Exhibit 4.1
EXECUTION COPY
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SERIES 1998-1 SUPPLEMENT
Dated as of June 23, 1998
to
POOLING AND SERVICING AGREEMENT
Dated as of May 16, 1996
$1,000,000,000
AMERICAN EXPRESS CREDIT ACCOUNT MASTER TRUST
Series 1998-1
among
AMERICAN EXPRESS CENTURION BANK
AMERICAN EXPRESS RECEIVABLES FINANCING CORPORATION II
as Transferors
AMERICAN EXPRESS TRAVEL RELATED SERVICES COMPANY, INC.
as Servicer
And
THE BANK OF NEW YORK
as Trustee
on behalf of the Series 1998-1 Certificateholders
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TABLE OF CONTENTS
Page
ARTICLE I Creation of the Series 1998-1 Certificates2
Section 1.01. Designation.........................................2
ARTICLE II Definitions..............................................3
Section 2.01. Definitions.........................................3
ARTICLE III Servicing Fee...........................................16
Section 3.01. Servicing Compensation.............................16
ARTICLE IV Rights of Series 1998-1 Certificateholders and
Allocation and Aplication of Collections
Section 4.01. Collections and Allocations........................17
Section 4.02. Determination of Monthly Interest..................20
Section 4.03. Principal Funding Account; Controlled
Accumulation Period................................21
Section 4.04. Required Amount....................................23
Section 4.05. Application of Class A Available Funds, Class B Available
Funds, Collateral Available Funds and Available
Principal Co24ections.
Section 4.06. Defaulted Amounts; Investor Charge-Offs............27
Section 4.07. Excess Spread; Excess Finance Charge Collections...28
Section 4.08. Reallocated Principal Collections..................30
Section 4.09. Excess Finance Charge Collections..................30
Section 4.10. Reallocated Investor Finance Charge Collections....31
Section 4.11. Shared Principal Collections.......................32
Section 4.12. Reserve Account....................................32
Section 4.13. Investment Instructions............................34
Section 4.14. Determination of LIBOR.............................34
ARTICLE V Distributions and Reports to Series 1998-1
Certificateholders......................................35
Section 5.01. Distributions......................................35
Section 5.02. Reports and Statements to Series 1998-1
Certificateholders.................................36
ARTICLE VI Pay-Out Events..........................................36
Section 6.01. Pay-Out Events.....................................36
ARTICLE VII Optional Repurchase; Series Termination.................38
Section 7.01. Optional Repurchase................................38
Section 7.02. Series Termination.................................38
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ARTICLE VIII Final Distributions.....................................39
Section 8.01. Sale of Receivables or Certificateholders'
Interest pursuant to Section 2.06 or 10.01 of
the Agreement and Section 7.01 or 7.02 of this
Supplement.........................................39
Section 8.02. Distribution of Proceeds of Sale, Disposition or
Liquidation of the Receivables pursuant to
Section 9.01 of the Agreement......................40
ARTICLE IX Miscellaneous Provisions.................................42
Section 9.01. Ratification of Agreement..........................42
Section 9.02. Counterparts.......................................42
Section 9.03. Governing Law......................................42
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SERIES 1998-1 SUPPLEMENT, dated as of June 23, 1998 (the
"Supplement"), among AMERICAN EXPRESS CENTURION BANK, a
Utah-chartered industrial loan company, and AMERICAN EXPRESS
RECEIVABLES FINANCING CORPORATION II, a Delaware corporation, as
Transferors, AMERICAN EXPRESS TRAVEL RELATED SERVICES COMPANY,
INC., a New York corporation, as Servicer, and THE BANK OF NEW
YORK, a banking corporation organized and existing under the laws
of the State of New York, not in its individual capacity, but
solely as Trustee.
Pursuant to the Pooling and Servicing Agreement, dated as of May 16, 1996
(as amended and supplemented, the "Agreement"), among the Transferors, the
Servicer and the Trustee, the Transferors have created the AMERICAN EXPRESS
CREDIT ACCOUNT MASTER TRUST (the "Trust"). Section 6.03 of the Agreement
provides that the Transferors may from time to time direct the Trustee to
authenticate one or more new Series of Investor Certificates representing
fractional undivided interests in the Trust. The Principal Terms of any new
Series are to be set forth in a Supplement to the Agreement.
Pursuant to this Supplement, the Transferors and the Trustee shall create
a new Series of Investor Certificates and specify the Principal Terms thereof.
ARTICLE I
Creation of the Series 1998-1 Certificates
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Section 1.01. Designation.
(a) There is hereby created a Series of Investor Certificates to be
issued pursuant to the Agreement and this Supplement to be known as "American
Express Credit Account Master Trust, Series 1998-1." The Series 1998-1
Certificates shall be issued in two Classes, the first of which shall be known
as the "Class A Series 1998-1 Floating Rate Asset Backed Certificates" and the
second of which shall be known as the "Class B Series 1998-1 Floating Rate Asset
Backed Certificates." In addition, there is hereby created a third Class of
uncertificated interests in the Trust which shall be known as the "Collateral
Interest, Series 1998-1" and which shall be deemed to be "Investor Certificates"
for all purposes under the Agreement and this Supplement other than for purposes
of the definition of the term "Tax Opinion" in Section 1.01 of the Agreement.
The Collateral Interest shall be considered a Class of Series 1998-1 for all
purposes of the Agreement and this Supplement, including for purposes of voting
concerning the liquidation of the Trust pursuant to Section 9.01 of the
Agreement. The Collateral Interest Holder shall be deemed to be the Series
Enhancer for all purposes under the Agreement and this Supplement.
(b) Series 1998-1 shall be included in Group II and shall be a Principal
Sharing Series. Series 1998-1 shall be an Excess Allocation Series. Series
1998-1 shall not be subordinated to any other Series. Notwithstanding any
provision in the Agreement or in this Supplement to the contrary, the first
Distribution Date with respect to Series 1998-1 shall be the July 1998
Distribution Date and the first Monthly Period shall begin on and include June
23, 1998, and end on and include July 24, 1998.
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(c) Except as expressly provided herein, the provisions of Article VI and
Article XII of the Agreement relating to the registration, authentication,
delivery, presentation, cancellation and surrender of Registered Certificates
shall not be applicable to the Collateral Interest.
ARTICLE II
Definitions
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Section 2.01. Definitions.
(a) Whenever used in this Supplement, the following words and phrases
shall have the following meanings, and the definitions of such terms are
applicable to the singular as well as the plural forms of such terms and the
masculine as well as the feminine and neuter genders of such terms.
"Additional Interest" means, with respect to any Distribution Date, the
Class A Additional Interest, the Class B Additional Interest and the Collateral
Additional Interest for such Distribution Date.
"Adjusted Invested Amount" shall mean, with respect to any date of
determination, an amount equal to the Invested Amount less the Principal Funding
Account Balance on such date of determination.
"Available Principal Collections" shall mean, with respect to any Monthly
Period, an amount equal to the sum of (a) (i) an amount equal to the Principal
Allocation Percentage of Series 1998-1 Allocable Principal Collections received
during such Monthly Period minus (ii) the amount of Reallocated Principal
Collections with respect to such Monthly Period which pursuant to Section 4.08
are required to fund the Required Amount for the related Distribution Date, (b)
any Shared Principal Collections with respect to other Series that are allocated
to Series 1998-1 in accordance with Section 4.04 of the Agreement and Section
4.11 hereof, and (c) any other amounts which pursuant to Section 4.05 or 4.07
hereof are to be treated as Available Principal Collections with respect to the
related Distribution Date.
"Available Reserve Account Amount" shall mean, with respect to any
Distribution Date, the lesser of (a) the amount on deposit in the Reserve
Account on such date (before giving effect to any deposit to be made to the
Reserve Account on such date) and (b) the Required Reserve Account Amount.
"Base Rate" shall mean, with respect to any Monthly Period, the
annualized percentage equivalent of a fraction, the numerator of which is equal
to the sum of the Class A Monthly Interest, the Class B Monthly Interest,
Collateral Monthly Interest and the Monthly Servicing Fee with respect to the
related Distribution Date and the denominator of which is the Invested Amount as
of the last day of the preceding Monthly Period.
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"Class A Additional Interest" shall have the meaning specified in
subsection 4.02(a).
"Class A Adjusted Invested Amount" shall mean, with respect to any date
of determination, an amount equal to the Class A Invested Amount less the
Principal Funding Account Balance (but not in excess of the Class A Invested
Amount) on such date.
"Class A Available Funds" shall mean, with respect to any Monthly Period,
an amount equal to the sum of (a) if such Monthly Period relates to a
Distribution Date with respect to the Controlled Accumulation Period, the amount
of Principal Funding Investment Proceeds, if any, with respect to such
Distribution Date, (b) the Class A Floating Percentage of the Reallocated
Investor Finance Charge Collections and (c) the amount of funds, if any, to be
withdrawn from the Reserve Account which, pursuant to subsection 4.12(d), are
required to be included in Class A Available Funds with respect to such
Distribution Date.
"Class A Certificate Rate" shall mean, for any Interest Period with
respect to the Class A Certificates, a per annum rate equal to LIBOR plus 0.09%.
"Class A Certificateholder" shall mean the Person in whose name a Class A
Certificate is registered in the Certificate Register.
"Class A Certificates" shall mean any one of the Certificates executed by
the Transferors and authenticated by or on behalf of the Trustee, substantially
in the form of Exhibit A-l.
"Class A Floating Percentage" shall mean, with respect to any Monthly
Period, the percentage equivalent (which percentage shall never exceed 100%) of
a fraction, the numerator of which is equal to the Class A Adjusted Invested
Amount as of the close of business on the last day of the preceding Monthly
Period and the denominator of which is equal to the Adjusted Invested Amount as
of such day; provided, however, that with respect to the first Monthly Period,
the Class A Floating Percentage shall mean the percentage equivalent of a
fraction, the numerator of which is the Class A Initial Invested Amount and the
denominator of which is the Initial Invested Amount.
"Class A Initial Invested Amount" shall mean $825,000,000.
"Class A Interest Shortfall" shall have the meaning specified in
subsection 4.02(a).
"Class A Invested Amount" shall mean, on any date of determination, an
amount equal to (a) the Class A Initial Invested Amount, minus (b) the aggregate
amount of principal payments made to the Class A Certificateholders on or prior
to such date, minus (c) the excess, if any, of (i) the aggregate amount of Class
A Investor Charge-Offs for all prior Distribution Dates over (ii) Class A
Investor Charge-Offs reimbursed pursuant to subsection 4.07(b) prior to such
date.
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"Class A Investor Charge-Offs" shall have the meaning specified in
subsection 4.06(a).
"Class A Investor Default Amount" shall mean, with respect to each
Distribution Date, an amount equal to the product of (i) the Investor Default
Amount for the related Monthly Period and (ii) the Class A Floating Percentage
for such Monthly Period.
"Class A Monthly Interest" shall have the meaning specified in
subsection 4.02(a).
"Class A Principal Percentage" shall mean, with respect to any Monthly
Period (i) during the Revolving Period, the percentage equivalent (which
percentage shall never exceed 100%) of a fraction, the numerator of which is the
Class A Invested Amount as of the last day of the immediately preceding Monthly
Period and the denominator of which is the Invested Amount as of such day and
(ii) during the Controlled Accumulation Period, the Early Amortization Period or
any Partial Amortization Period, the percentage equivalent (which percentage
shall never exceed 100%) of a fraction, the numerator of which is the Class A
Invested Amount as of the close of business on the date on which the Revolving
Period shall have terminated and the denominator of which is the Invested Amount
as of the close of business on the date on which the Revolving Period shall have
terminated; provided, however, that with respect to the first Monthly Period,
the Class A Principal Percentage shall mean the percentage equivalent of a
fraction, the numerator of which is the Class A Initial Invested Amount and
denominator of which is the Initial Invested Amount.
"Class A Required Amount" shall have the meaning specified in
subsection 4.04(a).
"Class A Servicing Fee" shall have the meaning specified in Section 3.01.
"Class B Additional Interest" shall have the meaning specified in
subsection 4.02(b).
"Class B Adjusted Invested Amount" shall mean an amount equal to the
Class B Invested Amount less the positive difference, if any, between the
Principal Funding Account Balance and the Class A Invested Amount on such date.
"Class B Available Funds" shall mean, with respect to any Monthly Period,
an amount equal to the Class B Floating Percentage of the Reallocated Investor
Finance Charge Collections.
"Class B Certificate Rate" shall mean, for any Interest Period with
respect to the Class B Certificates, a per annum rate equal to LIBOR plus 0.25%.
"Class B Certificateholder" shall mean the Person in whose name a Class B
Certificate is registered in the Certificate Register.
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"Class B Certificates" shall mean any one of the Certificates executed by
the Transferors and authenticated by or on behalf of the Trustee, substantially
in the form of Exhibit A-2.
"Class B Floating Percentage" shall mean, with respect to any Monthly
Period, the percentage equivalent (which percentage shall never exceed 100%) of
a fraction, the numerator of which is equal to the Class B Adjusted Invested
Amount as of the close of business on the last day of the preceding Monthly
Period and the denominator of which is equal to the Adjusted Invested Amount as
of the close of business on such day; provided, however, that with respect to
the first Monthly Period, the Class B Floating Percentage shall mean the
percentage equivalent of a fraction, the numerator of which is the Class B
Initial Invested Amount and the denominator of which is the Initial Invested
Amount.
"Class B Initial Invested Amount" shall mean $80,000,000.
"Class B Interest Shortfall" shall have the meaning specified in
subsection 4.02(b).
"Class B Invested Amount" shall mean, on any date of determination, an
amount equal to (a) the Class B Initial Invested Amount, minus (b) the aggregate
amount of principal payments made to the Class B Certificateholders prior to
such date, minus (c) the aggregate amount of Class B Investor Charge-Offs for
all prior Distribution Dates, minus (d) the amount of Reallocated Principal
Collections allocated on all prior Distribution Dates pursuant to subsection
4.08(a) (excluding any Reallocated Principal Collections that have resulted in a
reduction in the Collateral Invested Amount pursuant to Section 4.08), minus (e)
an amount equal to the amount by which the Class B Invested Amount has been
reduced on all prior Distribution Dates pursuant to subsection 4.06(a) and plus
(f) the amount of Excess Spread and Excess Finance Charge Collections allocated
and available on all prior Distribution Dates pursuant to subsection 4.07(e) for
the purpose of reimbursing amounts deducted pursuant to the foregoing clauses
(c), (d) and (e); provided, however, that the Class B Invested Amount may not be
reduced below zero.
"Class B Investor Charge-Offs" shall have the meaning specified in
subsection 4.06(b).
"Class B Investor Default Amount" shall mean, with respect to each
Distribution Date, an amount equal to the product of (i) the Investor Default
Amount for the related Monthly Period and (ii) the Class B Floating Percentage
for such Monthly Period.
"Class B Monthly Interest" shall have the meaning specified in
subsection 4.02(b).
"Class B Principal Percentage" shall mean, with respect to any Monthly
Period, (i) during the Revolving Period, the percentage equivalent (which
percentage shall never exceed 100%) of a fraction, the numerator of which is the
Class B Invested Amount as of the last day of the immediately preceding Monthly
Period and the denominator of which is the Invested Amount as of such day and
(ii) during the Controlled Accumulation Period, the Early Amortization Period or
any Partial Amortization Period, the percentage equivalent (which percentage
shall never exceed 100%) of a fraction, the numerator of which is the Class B
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Invested Amount as of the close of business on the date on which the Revolving
Period shall have terminated and the denominator of which is the Invested Amount
as of the close of business on the date on which the Revolving Period shall have
terminated; provided, however, that with respect to the first Monthly Period,
the Class B Principal Percentage shall mean the percentage equivalent of a
fraction, the numerator of which is the Class B Initial Invested Amount and the
denominator of which is the Initial Invested Amount.
"Class B Required Amount" shall have the meaning set forth in
subsection 4.04(b).
"Class B Servicing Fee" shall have the meaning specified in Section 3.01.
"Closing Date" shall mean June 23, 1998.
"Collateral Additional Interest" shall have the meaning specified in
subsection 4.02(c).
"Collateral Available Funds" shall mean with respect to any Distribution
Date, the Collateral Floating Percentage of Reallocated Investor Finance Charge
Collections with respect to the preceding Monthly Period.
"Collateral Charge-Offs" shall have the meaning specified in
subsection 4.06(c).
"Collateral Default Amount" shall mean, with respect to any Distribution
Date, the product of the Investor Default Amount for the related Monthly Period
and the Collateral Floating Percentage.
"Collateral Floating Percentage" shall mean, with respect to any
Distribution Date, the percentage equivalent (which percentage shall never
exceed 100%) of a fraction, the numerator of which is equal to the Collateral
Invested Amount as of the close of business on the last day of the preceding
Monthly Period and the denominator of which is the Adjusted Invested Amount as
of the close of business on such last day; provided, however, that with respect
to the first Monthly Period, the Collateral Floating Percentage shall mean the
percentage equivalent of a fraction, the numerator of which is the Collateral
Initial Invested Amount and the denominator of which is the Initial Invested
Amount.
"Collateral Initial Invested Amount" shall mean $95,000,000.
"Collateral Interest" shall mean a fractional undivided interest in the
Trust which shall consist of the right to receive, to the extent necessary to
make the required payments to the Collateral Interest Holder under this
Supplement, the portion of Collections allocable thereto under the Agreement and
this Supplement and funds on deposit in the Collection Account allocable thereto
pursuant to the Agreement and this Supplement.
"Collateral Interest Holder" shall mean the entity so designated in the
Loan Agreement.
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"Collateral Interest Shortfall" shall have the meaning specified in
subsection 4.02(c).
"Collateral Invested Amount" shall mean, when used with respect to any
date, an amount equal to (a) the Collateral Initial Invested Amount, minus (b)
the aggregate amount of principal payments made to the Collateral Interest
Holder prior to such date, minus (c) the aggregate amount of Collateral
Charge-Offs for all prior Distribution Dates pursuant to subsection 4.06(c),
minus (d) the aggregate amount of Reallocated Principal Collections allocated on
all prior Distribution Dates pursuant to Section 4.08 allocable to the
Collateral Invested Amount, minus (e) an amount equal to the amount by which the
Collateral Invested Amount has been reduced on all prior Distribution Dates
pursuant to subsections 4.06(a) and (b), and plus (f) the amount allocated and
available on all prior Distribution Dates pursuant to subsection 4.07(i), for
the purpose of reimbursing amounts deducted pursuant to the foregoing clauses
(c), (d) and (e); provided, however, that the Collateral Invested Amount may not
be reduced below zero.
"Collateral Monthly Interest" shall have the meaning specified in
subsection 4.02(c).
"Collateral Principal Percentage" shall mean, with respect to any Monthly
Period, (i) during the Revolving Period, the percentage equivalent (which
percentage shall never exceed 100%) of a fraction, the numerator of which is the
Collateral Invested Amount as of the last day of the immediately preceding
Monthly Period and the denominator of which is the Invested Amount as of such
day and (ii) during the Controlled Accumulation Period, the Early Amortization
Period or any Partial Amortization Period, the percentage equivalent (which
percentage shall never exceed 100%) of a fraction, the numerator of which is the
Collateral Invested Amount as of the close of business on the date on which the
Revolving Period shall have terminated and the denominator of which is the
Invested Amount as of the close of business on the date on which the Revolving
Period shall have terminated; provided, however, that with respect to the first
Monthly Period, the Collateral Principal Percentage shall mean the percentage
equivalent of a fraction, the numerator of which is the Collateral Initial
Invested Amount and the denominator of which is the Initial Invested Amount.
"Collateral Rate" shall mean the rate specified in the Loan Agreement.
"Collateral Servicing Fee" shall have the meaning set forth in
Section 3.01.
"Controlled Accumulation Amount" shall mean, for any Distribution Date
with respect to the Controlled Accumulation Period, $75,416,666.67; provided,
8
however, that, if the Controlled Accumulation Period Length is determined to be
less than 12 months, the Controlled Accumulation Amount for each Distribution
Date with respect to the Controlled Accumulation Period will be equal to (i) the
product of (x) the sum of the Class A Initial Invested Amount and the Class B
Initial Invested Amount and (y) the Controlled Accumulation Period Factor for
the related Monthly Period divided by (ii) the Required Accumulation Factor
Number.
"Controlled Accumulation Period" shall mean, unless a Pay-Out Event shall
have occurred prior thereto, the period commencing at the close of business on
the last day of the May 2002 Monthly Period or such later date as is determined
in accordance with subsection 4.03(c) and ending on the first to occur of (a)
the commencement of the Early Amortization Period, (b) the payment in full of
the Invested Amount and (c) the Series 1998-1 Termination Date.
"Controlled Accumulation Period Factor" shall mean, for each Monthly
Period, a fraction, the numerator of which is equal to the sum of the series
invested amounts as of the last day of the prior Monthly Period of all
outstanding Series, and the denominator of which is equal to the sum (without
duplication) of (a) the Series Invested Amount as of the last day of the prior
Monthly Period, (b) the series invested amounts as of the last day of the prior
Monthly Period of all outstanding Series (other than Series 1998-1) that are not
expected to be in their revolving periods, and (c) the series invested amounts
as of the last day of the prior Monthly Period of all other outstanding Series
that are not Principal Sharing Series and are in their revolving periods.
"Controlled Accumulation Period Length" has the meaning specified in
subsection 4.03(c).
"Controlled Deposit Amount" shall mean, for any Distribution Date with
respect to the Controlled Accumulation Period, an amount equal to the sum of the
Controlled Accumulation Amount for such Distribution Date and any Deficit
Controlled Accumulation Amount for the immediately preceding Distribution Date.
"Covered Amount" shall mean, for any Distribution Date with respect to
the Controlled Accumulation Period or the first Special Payment Date, if such
Special Payment Date occurs prior to the date the Class A Invested Amount is
paid in full, an amount equal to one-twelfth the product of (i) the Class A
Certificate Rate and (ii) the Principal Funding Account Balance, if any, as of
the preceding Distribution Date.
"Deficit Controlled Accumulation Amount" shall mean (a) on the first
Distribution Date with respect to the Controlled Accumulation Period, the
excess, if any, of the Controlled Accumulation Amount for such Distribution Date
over the amount deposited in the Principal Funding Account on such Distribution
Date and (b) on each subsequent Distribution Date with respect to the Controlled
Accumulation Period, the excess, if any, of the Controlled Deposit Amount for
such subsequent Distribution Date over the amount deposited in the Principal
Funding Account on such subsequent Distribution Date.
"Distribution Date" shall mean July 15, 1998, and the 15th day of each
calendar month thereafter, or if such 15th day is not a Business Day, the
next succeeding Business Day.
"Early Amortization Period" shall mean the period commencing at the close
of business on the Business Day immediately preceding the day on which a Pay-Out
Event with respect to Series 1998-1 is deemed to have occurred, and ending on
the first to occur of (i) the payment in full of the Invested Amount or (ii) the
Series 1998-1 Termination Date.
"Excess Spread" shall mean, with respect to any Distribution Date, the
sum of the amounts, if any, specified pursuant to subsections 4.05(a)(iv),
4.05(b)(iii) and 4.05(c)(ii) with respect to such Distribution Date.
"Expected Final Payment Date" shall mean the June 2003 Distribution Date.
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"Finance Charge Shortfall" shall have the meaning specified in
Section 4.09.
"Floating Allocation Percentage" shall mean, with respect to any Monthly
Period, the percentage equivalent (which percentage shall never exceed 100%) of
a fraction, the numerator of which is the Adjusted Invested Amount as of the
last day of the preceding Monthly Period (or with respect to the first Monthly
Period, the Initial Invested Amount) and the denominator of which is the product
of (x) the Series 1998-1 Allocation Percentage with respect to such Monthly
Period and (y) the sum of (i) the total amount of Principal Receivables in the
Trust as of such day (or with respect to the first Monthly Period, the total
amount of Principal Receivables in the Trust on the Closing Date) and (ii) the
principal amount on deposit in the Special Funding Account as of such last day
(or with respect to the first Monthly Period, as of the Closing Date); provided,
however, that with respect to any Monthly Period in which an Addition Date for
an Aggregate Addition or a Removal Date occurs the amount in (y)(i) above shall
be (1) the aggregate amount of Principal Receivables in the Trust at the end of
the day on the last day of the prior Monthly Period for the period from and
including the first day of such Monthly Period to but excluding the related
Addition Date or Removal Date and (2) the aggregate amount of Principal
Receivables in the Trust at the end of the day on the related Addition Date or
Removal Date for the period from and including the related Addition Date or
Removal Date to and including the last day of such Monthly Period.
"Group II" shall mean Series 1998-1 and each other Series specified in
the related Supplement to be included in Group II.
"Group II Investor Additional Amounts" shall mean, with respect to any
Distribution Date, the sum of (a) Series 1998-1 Additional Amounts for such
Distribution Date and (b) for all other Series included in Group II, the sum of
(i) the aggregate net amount by which the Invested Amounts of such Series have
been reduced as a result of investor charge-offs, subordination of principal
collections and funding the investor default amounts in respect of any Class or
Series Enhancement interests of such Series as of such Distribution Date and
(ii) if the applicable Supplements so provide, the aggregate unpaid amount of
interest at the applicable certificate rates that has accrued on the amounts
described in the preceding clause (i) for such Distribution Date.
"Group II Investor Default Amount" shall mean, with respect to any
Distribution Date, the sum of (a) the Investor Default Amount for such
Distribution Date and (b) the aggregate amount of the investor default amounts
for all other Series included in Group II for such Distribution Date.
"Group II Investor Finance Charge Collections" shall mean, with respect
to any Distribution Date, the sum of (a) Investor Finance Charge Collections for
such Distribution Date and (b) the aggregate amount of the investor finance
charge collections for all other Series included in Group II for such
Distribution Date.
"Group II Investor Monthly Fees" shall mean with respect to any
Distribution Date, the sum of (a) Series 1998-1 Monthly Fees for such
Distribution Date and (b) the aggregate amount of the servicing fees, investor
fees, fees payable to any Series Enhancer and any other similar fees, which are
payable out of reallocated investor finance charge collections pursuant to the
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related Supplements, for all other Series included in Group II for such
Distribution Date.
"Group II Investor Monthly Interest" shall mean, with respect to any
Distribution Date, the sum of (a) Series 1998-1 Monthly Interest for such
Distribution Date and (b) the aggregate amount of monthly interest, including
overdue monthly interest and interest on such overdue monthly interest, if such
amounts are payable out of reallocated investor finance charge collections
pursuant to the related Supplements, for all other Series included in Group II
for such Distribution Date.
"Initial Invested Amount" shall mean $1,000,000,000.
"Interest Period" shall mean, with respect to any Distribution Date, the
period (a) from and including the Distribution Date immediately preceding such
Distribution Date (or, in the case of the first Distribution Date, from and
including the Closing Date) and (b) to but excluding such Distribution Date.
"Invested Amount" shall mean, as of any date of determination, an amount
equal to the sum of (a) the Class A Invested Amount as of such date, (b) the
Class B Invested Amount as of such date and (c) the Collateral Invested Amount
as of such date.
"Investor Charge-Offs" shall mean Class A Investor Charge-Offs, Class B
Investor Charge-Offs and Collateral Charge-Offs.
"Investor Default Amount" shall mean, with respect to any Distribution
Date, an amount equal to the product of (a) the Series 1998-1 Allocable
Defaulted Amount for the related Monthly Period and (b) the Floating Allocation
Percentage for such Monthly Period.
"Investor Finance Charge Collections" shall mean with respect to any
Distribution Date, an amount equal to the product of (a) the Floating Allocation
Percentage for the related Monthly Period and (b) Series 1998-1 Allocable
Finance Charge Collections deposited in the Collection Account for the related
Monthly Period.
"LIBOR" shall mean, for any Interest Period, an interest rate per annum
determined by the Trustee for such Interest Period in accordance with the
provisions of Section 4.14.
"LIBOR Determination Date" shall mean the second London Business Day
prior to the Closing Date for the initial Interest Period, and the second London
Business Day prior to the commencement of the second and each subsequent
Interest Period for the second and each subsequent Interest Period.
"Loan Agreement" shall mean the agreement among the Transferors, the
Trustee, the Servicer and the Collateral Interest Holder, dated as of the date
hereof.
"London Business Day" shall mean any day on which dealings in deposits in
United States dollars are transacted in the London interbank market.
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"Monthly Interest" means, with respect to any Distribution Date, the
Class A Monthly Interest, the Class B Monthly Interest and the Collateral
Monthly Interest for such Distribution Date.
"Monthly Servicing Fee" shall have the meaning specified in
subsection 3.01.
"Pay-Out Event" shall mean any Pay-Out Event specified in Section 6.01.
"Principal Allocation Percentage" shall mean, with respect to any day
during a Monthly Period, the percentage equivalent (which percentage shall never
exceed 100%) of a fraction, the numerator of which is (a) during the Revolving
Period, the Series Adjusted Invested Amount for Series 1998-1 as of the last day
of the immediately preceding Monthly Period (or, in the case of the first
Monthly Period, the Initial Invested Amount) and (b) during the Controlled
Accumulation Period, the Early Amortization Period or any Partial Amortization
Period, the Series Adjusted Invested Amount for Series 1998-1 as of the close of
business on the date on which the Revolving Period shall have terminated and the
denominator of which is the product of (x) the sum of (i) the total amount of
Principal Receivables in the Trust as of the last day of the immediately
preceding Monthly Period (or with respect to the first Monthly Period, the total
amount of Principal Receivables in the Trust as of the Closing Date) and (ii)
the principal amount on deposit in the Special Funding Account as of such last
day (or with respect to the first Monthly Period, the Closing Date) and (y) the
Series 1998-1 Allocation Percentage as of the last day of the immediately
preceding Monthly Period; provided, however, that with respect to any Monthly
Period in which an Addition Date for an Aggregate Addition or a Removal Date
occurs the amount in (x)(i) above shall be (1) the aggregate amount of Principal
Receivables in the Trust at the end of the day on the last day of the prior
Monthly Period for the period from and including the first day of such Monthly
Period to but excluding the related Addition Date or Removal Date and (2) the
aggregate amount of Principal Receivables in the Trust at the end of the day on
the related Addition Date or Removal Date for the period from and including the
related Addition Date or Removal Date to and including the last day of such
Monthly Period; and provided further, that if after the commencement of the
Controlled Accumulation Period a Pay-Out Event occurs with respect to another
Series that was designated in the Supplement therefor as a Series that is a
"Paired Series" with respect to Series 1998-1, the Transferors may, by written
notice delivered to the Trustee and the Servicer, designate a different
numerator for the foregoing fraction, provided that (x) such numerator is not
less than the Adjusted Invested Amount as of the last day of the revolving
period for such Paired Series, (y) the Transferors shall have received written
notice from each Rating Agency that the Rating Agency Condition has been
satisfied with respect to such designation and shall have delivered copies of
each such written notice to the Servicer and the Trustee and (z) the Transferors
shall have delivered to the Trustee an Officer's Certificate to the effect that,
based on the facts known to such officer at such time, in the reasonable belief
of the Transferors, such designation will not cause a Pay-Out Event or an event
that, after the giving of notice or the lapse of time, would constitute a
Pay-Out Event, to occur with respect to Series 1998-1.
"Principal Funding Account" shall have the meaning specified in
subsection 4.03(a)(i).
12
"Principal Funding Account Balance" shall mean, with respect to any date
of determination during the Controlled Accumulation Period, the principal
amount, if any, on deposit in the Principal Funding Account on such date of
determination.
"Principal Funding Investment Proceeds" shall have the meaning specified
in subsection 4.03(a)(ii).
"Principal Funding Investment Shortfall" shall mean, with respect to each
Distribution Date during the Controlled Accumulation Period, the amount, if any,
by which the Principal Funding Investment Proceeds are less than the Covered
Amount.
"Reallocated Investor Finance Charge Collections" shall mean that portion
of Group II Investor Finance Charge Collections allocated to Series 1998-1
pursuant to Section 4.10.
"Reallocated Principal Collections" shall mean, with respect to any
Monthly Period, the product of (a) the Series 1998-1 Allocable Principal
Collections deposited in the Collection Account for such Monthly Period and (b)
the sum of the Class B Principal Percentage and the Collateral Principal
Percentage.
"Reassignment Amount" shall mean, with respect to any Distribution Date,
after giving effect to any deposits and distributions otherwise to be made on
such Distribution Date, the sum of (i) the Adjusted Invested Amount on such
Distribution Date, plus (ii) Monthly Interest for such Distribution Date and any
Monthly Interest previously due but not distributed to the Series 1998-1
Certificateholders on a prior Distribution Date, plus (iii) the amount of
Additional Interest, if any, for such Distribution Date and any Additional
Interest previously due but not distributed to the Series 1998-1
Certificateholders on a prior Distribution Date.
"Reference Banks" shall mean four major banks in the London interbank
market selected by the Servicer.
"Required Accumulation Factor Number" shall be equal to a fraction,
rounded upwards to the nearest whole number, the numerator of which is one and
the denominator of which is equal to the lowest monthly principal payment rate
on the Accounts, expressed as a decimal, for the three months preceding the date
of such calculation.
"Required Amount" shall mean, with respect to any Monthly Period, the sum
of the Class A Required Amount and the Class B Required Amount.
"Required Collateral Invested Amount" shall mean (i) initially
$95,000,000 and (ii) on any Distribution Date thereafter, 9.5% of the sum of the
Class A Adjusted Invested Amount on such Distribution Date, the Class B Adjusted
Invested Amount on such Distribution Date (in each case after taking into
account payments to be made on such Distribution Date) and the Collateral
Invested Amount on such Distribution Date after taking into account any
adjustments made on such Distribution Date, but not less than $30,000,000,
provided, however, that (1) if either (a) there is a reduction in the Collateral
Invested Amount pursuant to clauses (c), (d) or (e) of the definition thereof
during the Controlled Accumulation Period or (b) a Pay-Out Event with respect to
the Series 1998-1 Certificates has occurred, the Required Collateral Invested
Amount for such Distribution Date thereafter shall equal the Required Collateral
13
Invested Amount for such Distribution Date immediately preceding such reduction
or Pay-Out Event, (2) in no event shall the Required Collateral Invested Amount
exceed the unpaid principal amount of the Series 1998-1 Certificates as of the
last day of the Monthly Period preceding such Distribution Date after taking
into account payments to be made on the related Distribution Date and (3) the
Required Collateral Invested Amount may be reduced to a lesser amount at any
time if the Rating Agency Condition is satisfied.
"Required Reserve Account Amount" shall mean, with respect to any
Distribution Date on or after the Reserve Account Funding Date, an amount equal
to (1) 0.50% of the Class A Invested Amount as of the preceding Distribution
Date (after giving effect to all changes therein on such date) or (2) any other
percentage (which may be 0%) of the Class A Invested Amount designated by the
Transferors, provided that if such percentage is less than the percentage
specified in clause (1) above, the Transferors shall have received the prior
written consent of the Collateral Interest Holder and written notice from each
Rating Agency that the Rating Agency Condition shall have been satisfied with
respect to such designation and shall have delivered copies of each such written
notice to the Servicer and the Trustee.
"Reserve Account" shall have the meaning specified in subsection 4.12(a).
"Reserve Account Funding Date" shall mean the Distribution Date with
respect to the Monthly Period which commences three months prior to the
Distribution Date with respect to the first Monthly Period in the Controlled
Accumulation Period or such earlier date as the Transferors may determine by
written notice to the Trustee and the Servicer.
"Reserve Account Surplus" shall mean, as of any date of determination,
the amount, if any, by which the amount on deposit in the Reserve Account
exceeds the Required Reserve Account Amount.
"Reserve Draw Amount" shall have the meaning specified in
subsection 4.12(c).
"Revolving Period" shall mean the period beginning at the close of
business on the Series Cut-Off Date and ending on the earlier of (a) the close
of business on the day immediately preceding the day the Controlled Accumulation
Period commences and (b) the close of business on the day immediately preceding
the day the Early Amortization Period commences.
"Series Adjusted Portfolio Yield" shall mean, with respect to any Monthly
Period, the annualized percentage equivalent of a fraction, (A) the numerator of
which is equal to (a) Reallocated Investor Finance Charge Collections with
respect to such Monthly Period, plus (b) the amount of any Principal Funding
Investment Proceeds for the related Distribution Date, plus (c) provided that
each Rating Agency has consented in writing to the inclusion thereof in
calculating the Series Adjusted Portfolio Yield, any Excess Finance Charge
Collections that are allocated to Series 1998-1 with respect to such Monthly
Period plus (d) the amount of funds, if any, withdrawn from the Reserve Account
14
which pursuant to subsection 4.12(d) are required to be included as Class A
Available Funds for the Distribution Date with respect to such Monthly Period
minus (e) the Investor Default Amount for the Distribution Date with respect to
such Monthly Period, and (B) the denominator of which is the Invested Amount as
of the last day of the preceding Monthly Period.
"Series Cut-Off Date" shall mean the close of business on March 31, 1998.
"Series 1998-1" shall mean the Series of Certificates the terms of which
are specified in this Supplement.
"Series 1998-1 Additional Amounts" shall mean, with respect to any
Distribution Date, the sum of the amounts determined pursuant to subsections
4.07(b), (e) and (i) for such Distribution Date.
"Series 1998-1 Allocable Defaulted Amount" shall mean the Series
Allocable Defaulted Amount with respect to Series 1998-1.
"Series 1998-1 Allocable Finance Charge Collections" shall mean the
Series Allocable Finance Charge Collections with respect to Series 1998-1.
"Series 1998-1 Allocable Principal Collections" shall mean the Series
Allocable Principal Collections with respect to Series 1998-1.
"Series 1998-1 Allocation Percentage" shall mean the Series Allocation
Percentage with respect to Series 1998-1.
"Series 1998-1 Certificate" shall mean a Class A Certificate or a Class B
Certificate or the Collateral Interest.
"Series 1998-1 Certificateholder" shall mean a Class A Certificateholder
or a Class B Certificateholder or the Collateral Interest Holder.
"Series 1998-1 Certificateholders' Interest" shall mean the
Certificateholders' Interest for Series 1998-1, including the Collateral
Interest.
"Series 1998-1 Monthly Fees" shall mean, with respect to any Distribution
Date, the amount determined pursuant to subsections 4.05(a)(ii), (b)(ii) and
(c)(i) and subsection 4.07(g).
"Series 1998-1 Monthly Interest" shall mean the amounts determined
pursuant to subsections 4.02(a), (b) and (c).
"Series 1998-1 Principal Shortfall" shall have the meaning specified in
Section 4.11.
"Series 1998-1 Termination Date" shall mean the January 2006
Distribution Date.
"Series Invested Amount" shall mean the Initial Invested Amount.
"Series Required Transferor Amount" shall mean an amount equal to 7% of
the Invested Amount.
15
"Servicing Base Amount" shall have the meaning specified in Section 3.01.
"Servicing Fee Rate" shall mean 2.0% per annum.
"Special Payment Date" shall mean each Distribution Date with respect to
the Early Amortization Period.
"Telerate Page 3750" shall mean the display page currently so designated
on the Dow Xxxxx Service (or such other page as may replace that page on that
service for the purpose of displaying comparable rates or prices).
"Transferor Percentage" shall mean 100% minus (a) the Floating Allocation
Percentage, when used at any time with respect to Finance Charge Receivables and
Defaulted Receivables, or (b) the Principal Allocation Percentage, when used at
any time with respect to Principal Receivables.
(b) Notwithstanding anything to the contrary in this Supplement or the
Agreement, the term "Rating Agency" shall mean, whenever used in this Supplement
or the Agreement with respect to Series 1998-1, Moody's and Standard & Poor's.
As used in this Supplement and in the Agreement with respect to Series 1998-1,
"highest investment category" shall mean (i) in the case of Standard & Poor's,
AAA or A-1+, as applicable and (ii) in the case of Moody's, Aaa or P-1, as
applicable.
(c) Each capitalized term defined herein shall relate to the Series
1998-1 Certificates and no other Series of Certificates issued by the Trust,
unless the context otherwise requires. All capitalized terms used herein and not
otherwise defined herein have the meanings ascribed to them in the Agreement. In
the event that any term or provision contained herein shall conflict with or be
inconsistent with any term or provision contained in the Agreement, the terms
and provisions of this Supplement shall govern.
(d) The words "hereof," "herein" and "hereunder" and words of similar
import when used in this Supplement shall refer to this Supplement as a whole
and not to any particular provision of this Supplement; references to any
Article, subsection, Section or Exhibit are references to Articles, subsections,
Sections and Exhibits in or to this Supplement unless otherwise specified; and
the term "including" means "including without limitation."
ARTICLE III
Servicing Fee
-------------
Section 3.01. Servicing Compensation. The share of the Servicing
Fee allocable to the Series 1998-1 Certificateholders with respect to any
Distribution Date (the "Monthly Servicing Fee") shall be equal to one-twelfth
of the product of (a) the Servicing Fee Rate and (b) (i) the Adjusted
Invested Amount as of the last day of the Monthly Period preceding such
Distribution Date, (or, in the case of the first Distribution Date, the
product of (i) the actual number of days from and including the Closing
Date to and including June 30, 1998, divided by 365, (ii) the Servicing
Fee Rate and (iii) the Initial Invested Amount) minus (ii) the
16
product of the amount, if any, on deposit in the Special Funding Account as of
the last day of the Monthly Period preceding such Distribution Date and the
Series 1998-1 Allocation Percentage with respect to such Monthly Period (the
amount calculated pursuant to this clause (b) is referred to as the "Servicing
Base Amount"). The share of the Monthly Servicing Fee allocable to the Class A
Certificateholders with respect to any Distribution Date (the "Class A Servicing
Fee") shall be equal to one-twelfth of the product of (a) the Class A Floating
Percentage, (b) the Servicing Fee Rate and (c) the Servicing Base Amount. The
share of the Monthly Servicing Fee allocable to the Class B Certificateholders
with respect to any Distribution Date (the "Class B Servicing Fee") shall be
equal to one-twelfth of the product of (a) the Class B Floating Percentage, (b)
the Servicing Fee Rate and (c) the Servicing Base Amount. The share of the
Monthly Servicing Fee allocable to the Collateral Interest with respect to any
Distribution Date (the "Collateral Servicing Fee") shall be equal to one-twelfth
of the product of the (a) Collateral Floating Percentage, (b) the Servicing Fee
Rate and (c) the Servicing Base Amount. The remainder of the Servicing Fee shall
be paid by the Holders of the Transferor Certificates or the investor
certificateholders of other Series (as provided in the related Supplements) and
in no event shall the Trust, the Trustee or the Series 1998-1 Certificateholders
be liable for the share of the Servicing Fee to be paid by the Holders of the
Transferor Certificates or the investor certificateholders of any other Series.
To the extent that the Class A Servicing Fee, the Class B Servicing Fee and the
Collateral Servicing Fee are not paid in full pursuant to the preceding
provisions of this Section 3.01, and Sections 4.05 and 4.07, they shall be paid
by the Holders of the Transferor Certificates.
ARTICLE IV
Rights of Series 1998-1 Certificateholders and
Allocation and Application of Collections
-----------------------------------------
Section 4.01. Collections and Allocations
(a) Allocations. Collections of Finance Charge Receivables and Principal
Receivables and Defaulted Receivables allocated to Series 1998-1 pursuant to
Article IV of the Agreement (and, as described herein, Collections of Finance
Charge Receivables reallocated from other Series in Group II) shall be allocated
and distributed or reallocated as set forth in this Article.
(b) Payments to the Transferor. The Servicer shall on each Deposit Date
withdraw from the Collection Account and pay to the Holders of the Transferor
Certificates the following amounts:
(i) an amount equal to the Transferor Percentage for the related Monthly
Period of Series 1998-1 Allocable Finance Charge Collections to the extent such
amount is deposited in the Collection Account; and
(ii) an amount equal to the Transferor Percentage for the related Monthly
Period of Series 1998-1 Allocable Principal Collections deposited in the
Collection Account, if the Transferor Amount (determined after giving effect to
any Principal Receivables transferred to the Trust on such Deposit Date) exceeds
zero.
17
The withdrawals to be made from the Collection Account pursuant to this
subsection 4.01(b) do not apply to deposits into the Collection Account that do
not represent Collections, including payment of the purchase price for the
Certificateholders' Interest pursuant to Section 2.06 or 10.01 of the Agreement,
payment of the purchase price for the Series 1998-1 Certificateholders' Interest
pursuant to Section 7.01 of this Supplement and proceeds from the sale,
disposition or liquidation of Receivables pursuant to Section 9.01 or 12.02 of
the Agreement.
(c) Allocations to the Series 1998-1 Certificateholders. The Servicer
shall, prior to the close of business on each Deposit Date, allocate to the
Series 1998-1 Certificateholders the following amounts as set forth below:
(i) Allocations of Finance Charge Collections. The Servicer shall
allocate to the Series 1998-1 Certificateholders and retain in the Collection
Account for application as provided herein an amount equal to the product of (A)
the Floating Allocation Percentage and (B) the Series 1998-1 Allocation
Percentage and (C) the aggregate amount of Collections of Finance Charge
Receivables deposited in the Collection Account on such Deposit Date.
(ii) Allocations of Principal Collections. The Servicer shall allocate to
the Series 1998-1 Certificateholders the following amounts as set forth below:
(x) Allocations During the Revolving Period. During the Revolving Period
(A) an amount equal to the product of (I) the sum of the Class B Principal
Percentage and the Collateral Principal Percentage and (II) the Principal
Allocation Percentage and (III) the Series 1998-1 Allocation Percentage and (IV)
the aggregate amount of Collections of Principal Receivables deposited in the
Collection Account on such Deposit Date, shall be allocated to the Series 1998-1
Certificateholders and retained in the Collection Account until applied as
provided herein and (B) an amount equal to the product of (I) the Class A
Principal Percentage and (II) the Principal Allocation Percentage and (III) the
Series 1998-1 Allocation Percentage and (IV) the aggregate amount of Collections
of Principal Receivables deposited in the Collection Account on such Deposit
Date shall be allocated to the Series 1998-1 Certificateholders and, to the
extent needed to make any distribution pursuant to subsection 4.05(d)(i),
deposited in the Collection Account, and otherwise first, if any other Principal
Sharing Series is outstanding and in its amortization period or accumulation
period, retained in the Collection Account for application, to the extent
necessary, as Shared Principal Collections on the related Distribution Date, and
second paid to the Holders of the Transferor Certificates; provided, however,
that such amount to be paid to the Holders of the Transferor Certificates on any
Deposit Date shall be paid to such Holders only if the Transferor Amount on such
Deposit Date is greater than the Required Transferor Amount (after giving effect
18
to all Principal Receivables transferred to the Trust on such day) and otherwise
shall be deposited in the Special Funding Account.
(y) Allocations During the Controlled Accumulation Period. During the
Controlled Accumulation Period (A) an amount equal to the product of (I) the sum
of the Class B Principal Percentage and the Collateral Principal Percentage and
(II) the Principal Allocation Percentage and (III) the Series 1998-1 Allocation
Percentage and (IV) the aggregate amount of Collections of Principal Receivables
deposited in the Collection Account on such Deposit Date, shall be allocated to
the Series 1998-1 Certificateholders and retained in the Collection Account
until applied as provided herein and (B) an amount equal to the product of (I)
the Class A Principal Percentage and (II) the Principal Allocation Percentage
and (III) the Series 1998-1 Allocation Percentage and (IV) the aggregate amount
of Collections of Principal Receivables deposited in the Collection Account on
such Deposit Date (the product specified in this clause (B) for any such date is
hereinafter referred to as a "Percentage Allocation") shall be allocated to the
Series 1998-1 Certificateholders and retained in the Collection Account until
applied as provided herein; provided, however, that if the sum of such
Percentage Allocation and all preceding Percentage Allocations with respect to
the same Monthly Period exceeds the Controlled Deposit Amount during the
Controlled Accumulation Period for the related Distribution Date, then such
excess shall not be treated as a Percentage Allocation and shall be first, if
any other Principal Sharing Series is outstanding and in its amortization period
or accumulation period, retained in the Collection Account for application, to
the extent necessary, as Shared Principal Collections on the related
Distribution Date, and second paid to the Holders of the Transferor Certificates
only if the Transferor Amount on such Deposit Date is greater than the Required
Transferor Amount (after giving effect to all Principal Receivables transferred
to the Trust on such day) and otherwise shall be deposited in the Special
Funding Account.
(z) Allocations During the Early Amortization Period. During the Early
Amortization Period, an amount equal to the product of (A) the Principal
Allocation Percentage and (B) the Series 1998-1 Allocation Percentage and (C)
the aggregate amount of Collections of Principal Receivables deposited in the
Collection Account on such Deposit Date, shall be allocated to the Series 1998-1
Certificateholders and retained in the Collection Account until applied as
provided herein; provided, however, that after the date on which an amount of
such Collections equal to the Adjusted Invested Amount has been deposited into
the Collection Account and allocated to the Series 1998-1 Certificateholders,
the remainder that has not been so deposited and allocated shall be first, if
any other Principal Sharing Series is outstanding and in its amortization period
or accumulation period, retained in the Collection Account for application, to
19
the extent necessary, as Shared Principal Collections on the related
Distribution Date, and second paid to the Holders of the Transferor Certificates
only if the Transferor Amount on such date is greater than the Required
Transferor Amount (after giving effect to all Principal Receivables transferred
to the Trust on such day) and otherwise shall be deposited in the Special
Funding Account.
Section 4.02. Determination of Monthly Interest.
(a) The amount of monthly interest ("Class A Monthly Interest")
distributable from the Collection Account with respect to the Class A
Certificates on any Distribution Date shall be an amount equal to the product of
(i) a fraction, the numerator of which is the actual number of days in the
period from (and including) the immediately preceding Distribution Date (or in
the case of the first Distribution Date, the Closing Date) to (but excluding)
such Distribution Date and the denominator of which is 360, (ii) the Class A
Certificate Rate for such Distribution Date and (iii) the outstanding principal
balance of the Class A Certificates as of close of business on the immediately
preceding Record Date.
On the Determination Date preceding each Distribution Date, the Servicer
shall determine the excess, if any (the "Class A Interest Shortfall"), of (x)
the Class A Monthly Interest for such Distribution Date over (y) the aggregate
amount of funds allocated and available to pay such Class A Monthly Interest on
such Distribution Date. If the Class A Interest Shortfall with respect to any
Distribution Date is greater than zero, on each subsequent Distribution Date
until such Class A Interest Shortfall is fully paid, an additional amount
("Class A Additional Interest") equal to the product of (i) one-twelfth of the
sum of (x) the Class A Certificate Rate and (y) 2.0% per annum and (ii) such
Class A Interest Shortfall (or the portion thereof which has not been paid to
the Class A Certificateholders) shall be payable as provided herein with respect
to the Class A Certificates. Notwithstanding anything to the contrary herein,
Class A Additional Interest shall be payable or distributed to the Class A
Certificateholders only to the extent permitted by applicable law.
(b) The amount of monthly interest ("Class B Monthly Interest")
distributable from the Collection Account with respect to the Class B
Certificates on any Distribution Date shall be an amount equal to the product of
(i) a fraction, the numerator of which is the actual number of days in the
period from (and including) the immediately preceding Distribution Date (or in
the case of the first Distribution Date, the Closing Date) to (but excluding)
such Distribution Date and the denominator of which is 360 times (ii) the Class
B Certificate Rate for such Distribution Date and (iii) the Class B Invested
Amount as of the close of business on the immediately preceding Record Date.
On the Determination Date preceding each Distribution Date, the Servicer
shall determine the excess, if any (the "Class B Interest Shortfall"), of (x)
the Class B Monthly Interest for such Distribution Date over (y) the aggregate
amount of funds allocated and available to pay such Class B Monthly Interest on
such Distribution Date. If the Class B Interest Shortfall with respect to any
Distribution Date is greater than zero, on each subsequent Distribution Date
until such Class B Interest Shortfall is fully paid, an additional amount
("Class B Additional Interest") equal to the product of (i) one-twelfth of the
sum of (x) the Class B Certificate Rate and (y) 2.0% per annum and (ii) such
20
Class B Interest Shortfall (or the portion thereof which has not been paid to
the Class B Certificateholders) shall be payable as provided herein with respect
to the Class B Certificates. Notwithstanding anything to the contrary herein,
Class B Additional Interest shall be payable or distributed to the Class B
Certificateholders only to the extent permitted by applicable law.
(c) The amount of monthly interest ("Collateral Monthly Interest")
distributable from the Collection Account with respect to the Collateral
Invested Amount on any Distribution Date shall be an amount equal to the product
of (i) (A) a fraction, the numerator of which is the actual number of days in
the period from (and including) the immediately preceding Distribution Date (or
in the case of the first Distribution Date, the Closing Date) to (but excluding)
such Distribution Date and the denominator of which is 360, times (B) the
Collateral Rate in effect with respect to the period from (and including) the
immediately preceding Distribution Date (or in the case of the first
Distribution Date, the Closing Date) to (but excluding) such Distribution Date,
and (ii) the Collateral Invested Amount as of the close of business on the last
day of the preceding Monthly Period; provided, however, with respect to the
first Distribution Date, Collateral Monthly Interest shall be equal to the
interest accrued on the Collateral Initial Invested Amount at the Collateral
Rate for the period from the Closing Date to but excluding the first
Distribution Date..
On the Determination Date preceding each Distribution Date, the Servicer
shall determine an amount (the "Collateral Interest Shortfall") equal to (x) the
aggregate Collateral Monthly Interest for such Distribution Date minus (y) the
aggregate amount of funds allocated and available to pay such Collateral Monthly
Interest on such Distribution Date. If the Collateral Interest Shortfall with
respect to any Distribution Date is greater than zero, on each subsequent
Distribution Date until such Collateral Interest Shortfall is fully paid, an
additional amount ("Collateral Additional Interest") shall be payable as
provided herein with respect to the Collateral Invested Amount equal to the
product of (i) (A) a fraction, the numerator of which is the actual number of
days in the period from (and including) the immediately preceding Distribution
Date to (but excluding) such Distribution Date and the denominator of which is
360, times (B) the Collateral Rate in effect during the period from (and
including) the immediately preceding Distribution Date to (but excluding) such
Distribution Date, and (ii) such Collateral Interest Shortfall (or the portion
thereof which has not been paid to the Collateral Interest Holder).
Notwithstanding anything to the contrary herein, Collateral Additional Interest
shall be payable or distributed to the Collateral Interest Holder only to the
extent permitted by applicable law.
Section 4.03. Principal Funding Account; Controlled Accumulation
Period.
(a) (i) The Servicer, for the benefit of the Series 1998-1
Certificateholders, shall establish and maintain in the name of the Trustee, on
behalf of the Trust, an Eligible Deposit Account (the "Principal Funding
Account"), bearing a designation clearly indicating that the funds deposited
therein are held for the benefit of the Series 1998-1 Certificateholders. The
Principal Funding Account shall initially be established with the Trustee.
(ii) At the written direction of the Servicer, funds on deposit in the
Principal Funding Account shall be invested by the Trustee in Eligible
Investments selected by the Servicer. All such Eligible Investments shall be
held by the Trustee for the benefit of the Series 1998-1 Certificateholders;
provided, that on each Distribution Date all interest and other investment
income (net of losses and investment expenses) ("Principal Funding Investment
21
Proceeds") on funds on deposit therein shall be applied as set forth in
paragraph (iii) below. Funds on deposit in the Principal Funding Account shall
be invested in Eligible Investments that will mature so that such funds will be
available at the close of business on the Transfer Date preceding the following
Distribution Date. Unless the Servicer directs otherwise, funds deposited in the
Principal Funding Account on a Transfer Date (which immediately precedes a
Payment Date) upon the maturity of any Eligible Investments are not required to
be invested overnight. No such Eligible Investment shall be disposed of prior to
its maturity; provided, however, that the Trustee may sell, liquidate or dispose
of any such Eligible Investment before its maturity, at the written direction of
the Servicer, if such sale, liquidation or disposal would not result in a loss
of all or part of the principal portion of such Eligible Investment or if, prior
to the maturity of such Eligible Investment, a default occurs in the payment of
principal, interest or any other amount with respect to such Eligible
Investment.
(iii) On each Distribution Date with respect to the Controlled
Accumulation Period, the Servicer shall direct the Trustee in writing to
withdraw from the Principal Funding Account and deposit into the Collection
Account all Principal Funding Investment Proceeds then on deposit in the
Principal Funding Account and such Principal Funding Investment Proceeds shall
be treated as a portion of Class A Available Funds.
(iv) Reinvested interest and other investment income on funds deposited
in the Principal Funding Account shall not be considered to be principal amounts
on deposit therein for purposes of this Supplement.
(b) (i) The Trustee shall possess all right, title and interest in all
funds on deposit from time to time in the Principal Funding Account and in all
proceeds thereof. The Principal Funding Account shall be under the sole dominion
and control of the Trustee for the benefit of the Series 1998-1
Certificateholders. If, at any time, the Principal Funding Account ceases to be
an Eligible Deposit Account, the Trustee (or the Servicer on its behalf) shall
within 10 Business Days (or such longer period, not to exceed 30 calendar days,
as to which each Rating Agency may consent) establish a new Principal Funding
Account meeting the conditions specified in paragraph (a)(i) above as an
Eligible Deposit Account and shall transfer any cash or any investments to such
new Principal Funding Account.
(ii) Pursuant to the authority granted to the Servicer in subsection
3.01(b) of the Agreement, the Servicer shall have the power to make withdrawals
and payments or to instruct the Trustee to make withdrawals and payments from
the Principal Funding Account for the purposes of carrying out the Servicer's or
Trustee's duties hereunder. Pursuant to the authority granted to the Paying
Agent in Section 5.01 of this Supplement and Section 6.07 of the Agreement, the
Paying Agent shall have the power to withdraw funds from the Principal Funding
Account for the purpose of making distributions to the Series 1998-1
Certificateholders.
22
(c) The Controlled Accumulation Period is scheduled to commence at the
close of business on the last day of the May 2002 Monthly Period; provided,
however, that if the Controlled Accumulation Period Length (which shall be
determined as described below) is less than 12 months, the date on which the
Controlled Accumulation Period actually commences will be delayed to the close
of business on the last day of the month preceding the month that is the number
of months prior to the Expected Final Payment Date at least equal to the
Controlled Accumulation Period Length and, as a result, the number of Monthly
Periods in the Controlled Accumulation Period will at least equal the Controlled
Accumulation Period Length. On the Determination Date immediately preceding the
May 2002 Distribution Date, and on each Determination Date thereafter that
occurs prior to the Determination Date occurring in the Monthly Period in which
the Controlled Accumulation Period commences, the Servicer will determine the
"Controlled Accumulation Period Length" which will equal the number of months
such that the sum of the Controlled Accumulation Period Factors for each month
during such period will be equal to or greater than the Required Accumulation
Factor Number; provided, however, that the Controlled Accumulation Period Length
shall not be less than one month. Notwithstanding the foregoing, if the
Controlled Accumulation Period Length shall have been determined to be less than
12 months and, after the date on which such determination is made, a Pay-Out
Event or Reinvestment Event (as those terms are defined in the Supplement for
such Series) shall occur with respect to any outstanding Principal Sharing
Series other than Series 1998-1, the Controlled Accumulation Period will
commence on the earlier of (i) the first day of the Monthly Period immediately
succeeding the date that such Pay-Out Event or Reinvestment Event shall have
occurred with respect to such Series and (ii) the date on which the Controlled
Accumulation Period is then scheduled to commence.
Section 4.04. Required Amount
(a) With respect to each Distribution Date, on the related Determination
Date, the Servicer shall determine the amount (the "Class A Required Amount"),
if any, by which (x) the sum of (i) Class A Monthly Interest for such
Distribution Date, (ii) any Class A Monthly Interest previously due but not paid
to the Class A Certificateholders on a prior Distribution Date, (iii) any Class
A Additional Interest for such Distribution Date and (iv) any Class A Additional
Interest previously due but not paid to the Class A Certificateholders on a
prior Distribution Date, (v) if TRS or an Affiliate of TRS is no longer the
Servicer, the Class A Servicing Fee for such Distribution Date, (vi) if TRS or
an Affiliate of TRS is no longer the Servicer, any Class A Servicing Fee
previously due but not paid to the Servicer, and (vii) the Class A Investor
Default Amount, if any, for such Distribution Date exceeds (y) the Class A
Available Funds. In the event that the difference between (x) the Class A
Required Amount for such Distribution Date and (y) the amount of Excess Spread
and Excess Finance Charge Collections applied with respect thereto pursuant to
subsection 4.07(a) on such Distribution Date is greater than zero, the Servicer
shall give written notice to the Trustee of such excess Class A Required Amount
on the date of computation.
(b) With respect to each Distribution Date, on the related Determination
Date, the Servicer shall determine the amount (the "Class B Required Amount"),
if any, equal to the sum of (x) the amount, if any, by which (A) the sum of (i)
Class B Monthly Interest for such Distribution Date, (ii) any Class B Monthly
23
Interest previously due but not paid to the Class B Certificateholders, (iii)
Class B Additional Interest, if any, for such Distribution Date, (iv) any Class
B Additional Interest previously due but not paid to the Class B
Certificateholders on a prior Distribution Date, (v) if TRS or an Affiliate of
TRS is no longer the Servicer, the Class B Servicing Fee for such Distribution
Date and (vi) if TRS or an Affiliate of TRS is no longer the Servicer, any Class
B Servicing Fee previously due but not paid to the Servicer exceeds (B) the
Class B Available Funds and (y) the Class B Investor Default Amount for such
Distribution Date. In the event that the difference between (x) the Class B
Required Amount for such Distribution Date and (y) the amount of Excess Spread
and Excess Finance Charge Collections applied with respect thereto pursuant to
subsection 4.07(d) on such Distribution Date is greater than zero, the Servicer
shall give written notice to the Trustee of such excess Class B Required Amount
on the date of computation.
Section 4.05. Application of Class A Available Funds, Class B Available
Funds, Collateral Available Funds and Available Principal Collections. The
Servicer shall apply, or shall cause the Trustee to apply by written
instruction to the Trustee, on each Distribution Date, Class A Available Funds,
Class B Available Funds, Collateral Available Funds and Available Principal
Collections on deposit in the Collection Account with respect to such
Distribution Date to make the following distributions:
(a) On each Distribution Date, an amount equal to the Class A Available
Funds with respect to such Distribution Date will be distributed or deposited in
the following priority:
(i) an amount equal to Class A Monthly Interest for such Distribution
Date, plus the amount of any Class A Monthly Interest previously due but not
distributed to Class A Certificateholders on a prior Distribution Date, plus the
amount of any Class A Additional Interest for such Distribution Date and any
Class A Additional Interest previously due but not distributed to Class A
Certificateholders on a prior Distribution Date, shall be distributed to the
Paying Agent for payment to the Class A Certificateholders;
(ii) if TRS or an Affiliate of TRS is no longer the Servicer, an amount
equal to the Class A Servicing Fee for such Distribution Date, plus the amount
of any Class A Servicing Fee previously due but not distributed to the Servicer
on a prior Distribution Date, shall be distributed to the Servicer (unless such
amount has been netted against deposits to the Collection Account in accordance
with Section 4.03 of the Agreement);
(iii) an amount equal to the Class A Investor Default Amount for such
Distribution Date shall be treated as a portion of Available Principal
Collections for such Distribution Date; and
(iv) the balance, if any, shall constitute Excess Spread and shall be
allocated and distributed or deposited as set forth in Section 4.07.
24
(b) On each Distribution Date, an amount equal to the Class B Available
Funds with respect to such Distribution Date will be distributed or deposited in
the following priority:
(i) an amount equal to Class B Monthly Interest for such Distribution
Date, plus the amount of any Class B Monthly Interest previously due but not
distributed to Class B Certificateholders on a prior Distribution Date, plus the
amount of any Class B Additional Interest for such Distribution Date and any
Class B Additional Interest previously due but not distributed to Class B
Certificateholders on a prior Distribution Date, shall be distributed to the
Paying Agent for payment to the Class B Certificateholders;
(ii) if TRS or an Affiliate of TRS is no longer the Servicer, an amount
equal to the Class B Servicing Fee for such Distribution Date, plus the amount
of any Class B Servicing Fee previously due but not distributed to the Servicer
on a prior Distribution Date, shall be distributed to the Servicer (unless such
amount has been netted against deposits to the Collection Account in accordance
with Section 4.03 of the Agreement); and
(iii) the balance, if any, shall constitute Excess Spread and shall be
allocated and distributed or deposited as set forth in Section 4.07.
(c) On each Distribution Date, an amount equal to the Collateral
Available Funds with respect to such Distribution Date will be distributed or
deposited in the following priority:
(i) if TRS or an Affiliate of TRS is no longer the Servicer, an amount
equal to the Collateral Servicing Fee for such Distribution Date, plus the
amount of any Collateral Servicing Fee previously due but not distributed to the
Servicer on a prior Distribution Date, shall be distributed to the Servicer
(unless such amount has been netted against deposits to the Collection Account
in accordance with Section 4.03 of the Agreement); and
(ii) the balance, if any, shall constitute Excess Spread and shall be
allocated and distributed or deposited as set forth in Section 4.07.
(d) On each Distribution Date with respect to the Revolving Period, an
amount equal to the Available Principal Collections deposited in the Collection
Account for the related Monthly Period shall be distributed in the following
order of priority:
(i) an amount equal to the excess, if any, of the Collateral Invested
Amount over the Required Collateral Invested Amount shall be paid to the
Collateral Interest Holder for application in accordance with the Loan
Agreement; and
(ii) the balance of such Available Principal Collections shall be treated
as Shared Principal Collections and applied in accordance with Section 4.04 of
the Agreement.
25
(e) On each Distribution Date with respect to the Controlled Accumulation
Period, an amount equal to the Available Principal Collections deposited in the
Collection Account for the related Monthly Period shall be distributed in the
following order of priority:
(i) an amount equal to the lesser of (x) the Controlled Deposit Amount
and (y) the sum of the Class A Adjusted Invested Amount and the Class B Adjusted
Invested Amount shall be deposited in the Principal Funding Account;
(ii) for each Distribution Date prior to the Distribution Date on which
the Class B Invested Amount is paid in full, after giving effect to paragraph
(i) above, an amount equal to the balance, if any, of such Available Principal
Collections shall be paid to the Collateral Interest Holder for application in
accordance with the Loan Agreement to the extent the Collateral Invested Amount
exceeds the Required Collateral Invested Amount;
(iii) for each Distribution Date beginning on the Distribution Date on
which the Class B Invested Amount shall have been paid in full, an amount up to
the Collateral Invested Amount shall be paid to the Collateral Interest Holder
for application in accordance with the Loan Agreement; and
(iv) the balance of such Available Principal Collections shall be treated
as Shared Principal Collections and applied in accordance with Section 4.04 of
the Agreement.
(f) On each Distribution Date with respect to the Early Amortization
Period, an amount equal to Available Principal Collections deposited in the
Collection Account for the related Monthly Period shall be distributed or
deposited in the following order of priority:
(i) an amount up to the Class A Adjusted Invested Amount on such
Distribution Date shall be deposited in the Principal Funding Account for
distribution to the Class A Certificateholders;
(ii) for each Distribution Date beginning on the Distribution Date on
which the Class A Invested Amount is paid in full, an amount up to the Class B
Adjusted Invested Amount on such Distribution Date shall be deposited in the
Principal Funding Account for distribution to the Class B Certificateholders;
(iii) for each Distribution Date beginning on the Distribution Date on
which the Class B Invested Amount is paid in full, an amount up to the
Collateral Invested Amount on such Distribution Date shall be paid to the
Collateral Interest Holder for application in accordance with the Loan
Agreement; and
(iv) for each Distribution Date, after giving effect to paragraphs (i),
(ii) and (iii) above, an amount equal to the balance, if any, of such Available
Principal Collections will be treated as Shared Principal Collections and
applied in accordance with Section 4.04 of the Agreement.
26
Section 4.06. Defaulted Amounts; Investor Charge-Offs.
(a) On each Determination Date, the Servicer shall calculate the Class A
Investor Default Amount, if any, for the related Distribution Date. If, on any
Distribution Date, the Class A Required Amount for the related Monthly Period
exceeds the sum of (x) the amount of Reallocated Principal Collections allocated
to Series 1998-1 with respect to such Monthly Period and (y) the amount of
Excess Spread and the Excess Finance Charge Collections allocable to Series
1998-1 with respect to such Monthly Period, the Collateral Invested Amount, if
any, will be reduced by the amount of such excess, but not by more than the
Class A Investor Default Amount for such Distribution Date. In the event that
such reduction would cause the Collateral Invested Amount to be a negative
number, the Collateral Invested Amount will be reduced to zero and the Class B
Invested Amount shall be reduced by the amount by which the Collateral Invested
Amount would have been reduced below zero, but not by more than the excess, if
any, of the Class A Investor Default Amount for such Distribution Date over the
amount of such reduction, if any, of the Collateral Invested Amount with respect
to such Distribution Date. In the event that such reduction would cause the
Class B Invested Amount to be a negative number, the Class B Invested Amount
shall be reduced to zero, and the Class A Invested Amount shall be reduced by
the amount by which the Class B Invested Amount would have been reduced below
zero, but not by more than the excess, if any, of the Class A Investor Default
Amount for such Distribution Date over the aggregate amount of the reductions,
if any, of the Collateral Invested Amount and the Class B Invested Amount for
such Distribution Date (a "Class A Investor Charge-Off"). Class A Investor
Charge-Offs shall thereafter be reimbursed and the Class A Invested Amount
increased (but not by an amount in excess of the aggregate unreimbursed Class A
Investor Charge-Offs) on any Distribution Date by the amount of Excess Spread
and Excess Finance Charge Collections allocated and available for that purpose
pursuant to subsection 4.07(b). References to "negative numbers" above shall be
determined without regard to the requirement that the Invested Amount of a Class
not be reduced below zero.
(b) On each Determination Date, the Servicer shall calculate the Class B
Investor Default Amount, if any, for the related Distribution Date. If, on any
Distribution Date, the Class B Required Amount for such Distribution Date
exceeds the sum of (x) the amount of Excess Spread and Excess Finance Charge
Collections allocated to Series 1998-1 with respect to the related Monthly
Period which are allocated and available to pay such amount pursuant to
subsection 4.07(d) and (y) the Reallocated Principal Collections allocable to
the Collateral Interest and not required to pay the Class A Required Amount with
respect to such Distribution Date, then the Collateral Invested Amount shall be
reduced by the amount of such excess. In the event that such reduction would
cause the Collateral Invested Amount to be a negative number, the Collateral
Invested Amount shall be reduced to zero, and the Class B Invested Amount shall
be reduced by the amount by which the Collateral Invested Amount would have been
reduced below zero, but not by more than the excess, if any, of the Class B
Investor Default Amount for such Distribution Date over the amount of such
reduction, if any, of the Collateral Invested Amount with respect to such
Distribution Date (a "Class B Investor Charge-Off"). Class B Investor
Charge-Offs shall thereafter be reimbursed and the Class B Invested Amount
increased (but not by an amount in excess of the aggregate unreimbursed Class B
Investor Charge-Offs) on any Distribution Date by the amount of Excess Spread
and Excess Finance Charge Collections allocated and available for that purpose
27
pursuant to subsection 4.07(e). References to "negative numbers" above shall be
determined without regard to the requirement that the Invested Amount of a Class
not be reduced below zero.
(c) On each Determination Date, the Servicer shall calculate the
Collateral Default Amount. If on any Distribution Date the Collateral Default
Amount for the previous Monthly Period exceeds the amount of Excess Spread and
Excess Finance Charge Collections allocated to Series 1998-1 with respect to the
related Monthly Period which are allocated and available to pay such amount
pursuant to subsection 4.07(h), the Collateral Invested Amount will be reduced
by the amount of such excess but not by more than the lesser of the Collateral
Default Amount and the Collateral Invested Amount for such Distribution Date (a
"Collateral Charge-Off"). The Collateral Invested Amount will be reimbursed
after any reduction pursuant to this Section 4.06 on any Distribution Date by
the amount of Excess Spread and Excess Finance Charge Collections allocated and
available on such Distribution date for that purpose as described under
subsection 4.07(i).
Section 4.07. Excess Spread; Excess Finance Charge Collections. The
Servicer shall apply, or shall cause the Trustee to apply by written
instruction to the Trustee, on each Distribution Date, Excess Spread and Excess
Finance Charge Collections allocated to Series 1998-1 with respect to the
related Monthly Period, to make the following distributions or deposits in the
following order of priority:
(a) an amount equal to the Class A Required Amount, if any, with respect
to such Distribution Date shall be distributed by the Trustee to fund the Class
A Required Amount in accordance with, and in the priority set forth in,
subsections 4.05(a)(i), (ii) and (iii);
(b) an amount equal to the aggregate amount of Class A Investor
Charge-Offs which have not been previously reimbursed shall be treated as a
portion of Available Principal Collections for such Distribution Date;
(c) an amount equal to the interest accrued with respect to the
outstanding aggregate principal balance of the Class B Certificates not
otherwise distributed to the Class B Certificateholders on such Distribution
Date shall be distributed to the Class B Certificateholders;
(d) an amount equal to the Class B Required Amount, if any, with respect
to such Distribution Date will be used to fund the Class B Required Amount and
be applied first in accordance with, and in the priority set forth in,
subsections 4.05(b) (ii) and then any remaining amount up to the amount of the
Class B Investor Default Amount shall be treated as a portion of Available
Principal Collections for such Distribution Date;
(e) an amount equal to the aggregate amount by which the Class B Invested
Amount has been reduced pursuant to clauses (c), (d) and (e) of the definition
of "Class B Invested Amount" in Section 2.01 of this Supplement (but not in
excess of the aggregate amount of such reductions which have not been previously
reimbursed) shall be treated as a portion of Available Principal Collections for
such Distribution Date;
(f) an amount equal to Collateral Monthly Interest for such Distribution
Date, plus the amount of any Collateral Monthly Interest previously due but not
distributed to the Collateral Interest Holder on a prior Distribution Date, plus
28
the amount of any Collateral Additional Interest for such Distribution Date and
any Collateral Additional Interest previously due but not distributed to the
Collateral Interest Holder on a prior Distribution Date, shall be distributed to
the Collateral Interest Holder for application in accordance with the Loan
Agreement;
(g) an amount equal to the Monthly Servicing Fee for such Distribution
Date that has not been paid to the Servicer and any Monthly Servicing Fee due
but not paid to the Servicer on a prior Distribution Date shall be paid to the
Servicer;
(h) an amount equal to the Collateral Default Amount, if any, for such
Distribution Date shall be treated as a portion of Available Principal
Collections for such Distribution Date;
(i) an amount equal to the aggregate amount by which the Collateral
Invested Amount has been reduced pursuant to clauses (c), (d) and (e) of the
definition of "Collateral Invested Amount" (but not in excess of the aggregate
amount of such reductions which have not been previously reimbursed) shall be
treated as a portion of Available Principal Collections for such Distribution
Date;
(j) on each Distribution Date from and after the Reserve Account Funding
Date, but prior to the date on which the Reserve Account terminates pursuant to
subsection 4.12(f), an amount up to the excess, if any, of the Required Reserve
Account Amount over the Available Reserve Account Amount shall be deposited into
the Reserve Account;
(k) an amount equal to the aggregate of any other amounts then required
to be applied pursuant to the Loan Agreement (to the extent such amounts are
required to be applied pursuant to the Loan Agreement out of Excess Spread and
Excess Finance Charge Collections) shall be distributed to the Collateral
Interest Holder for application in accordance with the Loan Agreement; and
(l) balance, if any, will constitute a portion of Excess Finance Charge
Collections for such Distribution Date and will be available for allocation to
other Series or to the Holders of the Transferor Certificates as described in
Section 4.05 of the Agreement.
Section 4.08. Reallocated Principal Collections. On each
Distribution Date, the Servicer shall apply, or shall cause the
Trustee to apply, Reallocated Principal Collections with respect to such
Distribution Date, to make the following distributions or deposits in the
following order of priority:
(a) an amount equal to the excess, if any, of (i) the Class A Required
Amount, if any, with respect to such Distribution Date over (ii) the amount of
Excess Spread and Excess Finance Charge Collections allocated to Series 1998-1
with respect to the related Monthly Period shall be distributed by the Trustee
to fund any deficiency pursuant to and in the priority set forth in subsections
4.05(a)(i), (ii) and (iii); and
(b) an amount equal to the excess, if any, of (i) the Class B Required
Amount, if any, with respect to such Distribution Date over (ii) the amount of
Excess Spread and Excess Finance Charge Collections allocated and available to
29
the Class B Certificates pursuant to subsection 4.07(c) on such Distribution
Date shall be applied first to fund any deficiency pursuant to subsections
4.05(b)(i) and (ii) and then to fund any deficiency pursuant to and in the
priority set forth in subsection 4.07(c).
On each Distribution Date, the Collateral Invested Amount shall be
reduced by the amount of Reallocated Principal Collections for such Distribution
Date. In the event that such reduction would cause the Collateral Invested
Amount (after giving effect to any Collateral Charge-Offs for such Distribution
Date) to be a negative number, the Collateral Invested Amount (after giving
effect to any Collateral Charge-Offs for such Distribution Date) shall be
reduced to zero and the Class B Invested Amount shall be reduced by the amount
by which the Collateral Invested Amount would have been reduced below zero. In
the event that the reallocation of Reallocated Principal Collections would cause
the Class B Invested Amount (after giving effect to any Class B Investor
Charge-Offs for such Distribution Date) to be a negative number on any
Distribution Date, Reallocated Principal Collections shall be reallocated on
such Distribution Date in an aggregate amount not to exceed the amount which
would cause the Class B Invested Amount (after giving to any Class B Investor
Charge-Offs for such Distribution Date) to be reduced to zero. References to
"negative numbers" above shall be determined without regard to the requirement
that the Invested Amount of a Class not be reduced below zero.
Section 4.09. Excess Finance Charge Collections. Series 1998-1
shall be an Excess Allocation Series. Subject to Section 4.05 of the
Agreement, Excess Finance Charge Collections with respect to the Excess
Allocation Series for any Distribution Date will be allocated to Series
1998-1 in an amount equal to the product of (x) the aggregate amount of Excess
Finance Charge Collections with respect to all the Excess Allocation Series for
such Distribution Date and (y) a fraction, the numerator of which is the Finance
Charge Shortfall for Series 1998-1 for such Distribution Date and the
denominator of which is the aggregate amount of Finance Charge Shortfalls for
all the Excess Allocation Series for such Distribution Date. The "Finance Charge
Shortfall" for Series 1998-1 for any Distribution Date will be equal to the
excess, if any, of (a) the full amount required to be paid, without duplication,
pursuant to subsections 4.05(a), 4.05(b) and 4.05(c) and subsections 4.07(a)
through (k) on such Distribution Date over (b) the sum of (i) the Reallocated
Investor Finance Charge Collections, (ii) if such Monthly Period relates to a
Distribution Date with respect to the Controlled Accumulation Period or Early
Amortization Period, the amount of Principal Funding Investment Proceeds, if
any, with respect to such Distribution Date and (iii) the amount of funds, if
any, to be withdrawn from the Reserve Account which, pursuant to subsection
4.12(d), are required to be included in Class A Available Funds with respect to
such Distribution Date.
Section 4.10. Reallocated Investor Finance Charge Collections.
(a) That portion of Group II Investor Finance Charge Collections for any
Distribution Date equal to the amount of Reallocated Investor Finance Charge
Collections for such Distribution Date will be allocated to Series 1998-1 and
will be distributed as set forth in this Supplement.
(b) Reallocated Investor Finance Charge Collections with respect to any
Distribution Date shall equal the sum of (i) the aggregate amount of Series
1998-1 Monthly Interest, Investor Default Amount, Series 1998-1 Monthly Fees and
30
Series 1998-1 Additional Amounts for such Distribution Date and (ii) that
portion of excess Group II Investor Finance Charge Collections to be included in
Reallocated Investor Finance Charge Collections pursuant to subsection (c)
hereof; provided, however, that if the amount of Group II Investor Finance
Charge Collections for such Distribution Date is less than the sum of (w) Group
II Investor Monthly Interest, (x) Group II Investor Default Amount, (y) Group II
Investor Monthly Fees and (z) Group II Investor Additional Amounts, then
Reallocated Investor Finance Charge Collections shall equal the sum of the
following amounts for such Distribution Date:
(A) The product of (I) Group II Investor Finance Charge Collections (up
to the amount of Group II Investor Monthly Interest) and (II) a fraction, the
numerator of which is Series 1998-1 Monthly Interest and the denominator of
which is Group II Investor Monthly Interest;
(B) the product of (I) Group II Investor Finance Charge Collections less
the amount of Group II Investor Monthly Interest (up to the Group II Investor
Default Amount) and (II) a fraction, the numerator of which is the Investor
Default Amount and the denominator of which is the Group II Investor Default
Amount;
(C) the product of (I) Group II Investor Finance Charge Collections less
the amount of Group II Investor Monthly Interest and the Group II Investor
Default Amount (up to Group II Investor Monthly Fees) and (II) a fraction, the
numerator of which is Series 1998-1 Monthly Fees and the denominator of which is
Group II Investor Monthly Fees; and
(D) the product of (I) Group II Investor Finance Charge Collections less
the sum of (i) Group II Investor Monthly Interest, (ii) the Group II Investor
Default Amount and (iii) Group II Investor Monthly Fees and (II) a fraction, the
numerator of which is Series 1998-1 Additional Amounts and the denominator of
which is Group II Investor Additional Amounts.
(c) If the amount of Group II Investor Finance Charge Collections for
such Distribution Date exceeds the sum of (i) Group II Investor Monthly
Interest, (ii) Group II Investor Default Amount, (iii) Group II Investor Monthly
Fees and (iv) Group II Investor Additional Amounts, then Reallocated Investor
Finance Charge Collections for such Distribution Date shall include an amount
equal to the product of (x) the amount of such excess and (y) a fraction, the
numerator of which is the Invested Amount as of the last day of the second
preceding Monthly Period (or, for Series 1998-1 only, with respect to the first
Distribution Date, as of the Closing Date) and the denominator of which is the
sum of such Invested Amount and the aggregate invested amounts for all other
Series included in Group II as of such last day (or, for Series 1998-1 only,
with respect to the first Distribution Date, as of the Closing Date).
Section 4.11. Shared Principal Collections. Subject to Section 4.04
of the Agreement, Shared Principal Collections for any Distribution
Date will be allocated to Series 1998-1 in an amount equal to the
product of (x) the aggregate amount of Shared Principal Collections with
respect to all Principal Sharing Series for such Distribution Date and (y) a
fraction, the numerator of which is the Series 1998-1 Principal Shortfall for
31
such Distribution Date and the denominator of which is the aggregate amount of
Principal Shortfalls for all the Series which are Principal Sharing Series for
such Distribution Date. The "Series 1998-1 Principal Shortfall" will be equal to
(a) for any Distribution Date with respect to the Revolving Period, zero, (b)
for any Distribution Date with respect to the Controlled Accumulation Period,
the excess, if any, of the Controlled Deposit Amount with respect to such
Distribution Date over the amount of Available Principal Collections for such
Distribution Date (excluding any portion thereof attributable to Shared
Principal Collections), and (c) for any Distribution Date with respect to the
Early Amortization Period, the excess, if any, of the Invested Amount over the
amount of Available Principal Collections for such Distribution Date (excluding
any portion thereof attributable to Shared Principal Collections).
Section 4.12. Reserve Account.
(a) The Servicer shall establish and maintain, in the name of the
Trustee, on behalf of the Trust, for the benefit of the Class A
Certificateholders and the Collateral Interest Holder, an Eligible Deposit
Account (the "Reserve Account") bearing a designation clearly indicating that
the funds deposited therein are held for the benefit of the Class A
Certificateholders and the Collateral Interest Holder. The Reserve Account shall
initially be established with the Trustee. The Trustee shall possess all right,
title and interest in all funds on deposit from time to time in the Reserve
Account and in all proceeds thereof. The Reserve Account shall be under the sole
dominion and control of the Trustee for the benefit of the Class A
Certificateholders and the Collateral Interest Holder. If at any time the
Reserve Account ceases to be an Eligible Deposit Account, the Trustee (or the
Servicer on its behalf) shall within 10 Business Days (or such longer period,
not to exceed 30 calendar days, as to which each Rating Agency shall consent)
establish a new Reserve Account meeting the conditions specified above as an
Eligible Deposit Account, and shall transfer any cash or any investments to such
new Reserve Account. The Trustee, at the direction of the Servicer, shall (i)
make withdrawals from the Reserve Account from time to time in an amount up to
the Available Reserve Account Amount at such time, for the purposes set forth in
this Supplement, and (ii) on each Distribution Date (from and after the Reserve
Account Funding Date) prior to the termination of the Reserve Account make a
deposit into the Reserve Account in the amount specified in, and otherwise in
accordance with, subsection 4.07(j).
(b) Funds on deposit in the Reserve Account shall be invested at the
written direction of the Servicer by the Trustee in Eligible Investments. Funds
on deposit in the Reserve Account on any Transfer Date, after giving effect to
any withdrawals from the Reserve Account on such Transfer Date, shall be
invested in such investments that will mature so that such funds will be
available for withdrawal on or prior to the following Transfer Date. The Trustee
shall maintain for the benefit of the Class A Certificateholders and the
Collateral Interest Holder possession of the negotiable instruments or
securities, if any, evidencing such Eligible Investments. No such Eligible
Investment shall be disposed of prior to its maturity; provided, however, that
the Trustee may sell, liquidate or dispose of any such Eligible Investment
before its maturity, at the written direction of the Servicer, if such sale,
liquidation or disposal would not result in a loss of all or part of the
principal portion of such Eligible Investment or if, prior to the maturity of
such Eligible Investment, a default occurs in the payment of principal, interest
or any other amount with respect to such Eligible Investment. On each
32
Distribution Date, all interest and earnings (net of losses and investment
expenses) accrued since the preceding Distribution Date on funds on deposit in
the Reserve Account shall be retained in the Reserve Account (to the extent that
the Available Reserve Account Amount is less than the Required Reserve Account
Amount) and the balance, if any, shall be deposited in the Collection Account
and treated as collections of Finance Charge Receivables allocable to Series
1998-1. For purposes of determining the availability of funds or the balance in
the Reserve Account for any reason under this Supplement, except as otherwise
provided in the preceding sentence, investment earnings on such funds shall be
deemed not to be available or on deposit.
(c) On the Determination Date preceding each Distribution Date with
respect to the Controlled Accumulation Period and the first Special Payment
Date, the Servicer shall calculate the "Reserve Draw Amount" which shall be
equal to the excess, if any, of the Covered Amount with respect to such
Distribution Date or Special Payment Date over the Principal Funding Investment
Proceeds with respect to such Distribution Date or Special Payment Date;
provided, that such amount will be reduced to the extent that funds otherwise
would be available for deposit in the Reserve Account under subsection 4.07(j)
with respect to such Distribution Date or Special Payment Date.
(d) In the event that for any Distribution Date the Reserve Draw Amount
is greater than zero, the Reserve Draw Amount, up to the Available Reserve
Account Amount, shall be withdrawn from the Reserve Account on the related
Transfer Date by the Trustee (acting in accordance with the instructions of the
Servicer), deposited into the Collection Account and included in Class A
Available Funds for such Distribution Date.
(e) In the event that the Reserve Account Surplus on any Distribution
Date, after giving effect to all deposits to and withdrawals from the Reserve
Account with respect to such Distribution Date, is greater than zero, the
Trustee, acting in accordance with the written instructions of the Servicer,
shall withdraw from the Reserve Account, and pay to the Collateral Interest
Holder for application in accordance with the Loan Agreement, an amount equal to
such Reserve Account Surplus.
(f) Upon the earliest to occur of (i) the day on which the Invested
Amount is paid in full to the Series 1998-1 Certificateholders, (ii) if the
Controlled Accumulation Period has not commenced, the occurrence of a Pay-Out
Event with respect to Series 1998-1, (iii) if the Controlled Accumulation Period
has commenced, the earlier of the first Special Payment Date and the Expected
Final Payment Date and (iv) the termination of the Trust pursuant to the
Agreement, the Trustee, acting in accordance with the instructions of the
Servicer, after the prior payment of all amounts owing to the Class A
Certificateholders which are payable from the Reserve Account as provided
herein, shall withdraw from the Reserve Account and pay to the Collateral
Interest Holder for application in accordance with the Loan Agreement all
amounts, if any, on deposit in the Reserve Account and the Reserve Account shall
be deemed to have terminated for purposes of this Supplement.
Section 4.13. Investment Instructions. Any investment instructions
required to be given to the Trustee pursuant to the terms hereof must be
given to the Trustee no later than 10:30 a.m. (New York City time) on the
date such investment is to be made. In the event the Trustee receives
such investment instruction later than such time, the Trustee may, but
33
shall have no obligation to, make such investment. In the event
the Trustee is unable to make an investment required in an investment
instruction received by the Trustee after 10:30 a.m. (New York City time) on
such day, such investment shall be made by the Trustee on the next succeeding
Business Day. In no event shall the Trustee be liable for any investment not
made pursuant to investment instructions received after 10:30 a.m. (New York
City time) on the day such investment is requested to be made.
Section 4.14. Determination of LIBOR. (a) On each LIBOR Determination
Date, the Trustee will determine LIBOR for the related Interest Period,
which shall be the rate for deposits in United States dollars for a
period equal to one month (commencing on the first day of such Interest
Period) which appears on Telerate page 3750 as of 11:00 a.m., London time,
on such date. Upon such determination, the Trustee shall notify the
Servicer of LIBOR for such LIBOR Determination Date. If such rate does not
appear on Telerate Page 3750, the rate for the LIBOR Determination Date will be
determined on the basis of the rates at which deposits in United States dollars
are offered by the Reference Banks at approximately 11:00 a.m., London time, on
that day to prime banks in the London interbank market for a period equal to one
month (commencing on the first day of such Interest Period). The Servicer will
request the principal London office of each of the Reference Banks to provide a
quotation of its rate. If at least two such quotations are provided, the rate
for that LIBOR Determination Date will be the arithmetic mean of the quotations.
If fewer than two quotations are provided as requested, the rate for that LIBOR
Determination Date will be the arithmetic mean of the rates quoted by major
banks in New York City, selected by the Servicer, at approximately 11:00 a.m.,
New York City time, on that day for loans in United States dollars to leading
European banks for a period equal to one month (commencing on the first day of
such Interest Period). If the banks selected by the Servicer are not quoting
rates as provided in the immediately preceding sentence, LIBOR for such Interest
Period will be LIBOR in effect for the immediately preceding Interest Period.
(b) The Servicer shall determine, and promptly notify the Trustee of, the
Class A Certificate Rate and the Class B Certificate Rate for the applicable
Interest Period. The Class A Certificate Rate and Class B Certificate Rate
applicable to the then current and the immediately preceding Interest Periods
may be obtained by any Investor Certificateholder by telephoning the Trustee at
its Corporate Trust Office at (000) 000-0000.
(c) On each LIBOR Determination Date prior to 3:00 p.m., New York City
time, the Trustee shall send to the Servicer by facsimile, notification of LIBOR
for the following Interest Period.
ARTICLE V
Distributions and Reports to
Series 1998-1 Certificateholders
--------------------------------
Section 5.01. Distributions.
(a) On each Distribution Date, the Paying Agent shall distribute to each
Class A Certificateholder of record on the related Record Date (other than as
provided in Section 12.02 of the Agreement) such Class A Certificateholder's pro
34
rata share of the amounts held by the Paying Agent that are allocated and
available on such Distribution Date to pay interest on the Class A Certificates
pursuant to this Supplement.
(b) On each Special Payment Date and on the Expected Final Payment Date,
the Paying Agent shall distribute (in accordance with the Certificate delivered
by the Servicer pursuant to Section 3.04(b) of the Agreement) to each Class A
Certificateholder of record on the related Record Date (other than as provided
in Section 12.02 of the Agreement) such Class A Certificateholder's pro rata
share of the amounts on deposit in the Principal Funding Account or otherwise
held by the Paying Agent that are allocated and available on such date to pay
principal of the Class A Certificates pursuant to this Supplement up to a
maximum amount on any such date equal to the Class A Invested Amount on such
date (unless there has been an optional repurchase of the Series 1998-1
Certificateholders' Interest pursuant to Section 10.01 of the Agreement, in
which event the foregoing limitation will not apply).
(c) On each Distribution Date, the Paying Agent shall distribute (in
accordance with the Certificate delivered by the Servicer pursuant to Section
3.04(b) of the Agreement) to each Class B Certificateholder of record on the
related Record Date (other than as provided in Section 12.02 of the Agreement)
such Class B Certificateholder's pro rata share of the amounts held by the
Paying Agent that are allocated and available on such Distribution Date to pay
interest on the Class B Certificates pursuant to this Supplement.
(d) On each Special Payment Date, and on the Expected Final Payment Date,
the Paying Agent shall distribute (in accordance with the Certificate delivered
by the Servicer pursuant to Section 3.04(b) of the Agreement) to each Class B
Certificateholder of record on the related Record Date (other than as provided
in Section 12.02 of the Agreement) such Class B Certificateholder's pro rata
share of the amounts on deposit in the Principal Funding Account or otherwise
held by the Paying Agent that are allocated and available on such date to pay
principal of the Class B Certificates pursuant to this Supplement up to a
maximum amount on any such date equal to the Class B Invested Amount on such
date (unless there has been an optional repurchase of the Series 1998-1
Certificateholders' Interest pursuant to Section 10.01 of the Agreement, in
which event the foregoing limitation will not apply).
(e) The distributions to be made pursuant to this Section 5.01 are
subject to the provisions of Sections 2.06, 9.02, 10.01 and 12.02 of the
Agreement and Sections 8.01 and 8.02 of this Supplement.
(f) Except as provided in Section 12.02 of the Agreement with respect to
a final distribution, distributions to Series 1998-1 Certificateholders
hereunder shall be made by check mailed to each Series 1998-1 Certificateholder
at such Series 1998-1 Certificateholder's address appearing in the Certificate
Register without presentation or surrender of any Series 1998-1 Certificate or
the making of any notation thereon; provided, however, that with respect to
Series 1998-1 Certificates registered in the name of a Clearing Agency, such
distributions shall be made to such Clearing Agency in immediately available
funds.
Section 5.02. Reports and Statements to Series 1998-Certificateholders.
35
(a) On each Distribution Date, the Paying Agent, on behalf of the
Trustee, shall forward to each Series 1998-1 Certificateholder a statement
substantially in the form of Exhibit C to this Supplement prepared by the
Servicer and delivered to the Paying Agent.
(b) Not later than each Determination Date, the Servicer shall deliver to
the Trustee, the Paying Agent, each Rating Agency and the Collateral Interest
Holder (i) a statement substantially in the form of Exhibit C to this Supplement
prepared by the Servicer and (ii) a certificate of a Servicing Officer
substantially in the form of Exhibit D.
(c) A copy of each statement or certificate provided pursuant to
paragraph (a) or (b) may be obtained by any Series 1998-1 Certificateholder or
any Certificate Owner thereof by a request in writing to the Servicer.
(d) On or before January 31 of each calendar year, beginning with
calendar year 1999, the Paying Agent, on behalf of the Trustee, shall furnish or
cause to be furnished to each Person who at any time during the preceding
calendar year was a Series 1998-1 Certificateholder, a statement prepared by the
Servicer containing the information which is required to be contained in the
statement to Series 1998-1 Certificateholders, as set forth in paragraph (a)
above aggregated for such calendar year or the applicable portion thereof during
which such Person was a Series 1998-1 Certificateholder, together with other
information as is required to be provided by an issuer of indebtedness under the
Code. Such obligation of the Servicer shall be deemed to have been satisfied to
the extent that substantially comparable information shall be provided by the
Paying Agent pursuant to any requirements of the Code as from time to time in
effect.
ARTICLE VI
Pay-Out Events
--------------
Section 6.01. Pay-Outs Events. If any one of the following events
shall occur with respect to the Series 1998-1 Certificates:
(a) the occurrence of an Insolvency Event relating to any Transferor or
other holder of the Original Transferor Certificate;
(b) the Trust becomes an investment company within the meaning of the
Investment Company Act;
(c) failure on the part of any Transferor (i) to make any payment or
deposit required by the terms of the Agreement or this Supplement on or before
the date occurring five Business Days after the date such payment or deposit is
required to be made therein or herein or (ii) duly to observe or perform any
other covenants or agreements of the Transferors set forth in the Agreement or
this Supplement, which failure has a material adverse effect on the Series
1998-1 Certificateholders and which continues unremedied 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 such Transferor by the Trustee, or to the
Transferors and the Trustee by any Holder of the Series 1998-1 Certificates;
36
(d) any representation or warranty made by any Transferor in the
Agreement or this Supplement, or any information contained in a computer file or
microfiche list required to be delivered by any Transferor pursuant to Section
2.01 or subsection 2.08(f) of the Agreement shall prove to have been incorrect
in any material respect when made or when delivered, which continues to be
incorrect in any material respect for a period of 60 days after the date on
which written notice of such failure, requiring the same to be remedied, shall
have been given to such Transferor by the Trustee, or to such Transferor and the
Trustee by any Holder of the Series 1998-1 Certificates and as a result of which
the interests of the Series 1998-1 Certificateholders are materially and
adversely affected for such period; provided, however, that a Pay-Out Event
pursuant to this subsection 6.01(d) shall not be deemed to have occurred
hereunder if a Transferor has accepted reassignment of the related Receivable,
or all of such Receivables, if applicable, during such period (or such longer
period not to exceed an additional 60 days as the Trustee may specify) in
accordance with the provisions of the Agreement;
(e) a failure by a Transferor to convey Receivables in Additional
Accounts or Participation Interests to the Trust within five Business Days after
the day on which it is required to convey such Receivables or Participation
Interests pursuant to subsection 2.09(a) of the Agreement;
(f) any Servicer Default which would have an Adverse Effect shall occur;
(g) the average Series Adjusted Portfolio Yield for any three consecutive
Monthly Periods is reduced to a rate which is less than the average of the Base
Rates for such period;
(h) the Class A Invested Amount and the Class B Invested Amount shall not
be paid in full on the Expected Final Payment Date; or
(i) a Transfer Restriction Event shall occur;
then, in the case of any event described in subparagraph (c), (d) or (f),
after the applicable grace period, if any, set forth in such subparagraphs,
either the Trustee or the Holders of Series 1998-1 Certificates evidencing more
than 50% of the aggregate unpaid principal amount of Series 1998-1 Certificates
by notice then given in writing to the Transferors and the Servicer (and to the
Trustee if given by the Series 1998-1 Certificateholders) may declare that a
Pay-Out Event has occurred with respect to Series 1998-1 as of the date of such
notice, and, in the case of any event described in subparagraph (a), (b), (e),
(g), (h) or (i), a Pay-Out Event shall occur with respect to Series 1998-1
without any notice or other action on the part of the Trustee or the Series
1998-1 Certificateholders immediately upon the occurrence of such event.
ARTICLE VII
Optional Repurchase; Series Termination
---------------------------------------
Section 7.01. Optional Repurchase.
(a) On any day occurring on or after the date on which the Invested
Amount is reduced to 5% or less of the Initial Invested Amount, the Transferors
37
shall have the option to purchase the Series 1998-1 Certificateholders'
Interest, at a purchase price equal to (i) if such day is a Distribution Date,
the Reassignment Amount for such Distribution Date or (ii) if such day is not a
Distribution Date, the Reassignment Amount for the Distribution Date following
such day. If, on the date on which the Transferors exercise such option, the
long-term unsecured debt obligations of either Transferor purchasing the Series
1998-1 Certificateholders' Interest is not rated at least in the third highest
rating category by the Rating Agency, such Transferor shall deliver to the
Trustee, with a copy to the Rating Agency, an Officer's Certificate which shall
have attached to it the relevant fraudulent conveyance statute, if any, and set
forth the factual basis for a conclusion that the exercise of such optional
repurchase would not constitute a fraudulent conveyance of such Transferor.
(b) The Transferors shall give the Servicer and the Trustee at least 30
days prior written notice of the date on which the Transferors intend to
exercise such purchase option. Not later than 12:00 noon, New York City time, on
such day the Transferors shall deposit the Reassignment Amount into the
Collection Account in immediately available funds. Such purchase option is
subject to payment in full of the Reassignment Amount. Following the deposit of
the Reassignment Amount into the Collection Amount in accordance with the
foregoing, the Invested Amount for Series 1998-1 shall be reduced to zero and
the Series 1998-1 Certificateholders shall have no further interest in the
Receivables.
The Reassignment Amount shall be distributed as set forth in subsection 8.01(b).
Section 7.02. Series Termination.
(a) If, on the November 2005 Distribution Date, the Invested Amount
(after giving effect to all changes therein on such date) would be greater than
zero, the Servicer, on behalf of the Trustee, shall, within the 40-day period
which begins on such Distribution Date, solicit bids for the sale of Principal
Receivables and the related Finance Charge Receivables (or interests therein) in
an amount equal to the Invested Amount at the close of business on the last day
of the Monthly Period preceding the Series 1998-1 Termination Date (after giving
effect to all distributions required to be made on the Series 1998-1 Termination
Date, except pursuant to this Section 7.02). Such bids shall require that such
sale shall (subject to subsection 7.02(b)) occur on the Series 1998-1
Termination Date. The Transferors and the Collateral Interest Holder shall be
entitled to participate in, and to receive from the Trustee a copy of each other
bid submitted in connection with, such bidding process. Each Transferor and its
Affiliates shall be permitted to bid for the Receivables and, in addition, shall
have the right to match any bid and to purchase the Receivables at such matched
price if such matched price shall be the highest bid price received by the
Trustee.
(b) The Servicer, on behalf of the Trustee, shall sell such Receivables
(or interests therein) on the Series 1998-1 Termination Date to the bidder who
made the highest cash purchase offer. The proceeds of any such sale shall be
treated as Collections on the Receivables allocated to the Series 1998-1
Certificateholders pursuant to the Agreement and this Supplement; provided,
however, that the Servicer shall determine conclusively the amount of such
proceeds which are allocable to Finance Charge Receivables and the amount of
such proceeds which are allocable to Principal Receivables. During the period
from the November 2005 Distribution Date to the Series 1998-1 Termination Date,
the Servicer shall continue to collect payments on the Receivables and allocate
38
and deposit such Collections in accordance with the provisions of the Agreement
and the Supplements.
ARTICLE VIII
Final Distributions
-------------------
Section 8.01. Sale of Receivables or Certificateholders' Interest
pursuant to Section 2.06 or 10.01 of the Agreement and Section 7.01 or 7.02 of
this Supplement.
(a) (i) The amount to be paid by the Transferors with respect to Series
1998-1 in connection with a reassignment of Receivables to the Transferors
pursuant to Section 2.06 of the Agreement shall equal the Reassignment Amount
for the first Distribution Date following the Monthly Period in which the
reassignment obligation arises under the Agreement.
(ii) The amount to be paid by the Transferors with respect to Series
1998-1 in connection with a repurchase of the Certificateholders' Interest
pursuant to Section 10.01 of the Agreement shall equal the sum of (x) the
Reassignment Amount for the Distribution Date of such repurchase and (y) the sum
of (A) the excess, if any, of (I) a price equivalent to the average of bids
quoted on the Record Date preceding the date of repurchase or, if not a Business
Day, on the next succeeding Business Day by at least two recognized dealers
selected by the Trustee for the purchase by such dealers of a security which is
similar to the Class A Certificates with a remaining maturity approximately
equal to the remaining maturity of the Class A Certificates and rated by each
Rating Agency in the rating category originally assigned to the Class A
Certificates over (II) the portion of the Reassignment Amount attributable to
the Class A Certificates and (B) the excess, if any, of (I) a price equivalent
to the average of bids quoted on such Record Date, or if not a Business Day, on
the next succeeding Business Day by at least two recognized dealers selected by
the Trustee for the purchase by such dealers of a security which is similar to
the Class B Certificates with a remaining maturity approximately equal to the
remaining maturity of the Class B Certificates and rated by each Rating Agency
in the rating category originally assigned to the Class B Certificates over (II)
the portion of the Reassignment Amount attributable to the Class B Certificates.
(b) With respect to the Reassignment Amount deposited into the Collection
Account pursuant to Section 7.01 or any amounts allocable to the Series 1998-1
Certificateholders' Interest deposited into the Collection Account pursuant to
Section 7.02, the Trustee shall, in accordance with the written direction of the
Servicer, not later than 12:00 noon, New York City time, on the related
Distribution Date, make deposits or distributions of the following amounts (in
the priority set forth below and, in each case after giving effect to any
deposits and distributions otherwise to be made on such date) in immediately
available funds: (i) (x) the Class A Invested Amount on such Distribution Date
will be distributed to the Paying Agent for payment to the Class A
39
Certificateholders and (y) an amount equal to the sum of (A) Class A Monthly
Interest for such Distribution Date, (B) any Class A Monthly Interest previously
due but not distributed to the Class A Certificateholders on a prior
Distribution Date and (C) the amount of Class A Additional Interest, if any, for
such Distribution Date and any Class A Additional Interest previously due but
not distributed to the Class A Certificateholders on any prior Distribution
Date, will be distributed to the Paying Agent for payment to the Class A
Certificateholders, (ii) (x) the Class B Invested Amount on such Distribution
Date will be distributed to the Paying Agent for payment to the Class B
Certificateholders and (y) an amount equal to the sum of (A) Class B Monthly
Interest for such Distribution Date, (B) any Class B Monthly Interest previously
due but not distributed to the Class B Certificateholders on a prior
Distribution Date and (C) the amount of Class B Additional Interest, if any, for
such Distribution Date and any Class B Additional Interest previously due but
not distributed to the Class B Certificateholders on any prior Distribution
Date, will be distributed to the Paying Agent for payment to the Class B
Certificateholders and (iii) the balance, if any, will be distributed to the
Collateral Interest Holder for application in accordance with the Loan
Agreement.
(c) Notwithstanding anything to the contrary in this Supplement or the
Agreement, all amounts distributed to the Paying Agent pursuant to subsection
8.01(b) for payment to the Series 1998-1 Certificateholders shall be deemed
distributed in full to the Series 1998-1 Certificateholders on the date on which
such funds are distributed to the Paying Agent pursuant to this Section and
shall be deemed to be a final distribution pursuant to Section 12.02 of the
Agreement.
Section 8.02. Distribution of Proceeds of Sale, Disposition or
Liquidation of the Receivables pursuant to Section 9.01 of the Agreement.
(a) Not later than 12:00 noon, New York City time, on the Distribution
Date following the date on which the Insolvency Proceeds are deposited into the
Collection Account pursuant to subsection 9.01(b) of the Agreement, the Trustee
shall in accordance with the written direction of the Servicer (in the following
priority and, in each case, after giving effect to any deposits and
distributions otherwise to be made on such Distribution Date) (i) deduct an
amount equal to the Class A Invested Amount on such Distribution Date from the
portion of the Insolvency Proceeds allocated to Series 1998-1 Allocable
Principal Collections and distribute such amount to the Paying Agent for payment
to the Class A Certificateholders, provided that the amount of such distribution
shall not exceed the product of (x) the portion of the Insolvency Proceeds
allocated to Series 1998-1 Allocable Principal Collections and (y) the Principal
Allocation Percentage with respect to the related Monthly Period, (ii) deduct an
amount equal to the Class B Invested Amount on such Distribution Date from the
portion of the Insolvency Proceeds allocated to Series 1998-1 Allocable
Principal Collections and distribute such amount to the Paying Agent for payment
to the Class B Certificateholders, provided that the amount of such distribution
shall not exceed (x) the product of (A) the portion of such Insolvency Proceeds
allocated to Series 1998-1 Allocable Principal Collections and (B) the Principal
Allocation Percentage with respect to the related Monthly Period minus (y) the
amount distributed to the Paying Agent pursuant to clause (i) of this sentence
and (iii) deduct an amount equal to the Collateral Invested Amount, if any, on
such Distribution Date from the portion of the Insolvency Proceeds allocated to
Series 1998-1 Allocable Principal Collections and distribute such amount to the
Collateral Interest Holder for application in accordance with the Loan
Agreement, provided that the amount of such distribution shall not exceed (x)
the product of (1) the portion of the Insolvency Proceeds allocated to Series
1998-1 Allocable Principal Collections and (2) the Principal Allocation
40
Percentage with respect to such Monthly Period minus (y) the amounts distributed
to the Paying Agent pursuant to clauses (i) and (ii) of this sentence. To the
extent that the product of (A) the portion of the Insolvency Proceeds allocated
to Series 1998-1 Allocable Principal Collections and (B) the Principal
Allocation Percentage with respect to the related Monthly Period exceeds the
aggregate amounts distributed to the Paying Agent pursuant to the preceding
sentence, the excess shall be allocated to the Transferor's Interest and shall
be released to the Holders of the Transferor Certificates on such Distribution
Date.
(b) Not later than 12:00 noon, New York City time, on such Distribution
Date, the Trustee shall in accordance with the written direction of the Servicer
(in the following priority and, in each case, after giving effect to any
deposits and distributions otherwise to be made on such Distribution Date) (i)
deduct an amount equal to the sum of (w) Class A Monthly Interest for such
Distribution Date, (x) any Class A Monthly Interest previously due but not
distributed to the Class A Certificateholders on a prior Distribution Date and
(y) the amount of Class A Additional Interest, if any, for such Distribution
Date and any Class A Additional Interest previously due but not distributed to
the Class A Certificateholders on a prior Distribution Date from the portion of
the Insolvency Proceeds allocated to Collections of Finance Charge Receivables
and distribute such amount to the Paying Agent for payment to the Class A
Certificateholders, provided that the amount of such distribution shall not
exceed the product of (x) the portion of the Insolvency Proceeds allocated to
Series 1998-1 Allocable Finance Charge Collections, (y) the Floating Allocation
Percentage with respect to the related Monthly Period and (z) the Class A
Floating Percentage with respect to such Monthly Period and (ii) deduct an
amount equal to the sum of (w) Class B Monthly Interest for such Distribution
Date, (x) Class B Monthly Interest previously due but not distributed to the
Class B Certificateholders on a prior Distribution Date and (y) the amount of
Class B Additional Interest, if any, for such Distribution Date and any Class B
Additional Interest previously due but not distributed to the Class B
Certificateholders on a prior Distribution Date from the portion of the
Insolvency Proceeds allocated to Series 1998-1 Allocable Finance Charge
Collections and distribute such amount to the Paying Agent for payment to the
Class B Certificateholders, provided that the amount of such distribution shall
not exceed the product of (x) the portion of the Insolvency Proceeds allocated
to Series 1998-1 Allocable Finance Charge Collections, (y) the Floating
Allocation Percentage with respect to the related Monthly Period and (z) the
Class B Floating Percentage with respect to such Monthly Period. To the extent
that the product of (A) the portion of the Insolvency Proceeds allocated to
Series 1998-1 Allocable Finance Charge Collections and (B) the Floating
Allocation Percentage with respect to the related Monthly Period exceeds the
aggregate amount distributed to the Paying Agent pursuant to the preceding
sentence, the excess shall be released to the Collateral Interest Holder for
application by the Collateral Interest Holder in accordance with the Loan
Agreement.
(c) Notwithstanding anything to the contrary in this Supplement or the
Agreement, all amounts distributed to the Paying Agent pursuant to this Section
for payment to the Series 1998-1 Certificateholders shall be distributed in full
to the Series 1998-1 Certificateholders on the date on which funds are
distributed to the Paying Agent pursuant to this Section and shall be deemed to
be a final distribution pursuant to Section 12.02 of the Agreement.
41
ARTICLE IX
Miscellaneous Provisions
------------------------
Section 9.01. Ratification of Agreement. As supplemented by this
Supplement, the Agreement is in all respects ratified and confirmed and
the Agreement as so supplemented by this Supplement shall be read, taken
and construed as one and the same instrument.
Section 9.02. Counterparts. This Supplement may be executed in two
or more counterparts, and by different parties on separate counterparts,
each of which shall be an original, but all of which shall constitute one
and the same instrument.
Section 9.03. Governing Law. THIS SUPPLEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, 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.
[The signature page follows this page.]
42
IN WITNESS WHEREOF, the undersigned have caused this Supplement to be
duly executed and delivered by their respective duly authorized officers on the
day and year first above written.
AMERICAN EXPRESS RECEIVABLES FINANCING
CORPORATION II,
as a Transferor,
By: /s/ Xxxxxx X. Xxxxxxxxxxx
_____________________________
Name:
Title:
AMERICAN EXPRESS CENTURION BANK,
as a Transferor,
By: /s/ Xxxxxxx Xxxx
______________________________
Name:
Title:
AMERICAN EXPRESS TRAVEL RELATED SERVICES
COMPANY, INC.,
as the Servicer,
By: /s/ Xxx X. Xxxxxxxxx
______________________________
Name:
Title:
THE BANK OF NEW YORK,
as Trustee,
By: /s/ Xxxxx X. Xxxxxxxx
_______________________________
Name Xxxxx X. Xxxxxxxx
Title: Assistant Vice President
43
