or more Class B Rule 144A
Global Securities, (iv) one or more CTO Temporary Regulation S Global
Securities, (v) one or more CTO Regulation S Global Securities, and (vi) one or
more CTO Rule 144A Global Securities, each having a principal balance as shall
have been indicated to the Trustee by the Transferor and having an aggregate
principal balance equal to the Class B Invested Amount or the CTO Invested
Amount, respectively, as of the date of execution of such Global Securities by
the Transferor.
The Global Securities (i) shall be delivered by the Trustee to DTC
acting as the initial Clearing Agency, and (ii) in each case shall be registered
in the name of Cede & Co. The Global Securities shall bear a legend
substantially in the form set forth in Exhibit A-2 or Exhibit A-3, as the case
may be. The Global Securities initially will be held by the Trustee as
custodian for DTC.
(d) So long as any of the Global Securities remains outstanding and
are held by or on behalf of the Clearing Agency, transfers of beneficial
interests in any of such Global Securities may be made only in accordance with
this Section 5 and in accordance with the rules of the Clearing Agency and the
Euroclear Operator or Cedel.
(1) A beneficial interest in the Class B Temporary Regulation S
Global Security may be trans-
39
ferred to a transferee that takes delivery in the form of a beneficial
interest in the Class B Rule 144A Global Securities only upon receipt by
the Trustee of a Rule 144A Transfer Certificate.
(2) On and after the Exchange Date, a beneficial interest in the
Class B Temporary Regulation S Global Security may be transferred to a
transferee that takes delivery in the form of a beneficial interest in the
Class B Regulation S Global Security only upon receipt by the Trustee of a
Clearing System Certificate from the Euroclear Operator or Cedel, as
applicable, and a Member Organization Certificate, relating to the
appropriate portion of the Class B Temporary Regulation S Global Security.
(3) A beneficial interest in a Class B Rule 144A Global Security
may be transferred to a transferee that takes delivery in the form of a
beneficial interest in a Class B Regulation S Global Security or Class B
Temporary Regulation S Global Security only upon receipt by the Transfer
Agent and Registrar of a Regulation S Transfer Certificate.
(4) No restrictions shall apply with respect to the transfer or
registration of transfer of (x) a beneficial interest in a Class B Rule
144A Global Security to a transferee that takes delivery in the form of a
beneficial interest in the Class B Rule 144A Global Security, or (y) a
beneficial interest in a Class B Regulation S Global Security to a
transferee that takes delivery in the form of a beneficial interest in the
Class B Regulation S Global Security.
(5) A beneficial interest in the CTO Temporary Regulation S
Global Security may be transferred to a transferee that takes delivery in
the form of a beneficial interest in the CTO Rule 144A Global Securities
only upon receipt by the Trustee of a Rule 144A Transfer Certificate.
(6) On and after the Exchange Date, a beneficial interest in the
CTO Temporary Regulation S Global Security may be transferred to a
transferee that takes delivery in the form of a beneficial
40
interest in the CTO Regulation S Global Security only upon receipt by the
Trustee of a Clearing System Certificate from the Euroclear Operator or
Cedel, as applicable, and a Member Organization Certificate, relating to
the appropriate portion of the CTO Temporary Regulation S Global Security.
(7) A beneficial interest in a CTO Rule 144A Global Security may
be transferred to a transferee that takes delivery in the form of a
beneficial interest in a CTO Regulation S Global Security or CTO Temporary
Regulation S Global Security only upon receipt by the Transfer Agent and
Registrar of a Regulation S Transfer Certificate.
(8) No restrictions shall apply with respect to the transfer or
registration of transfer of (x) a beneficial interest in a CTO Rule 144A
Global Security to a transferee that takes delivery in the form of a
beneficial interest in the CTO Rule 144A Global Security, or (y) a
beneficial interest in a CTO Regulation S Global Security to a transferee
that takes delivery in the form of a beneficial interest in the CTO
Regulation S Global Security.
(e) An exchange of a beneficial interest in the Class B Temporary
Regulation S Global Security for a beneficial interest in the Class B Regulation
S Global Security, may be made only on or after the Exchange Date and only upon
receipt by the Trustee of a Clearing System Certificate from the Euroclear
Operator or Cedel, as applicable, relating to the appropriate portion of the
Class B Temporary Regulation S Global Security.
(f) An exchange of a beneficial interest in the CTO Temporary
Regulation S Global Security for a beneficial interest in the CTO Regulation S
Global Security, may be made only on or after the Exchange Date and only upon
receipt by the Trustee of a Clearing System Certificate from the Euroclear
Operator or Cedel, as applicable, relating to the appropriate portion of the CTO
Temporary Regulation S Global Security.
(g) Upon acceptance for transfer of a beneficial interest in any
Global Security for a beneficial interest in another corresponding Global
Security as
41
provided herein, the Trustee shall (or shall request the Clearing Agency to)
endorse on the schedules affixed to each of such Global Securities (or on
continuations of such schedules affixed to each of such Global Security and made
parts thereof) appropriate notations evidencing the date of such transfer and
(x) in the case of the Global Security from which such transfer is made, a
decrease in the outstanding balance of such Global Security equal to the
outstanding balance being transferred and (y) in the case of the Global Security
into which such transfer is made, an increase in the outstanding balance of such
Global Security equal to the outstanding balance being transferred.
SECTION 6. ARTICLE IV OF AGREEMENT. Sections 4.1, 4.2 and 4.3 of the
Agreement shall read in their entirety as provided in the Agreement. Article IV
of the Agreement (except for Sections 4.1, 4.2 and 4.3 thereof) shall read in
its entirety as follows and shall be applicable only to the Series 1998-1
Securities:
ARTICLE IV
RIGHTS OF SECURITYHOLDERS AND
ALLOCATION AND APPLICATION OF COLLECTIONS
SECTION 4.4 RIGHTS OF SECURITYHOLDERS. The Series 1998-1 Securities
shall represent undivided interests in the Trust, including the right to
receive, to the extent necessary to make the required payments with respect to
such Series 1998-1 Securities at the times and in the amounts specified in this
Agreement, (a) the Floating Percentage and the Fixed/Floating Percentage (as
applicable from time to time) of Collections (including Finance Charge
Collections) available in the Collection Account, (b) funds allocable to the
Series 1998-1 Securities on deposit in the Excess Funding Account and (c) funds
on deposit in the Interest Funding Account, the Principal Account, the
Distribution Account, the Cap Proceeds Account, the CTO Reserve Account, the
Payment Reserve Account and the Defeasance Account (for such Series, the "Series
1998-1 Securityholders' Interest"). The Class B Invested Amount, the CTO
Invested Amount and the Class D Invested Amount shall be subordinated to the
Class A Security; the CTO Invested Amount and the Class D Invested Amount shall
be subordinated to the Class B
42
Securities; and the Class D Invested Amount shall be subordinated to the
Collateralized Trust Obligations, in each case to the extent provided in this
Article IV. The Class B Securities will not have the right to receive payments
of principal until the Class A Invested Amount has been paid in full. The
Collateralized Trust Obligations will not have the right to receive payments of
principal until the Class A Invested Amount and the Class B Invested Amount have
been paid in full. Except in connection with a payment of Class D Daily
Principal pursuant to subsection 4.9(f) of this Agreement, the Class D Security
will not have the right to receive payments of principal until the Class A
Invested Amount, the Class B Invested Amount and the CTO Invested Amount have
been paid in full.
SECTION 4.5 COLLECTIONS AND ALLOCATION; PAYMENTS ON EXCHANGEABLE
TRANSFEROR SECURITY.
(a) COLLECTIONS AND ALLOCATIONS. The Servicer will apply or will
instruct the Trustee to apply all funds on deposit in the Collection Account and
the Excess Funding Account allocable to the Series 1998-1 Securities, and all
funds on deposit in the Interest Funding Account, the Principal Account, the Cap
Proceeds Account, the Distribution Account, the CTO Reserve Account, the Payment
Reserve Account and the Defeasance Account maintained for this Series, as
described in this Article IV. On each Business Day, (i) the amount of Finance
Charge Collections available in the Collection Account allocable to Series
1998-1 Securities shall be determined by multiplying the aggregate amount of
such Finance Charge Collections by the Floating Percentage, (ii) the amount of
Principal Collections available in the Collection Account allocable to the
Series 1998-1 Securities shall be determined by multiplying the aggregate amount
of such Principal Collections by (x) during the Revolving Period, the Floating
Percentage and (y) during any Amortization Period, the Fixed/Floating
Percentage, and (iii) the Receivables in Defaulted Accounts allocable to the
Series 1998-1 Securities shall be determined by multiplying the aggregate amount
of such Receivables in Defaulted Accounts by the Floating Percentage. In
addition, on the Closing Date the Transferor shall make a deposit to the
Interest Funding Account in the amount of $579,770.10, to be allocated to the
Series 1998-1 Certificates and applied as Available Series 1998-1 Finance
43
Charge Collections in accordance with subsection 4.9(a) of the Agreement.
(b) PAYMENTS TO THE HOLDER OF THE EXCHANGEABLE TRANSFEROR
SECURITY. On each Business Day, the Servicer shall determine whether a Pay Out
Event is deemed to have occurred with respect to the Series 1998-1 Securities,
and the Servicer shall allocate and pay Collections in accordance with the Daily
Report with respect to such Business Day to the Holder of the Exchangeable
Transferor Security as follows:
For each Business Day on and after the Amortization Period
Commencement Date, the amount of payments of Principal Collections made to the
Holder of the Exchangeable Transferor Security shall be determined as provided
in subsection 4.3(b) of the Agreement.
SECTION 4.6 DETERMINATION OF INTEREST FOR THE SERIES 1998-1
SECURITIES. (a) The amount of interest (the "Class A Interest") allocable to
the Class A Security with respect to any Business Day shall be an amount equal
to the sum of (x) the Series 1998-1 Allocation Percentage of the Total Program
Fees accrued from and including the preceding Business Day to but excluding such
Business Day and (y) the product of (i) the Class A Interest Rate and (ii) a
fraction the numerator of which is the actual number of days from and including
the immediately preceding Business Day to but excluding such Business Day and
the denominator of which is 365 or 366, as the case may be, and (iii) the Class
A Outstanding Principal Amount on such Business Day after giving effect to all
transactions on such Business Day.
On each Business Day, the Servicer shall determine an amount (the
"Class A Interest Shortfall") equal to the excess, if any, of (x) the Class A
Interest for such Business Day plus the Class A Interest Shortfall for the
preceding Business Day OVER (y) the amount available to be paid to the Class A
Securityholder in respect of Class A Interest on such Business Day. The Class A
Interest Shortfall shall initially be zero.
(b) The amount of monthly interest (the "Class B Interest")
allocable to the Class B Securities with respect to any Interest Accrual Period
shall be an amount equal to the product of (i) the Class B Interest
44
Rate and (ii) a fraction the numerator of which is the actual number of days in
such Interest Accrual Period and the denominator of which is 360 and (iii) the
Class B Invested Amount as of the close of business on the first day of such
Interest Accrual Period.
On the Determination Date preceding each Distribution Date, the
Servicer shall determine an amount (the "Class B Interest Shortfall") equal to
the excess, if any, of (x) the aggregate Class B Interest for the Interest
Accrual Period applicable to the Distribution Date OVER (y) the amount available
to be paid to the Class B Securityholders in respect of interest on such
Distribution Date. If there is a Class B Interest Shortfall with respect to any
Distribution Date, an additional amount ("Class B Additional Interest") shall be
payable as provided herein with respect to the Class B Securities on each
Distribution Date following such Distribution Date, to and including the
Distribution Date on which such Class B Interest Shortfall is paid to Class B
Securityholders, equal to the product of (i) the Class B Interest Rate plus 2%
per annum and (ii) such Class B Interest Shortfall remaining unpaid calculated
on the basis of a fraction the numerator of which is the actual number of days
in the related Interest Accrual Period and the denominator of which is 360.
Notwithstanding anything to the contrary herein, Class B Additional Interest
shall be payable or distributed to Class B Securityholders only to the extent
permitted by applicable law.
(c) The amount of monthly interest (the "CTO Interest") allocable
to the Collateralized Trust Obligations with respect to any Interest Accrual
Period shall be an amount equal to the product of (i) the CTO Interest Rate and
(ii) a fraction the numerator of which is the actual number of days in such
Interest Accrual Period and the denominator of which is 360 and (iii) the CTO
Invested Amount as of the close of business on the first day of such Interest
Accrual Period.
On the Determination Date preceding each Distribution Date, the
Servicer shall determine an amount (the "CTO Interest Shortfall") equal to the
excess, if any, of (x) the aggregate CTO Interest for the Interest Accrual
Period applicable to the Distribution Date OVER (y) the amount available to be
paid to the CTO
45
Securityholders in respect of interest on such Distribution Date. If there is a
CTO Interest Shortfall with respect to any Distribution Date, an additional
amount ("CTO Additional Interest") shall be payable as provided herein with
respect to the Collateralized Trust Obligations on each Distribution Date
following such Distribution Date, to and including the Distribution Date on
which such CTO Interest Shortfall is paid to CTO Securityholders, equal to the
product of (i) the CTO Interest Rate plus 2% per annum and (ii) such CTO
Interest Shortfall remaining unpaid calculated on the basis of a fraction the
numerator of which is the actual number of days in the related Interest Accrual
Period and the denominator of which is 360. Notwithstanding anything to the
contrary herein, CTO Additional Interest shall be payable or distributed to CTO
Securityholders only to the extent permitted by applicable law.
SECTION 4.6A DETERMINATION OF THE CLASS A INTEREST ADJUSTMENT. On
each Business Day on which any obligations of the Trust to the Class A
Securityholder remain outstanding, the Servicer shall compute the excess, if
any, of (i) the amount payable pursuant to subsection 4.9(a)(i) over (ii) the
aggregate amounts actually paid to the Class A Securityholder pursuant to
subsection 4.9(a)(i) on such Business Day. The greater of zero and the amount
of the excess, if any, computed in the immediately preceding sentence shall be
the "Class A Interest Adjustment" for such Business Day and the Servicer shall
provide the Trustee with written notice by facsimile or otherwise of the Class A
Interest Adjustment. If the Class A Interest Adjustment is greater than zero,
the Trustee shall withdraw from the Interest Funding Account and deposit in the
Distribution Account an amount equal to the lesser of the aggregate amounts
deposited in the Interest Funding Account pursuant to subsections 4.9(a)(iii)
and 4.9(a)(ix) of the Agreement during the then current Monthly Period on and
prior to such Business Day (less the amount of any prior withdrawals therefrom
pursuant to this third sentence of Section 4.6A on each prior Business Day in
the then current Monthly Period) and the Class A Interest Adjustment (the
greater of any such amount withdrawn and zero, the "CTO Interest Adjustment" for
such Business Day). If the Class A Interest Adjustment for such Business Day
exceeds the CTO Interest Adjustment for such Business Day, the Trustee shall
withdraw from the Interest Funding Account
46
and deposit in the Distribution Account an amount equal to the lesser of (i) the
aggregate amounts deposited in the Interest Funding Account pursuant to
subsection 4.9(a)(ii) and 4.9(a)(viii) of the Agreement during the then current
Monthly Period on and prior to such Business Day (less the amount of any prior
withdrawals therefrom pursuant to this fourth sentence of Section 4.6A on each
prior Business Day in the then current Monthly Period and (ii) the difference
between the Class A Interest Adjustment and the CTO Interest Adjustment (the
greater of any such amount withdrawn and zero, the "Class B Interest Adjustment"
for such Business Day).
SECTION 4.7 DETERMINATION OF PRINCIPAL AMOUNTS. (a) The amount of
principal (the "Class A Principal") distributable from the Distribution Account
with respect to the Class A Security on each Business Day with respect to (A)
the Revolving Period (except for any portion of the Revolving Period during a
Class A Pay Down Period) shall be an amount equal to the sum of (x) amounts
deposited into the Principal Account from the Defeasance Account pursuant to
Section 9A of this Series Supplement and (y) the amount, if any, specified in
the last sentence of Section 3A(i) of this Series Supplement and (B) the
Amortization Period or the Class A Pay Down Period shall be equal to an amount
calculated as follows: the sum of (i) an amount equal to the product of the
Fixed/Floating Percentage and the aggregate amount of Principal Collections
(less the amount of Redirected Class B Principal Collections, and Redirected CTO
Principal Collections and Redirected Class D Principal Collections) with respect
to such Business Day, (ii) any amount on deposit in the Excess Funding Account
allocated to the Class A Security pursuant to subsection 4.9(d) with respect to
such Business Day, (iii) the amount, if any, allocated to the Class A Security
pursuant to subsections 4.9(a)(v), (vi), (vii), (x), (xi) and (xii) of the
Agreement and, with respect to such subsections, pursuant to subsections 4.10(a)
and (b) and 4.14(a), (b) and (c) on such Business Day, (iv) the amount of Shared
Principal Collections allocated to the Class A Security with respect to such
Business Day pursuant to Section 4.3(d) and (v) the amount, if any, specified in
the last sentence of Section 3A(i) of this Series Supplement; PROVIDED, HOWEVER,
that with respect to any Business Day, Class A Principal may not exceed the
Class A Invested Amount; PROVIDED, FURTHER, that with respect to the Scheduled
47
Series 1998-1 Termination Date, the Class A Principal shall be an amount equal
to the Class A Invested Amount.
(b) The amount of principal (the "Class B Principal")
distributable from the Distribution Account with respect to the Class B
Securities on each Distribution Date, beginning with the Class B Principal
Payment Commencement Date, shall equal an amount calculated as follows: the sum
of (i) an amount equal to the product of the Fixed/Floating Percentage and the
aggregate amount of Principal Collections (less the amount of Redirected Class B
Principal Collections, Redirected CTO Principal Collections and Redirected Class
D Principal Collections) with respect to the preceding Monthly Period (or, in
the case of the first Distribution Date in the Amortization Period following the
date on which an amount equal to the Class A Invested Amount is paid to the
Class A Securityholder in respect of Class A Principal, the Fixed/Floating
Percentage of Principal Collections from the date on which such deposit is
made), (ii) any amount on deposit in the Excess Funding Account allocated to the
Class B Securities pursuant to subsection 4.9(d) with respect to the preceding
Monthly Period, (iii) the amount, if any, allocated to the Class B Securities
pursuant to subsections 4.9(a)(v), (vi), (x), (xi) and (xii) of the Agreement
and, with respect to such subsections, pursuant to subsections 4.10(a) and (b)
and 4.14(a) and (b) of the Agreement with respect to such Distribution Date,
(iv) the amount of Shared Principal Collections allocated to the Class B
Securities with respect to the preceding Monthly Period pursuant to Section
4.3(d) of the Agreement on and after the Class B Principal Payment Commencement
Date and (v) the amount, if any, specified in the last sentence of Section 3A(i)
of this Series Supplement; PROVIDED, FURTHER, that with respect to any
Distribution Date, Class B Principal may not exceed the Class B Invested Amount;
PROVIDED, FURTHER, that with respect to the Scheduled Series 1998-1 Termination
Date, the Class B Principal shall be an amount equal to the Class B Invested
Amount.
(c) The amount of principal (the "CTO Principal") distributable
from the Distribution Account with respect to the Collateralized Trust
Obligations on each Distribution Date, beginning with the CTO Principal Payment
Commencement Date, shall be an amount equal to and calculated as follows: the
sum of (i) an amount
48
equal to the product of the Fixed/Floating Percentage and the aggregate amount
of Principal Collections (less the amount of Redirected CTO Principal
Collections and Redirected Class D Principal Collections) with respect to the
preceding Monthly Period (or, in the case of the first Distribution Date
following the date on which an amount equal to the Class B Invested Amount is
deposited in the Principal Account to be applied to the payment of Class B
Principal, the Fixed/Floating Percentage of Principal Collections from the date
on which such deposit is made), (ii) any amounts on deposit in the Excess
Funding Account allocated to the Collateralized Trust Obligations pursuant to
subsection 4.9(d) with respect to the preceding Monthly Period, (iii) the
amount, if any, allocated to the Collateralized Trust Obligations pursuant to
subsections 4.9(a)(v), (vi), (xi) and (xii) of the Agreement and, with respect
to such subsections, pursuant to subsections 4.10(a) and (b) and 4.14(a) on such
Business Day, (iv) the amount of Shared Principal Collections allocated to the
Collateralized Trust Obligations with respect to the preceding Monthly Period
pursuant to Section 4.3(d) of the Agreement on and after the CTO Principal
Payment Commencement Date and (v) the amount, if any, specified in the last
sentence of Section 3A(i) of this Series Supplement; PROVIDED that with respect
to any Distribution Date, CTO Principal may not exceed the CTO Invested Amount;
PROVIDED, FURTHER, that with respect to the Scheduled Series 1998-1 Termination
Date, the CTO Principal shall be an amount equal to the CTO Invested Amount.
(d) The amount of principal (the "Class D Principal") distributable
from the Distribution Account with respect to the Class D Security on each
Distribution Date beginning with the Class D Principal Payment Commencement
Date, or in the case of distributions of Class D Daily Principal pursuant to the
last proviso of this subsection 4.7(d), on each Business Day, shall be an amount
equal to and calculated as follows: the sum of (i) an amount equal to the
product of the Fixed/Floating Percentage of Principal Collections (less the
amount of Redirected Class D Principal Collections) with respect to the
preceding Monthly Period (or, in the case of the first Distribution Date
following the date on which an amount equal to the CTO Invested Amount is
deposited in the Principal Account to be applied to the payment of CTO
Principal, the Fixed/Floating Percentage of Principal
49
Collections from the date on which such deposit is made), (ii) any amount on
deposit in the Excess Funding Account allocated to the Class D Security pursuant
to subsection 4.9(d) with respect to the preceding Monthly Period, and (iii) the
amount, if any, allocated to the Class D Security pursuant to subsections
4.9(a)(v), (vi) and (xii) of the Agreement and, with respect to such
subsections, pursuant to subsection 4.10(a) and (b) of the Agreement with
respect to such Distribution Date; PROVIDED, HOWEVER, that with respect to the
Scheduled Series 1998-1 Termination Date, the Class D Principal shall be an
amount equal to the Class D Invested Amount; PROVIDED FURTHER, that on any
Business Day during any period other than an Early Amortization Period or Class
A Pay Down Period, the Transferor may designate that either (x) an amount up to
the lesser of (i) the excess of the Class D Invested Amount over the Stated
Class D Amount on such day after taking into account all adjustments of the
Class A Invested Amount on such day and (ii) (I) during the Revolving Period an
amount equal to (x) the product of the Floating Percentage and the amount of
Principal Collections on such Business Day minus (y) Redirected Class B
Principal Collections, Redirected CTO Principal Collections and Redirected Class
D Principal Collections on such Business Day or (II) after the Amortization
Period Commencement Date an amount equal to (x) the product of the
Fixed/Floating Percentage and the amount of Principal Collections on such
Business Day minus (y) Redirected Class B Principal Collections, Redirected CTO
Principal Collections and Redirected Class D Principal Collections on such
Business Day minus (z) the amounts allocated with respect to Class A Principal,
Class B Principal and CTO Principal on such Business Day (such designated
amount, the "Class D Daily Principal") shall be distributed in accordance with
subsection 4.9(f) or (y) an amount up to the excess of the Class D Invested
Amount over the Stated Class D Amount on such day after taking into account all
adjustments of the Class A Invested Amount on such day, shall be subtracted from
the Class D Invested Amount and added to the Transferor Interest.
SECTION 4.8 SHARED PRINCIPAL COLLECTIONS. Shared Principal
Collections allocated to the Series 1998-1 Securities and to be applied pursuant
to subsections 4.9 (b), 4.9(c)(i)(z), 4.9(c)(ii)(z), 4.9(c)(iii)(z),
4.9(c)(iv)(z) and 4.9(e)(i)(z) for any
50
Business Day shall mean an amount equal to the sum of (i) the product of (x)
Shared Principal Collections for all Series for such Business Day and (y) a
fraction, the numerator of which is the Principal Shortfall for the Series
1998-1 Securities for such Business Day and the denominator of which is the
aggregate amount of Principal Shortfalls for all Series for such Business Day
and (ii) Shared Principal Collections for all Series for such Business Day, less
the amount thereof to be applied with respect to Principal Shortfalls for all
Series for such Business Day, which the Transferor has opted to apply to the
Variable Funding Securities of Series 1998-1 in accordance with Section 4.3(d)
of the Agreement.
SECTION 4.9 APPLICATION OF FUNDS. (a) On each Business Day, the
Servicer shall deliver to the Trustee a Daily Report in which it shall instruct
the Trustee to withdraw, and the Trustee, acting in accordance with such
instructions, shall withdraw from the Collection Account and the Cap Proceeds
Account, to the extent of the sum of (v) prior to the Pay Out Commencement Date,
the Floating Percentage of Finance Charge Collections available in the
Collection Account or, on and after the Pay Out Commencement Date, the
Fixed/Floating Percentage of Finance Charge Collections available in the
Collection Account, (w) Investment Earnings on deposit in the Collection
Account, (x) amounts on deposit in the Payment Reserve Account, if any, if and
to the extent so designated by the Transferor and (y) the Cap Receipt Amount, if
any, for such Business Day(the "Available Series 1998-1 Finance Charge
Collections"; provided, however, that on the Closing Date the amount of the
initial deposit by the Transferor to the Interest Funding Account will also
constitute Available Series 1998-1 Finance Charge Collections) the amounts set
forth in subsections 4.9(a)(i) through 4.9(a)(xix) in the following priority.
(i) CLASS A INTEREST. On each Business Day during a Monthly
Period, the Trustee, acting in accordance with instructions from the
Servicer, shall withdraw first from the Cap Proceeds Account to the extent
of the Cap Receipt Amount and then from the Collection Account and then
from the Payment Reserve Account and pay to the Class A Securityholders on
such Business Day, to the extent of the Available Series 1998-1 Finance
Charge Col-
51
lections, an amount equal to the lesser of (x) the Available Series 1998-1
Finance Charge Collections and (y) the sum of (A) the lesser of (I) the
Class A Interest for such Business Day and (II) the product of (i) the
greater of LIBOR then in effect plus 0.75% per annum and 10% per annum and
(ii) a fraction the numerator of which is the number of days from and
including the preceding Business Day to but excluding such Business Day and
the denominator of which is the actual number of days in the then current
calendar year and (iii) the Class A Outstanding Principal Balance as of the
close of business on the preceding Business Day plus (B) the excess, if
any, of the amount payable to the Class A Securityholders pursuant to
clause (A) on each prior Business Day over the amount which has been paid
to the Class A Securityholders with respect thereto on each prior Business
Day.
(ii) CLASS B INTEREST. On each Business Day during a Monthly
Period, the Trustee, acting in accordance with instructions from the
Servicer, shall allocate to the Class B Securities and withdraw first from
the Cap Proceeds Account to the extent of the remaining Cap Receipt Amount
for such Business Day, and then from the Collection Account and then from
the Payment Reserve Account and deposit into the Interest Funding Account,
to the extent of the Available Series 1998-1 Finance Charge Collections
remaining after giving effect to the withdrawal pursuant to subsection
4.9(a)(i), an amount equal to the lesser of (x) any such remaining
Available Series 1998-1 Finance Charge Collections and (y) the sum of (A)
the Daily Portion of Class B Interest to be distributed on the Distribution
Date following such Monthly Period plus (B) the excess, if any, of the
amount required to be deposited pursuant to clause (A) above on each prior
Business Day over the amount on deposit in the Interest Funding Account
with respect thereto on such Business Day plus (C) an amount equal to the
portion of Carryover Class B Interest attributable to amounts required to
be deposited pursuant to clause (A) above that were not so deposited prior
to such Business Day minus the amounts required to be deposited pursuant to
clause (B) above.
52
(iii) CTO INTEREST. On each Business Day during a Monthly
Period, the Trustee, acting in accordance with instructions from the
Servicer, shall allocate to the Collateralized Trust Obligations and
withdraw first from the Cap Proceeds Account, to the extent of the
remaining Cap Receipt Amount for such Business Day and then from the
Collection Account and then from the Payment Reserve Account and deposit
into the Interest Funding Account, to the extent of the Available Series
1998-1 Finance Charge Collections remaining after giving effect to the
withdrawal pursuant to subsections 4.9(a)(i) and (ii), an amount equal to
the lesser of (x) any such remaining Available Series 1998-1 Finance Charge
Collections and (y) the sum of (A) the Daily Portion of CTO Interest to be
distributed on the Distribution Date following such Monthly Period plus (B)
the excess, if any, of the amount required to be deposited pursuant to
clause (A) above on each prior Business Day over the amount on deposit in
the Interest Funding Account with respect thereto on such Business Day plus
(C) an amount equal to the portion of Carryover CTO Interest attributable
to amounts required to be deposited pursuant to clause (A) above that were
not so deposited prior to such Business Day minus the amounts required to
be deposited pursuant to clause (B) above.
(iv) SERVICING FEE. On each Business Day, the Trustee, acting in
accordance with instructions from the Servicer, shall withdraw first from
the Cap Proceeds Account to the extent of the remaining Cap Receipt Amount
and then from the Collection Account and then from the Payment Reserve
Account, and distribute to the Servicer, to the extent of any Available
Series 1998-1 Finance Charge Collections remaining after giving effect to
the withdrawals pursuant to subsections 4.9(a)(i) through (iii), an amount
equal to the lesser of (x) any such remaining Available Series 1998-1
Finance Charge Collections and (y) the Servicing Fee for such Business Day
plus any Servicing Fee due with respect to any prior Business Day but not
distributed to the Servicer
53
(v) SERIES DEFAULT AMOUNT. On each Business Day, the Trustee,
acting in accordance with instructions from the Servicer, shall withdraw
first from the Cap Proceeds Account to the extent of the remaining Cap
Receipt Amount second, only if such day is a Default Recognition Date, from
the Transferor an amount equal to the aggregate Transferor Retained Finance
Charge Collections for each day during the related Monthly Period and then
from the Collection Account and then from the Payment Reserve Account to
the extent of any Available Series 1998-1 Finance Charge Collections
remaining after giving effect to the withdrawals pursuant to subsections
4.9(a)(i) through (iv), an amount equal to the lesser of (x) any such
remaining Available Series 1998-1 Finance Charge Collections and (y) the
sum of (1) the aggregate Series Default Amount for such Business Day PLUS
(2) the unpaid Series Default Amount for each previous Business Day during
such Monthly Period, such amount to be (A) during the Revolving Period
(except for any portion of the Revolving Period during a Class A Paydown
Period) treated as Shared Principal Collections, (B) during the
Amortization Period or the Class A Pay Down Period on and prior to the day
on which an amount equal to the Class A Invested Amount is deposited in the
Principal Account, to be deposited in the Principal Account for
distribution to the Class A Securityholder on the next Distribution Date,
(C) during the Amortization Period, on and after the day on which such
deposit to the Principal Account with respect to the Class A Invested
Amount has been made and on and prior to the day on which an amount equal
to the Class B Invested Amount is deposited in the Principal Account, to be
deposited in the Principal Account for payment to the Class B
Securityholders on the next Distribution Date, (D) during the Amortization
Period on and after the day on which such deposit to the Principal Account
with respect to the Class B Invested Amount has been made on and prior to
the day on which an amount equal to the CTO Invested Amount is deposited in
the Principal Account, to be deposited in the Principal Account for payment
to the CTO Securityholders on the next Distribution Date and (E) on and
after the day such deposit to the Principal Account with respect to CTO
54
Invested Amount has been made, to be paid to the Class D Securityholders.
(vi) ADJUSTMENT PAYMENT SHORTFALLS. On each Business Day, the
Trustee, acting in accordance with instructions from the Servicer, shall
withdraw first from the Cap Proceeds Account to the extent of the remaining
Cap Receipt Amount and then from the Collection Account and then from the
Payment Reserve Account, to the extent of any Available Series 1998-1
Finance Charge Collections remaining after giving effect to the withdrawals
pursuant to subsections 4.9(a)(i) through (v), an amount equal to the
lesser of (x) any such remaining Available Series 1998-1 Finance Charge
Collections and (y) an amount equal to the Series 1998-1 Percentage of any
Adjustment Payment which the Transferor is required but fails to make
pursuant to subsection 3.8(a) of the Agreement, such amount, (i) during the
Revolving Period (except for any portion of the Revolving Period during a
Class A Paydown Period), to be treated as Shared Principal Collections,
(ii) during the Amortization Period or the Class A Pay Down Period on and
prior to the day on which an amount equal to the Class A Invested Amount is
deposited in the Principal Account, to be deposited in the Principal
Account for distribution to the Class A Securityholder on the next
Distribution Date, (iii) during the Amortization Period, on and after the
day on which such deposit to the Principal Account with respect to the
Class A Invested Amount has been made and on and prior to the day on which
an amount equal to the Class B Invested Amount is deposited in the
Principal Account for payment to the Class B Securityholders on the next
Distribution Date, (iv) during the Amortization Period on and after the day
on which such deposit to the Principal Account with respect to the Class B
Invested Amount has been made on and prior to the day on which an amount
equal to the CTO Invested Amount is deposited in the Principal Account, to
be deposited in the Principal Account for payment to the CTO
Securityholders on the next Distribution Date and (v) on and after the day
such deposit to the Principal Account with respect to CTO Invested Amount
has been made, to be paid to the Class D Securityholders.
55
(vii) REIMBURSEMENT OF CLASS A SERIES CHARGE-OFFS. On each
Business Day, the Trustee, acting in accordance with instructions from the
Servicer, shall withdraw first from the Cap Proceeds Account to the extent
of the remaining Cap Receipt Amount and then from the Collection Account
and then from the Payment Reserve Account, to the extent of any Available
Series 1998-1 Finance Charge Collections remaining after giving effect to
the withdrawals pursuant to subsections 4.9(a)(i) through (vi), an amount
equal to the lesser of (x) any such remaining Available Series 1998-1
Finance Charge Collections and (y) the unreimbursed Class A Series
Charge-Offs, if any; such amount will be applied to reimburse Class A
Series Charge-Offs, and, during the Revolving Period (except for any
portion of the Revolving Period during a Class A Paydown Period), will be
treated as Shared Principal Collections, and during the Amortization Period
or the Class A Pay Down Period on and prior to the day on which an amount
equal to the Class A Invested Amount is deposited in the Principal Account
will be deposited in the Principal Account for distribution to the Class A
Securityholders on the next Distribution Date.
(viii) UNPAID CLASS B INTEREST. On each Business Day, the
Trustee, acting in accordance with the instructions from the Servicer,
shall allocate to the Class B Securities and withdraw first from the Cap
Proceeds Account, to the extent of the remaining Cap Receipt Amount for
such Business Day and then from the Collection Account and then from the
Payment Reserve Account and deposit in the Interest Funding Account, to the
extent of the Available Series 1998-1 Finance Charge Collections remaining
after giving effect to the withdrawals pursuant to subsections 4.9(a)(i)
through (vii), an amount equal to the lesser of (x) any such remaining
Available Series 1998-1 Finance Charge Collections and (y) the sum of (1)
the excess of the Daily Portion of the product of (i) the Class B Interest
Rate and (ii) a fraction the numerator of which is the actual number of
days in the then current Interest Accrual Period and the denominator of
which is 360 and (iii) the Class B Outstanding Principal Amount as of the
close of business on the first day
56
of such Interest Accrual Period, over the amount on deposit in the
Interest Funding Account or previously paid to the Class B Securityholders
with respect thereto and (2) any additional interest (to the extent
permitted by applicable law) at the Class B Interest Rate plus 2% for
interest that has accrued on interest that was due during a prior Monthly
Period pursuant to this subsection but was not deposited in the Interest
Funding Account or paid to the Class B Securityholders.
(ix) UNPAID CTO INTEREST. On each Business Day, the Trustee,
acting in accordance with the instructions from the Servicer, shall
allocate to the Collateralized Trust Obligations and withdraw first from
the Cap Proceeds Account, to the extent of the remaining Cap Receipt Amount
for such Business Day and then from the Collection Account and then from
the Payment Reserve Account and deposit in the Interest Funding Account, to
the extent of any Available Series 1998-1 Finance Charge Collections
remaining after giving effect to the withdrawals pursuant to subsections
4.9(a)(i) through (viii), an amount equal to the lesser of (x) any such
remaining Available Series 1998-1 Finance Charge Collections and (y) the
sum of (1) the excess of the Daily Portion of the product of (i) the CTO
Security Rate and (ii) a fraction the numerator of which is the actual
number of days in the then current Interest Accrual Period and the
denominator of which is 360 and (iii) the CTO Outstanding Principal Amount
as of the close of business on the first day of such Interest Accrual
Period over the amount on deposit in the Interest Funding Account or
previously paid to the CTO Securityholders with respect thereto and (2) any
additional interest (to the extent permitted by applicable law) at the CTO
Security Rate plus 2% for interest that has accrued on interest that was
due during a prior Monthly Period pursuant to this subsection but was not
deposited in the Interest Funding Account or paid to the CTO
Securityholders.
(x) REIMBURSEMENT OF CLASS B SERIES CHARGE-OFFS. On each
Business Day, the Trustee, acting in accordance with instructions from the
Servicer, shall withdraw first from the Cap Proceeds Account to the extent
of the remaining Cap Receipt
57
Amount for such Business Day and then from the Collection Account and then
from the Payment Reserve Account, to the extent of any Available Series
1998-1 Finance Charge Collections remaining after giving effect to the
withdrawals pursuant to subsections 4.9(a)(i) through (ix), an amount equal
to the lesser of (x) any such remaining Available Series 1998-1 Finance
Charge Collections and (y) the unreimbursed amount by which the Class B
Invested Amount has been reduced on prior Business Days pursuant to clauses
(c) and (d) of the definition of Class B Invested Amount, if any, such
amount, (i) during the Revolving Period (except for any portion of the
Revolving Period during a Class A Paydown Period), to be treated as Shared
Principal Collections, (ii) during the Amortization Period or the Class A
Pay Down Period, on and prior to the day on which an amount equal to the
Class A Invested Amount is deposited in the Principal Account, to be
deposited in the Principal Account for distribution to the Class A
Securityholders on the next Distribution Date, and (iii) during the
Amortization Period, on and after the day on which such deposit has been
made and on and prior to the day on which the Class B Invested Amount has
been deposited in the Principal Account, to be deposited in the Principal
Account for payment to the Class B Securityholders on the next Distribution
Date.
(xi) REIMBURSEMENT OF CTO SERIES CHARGE-OFFS. On each Business
Day, the Trustee, acting in accordance with instructions from the Servicer,
shall withdraw first from the Cap Proceeds Account to the extent of the
remaining Cap Receipt Amount for such Business Day and then from the
Collection Account and then from the Payment Reserve Account, to the extent
of any Available Series 1998-1 Finance Charge Collections remaining after
giving effect to the withdrawals pursuant to subsections 4.9(a)(i) through
(x), an amount equal to the lesser of (x) any remaining Available Series
1998-1 Finance Charge Collections and (y) the unreimbursed amount by which
the CTO Invested Amount has been reduced on prior Business Days pursuant to
clauses (c) and (d) of the definition of CTO Invested Amount, if any, such
amount, (i) during the Revolving Period (except for any portion of the
Revolving Period during a Class A
58
Paydown Period), to be treated as Shared Principal Collections, (ii) during
the Amortization Period or the Class A Pay Down Period, on and prior to the
day on which an amount equal to the Class A Invested Amount is deposited in
the Principal Account, to be deposited in the Principal Account for
distribution to the Class A Securityholders on the next Distribution Date,
(iii) during the Amortization Period, on and prior to the day on which an
amount equal to the Class B Invested Amount is deposited in the Principal
Account, to be deposited in the Principal Account for distribution to the
Class B Securityholders on the next Distribution Date and (iv) during the
Amortization Period, on and after the day on which such deposit has been
made and on and prior to the day on which an amount equal to the CTO
Invested Amount is deposited in the Principal Account, to be deposited in
the Principal Account for payment to the CTO Securityholders on the next
Distribution Date.
(xii) REIMBURSEMENT OF CLASS D SERIES CHARGE-OFFS. On each
Business Day, the Trustee, acting in accordance with instructions from the
Servicer, shall withdraw first from the Cap Proceeds Account to the extent
of the remaining Cap Receipt Amount for such Business Day and then from the
Collection Account and then from the Payment Reserve Account, to the extent
of any Available Series 1998-1 Finance Charge Collections remaining after
giving effect to the withdrawals pursuant to subsections 4.9(a)(i) through
(xi), an amount equal to the lesser of (x) any such remaining Available
Series 1998-1 Finance Charge Collections and (y) the unreimbursed amount by
which the Class D Invested Amount has been reduced on prior Business Days
pursuant to clauses (d) and (e) of the definition of Class D Invested
Amount, if any, such amount, (i) during the Revolving Period (except for
any portion of the Revolving Period during a Class A Paydown Period), to be
treated as Shared Principal Collections, (ii) during the Amortization
Period or the Class A Pay Down Period, on and prior to the day on which an
amount equal to the Class A Invested Amount is deposited in the Principal
Account, to be deposited in the Principal Account for distribution to the
Class A Securityholders on the next Distribu-
59
tion Date, (iii) during the Amortization Period, on and prior to the day on
which an amount equal to the Class B Invested Amount is deposited in the
Principal Account, to be deposited in the Principal Account for
distribution to the Class B Securityholders on the next Distribution Date,
(iv) during the Amortization Period, on and after the day on which such
deposit has been made and on and prior to the day on which an amount equal
to the CTO Invested Amount is deposited in the Principal Account, to be
deposited in the Principal Account for payment to the CTO Securityholders
on the next Distribution Date and (v) during the Amortization Period, on
and after the day on which such deposit has been made and on and prior to
the day on which an amount equal to the Class D Invested Amount is
deposited in the Principal Account, to be deposited in the Principal
Account for payment to the Class D Securityholders on the next Distribution
Date.
(xiii) ADDITIONAL CLASS A INTEREST. On each Business Day during
a Monthly Period, the Trustee, acting in accordance with instructions from
the Servicer, shall withdraw first from the Cap Proceeds Account to the
extent of the remaining Cap Receipt Amount for such Business Day and then
from the Collection Account and then from the Payment Reserve Account and
pay to the Class A Securityholder on such Business Day, to the extent of
the Available Series 1998-1 Finance Charge Collections remaining after
giving effect to the withdrawal pursuant to subsections 4.9(a)(i) through
(xii), an amount equal to the lesser of (x) any such remaining Available
Series 1998-1 Finance Charge Collections and (y) the excess, if any, of (1)
the sum of Class A Interest for such Business Day and the Class A Interest
Shortfall for the preceding Business Day OVER (2) the amounts previously
deposited into the Interest Funding Account on such Business Day pursuant
to subsection 4.9(a)(i).
(xiv) CLASS A COSTS. On each Business Day, the Trustee acting in
accordance with instructions from the Servicer, shall withdraw first from
the Cap Proceeds Account to the extent of the remaining Cap Receipt Amount
for such Business Day and then from the Collection Account and then from
the
60
Payment Reserve Account and pay to the Class A Securityholder, to the
extent of any Available Series 1998-1 Finance Charge Collections remaining
after giving effect to the withdrawals pursuant to subsections 4.9(a)(i)
through (xiii), an amount equal to the lesser of (x) any such remaining
Available Series 1998-1 Finance Charge Collections and (y) the Class A
Costs for such Business Day and any such amounts that remain unpaid from
previous days to the extent not included in Class A Costs for such Business
Day.
(xv)CTO RESERVE ACCOUNT. On each Business Day, the Trustee acting
in accordance with instructions from the Servicer, shall withdraw first
from the Cap Proceeds Account to the extent of the remaining Cap Receipt
Amount for such Business Day and then from the Collection Account and then
from the Payment Reserve Account, to the extent of any Available Series
1998-1 Finance Charge Collections remaining after giving effect to
withdrawals pursuant to subsections 4.9(a)(i) through (xiv), an amount
equal to the lesser of (x) any such remaining Available Series 1998-1
Finance Charge Collections and (y) the amount by which the Specified CTO
Reserve Amount exceeds the amount on deposit in the CTO Reserve Account,
and deposit such amount, if any, into the CTO Reserve Account.
(xvi) PAYMENT RESERVE ACCOUNT. On each Business Day, the Trustee
acting in accordance with instructions from the Servicer, shall withdraw
first from the Cap Proceeds Account to the extent of the remaining Cap
Receipt Amount for such Business Day and then from the Collection Account,
to the extent of any Available Series 1998-1 Finance Charge Collections
remaining after giving effect to the withdrawals pursuant to subsections
4.9(a)(i) through (xv) an amount equal to the lesser of (x) any such
remaining Available Series 1998-1 Finance Charge Collections and (y) the
amount designated by the Transferor in writing (which include facsimile
transmission) in its instructions to the Trustee on such Business Day and
deposit such amount, if any, into the Payment Reserve Account.
61
(xvii) EXCESS FINANCE CHARGE COLLECTIONS. Any amounts remaining
in the Cap Proceeds Account or the Collection Account to the extent of any
Available Series 1998-1 Finance Charge Collections remaining after giving
effect to the withdrawals pursuant to subsection 4.9(a)(i) through (xvi),
shall be treated as Excess Finance Charge Collections, and the Servicer
shall direct the Trustee in writing on each Business Day to withdraw such
amounts from the Cap Proceeds Account, if applicable, and the Collection
Account and the Payment Reserve Account and to first make such amounts
available to pay to Securityholders of other Series to the extent of
shortfalls, if any, in amounts payable to such Securityholders from Finance
Charge Collections allocated to such other Series, then to pay any unpaid
commercially reasonable costs and expenses of a Successor Servicer, if any,
and then on each Business Day other than the Default Recognition Date, pay
to the Transferor to be treated as "Transferor Retained Finance Charge
Collections," and, on each Default Recognition Date pay any remaining
Excess Finance Charge Collections to the Transferor.
(b) For each Business Day with respect to the Revolving Period (except
for any portion of the Revolving Period during a Class A Paydown Period), the
funds on deposit in the Collection Account to the extent of the lesser of (A)
the Class A Invested Amount and (B) the sum of (x) the product of the Floating
Percentage and (ii) the amount of Principal Collections on such Business Day
(such product the "Revolving Principal Collections") less the amount of
Redirected Class D Principal Collections, Redirected CTO Principal Collections
and Redirected Class B Principal Collections on such Business Day (the Revolving
Principal Collections less the Redirected Class D Principal Collections, the
Redirected CTO Principal Collections and the Redirected Class B Principal
Collections on the related Business Day, the "Net Revolving Principal
Collections"), (y) the amount then on deposit in the Collection Account pursuant
to subsection 3A(i) of this Series Supplement and (z) the amount of Shared
Principal Collections allocated to the Series 1998-1 Securities in accordance
with Section 4.8 on such Business Day may, at the option of the Transferor or
shall, if the Aggregate ABC Principal Amount exceeds the Aggre-
62
gate Interest Rate Caps Notional Amount on such Business Day, pursuant to
instructions delivered to the Servicer and the Trustee by facsimile or other
similar means of documented communication, be deposited into the Defeasance
Account and applied as provided in Section 9A(b) of this Series Supplement.
During the Revolving Period (except for any portion of the Revolving Period
during a Class A Pay Down Period), an amount equal to the Net Revolving
Principal Collections less any amount deposited to the Defeasance Account
pursuant to the immediately preceding sentence shall be treated as Shared
Principal Collections and applied pursuant to the written direction of the
Servicer in the Daily Report for such Business Day, as provided in Section
4.3(d) of the Agreement.
(c) For each Business Day on and after the Amortization Period
Commencement Date, the amount of funds on deposit in the Collection Account and
the other amounts described below will be distributed, pursuant to the written
direction of the Servicer in the Daily Report for such Business Day in the
following priority:
(i) on and prior to the day on which an amount equal to the Class
A Invested Amount has been deposited in the Principal Account to be applied
to the payment of Class A Principal, an amount (not in excess of the Class
A Invested Amount) equal to the sum of (v) the product of the
Fixed/Floating Percentage and Principal Collections in the Collection
Account at the end of the preceding Business Day (less the amount thereof
to be applied as Redirected Class B Principal Collections, Redirected CTO
Principal Collections or Redirected Class D Principal Collections on such
Business Day), (w) any amount on deposit in the Excess Funding Account
allocated to the Class A Security on such Business Day pursuant to
subsection 4.9(d), (x) amounts to be paid pursuant to subsections
4.9(a)(v), (vi), (vii), (x), (xi) and (xii) of the Agreement from Available
Series 1998-1 Finance Charge Collections and from amounts available
pursuant to subsections 4.10(a) and (b) and 4.14(a), (b) and (c) of the
Agreement on such Business Day, (y) any amounts specified in the last
sentence of Section 3A(i) of this Series Supplement and (z) the amount of
Shared Principal Collections allocated to the Series 1998-1 Securities in
accor-
63
dance with Section 4.8 on such Business Day, will be paid to the Class A
Securityholder;
(ii) on and after the day on which an amount equal to the Class A
Invested Amount has been paid to the Class A Securityholder, an amount (not
in excess of the Class B Invested Amount) equal to the sum of (v) an amount
equal to the product of the Fixed/Floating Percentage and Principal
Collections in the Collection Account at the end of the preceding Business
Day (less the amount thereof to be applied as Redirected Class B Principal
Collections, Redirected CTO Principal Collections or Redirected Class D
Principal Collections on such Business Day), (w) any amount on deposit in
the Excess Funding Account allocated to the Class B Securities on such
Business Day pursuant to subsection 4.9(d), (x) the amount, if any,
allocated to be paid to the Class B Securities pursuant to subsections
4.9(a)(v), (vi), (x), (xi) and (xii) of the Agreement from Available Series
Finance Charge Collections and from amounts available pursuant to
subsections 4.10(a) and (b) and 4.14(a) and (b) of the Agreement with
respect to such Business Day, (y) any amounts specified in the last
sentence of Section 3A(i) of this Series Supplement and (z) the amount of
Shared Principal Collections allocated to the Series 1998-1 Securities in
accordance with Section 4.8 on such Business Day (such sum, the "Class B
Daily Principal Amount") will be deposited into the Principal Account;
(iii) on and after the day on which an amount equal to the Class
B Invested Amount has been deposited in the Principal Account to be applied
to the payment of Class B Principal, an amount (not in excess of the CTO
Invested Amount) equal to the sum of (v) an amount equal to the product of
the Fixed/Floating Percentage and Principal Collections in the Collection
Account at the end of the preceding Business Day (less the amount thereof
to be applied as Redirected CTO Principal Collections or Redirected Class D
Principal Collections on such Business Day), (w) any amount on deposit in
the Excess Funding Account allocated to the Collateralized Trust
Obligations on such Business Day pursuant to subsection 4.9(d), (x) the
amount, if any, allocated to be paid to the Collateralized Trust Xxxxxx-
00
tions pursuant to subsections 4.9(a)(v), (vi), (xi) and (xii) of the
Agreement from Available Series Finance Charge Collections and from amounts
available pursuant to subsections 4.10(a) and (b) and 4.14(a) of the
Agreement with respect to such Business Day, (y) any amounts specified in
the last sentence of Section 3A(i) of this Series Supplement and (z) the
amount of Shared Principal Collections allocated to the Series 1998-1
Securities in accordance with Section 4.8 on such Business Day (such sum,
the "CTO Daily Principal Amount") will be deposited into the Principal
Account;
(iv) on and after the day on which an amount equal to the CTO
Invested Amount has been deposited in the Principal Account to be applied
to the payment of CTO Principal, an amount equal to the sum of (w) an
amount equal to the product of the Fixed/Floating Percentage and Principal
Collections in the Collection Account at the end of the preceding Business
Day (less the amount thereof to be applied as Redirected Class D Principal
Collections on such Business Day), (x) any amount on deposit in the Excess
Funding Account allocated to the Class D Security on such Business Day
pursuant to subsection 4.9(d), (y) the amount, if any, allocated to be paid
to the Class D Security pursuant to subsections 4.9(a)(v), (vi) and (xii)
of the Agreement from Available Series 1998-2 Finance Charge Collections
and from amounts available pursuant to subsections 4.10(a) and (b) of the
Agreement with respect to such Business Day and (z) the amount of Shared
Principal Collections allocated to the Series 1998-1 Securities in
accordance with Section 4.8 on such Business Day (such sum, the "Class D
Daily Principal Amount") will be distributed to the Class D
Securityholders; and
(v) an amount equal to the excess, if any, of (A) the sum of the
amounts described in clauses (i)(v) and (x), (ii)(v) and (x) and (iii)(v)
and (x) above over (B) the sum of Class A Principal, Class B Principal and
CTO Principal will be treated as Shared Principal Collections and applied
as provided in subsection 4.3(d) of the Agreement.
65
(d) On the first Business Day of the Amortization Period, funds on
deposit in the Excess Funding Account will be deposited in the Principal
Account, provided that if any other Series enters its Amortization Period, as
defined in its related Series Supplement, the amount of the foregoing deposit
shall be equal to the product of an amount equal to the amount of funds on
deposit in the Excess Funding Account and a fraction the numerator of which is
the Invested Amount and the denominator of which is equal to the sum of the
invested amounts of each Series then entering its related Amortization Period as
defined in its related Series Supplement. Amounts deposited in the Principal
Account pursuant to the foregoing sentence will be allocated in the following
order of priority: (i) to the Class A Security in an amount not to exceed the
Class A Principal after subtracting therefrom any amounts to be paid to the
Class A Securityholders with respect thereto pursuant to subsections
4.9(c)(i)(v), (y), and (z), (ii) to the Class B Securities in an amount not to
exceed the Class B Principal after subtracting therefrom any amounts to be
deposited in the Principal Account with respect thereto pursuant to subsections
4.9(c)(ii)(v), (y) and (z), and (iii) to the Collateralized Trust Obligations in
an amount not to exceed the CTO Principal after subtracting therefrom any
amounts to be deposited in the Principal Account with respect thereto pursuant
to subsections 4.9(c)(iii)(v), (y) and (z). On and after the Class D Principal
Payment Commencement Date any amounts remaining on deposit in the Excess Funding
Account and allocated to the Series 1998-1 Securities will be deposited in the
Principal Account in an amount not to exceed the Class D Invested Amount after
subtracting therefrom any amounts to be deposited in the Principal Account with
respect thereto pursuant to subsections 4.9(c)(iv)(w), (y) and (z).
(e) For each Business Day during the Class A Pay Down Period:
(i) funds on deposit in the Collection Account will be, pursuant
to the written direction of the Servicer in the Daily Report for such
Business Day, paid to the Class A Securityholder in respect of the Class A
Principal in an amount (not in excess of the Class A Invested Amount) equal
to the sum of (w) the product of the Fixed/Floating Percentage and
Principal Collections in the Collec-
66
tion Account at the end of the preceding Business Day (less the amount
thereof to be applied as Redirected Class B Principal Collections or
Redirected CTO Principal Collections on such Business Day), (x) amounts to
be paid pursuant to subsections 4.9(a)(v), (vi), (x), (xi) and (xii) of the
Agreement from Available Series 1998-1 Finance Charge Collections and from
amounts available pursuant to subsections 4.10(a) and (b) and 4.14(a), (b)
and (c) of the Agreement on such Business Day, (y) any amounts specified in
the last sentence of Section 3A(i) of this Series Supplement and (z) the
amount of Shared Principal Collections allocated to the Series 1998-1
Securities in accordance with Section 4.8 of the Agreement on such Business
Day;
(ii) an amount equal to the excess, if any, of (A) the sum of
the amounts described in clauses (i)(w) and (x) above over (B) the Class A
Principal will be treated as Shared Principal Collections and applied as
provided in subsection 4.3(d) of the Agreement.
(f) On each Business Day on which Class D Daily Principal has been
allocated pursuant to subsection 4.7(d) of the Agreement, funds on deposit in
the Collection Account in an amount equal to the Class D Daily Principal Amount
designated by the Transferor with respect to such Business Day will be
distributed to the Class D Securityholders.
SECTION 4.10 COVERAGE OF REQUIRED AMOUNT FOR THE SERIES 1998-1
SECURITIES. (a) To the extent that any amounts are on deposit in the Excess
Funding Account on any Business Day, the Servicer shall apply, in the manner
specified for application of Available Series 1998-1 Finance Charge Collections
in subsections 4.9(a)(i) through (xvi), Transferor Finance Charge Collections in
an amount equal to the excess of (x) the product of (a) the Base Rate, (b) the
amounts on deposit in the Excess Funding Account and (c) the number of days
elapsed since the previous Business Day DIVIDED by the actual number of days in
such year over (y) the aggregate amount of all earnings since the previous
Business Day available from the Cash Equivalents in which funds on deposit in
the Excess Funding Account are invested (the "Negative Carry Amount").
67
(b) To the extent that on any Business Day payments are being made
pursuant to any of subsections 4.9(a)(i) through (xvi), respectively, and the
full amount to be paid pursuant to any such subsection receiving payments on
such Business Day is not paid in full on such Business Day, the Servicer shall
apply, in the manner specified for application of Available Series 1998-1
Finance Charge Collections in subsections 4.9(a)(i) through (xvi), all or a
portion of the Excess Finance Charge Collections from other Series with respect
to such Business Day allocable to the Series 1998-1 Securities in an amount
equal to the excess of the full amount to be allocated or paid pursuant to the
applicable subsection over the amount applied with respect thereto from
Available Series 1998-1 Finance Charge Collections and Transferor Finance Charge
Collections on such Business Day (the "Required Amount"). Excess Finance Charge
Collections allocated to the Series 1998-1 Securities for any Business Day shall
mean an amount equal to the product of (x) Excess Finance Charge Collections
available from all other Series for such Business Day and (y) a fraction, the
numerator of which is the Required Amount for such Business Day and the
denominator of which is the aggregate amount of shortfalls in required amounts
or other amounts to be paid from Finance Charge Collections for all Series for
such Business Day.
SECTION 4.11 PAYMENT OF INTEREST WITH RESPECT TO SECURITIES. On each
Transfer Date, the Trustee, acting in accordance with instructions from the
Servicer set forth in the Daily Report for such day, shall withdraw the amount
on deposit in the Interest Funding Account with respect to the preceding Monthly
Period allocable to the Series 1998-1 Securities and deposit such amount in the
Distribution Account. On each Business Day, the Paying Agent shall pay in
accordance with Section 5.1 of the Agreement to Class A Securityholders from the
Distribution Account an amount equal to the sum of the CTO Interest Adjustment,
if any, and the Class B Interest Adjustment, if any, deposited into the
Distribution Account pursuant to Section 4.6A. On each Distribution Date, the
Paying Agent shall pay in accordance with Section 5.1 of the Agreement (x) to
the Class B Securityholders from the Distribution Account the amount deposited
into the Interest Funding Account during the preceding Monthly Period pursuant
to subsections
68
4.9(a)(ii) and (viii) and Sections 4.10 and 4.14 less the aggregate Class B
Interest Adjustment made with respect to the related Interest Accrual Period and
(y) the CTO Securityholders from the Distribution Account the amount deposited
into the Interest Funding Account pursuant to subsections 4.9(a)(iii) and (ix)
and Sections 4.10 and 4.14 during the preceding Monthly Period less the
aggregate CTO Interest Adjustment made in the related Interest Accrual Period.
SECTION 4.12 PAYMENT OF SECURITY PRINCIPAL.
(a) On the Transfer Date preceding the Class B Principal Payment
Commencement Date and each Distribution Date thereafter, the Trustee, acting in
accordance with instructions from the Servicer set forth in the Daily Report for
such day, shall withdraw from the Principal Account and deposit in the
Distribution Account, to the extent of funds available, an amount equal to the
Class B Principal for such Distribution Date. On the Class B Principal Payment
Commencement Date, after the payment of any principal amounts to the Class A
Security on such day, and on each Distribution Date thereafter until the Class B
Invested Amount is paid in full, the Paying Agent shall pay in accordance with
Section 5.1 to the Class B Securityholders from the Distribution Account such
amount deposited into the Distribution Account on the related Transfer Date.
(b) On the Transfer Date preceding the CTO Principal Payment
Commencement Date and each Distribution Date thereafter, the Trustee, acting in
accordance with instructions from the Servicer set forth in the Daily Report for
such day, shall withdraw from the Principal Account and deposit in the
Distribution Account an amount equal to the lesser of the CTO Invested Amount
and the amount on deposit in the Principal Account allocable to the Series
1998-1 Securities (after giving effect to transfers pursuant to subsection
4.12(b)). On the CTO Principal Payment Commencement Date, after the payment of
any principal amounts to the Class B Securities on such day, and on each
Distribution Date thereafter until the CTO Invested Amount is paid in full, the
Paying Agent shall pay in accordance with Section 5.1 to the CTO Securityholders
from the Distribution Account such amount deposited into the Distribution
Account on the related Transfer Date.
69
(c) On the Transfer Date preceding the Class D Principal Payment
Commencement Date and each Business Day thereafter, the Trustee, acting in
accordance with instructions from the Servicer set forth in the Daily Report for
such day, shall make payments of principal to the Class D Securityholders in
accordance with subsection 4.9(c)(iv) of the Agreement.
(d) On each Business Day the Trustee acting in accordance with
instructions from the Servicer set forth in the Daily Report for such Business
Day shall make payments of principal to the Class D Securityholders of Class D
Daily Principal, if any, designated by the Transferor pursuant to Section 4.7(d)
of the Agreement.
Any amounts remaining in the Principal Account and allocable to the
Series 1998-1 Securities, after the Class D Invested Amount has been paid in
full, will be treated as Shared Principal Collections and applied in accordance
with subsection 4.3(d) of the Agreement.
SECTION 4.13 SERIES CHARGE-OFFS. (a) If, on any Determination Date,
the aggregate Series Default Amount and the Series 1998-1 Percentage of unpaid
Adjustment Payments, if any, for each Business Day in the preceding Monthly
Period exceeded the Available Series 1998-1 Finance Charge Collections applied
to the payment thereof pursuant to subsections 4.9(a)(v) and (vi) of the
Agreement and the amount of Transferor Finance Charge Collections and Excess
Finance Charge Collections allocated thereto pursuant to Section 4.10 of the
Agreement, and the amount of Redirected Principal Collections applied with
respect thereto pursuant to Section 4.14 of the Agreement, the Class D Invested
Amount will be reduced by the amount by which the remaining aggregate Series
Default Amount and Series 1998-1 Percentage of unpaid Adjustment Payments exceed
the amount applied with respect thereto during such preceding Monthly Period (a
"Class D Series Charge-Off").
(b) In the event that any such reduction of the Class D Invested
Amount would cause the Class D Invested Amount to be a negative number, the
Class D Invested Amount will be reduced to zero, and, the CTO Invested Amount
will be reduced by the amount by which the Class D Invested Amount would have
been reduced below zero, but not more than the aggregate Series De-
70
fault Amount and Series 1998-1 Percentage of unpaid Adjustment Payments for such
Monthly Period (a "CTO Series Charge-Off").
(c) In the event that any such reduction of the CTO Invested Amount
would cause the CTO Invested Amount to be a negative number, the CTO Invested
Amount will be reduced to zero, and, the Class B Invested Amount will be reduced
by the amount by which the CTO Invested Amount would have been reduced below
zero, but not more than the remaining aggregate Series Default Amount and Series
1998-1 Percentage of unpaid Adjustment Payments for such Monthly Period (a
"Class B Series Charge-Off").
(d) In the event that any such reduction of the Class B Invested
Amount 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 more than the remaining aggregate Series
Default Amount and Series 1998-1 Percentage of unpaid Adjustment Payments for
such Monthly Period (a "Class A Series Charge-Off").
SECTION 4.14 REDIRECTED PRINCIPAL COLLECTIONS FOR THE SERIES 1998-1
SECURITIES. (a) On each Business Day, the Servicer will determine an amount
equal to the least of (i) the Class D Invested Amount, (ii) the product of
(x)(I) during the Revolving Period, the Class D Floating Percentage or (II)
during an Amortization Period, the Class D Fixed/Floating Percentage and (y) the
amount of Principal Collections with respect to such Business Day and (iii) an
amount equal to the sum of (a) the Class A Required Amount for such Business
Day, (b) the Class B Required Amount for such Business Day and (c) the CTO
Required Amount for such Business Day (such amount called "Redirected Class D
Principal Collections") and shall apply Principal Collections in an amount equal
to such amount first to the components of the Class A Required Amount, then to
the components of the Class B Required Amount and then to the components of the
CTO Required Amount in the same priority as amounts are applied to such
components from Available Series 1998-1 Finance Charge Collections pursuant to
subsection 4.9(a).
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(b) On each Business Day, the Servicer will determine an amount equal
to the least of (i) the CTO Invested Amount, (ii) the product of (x)(I) during
the Revolving Period, the CTO Floating Percentage or (II) during an Amortization
Period, the CTO Fixed/Floating Percentage and (y) the amount of Principal
Collections for such Business Day and (iii) an amount equal to the sum of (a)
the Class A Required Amount for such Business Day over the amount of Redirected
Class D Principal Collections applied with respect thereto for such Business Day
and (b) the Class B Required Amount for such Business Day over the amount of
Redirected Class D Principal Collections applied with respect thereto for such
Business Day (such amount called "Redirected CTO Principal Collections") and
shall apply Principal Collections in an amount equal to such amount first to the
remaining components of the Class A Required Amount and then to the remaining
components of the Class B Required Amount in the same priority as amounts are
applied to such components from Available Series 1998-1 Finance Charge
Collections pursuant to subsection 4.9(a).
(c) On each Business Day, the Servicer will determine an amount equal
to the least of (i) the Class B Invested Amount, (ii) the product of (x)(I)
during the Revolving Period, the Class B Floating Percentage or (II) during an
Amortization Period, the Class B Fixed/Floating Percentage and (y) the amount of
Principal Collections for such Business Day and (iii) an amount equal to the
excess, if any, of the Class A Required Amount for such Business Day over the
sum of the amount of Redirected Class D Principal Collections and Redirected CTO
Principal Collections applied with respect thereto for such Business Day (such
amount called "Redirected Class B Principal Collections") and shall apply
Principal Collections equal to such amount to the remaining components of the
Class A Required Amount in the same priority as amounts are applied to such
components from Available Series 1998-1 Finance Charge Collections pursuant to
subsection 4.9(a).
SECTION 4.15 DETERMINATION OF LIBOR. (a) "LIBOR" shall mean, for a
specific Interest Accrual Period, the rate for deposits in United States dollars
for one month (commencing on the first day of the relevant Interest Accrual
Period) which appears on Telerate Page 3750 as of 11:00 A.M., London time, on
the LIBOR
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Determination Date for such Interest Accrual Period. If such rate does not
appear on Telerate Page 3750, the rate for such Interest Accrual Period will be
determined on the basis of the rates at which deposits in the United States
dollars are offered by the Reference Banks at approximately 11:00 a.m., London
time, on such LIBOR Determination Date to prime banks in the London interbank
market for a period equal to one month (commencing on the first day of Interest
Accrual Period). The Trustee will request the principal London office of each
such bank to provide a quotation of its rate. If at least two such quotations
are provided, the rate for such Interest Accrual Period will be the arithmetic
mean of the quotations. If fewer than two quotations are provided as requested,
the rate for such Interest Accrual Period will be the arithmetic mean of the
rates quoted by four major banks in New York City, selected by the Trustee, at
approximately 11:00 a.m., New York City time, on the LIBOR Determination Date
for loans in United States dollars to leading European banks for a period equal
to one month (commencing on the first day of such Interest Accrual Period).
(b) The Class B Interest Rate and the CTO Security Rate applicable to
the then current and the immediately preceding Interest Accrual Periods may be
obtained by any Series 1998-1 Securityholder by telephoning the Trustee at (212)
815-5737.
(c) On each LIBOR Determination Date, the Trustee shall send to the
Servicer by facsimile notification of LIBOR for the following Interest Accrual
Period.
SECTION 4.16 PAYMENT RESERVE ACCOUNT.
(a) The Servicer shall establish and maintain or cause to be
established and maintained with a Qualified Institution, which may be the
Trustee, in the name of the Trustee, on behalf of the Securityholders, the
"Payment Reserve Account," which shall be a segregated trust account with the
corporate trust department of such Qualified Institution, bearing a designation
clearly indicating that the funds deposited therein are held for the benefit of
the Securityholders. The Trustee shall possess all right, title and interest in
all funds on deposit from time to time in the Payment
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Reserve Account and in all proceeds thereof. The Payment Reserve Account shall
be under the sole dominion and control of the Trustee for the benefit of the
Securityholders. If, at any time, the institution holding the Payment Reserve
Account ceases to be a Qualified Institution, the Trustee shall within 20
Business Days establish a new Payment Reserve Account meeting the conditions
specified above with a Qualified Institution, and shall transfer any cash or any
investments to such new Payment Reserve Account. From the date such new Payment
Reserve Account is established, it shall be the "Payment Reserve Account."
(b) The Transferor, at its discretion, may withdraw on any
Determination Date a part or all of any amounts remaining in the Payment Reserve
Account after giving effect to any withdrawals required to be made under
subsection 4.9(a) above.
(c) Funds on deposit in the Payment Reserve Account shall be invested
in Cash Equivalents by the Trustee (or, at the direction of the Trustee, by the
Servicer on behalf of the Trustee) at the direction of the Servicer. Funds on
deposit in the Payment Reserve Account on any Business Day, after giving effect
to any withdrawals from the Payment Reserve Account, shall be invested in Cash
Equivalents that will mature so that such funds will be available for withdrawal
on or prior to the following Business Day. The proceeds of any such investments
shall be invested in Cash Equivalents that will mature so that such funds will
be available for withdrawal on or prior to the following Business Day. On each
Business Day following a deposit of funds to the Payment Reserve Account, the
aggregate proceeds of any such investment shall be deposited in the Collection
Account and treated as Investment Proceeds for application as Available Series
1998-1 Finance Charge Collections.
SECTION 4.17 CTO RESERVE ACCOUNT.
(a) The Servicer, for the benefit of the CTO Securityholders, shall
establish and maintain or cause to be established and maintained with a
Qualified Institution, which may be the Trustee, in the name of the Trustee, on
behalf of the CTO Securityholders, a reserve account (the "CTO Reserve
Account"), which shall be a
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segregated trust account with the corporate trust department of such Qualified
Institution, bearing a designation clearly indicating that the funds deposited
therein are held for the benefit of the CTO Securityholders. The Trustee will
possess all right, title and interest in all funds on deposit from time to time
in the CTO Reserve Account and in all proceeds thereof. The CTO Reserve Account
will be under the sole dominion and control of the Trustee for the benefit of
the CTO Securityholders. If, at any time, the institution holding the CTO
Reserve Account ceases to be a Qualified Institution, the Trustee will within 10
Business Days establish a new CTO Reserve Account meeting the conditions
specified above with a Qualified Institution, and shall transfer any cash or any
investments to such new CTO Reserve Account. From the date such new CTO Reserve
Account is established, it shall be the "CTO Reserve Account."
(b) The Servicer shall on each Business Day deposit in the CTO Reserve
Account an amount equal to the excess of the Specified CTO Reserve Amount over
the amount on deposit in the CTO Reserve Account to the extent of funds
available therefor pursuant to subsection 4.9(a) (xv) of the Agreement. Funds
on deposit in the CTO Reserve Account shall be withdrawn by the Servicer in the
following order of priority: (i) on each Default Recognition Date an amount not
exceeding the amount deposited in the CTO Reserve Account during the then
current Monthly Period pursuant to subsection 4.9(a)(xv) of the Agreement, shall
be applied to any shortfalls in amounts payable pursuant to subsection 4.9(a)(v)
of the Agreement which have not been paid from Available Series 1998-1 Finance
Charge Collections or Transferor Retained Finance Charge Collections (prior to
application of amounts described herein), which amount shall be treated as
Transferor Retained Finance Charge Collections and applied in accordance with
subsection 4.9(a)(v) of the Agreement, (ii) on each Business Day amounts
remaining in the CTO Reserve Account shall be applied to any shortfalls in
amounts payable pursuant to subsections 4.9(a)(iii) and 4.9(a)(ix) of the
Agreement which have not been paid from Available Series 1998-1 Finance Charge
Collections, Transferor Finance Charge Collections, Excess Finance Charge
Collections or Redirected Class D Principal Collections, which amounts shall be
applied in accordance with subsections
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4.9(a)(iii) and 4.9(a)(ix) of the Agreement, respectively, and (iii) on the CTO
Principal Payment Commencement Date an amount equal to the CTO Series
Charge-Offs, if any, shall be applied in accordance with subsection 4.9(c)(iii)
of the Agreement. Amounts on deposit in the CTO Reserve Account may be
subsequently released therefrom to the extent that such amounts exceed the
Specified CTO Reserve Amount and shall be treated as Transferor Retained Finance
Charge Collections to be applied for the then current Monthly Period in
accordance with subsection 4.9(a) of the Agreement.
(c) Funds on deposit in the CTO Reserve Account will be invested by
the Trustee (or, at the direction of the Trustee, by the Servicer on behalf of
the Trustee) at the direction of the Servicer in Cash Equivalents that will
mature so that such funds will be available for withdrawal on or prior to the
following Business Day. The interest and other investment income (net of
investment expenses and losses) earned on such investments will be retained in
the CTO Reserve Account (to the extent the amount on deposit therein is less
than the Specified CTO Reserve Amount) or shall be deposited in the Collection
Account and treated as Investment Proceeds for application as Available Series
1998-1 Finance Charge Collections.
SECTION 4.18 CTO DEFAULTS AND REMEDIES.
CTO Securityholders will have certain remedies available to them upon the
occurrence of a CTO Default. A "CTO Default" means any one of the following
events: (i) on two consecutive Distribution Dates the CTO Monthly Interest
accrued with respect to the related Interest Accrual Period is not paid in full
to the CTO Securityholders; or (ii) there is a CTO Charge-Off on three
consecutive Distribution Dates. If a CTO Default has occurred, upon the
direction of CTO Securityholders holding more than 50% of the CTO Invested
Amount: (i) the Specified CTO Reserve Amount will thereafter be equal to the
outstanding principal amount of the Collateralized Trust Obligations; or (ii)
following the payment in full of the Class A Invested and the Class B Invested
Amount, the Trustee will sell or cause to be sold, and the Trustee will pay the
proceeds to the Securityholders in final payment of all principal of and accrued
interest on such Series to be applied first to
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the CTO Invested Amount until paid in full and then to the Class D Invested
Amount until paid in full, an amount of Principal Receivables and the related
Finance Charge Receivables (or interests therein) up to 110% of the Invested
Amount at the close of business on such date; PROVIDED, that the amount of such
Principal Receivables shall not exceed the sum of (1) the product of (A) the
Transferor Percentage on the date of any such sale, (B) the aggregate
outstanding Principal Receivables on such date and (C) a fraction the numerator
of which is the Invested Amount on such date and the denominator of which is the
sum of the invested amounts of all Series and (2) the Invested Amount on such
date. The Transferor will be permitted to purchase such Receivables in such
case and will have a right of first refusal with respect thereto to the extent
of a bona fide offer by an unrelated third party for fair value. Any proceeds
of such sale in excess of such principal and interest paid will be paid to the
Transferor.
Section 7. ARTICLE V OF THE AGREEMENT. Article V of the Agreement
shall read in its entirety as follows and shall be applicable only to the Series
1998-1 Securities:
ARTICLE V
DISTRIBUTIONS AND REPORTS TO INVESTOR
SECURITYHOLDERS
SECTION 5.1 DISTRIBUTIONS. (a) On each Business Day, the Paying
Agent shall distribute (in accordance with the Settlement Statement delivered by
the Servicer to the Trustee and the Paying Agent pursuant to subsection 3.4(c))
to the Class A Securityholder of record on the preceding Record Date (other than
as provided in subsection 2.4(e) or in Section 12.3 respecting a final
distribution) such Securityholder's PRO RATA share (based on the aggregate
Undivided Interests represented by the Class A Security held by such
Securityholder) of amounts on deposit in the Distribution Account as are payable
to the Class A Securityholder pursuant to Section 4.11 of the Agreement and
amounts deposited in the Principal Account pursuant to subsection 9A(b) of this
Supplement and amounts on deposit in the Principal Account or Principal Funding
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Account pursuant to subsection 4.9(c)(i) of the Agreement by wire transfer to an
account or accounts designated by such Class A Securityholder by written notice
given to the Paying Agent not less than five days prior to such Business Day;
PROVIDED, HOWEVER, that the final payment in retirement of the Class A Security
will be made only upon presentation and surrender of the Class A Security at the
office or offices specified in the notice of such final distribution delivered
by the Trustee pursuant to Section 12.3.
(b) On each Distribution Date, the Paying Agent shall distribute (in
accordance with the Settlement Statement delivered by the Servicer to the
Trustee and the Paying Agent pursuant to subsection 3.4(c)) to each Class B
Securityholder of record on the preceding Record Date (other than as provided in
subsection 2.4(e) or in Section 12.3 respecting a final distribution) such
Securityholder's PRO RATA share (based on the aggregate Undivided Interests
represented by Class B Securities held by such Securityholder) of amounts on
deposit in the Distribution Account as are payable to the Class B
Securityholders pursuant to Sections 4.11 and 4.12 of the Agreement by wire
transfer to an account or accounts designated by such Class B Securityholder by
written notice given to the Paying Agent not less than five days prior to the
related Distributed Date; PROVIDED, HOWEVER, that the final payment in
retirement of the Class B Securities will be made only upon presentation and
surrender of the Class B Securities at the office or offices specified in the
notice of such final distribution delivered by the Trustee pursuant to Section
12.3.
(c) On each Distribution Date, the Paying Agent shall distribute (in
accordance with the Settlement Statement delivered by the Servicer to the
Trustee and the Paying Agent pursuant to subsection 3.4(c)) to each CTO
Securityholder of record on the preceding Record Date (other than as provided in
subsection 2.4(e) or in Section 12.3 respecting a final distribution) such
Securityholder's PRO RATA share (based on the aggregate Undivided Interests
represented by Collateralized Trust Obligations held by such Securityholder) of
amounts on deposit in the Distribution Account as are payable to the CTO
Securityholders pursuant to Sections 4.11 and 4.12 of the Agreement by wire
transfer to each CTO Securityholder to an account or accounts designated by
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such CTO Securityholder by written notice given to the Paying Agent not less
than five days prior to the related Distribution Date; PROVIDED, HOWEVER, that
the final payment in retirement of the Collateralized Trust Obligations will be
made only upon presentation and surrender of the Collateralized Trust
Obligations at the office or offices specified in the notice of such final
distribution delivered by the Trustee pursuant to Section 12.3.
SECTION 5.2 SECURITYHOLDERS' STATEMENT. (a) On the 20th day of each
calendar month (or if such day is not a Business Day the next succeeding
Business Day), the Paying Agent shall forward to each Securityholder and the
Rating Agencies a statement substantially in the form of Exhibit C prepared by
the Servicer and delivered to the Trustee and the Paying Agent on the preceding
Determination Date setting forth the following information:
(i) the total amount distributed;
(ii) the amount of such distribution allocable to Class A
Principal, Class B Principal, CTO Principal and Class D Principal;
(iii) the amount of such distribution allocable to Class A
Monthly Interest and Carryover Class A Monthly Interest, Class B Monthly
Interest and Carryover Class B Monthly Interest, CTO Monthly Interest and
Carryover CTO Monthly Interest and any amounts payable to the Class D
Securityholders with respect to interest;
(iv) the amount of Principal Collections received in the
Collection Account during the preceding Monthly Period and allocated in
respect of the Class A Security, the Class B Securities, the Collateralized
Trust Obligations and the Class D Security, respectively;
(v) the amount of Finance Charge Collections processed during the
preceding Monthly Period and allocated in respect of the Class A Security,
the Class B Securities, the Collateralized Trust Obligations and the Class
D Security, respectively;
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(vi) the aggregate amount of Principal Receivables, the Invested
Amount, the Class A Invested Amount, the Class B Invested Amount, the CTO
Invested Amount, the Class D Invested Amount, the Floating Percentage and,
during the Amortization Period, the Fixed/Floating Percentage, as of the
end of the day on the last day of the related Monthly Period;
(vii) the aggregate outstanding balance of Receivables which are
current, 30-59, 60-89, and 90 days and over delinquent as of the end of the
day on the last day of the related Monthly Period;
(viii) the aggregate Series Default Amount for the preceding
Monthly Period;
(ix) the aggregate amount of Class A Series Charge-Offs, Class B
Series Charge-Offs, CTO Series Charge-Offs and Class D Series Charge-Offs
for the preceding Monthly Period;
(x) the amount of the Servicing Fee for the preceding Monthly
Period;
(xi) the amount of unreimbursed Redirected Class B Principal
Collections, Redirected CTO Principal Collections and Redirected Class D
Principal Collections for the related Monthly Period;
(xii) the aggregate amount of funds in the Excess Funding Account
as of the last day of the Monthly Period immediately preceding the
Distribution Date;
(xiii) the Aggregate Interest Rate Caps Notional Amount and the
amount deposited in the Cap Proceeds Account during the related Monthly
Period.
(b) ANNUAL SECURITYHOLDERS' TAX STATEMENT. On or before January
31 of each calendar year, beginning with calendar year 1999, the Paying Agent
shall distribute to each Person who at any time during the preceding calendar
year was a Series 1998-1 Securityholder, a statement prepared by the Servicer
containing the information required to be contained in
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the regular report to Series 1998-1 Securityholders, as set forth in subclauses
(i), (ii) and (iii) above, aggregated for such calendar year or the applicable
portion thereof during which such Person was a Series 1998-1 Securityholder,
together with, on or before January 31 of each year, beginning in 1999, such
other customary information (consistent with the treatment of the Securities as
debt) as the Trustee or the Servicer deems necessary or desirable to enable the
Series 1998-1 Securityholders to prepare their tax returns. Such obligations of
the Trustee shall be deemed to have been satisfied to the extent that
substantially comparable information shall be provided by the Trustee pursuant
to any requirements of the Internal Revenue Code as from time to time in effect.
SECTION 7A. ARTICLE VI OF THE AGREEMENT. Article VI (except for
Sections 6.01 through 6.14 thereof) shall read in its entirety as follows and
shall be applicable only to the Series 1998-1:
ARTICLE VI
THE SECURITIES
SECTION 6.15 ADDITIONAL CLASS A INVESTED AMOUNTS. The Class A
Securityholder agrees, by acceptance of the Class A Security, that the
Transferor may from time to time, other than after a Pay Out Commencement Date,
request that such Class A Securityholder acquire on any Business Day additional
undivided interests in the Trust in specified amounts (such amounts, the
"Additional Class A Invested Amounts"); PROVIDED, HOWEVER, that if such an
increase in the Class A Invested Amount would cause a Trust Pay Out Event or a
Series 1998-1 Pay Out Event to occur, then the amount of the increase in the
Class A Invested Amount shall be limited on such Business Day to the maximum
increase in the Class A Invested Amount that may be obtained without causing
either a Trust Pay Out Event or a Series 1998-1 Pay Out Event to occur; and
PROVIDED FURTHER, that in no case shall the Class A Invested Amount be increased
above the Class A Maximum Invested Amount. The Additional Class A Invested
Amounts on any Business Day shall not exceed an amount equal to the excess of
the aggregate amount of Principal Receivables over the
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greater of (a) the sum of (i) the aggregate invested amount of each Series then
outstanding as of such day including the Class A Security (prior to the addition
of such Additional Class A Invested Amount) minus amounts on deposit in the
Principal Account or Principal Funding Account for any Series, if any, and (ii)
the Minimum Transferor Interest as of such day or (b) the Minimum Aggregate
Principal Receivables. The Class A Securityholder shall acquire such Additional
Class A Invested Amount, only if (a) the Class D Invested Amount following the
acquisition of such Additional Class A Invested Amount shall be at least equal
to the Stated Class D Amount (including increases to the Class D Invested Amount
pursuant to Section 6.16 of the Agreement), (b) the notional amount of the
Interest Rate Caps shall be at least equal to the Aggregate ABC Principal Amount
after giving effect to the proposed increase in the Class A Invested Amount, (c)
after giving effect to the proposed increase in the Class A Invested Amount no
Series 1998-1 Pay Out Event shall occur as a result of such increase and (d) the
conditions precedent to issuance of Commercial Paper or making a Revolving Loan
(as defined in the Liquidity Agreement) pursuant to the Liquidity Agreement have
been met. If the Class A Securityholder acquires such Additional Class A
Invested Amount, such Class A Securityholder shall pay an amount equal to the
Additional Class A Invested Amount to the Trustee and, in consideration of such
Securityholder's payment of the Additional Class A Invested Amount, the Servicer
shall appropriately note such Additional Class A Invested Amount (and the
increased Class A Invested Amount) on the next succeeding Servicer's report and
direct the Trustee in writing to pay to the Transferor an amount equal to the
remaining proceeds in an amount not to exceed such Additional Class A Invested
Amount, and the Invested Amount of the Class A Security will be equal to the
Invested Amount of the Class A Security stated in such Servicer's report.
The purchase of any Additional Class A Invested Amount shall be in an
aggregate principal amount that is not less than $1,000,000 or integral
multiples of $1,000,000 in excess thereof.
The outstanding amounts of any Additional Class A Invested Amount
purchased by the Class A Securityholder shall be evidenced by a Class A Security
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to be issued on the Closing Date substantially in the form of Exhibit A-1
hereto. The Class A Securityholder shall be and is hereby authorized to record
on the grid attached to its Class A Security (or at such Class A
Securityholder's option, in its internal books and records) the date and amount
of any Additional Class A Invested Amount purchased by it, and each repayment
thereof; PROVIDED that failure to make any such recordation on such grid or any
error in such grid shall not adversely affect the Class A Securityholder's
rights with respect to its Class A Invested Amount and its right to receive
interest payments in respect of the Class A Invested Amount held by the Class A
Securityholder.
SECTION 6.16 ADDITIONAL CLASS D INVESTED AMOUNTS.
(a) On any Business Day while any Series 1998-1 Securities are
outstanding, the Transferor may elect to increase the Class D Invested Amount
(such additional amounts, "Additional Class D Invested Amounts") by written
notice to the Trustee on such date which notice shall specify the effective date
and the amount of such increase in the Class D Invested Amount; PROVIDED,
HOWEVER, that if such an increase in the Class D Invested Amount would cause a
Trust Pay Out Event or a Series 1998-1 Pay Out Event to occur, then the amount
of the increase in the Class D Invested Amount shall be limited on such Business
Day to the maximum increase in the Class D Invested Amount that may be obtained
without causing either a Trust Pay Out Event or a Series 1998-1 Pay Out Event to
occur; and PROVIDED FURTHER, that in no case shall the Class D Invested Amount
be increased above the Class D Maximum Required Amount; PROVIDED FURTHER that no
such increase in the Class D Invested Amount shall be permitted under this
Section 6.16 unless: (i) after giving effect to the proposed increase in Class
D Invested Amount the Transferor Interest shall equal or exceed the Minimum
Transferor Interest, (ii) no Series 1998-1 Pay Out Event will occur as a result
of such increase in the Class D Invested Amount and (iii) such increase in the
Class D Invested Amount shall be made concurrently with an increase in the Class
A Invested Amount pursuant to Section 6.15 of the Agreement.
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SECTION 6.17 EXTENSION. (a) If a Pay Out Event has not occurred or
has occurred but has been remedied on or before the 30th Business Day preceding
the Extension Date, the Transferor, in its sole discretion, may deliver to the
Trustee on or before such date a notice substantially in the form of Exhibit E
(the "EXTENSION NOTICE") to this Series Supplement. The Trustee shall deliver a
copy of the Extension Notice and all documents annexed thereto to the Investor
Securityholders of record on the date of receipt thereof. The Transferor shall
state in the Extension Notice that it intends to extend the Revolving Period
until the later Amortization Period Commencement Date set forth in the Extension
Notice. The Extension Notice shall also set forth the next Extension Date. The
following documents shall be annexed to the Extension Notice: (i) a form of the
Opinion of Counsel addressed to the Transferor and the Trustee to the effect
that despite the extension the Trust will not be treated as an association
taxable as a corporation (the "EXTENSION TAX OPINION"); (ii) a form of the
Opinion of Counsel addressed to the Transferor and the Trustee (the "EXTENSION
OPINION") to the effect that (A) the Transferor has the corporate power and
authority to effect the Extension, (B) the extension has been duly authorized by
the Transferor, and (C) all conditions precedent to the Extension required by
this Section 6.17 have been fulfilled; (iii) a form of Investor Securityholder
Election Notice substantially in the form of Exhibit F (the "ELECTION NOTICE")
to this Series Supplement; and (iv) a schedule setting forth the Aggregate
Interest Rate Caps Notional Amount for the period or periods as indicated from
the Extension Date through the new Scheduled Series 1998-1 Termination Date,
each as specified in the related Extension Notice. In addition, the Extension
Notice shall state that any Investor Securityholder electing to approve the
Extension must do so on or before the Election Date (as defined below) by
returning the annexed Election Notice properly executed to the Trustee in the
manner described below. The Extension Notice shall also state that an Investor
Securityholder may withdraw any such election in whole or in part on or before
the Election Date, and the Transferor, in its sole discretion, may, prior to the
Election Date, withdraw its election to extend the Revolving Period. Any Holder
that elects to approve an Extension hereunder shall deliver a duly executed
Election Notice to the
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Trustee at the address designated in the Extension Notice on or before 3:00
p.m., New York City time, on or before the fifth Business Day preceding the
Extension Date (such Business Day constituting the "Election Date").
(b) No extension shall occur unless each of the following conditions
have been satisfied prior to the close of business on the Election Date: (i) no
Pay Out Event shall have occurred and be continuing, (ii) there shall have been
delivered to the Trustee (A) the Extension Tax Opinion and the Extension
Opinion, each addressed to the Trustee and (B)(1) written confirmation from each
Rating Agency rating the Class A Security that the Extension will not cause such
Rating Agency to lower or withdraw its then current rating of such Investor
Securities, (2) written confirmation from each Rating Agency rating the Class B
Securities that the Extension will not cause such Rating Agency to lower or
withdraw its then current rating of such Investor Securities, and (3) written
confirmation from each Rating Agency rating its Collateralized Trust Obligations
that the extension will not cause such Rating Agency to lower or withdraw its
then current rating of such Investor Securities, (iii) each of the holders of
the Class A Security, the Class B Securities, and the Collateralized Trust
Obligations shall have elected to approve the Extension by returning to the
Trustee on or before the Election Date the executed Election Notice annexed to
the Extension Notice delivered to the Securityholders pursuant to subsection
6.17(a) of the Agreement. If, by the close of business on the Election Date,
all of the conditions stated in this subsection 6.17(b) of the Agreement have
not been satisfied and all such documents delivered to the Trustee pursuant to
this subsection 6.17(b) of the Agreement are not in form satisfactory to it, or
if the Transferor has notified the Trustee, prior to the Election Date, that the
Transferor has exercised its right to withdraw its election of an Extension, no
Extension shall occur.
(c) The execution by the required number of Investor Securityholders
of the applicable Election Notice and return thereof to the Trustee by the
required Date and time, the continued election by the Transferor to extend the
Revolving Period at the Election Date, and the compliance with all of the
provisions of this Sec-
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tion 6.17, shall evidence an extension or renewal of the obligations represented
by the Investor Securities, and not a novation or extinguishment of such
obligations or a substitution with respect thereto.
(d) To the extent required by applicable laws and regulations, as
evidenced by an Opinion of Counsel delivered by the Transferor to the Trustee,
the provisions of this Section 6.17 shall or may be modified to comply with all
applicable laws and regulations in effect at the time of the Extension.
SECTION 8. SERIES 1998-1 PAY OUT EVENTS. If any one of the following
events shall occur with respect to the Series 1998-1 Securities:
(a) failure on the part of the Transferor (i) to make any
payment or deposit required to be made by the Transferor by the terms of (A) the
Agreement or (B) this Series Supplement, on or before the date occurring five
Business Days after the date such payment or deposit is required to be made
herein, (ii) to 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) duly to observe or perform in any material
respect any covenants or agreements of the Transferor set forth in the Agreement
or this Series Supplement, which failure has a material adverse effect on the
Series 1998-1 Securityholders and which continues unremedied for a period of 60
days (or, in the case of a covenant pursuant to Section 3A of this Series
Supplement, 30 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 the Holders of Series
1998-1 Securities evidencing Undivided Interests aggregating not less than 50%
of any of the Class A Invested Amount, the Class B Invested Amount or the CTO
Invested Amount, and continues to affect materially and adversely the interests
of the Series 1998-1 Securityholders for such period;
(b) any representation or warranty made by the Transferor in the
Agreement or this Series Supplement, (i) shall prove to have been incorrect in
any material respect when made, which continues to be incor-
86
rect 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 the Holders of the Series 1998-1 Securities evidencing Undivided
Interests aggregating more than 50% of any of the Class A Invested Amount, the
Class B Invested Amount or the CTO Invested Amount, and (ii) as a result of
which the interests of the Series 1998-1 Securityholders are materially and
adversely affected and continue to be materially and adversely affected for such
period; PROVIDED, HOWEVER, that a Series 1998-1 Pay Out Event pursuant to this
subsection 8(b) shall not be deemed to have occurred hereunder if the Transferor
has accepted reassignment of the related Receivable, or all of such Receivables,
if applicable, during such period in accordance with the provisions of the
Agreement;
(c) the average of the Portfolio Yields for any three
consecutive Monthly Periods is reduced to a rate which is less than the weighted
average Base Rates for such three consecutive Monthly Periods;
(d) (i) the Transferor Interest shall be less than the Minimum
Transferor Interest, (ii) the Series 1998-1 Percentage of the sum of the total
amount of Principal Receivables plus amounts on deposit in the Excess Funding
Account shall be less than (B) the sum of the Class A Outstanding Principal
Amount, the Class B Outstanding Principal Amount, the CTO Outstanding Principal
Amount and the Class D Outstanding Principal Amount or (iii) the total amount of
Principal Receivables and the amount on deposit in the Excess Funding Account
shall be less than the Minimum Aggregate Principal Receivables, in each case as
of any Determination Date;
(e) any Servicer Default shall occur which would have a material
adverse effect on the Series 1998-1 Securityholders; or
(f) the amount on deposit in the Excess Funding Account as a
percentage of the sum of the aggregate amount of Principal Receivables plus the
amount on deposit in the Excess Funding Account shall equal or
87
exceed 30% on the last day of three consecutive Monthly Periods;
then, in the case of any event described in subparagraph (a), (b) or (e), after
the applicable grace period, if any, set forth in such subparagraphs, the
Holders of Series 1998-1 Securities evidencing Undivided Interests aggregating
more than 50% of any of the Class A Invested Amount, the Class B Invested Amount
or the CTO Invested Amount by notice then given in writing to the Trustee, the
Transferor, the Cap Provider and the Servicer may declare that a pay out event
(a "Series 1998-1 Pay Out Event") has occurred as of the date of such notice,
and in the case of any event described in subparagraphs (c), (d) or (f), a
Series 1998-1 Pay Out Event shall occur without any notice or other action on
the part of the Trustee or the Series 1998-1 Securityholders immediately upon
the occurrence of such event.
SECTION 8A. CLASS A PAY DOWN PERIOD. If (i) a Class A Event of
Default shall have occurred and the Trustee shall have received written notice
from Lenders (as defined in the Liquidity Agreement) whose aggregate Voting
Interests (as defined in the Collateral Trust Agreement) exceed 50 percent of
the total Voting Interests or (ii) the principal amount of the MRI Note shall be
less than the MRI Note Required Amount or (iii) the Transferor shall sell,
transfer, assign, pledge, hypothecate, participate or otherwise convey or
encumber the MRI Note and such action shall not be completely revoked or
otherwise remedied within five days, or (iv) the Transferor shall permit to
exist any Lien (other than a Permitted Lien) on the MRI Note not created with
the Transferor's consent and such Lien shall not be completely removed, revoked
or otherwise remedied within 30 days, then the "Class A Pay Down Period" shall
commence without notice or any action on the part of the Trustee or the Class A
Securityholder immediately upon the occurrence of such event and continue until
the earlier of (i) the payment in full of the Class A Security and (ii) the
Amortization Period Commencement Date.
SECTION 9. SERIES 1998-1 TERMINATION. The right of the Series 1998-1
Securityholders to receive payments from the Trust will terminate on the first
Business Day following the Series 1998-1 Termination Date unless such Series is
an Affected Series as speci-
88
fied in Section 12.1(c) of the Agreement and the sale contemplated therein has
not occurred by such date, in which event the Series 1998-1 Securityholders
shall remain entitled to receive proceeds of such sale when such sale occurs.
SECTION 9A. CLASS A PRE-PAYMENT. (a) During the Revolving Period
(except for any portion of the Revolving Period during a Class A Pay Down
Period), the Holder of the Exchangeable Transferor Security may specify upon an
Exchange, pursuant to Section 6.9 of the Agreement, that the purchaser of a
newly issued Series deposit payment therefor, in full or in part, in the
Defeasance Account in an amount not to exceed the Class A Invested Amount on
such date. On the Closing Date the Trustee shall, for the benefit of the Class
A Securityholder, establish and maintain with a Qualified Institution in the
name of the Trust, a certain segregated trust account (the "Defeasance
Account"). Any amounts on deposit in the Defeasance Account on any Business Day
shall be invested at the direction of the Servicer in Cash Equivalents which
mature on the next succeeding Business Day. On each Business Day following a
deposit of funds to the Defeasance Account, the aggregate proceeds of any such
investment shall be deposited in the Collection Account and treated as
Investment Proceeds for application as Available Series 1998-1 Finance Charge
Collections.
(b) Upon the direction of the Servicer any amounts, up to the
Class A Invested Amount, on deposit in the Defeasance Account may, or upon the
occurrence of a Pay Out Event the amount on deposit in the Defeasance Account
shall, be deposited in the Principal Account for distribution on the next
Business Day to be applied to the payment of Class A Principal. Such amounts
shall be applied and paid in accordance with Sections 4.7, 4.12 and 5.1 of the
Agreement. Subsequent to any reduction of the Class A Invested Amount as a
result of payments pursuant to this Section 9A, the Class A Invested Amount may
be increased pursuant to the terms and conditions set forth in Section 6.15 of
the Agreement.
SECTION 10. LEGENDS; TRANSFER AND EXCHANGE; RESTRICTIONS ON TRANSFER
OF SERIES 1998-1 SECURITIES; TAX TREATMENT.
89
(a) Each Class A Security shall bear a legend substantially in
the following form:
THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"). THIS SECURITY HAS NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAW OF ANY
STATE AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED UNLESS
REGISTERED PURSUANT TO OR EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT
AND ANY OTHER APPLICABLE SECURITIES LAW. THE TRANSFER OF THIS SECURITY IS
SUBJECT TO CERTAIN CONDITIONS SET FORTH IN THE POOLING AND SERVICING
AGREEMENT REFERRED TO HEREIN.
(b) Each Class A Security, Class B Security, Collateralized
Trust Obligation and Class D Security shall bear a legend
substantially in the following form:
EACH PURCHASER REPRESENTS AND WARRANTS FOR THE BENEFIT OF METRIS
RECEIVABLES, INC. AND THE TRUSTEE THAT SUCH PURCHASER IS NOT (I) AN
EMPLOYEE BENEFIT PLAN (AS DEFINED IN SECTION 3(3) OF THE EMPLOYEE
RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA")) THAT IS
SUBJECT TO THE PROVISIONS OF TITLE I OF ERISA, (II) A PLAN DESCRIBED IN
SECTION 4975(e)(1) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE
"CODE") THAT IS SUBJECT TO SECTION 4975 OF THE CODE, (III) A GOVERNMENTAL
PLAN, AS DEFINED IN SECTION 3(32) OF ERISA, SUBJECT TO ANY FEDERAL, STATE
OR LOCAL LAW WHICH IS, TO A MATERIAL EXTENT, SIMILAR TO THE PROVISIONS OF
SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE, (IV) AN ENTITY WHOSE
UNDERLYING ASSETS INCLUDE "PLAN ASSETS" (AS DEFINED IN 29 C.F.R. SECTION
2510.3-101 OR OTHERWISE UNDER ERISA) BY REASON OF A PLAN'S INVESTMENT IN
THE ENTITY OR (V) A PERSON INVESTING "PLAN ASSETS" OF ANY SUCH PLAN
(INCLUDING WITHOUT LIMITATION, FOR PURPOSES OF CLAUSE (IV) AND THIS CLAUSE
(V), AS APPLICABLE, AN INSURANCE COMPANY GENERAL ACCOUNT, BUT EXCLUDING ANY
ENTITY REGISTERED UNDER THE INVESTMENT COMPANY ACT OF 1940, AS AMENDED).
90
Each Security Owner by virtue of its beneficial interest in the Class
A Security, the Class B Securities or the Collateralized Trust Obligations, as
applicable, shall be deemed to have made the representations and warranties
stated in such legend.
(c) Each Class B Security and each Collateralized Trust Obligation
that is a Global Security deposited with DTC, or a custodian on behalf of DTC,
shall bear the following legend:
UNLESS THIS SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER
OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
SECURITY 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.
(d) Each Class B Security and each Collateralized Trust Obligation
that is issued pursuant to Rule 144A shall bear the following legend:
THIS SECURITY HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY
STATE SECURITIES LAWS. THE HOLDER HEREOF, BY PURCHASING THIS
SECURITY, AGREES THAT THIS SECURITY MAY BE REOFFERED, RESOLD, PLEDGED
OR OTHERWISE TRANSFERRED ONLY IN COMPLIANCE WITH THE SECURITIES ACT
AND OTHER APPLICABLE LAWS AND ONLY (1) PURSUANT TO RULE 144A UNDER THE
SECURITIES ACT TO A PERSON WHO THE HOLDER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER ("QIB") WITHIN THE MEANING OF RULE 144A,
PURCHASING FOR ITS OWN ACCOUNT, OR A QIB PURCHASING FOR THE ACCOUNT OF
A QIB, WHOM THE HOLDER HAS INFORMED, IN EACH CASE, THAT SUCH REOFFER,
RESALE, PLEDGE OR OTHER TRANSFER IS
91
BEING MADE IN RELIANCE ON RULE 144A OR (2) IN AN OFFSHORE TRANSACTION IN
ACCORDANCE WITH RULE 903 OR RULE 904 OF REGULATION S UNDER THE SECURITIES
ACT. EACH SECURITY OWNER BY ACCEPTING A BENEFICIAL INTEREST IN THIS
SECURITY, UNLESS SUCH PERSON ACQUIRED THIS SECURITY IN A TRANSFER DESCRIBED
IN CLAUSE (2) ABOVE, IS DEEMED TO REPRESENT THAT IT IS EITHER A QIB
PURCHASING FOR ITS OWN ACCOUNT OR A QIB PURCHASING FOR THE ACCOUNT OF
ANOTHER QIB.
Each Class B Security and each Collateralized Trust Obligation that is
issued pursuant to Regulation S shall bear the following legend:
THIS SECURITY HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND PRIOR
TO THE DATE THAT IS 40 DAYS AFTER THE LATER OF THE COMMENCEMENT OF THE
OFFERING AND THE CLOSING DATE MAY NOT BE OFFERED, SOLD, PLEDGED OR
OTHERWISE TRANSFERRED IN THE UNITED STATES OR TO A U.S. PERSON EXCEPT
PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT.
(e) Each Class D Security will bear a legend substantially in
the following form:
THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"). THIS SECURITY HAS NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAW OF ANY
STATE AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED UNLESS
REGISTERED PURSUANT TO OR EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT
AND ANY OTHER APPLICABLE SECURITIES LAW. METRIS RECEIVABLES, INC. SHALL BE
PROHIBITED FROM TRANSFERRING ANY INTEREST IN OR PORTION OF THIS SECURITY
UNLESS, PRIOR TO SUCH TRANSFER, IT SHALL HAVE DELIVERED TO THE TRUSTEE AN
OPINION OF COUNSEL TO THE EFFECT THAT SUCH PROPOSED TRANSFER WILL NOT
ADVERSELY AFFECT THE FEDERAL, MINNESOTA OR DELAWARE INCOME TAX
CHARACTERIZATION OF ANY OUTSTANDING SERIES OF INVESTOR SECURITIES OR THE
TAXABILITY (OR TAX CHAR-
92
ACTERIZATION) OF THE TRUST UNDER FEDERAL, MINNESOTA OR DELAWARE INCOME TAX
LAWS. THE TRANSFER OF THIS SECURITY IS SUBJECT TO CERTAIN CONDITIONS SET
FORTH IN THE POOLING AND SERVICING AGREEMENT REFERRED TO HEREIN.
(f) Upon surrender for registration of transfer of a Class B
Security or Collateralized Trust Obligation at the office of the Transfer Agent
and Registrar, accompanied by a certification by the Class B Securityholder or
CTO Securityholder, as applicable, substantially in the form attached as Exhibit
D if the new purchaser is a "qualified institutional buyer" as defined in Rule
144A under the Securities Act of 1933 and by a written instrument of transfer in
the form approved by the Transferor and the Trustee (it being understood that,
until notice to the contrary is given to Class B Securityholders or CTO
Securityholders, the Transferor and the Trustee shall each be deemed to have
approved the form of instrument of transfer, if any printed on any definitive
Class B Security or Collateralized Trust Obligation), executed by the registered
owner, in person or by such Class B Securityholder's or CTO Securityholder's
attorney thereunto duly authorized in writing, such Class B Security or
Collateralized Trust Obligation shall be transferred upon the register, and the
Transferor shall execute, and the Trustee shall authenticate and deliver, in the
name of the designated transferees one or more new registered Collateralized
Trust Obligations of any authorized denominations and of a like aggregate
principal amount and tenor. Transfers and exchanges of Class B Securities or
Collateralized Trust Obligations shall be subject to such restrictions as shall
be set forth in the text of the Class B Securities or Collateralized Trust
Obligations and such reasonable regulations as may be prescribed by the
Transferor. Successive registrations and registrations of transfers as
aforesaid may be made from time to time as desired, and each such registration
shall be noted on the register.
(g) Metris Receivables, Inc. shall be prohibited from
transferring any interest in or portion of the Class D Security unless, prior to
such Transfer, it shall have delivered to the Trustee an Opinion of Counsel to
the effect that such proposed Transfer will not adversely affect the Federal,
Minnesota or Delaware
93
income tax characterization of any outstanding Series of Investor Securities or
the taxability (or tax characterization) of the Trust under Federal, Minnesota
or Delaware income tax laws. In no event shall any interest in or portion of
the Class D Security be transferred to MCI. As a condition to transfer of an
interest in or portion of the Class D Security the transferee shall be required
to agree not to institute against, or join any other Person in instituting
against, the Trust any bankruptcy, reorganization, arrangement, insolvency or
liquidation proceeding, or other proceeding under any federal or state
bankruptcy or similar law, for one year and one day after all Investor
Securities are paid in full. The Transferor shall provide prompt written notice
to the Rating Agencies of any such transfer.
(h) No transfer of a Class B Security, Collateralized Trust
Obligation or Class D Security will be permitted to be made to a Benefit Plan
unless such Benefit Plan, at its expense, delivers to the Trustee, the Servicer
and the Transferor an opinion of counsel satisfactory to them to the effect that
the purchase or holding of a Class B Security, Collateralized Trust Obligation
or Class D Security by such Benefit Plan will not result in the assets of the
Trust being deemed to be "assets of the Benefit Plan" and subject to the
prohibited transaction provisions of ERISA and the Code and will not subject the
Trustee, the Transferor or the Servicer to any obligation in addition to those
undertaken in the Agreement. Unless such opinion is delivered, each person
acquiring a Class B Security, Collateralized Trust Obligation or Class D
Security or the beneficial ownership of a Class B Security, Collateralized Trust
Obligation or Class D Security will be deemed to represent to the Trustee, the
Transferor and the Servicer that it is not (i) an employee benefit plan (as
defined in Section 3(3) of ERISA) that is subject to the provisions of Title I
of ERISA, (ii) a plan described in Section 4975(e)(1) of the Code, or (iii) any
entity whose underlying assets include plan assets by reason of a plan's
investment in the entity.
(i) The Class B Securityholders or CTO Securityholders shall
comply with their obligations under Section 3.7 of the Agreement with respect to
the tax treatment of the Class B Securities or Collateral-
94
ized Trust Obligations, except to the extent that a relevant taxing authority
has disallowed such treatment.
(j) In accordance with Section 6.2 of the Agreement, no sale,
assignment, participation, pledge, hypothecation, transfer or other disposition
(a "Transfer") of a Class A Security(or any interest therein) shall be made
unless the Transferor shall have granted its prior consent thereto, which
consent may not be unreasonably withheld; provided, however, that for purposes
of this sentence, it shall in all cases be reasonable for the Transferor to
withhold consent to such proposed sale, assignment, participation, pledge,
hypothecation, transfer or other disposition of all or any part of a Class A
Security (or any interest therein) if the transaction would, if effected, give
rise to any adverse tax consequence or if such Transfer would create more than
an insubstantial risk that the Trust would be classified for federal or any
applicable state tax purposes as an association or publicly traded partnership
taxable as a corporation, each as determined in the sole and absolute discretion
of the Transferor; provided, further, that any attempted Transfer that would
cause the number of Targeted Holders (as defined herein) to exceed one-hundred
shall be void.
(k) Each purchaser of an interest in a Class A Security (other
than Metris Owner Trust) shall certify that it is a Person who is either (A)(i)
a citizen or resident of the United States, (ii) a corporation or other entity
organized in or under the laws of the United States or any political subdivision
thereof or (iii) a Person not described in (i) or (ii) whose ownership of the
Class A Securities is effectively connected with such person's conduct of a
trade or business within the United States (within the meaning of the Internal
Revenue Code) and whose ownership of any interest in a Class A Security will not
result in any withholding obligation with respect to any payments with respect
to the Class A Securities by any Person or (B) an estate the income of which is
includible in gross income for United States federal income tax purposes or any
trust if a court within the United States is able to exercise primary
supervision over the administration of the trust and one or more United States
fiduciaries have the authority to control all substantial decisions of the
trust. Each such purchaser shall agree that if they are
95
a Person described in clause (A)(iii) above, they will furnish to the Person
from whom they are acquiring a Class A Security, the Servicer and the Trustee, a
properly executed U.S. Internal Revenue Service Form 4224 and a new Form 4224,
or any successor applicable form, upon the expiration or obsolescence of any
previously delivered form (and such other certifications, representations or
opinions of counsel as may be requested by the Transferor, the Servicer or the
Trustee).
(l) Each purchaser of an interest in a Class A Security shall
certify that if it is not created or organized under the laws of the United
States or any State thereof (including the District of Columbia) it will, upon
written notice by the Transferor that the Transferor intends, pursuant to
Section 1446 or other applicable section of the Internal Revenue Code, to
withhold U.S. tax (a "Withholding Tax") from amounts paid or accruing hereunder
to such purchaser (such determination being a "Withholding Event"), for tax
years for which the purchaser has already filed U.S. federal income tax returns
(each a "Prior Tax Year") prior to proper notice of such Withholding Event,
provide (A) a signed officer's certificate of such purchaser stating that
amounts paid or accruing hereunder have been included in such purchaser's U.S.
federal income tax returns for each such Prior Tax Year, which certificate may
be relied on by the Transferor in asserting to the Internal Revenue Service the
applicability of Section 1463 of the Internal Revenue Code with respect to any
Withholding Tax for each such Prior Tax Year and (B) provide information to the
Transferor or, at the option of such purchaser, to the Internal Revenue Service
in support of the application of Section 1463 of the Internal Revenue Code for
each such Prior Tax Year.
(m) Each purchaser of an interest in a Class A Security
(other than Metris Owner Trust)shall certify that it is not and will not become
a partnership, subchapter S corporation or grantor trust for United States
federal income tax purposes for so long as such purchaser holds a beneficial
interest in such Class A Security.
(n) Each purchaser of an interest in a Class A Security shall
certify that it has neither acquired nor will it Transfer the Class A Security
(or any interest therein) or cause the Class A Security (or any
96
interest therein) to be marketed on or through (i) an "established securities
market" within the meaning of Section 7704(b)(1) of the Internal Revenue Code,
and any treasury regulation thereunder, including, without limitation, an
over-the- counter market or an interdealer quotation system that regularly
disseminates firm buy or sell quotations or (ii) a "secondary market" within the
meaning of Section 7704(b)(2) of the Internal Revenue Code and any treasury
regulation thereunder, including a market wherein the Class A Securities (or any
interest therein) are regularly quoted by any person making a market in such
interests and a market wherein any person regularly makes available bid or offer
quotes with respect to the Class A Securities (or any interest therein) and
stands ready to effect buy or sell transactions at the quoted prices for itself
or on behalf of others. Such purchaser shall acknowledge that it is aware that
the opinion of special tax counsel to the Transferor regarding the Trust's
status is dependent in part on the accuracy of the preceding sentence.
(o) No subsequent transfer of a Class A Security is permitted
unless (i) such transfer is of a Class A Security with a minimum principal
amount of at least $500,000 and (ii) the condition specified in clause (j) above
shall have been satisfied; provided, that any attempted transfer that would
cause the number of Targeted Holders to exceed one-hundred shall be void.
SECTION 11. RATIFICATION OF AGREEMENT. (a) As supplemented by this
Series Supplement, the Agreement is in all respects ratified and confirmed and
the Agreement as so supplemented by this Series Supplement shall be read, taken,
and construed as one and the same instrument.
(b) For so long as any of the Class B Securities or the
Collateralized Trust Obligations are outstanding, each of the Transferor, the
Servicer and the Trustee agree to cooperate with each other to provide to any
Class B Securityholders or CTO Securityholders, as applicable, and to any
prospective purchaser of Class B Securities or Collateralized Trust Obligations
designated by such a Class B Securityholder or CTO Securityholder upon the
request of such Class B Securityholder or CTO Securityholder or prospective
97
purchaser, any information required to be provided to such holder or prospective
purchaser to satisfy the condition set forth in Rule 144A(d)(4) under the
Securities Act.
SECTION 12. COUNTERPARTS. This Series Supplement may be executed
in any number of counterparts, each of which so executed shall be deemed to be
an original, but all of such counterparts shall together constitute but one and
the same instrument.
SECTION 13. GOVERNING LAW. THIS SERIES SUPPLEMENT 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.
SECTION 14. INSTRUCTIONS IN WRITING. All instructions or other
communications given by the Servicer or any other person to the Trustee pursuant
to this Series Supplement shall be in writing, and, with respect to the
Servicer, may be included in a Daily Report or Settlement Statement.
SECTION 15. AMENDMENTS. Solely with respect to any amendment
pursuant to Section 13.1(b) of the Agreement and any consent required pursuant
thereto from the Holders of Investor Securities of Series 1998-1, this Series
Supplement and the Agreement may be amended from time to time by the Servicer,
the Transferor and the Trustee with the consent of the Holders of Investor
Securities evidencing Undivided Interests aggregating (x) not less than 66 2/3%
of the Invested Amount of the Series 1998-1 Securities and (y) not less than 51%
of each of the Class A Invested Amount, the Class B Invested Amount and the CTO
Invested Amount to the extent that such classes would be adversely affected, for
the purpose of adding any provisions to or changing in any manner or eliminating
any of the provisions of this Series Supplement or the Agreement or of modifying
in any manner the rights of the Securityholders of any Class of the Series
1998-1 Securities then issued and outstanding; PROVIDED, HOWEVER, that no such
amendment under this Section 15 shall (i) reduce in any manner the amount of, or
delay the timing of, distributions which
98
are required to be made on any Investor Security of such Class without the
consent of all of the related Investor Securityholders; (ii) change the
definition of or the manner of calculating the interest of any Investor Security
of such Class without the consent of the related Investor Securityholders or
(iii) reduce the aforesaid percentage required to consent to any such amendment,
in each case without the consent of all such Investor Securityholders.
SECTION 16. INCREASED COSTS. (a) Notwithstanding any other
provision herein, if after the Effective Date (as defined in the Liquidity
Agreement), any change in applicable law or regulation or in the interpretation
or administration thereof by any Governmental Authority charged with the
interpretation or administration thereof (whether or not having the force of
law) shall change the basis of taxation of payments to any Class B
Securityholder or CTO Securityholder that is a commercial bank or controlled by
a commercial bank of the principal of or interest on any Class B Certificate or
Collateralized Trust Obligation (other than changes in respect of taxes imposed
on the overall net income of such Securityholder by the jurisdiction in which
such Securityholder has its principal office or by any political subdivision or
taxing authority therein), or shall impose, modify or deem applicable any
reserve, special deposit or similar requirement against assets of, deposits with
or for the account of or credit extended by such Securityholder, or shall impose
on such Securityholder or the London interbank market any other condition
affecting this Series Supplement or any Class B Certificate or Collateralized
Trust Obligation owned by such Securityholder, and the result of any of the
foregoing shall be to increase the cost to such Securityholder of holding any
Class B Certificate or Collateralized Trust Obligation or to reduce the amount
of any sum received or receivable by such Securityholder hereunder (whether of
principal or interest) in respect thereof by an amount deemed by such
Securityholder to be material, then the Trustee will pay to such Securityholder
upon demand such additional amount or amounts as will compensate such
Securityholder for such additional costs incurred or reduction
suffered. Any Class B Securityholder or CTO Securityholder claiming any
additional amounts payable pursuant to this Section 16 shall use reasonable
efforts (consistent with legal
99
and regulatory restrictions) to file any certificate or document requested by
the Transferor or the Trustee or to change the jurisdiction of its applicable
lending office if the making of such a filing or change would avoid the need for
or reduce the amount of any additional amount which may thereafter accrue and
would not, in the sole determination of such Securityholder, be otherwise
disadvantageous to such Securityholder.
(b) If any Class B Securityholder or CTO Securityholder that
is a commercial bank or controlled by a commercial bank shall have determined
that the adoption after the Effective Date (as defined in the Liquidity
Agreement) of any other law, rule, regulation or guideline regarding capital
adequacy, or any change in any of the foregoing or in the interpretation or
administration of any of the foregoing by any Governmental Authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or compliance by any such Securityholder (or any lending office of such
Securityholder) or any such Securityholder's holding company with any request or
directive regarding capital adequacy (whether or not having the force of law) of
any such authority, central bank or comparable agency, has or would have the
effect of reducing the rate of return on such Securityholder's capital or on the
capital of such Securityholder's holding company, if any, as a consequence of
this Series Supplement or the Class B Certificates or Collateralized Trust
Obligations owned by such Securityholder to a level below that which such
Securityholder or such Securityholder's holding company could have achieved but
for such adoption, change or compliance (taking into consideration such
Securityholder's policies and the policies of such Securityholder's holding
company with respect to such capital adequacy) by an amount deemed by such
Securityholder to be material, then from time to time the Trustee shall pay to
such Securityholder such additional amount or amounts as will compensate such
Securityholder or such Trustee's holding company for any such reduction suffered
after the date hereof.
(c) A certificate of a Class B Securityholder or CTO
Securityholder setting forth such amount or amounts, along with such
Securityholder's method of computation of such amounts, as shall be necessary to
compensate such Securityholder as specified in
100
paragraph (a) or (b) above, as the case may be, shall be delivered to the
Trustee and shall be conclusive absent manifest error. The Trustee shall pay
each Securityholder the amount shown as due on any such Security delivered by it
no later than the Distribution Date immediately succeeding the date of delivery
of such Security.
(d) Failure on the part of any eligible Class B
Securityholder or CTO Securityholder to demand compensation for any increased
costs or reduction in amounts received or receivable or reduction in return on
capital with respect to any period shall not constitute a waiver of such
Securityholder's right to demand compensation with respect to such period or any
other period; PROVIDED, HOWEVER, that no Securityholder shall be entitled to
compensation for any such increased costs or reductions unless it shall have
submitted a certificate under paragraph (c) above with respect thereto not more
than 90 days after the date that such Securityholder knows that such increased
costs have been incurred or such reduction suffered. Notwithstanding any other
provision of this Section 16, no Securityholder shall demand compensation for
any increased cost or reduction referred to above if it shall not at the time be
the general policy of such Securityholder to demand such compensation in similar
circumstances under comparable provisions of other credit agreements, and each
Securityholder shall in good faith endeavor to allocate increased costs or
reductions fairly among all of its affected commitments and credit extensions
(whether or not it seeks compensation from all affected borrowers). The
protection of this Section 16 shall be available to each Class B Securityholder
or CTO Securityholder that is a commercial bank or controlled by a commercial
bank regardless of any possible contention of the invalidity or inapplicability
of the law, rule, regulation, guideline or other change or condition which shall
have occurred or been imposed.
(e) The amounts owing by the Trustee pursuant to this Section
16 shall be payable solely from amounts available therefor pursuant to
subsections 4.9(a)(xvi) and (xvii) of the Agreement.
SECTION 17. REPLACEMENT OF CERTAIN INVESTOR SECURITYHOLDERS. In
the event that (i) a Class B
101
Securityholder or CTO Securityholder requests compensation pursuant to Section
16, (ii) a Holder of Investor Securities (a "Non-Consenting Holder") does not
consent to an amendment, supplement, waiver or other modification with respect
to this Series Supplement or to the Agreement, as provided in Section 15 within
the time period specified for delivery of such consent pursuant to the
documentation associated therewith and the amendment, supplement, waiver or
other modification is not approved in accordance with said Section 15, or (iii)
an Investor Securityholder fails to approve any Extension requested by the
Transferor pursuant to Section 6.17 of the Agreement, the Transferor shall have
the right to replace such Holder with a Person or Persons meeting the
requirements of Section 10, by giving three Business Days prior written notice
to the Trustee and such Holder, specifying the date on which such Holder's
Securities shall be transferred; PROVIDED, HOWEVER that, (a) such transfer shall
not conflict with any law, rule or regulation or order of any court or other
Governmental Authority, and (b) in the case of clause (ii) above, all
Non-Consenting Holders with respect to any one proposed amendment, supplement,
waiver or other modification or Extension must be concurrently replaced in
accordance with this Section 17. In the event of the replacement of an Investor
Securityholder, such Investor Securityholder agrees to assign, without recourse,
its rights and obligations hereunder to a replacement Holder selected by the
Transferor upon payment by the replacement Holder to such Investor
Securityholder in immediately available funds of the principal amount of such
Investor Securityholder's outstanding Securities and any interest accrued and
unpaid thereon and all other amounts owing to such Investor Securityholder
hereunder and to execute and/or deliver any certification or other document
required to be delivered pursuant to Section 10.
SECTION 18. MRI NOTE. The Transferor has received a note from
Metris Companies Inc. in the amount of $33,000,000 (such note, together with any
additional notes of Metris Companies Inc. held by the Transferor at any time
other than a certain demand note in the amount of $10,000,000 issued on
September 16, 1996, the "MRI Note"). The Transferor hereby agrees that at no
time shall the principal amount of the MRI Note be less than $31,000,000 (the
"MRI Note Required Amount"). The MRI
102
Note may not be sold, transferred, assigned, pledged, hypothecated, participated
or otherwise conveyed or encumbered, nor may the Transferor grant any security
interest in the MRI Note.
103
IN WITNESS WHEREOF, the Transferor, the Servicer and the Trustee have
caused this Series 1998-1 Supplement to be duly executed by their respective
officers as of the day and year first above written.
METRIS RECEIVABLES, INC.
Transferor
By:
-----------------------
Name:
Title:
DIRECT MERCHANTS CREDIT CARD BANK,
NATIONAL ASSOCIATION
Servicer
By:
-----------------------
Name:
Title:
THE BANK OF NEW YORK (DELAWARE)
Trustee
By:
-----------------------
Name:
Title:
EXHIBIT A-1
[FORM OF VARIABLE FUNDING SECURITY]
THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"). THIS SECURITY HAS NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAW OF ANY STATE AND
MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED UNLESS
REGISTERED PURSUANT TO OR EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT
AND ANY OTHER APPLICABLE SECURITIES LAW. THE TRANSFER OF THIS SECURITY IS
SUBJECT TO CERTAIN CONDITIONS SET FROTH IN THE POOLING AND SERVICING
AGREEMENT REFERRED TO HEREIN.
EACH PURCHASER REPRESENTS AND WARRANTS FOR THE BENEFIT OF METRIS
RECEIVABLES, INC. AND THE TRUSTEE THAT SUCH PURCHASER IS NOT (I) AN
EMPLOYEE BENEFIT PLAN (AS DEFINED IN SECTION 3(3) OF THE EMPLOYEE
RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA")) THAT IS
SUBJECT TO THE PROVISIONS OF TITLE I OF ERISA, (II) A PLAN DESCRIBED IN
Section 4975 (E)(1) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE
"CODE") THAT IS SUBJECT TO SECTION 4975 OF THE CODE, (III) A GOVERNMENTAL
PLAN, AS DEFINED IN SECTION 3(32) OF ERISA, SUBJECT TO ANY FEDERAL, STATE
OR LOCAL LAW WHICH IS, TO A MATERIAL EXTENT, SIMILAR TO THE PROVISIONS OF
SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE, (IV) AN ENTITY WHOSE
UNDERLYING ASSETS INCLUDE "PLAN ASSETS" (AS DEFINED IN 29 C.F.R. SECTION
2510.3-101 OR OTHERWISE UNDER ERISA) BY REASON OF A PLAN'S INVESTMENT IN
THE ENTITY OR (V) A PERSON INVESTING "PLAN ASSETS" OF ANY SUCH PLAN
(INCLUDING WITHOUT LIMITATION, FOR PURPOSES OF CLAUSE (IV) AND THIS CLAUSE
(V) AS APPLICABLE, AN INSURANCE COMPANY GENERAL ACCOUNT, BUT EXCLUDING ANY
ENTITY REGISTERED UNDER THE INVESTMENT COMPANY ACT OF 1940, AS AMENDED).
No.___ Percentage Interest: ___%
METRIS MASTER TRUST
VARIABLE FUNDING TRUST
SECURITY, SERIES 1998-1, CLASS A
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 open end or revolving credit receivables generated
or to be generated by Direct Merchants Credit Card Bank, National Association
(the "Bank" 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 Metris Receivables,
Inc., the Bank or any affiliate of either of them.)
This certifies that _________ (the "Securityholder") is the registered
owner of a fractional undivided interest in the Metris Master Trust (the
"Trust") issued pursuant to the Amended and Restated Pooling and Servicing
Agreement, dated as of July 30, 1998 (the "Pooling and Servicing Agreement";
such term to include any amendment thereto) by and between Metris Receivables,
Inc., as Transferor (the "Transferor"), the Bank , as the Servicer, and The Bank
of New York (Delaware), as Trustee (the "Trustee"), and the Series 1998-1
Supplement, dated as of July 30, 1998 (the "Series 1998-1 Supplement"), among
the Transferor, the Bank, as Servicer and the Trustee (the Pooling and Servicing
Agreement, as supplemented by the Series 1998-1 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 (i) the Trust Property
(as defined in the Agreement) and (ii) the property described in Section 3A of
the Series 1998- 1 Supplement and Section 4.4 of the Agreement.
This Security does not purport to summarize the Agreement and reference
is made to the 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 Security is entitled the "Metris Master Trust Variable Funding
Trust Security, Series 1998-1, Class A" (the "Class A Security"), and 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 Securityholder by virtue of the acceptance hereof assents and by which the
Securityholder is bound. In the case of any conflict between terms specified in
this Security and terms specified in the Agreement, the terms of the Agreement
shall govern.
The Transferor has structured the Agreement, the Class A Security, the
Metris Master Trust Floating Rate Asset Backed Trust Securities, Series 1998-1,
Class B (the "Class B Securities") and the Metris Master Trust Asset Backed
Collateralized Trust Obligation, Series 1998-1 (the "Collateralized Trust
Obligations") with the intention that the Class A Security, the Class B
Securities and the Collateralized Trust Obligations will qualify under
applicable tax law as indebtedness, and both the Transferor and each holder of a
Class A Security (a "Class A Securityholder") or any interest therein by
acceptance of its Security or any interest therein, agrees to treat the Class A
Security for purposes of federal, state and local income or franchise taxes and
any other tax imposed on or measured by income, as indebtedness.
Except in limited circumstance described in the third succeeding
paragraph no principal will be payable to the Class A Securityholder before the
first Business Day in the Amortization Period. No principal will be payable to
the Class B Securityholders, or CTO Securityholders until all principal payments
have been made to the Class A Securityholders. Except in connection with a
payment of Class D Daily Principal, the Class D Security will not have the right
to receive payments of principal until the Class A Invested Amount, the Class B
Invested Amount and the CTO Invested Amount have been paid in full.
Upon issuance, the Class A Security represents the right to receive, on
each Business Day, an amount equal to the lesser of (x) the Available Series
1998-1 Finance Charge Collections for such Business Day and (y) the sum of (A)
the lesser of (I) the sum of (a) the Total Program Fees, and (b) the product of
(i) the Class A Interest Rate, (ii) a fraction the numerator of which is the
actual number of days from and including the next preceding Business Day to but
excluding such Business Day and the denominator of which is 365 or 366, as the
case may be, and (iii) the Class A Outstanding Principal Amount as of the closed
of business on the preceding
Business Day and (II) the product of (X) the greater of LIBOR as then in effect
plus 0.675% per annum and 10% per annum and (Y) a fraction the numerator of
which is the number of days from and including the preceding Business Day to but
excluding such Business Day and the denominator of which is the actual number of
days in the then current calendar year and (Z) the Class A Outstanding Principal
Balance as of the close of business on the preceding Business Day plus (B) the
excess, if any, of the amount payable to the Class A Securityholders pursuant to
clause (A) on each prior Business Day over the amount which has been paid to the
Class A Securityholders with respect thereto on each prior Business Day.
Unless there is any Extension, on the earlier of the September 2001
Distribution Date and the Pay Out Commencement Date, interest and principal will
be distributed to the Class A Securityholders on each Business Day prior to the
Series Termination Date. If in accordance with Section 6.17 of the Agreement,
the Transferor elects to issue an Extension Notice and the conditions precedent
for Extension specified therein have been satisfied, no principal will be
payable with respect to the Class A Security until the date specified in such
Extension Notice or in the last of any subsequent Extension Notices. Interest
for any Business Day due but not paid on any Business Day will be due on the
next succeeding Business Day.
On any Business Day during the Revolving Period, except during a Class
A Pay Down Period, the Transferor may specify an amount, not to exceed the Net
ABC Revolving Principal Collections, to be deposited into the Defeasance
Account. Any amounts so deposited, shall be paid to the Class A Securityholder
in accordance with Section 9A of the Agreement and upon payment shall reduce the
Class A Invested Amount by an amount equal to any such payment. In addition the
Transferor may specify, upon the issuance of a new Series pursuant to an
Exchange made at any time during the Revolving Period, except during a Class A
Pay Down Period, that the proceeds of such issuance be deposited into the
Defeasance Account for payment to the Class A Securityholder pursuant to Section
9A of the Agreement. The Class A Invested Amount will be reduced by an amount
equal to the amount of any such payments made.
In addition, pursuant to Section 6.15 of the Agreement, the holders of
this Security may from time to
time be required, prior to the commencement of the Amortization Period for the
Securities or the Class A Paydown Period, to purchase Additional Class A
Invested Amounts on the terms and conditions specified therein. The holder of
this Security is authorized to record on the grid attached to its Class A
Security (or at such Securityholder's option, in its internal books and records)
the date and amount of any Additional Invested Amount purchased by it, and each
repayment thereof; PROVIDED that failure to make any such recordation on such
grid or any error in such grid shall not adversely affect such Securityholder's
rights with respect to its Class A Invested Amount and its right to receive
interest payments in respect of the Class A Invested Amount held by such
Securityholder.
"CLASS A INVESTED AMOUNT" means, when used with respect to any Business
Day, an amount equal to (a) the initial aggregate principal amount of the Class
A Security, MINUS (b) the aggregate amount of principal payments made to Class A
Securityholders through and including such Business Day MINUS (c) the aggregate
amount of Class A Series Charge-Offs for all prior Distribution Dates, and PLUS
(d) the sum of the aggregate amount allocated with respect to Class A Series
Charge-Offs and available on all prior Distribution Dates pursuant to subsection
4.9(a)(vii) of the Agreement and, with respect to such subsection and pursuant
to subsections 4.10(a) and (b) and Section 4.14 of the Agreement for the purpose
of reinstating amounts reduced pursuant to the foregoing clause (d) PLUS (e) the
aggregate principal amount of any Additional Class A Invested Amounts purchased
pursuant to Section 6.15 of the Agreement.
Subject to the Agreement, payments of principal are limited to the
unpaid Class A Invested Amount of the Class A Security, which may be less than
the unpaid balance of the Class A Security pursuant to the terms of the
Agreement. All principal of and interest on the Class A Security is due and
payable no later than August 20, 2005 (the "Series 1998-1 Termination Date").
After the Series 1998-1 Termination Date neither the Trust nor the Transferor
will have any further obligation to distribute principal or interest on the
Class A Security. In the event that the Class A Invested Amount is greater than
zero on the Series Termination Date, the Trustee will sell or cause to be sold,
to the extent necessary, an amount of interests in the Receivables or certain of
the Receivables up to 110% of the Class A Invested Amount, the Class B Invested
Amount, the CTO Invested
Amount and the Class D Invested Amount at the close of business on such date
(but not more than the total amount of Receivables allocable to the Investor
Securities), and shall pay the proceeds to the Class A Securityholders pro rata
in final payment of the Class A Security, then to the Class B Securityholders
pro rata in final payment of the Class B Securities, then to the CTO
Securityholders pro rata in final payment of the Collateralized Trust
Obligations and finally to the Class D Securityholders pro rata in final payment
of the Class D Security.
Unless the certificate of authentication hereon has been executed by or
on behalf of the Trustee, by manual signature, this Security shall not be
entitled to any benefit under the Agreement, or be valid for any purpose.
IN WITNESS WHEREOF, the Transferor has caused this Security to be duly
executed under its official seal.
METRIS RECEIVABLES, INC.
By:
----------------------------
Name:
Title:
Dated:
CERTIFICATE OF AUTHENTICATION
This is the Class A Security referred to in the within-mentioned
Pooling and Servicing Agreement.
THE BANK OF NEW YORK (DELAWARE)
By:
----------------------------
Name:
Title:
Beginning Ending
Principal Principal
Date Balance Additions Payments Balance
---- --------- --------- -------- ---------
Exhibit A-2
[FORM OF CLASS B INVESTOR SECURITY]
[Each Class B Security that is a Class B Global Security deposited with
DTC, or a custodian on behalf of DTC, shall bear the following legend:]
UNLESS THIS SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO
THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT, AND ANY SECURITY 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.
[Each Class B Security that is issued pursuant to Rule 144A shall bear
the following legend:]
THIS SECURITY HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY
STATE SECURITIES LAWS. THE HOLDER HEREOF, BY PURCHASING THIS SECURITY,
AGREES THAT THIS SECURITY MAY BE REOFFERED, RESOLD, PLEDGED OR
OTHERWISE TRANSFERRED ONLY IN COMPLIANCE WITH THE SECURITIES ACT AND
OTHER APPLICABLE LAWS AND ONLY (1) PURSUANT TO RULE 144A UNDER THE
SECURITIES ACT TO A PERSON WHO THE HOLDER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER ("QIB") WITHIN THE MEANING OF RULE 144A,
PURCHASING FOR ITS OWN ACCOUNT, OR A QIB PURCHASING FOR THE ACCOUNT OF
A QIB, WHOM THE HOLDER HAS INFORMED, IN EACH
CASE, THAT SUCH REOFFER, RESALE, PLEDGE OR OTHER TRANSFER IS BEING
MADE IN RELIANCE ON RULE 144A OR (2) IN AN OFFSHORE TRANSACTION IN
ACCORDANCE WITH RULE 903 OR RULE 904 OF REGULATION S UNDER THE
SECURITIES ACT. EACH SECURITY OWNER BY ACCEPTING A BENEFICIAL INTEREST
IN THIS SECURITY, UNLESS SUCH PERSON ACQUIRED THIS SECURITY IN A
TRANSFER DESCRIBED IN CLAUSE (2) ABOVE, IS DEEMED TO REPRESENT THAT IT
IS EITHER A QIB PURCHASING FOR ITS OWN ACCOUNT OR A QIB PURCHASING FOR
THE ACCOUNT OF ANOTHER QIB.
[Each Class B Security that is issued pursuant to Regulation S shall
bear the following legend:]
THIS SECURITY HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND PRIOR TO THE DATE THAT IS 40 DAYS AFTER THE LATER OF THE
COMMENCEMENT OF THE OFFERING AND THE CLOSING DATE MAY NOT BE OFFERED,
SOLD, PLEDGED OR OTHERWISE TRANSFERRED IN THE UNITED STATES OR TO A
U.S. PERSON EXCEPT PURSUANT TO AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT.
[Each Class B Security shall bear the following legends:]
EACH PURCHASER REPRESENTS AND WARRANTS FOR THE BENEFIT OF METRIS
RECEIVABLES, INC. AND THE TRUSTEE THAT SUCH PURCHASER IS NOT (I) AN
EMPLOYEE BENEFIT PLAN (AS DEFINED IN SECTION 3(3) OF THE EMPLOYEE
RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA")) THAT IS
SUBJECT TO THE PROVISIONS OF TITLE I OF ERISA, (II) A PLAN DESCRIBED
IN SECTION 4975(e)(1) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED
(THE "CODE") THAT IS SUBJECT TO SECTION 4975 OF THE CODE, (III) A
GOVERNMENTAL PLAN, AS DEFINED IN SECTION 3(32) OF ERISA, SUBJECT TO
ANY FEDERAL, STATE OR LOCAL LAW WHICH IS, TO A MATERIAL EXTENT,
SIMILAR TO THE PROVI-
SIONS OF SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE, (IV) AN
ENTITY WHOSE UNDERLYING ASSETS INCLUDE "PLAN ASSETS" (AS DEFINED IN 29
C.F.R. SECTION 2510.3-101 OR OTHERWISE UNDER ERISA) BY REASON OF A
PLAN'S INVESTMENT IN THE ENTITY OR (V) A PERSON INVESTING "PLAN
ASSETS" OF ANY SUCH PLAN (INCLUDING WITHOUT LIMITATION, FOR PURPOSES
OF CLAUSE (IV) AND THIS CLAUSE (V), AS APPLICABLE, AN INSURANCE
COMPANY GENERAL ACCOUNT, BUT EXCLUDING ANY ENTITY REGISTERED UNDER THE
INVESTMENT COMPANY ACT OF 1940, AS AMENDED).
No. Percentage Interest: ___%
METRIS MASTER TRUST
FLOATING RATE ASSET BACKED TRUST
SECURITY, SERIES 1998-1, CLASS B
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 open end or revolving credit receivables generated
or to be generated by Direct Merchants Credit Card Bank, National Association
(the "Bank" 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 Metris
Receivables, Inc., the Bank or any affiliate of either of them.)
This certifies that _________ (the "Securityholder") is the
registered owner of a fractional undivided interest in the Metris Master Trust
(the "Trust") issued pursuant to the Amended and Restated Pooling and Servicing
Agreement, dated as of July 30, 1998 (the "Pooling and Servicing Agreement";
such term to include any amendment thereto) by and between Metris Receivables,
Inc., as Transferor (the "Transferor"), the Bank, as the Servicer, and The Bank
of New York (Delaware), as Trustee (the "Trustee"), and the Series 1998-1
Supplement, dated as of July 30, 1998 (the "Series 1998-1 Supplement"), among
the Transferor, the Bank, as Servicer and the Trustee (the Pooling and Servicing
Agreement, as supplemented by the Series 1998-1 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 (i) the Trust Property
(as defined in the Agreement) and (ii) the property described in Section 3A of
the Series 1998-1 Supplement and Section 4.4 of the Agreement.
This Security does not purport to summarize the Agreement and
reference is made to the 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 Security is one of a series of Securi-
ties entitled "Metris Master Trust Floating Rate Asset Backed Trust Securities,
Series 1998-1, Class B" (the "Class B Securities"), 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 Securityholder by virtue of the acceptance hereof
assents and by which the Securityholder is bound. In the case of any conflict
between terms specified in this Security and terms specified in the Agreement,
the terms of the Agreement shall govern.
The Transferor has structured the Agreement, the Class B
Securities, the Metris Master Trust Variable Funding Trust Security, Series
1998-1, Class A (the "Class A Security") and the Metris Master Trust Asset
Backed Collateralized Trust Obligations, Series 1998-1 (the "Collateralized
Trust Obligations") with the intention that the Class A Security, the Class B
Securities and the Collateralized Trust Obligations will qualify under
applicable tax law as indebtedness, and both the Transferor and each holder of a
Class B Security (a "Class B Securityholder") or any interest therein by
acceptance of its Security or any interest therein, agrees to treat the Class B
Security for purposes of federal, state and local income or franchise taxes and
any other tax imposed on or measured by income, as indebtedness.
No principal will be payable to the Class B Securityholders until
the Class B Principal Payment Commencement Date, which is the Distribution Date
either on or following the Distribution Date, on which the Class A Invested
Amount had been paid in full. No principal will be payable to the Class B
Securityholders until all principal payments have been made to the Class A
Securityholders. No principal payments will be made to the CTO Securityholder
until the Distribution Date either on or following the Distribution Date on
which the Class B Invested Amount has been paid in full. Except in connection
with a payment of Class D Daily Principal, the Class D Security will not have
the right to receive payments of principal until the Class A Invested Amount,
the Class B Invested Amount and the CTO Invested Amount have been paid in full.
Each Class B Security represents the right to receive interest at
the rate of .__% per annum above LIBOR (as determined on the related LIBOR
Determination Date, and such rate, as in effect from time to time, the "Class B
Interest Rate" ) on the 20th day of each month after the issuance of the Class B
Securities, or if such day is not a business day, on the next succeeding
business day (each, a "Distribution Date"), in an amount equal to the product of
(a) the actual number of days in the related Interest Accrual Period divided by
360, (b) the Class B Interest Rate and (c) the Class B Invested Amount as of the
close of business on the first day of the related Interest Accrual Period;
PROVIDED, HOWEVER, that with respect to any Distribution Date occurring in the
Pre-Funding Period, the amount described in clause (c) above shall be the Class
B Outstanding Principal Amount on the first day of the Pre-Funding Period.
Interest for any Distribution Date will include accrued interest
at the Class B Interest 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 B Interest Rate
plus 2%.
"CLASS B INVESTED AMOUNT" shall mean, when used with respect to
any Business Day, an amount equal to (a) the initial aggregate principal amount
of the Class B Securities, MINUS (b) the aggregate amount of principal payments
made to Class B Securityholders prior to such Business Day, MINUS (c) the
aggregate amount of Class B Series Charge-Offs for all prior Distribution Dates,
MINUS (d) the aggregate amount of Redirected Class B Principal Collections for
which neither the Class D Invested Amount nor the CTO Invested Amount has been
reduced for all prior Business Days, and PLUS (e) the sum of the aggregate
amount allocated and available on all prior Business Days pursuant to subsection
4.9(a)(x) of the Agreement and, with respect to such subsection and pursuant to
subsections 4.10(a) and (b) and Section 4.14 of the
Agreement, for the purpose of reinstating amounts reduced pursuant to the
foregoing clauses (c) and (d).
Subject to the Agreement, payments of principal are limited to the
unpaid Class B Invested Amount of the Class B Security, which may be less than
the unpaid balance of the Class B Security pursuant to the terms of the
Agreement. All principal of and interest on the Class B Security is due and
payable no later than August 20, 2005, unless a different date is set forth in
the Extension Notice (the "Series 1998-1 Termination Date"). After the Series
1998-1 Termination Date neither the Trust nor the Transferor will have any
further obligation to distribute principal or interest on the Class B Security.
In the event that the Class B Invested Amount is greater than zero on the Series
1998-1 Termination Date, the Trustee will sell or cause to be sold, to the
extent necessary, an amount of interests in the Receivables or certain of the
Receivables up to 110% of the Class A Invested Amount, the Class B Invested
Amount, the CTO Invested Amount and the Class D Invested Amount at the close of
business on such date (but not more than the total amount of Receivables
allocable to the Investor Securities), and shall pay the proceeds to the Class A
Securityholders pro rata in final payment of the Class A Security, then to the
Class B Securityholders pro rata in final payment of the Class B Securities,
then to the CTO Securityholders pro rata in final payment of the Collateralized
Trust Obligations and finally to the Class D Securityholders pro rata in final
payment of the Class D Security.
Unless the certificate of authentication hereon has been executed
by or on behalf of the Trustee, by manual signature, this Security shall not be
entitled to any benefit under the Agreement, or be valid for any purpose.
IN WITNESS WHEREOF, the Transferor has caused this Security to be
duly executed under its official seal.
METRIS RECEIVABLES, INC.
By:
----------------------------
Name:
Title:
Dated:
CERTIFICATE OF AUTHENTICATION
This is one of the Class B Securities referred to in the
within-mentioned Pooling and Servicing Agreement.
THE BANK OF NEW YORK (DELAWARE)
By:
----------------------------
Name:
Title:
Exhibit A-3
[FORM OF COLLATERALIZED TRUST OBLIGATION]
[Each Collateralized Trust Obligation that is a CTO Global
Security deposited with DTC, or a custodian on behalf of DTC, shall bear the
following legend:]
UNLESS THIS SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO
THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT, AND ANY SECURITY 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.
[Each Collateralized Trust Obligation that is issued pursuant to
Rule 144A shall bear the following legend:]
THIS SECURITY HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY
STATE SECURITIES LAWS. THE HOLDER HEREOF, BY PURCHASING THIS SECURITY,
AGREES THAT THIS SECURITY MAY BE REOFFERED, RESOLD, PLEDGED OR
OTHERWISE TRANSFERRED ONLY IN COMPLIANCE WITH THE SECURITIES ACT AND
OTHER APPLICABLE LAWS AND ONLY (1) PURSUANT TO RULE 144A UNDER THE
SECURITIES ACT TO A PERSON WHO THE HOLDER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER ("QIB") WITHIN THE MEANING OF RULE 144A,
PURCHASING FOR ITS OWN ACCOUNT, OR A QIB PURCHASING FOR THE ACCOUNT OF
A QIB, WHOM THE HOLDER HAS INFORMED, IN EACH
CASE, THAT SUCH REOFFER, RESALE, PLEDGE OR OTHER TRANSFER IS BEING
MADE IN RELIANCE ON RULE 144A OR (2) IN AN OFFSHORE TRANSACTION IN
ACCORDANCE WITH RULE 903 OR RULE 904 OF REGULATION S UNDER THE
SECURITIES ACT. EACH SECURITY OWNER BY ACCEPTING A BENEFICIAL INTEREST
IN THIS SECURITY, UNLESS SUCH PERSON ACQUIRED THIS SECURITY IN A
TRANSFER DESCRIBED IN CLAUSE (2) ABOVE, IS DEEMED TO REPRESENT THAT IT
IS EITHER A QIB PURCHASING FOR ITS OWN ACCOUNT OR A QIB PURCHASING FOR
THE ACCOUNT OF ANOTHER QIB.
[Each Collateralized Trust Obligation that is issued pursuant to
Regulation S shall bear the following legend:]
THIS SECURITY HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND PRIOR TO THE DATE THAT IS 40 DAYS AFTER THE LATER OF THE
COMMENCEMENT OF THE OFFERING AND THE CLOSING DATE MAY NOT BE OFFERED,
SOLD, PLEDGED OR OTHERWISE TRANSFERRED IN THE UNITED STATES OR TO A
U.S. PERSON EXCEPT PURSUANT TO AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT.
[Each Collateralized Trust Obligation shall bear the following
legends:]
EACH PURCHASER REPRESENTS AND WARRANTS FOR THE BENEFIT OF METRIS
RECEIVABLES, INC. AND THE TRUSTEE THAT SUCH PURCHASER IS NOT (I) AN
EMPLOYEE BENEFIT PLAN (AS DEFINED IN SECTION 3(3) OF THE EMPLOYEE
RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA")) THAT IS
SUBJECT TO THE PROVISIONS OF TITLE I OF ERISA, (II) A PLAN DESCRIBED
IN SECTION 4975(e)(1) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED
(THE "CODE") THAT IS SUBJECT TO SECTION 4975 OF THE CODE, (III) A
GOVERNMENTAL PLAN, AS DEFINED IN SECTION 3(32) OF ERISA, SUBJECT TO
ANY FEDERAL, STATE OR LOCAL LAW WHICH IS, TO A MATERIAL EXTENT,
SIMILAR TO THE PROVI-
SIONS OF SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE, (IV) AN
ENTITY WHOSE UNDERLYING ASSETS INCLUDE "PLAN ASSETS" (AS DEFINED IN 29
C.F.R. SECTION 2510.3-101 OR OTHERWISE UNDER ERISA) BY REASON OF A
PLAN'S INVESTMENT IN THE ENTITY OR (V) A PERSON INVESTING "PLAN
ASSETS" OF ANY SUCH PLAN (INCLUDING WITHOUT LIMITATION, FOR PURPOSES
OF CLAUSE (IV) AND THIS CLAUSE (V), AS APPLICABLE, AN INSURANCE
COMPANY GENERAL ACCOUNT, BUT EXCLUDING ANY ENTITY REGISTERED UNDER THE
INVESTMENT COMPANY ACT OF 1940, AS AMENDED).
No. Percentage Interest: ___%
METRIS MASTER TRUST
FLOATING RATE ASSET BACKED
COLLATERALIZED TRUST OBLIGATIONS, SERIES 1998-1
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 open end or revolving credit receivables generated
or to be generated by Direct Merchants Credit Card Bank, National Association
(the "Bank" 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 Metris
Receivables, Inc., the Bank or any affiliate of either of them.)
This certifies that _________ (the "Securityholder") is the
registered owner of a fractional undivided interest in the Metris Master Trust
(the "Trust") issued pursuant to the Amended and Restated Pooling and Servicing
Agreement, dated as of July 30, 1998 (the "Pooling and Servicing Agreement";
such term to include any amendment thereto) by and between Metris Receivables,
Inc., as Transferor (the "Transferor"), the Bank, as the Servicer, and The Bank
of New York (Delaware), as Trustee (the "Trustee"), and the Series 1998-1
Supplement, dated as of July 30, 1998 (the "Series 1998-1 Supplement"), among
the Transferor, the Bank, as Servicer and the Trustee (the Pooling and Servicing
Agreement, as supplemented by the Series 1998-1 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 (i) the Trust Property
(as defined in the Agreement) and (ii) the property described in Section 3A of
the Series 1998-1 Supplement and Section 4.4 of the Agreement.
This Security does not purport to summarize the Agreement and
reference is made to the 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 Security is one of a
series of Securities entitled "Metris Master Trust Floating Rate Asset Backed
Collateralized Trust Obligations, Series 1998-1" (the "Collateralized Trust
Obligations"), 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 Securityholder by virtue of the acceptance hereof assents and by which the
Securityholder is bound. In the case of any conflict between terms specified in
this Security and terms specified in the Agreement, the terms of the Agreement
shall govern.
The Transferor has structured the Agreement, the Collateralized
Trust Obligations, the Metris Master Trust Variable Funding Trust Security,
Series 1998-1, Class A (the "Class A Security") and the Metris Master Trust
Asset Backed Trust Securities, Series 1998-1, Class B (the "Class B Securities")
with the intention that the Class A Security, the Class B Securities and the
Collateralized Trust Obligations will qualify under applicable tax law as
indebtedness, and both the Transferor and each holder of a Collateralized Trust
Obligation (a "CTO Securityholder") or any interest therein by acceptance of its
Security or any interest therein, agrees to treat the Collateralized Trust
Obligation for purposes of federal, state and local income or franchise taxes
and any other tax imposed on or measured by income, as indebtedness.
No principal will be payable to the CTO Securityholders until the
CTO Principal Payment Commencement Date, which is the Distribution Date either
on or following the Distribution Date, on which the Class B Invested Amount had
been paid in full. No principal will be payable to the CTO Securityholders until
all principal payments have been made to the Class B Securityholders. Except in
connection with a payment of Class D Daily Principal, the Class D Security will
not have the right to receive payments of principal until the Class A Invested
Amount, the Class B Invested Amount and the CTO Invested Amount have been paid
in full.
Each Collateralized Trust Obligation represents the right to
receive interest at the rate of .__% per annum above LIBOR (as determined on the
related LIBOR Determination Date, and such rate, as in effect from time to time,
the "CTO Security Rate" ) on the 20th day of each month after the issuance of
the Collateralized Trust Obligations, or if such day is not a business day, on
the next succeeding business day (each, a "Distribution Date"), in an amount
equal to the product of (a) the actual number of days in the related Interest
Accrual Period divided by 360, (b) the CTO Security Rate and (c) the CTO
Invested Amount as of the close of business on the first day of the related
Interest Accrual Period; PROVIDED, HOWEVER, that with respect to any
Distribution Date occurring in the Pre-Funding Period, the amount described in
clause (c) above shall be the CTO Outstanding Principal Amount on the first day
of the Pre-Funding Period.
Interest for any Distribution Date will include accrued interest
at the CTO Security 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 CTO Security Rate plus 2%.
"CTO INVESTED AMOUNT" shall mean, when used with respect to any
Business Day, an amount equal to (a) the initial aggregate principal amount of
the Collateralized Trust Obligations, MINUS (b) the aggregate amount of
principal payments made to CTO Securityholders prior to such Business Day, MINUS
(c) the aggregate amount of CTO Series Charge-Offs for all prior Distribution
Dates, MINUS (d) the aggregate amount of Redirected CTO Principal Collections
for which the Class D Invested Amount has not been reduced for all prior
Business Days and PLUS (e) the sum of the aggregate amount allocated and
available on all prior Business Days pursuant to subsection 4.9(a)(xi) of the
Agreement and, with respect to such subsection, pursuant to subsections 4.10(a)
and (b), Section 4.14 and subsection 4.17(b) of the Agreement, for
the purpose of reinstating amounts reduced pursuant to the foregoing clauses (c)
and (d).
Subject to the Agreement, payments of principal are limited to the
unpaid CTO Invested Amount of the Collateralized Trust Obligation, which may be
less than the unpaid balance of the Collateralized Trust Obligation pursuant to
the terms of the Agreement. All principal of and interest on the Collateralized
Trust Obligation is due and payable no later than August 20, 2005 unless a
different date is set forth in the Extension Notice (the "Series 1998- 1
Termination Date"). After the Series 1998-1 Termination Date neither the Trust
nor the Transferor will have any further obligation to distribute principal or
interest on the Collateralized Trust Obligation. In the event that the CTO
Invested Amount is greater than zero on the Series 1998- 1 Termination Date, the
Trustee will sell or cause to be sold, to the extent necessary, an amount of
interests in the Receivables or certain of the Receivables up to 110% of the
Class A Invested Amount, the Class B Invested Amount, the CTO Invested Amount
and the Class D Invested Amount at the close of business on such date (but not
more than the total amount of Receivables allocable to the Investor Securities),
and shall pay the proceeds to the Class A Securityholders pro rata in final
payment of the Class A Security, then to the Class B Securityholders pro rata in
final payment of the Class B Securities, then to the CTO Securityholders pro
rata in final payment of the Collateralized Trust Obligations and finally to the
Class D Securityholders pro rata in final payment of the Class D Security.
Unless the certificate of authentication hereon has been executed
by or on behalf of the Trustee, by manual signature, this Security shall not be
entitled to any benefit under the Agreement, or be valid for any purpose.
IN WITNESS WHEREOF, the Transferor has caused this Security to be
duly executed under its official seal.
METRIS RECEIVABLES, INC.
By:
----------------------------
Name:
Title:
Dated:
CERTIFICATE OF AUTHENTICATION
This is one of the Collateralized Trust Obligations referred to in
the within-mentioned Pooling and Servicing Agreement.
THE BANK OF NEW YORK (DELAWARE)
By:
----------------------------
Name:
Title:
Exhibit A-4
[FORM OF CLASS D INVESTOR SECURITY]
THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION
EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"). THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OR ANY APPLICABLE STATE SECURITIES LAW OF ANY STATE AND MAY NOT BE OFFERED,
SOLD, PLEDGED OR OTHERWISE TRANSFERRED UNLESS REGISTERED PURSUANT TO OR EXEMPT
FROM REGISTRATION UNDER THE SECURITIES ACT AND ANY OTHER APPLICABLE SECURITIES
LAW. METRIS RECEIVABLES INC. SHALL BE PROHIBITED FROM TRANSFERRING ANY INTEREST
IN OR PORTION OF THIS SECURITY UNLESS, PRIOR TO SUCH TRANSFER, IT SHALL HAVE
DELIVERED TO THE TRUSTEE AN OPINION OF COUNSEL TO THE EFFECT THAT SUCH PROPOSED
TRANSFER WILL NOT ADVERSELY AFFECT THE FEDERAL, MINNESOTA OR DELAWARE INCOME TAX
CHARACTERIZATION OF ANY OUTSTANDING SERIES OF INVESTOR SECURITIES OR THE
TAXABILITY (OR TAX CHARACTERIZATION) OF THE TRUST UNDER FEDERAL, MINNESOTA OR
DELAWARE INCOME TAX LAWS. THE TRANSFER OF THIS SECURITY IS SUBJECT TO CERTAIN
CONDITIONS SET FORTH IN THE POOLING AND SERVICING AGREEMENT REFERRED TO HEREIN.
EACH PURCHASER REPRESENTS AND WARRANTS FOR THE BENEFIT OF METRIS
RECEIVABLES, INC. AND THE TRUSTEE THAT SUCH PURCHASER IS NOT (I) AN EMPLOYEE
BENEFIT PLAN (AS DEFINED IN SECTION 3(3) OF THE EMPLOYEE RETIREMENT INCOME
SECURITY ACT OF 1974, AS AMENDED ("ERISA")) THAT IS SUBJECT TO THE PROVISIONS OF
TITLE I OF ERISA, (II) A PLAN DESCRIBED IN SECTION 4975(e)(1) OF THE INTERNAL
REVENUE CODE OF 1986, AS AMENDED (THE "CODE") THAT IS SUBJECT TO SECTION 4975 OF
THE CODE, (III) A GOVERNMENTAL PLAN, AS DEFINED IN SECTION 3(32) OF ERISA,
SUBJECT TO ANY FEDERAL, STATE OR LOCAL LAW WHICH IS, TO A MATERIAL EXTENT,
SIMILAR TO THE PROVISIONS OF SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE,
(IV) AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE "PLAN ASSETS" (AS DEFINED IN 29
C.F.R. SECTION 2510.3-101 OR OTHERWISE UNDER ERISA) BY REASON OF A PLAN'S
INVESTMENT IN THE ENTITY OR (V) A PERSON INVESTING "PLAN ASSETS" OF ANY SUCH
PLAN (IN-
CLUDING WITHOUT LIMITATION, FOR PURPOSES OF CLAUSE (IV) AND THIS CLAUSE
(V), AS APPLICABLE, AN INSURANCE COMPANY GENERAL ACCOUNT, BUT EXCLUDING ANY
ENTITY REGISTERED UNDER THE INVESTMENT COMPANY ACT OF 1940, AS AMENDED).
No. ___ $_________
METRIS MASTER TRUST
FLOATING RATE ASSET BACKED TRUST
SECURITY, SERIES 1998-1, CLASS D
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 open end or revolving credit receivables generated
or to be generated by Direct Merchants Credit Card Bank, National Association
(the "Bank" 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 Metris Receivables,
Inc., the Bank or any affiliate of either of them.)
This certifies that METRIS RECEIVABLES, INC. (the "Securityholder") is
the registered owner of a fractional undivided interest in the Metris Master
Trust (the "Trust") issued pursuant to the Amended and Restated Pooling and
Servicing Agreement, dated as of July 30, 1998 (the "Pooling and Servicing
Agreement"; such term to include any amendment or Series Supplement thereto) by
and between Metris Receivables, Inc., as Transferor (the "Transferor"), the
Bank, as the Servicer, and The Bank of New York (Delaware), as Trustee (the
"Trustee"), and the Series 1998-1 Supplement, dated as of July 30, 1998 (the
"Series 1998-1 Supplement"), among the Transferor, the Bank, as Servicer and the
Trustee (the Pooling and Servicing Agreement, as supplemented by the Series
1998-1 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 (i) the Trust Property (as defined in the Agreement) and (ii) the property
described in Section 3A of the Series 1998-1 Supplement and Section 4.4 of the
Agreement.
This Security does not purport to summarize the Agreement and reference
is made to the 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
Agree-
ment. This Security is one of a series of Securities entitled "Metris Master
Trust Floating Rate Asset Backed Trust Securities, Series 1998-1, Class D" (the
"Class D Security"), 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 Securityholder by virtue of the acceptance hereof assents and by which the
Securityholder is bound.
Metris Receivables, Inc. shall be prohibited from Transferring any
interest in or portion of the Class D Security unless, prior to such Transfer,
it shall have delivered to the Trustee an Opinion of Counsel to the effect that
such proposed Transfer will not adversely affect the Federal, Minnesota or
Delaware income tax characterization of any outstanding Series of Investor
Security or the taxability (or tax characterization) of the Trust under Federal,
Minnesota or Delaware income tax laws.
Except in connection with a payment of Class D Daily Principal, no
principal will be payable to the Class D Securityholders until the Class D
Payment Commencement Date, which is the Distribution Date either on or following
the Distribution Date on which the CTO Invested Amount had been paid in full. No
principal will be payable to the Class D Securityholders until all principal
payments have first been made to the Class A Securityholders and then on and
after the Class B Principal Payment Commencement Date, after all principal
payments have been made to the Class B Securityholders and then on and after the
CTO Principal Payment Commencement Date, after all payments have been made to
the CTO Securityholders.
Interest will not accrue on the unpaid principal amount of the Class D
Security.
"CLASS D INVESTED AMOUNT" shall mean, when used with respect to any
Business Day, an amount equal to (a) upon the initial issuance of the Class D
Security the initial amount designated by the Transferor (which shall not be
less than the Stated Class D Amount), PLUS (b) the aggregate principal amount of
any Additional Class D Invested Amounts pursuant to Section 6.16 of the
Agreement,
MINUS (c) the aggregate amount of principal payments made to Class D
Securityholders prior to such Business Day, MINUS (d) the aggregate amount of
Class D Series Charge-Offs for all prior Distribution Dates, MINUS (e) the
aggregate amount of Redirected Principal Collections for all prior Business
Days, PLUS (f) the sum of the aggregate amount allocated and available on all
prior Business Days pursuant to subsection 4.9(a)(xii) of the Agreement and,
with respect to such subsection, pursuant to subsections 4.10(a) and (b) of the
Agreement, for the purpose of reinstating amounts reduced pursuant to the
foregoing clauses (d) and (e).
Subject to the Agreement, payments of principal are limited to the
unpaid Class D Invested Amount of the Class D Security, which may be less than
the unpaid balance of the Class D Security pursuant to the terms of the
Agreement. All principal of and interest on the Class D Security is due and
payable no later than August 20, 2005 (the "Series 1998-1 Termination Date").
After the Series 1998-1 Termination Date neither the Trust nor the Transferor
will have any further obligation to distribute principal or interest on the
Collateralized Trust Obligations. In the event that the Class D Invested Amount
is greater than zero on the Series 1998-1 Termination Date, the Trustee will
sell or cause to be sold, to the extent necessary, an amount of interests in the
Receivables or certain of the Receivables up to 110% of the Class A Invested
Amount, the Class B Invested Amount, the CTO Invested Amount and the Class D
Invested Amount at the close of business on such date (but not more than the
total amount of Receivables allocable to the Investor Securities), and shall pay
the proceeds to the Class A Securityholders pro rata in final payment of the
Class A Security, then to the Class B Securityholders pro rata in final payment
of the Class B Securities, then to the CTO Securityholders pro rata in final
payment of the Collateralized Trust Obligations and finally to the Class D
Securityholders pro rata in final payment of the Class D Security.
Unless the certificate of authentication hereon has been executed by or
on behalf of the Trustee, by manual signature, this Security shall not be
entitled to any benefit under the Agreement, or be valid for any purpose.
IN WITNESS WHEREOF, the Transferor has caused this Security to be duly
executed under its official seal.
METRIS RECEIVABLES, INC.
By:
------------------------
Name:
Title:
Dated:
CERTIFICATE OF AUTHENTICATION
This is one of the Class D Security referred to in the within-mentioned
Pooling and Servicing Agreement.
THE BANK OF NEW YORK (DELAWARE)
By:
------------------------
Name:
Title:
EXHIBIT B
[RESERVED]
EXHIBIT C
[Form of Monthly Securityholders' Statement]
EXHIBIT D
EXHIBIT E
FORM OF EXTENSION NOTICE
METRIS CARD MASTER TRUST, SERIES 1998-1
The undersigned, a duly authorized representative of Metris
Receivables, Inc., a Delaware corporation (the "Transferor"), as Transferor
pursuant to the Amended and Restated Pooling and Servicing Agreement dated as of
July 30, 1998 (the "Pooling and Servicing Agreement"), by and between the
Transferor, as transferor, Direct Merchants Credit Card Bank, National
Association, as servicer (the "Servicer"), and The Bank of New York (Delaware),
as trustee (the "Trustee"), as supplemented by the Series 1998-1 Supplement,
dated July 30, 1998 (the "Series 1998-1 Supplement"), by and between the
Transferor, the Servicer and the Trustee (the Pooling and Servicing Agreement,
as supplemented by the Series 1998-1 Supplement, or as the Pooling and Servicing
Agreement may from time to time be amended, supplemented, or modified, the
"Agreement"), does hereby notify the Trustee (or any successor Trustee) and the
Investor Securityholders:
A. Capitalized terms used but not defined in this Security shall have
the respective meanings set forth in the Agreement. References herein to certain
sections and subsections are references to the respective sections and
subsections of the Agreement.
B. The undersigned is a [Vice President] or more senior officer of the
Transferor who is duly authorized to execute and deliver this Security on behalf
of the Transferor.
C. This Certificate is being delivered pursuant to Section 6.17(a) of
the Agreement.
D. The Transferor is the Transferor under the Agreement.
E. No Pay Out Event has occurred that has not been remedied pursuant to
the provisions of the Agreement.
F. The Certificate is being delivered to the Trustee on or before the
date specified in subsection 6.17(a) for delivery.
G. NOTIFICATION OF EXTENSION
Pursuant to subsection 6.17(a) and in respect of [ , ]
(the "Current Extension Date"), the Transferor hereby notifies the Trustee and
the Investor Securityholders of the Transferor's intention to extend the
Revolving Period in respect of Series 1998-1 on the Current Extension Date
pursuant to the provisions of Section 6.17, until the date set forth below
(such extension, the "Extension").
H. REQUIREMENTS TO COMPLETE EXTENSION
(1) Annexed hereto is an election notice (an "Election Notice") to be
returned by any Investor Securityholder electing to approve the Extension. No
Extension shall occur unless Investor Securityholders holding at least more than
fifty percent of each of the aggregate principal amount of Class A Security,
Class B Securities, Collateralized Trust Obligations and Class D Security,
respectively, shall return properly executed Election Notices approving the
Extension by the Election Date (as defined below). Any Investor Securityholder
electing to approve the Extension must deliver a properly executed Election
Notice at the office of the Trustee, [ ] on or before 3:00 p.m., [ ] time, on [
, ] (the "Election Date"). Any Investor Securityholder may withdraw any Election
Notice delivered by it to the Trustee by notifying the Trustee in writing at the
address set forth in the previous sentence on or prior to the Election Date.
(2) THE EXTENSION SHALL NOT OCCUR UNTIL PRIOR SATISFACTION OF CERTAIN
CONDITIONS PRECEDENT BY THE CLOSE OF BUSINESS ON THE ELECTION DATE, INCLUDING
THE APPROVAL OF SUCH EXTENSION BY THE INVESTOR SECURITYHOLDERS HOLDING THE
REQUIRED AGGREGATE PRINCIPAL AMOUNT OF CLASS A SECURITY, CLASS B SECURITIES,
COLLATERALIZED TRUST OBLIGATIONS AND CLASS D SECURITY, THAT NO PAY OUT EVENT
SHALL HAVE OCCURRED AND BE CONTINUING, AND THAT CERTAIN LEGAL OPINIONS AND
RATING AGENCY CONFIRMATIONS SHALL HAVE BEEN DELIVERED TO THE TRANSFEROR
AND THE TRUSTEE PURSUANT TO SECTION 6.17(b). THE TRANSFEROR MAY IN ITS SOLE
DISCRETION WITHDRAW THIS EXTENSION NOTICE AT ANY TIME ON OR PRIOR TO THE
ELECTION DATE BY DELIVERING NOTICE OF SUCH WITHDRAWAL IN WRITING TO THE TRUSTEE.
IF ANY SUCH NOTICE OF WITHDRAWAL SHALL BE SO DELIVERED, NO EXTENSION SHALL
OCCUR.
I. NEW PROVISIONS TO BECOME EFFECTIVE ON THE EXTENSION DATE
(1) The new Amortization Period Commencement Date shall be the earlier
of (a) [ , ] or (b) the Pay Out Commencement Date.
(2) The new Extension Date shall be [ , ].
[(3) The new Scheduled Series 1998-1 Termination Date shall be [ , ].]
(4) The new Class A Expected Payment Date is ______.
(5) The new Class B Expected Payment Date is ______.
(6) The new CTO Expected Payment Date is ______.
[(7) The following are additional provisions that will apply to the
Investor Securities on and after the Extension Date:
INSERT PROVISIONS]
J. Annexed hereto are the following:
(1) the form of Extension Tax Opinion.
(2) the form of Extension Opinion.
(3) the Election Notice.
IN WITNESS WHEREOF, the undersigned has duly executed this certificate
this [ ] day of [ , ].
METRIS RECEIVABLES, INC.
By:
------------------------
Name:
Title:
EXHIBIT F
FORM OF INVESTOR SECURITYHOLDER ELECTION NOTICE
[INSERT NAME
AND ADDRESS OF TRUSTEE]
Re: Metris Master Trust:
Election Notice to Extend Series 1998-1
---------------------------------------
Ladies and Gentlemen:
The undersigned hereby elects to approve the extension of the
Revolving Period for Series 1998-1 until the Amortization Period Commencement
Date set forth in the Extension Notice dated [ , ] (the "Extension
Notice") and delivered to the undersigned pursuant Section 6.17(a) of the
Amended and Restated Pooling and Servicing Agreement, dated as of July 30,
1998, including the Series 1998-1 Supplement thereto, dated as of July 30,
1998, each by and among Metris Receivables, Inc., as transferor, Direct
Merchants Credit Card Bank, National Association, as servicer, and The Bank
of New York (Delaware), as trustee (the "Pooling and Servicing Agreement").
The undersigned hereby acknowledges that, commencing on the Current Extension
Date (as defined in the Extension Notice), the terms and provisions of the
Pooling and Servicing Agreement shall be modified as set forth in the
Extension Notice.
IN WITNESS WHEREOF, the undersigned registered owner(s) has [have]
executed this Election Notice as of the date set forth below.
Dated:
Name(s):
Address:
(Please Print)
Signature(s):
EXHIBIT G
FORM OF CLEARING SYSTEM CERTIFICATE
Metris Receivables, Inc.
000 Xxxxx Xxxxxxx 000
Xxxxx 000
Xx. Xxxxx Xxxx, XX 00000
The Bank of New York (Delaware)
Xxxxx Xxxx Xxxxxx
Xxxxx 000
Xxxxxx, Xxxxxxxx 00000
Re: Metris Master Trust
Series 1998-1
-------------------
Ladies and Gentlemen:
Reference is hereby made to the Amended and Restated Pooling and
Servicing Agreement dated as of July 20, as supplemented by the Series 1998-1
Supplement thereto, dated July 30, 1998 (collectively, the "Pooling and
Servicing Agreement"), each by and among Metris Receivables, Inc., as
Transferor, Direct Merchants Credit Card Bank, National Association, as Servicer
and The Bank of New York (Delaware), as Trustee. Capitalized terms used but not
defined herein shall have the meanings given to them in the Pooling and
Servicing Agreement.
This is to certify that, based solely on certifications we have
received in writing, by telex or by electronic transmission from member
organizations appearing in our records as persons being entitled to a portion
of the principal amount set forth below (our "Member Organizations"), as of
the date hereof, $__________ principal amount of the Metris Master Trust,
Series 1998-1, [Class B Securities/Collateralized Trust Obligations] (the
"Securities") (i) is beneficially owned by persons that are not U.S. persons
or (ii) is owned by U.S. persons who purchased the Securities in transactions
that did not require registration under the United States Securities Act of
1933, as amended
(the "Securities Act"). As used in this paragraph, the term "U.S. person" has
the meaning given to it by Regulation S under the Securities Act.
We further certify (i) that we are not making available herewith for
exchange (or, if relevant, for the payment of interest on) any portion of the
Temporary Regulation S Global Security excepted in such Member Organization
certifications and (ii) that as of the date hereof we have not received any
notification from any of our Member Organizations to the effect that the
statements made by such Member Organizations with respect to any portion of the
part submitted herewith for exchange (or, if relevant, for the payment of
interest on) are no longer true and cannot be relied upon at the date hereof.
EXHIBIT H
FORM OF MEMBER ORGANIZATION CERTIFICATE
Metris Receivables, Inc.
000 Xxxxx Xxxxxxx 000
Xxxxx 000
Xx. Xxxxx Xxxx, XX 00000
The Bank of New York (Delaware)
Xxxxx Xxxx Xxxxxx
Xxxxx 000
Xxxxxx, Xxxxxxxx 00000
Re: Metris Master Trust
Series 1998-1
-------------------
Ladies and Gentlemen:
Reference is hereby made to the Amended and Restated Pooling and
Servicing Agreement dated as of July 20, as supplemented by the Series 1998-1
Supplement thereto, dated July 30, 1998 (collectively, the "Pooling and
Servicing Agreement"), each by and among Metris Receivables, Inc., as
Transferor, Direct Merchants Credit Card Bank, N.A., as Servicer and The Bank of
New York (Delaware) as Trustee. Capitalized terms used but not defined herein
shall have the meanings given to them in the Pooling and Servicing Agreement.
This is to certify that, as of the date hereof and except as set forth
below, the Metris Master Trust, Series 1998-1, [Class B Securi-
ties/Collateralized Trust Obligations] (the "Securities") held by you for our
account (i) are beneficially owned by persons that are not U.S. persons or (ii)
are owned by U.S. persons who purchased the Securities in transactions that did
not require registration under the United States Securities Act of 1933, as
amended (the "Securities Act"). As used in this paragraph, the term "U.S.
person" has the meaning given to it by Regulation S under the Securities Act.
We undertake to advise you promptly by tested telex on or prior to the
date on which you
intend to submit your certification relating to the Securities held by you for
our account in accordance with your documented procedures if any applicable
statement herein is not correct on such date, and in the absence of any such
notification it may be assumed that this certificate applies as of such date.
This certificate excepts and does not relate to U.S. $_______ in
principal amount of Securities held by you for our account, in respect of which
we are not able to certify beneficial ownership. We understand that exchange and
delivery of beneficial interests in the Regulation S Global Security or Rule
144A Global Security cannot be made until we do so certify.
We understand that this certificate is required in connection with
certain securities and tax laws of the United States of America. If
administrative or legal proceedings are commenced or threatened in connection
with which this certificate is or would be relevant, we irrevocably authorize
you to produce this certificate or a copy thereof to any interested party in
such proceedings. As used herein, "United States" means the United States of
America (including the States and the District of Columbia), its territories,
its possessions (including Puerto Rico, the U.S. Virgin Islands, Guam, American
Samoa, Wake Island, and Northern Mariana Islands) and other areas subject to its
jurisdiction.
Dated: , 199_(1)
Yours faithfully,
[Name of Person giving
the certificate]
By:
--------------------
------------------
(1) This certificate must be dated no earlier than 15 days prior to the
Exchange Date.
EXHIBIT I
FORM OF REGULATION S TRANSFER CERTIFICATE
Metris Receivables Inc.
000 Xxxxx Xxxxxxx 000
Xxxxx 000
Xx. Xxxxx Xxxx, XX 00000
The Bank of New York (Delaware)
Xxxxx Xxxx Xxxxxx
Xxxxx 000
Xxxxxx, Xxxxxxxx 00000
Attention: Corporate Trust Division
Re: Metris Master Trust
Series 1998-1
-------------------
Ladies and Gentlemen:
Reference is hereby made to the Amended and Restated Pooling and
Servicing Agreement dated as of July 30, as supplemented by the Series 1998-1
Supplement thereto, dated July 30, 1998 (collectively, the "Pooling and
Servicing Agreement") each by and among Metris Receivables, Inc. as Transferor,
and Direct Merchants Credit Card Bank, N.A., as Servicer and The Bank of New
York (Delaware), as Trustee. Capitalized terms used but not defined herein shall
have the meanings given to them in the Pooling and Servicing Agreement.
[NOTE: INSERT [A] FOR A TRANSFER PRIOR TO THE EXCHANGE DATE OF AN INTEREST IN A
RULE 144A GLOBAL SECURITY TO A TRANSFEREE THAT TAKES DELIVERY IN THE FORM OF AN
INTEREST IN A TEMPORARY REGULATION S GLOBAL SECURITY. INSERT [B] FOR A TRANSFER
ON OR AFTER THE EXCHANGE DATE OF AN INTEREST IN A RULE 144A GLOBAL SECURITY TO A
TRANSFEREE THAT TAKES DELIVERY IN THE FORM OF AN INTEREST IN A REGULATION S
GLOBAL SECURITY.]
[A] This letter relates to U.S. $______ in principal amount of Metris
Master Trust, Series 1998-1, [Class B Securities/Collateralized Trust
Obligations] (the "Securities") which are held as a beneficial interest in the
Rule 144A Global Security (CUSIP No. ______) with DTC in the name of [insert
name of transferor] (the "Transferor"). The Transferor has requested an exchange
or transfer of such beneficial interest for an interest in a Temporary
Regulation S Global Security (CUSIP No. ______) to be held with [the Euroclear
System] [Cedel Bank, Societe Anonyme] through DTC.
[B] This letter relates to U.S. $_________ in principal amount of
Metris Master Trust, Series 1998-1, [Class B Securities/Collateralized Trust
Obligations] (the "Securities"), which are held as a beneficial interest in the
Rule 144A Global Security (CUSIP No. ______) with DTC in the name of [insert
name of transferor] (the "Transferor"). The Transferor has requested an exchange
or transfer of such beneficial interest for an interest in a Regulation S Global
Security (CUSIP No. ______) to be held with [the Euroclear System][Cedel Bank,
Societe Anonyme] through DTC.
[NOTE: INSERT [C] IN ALL CASES UNLESS [D] IS INSERTED IN ACCORDANCE WITH THE
NEXT SENTENCE. AT THE OPTION OF THE TRANSFEROR, [C] MAY BE INSERTED IN PLACE OF
[D] ON AND AFTER THE EXCHANGE DATE IN CASES OF A TRANSFER INTO A REGULATION S
GLOBAL SECURITY.]
[C] In connection with such request and in respect of such Securities,
the Transferor does hereby certify that such exchange or transfer has been
effected in accordance with the transfer restrictions set forth in the Pooling
and Servicing Agreement and such Securities and pursuant to and in accordance
with Regulation S under the Securities Act of 1933, as amended (the "Securities
Act"), and accordingly the Transferor does hereby certify that:
(4) the offer of the Securities was not made to a Person in the United
States,
[(5) at the time the buy order was originated, the transferee was
outside the United States, or the Transferor and any person acting
on its behalf reasonably believed that the transferee was outside the
United States,](2)
[(2) the transaction was executed in, on or through the facilities of
a designated offshore securities market and neither the Transferor nor any
person acting on its behalf knows that the transaction was pre-arranged
with a buyer in the United States,]*
(6) no directed selling efforts have been made in contravention of the
requirements of Rule 903(b) or 904(b) of Regulation S, as applicable, and
(7) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act.
[D] In connection with such request and in respect of such Securities,
the Transferor does hereby certify that such transfer has been effected in
accordance with the transfer restrictions set forth in the Pooling and Servicing
Agreement and the Securities, and that the Securities are being transferred in a
transaction permitted by Rule 144A under the Securities Act.
This certificate and the statements contained herein are made for the
benefit of the Trustee and the benefit of the Transferor and the initial
purchaser.
[Insert Name of Transferor]
By:
-----------------------
Name:
Title:
Dated:
-----------------
-----------------
(2) Insert one of these two provisions, which come from the definition of
"offshore transaction" in Regulation S.
EXHIBIT J
FORM OF RULE 144A TRANSFER CERTIFICATE
Metris Receivables
000 Xxxxx Xxxxxxx 000
Xxxxx 000
Xx. Xxxxx Xxxx, XX 00000
The Bank of New York (Delaware)
Xxxxx Xxxx Xxxxxx
Xxxxx 000
Xxxxxx, Xxxxxxxx 00000
Re: Metris Master Trust
Series 1998-1
-------------------
Ladies and Gentlemen:
Reference is hereby made to the Amended and Restated Pooling and
Servicing Agreement, dated as of July 20, as supplemented by the Series 1998-1
Supplement thereto, dated July 30, 1998 (collectively, the "Pooling and
Servicing Agreement"), each by and among Metris Receivables, Inc., as
Transferor, Direct Merchants Credit Card Bank, N.A., as Servicer and The Bank of
New York (Delaware), as Trustee. Capitalized terms used but not defined herein
shall have the meanings given to them in the Pooling and Servicing Agreement.
[NOTE: INSERT [A] FOR A TRANSFER PRIOR TO THE EXCHANGE DATE OF AN INTEREST IN A
TEMPORARY REGULATION S GLOBAL SECURITY TO A TRANSFEREE THAT TAKES DELIVERY IN
THE FORM OF AN INTEREST IN A RULE 144A GLOBAL SECURITY. INSERT [B] FOR A
TRANSFER AFTER THE EXCHANGE DATE OF AN INTEREST IN A REGULATION S GLOBAL
SECURITY TO A TRANSFEREE THAT TAKES DELIVERY IN THE FORM OF AN INTEREST IN A
RULE 144A GLOBAL SECURITY.]
[A] This letter relates to U.S. $_______ in principal amount of Metris
Master Trust, Series 1998-1, [Class B Securities/Collateralized Trust
Obligations] (the "Securities") which are held in the form of a beneficial
interest in the Temporary
Regulation S Global Security (CUSIP No. _________) with [The Euroclear System]
[Cedel Bank, Societe Anonyme] (Common Code No. _______) through DTC in the name
of [insert name of transferor] (the "Transferor"). The Transferor has requested
a transfer of such beneficial interest in the Securities for a beneficial
interest in the Rule 144A Global Security (CUSIP No. _________) to be held with
DTC in the name of [insert name of transferee].
[B] This letter relates to U.S. $_______ in principal amount of Metris
Master Trust, Series 1998-1, [Class B Securities/Collateralized Trust
Obligations] (the "Securities") which are held in the form of a beneficial
interest in the Regulation S Global Security (CUSIP No. _________) with [The
Euroclear System] [Cedel Bank, Societe anonyme] (Common Code No. _______)
through the DTC in the name of [insert name of transferor] (the "Transferor").
The Transferor has requested a transfer of such beneficial interest in the
Securities for a beneficial interest in the Rule 144A Global Security (CUSIP No.
_________) to be held with the DTC in the name of [insert name of transferee].
In connection with such request, and in respect of such Securities, the
Transferor does hereby certify that such Securities are being transferred in
accordance with (i) the transfer restrictions set forth in the Pooling and
Servicing Agreement and the Securities and (ii) Rule 144A under the Securities
Act to a transferee that the Transferor reasonably believes is purchasing the
Securities for its own account or an account with respect to which the
transferee exercises sole investment discretion and the transferee and any such
account is a "qualified institutional buyer" within the meaning of Rule 144A,
and such transferee is aware that the sale to it is being made in reliance upon
Rule 144A, in each case in a transaction meeting the requirements of Rule 144A
and in accordance with any applicable securities laws of any state of the United
States or any other jurisdiction.
This certificate and the statements contained herein are made for the
benefit of the Trustee, the benefit of the Transferor and the initial purchaser.
[Insert Name of Transferor]
By:
------------------------------------
Name:
Title:
Dated: ____________, ___
