Exhibit 4B
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METRIS RECEIVABLES, INC.
Transferor
DIRECT MERCHANTS CREDIT CARD BANK, NATIONAL ASSOCIATION
Servicer
and
THE BANK OF NEW YORK (DELAWARE)
Trustee
on behalf of the Series 1998-2 Securityholders
SERIES 1998-2 SUPPLEMENT
Dated as of ________ __, 1998
to
AMENDED AND RESTATED POOLING AND SERVICING AGREEMENT
Dated as of July 30, 1998
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METRIS MASTER TRUST
$500,000,000 Floating Rate Asset Backed
Securities, Series 1998-2, Class A
$49,450,550 Asset Backed
Securities, Series 1998-2, Class B
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TABLE OF CONTENTS
Page
SECTION 1. Designation................................................1
SECTION 2. Definitions................................................1
SECTION 3. Reassignment Terms........................................23
SECTION 3A. Conveyance of Interest in Interest
Rate Cap; Cap Proceeds Account............................23
SECTION 4. Delivery and Payment for the Series
1998-2 Securities.........................................27
SECTION 5. Form of Delivery of Series 1998-2
Securities; Denominations.................................28
SECTION 6. Article IV of Agreement...................................28
ARTICLE IV
RIGHTS OF SECURITYHOLDERS AND
ALLOCATION AND APPLICATION OF COLLECTIONS
SECTION 4.4. Rights of Securityholders.................................28
SECTION 4.5. Collections and Allocation; Payments
on Exchangeable Transferor Security.......................29
SECTION 4.6. Determination of Interest for the
Series 1998-2 Securities..................................30
SECTION 4.7. Determination of Principal Amounts........................31
SECTION 4.8. Shared Principal Collections..............................32
SECTION 4.9. Application of Funds......................................32
SECTION 4.10. Coverage of Required Amount for the
Series 1998-2 Securities..................................42
SECTION 4.11. Payment of Interest on Securities
and Amounts Owing to Insurer..............................43
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SECTION 4.12. Payment of Security Principal.............................44
SECTION 4.13. Series Charge-Offs........................................45
SECTION 4.14. Redirected Principal Collections
for the Series 1998-2 Securities..........................46
SECTION 4.15. Determination of LIBOR....................................47
SECTION 4.16. Payment Reserve Account...................................48
SECTION 4.17. Principal Funding Account.................................49
SECTION 4.18. Accumulation Period Reserve
Account...................................................50
SECTION 4.19. Postponement of Accumulation Period.......................52
SECTION 4.20. Defeasance................................................52
SECTION 7. Article V of the Agreement................................53
ARTICLE V
DISTRIBUTIONS AND REPORTS TO INVESTOR
SECURITYHOLDERS
SECTION 5.1. Distributions..............................................54
SECTION 5.2. Securityholders' Statement.................................55
SECTION 8. Series 1998-2 Pay Out Events...............................58
SECTION 9. Series 1998-2 Termination..................................60
SECTION 10. Legends; Transfer and Exchange;
Restrictions on Transfer of Series
1998-2 Securities...........................................60
SECTION 11. The Policy..................................................62
SECTION 12. Ratification of Agreement...................................64
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SECTION 13. Registration of the Class A Securities
under the Securities Exchange
Act of 1934.................................................64
SECTION 14. Counterparts................................................64
SECTION 15. GOVERNING LAW...............................................64
SECTION 16. Instructions in Writing.....................................64
SECTION 17. Amendment for FASIT Purposes................................65
SECTION 18. Paired Series...............................................65
EXHIBITS
Exhibit A-1 Form of Class A Investor Security
Exhibit A-2 Form of Class B Investor Security
Exhibit B Form of Monthly Securityholder's Statement
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SERIES 1998-2 SUPPLEMENT, dated as of _________ ___, 1998
(this "Series Supplement") by and among METRIS RECEIVABLES, INC., a corporation
organized and existing under the laws of the State of Delaware, as Transferor
(the "Transferor"), DIRECT MERCHANTS CREDIT CARD BANK, NATIONAL ASSOCIATION, a
national banking association organized under the laws of the United States, as
Servicer (the "Servicer"), and THE BANK OF NEW YORK (DELAWARE), a Delaware
banking corporation organized and existing under the laws of the State of
Delaware as trustee (together with its successors in trust thereunder as
provided in the Agreement referred to below, the "Trustee"), under the Amended
and Restated Pooling and Servicing Agreement dated as of July 30, 1998 as
amended, supplemented or otherwise modified from time to time (the "Agreement")
among the Transferor, the Servicer and the Trustee.
Section 6.9 of the Agreement provides, among other things,
that the Transferor and the Trustee may at any time and from time to time enter
into a supplement to the Agreement for the purpose of authorizing the issuance
by the Trustee to the Transferor, for execution and redelivery to the Trustee
for authentication, of one or more Series of Securities.
Pursuant to this Series Supplement, the Transferor and the
Trustee shall create a new Series of Investor Securities and shall specify the
Principal Terms thereof.
SECTION 1. Designation. There is hereby created a Series of
Investor Securities to be issued pursuant to the Agreement and this Series
Supplement to be known generally as the "Series 1998-2 Securities." The Series
1998-2 Securities shall be issued in two Classes, which shall be designated
generally as the Floating Rate Asset Backed Securities, Series 1998-2, Class A
(the "Class A Securities"), and the Asset Backed Securities, Series 1998-2,
Class B (the "Class B Securities").
SECTION 2. Definitions. In the event that any term or
provision contained herein shall conflict with or
be inconsistent with any provision contained in the Agreement, the terms and
provisions of this Series Supplement shall govern with respect to the Series
1998-2 Securities. All Article, Section or subsection references herein shall
mean Articles, Sections or subsections of the Agreement, as amended or
supplemented by this Series Supplement, except as otherwise provided herein. All
capitalized terms not otherwise defined herein are defined in the Agreement.
Each capitalized term defined herein shall relate only to the Series 1998- 2
Securities and no other Series of Securities issued by the Trust.
"Accumulation Period" shall mean the period commencing at the
close of business on the last day of the April 2000 Monthly Period or such later
date as is determined in accordance with Section 4.19 of the Agreement and
ending on the first to occur of (a) the commencement of the Early Amortization
Period and (b) the Series 1998-2 Termination Date.
"Accumulation Period Factor" shall mean, for any Monthly
Period, a fraction, the numerator of which is equal to the sum of the numerators
with respect to all Classes of all Series then outstanding used to calculate the
allocation percentages applicable for Principal Collections, and the denominator
of which is equal to the sum of (a) the Class A Invested Amount, (b) the sum of
the numerators with respect to all Classes of all Series then outstanding used
to calculate the allocation percentages applicable for Principal Collections
(other than Series 1998-2 and any Class of any such Series retained by the
Transferor) which are not expected to be in their revolving periods during such
Monthly Period, and (c) the sum of the numerators used to calculate the
allocation percentages applicable for Principal Collections of all Classes of
other outstanding Series which are not allocating Shared Principal Collections
and are expected to be in their revolving periods during such Monthly Period.
"Accumulation Period Length" shall have the meaning assigned
such term in Section 4.19 of the Agreement.
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"Accumulation Period Reserve Account" shall have the meaning
specified in subsection 4.18(a) of the Agreement.
"Accumulation Shortfall" shall initially mean zero and
thereafter shall mean, with respect to any Monthly Period during the
Accumulation Period, the excess, if any, of the Controlled Deposit Amount for
the previous Monthly Period over the amount deposited into the Principal Funding
Account pursuant to sub section 4.12(a) of the Agreement with respect to the
Series 1998-2 Securities for the previous Monthly Period.
"Additional Interest" shall mean, at any time of
determination, the Class A Additional Interest.
"Adjusted Invested Amount" shall mean as of any Business Day,
(i) the Invested Amount minus (ii) the sum of the amounts then on deposit in the
Principal Account and the Principal Funding Account and the Series 1998-2
Percentage of the amount then on deposit in the Excess Funding Account.
"Aggregate Interest Rate Caps Notional Amount" shall mean with
respect to any date of determination an amount equal to the sum of the notional
amounts or equivalent amounts of all outstanding Cap Agreements, Replacement
Interest Rate Caps and Qualified Substitute Arrangements, each as of such date
of determination.
"Amortization Period" shall mean the period commencing on the
Amortization Period Commencement Date and continuing until the earlier of (x)
the Invested Amount of the Series 1998-2 Securities and amounts owing to the
Insurer pursuant to the Insurance Agreement are paid in full and (y) the Series
1998-2 Termination Date.
"Amortization Period Commencement Date" shall mean the earlier
of the first day of the Accumulation Period and the Pay Out Commencement Date.
"Available Reserve Account Amount" shall mean, with respect to
any Transfer Date, the lesser of (a) the amount on deposit in the Accumulation
Period Reserve
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Account as of such date (before giving effect to any withdrawal made or to be
made pursuant to subsection 4.18(c) of the Agreement from the Accumulation
Period Reserve Account on such Transfer Date) and (b) the Required Reserve
Account Amount for such Transfer Date.
"Available Series 1998-2 Finance Charge Collections" shall
have the meaning specified in subsection 4.9(a) of the Agreement.
"Available Series 1998-2 Principal Collections" shall mean,
with respect to any Monthly Period or portion thereof commencing on the
Amortization Period Commencement Date, an amount equal to the sum of (i) an
amount equal to the Fixed/Floating Percentage of all Principal Collections (less
the amount of Redirected Principal Collections) received during such Monthly
period, (ii) any amount on deposit in the Excess Funding Account allocated to
the Series 1998-2 Securities pursuant to subsection 4.9(d) of the Agreement with
respect to such period, (iii) the sum of the aggregate amount allocated with
respect to the Series Default Amount with respect to such period and the Series
1998-2 Percentage of any unpaid Adjustment Payments paid pursuant to subsections
4.9(a)(iii) and 4.9(a)(iv) of the Agreement with respect to such period, any
reimbursements of unreimbursed Charge-Offs pursuant to subsections 4.9(a)(v) and
(x) of the Agreement with respect to such period plus in each case, amounts
applied with respect thereto pursuant to subsections 4.10(a) and (b), 4.14,
4.17(b), 4.18(b), (c) and (d) of the Agreement, (iv) the Policy Claim Amount
with respect to Potential Class A Charge-Offs for the related Distribution Date
paid pursuant to subsection 11(b) of this Series Supplement and (v) the
aggregate Shared Principal Collections allocated to the Series 1998-2 Securities
pursuant to Section 4.8 of the Agreement with respect to such period.
"Base Rate" shall mean, with respect to any Monthly Period,
the sum of (i) the weighted average of the Class A Interest Rate as of the last
day of such Monthly Period (weighted based on the Class A Invested Amount, as of
the last day of such Monthly Period) plus (ii) the product of 2.00% per annum
and the percentage
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equivalent of a fraction the numerator of which is the Adjusted Invested Amount
and the denominator of which is the Invested Amount, each as of the last day of
such Monthly Period.
"Cap Agreements" shall mean each interest rate cap agreement,
between the Transferor, the Trustee and a Cap Provider, as amended from time to
time, with respect to the Class A Interest Rate and any additional interest rate
protection agreement or agreements, entered into between the Transferor, the
Trustee and a Cap Provider, as the same may from time to time be amended,
restated, modified and in effect.
"Cap Proceeds Account" shall have the meaning specified in
subsection 3A(b) of this Series Supplement.
"Cap Provider" shall mean a third party cap provider having a
rating acceptable to the Rating Agencies.
"Cap Receipt Amount" shall mean, with respect to any Business
Day the amount on deposit in the Cap Proceeds Account.
"Cap Settlement Date" shall have the meaning specified in
subsection 3A(b) of this Series Supplement.
"Carryover Class A Interest" shall mean with respect to any
Business Day (a) any Class A Monthly Interest due but not paid on any previous
Distribution Date plus (b) any Class A Additional Interest due on the next
succeeding Distribution Date.
"Charge-Offs" shall mean the sum of Class A
Charge-Offs and Class B Charge-Offs.
"Class A Additional Interest" shall have the meaning specified
in subsection 4.6 of the Agreement.
"Class A Adjusted Invested Amount" shall mean, for any date of
determination, an amount not less than zero equal to the then current Class A
Invested Amount minus the sum of the Principal Funding Account Balance
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and the amount then on deposit in the Principal Account on such date of
determination.
"Class A Charge-Offs" shall have the meaning specified in
subsection 4.13(c) of the Agreement.
"Class A Floating Percentage" shall mean, with respect to any
Business Day, the percentage equivalent of a fraction, the numerator of which is
the Class A Adjusted Invested Amount as of the end of the preceding Business Day
and the denominator of which is the greater of (a) the sum of the aggregate
amount of Principal Receivables in the Trust and the amounts on deposit in the
Excess Funding Account as of the end of the preceding Business Day and (b) the
sum of the numerators with respect to all Classes of all Series then outstanding
used to calculate the applicable allocation percentage.
"Class A Initial Invested Amount" shall mean the aggregate
initial principal amount of the Class A Securities, which is $500,000,000.
"Class A Interest Rate" shall mean % per annum from the
Closing Date through and including January 19, 1999 and, with respect to each
Interest Accrual Period thereafter, a per annum rate % in excess of LIBOR
as determined on the related LIBOR Determination Date.
"Class A Interest Shortfall" shall have the meaning specified
in subsection 4.6 of the Agreement.
"Class A Invested Amount" shall mean, when used with respect
to any Business Day, the greater of (x) zero and (y) an amount equal to (a) the
Class A Initial Invested Amount, minus (b) the aggregate amount of principal
payments made to Class A Securityholders through and including such Business
Day, minus (c) the aggregate amount of Class A Charge-Offs for all prior
Distribution Dates, plus (d) the sum of the aggregate amount reimbursed with
respect to reductions of the Class A Invested Amount through and including such
Business Day pursuant to subsection 4.9(a)(v) of the Agreement plus, with
respect to such subsection, amounts applied thereto
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pursuant to subsections 4.10(a) and (b), 4.14, 4.17(b) and 4.18(b), (c) and (d)
of the Agreement, for the purpose of reimbursing amounts deducted pursuant to
the foregoing clause (c) plus (e) the Policy Claim Amount paid by the Insurer to
the Trustee with respect to any Potential Class A Charge-Off pursuant to
subsection 11(b) of this Series Supplement; provided, however that the Class A
Invested Amount may not be reduced below zero.
"Class A Monthly Interest" shall mean the interest
distributable in respect of the Class A Securities as calculated in accordance
with subsection 4.6 of the Agreement.
"Class A Outstanding Principal Amount" shall mean with respect
to the Class A Securities, when used with respect to any Business Day, an amount
equal to (a) the Class A Initial Invested Amount minus (b) the aggregate amount
of principal payments made to the Class A Securityholders on or prior to such
Business Day.
"Class A Percentage" shall mean a fraction the numerator of
which is the Class A Initial Invested Amount and the denominator of which is the
Class A Initial Invested Amount.
"Class A Principal" shall mean the principal distributable in
respect of the Class A Securities as calculated in accordance with subsection
4.7(a) of the Agreement.
"Class A Required Amount" shall mean the amount determined by
the Servicer for each Business Day equal to the excess, if any, of (x) the sum
of (i) the Class A Monthly Interest for the Interest Accrual Period beginning in
the then current Monthly Period, (ii) any Carryover Class A Interest, (iii) the
Class A Floating Percentage of the Servicing Fee for the then current Monthly
Period, (iv) the Class A Floating Percentage of the Default Amount, if any, for
such Business Day and, to the extent not previously paid, for any previous
Business Day in such Monthly Period and, (v) the Class A Percentage of the
Series 1998-2 Percentage of any Adjustment Payment the Transferor is required
but fails to make pursuant to
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subsection 3.8(a) of the Agreement on such Business Day and on each previous
Business Day during such Monthly Period over (y) the Available Series 1998-2
Finance Charge Collections plus any Excess Finance Charge Collections from other
Series and any Transferor Finance Charge Collections allocated with respect to
the amounts described in clauses (x)(i) through (vi) above with respect to such
Business Days and all previous Business Days in such Monthly Period.
"Class A Securities" shall mean any of the securities executed
by the Transferor and authenticated by or on behalf of the Trustee,
substantially in the form of Exhibit A-1 hereto.
"Class A Securityholder" shall mean the Person in whose name a
Class A Security is registered in the Security Register.
"Class A Securityholders' Interest" shall mean the portion of
the Series 1998-2 Securityholders' Interest evidenced by the Class A Security.
"Class B Charge-Offs" shall have the meaning specified in
subsection 4.13(a) of the Agreement.
"Class B Excess Amounts" shall mean with respect to any
Business Day, the excess of the Class B Invested Amount over the Stated Class B
Amount on such day after taking into account all adjustments of the Class A
Adjusted Invested Amount on such day.
"Class B Fixed/Floating Percentage" shall mean for any
Business Day the percentage equivalent of a fraction, the numerator of which is
the Class B Invested Amount at the end of the last day of the Revolving Period
and the denominator of which is the greater of (a) the sum of the aggregate
amount of Principal Receivables and the amount on deposit in the Excess Funding
Account as of the end of the preceding Business Day and (b) the sum of the
numerators with respect to all Classes of all Series then outstanding used to
calculate the applicable allocation percentage.
8
"Class B Floating Percentage" shall mean with respect to any
Business Day the percentage equivalent of a fraction, the numerator of which is
the Class B Invested Amount on such day after taking into account all
adjustments of the Class B Invested Amount on such day and the denominator of
which is the greater of (a) the sum of the aggregate amount of Principal
Receivables and the amount on deposit in the Excess Funding Account at the end
of the preceding Business Day and (b) the sum of the numerators with respect to
all Classes of all Series then outstanding used to calculate the applicable
allocation percentage.
"Class B Initial Invested Amount" shall mean the aggregate
initial principal amount of the Class B Securities, which is $49,450,550.
"Class B Interest Shortfall" shall have the meaning specified
in subsection 4.6(d) of the Agreement.
"Class B Invested Amount" shall mean, when used with respect
to any Business Day, the greater of (x) zero and (y) an amount equal to (a) the
initial principal balance of the Class B Securities, minus (b) the aggregate
amount of principal payments made to Class B Securityholders through and
including such Business Day, minus (c) the aggregate amounts by which the
Transferor has reduced the Class B Invested Amount pursuant to subsection
4.12(c) of the Agreement, minus (d) the aggregate amount of Class B Charge-Offs
for all prior Distribution Dates, minus (e) the aggregate amount of Redirected
Principal Collections for all prior Business Days.
"Class B Outstanding Principal Amount" shall mean, when used
with respect to any Business Day, an amount equal to (a) the Class B Initial
Invested Amount minus (b) the aggregate amount of principal payments made to
Class B Securityholders prior to such Business Day.
"Class B Principal" shall mean the principal distributable in
respect of the Class B Securities as specified in subsection 4.7(b) of the
Agreement.
9
"Class B Principal Payment Commencement Date" shall mean the
earlier of (a) (i) with respect to the Accumulation Period, the Expected Final
Payment Date or (ii) during the Early Amortization Period, the first
Distribution Date on which the Class A Invested Amount is paid in full or, if
there are no Principal Collections allocable to the Series 1998-2 Securities
remaining after payments have been made to the Class A Securities on such
Distribution Date, the Distribution Date following the first Distribution Date
on which the Class A Invested Amount is paid in full and (b) the Distribution
Date following a sale or repurchase of the Receivables as set forth in Section
2.4(e), 9.2, 10.2(a), 12.1 or 12.2 of the Agreement or Section 3 of this Series
Supplement.
"Class B Securities" shall mean any of the securities executed
by the Transferor and authenticated by or on behalf of the Trustee,
substantially in the form of Exhibit A-2 hereto.
"Class B Securityholder" shall mean the Person in whose name
Class B Securities is registered in the Security Register.
"Class B Securityholders' Interest" shall mean the portion of
the Series 1998-2 Securityholders' Interest evidenced by the Class B Security.
"Closing Date" shall mean ___________ , 1998.
"Controlled Accumulation Amount" shall mean, for any Transfer
Date with respect to the Accumulation Period prior to the payment in full of the
Class A Invested Amount, $83,333,334; provided, however, that if the
Accumulation Period Length is determined to be less than 12 months pursuant to
Section 4.19 of the Agreement, the Controlled Accumulation Amount for each
Transfer Date with respect to the Accumulation Period prior to the payment in
full of the sum of the Class A Invested Amount will be equal to (i) the product
of (x) the Class A Initial Invested Amount and (y) the Accumulation Period
Factor for the Monthly Period preceding such Transfer Date divided by (ii) the
Required Accumulation Factor Number.
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"Controlled Deposit Amount" shall mean, with respect to any
Transfer Date, the sum of (a) the Controlled Accumulation Amount for such
Transfer Date and (b) any existing Accumulation Shortfall.
"Covered Amount" shall mean, with respect to any Interest
Accrual Period during the Accumulation Period prior to the payment in full of
the Class A Invested Amount, the product of (a) the weighted average of the
Class A Interest Rate in effect with respect to such Interest Accrual Period,
(b) a fraction the numerator of which is the actual number of days in the
related Interest Accrual Period and the denominator of which is 360 and (c) the
Principal Funding Account Balance (up to the Class A Invested Amount) as of the
last day of the Monthly Period preceding the Monthly Period in which such
Interest Accrual Period ends.
"Default Amount" shall mean, (i) on any Business Day other
than the Default Recognition Date, the aggregate amount of Principal Receivables
in Accounts which became Defaulted Accounts on such Business Day and (ii) on any
Default Recognition Date the aggregate amount of Principal Receivables in
Accounts which became Defaulted Accounts during the then current Monthly Period
(other than such Accounts which were included in clause (i)).
"Default Recognition Allocation Percentage" shall mean, with
respect to each Default Recognition Date, the percentage equivalent of a
fraction, the numerator of which is the Weighted Average Invested Amount for the
related Monthly Period and the denominator of which is the Weighted Average
Principal Receivables in the Trust for the related Monthly Period.
"Default Recognition Date" shall mean the last day of each
calendar month; provided, however, that with respect to any Monthly Period the
"related Default Recognition Date" shall mean the Default Recognition Date
occurring closest to the last day of such Monthly Period and any amounts
allocated or applied on such Default Recognition Date shall be deemed to apply
to the related Monthly Period.
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"Distribution Date" shall mean January 20, 1999, and the
twentieth day of each month thereafter, or if such day is not a Business Day,
the next succeeding Business Day.
"DTC" shall mean The Depository Trust Company.
"Early Amortization Period" shall mean the period beginning on
the earlier of (a) the day on which a Pay Out Event occurs or is deemed to have
occurred and (b) the Expected Final Payment Date if the Class A Invested Amount
has not been paid in full on such date, and ending on the earlier of (i) the
date on which the Class A Invested Amount and the Class B Invested Amount have
been paid in full and (ii) the Scheduled Series 1998-2 Termination Date.
"Enhancement" shall mean, with respect to the Class A
Securities, the Policy and the Interest Rate Cap for the benefit of the Class A
Securityholders and the subordination of the Class B Invested Amount.
"Excess Finance Charge Collections" shall mean, with respect
to any Business Day, as the context requires, either (x) the amount described in
subsection 4.9(a)(xiii) of the Agreement allocated to the Series 1998-2
Securities but available to cover shortfalls in amounts paid from Finance Charge
Collections for other Series, if any, or (y) the aggregate amount of Finance
Charge Collections allocable to other Series in excess of the amounts necessary
to make required payments with respect to such Series, if any, and available to
cover shortfalls with respect to the Series 1998-2 Securities.
"Excess Spread Percentage" shall mean with respect to any
Monthly Period the excess of the Portfolio Yield for such Monthly Period over
the Base Rate as determined at the close of business on the Distribution Date in
such Monthly Period; provided, however, that with respect to the December 1998
Monthly Period for purposes of determining the Excess Spread Percentage the
Available Series 1998-2 Finance Charge Collections shall include the initial
deposit of $_____________ to the Interest
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Funding Account made on the Closing Date pursuant to subsection 4.5(a) of the
Agreement.
"Expected Final Payment Date" shall mean the
November 2000 Distribution Date.
"FASIT" shall have the meaning specified in Section 16 of this
Series Supplement.
"Fixed/Floating Percentage" shall mean for any Business Day
the percentage equivalent of a fraction, the numerator of which is the Invested
Amount at the end of the last day of the Revolving Period and the denominator of
which is the greater of (a) the sum of the aggregate amount of Principal
Receivables and the amount on deposit in the Excess Funding Account as of the
end of the preceding Business Day and (b) the sum of the numerators with respect
to all Classes of all Series then outstanding used to calculate the applicable
allocation percentage; provided, however, that, on and after the Pay Out
Commencement Date, with respect to the allocations of Collections of Finance
Charge Receivables, the numerator used in the above calculation shall be the
Adjusted Invested Amount as of the day immediately preceding the Pay Out
Commencement Date.
"Floating Percentage" shall mean for any Business Day the sum
of the applicable Class A Floating Percentage and Class B Floating Percentage
for such Business Day.
"Guaranteed Distributions" shall have the meaning specified in
Section 11.1 of the Agreement.
"Initial Invested Amount" shall mean an amount equal to the
sum of (i) the Class A Initial Invested Amount and (ii) the Class B Initial
Invested Amount.
"Insurance Agreement" shall mean the Insurance and
Reimbursement Agreement, dated as of November __, 1998 among the Insurer, the
Trustee, the Servicer and the Transferor.
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"Insurer" shall mean MBIA Insurance Corporation, a New York
stock insurance company.
"Interest Accrual Period" shall mean, with respect to a
Distribution Date, the period from and including the preceding Distribution Date
to but excluding such Distribution Date; provided, however, that the initial
Interest Accrual Period shall be the period from the Closing Date to but
excluding the initial Distribution Date.
"Interest and Servicing Fee Deficiency" shall mean, with
respect to any Monthly Period, an amount equal to the excess of (a) the sum of
the Class A Monthly Interest for the Interest Accrual Period beginning in such
Monthly Period, the Carryover Class A Monthly Interest and the Servicing Fee for
such Monthly Period over (b) the Available Series 1998-2 Finance Charge
Collections applied to the payment thereof pursuant to subsections 4.9(a)(i) and
(ii) of the Agreement, the amount of Transferor Finance Charge Collections and
Excess Finance Charge Collections allocated thereto pursuant to Section 4.10 of
the Agreement, the amount of Redirected Principal Collections applied with
respect thereto pursuant to Section 4.14 of the Agreement, the amount of
Principal Funding Account Investment Proceeds applied with respect thereto
pursuant to subsection 4.17(b) of the Agreement and amounts withdrawn from the
Accumulation Period Reserve Account and applied with respect thereto pursuant to
subsection 4.18(c) of the Agreement.
"Interest Rate Caps" shall mean the interest rate caps
provided pursuant to Cap Agreements by one or more Cap Providers to the Trustee
on behalf of any of the Securityholders which shall entitle the Trust to receive
monthly payments equal to the product of (i) the positive difference, if any,
between LIBOR in effect for each applicable Interest Accrual Period and 9.25%,
(ii) the notional amount of such interest rate cap and (iii) the actual number
of days in the Interest Period divided by 360.
"Invested Amount" shall mean, when used with respect to any
Business Day, an amount equal to the sum
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of (a) the Class A Invested Amount as of such Business Day and (b) the Class B
Invested Amount as of such Business Day.
"Investment Earnings" shall mean, with respect to any Business
Day, the investment earnings on amounts on deposit in (i) the Payment Reserve
Account, deposited in the Collection Account pursuant to subsection 4.16(c),
(ii) the Principal Funding Account, deposited in the Collection Account pursuant
to subsection 4.17(b) and (iii) the Accumulation Period Reserve Account,
deposited in the Collection Account pursuant to subsection 4.18(b).
"Investor Securities" shall mean the Class A Securities, and
the Class B Security.
"Investor Percentage" shall mean, for any Business Day, (a)
with respect to Finance Charge Collections prior to the Pay Out Commencement
Date, Receivables in Defaulted Accounts at any time and Principal Collections
during the Revolving Period, the Floating Percentage and (b) with respect to
Finance Charge Collections on and after the Pay Out Commencement Date and
Principal Collections during the Amortization Period, the Fixed/Floating
Percentage.
"Investor Securityholder" shall mean the Holder of record of
an Investor Security of Series 1998-2.
"LIBOR" shall mean, as of any LIBOR Determination Date, the
London interbank offered quotations for one-month Dollar deposits determined by
the Trustee for each Interest Accrual Period in accordance with the provisions
of Section 4.15 of the Agreement.
"LIBOR Determination Date" shall mean the second Business Day
prior to the commencement of each Interest Accrual Period beginning with
Interest Accrual Period commencing in January 1999. For purposes of this
definition, a Business Day is any day on which banks in London and New York are
open for the transaction of international business.
15
"Minimum Retained Percentage" shall mean 2%.
"Minimum Transferor Percentage" shall mean 0%; provided,
however, that in certain circumstances such percentage may be increased.
"Monthly Period" shall have the meaning specified in the
Agreement, except that the first Monthly Period with respect to the Series
1998-2 Securities shall begin on and include the Closing Date and shall end on
and include December 31, 1998.
"Negative Carry Amount" shall have the meaning specified in
subsection 4.10(a) of the Agreement.
"Paired Series" shall have the meaning specified in Section 17
of this Series Supplement.
"Pay Out Commencement Date" shall mean the date on which a
Trust Pay Out Event is deemed to occur pursuant to Section 9.1 of the Agreement
or a Series 1998-2 Pay Out Event is deemed to occur pursuant to Section 8 of
this Series Supplement.
"Paying Agent" shall mean, for the Series 1998-2 Securities,
initially The Bank of New York and, in certain limited circumstances, the Banque
Generale du Luxembourg, S.A.
"Payment Reserve Account" shall have the meaning specified in
subsection 4.16(a) of the Agreement.
"Policy" shall mean the Financial Guaranty Insurance Policy
issued by the Insurer.
"Portfolio Adjusted Yield" shall mean, with respect to any
Monthly Period, the average of the percentages obtained for each of the three
preceding Monthly Periods by subtracting the Base Rate for such Monthly Period
from the Portfolio Yield for such Monthly Period.
"Portfolio Yield" shall mean for the Series 1998-2 Securities,
with respect to any Monthly Period, the annualized percentage equivalent of a
fraction, the
16
numerator of which is an amount equal to the sum of the aggregate amount of
Available Series 1998-2 Finance Charge Collections for such Monthly Period (not
including the amounts on deposit in the Payment Reserve Account and Adjustment
Payments made by the Transferor with respect to Adjustment Payments required to
be made but not made in prior Monthly Periods, if any) plus the Principal
Funding Account Investment Proceeds and amounts withdrawn from the Accumulation
Period Reserve Account, if any, with respect to such Monthly Period calculated
on a cash basis, minus the aggregate Series Default Amount for such Monthly
Period and the Series 1998-2 Percentage of any Adjustment Payments which the
Transferor is required but fails to make pursuant to the Agreement for such
Monthly Period, and the denominator of which is the average daily Invested
Amount; provided, however, that Excess Finance Charge Collections applied for
the benefit of the Series 1998-2 Securityholders may be added to the numerator
if the Transferor shall have provided ten Business Days prior written notice of
such action to each Rating Agency and the Transferor, the Servicer and the
Trustee shall have received notification in writing that such action will not
result in Standard & Poor's reducing or withdrawing its then existing rating of
the Investor Securities (without giving effect to the Policy) of any outstanding
Series or Class with respect to which it is a Rating Agency.
"Potential Class A Charge-Offs" shall have the meaning
specified in subsection 4.13(b) of the Agreement.
"Principal Funding Account" shall have the meaning set forth
in subsection 4.17 of the Agreement.
"Principal Funding Account Balance" shall mean, with respect
to any date of determination during the Accumulation Period, the principal
amount, if any, on deposit in the Principal Funding Account on such date of
determination.
"Principal Funding Account Investment Proceeds" shall mean,
with respect to each Interest Accrual Period during the Accumulation Period, the
investment earnings on funds on deposit in the Principal Funding Account (net
17
of investment losses and expenses) for such Interest Accrual Period.
"Principal Shortfalls" shall mean on any Business Day (x) for
Series 1998-2, (i) during the Accumulation Period, the amount, if any, by which
the Controlled Deposit Amount for the Transfer Date immediately following the
then current Monthly Period exceeds the total of the amounts described in
clauses (v), (w), (x) and (y) of subsection 4.9(c)(i), and (ii) at all other
times, the Invested Amount of the class then receiving principal payments after
the application of Principal Collections on such Business Day or (y) for any
other Series the amounts specified as such in the Supplement for such other
Series.
"QIB" shall mean a "qualified institutional buyer" within the
meaning of Rule 144A under the Securities Act.
"Qualified Substitute Arrangement" shall mean an arrangement
in addition to or in substitution for any prior interest rate cap arrangement
satisfactory to the Rating Agencies.
"Rating Agencies" shall mean Standard & Poor's and Xxxxx'x.
"Redirected Principal Collections" shall have the meaning
specified in Section 4.14 of the Agreement.
"Reference Banks" shall mean four major banks in the London
interbank market selected by the Trustee.
"Reimbursement Required Amount" shall have the meaning
specified in subsection 4.01(b) of the Agreement.
"Replacement Event" shall have the meaning specified in
subsection 11(c) of this Series Supplement.
"Replacement Interest Rate Cap" shall mean one or more
Interest Rate Caps, which in combination with all other Interest Rate Caps then
in effect, after giving
18
effect to any planned cancellations of any presently outstanding Interest Rate
Caps satisfies the Transferor's covenant contained in Section 3A of this Series
Supplement to maintain Interest Rate Caps.
"Required 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 Receivables, expressed as a decimal, for the 12 months
preceding the date of such calculation.
"Required Amount" shall have the meaning specified in
subsection 4.10(b) of the Agreement.
"Required Reserve Account Amount" shall mean, for any date on
or after the Reserve Account Funding Date an amount equal to (a) 0.50% of the
Class A Invested Amount or (b) any other amount designated by the Transferor;
provided, that if such designation is of a lesser amount, the Transferor shall
have (i) provided the Servicer and the Trustee with evidence that the Rating
Agency Condition has been satisfied and (ii) the Transferor shall have delivered
to the Trustee a certificate of an authorized officer to the effect that, based
on the facts known to such officer at such time, in the reasonable belief of the
Transferor, such designation will not cause a Pay Out Event or an event that,
after giving of notice or the lapse of time, would cause a Pay Out Event to
occur with respect to Series 1998-2.
"Reserve Account Funding Date" shall mean the earliest of (a)
the first day of the third Monthly Period preceding the first full day of the
Accumulation Period; (b) the Determination Date occurring in the first Monthly
Period for which the Portfolio Adjusted Yield is less than 2.0%, but in such
event the Reserve Account Funding Date shall not be required to occur earlier
than the first day of the Monthly Period which commences 12 months prior to the
first full day of the Accumulation Period; (c) the Determination Date occurring
in the first Monthly Period for which the Portfolio Adjusted Yield is less than
3.0%, but in such event the Reserve Account Funding Date shall not be required
to occur earlier than the
19
first day of the Monthly Period which commences 6 months prior to the first full
day of the Accumulation Period; or (d) the Determination Date occurring in the
first Monthly Period for which the Portfolio Adjusted Yield is less than 3.5%,
but in such event the Reserve Account Funding Date shall not be required to
occur earlier than the first day of the Monthly Period which commences 4 months
prior to the first full day of the Accumulation Period.
"Revolving Period" shall mean the period from and including
the Closing Date to, but not including, the Amortization Period Commencement
Date.
"Rule 144A Transfer Certificate" shall mean a certificate
substantially in the form of Exhibit F hereto.
"Scheduled Series 1998-2 Termination Date" shall mean the
October 2004 Distribution Date.
"Series 1998-2" shall mean the Series of the Metris Master
Trust represented by the Series 1998-2 Securities.
"Series 1998-2 Pay Out Event" shall have the meaning specified
in Section 8 of this Series Supplement.
"Series 1998-2 Percentage" shall mean, on any date of
determination, the percentage equivalent of a fraction the numerator of which is
the Invested Amount and the denominator of which is the sum of the Invested
Amounts relating to all other Series then outstanding.
"Series 1998-2 Securities" shall mean the Class A Securities
and the Class B Securities.
"Series 1998-2 Securityholder" shall mean the holder of record
of any Series 1998-2 Security.
"Series 1998-2 Securityholders' Interest" shall have the
meaning specified in Section 4.4 of the Agreement.
20
"Series 1998-2 Termination Date" shall mean the earlier to
occur of (i) the day after the Distribution Date on which the Series 1998-2
Securities are paid in full, or (ii) the Scheduled Series 1998-2 Termination
Date.
"Series Default Amount" shall mean, with respect to each
Business Day, an amount equal to the product of the Default Amount identified
since the prior reporting date and the Floating Percentage applicable for such
Business Day.
"Series Servicing Fee Percentage" shall mean
2.00% per annum.
"Servicing Fee" shall mean for any Monthly Period, an amount
equal to the product of (i) a fraction the numerator of which is the actual
number of days in such Monthly Period and the denominator of which is 365 or
366, (ii) the Series Servicing Fee Percentage and (iii) the Adjusted Invested
Amount as of the beginning of the day on the first day of such Monthly Period.
"Shared Principal Collections" shall mean, as the context
requires, either (a) the amount allocated to the Series 1998-2 Securities which,
in accordance with subsections 4.9(b) and 4.9(c)(v) of the Agreement, may be
applied in accordance with Section 4.3(d) of the Agreement or (b) the amounts
allocated to the investor securities of other Series which the applicable Series
Supplements for such Series specify are to be treated as "Shared Principal
Collections" and which may be applied to cover Principal Shortfalls with respect
to the Series 1998-2 Securities.
"Spread Account" shall have the meaning specified in the
Insurance Agreement.
"Spread Account Maximum" shall have the meaning specified in
the Insurance Agreement.
"Stated Class B Amount" shall mean the greater of (i) zero and
(ii) a number rounded to the nearest Dollar equal to the product of 9.89 percent
and the Class
21
A Adjusted Invested Amount; provided, however, that in no event shall the Stated
Class B Amount be less than $16,483,517, except that if the Class A Adjusted
Invested Amount is equal to zero, the Stated Class B Amount shall be zero; and
provided further that during any Early Amortization Period the Stated Class B
Amount shall be equal to the Stated Class B Amount immediately preceding the
commencement of the Early Amortization Period.
"Termination Payment Date" shall mean the earlier of the first
Distribution Date following the liquidation or sale of the Receivables as a
result of an Insolvency Event and the occurrence of the Scheduled Series 1998-2
Termination Date.
"Transferor Finance Charge Collections" shall mean on any
Business Day the product of (a) the Finance Charge Collections for such Business
Day, (b) the Transferor Percentage and (c) the Series 1998-2 Percentage.
"Transferor Retained Securities" shall mean investor
securities of any Series, which may include the Class B Securities, which the
Transferor retains, but only to the extent that and for so long as the
Transferor is the Holder of such Securities.
"Transferor Retained Finance Charge Collections" shall mean
with respect to each Business Day other than a Default Recognition Date, the
amount specified in subsection 4.9(a)(xiii) of the Agreement.
"Weighted Average Invested Amount" shall mean with respect to
any Monthly Period the weighted average Adjusted Invested Amount based on the
Adjusted Invested Amount outstanding on each Business Day after giving effect to
all transactions on such Business Day from but excluding the Default Recognition
Date related to the preceding Monthly Period to and including the Default
Recognition Date with respect to such Monthly Period.
"Weighted Average Principal Receivables" shall mean with
respect to any Monthly Period the weighted average sum of the total amount of
Principal Receivables and the amount on deposit in the Excess Funding Account
22
on each Business Day after giving effect to all transactions on such Business
Day from but excluding the Default Recognition Date related to the preceding
Monthly Period to and including the Default Recognition Date with respect to
such Monthly Period.
SECTION 3. Reassignment Terms. The Series 1998-2 Securities
shall be subject to termination by the Transferor at its option, in accordance
with the terms specified in subsection 12.2(a) of the Agreement, on any
Distribution Date on or after the Distribution Date on which the Class A
Invested Amount would be reduced to an amount less than or equal to 10% of the
highest Class A Invested Amount during the Revolving Period; provided, that all
amounts due and owing to the Insurer and unreimbursed draws on the Policy,
together with interest thereon, have been paid. The deposit required in
connection with any such termination and final distribution shall be equal to
the unpaid Class A Invested Amount plus accrued and unpaid interest on the Class
A Securities through the day prior to the Distribution Date on which the final
distribution occurs, in each case after giving effect to any payments on such
date.
SECTION 3A. Conveyance of Interest in Interest Rate Cap; Cap
Proceeds Account. (a) The Transferor hereby covenants and agrees that, on or
prior to the issuance of the Class A Securities, it shall obtain and at all
times prior to the close of business on the Series 1998-2 Termination Date
maintain one or more Interest Rate Caps whose notional amounts singly or taken
as a group equal or exceed the Class A Outstanding Principal Amount. The
Transferor hereby assigns, sets-over, conveys, pledges and grants a security
interest and lien (free and clear of all other Liens) to the Trustee for the
benefit of the Series 1998-2 Securityholders, in all of the Transferor's right,
title and interest now existing or hereafter arising in and to the Cap
Agreements and the Interest Rate Caps arising thereunder, together with the Cap
Proceeds Account and all other proceeds thereof, as collateral security for the
benefit of the Series 1998-2 Securityholders. The Transferor hereby further
agrees to execute all such instruments, documents and financing statements and
take all such further action
23
requested by the Trustee to evidence and perfect the assignment of the Cap
Agreements and the Interest Rate Caps pursuant to this Section 3A. The
Transferor agrees that each Interest Rate Cap shall provide for payments to the
Trustee and that the Trust's interest in respect of such payments shall be
deposited into the Cap Proceeds Account.
(b) The Trustee, for the benefit of the Series 1998-2
Securityholders, shall establish and maintain with the Trustee, in the name of
the Trustee, on behalf of the Securityholders, a certain segregated trust
account (the "Cap Proceeds Account"). All amounts paid pursuant to the Interest
Rate Caps or any Qualified Substitute Arrangement on any Business Day (a "Cap
Settlement Date") shall be deposited in the Cap Proceeds Account. Any amounts
paid pursuant to the Interest Rate Caps or any Qualified Substitute Arrangement
on the Transfer Date in any Monthly Period shall be treated for all purposes
herein, including application in accordance with subsection 4.9(a) of the
Agreement, as if they had been received on the last Business Day of the
preceding Monthly Period. Funds in the Cap Proceeds Account shall be invested at
the direction of the Servicer, in Cash Equivalents with maturities not later
than the next succeeding Business Day. Any earnings on such invested funds shall
be deposited and held in the Cap Proceeds Account and applied in the same manner
and priority as payments pursuant to the Interest Rate Caps.
(c) In the event that the Cap Provider defaults in its
obligation to make a payment to the Trustee under one or more Cap Agreements on
any Cap Settlement Date, the Trustee shall make a demand on such Cap Provider,
or any guarantor, if applicable, demanding payment by 12:30 p.m., New York time,
on such date. The Trustee shall give notice to the Securityholders upon the
continuing failure by any Cap Provider to perform its obligation during the two
Business Days following a demand made by the Trustee on such Cap Provider, and
shall take such action with respect to such continuing failure directed to be
taken by the Securityholders.
24
(d) In the event that the Cap Provider is downgraded below the
rating required by a Rating Agency, then within 30 days after receiving notice
of such decline in the creditworthiness of the Cap Provider as determined by the
Rating Agencies, either (x) the Cap Provider, with the prior written
confirmation of the Rating Agencies that such arrangement will not result in the
reduction or withdrawal of the rating of the Class A Securities (without giving
effect to the Policy) will enter into an arrangement the purpose of which shall
be to assure performance by the Cap Provider of its obligations under the
Interest Rate Cap; or (y) the Servicer shall at its option either (i) with the
prior written confirmation of the Rating Agencies that such action will not
result in a reduction or withdrawal of the rating of the Class A Securities,
cause the Cap Provider to pledge securities in the manner provided by applicable
law which shall be held by the Trustee or its agent free and clear of the Lien
of any third party, in a manner conferring on the Trustee a perfected first Lien
in such securities securing the Cap Provider's performance of its obligations
under the applicable Interest Rate Cap, or (ii) provided that a Replacement
Interest Rate Cap or Qualified Substitute Arrangement meeting the requirements
of Section 3A(e) has been obtained, direct the Trustee (A) to provide written
notice to the Cap Provider of its intention to terminate the applicable Interest
Rate Cap within such 30-day period and (B) to terminate the applicable Interest
Rate Cap within such 30-day period, to request the payment to it of all amounts
due to the Trust under the applicable Interest Rate Cap through the termination
date and to deposit any such amounts so received, on the day of receipt, to the
Cap Proceeds Account for the benefit of the Class A Securityholders, or (iii)
establish any other arrangement (including an arrangement or arrangements in
addition to or in substitution for any prior arrangement made in accordance with
the provisions of this Section 3A(d)) satisfactory to the Rating Agencies such
that the Rating Agencies will not reduce or withdraw the rating of the Class A
Securities (without giving effect to the Policy) (a "Qualified Substitute
Arrangement"); provided, however, that in the event at any time any alternative
arrangement established pursuant to clause (x) or (y)(i) or (y)(iii) above shall
cease to
25
be satisfactory to the Rating Agencies then the provisions of this Section 3A(d)
shall again be applied and in connection therewith the 30-day period referred to
above shall commence on the date the Servicer receives notice of such cessation
or termination, as the case may be.
(e) Unless an alternative arrangement pursuant to clause (x)
or (y)(i) of Section 3A(d) is being established, the Servicer shall use its best
efforts to obtain a Replacement Interest Rate Cap or Qualified Substitute
Arrangement meeting the requirements of this Section 3A(e) during the 30-day
period referred to in Section 3A(d). The Trustee shall not terminate the
Interest Rate Cap unless, prior to the expiration of the 30-day period referred
to in said Section 3A(d), the Servicer delivers to the Trustee (i) a Replacement
Interest Rate Cap or Qualified Substitute Arrangement, (ii) to the extent
applicable, an Opinion of Counsel as to the due authorization, execution and
delivery and validity and enforceability of such Replacement Interest Rate Cap
or Qualified Substitute Arrangement, as the case may be, and (iii) a letter from
each of the Rating Agencies confirming that the termination of the Interest Rate
Cap and its replacement with such Replacement Interest Rate Cap or Qualified
Substitute Arrangement will not adversely affect its rating of the Class A
Securities (without giving effect to the Policy).
(f) The Servicer shall notify the Trustee and the Rating
Agencies within five Business Days after obtaining knowledge that the senior
unsecured debt rating of the Interest Rate Cap Provider has been withdrawn or
reduced by either of the Rating Agencies.
(g) Notwithstanding the foregoing, the Servicer may at any
time obtain a Replacement Interest Rate Cap, provided that the Servicer delivers
to the Trustee (i) an Opinion of Counsel as to the due authorization, execution
and delivery and validity and enforceability of such Replacement Interest Rate
Cap and (ii) a letter from each of the Rating Agencies confirming that the
termination of the then current Interest Rate Cap and its replacement with such
Replacement Interest
26
Rate Cap will not adversely affect its rating of the Class A Securities (without
giving effect to the Policy).
(h) The Trustee, on behalf of the Securityholders, upon
notification from the Servicer shall, sell all or a portion of the Interest Rate
Caps subject to the following conditions having been met:
(x) the Aggregate Interest Rate Caps Notional Amount
after giving effect to such sale shall equal or exceed the Class A
Outstanding Principal Amount as of the date of such sale after giving
effect to all payments and allocations made pursuant to this Agreement;
(y) such sale will not result in a downgrading or
withdrawal of the then current rating on the Class A Securities by the
Rating Agencies; and
(z) the minimum notional amount denomination of any
Interest Rate Cap to be sold is $500,000.
The Servicer shall have the duty of obtaining a fair market
value price for the sale of the Trust's rights under any Interest Rate Cap,
notifying the Trustee of prospective purchasers and bids, and selecting the
purchaser of such Interest Rate Cap. The Trustee upon receipt of the purchase
price in the Collection Account shall execute all documentation necessary to
effect the transfer of the Trust's rights under the Interest Rate Cap and to
release the Lien of the Trustee on the Interest Rate Cap to the extent of such
sale and proceeds thereof.
Funds deposited in the Collection Account in respect of the
sale of all or a portion of an Interest Rate Cap shall be applied as Principal
Collections allocable to Series 1998-2 and shall be applied on the next
Distribution Date in accordance with subsections 4.7(a), (b), (c) and (d) and
4.9(b), (c) and (e).
SECTION 4. Delivery and Payment for the Series 1998-2
Securities. The Transferor shall execute and
27
deliver the Series 1998-2 Securities to the Trustee for authentication in
accordance with Section 6.1 of the Agreement. The Trustee shall deliver the
Series 1998-2 Securities to or upon the order of the Transferor when
authenticated in accordance with Section 6.2 of the Agreement.
SECTION 5. Form of Delivery of Series 1998-2 Securities;
Denominations. The Class A Securities, shall be delivered as Book-Entry
Securities as provided in Sections 6.1 and 6.10 of the Agreement. The Class A
Securities shall be issued in minimum denominations of $1,000 and integral
multiples thereof. The Class B Security shall be delivered as a Registered
Security as provided in Section 6.1 of the Agreement.
(a) The Depositary for Series 1998-2 shall be DTC and the
Class A Securities shall be initially registered in the name of Cede & Co., its
nominee, and will initially be held by the Trustee as custodian for DTC.
SECTION 6. Article IV of Agreement. Sections 4.1, 4.2 and 4.3
of the Agreement shall read in their entirety as provided in the Agreement.
Article IV of the Agreement (except for Sections 4.1, 4.2 and 4.3 thereof) shall
read in its entirety as follows and shall be applicable only to the Series
1998-2 Securities:
ARTICLE IV
RIGHTS OF SECURITYHOLDERS AND
ALLOCATION AND APPLICATION OF COLLECTIONS
SECTION 4.4. Rights of Securityholders. The Series 1998-2
Securities shall represent undivided interests in the Trust, including the right
to receive, to the extent necessary to make the required payments with respect
to such Series 1998-2 Securities at the times and in the amounts specified in
this Agreement, (a) the Floating Percentage and the Fixed/Floating Percentage
(as applicable from time to time) of Collections (including Finance Charge
Collections) available in the Collection Account, (b) funds allocable to the
Series 1998-2 Securi-
28
ties on deposit in the Excess Funding Account, (c) funds on deposit in the
Interest Funding Account, the Principal Account, the Principal Funding Account,
the Accumulation Period Reserve Account, the Distribution Account, the Cap
Proceeds Account and the Payment Reserve Account and (d) in the case of Class A
Securityholders only, the proceeds of any draws on the Policy (for such Series,
the "Series 1998-2 Securityholders' Interest"). The Class B Securities shall be
subordinated to the Class A Securities. The Class B Securities will not have the
right to receive payments of principal other than to the extent of the Class B
Invested Amount, until the Class A Invested Amount has been paid in full.
SECTION 4.5. Collections and Allocation; Payments on
Exchangeable Transferor Security.
(a) Collections and Allocations. The Servicer will apply or
will instruct the Trustee to apply all funds on deposit in the Collection
Account and the Excess Funding Account allocable to the Series 1998-2
Securities, and all funds on deposit in the Interest Funding Account, the
Principal Account, the Cap Proceeds Account, the Principal Funding Account, the
Accumulation Period Reserve Account, the Distribution Account and the Payment
Reserve Account, as described in this Article IV. On each Business Day, (i) the
amount of Finance Charge Collections available in the Collection Account
allocable to the Series 1998-2 Securities shall be determined by multiplying the
aggregate amount of such Finance Charge Collections by (x) prior to the Pay Out
Commencement Date, the Floating Percentage and (y) on and after the Pay Out
Commencement Date, the Fixed/Floating Percentage, (ii) the amount of Principal
Collections available in the Collection Account allocable to the Series 1998-2
Securities shall be determined by multiplying the aggregate amount of such
Principal Collections by (x) during the Revolving Period, the Floating
Percentage and (y) during any Amortization Period, the Fixed/Floating
Percentage, and (iii) the Receivables in Defaulted Accounts allocable to the
Series 1998-2 Securities shall be determined by multiplying the Default Amount
by the Floating Percentage. In addition, on the Closing Date the Transferor
shall make a deposit to the Interest Funding Account in
29
the amount of $ to be allocated to the Series 1998-2 Securities and
applied as Available Series 1998-2 Finance Charge Collections in accordance
with subsection 4.9(a) of the Agreement.
(b) Payments to the Holder of the Exchangeable Transferor
Security. On each Business Day, the Servicer shall allocate and pay Collections
in accordance with the Daily Report with respect to such Business Day to the
Holder of the Exchangeable Transferor Security in accordance with subsection
4.3(b) of the Agreement; provided, however, that such amounts shall be applied
in accordance with Section 4.10 hereof to the extent specified therein.
Notwithstanding the foregoing and any other provisions of this
Supplement, amounts payable to the Transferor shall instead be deposited in the
Excess Funding Account to the extent necessary to prevent the Transferor
Interest from being less than the Minimum Transferor Interest.
SECTION 4.6. Determination of Interest for the Series
1998-2 Securities. The amount of monthly interest (the "Class A Monthly
Interest") which shall accrue for the benefit of the Class A Securities with
respect to any Interest Accrual Period shall be an amount equal to the
product of (i) the Class A Interest Rate, (ii) a fraction the numerator of
which is the actual number of days in the related Interest Accrual Period and
the denominator of which is 360 and (iii) the Class A Outstanding Principal
Amount as of the close of business on the first day of such Interest Accrual
Period (or in the case of the initial Distribution Date, an amount equal to
the product of (u) the Class A Initial Invested Amount, (v) divided by
360, and (w) the Class A Interest Rate determined on , 1998).
On the Determination Date preceding each Distribution Date,
the Servicer shall determine an amount (the "Class A Interest Shortfall") equal
to the excess, if any, of (x) the Class A Monthly Interest for the Interest
Accrual Period applicable to the Distribution Date over (y) the amount available
to be paid to the Class A Securityholders in respect of interest on such
30
Distribution Date. If there is a Class A Interest Shortfall with respect to any
Distribution Date, an additional amount ("Class A Additional Interest") shall be
payable as provided herein with respect to the Class A Securities on each
Distribution Date following such Distribution Date, to and including the
Distribution Date on which such Class A Interest Shortfall is paid to Class A
Securityholders, equal to the product of (i) the Class A Interest Rate, (ii) a
fraction the numerator of which is the actual number of days in the related
Interest Accrual Period and the denominator of which is 360 and (iii) such Class
A Interest Shortfall remaining unpaid. Notwithstanding anything to the contrary
herein, Class A Additional Interest shall be payable or distributed to Class A
Securityholders only to the extent permitted by applicable law.
SECTION 4.7. Determination of Principal Xxxxxxx. (a) The
amount of principal (the "Class A Principal") distributable from the
Distribution Account or available for deposit into the Principal Funding Account
with respect to the Class A Securities for each Distribution Date with respect
to the Amortization Period shall be equal to the least of (i) the Available
Series 1998-2 Principal Collections on deposit in the Principal Account with
respect to the related Transfer Date, (ii) for each Distribution Date with
respect the Accumulation Period, prior to the payment in full of the Class A
Invested Amount and on or prior to the Expected Final Payment Date, the
applicable Controlled Deposit Amount for such Transfer Date and (iii) the Class
A Adjusted Invested Amount on such Transfer Date.
(b) The amount of principal (the "Class B Principal")
distributable from the Distribution Account with respect to the Class B
Securities for each Distribution Date, beginning with the Class B Principal
Payment Commencement Date, or, in the case of distributions of Class B Excess
Amounts, on each Distribution Date during the Accumulation Period, shall be
equal to the lesser of (i) the Available Series 1998-2 Principal Collections
remaining on deposit in the Principal Account with respect to the related
Transfer Date after application thereof to Class A Principal, if any, (ii) the
Class B
31
Invested Amount on such Transfer Date and (iii) in the case of distributions of
Class B Excess Amounts, the Class B Excess Amount.
SECTION 4.8. Shared Principal Collections. Shared Principal
Collections allocated to Available Series 1998-2 Principal Collections for the
Series 1998-2 Securities and to be applied to Class A Principal and Class B
Principal pursuant to subsection 4.9(c)(i)(z) of the Agreement for any Business
Day with respect to the Amortization Period shall mean an amount equal to the
product of (x) Shared Principal Collections for all Series for such Business Day
and (y) a fraction, the numerator of which is the Principal Shortfall for the
Series 1998-2 Securities for such Business Day and the denominator of which is
the aggregate amount of Principal Shortfalls for all Series for such Business
Day. For any Business Day with respect to the Revolving Period, Shared Principal
Collections allocated to Available Series 1998- 2 Principal Collections for the
Series 1998-2 Securities shall be zero.
SECTION 4.9. Application of Funds. (a) On each Business Day,
the Servicer shall deliver to the Trustee a Daily Report in which it shall
instruct the Trustee to withdraw, and the Trustee, acting in accordance with
such instructions, shall withdraw from the Collection Account and the Cap
Proceeds Account, to the extent of the sum of (w) prior to the Pay Out
Commencement Date, the Floating Percentage of the sum of Finance Charge
Collections and the amount of Adjustment Payments made by the Transferor with
respect to Adjustment Payments required to be made but not made in a prior
Monthly Period, available in the Collection Account or, on and after the Pay Out
Commencement Date, the Fixed/Floating Percentage of the sum of Finance Charge
Collections and the amount of Adjustment Payments made by the Transferor with
respect to Adjustment Payments required to be made by not made in a prior
Monthly Period, available in the Collection Account, (x) Investment Earnings on
deposit in the Collection Account, (y) amounts on deposit in the Payment Reserve
Account, if any, if and to the extent the Transferor designates that such
amounts are to be so applied, and (z) the Cap Receipt Amount, if any, for such
32
Business Day (the "Available Series 1998-2 Finance Charge Collections";
provided, that with respect to the Closing Date the amount deposited by the
Transferor into the Interest Funding Account pursuant to subsection 4.5(a) of
the Agreement shall also constitute Available Series 1998-2 Finance Charge
Collections) the amounts required to be withdrawn from the Collection Account
pursuant to subsections 4.9(a)(i) through 4.9(a)(xiii) of the Agreement.
(i) Class A Monthly Interest. On each Business Day
during a Monthly Period, the Trustee, acting in accordance with
instructions from the Servicer, shall withdraw first from the Cap
Proceeds Account to the extent of the Cap Receipt Amount and then from
the Collection Account and then from the Payment Reserve Account, and
deposit into the Interest Funding Account for distribution on the next
Distribution Date to the Class A Securityholders, to the extent of the
Available Series 1998-2 Finance Charge Collections for such Business
Day, an amount equal to the lesser of (x) the Available Series 1998-2
Finance Charge Collections and (y) the excess of (1) the sum of Class A
Monthly Interest for the Interest Accrual Period beginning in such
Monthly Period and Carryover Class A Interest over (2) any amounts with
respect thereto ---- previously deposited into the Interest Funding
Account on any prior Business Day during such Monthly Period.
Notwithstanding anything to the contrary herein, the portion of
Carryover Class A Interest that constitutes Class A Additional Interest
shall be payable or distributable to Class A Securityholders only to
the extent permitted by applicable law.
(ii) Investor Servicing Fee. On each Business Day,
the Trustee, acting in accordance with instructions from the Servicer,
shall withdraw first from the Cap Proceeds Account to the extent of the
Cap Receipt Amount and then from the Collection Account and then
33
from the Payment Reserve Account, and distribute to the Servicer, to
the extent of any Available Series 1998-2 Finance Charge Collections
remaining after giving effect to the withdrawals pursuant to subsection
4.9(a)(i) of the Agreement, an amount equal to the lesser of (x) any
such remaining Available Series 1998-2 Finance Charge Collections and
(y) the excess of (i) the Servicing Fee for such Monthly Period plus
any unpaid Servicing Fees from prior Monthly Periods over (ii) any
amounts with respect thereto previously distributed to the Servicer
during such Monthly Period.
(iii) Series Default Amount. On each Business Day,
first if such day is the Default Recognition Date for the related
Monthly Period, the Transferor will deposit (as described below)
Transferor Retained Finance Charge Collections for each prior day in
the Current Monthly Period and second the Trustee, acting in accordance
with instructions from the Servicer, shall withdraw first from the Cap
Proceeds Account to the extent of the Cap Receipt Amount and then from
the Collection Account and then from the Payment Reserve Account, to
the extent of any Available Series 1998-2 Finance Charge Collections
remaining after giving effect to the withdrawals pursuant to
subsections 4.9(a)(i) and (ii) of the Agreement, an amount equal to the
lesser of (x) any such remaining Available Series 1998-2 Finance Charge
Collections and, if such day is the related Default Recognition Date
for such Monthly Period, an amount equal to the aggregate Transferor
Retained Finance Charge Collections for each prior day during the
related Monthly Period and (y) the sum of (1) the aggregate Series
Default Amount for such Business Day plus (2) the unpaid Series Default
Amount for each previous Business Day during such Monthly Period, such
amount to be (A) treated as Shared Principal Collections during the
Revolving Period, and (B) treated as Available
34
Series 1998-2 Principal Collections during the Amortization Period.
(iv) Adjustment Payment Shortfalls. On each Business
Day, the Trustee, acting in accordance with instructions from the
Servicer, shall withdraw first from the Cap Proceeds Account to the
extent of the Cap Receipt Amount and then from the Collection Account
and then from the Payment Reserve Account, to the extent of any
Available Series 1998-2 Finance Charge Collections remaining after
giving effect to the withdrawals pursuant to subsections 4.9(a)(i)
through (iii) of the Agreement, an amount equal to the lesser of (x)
any such remaining Available Series 1998-2 Finance Charge Collections
and (y) an amount equal to the Series 1998-2 Percentage of any
Adjustment Payment which the Transferor is required but fails to make
pursuant to subsection 3.8(a) of the Agreement, such amount, (i) during
the Revolving Period, to be treated as Shared Principal Collections,
and (ii) during the Amortization Period, to be treated as Available
Series 1998-2 Principal Collections.
(v) Reimbursement of Class A Charge-Offs. On each
Business Day, the Trustee, acting in accordance with instructions from
the Servicer, shall withdraw first from the Cap Proceeds Account to the
extent of the Cap Receipt Amount and then from the Collection Account
and then from the Payment Reserve Account, to the extent of any
Available Series 1998-2 Finance Charge Collections remaining after
giving effect to the withdrawals pursuant to subsections 4.9(a)(i)
through (iv) of the Agreement, an amount equal to the lesser of (x)
any such remaining Available Series 1998-2 Finance Charge
Collections and (y) the unreimbursed Class A Charge-Offs, if any,
will be applied to reimburse Class A Charge-Offs, such amount
during the Revolving Period, to be treated as Shared Principal
Collections, and
35
during the Amortization Period, to be treated as Available Series
1998-2 Principal Collections.
(vi) Monthly Premium. On each Business Day, the
Trustee, acting in accordance with the instructions from the Servicer,
shall withdraw first from the Cap Proceeds Account to the extent of the
Cap Receipt Amount and then from the Collection Account and then from
the Payment Reserve Account, to the extent of any Available Series
1998-2 Finance Charge Collections remaining after giving effect to the
withdrawals pursuant to subsections 4.9(a)(i) through (v) of the
Agreement, an amount equal to the lesser of (x) any such remaining
Available Series 1998-2 Finance Charge Collections and (y) the portion
of the monthly premium with respect to the Policy due on the
Distribution Date in the next succeeding Monthly Period that has not
been previously deposited in the Interest Funding Account plus any
prior monthly premium with respect to the Policy that was due but not
previously deposited in the Interest Funding Account, and deposit such
amount into the Interest Funding Account for distribution on the next
succeeding Distribution Date to the Insurer.
(vii) Reimbursement of Policy Draws. On each Business
Day, the Trustee, acting in accordance with the instructions from the
Servicer, shall withdraw first from the Cap Proceeds Account to the
extent of the Cap Receipt Amount and then from the Collection Account
and then from the Payment Reserve Account, to the extent of any
Available Series 1998-2 Finance Charge Collections remaining after
giving effect to the withdrawals pursuant to subsections 4.9(a)(i)
through (vi) of the Agreement, an amount equal to the lesser of (x) any
such remaining Available Series 1998-2 Finance Charge Collections and
(y) the portion of the unreimbursed claims on the Policy, that
36
have not been previously deposited in the Interest Funding Account, and
deposit such amount into the Interest Funding Account for distribution
on the next succeeding Distribution Date to the Insurer.
(viii) Spread Account. On each Business Day, the
Trustee, acting in accordance with the instructions from the Servicer,
shall withdraw first from the Cap Proceeds Account to the extent of the
Cap Receipt Amount and then from the Collection Account and then from
the Payment Reserve Account, to the extent of any Available Series
1998-2 Finance Charge Collections remaining after giving effect to the
withdrawals pursuant to subsections 4.9(a)(i) through (vii) of the
Agreement, an amount equal to the lesser of (x) any such remaining
Available Series 1998-2 Finance Charge Collections and (y) the excess,
if any, of the Spread Account Maximum over the amount on deposit in
such Spread Account and deposit such amount into the Spread Account.
(ix) Payment to the Insurer. On each Business Day,
the Trustee, acting in accordance with the instructions from the
Servicer, shall withdraw first from the Cap Proceeds Account to the
extent of the Cap Receipt Amount and then from the Collection Account
and then from the Payment Reserve Account, to the extent of any
Available Series 1998-2 Finance Charge Collections remaining after
giving effect to the withdrawals pursuant to subsections 4.9(a)(i)
through (viii) of the Agreement, an amount equal to the lesser of (x)
any such remaining Available Series 1998-2 Finance Charge Collections
and (y) the portion of any other amounts required to be paid to the
Insurer pursuant to the Insurance Agreement which have not been
previously deposited in the Interest Funding Account and deposit such
amount in the Interest Funding Account for
37
distribution on the next succeeding Distribution Date to the Insurer.
(x) Reimbursement of Class B Charge-Offs. On each
Business Day, the Trustee, acting in accordance with instructions from
the Servicer, shall withdraw first from the Cap Proceeds Account to the
extent of the Cap Receipt Amount and then from the Collection Account
and then from the Payment Reserve Account, to the extent of any
Available Series 1998-2 Finance Charge Collections remaining after
giving effect to the withdrawals pursuant to subsections 4.9(a)(i)
through (ix) of the Agreement, an amount equal to the lesser of (x) any
such remaining Available Series 1998-2 Finance Charge Collections and
(y) the unreimbursed amount by which the Class B Invested Amount has
been reduced on prior Business Days pursuant to clauses (c) and (d) of
the definition of Class B Invested Amount, if any, such amount, (i)
during the Revolving Period, to be treated as Shared Principal
Collections, and (ii) during the Amortization Period, to be treated as
Available Series 1998- 2 Principal Collections.
(xi) Accumulation Period Reserve Account. On each
Business Day on and after the Reserve Account Funding Date, but prior
to the date on which the Accumulation Period Reserve Account terminates
pursuant to subsection 4.18(d) of the Agreement, the Trustee, acting in
accordance with instructions from the Servicer, shall withdraw first
from the Cap Proceeds Account to the extent of the Cap Receipt Amount
and then from the Collection Account and then from the Payment Reserve
Account, and distribute to the Servicer, to the extent of any Available
Series 1998-2 Finance Charge Collections remaining after giving effect
to the withdrawals pursuant to subsections 4.9(a)(i) through (x) of the
Agreement, an amount equal to the lesser of (x) any such
38
remaining Available Series 1998-2 Finance Charge Collections and (y)
the excess, if any, of the Required Reserve Account Amount over the
Available Reserve Account Amount and the Servicer shall deposit such
amount, if any, in the Accumulation Period Reserve Account.
(xii) Payment Reserve Account. On each Business Day,
the Trustee, acting in accordance with instructions from the
Transferor, shall withdraw first from the Cap Proceeds Account to the
extent of the Cap Receipt Amount and then from the Collection Account
and then from the Payment Reserve Account, and distribute to the
Servicer, to the extent of any Available Series 1998-2 Finance Charge
Collections remaining after giving effect to the withdrawals pursuant
to subsections 4.9(a)(i) through (xi) of the Agreement, an amount equal
to the lesser of (x) any such remaining Available Series 1998-2 Finance
Charge Collections and (y) the amount designated by the Transferor in
writing (which includes facsimile transmission) in its instructions to
the Trustee on such Business Day and the Servicer shall deposit such
amount, if any, in the Payment Reserve Account.
(xiii) Excess Finance Charge Collections. Any amounts
remaining in the Cap Proceeds Account, the Collection Account and the
Payment Reserve Account, to the extent of any Available Series 1998-2
Finance Charge Collections remaining after giving effect to the
withdrawals pursuant to subsection 4.9(a)(i) through (xii) of the
Agreement, shall be treated as Excess Finance Charge Collections,
and the Servicer shall direct the Trustee in writing on each
Business Day to withdraw such amounts from the Collection Account
and to first make such amounts available to pay to Securityholders
of other Series to the extent of shortfalls, if any, in amounts
payable to such Securityholders from Finance Charge Collections
39
allocated to such other Series, then to pay any unpaid commercially
reasonable costs and expenses of a Successor Servicer, if any, and
then on each Business Day other than the Default Recognition Date,
to pay to the Transferor to be treated as "Transferor Retained
Finance Charge Collections," and, on each Default Recognition Date,
to pay any remaining Excess Finance Charge Collections to the
Transferor.
Notwithstanding the foregoing, if on any Default Recognition Date the sum of the
amount of Available Series 1998-2 Finance Charge Collections (including, all
amounts on deposit in the Payment Reserve Account) and Transferor Retained
Finance Charge Collections is less than the Series Default Amount for such
Default Recognition Date, the Servicer shall apply amounts deposited in the
Accumulation Period Reserve Account pursuant to subsection 4.9(a)(xi) of the
Agreement and the Spread Account pursuant to subsection 4.9(a)(viii) of the
Agreement during the then current Monthly Period in accordance with subsection
4.9(a)(iii) of the Agreement to the extent of such shortfall.
(b) For each Business Day with respect to the Revolving
Period, the funds on deposit in the Collection Account to the extent of the
product of (i) the Floating Percentage and (ii) Principal Collections with
respect to such Business Day (less the amount of Redirected Principal
Collections on such Business Day) will be treated as Shared Principal
Collections and applied, pursuant to the written direction of the Servicer in
the Daily Report for such Business Day, as provided in Section 4.3(d) of the
Agreement.
(c) For each Business Day on and after the Amortization Period
Commencement Date, the amount of funds on deposit in the Collection Account or
the Excess Funding Account and other accounts as described below will be
distributed, pursuant to the written direction of the Servicer in the Daily
Report for such Business Day in the following priority:
40
(i) an amount (not in excess of the Invested Amount)
equal to the sum of (v) the product of the Fixed/Floating Percentage
and Principal Collections in the Collection Account at the end of the
preceding Business Day (less the amount thereof applied as Redirected
Principal Collections on such Business Day), (w) any amount on deposit
in the Excess Funding Account allocated to the Series 1998-2 Securities
on such Business Day pursuant to subsection 4.9(d) of the Agreement,
(x) amounts to be paid pursuant to subsections 4.9(a)(iii), (iv), (v)
and (x) of the Agreement from Available Series 1998-2 Finance Charge
Collections and from amounts available pursuant to subsections 4.10(a)
and (b), 4.14, 4.17(b) and 4.18(b), (c) and (d) of the Agreement on
such Business Day and (y) the amount of Shared Principal Collections
allocated to the Series 1998-2 Securities in accordance with Section
4.8 of the Agreement on such Business Day, will be deposited into the
Principal Account; provided, however that with respect to any Monthly
Period during the Controlled Accumulation Period, the aggregate amount
required to be deposited in the Principal Account pursuant to this
subsection 4.9(c)(i) shall not exceed the sum of the Controlled Deposit
Amount and, at the option of the Transferor, the Class B Excess Amount.
(ii) an amount equal to the excess, if any, of (A)
the sum of the amounts described in clauses (i)(v) and (x) above over
(B) the sum of the Class A Principal and the Class B Principal will be
treated as Shared Principal Collections and applied as provided in
subsection 4.3(d) of the Agreement.
(d) On the first Business Day of the Amortization Period funds
on deposit in the Excess Funding Account will be deposited in the Principal
Account to the extent of the lesser of (x) the Invested Amount and (y) the
product of (i) the amount on deposit in the Excess Funding Account at the
beginning of the Amortization
41
Period and (ii) a fraction, the numerator of which is equal to the Invested
Amount and the denominator of which is equal to the sum of the invested amounts
of all Series in amortization periods on such day.
SECTION 4.10. Coverage of Required Amount for the Series
1998-2 Securities. (a) To the extent that any amounts are on deposit in the
Excess Funding Account on any Business Day, the Servicer shall apply, in the
manner specified for application of Available Series 1998-2 Finance Charge
Collections in subsections 4.9(a)(i) through (xi) of the Agreement, Transferor
Finance Charge Collections in an amount equal to the sum of (i) the excess of
(x) the product of (a) the Base Rate, (b) the amounts on deposit in the Excess
Funding Account and (c) the number of days elapsed since the previous Business
Day divided by the actual number of days in such year over (y) the aggregate
amount of all earnings since the previous Business Day available from the Cash
Equivalents in which funds on deposit in the Excess Funding Account are invested
(the "Negative Carry Amount") and (ii) the amount of unreimbursed claims on the
Policy that have not been deposited in the Interest Funding Account pursuant to
subsection 4.9(a)(vii) of the Agreement prior to such Business Day.
(b) To the extent that on any Business Day payments are being
made pursuant to any of subsections 4.9(a)(i) through (xi) of the Agreement,
respectively, and the full amount to be paid pursuant to any such subsection
receiving payments on such Business Day is not paid in full on such Business
Day, the Servicer shall apply, in the manner specified for application of
Available Series 1998-2 Finance Charge Collections in subsections 4.9(a)(i)
through (xi) of the Agreement, all or a portion of the Excess Finance Charge
Collections from other Series with respect to such Business Day allocable to the
Series 1998-2 Securities in an amount equal to the excess of the full amount to
be allocated or paid pursuant to the applicable subsection over the amount
applied with respect thereto from Available Series 1998-2 Finance Charge
Collections and Transferor Finance Charge Collections on such Business Day (the
"Required Amount").
42
To the extent that on any Business Day on and after the day on
which the Invested Amount is paid in full but prior to the Series 1998-2
Termination Date there are unreimbursed claims on the Policy, the Servicer shall
apply, in the manner specified for application of Available Series 1998-2
Finance Charge Collections in subsection 4.9(a)(vii) of the Agreement all or a
portion of the Excess Finance Charge Collections from other Series with respect
to such Business Day allocable to the Series 1998-2 Securities in an amount
equal to the excess of the full amount to be allocated or paid pursuant to the
applicable subsection over the amount applied with respect thereto from
Transferor Finance Charge Collections on such Business Day (the "Reimbursement
Required Amount").
Excess Finance Charge Collections allocated to the Series
1998-2 Securities for any Business Day shall mean an amount equal to the product
of (x) Excess Finance Charge Collections available from all other Series for
such Business Day and (y) a fraction, the numerator of which is the Required
Amount or Reimbursement Required Amount, as applicable, for such Business Day
and the denominator of which is the aggregate amount of shortfalls in required
amounts or other amounts to be paid from Finance Charge Collections for all
Series for such Business Day.
SECTION 4.11. Payment of Interest on Securities and Amounts
Owing to Insurer. (a) On each Transfer Date, the Trustee, acting in accordance
with instructions from the Servicer set forth in the Daily Report for such day,
shall withdraw the amount on deposit in the Interest Funding Account with
respect to the preceding Monthly Period allocable to the Series 1998-2
Securities and deposit such amount in the Distribution Account. On each
Distribution Date, the Paying Agent shall pay in accordance with Section 5.1 of
the Agreement to the Class A Securityholders from the Distribution Account the
amount deposited into the Distribution Account on the related Transfer Date
allocable thereto pursuant to subsection 4.9(a)(i) of the Agreement.
43
(b) On each Distribution Date, the Paying Agent shall pay in
accordance with Section 5.1 of the Agreement from the Distribution Account to
the Insurer for application in accordance with the Insurance Agreement the
amount deposited into the Distribution Account pursuant to subsection 4.11(a) of
the Agreement on the related Transfer Date allocable thereto pursuant to
subsections 4.9(a)(vi), (vii), (viii) and (ix) of the Agreement.
SECTION 4.12. Payment of Security Principal. (a) On the
Transfer Date preceding each Distribution Date with respect to the Amortization
Period, the Trustee, acting in accordance with instructions from the Servicer
set forth in the Daily Report for such day, shall withdraw from the Principal
Account and deposit into the Distribution Account with respect to the Early
Amortization Period, or the Principal Funding Account with respect to the
Accumulation Period, to the extent of funds available, an amount equal to the
Class A Principal for such Distribution Date. On each Distribution Date with
respect to the Early Amortization Period until the Class A Invested Amount is
paid in full, or on the Expected Final Payment Date with respect to the
Accumulation Period following any deposit to the Distribution Account pursuant
to subsection 4.12(e) of the Agreement, the Paying Agent shall pay in accordance
with Section 5.1 of the Agreement to the Class A Securityholders from the
Distribution Account such amounts deposited with respect to Class A Principal
into the Distribution Account on the related Transfer Date.
(b) On the Transfer Date preceding the Class B Principal
Payment Commencement Date and each Transfer Date thereafter, or, in the case of
distributions of Class B Excess Amounts, on each Transfer Date during the
Accumulation Period preceding a Distribution Date on which a distribution shall
be made with respect to Class B Excess Amounts, the Trustee, acting in
accordance with instructions from the Servicer set forth in the Daily Report for
such day, shall withdraw from the Principal Account and deposit in the
Distribution Account, to the extent of funds available, an amount equal to the
Class B Principal for the related Distribution Date. On the
44
Class B Principal Payment Commencement Date after the payment of any principal
amounts to the Class A Securities on such day, and on each Distribution Date
thereafter until the Class B Invested Amount is paid in full and on each
Distribution Date during the Accumulation Period on which amounts are to be
distributed with respect to Class B Excess Amounts, the Paying Agent shall pay
in accordance with Section 5.1 of the Agreement to the Class B Securityholder
from the Distribution Account such amounts deposited with respect to Class B
Principal into the Distribution Account on the related Transfer Date; provided,
however, that, if so designated in writing by the Transferor with respect to any
such Transfer Date, any such payment of Class B Principal shall not be made to
the Class B Securityholder and such amount shall be subtracted from the Class B
Invested Amount and added to the Transferor Interest.
(c) Any amounts remaining in the Principal Account and
allocable to the Series 1998-2 Securities, after the Class B Invested Amount has
been paid in full, will be treated as Shared Principal Collections and applied
in accordance with Section 4.3(d) of the Agreement.
(d) On the earlier to occur of (i) the first Transfer Date
with respect to the Early Amortization Period and (ii) the Transfer Date
immediately preceding the Expected Final Payment Date, the Trustee, acting in
accordance with instructions from the Servicer, shall withdraw from the
Principal Funding Account and deposit in the Distribution Account the amount on
deposit in the Principal Funding Account for distribution to Class A
Securityholders up to an amount equal to the Class A Invested Amount.
SECTION 4.13. Series Charge-Offs. (a) If, on any Determination
Date, the aggregate Series Default Amount and the Series 1998-2 Percentage of
unpaid Adjustment Payments, if any, for each Business Day in the preceding
Monthly Period exceeded the Available Series 1998-2 Finance Charge Collections
applied to the payment thereof pursuant to subsections 4.9(a)(iii) and (iv) of
the Agreement, the amount of Transferor Finance Charge
45
Collections and Excess Finance Charge Collections allocated thereto pursuant to
Section 4.10 of the Agreement, the amount of Redirected Principal Collections
applied with respect thereto pursuant to Section 4.14 of the Agreement, the
amount of Principal Funding Account Investment Proceeds applied with respect
thereto pursuant to subsection 4.17(b), and amounts withdrawn from the
Accumulation Period Reserve Account and applied with respect to the Series
Default Amount pursuant to subsection 4.18(b), (c) and (d) and the Series 1998-2
Percentage of unpaid Adjustment Payments with respect to such Monthly Period,
the Class B Invested Amount will be reduced by the amount by which the remaining
aggregate Series Default Amount and Series 1998-2 Percentage of unpaid
Adjustment Payments exceed the amount applied with respect thereto during such
preceding Monthly Period (a "Class B Charge-Off").
(b) In the event that any such reduction of the Class B
Invested Amount would cause the Class B Invested Amount to be a negative number,
the Class B Invested Amount will be reduced to zero, and the Trustee will demand
payment on the Policy in an amount equal to the amount by which the Class B
Invested Amount would have been reduced below zero, but in no case more than the
sum of (i) the remaining aggregate Series 1998-2 Default Amount and (ii) the
remaining Series 1998-2 Percentage of unpaid Adjustment Payments for such
Monthly Period (a "Potential Class A Charge-Off").
(c) In the event that the Insurer fails to deliver to the
Trustee an amount equal to the Potential Class A Charge-Off amount as required
under the Policy, the Class A Invested Amount will be reduced by the amount the
Insurer has failed to pay (a "Class A Charge-Off").
SECTION 4.14. Redirected Principal Collections for the Series
1998-2 Securities. On each Business Day, the Servicer will determine an amount
equal to the least of (i) the Class B Invested Amount, (ii) the product of
(x)(I) during the Revolving Period, the Class B Floating Percentage or (II)
during an Amortization Period, the Class B Fixed/Floating Percentage and (y) the
amount of Principal Collections with respect to such Business Day
46
and (iii) an amount equal to the Class A Required Amount for such Business Day
(such amount called "Redirected Principal Collections") and shall apply
Principal Collections in an amount equal to such amount to the components of the
Class A Required Amount as amounts are applied to such components from Available
Series 1998-2 Finance Charge Collections pursuant to subsection 4.9(a) of the
Agreement.
SECTION 4.15. Determination of LIBOR. (a) "LIBOR" shall mean,
as of any LIBOR Determination Date, the rate for deposits in United States
dollars for one month (commencing on the first day of the relevant Interest
Accrual Period) which appears on Telerate Page 3750 as of 11:00 A.M., London
time, on the LIBOR Determination Date for such Interest Accrual Period. If such
rate does not appear on Telerate Page 3750, the rate for such LIBOR
Determination Date will be determined on the basis of the rates at which
deposits in the United States dollars are offered by the Reference Banks at
approximately 11:00 a.m., London time, on such LIBOR Determination Date to prime
banks in the London interbank market for a period equal to one month (commencing
on the first day of the relevant Interest Accrual Period). The Trustee will
request the principal London office of each such bank to provide a quotation of
its rate. If at least two such quotations are provided, the rate for such LIBOR
Determination Date will be the arithmetic mean of the quotations. If fewer than
two quotations are provided as requested, the rate for such LIBOR Determination
Date will be the arithmetic mean of the rates quoted by four major banks in New
York City, selected by the Trustee, at approximately 11:00 a.m., New York City
time, on the LIBOR Determination Date for loans in United States dollars to
leading European banks for a period equal to one month (commencing on the first
day of such Interest Accrual Period).
(b) On each LIBOR Determination Date, the Trustee shall send
to the Servicer by facsimile notification of LIBOR for such LIBOR Determination
Date.
47
SECTION 4.16. Payment Reserve Account. (a) The Servicer shall
establish and maintain or cause to be established and maintained with a
Qualified Institution, which may be the Trustee, in the name of the Trustee, on
behalf of the Securityholders, the "Payment Reserve Account," which shall be a
segregated trust account with the corporate trust department of such Qualified
Institution, bearing a designation clearly indicating that the funds deposited
therein are held for the benefit of the Securityholders. The Trustee shall
possess all right, title and interest in all funds on deposit from time to time
in the Payment Reserve Account and in all proceeds thereof. The Payment Reserve
Account shall be under the sole dominion and control of the Trustee for the
benefit of the Securityholders. If, at any time, the institution holding the
Payment Reserve Account ceases to be a Qualified Institution, the Trustee shall
within 10 Business Days establish a new Payment Reserve Account meeting the
conditions specified above with a Qualified Institution, and shall transfer any
cash or any investments to such new Payment Reserve Account. From the date such
new Payment Reserve Account is established, it shall be the "Payment Reserve
Account."
(b) The Transferor, at its discretion, may on any Business Day
withdraw all or a part of any amounts then on deposit in the Payment Reserve
Account and apply such funds in accordance with Section 4.9(a) of the Agreement.
(c) Funds on deposit in the Payment Reserve Account shall be
invested in Cash Equivalents by the Trustee (or, at the direction of the
Trustee, by the Servicer on behalf of the Trustee) at the direction of the
Servicer. Funds on deposit in the Payment Reserve Account on any Business Day,
after giving effect to any withdrawals from the Payment Reserve Account, shall
be invested in Cash Equivalents that will mature so that such funds will be
available for withdrawal on or prior to the following Business Day. The proceeds
of any such investments shall be invested in Cash Equivalents that will mature
so that such funds will be available for withdrawal on or prior to the following
Business Day. On
48
each Business Day following a deposit of funds to the Payment Reserve Account,
the aggregate proceeds of any such investment shall be deposited in the
Collection Account and treated as Investment Proceeds for application as
Available Series 1998-2 Finance Charge Collections.
SECTION 4.17. Principal Funding Account. (a) The Servicer
shall establish and maintain or cause to be established and maintained with a
Qualified Institution, which may be the Trustee, in the name of the Trustee, on
behalf of the Securityholders, the "Principal Funding Account," which shall be a
segregated trust account with the corporate trust department of such Qualified
Institution, bearing a designation clearly indicating that the funds deposited
therein are held for the benefit of the Series 1998-2 Securityholders. 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 1998-2 Securityholders. If, at any time,
the institution holding the Principal Funding Account ceases to be a Qualified
Institution, the Trustee shall within 10 Business Days establish a new Principal
Funding Account meeting the conditions specified above with a Qualified
Institution, and shall transfer any cash or any investments to such new
Principal Funding Account. From the date such new Principal Funding Account is
established, it shall be the "Principal Funding Account." The Trustee, at the
written direction of the Servicer, shall (i) make withdrawals from the Principal
Funding Account from time to time, in the amounts and for the purposes set forth
in this Series Supplement, and (ii) on each Transfer Date (from and after the
commencement of the Accumulation Period) prior to termination of the Principal
Funding Account make a deposit into the Principal Funding Account in the amount
specified in, and otherwise in accordance with, subsection 4.12(a) of the
Agreement.
49
(b) Funds on deposit in the Principal Funding Account shall be
invested by the Trustee at the direction of the Servicer in Cash Equivalents
maturing no later than the following Transfer Date. On the Transfer Date
occurring in the month following the commencement of the Accumulation Period and
on each Transfer Date thereafter with respect to the Accumulation Period, the
Trustee, at the Servicer's written direction, shall transfer from the Principal
Funding Account to the Collection Account the Principal Funding Account
Investment Proceeds on deposit in the Principal Funding Account, but not in
excess of the Covered Amount, and shall apply such amount as if such amounts
were Available Series 1998-2 Finance Charge Collections available to be applied
pursuant to subsection 4.9(a) on the last Business Day of the preceding Monthly
Period. Principal Funding Account Investment Proceeds (including reinvested
interest) shall not be considered part of the amounts on deposit in the
Principal Funding Account for purposes of this Series Supplement.
SECTION 4.18. Accumulation Period Reserve Account. (a) The
Servicer shall establish and maintain or cause to be established and maintained
with a Qualified Institution, which may be the Trustee, in the name of the
Trustee, on behalf of the Securityholders, the "Accumulation Period Reserve
Account," which shall be a segregated trust account with the corporate trust
department of such Qualified Institution, bearing a designation clearly
indicating that the funds deposited therein are held for the benefit of the
Series 1998-2 Securityholders. The Trustee shall possess all right, title and
interest in all funds on deposit from time to time in the Accumulation Period
Reserve Account and in all proceeds thereof. The Accumulation Period Reserve
Account shall be under the sole dominion and control of the Trustee for the
benefit of the Series 1998-2 Securityholders. If, at any time, the institution
holding the Accumulation Period Reserve Account ceases to be a Qualified
Institution, the Trustee shall within 10 Business Days establish a new
Accumulation Period Reserve Account meeting the conditions specified above with
a Qualified Institution, and shall transfer any cash or any investments to such
new Accumulation Period Reserve Account. From the date such new Accumulation
Period Reserve
50
Account is established, it shall be the "Accumulation Period Reserve Account."
The Trustee, at the written direction of the Servicer, shall (i) make
withdrawals from the Accumulation Period Reserve Account from time to time, in
the amounts and for the purposes set forth in this Series Supplement, and (ii)
on each Transfer Date (from and after the Reserve Account Funding Date) prior to
termination of the Accumulation Period Reserve Account make a deposit into the
Accumulation Period Reserve Account in the amount specified in, and otherwise in
accordance with, subsection 4.9(a)(xi) of the Agreement.
(b) Funds on deposit in the Accumulation Period Reserve
Account shall be invested by the Trustee at the direction of the Servicer in
Cash Equivalents maturing no later than the following Transfer Date. The
interest and other investment income (net of investment expenses and losses)
earned on such investments will be retained in the Accumulation Period Reserve
Account (to the extent the amount on deposit therein is less than the Required
Reserve Account Amount) or deposited in the Collection Account and treated as
Investment Proceeds for application as Available Series 1998-2 Finance Charge
Collections available to be applied pursuant to subsection 4.9(a) on the last
Business Day of the preceding Monthly Period.
(c) On or before each Transfer Date with respect to the
Accumulation Period and on the first Transfer Date with respect to the Early
Amortization Period, the Trustee at the direction of the Servicer shall withdraw
from the Accumulation Period Reserve Account, up to the Available Reserve
Account Amount, an amount equal to the excess of the Covered Amount for the
related Interest Accrual Period over the Principal Funding Account Investment
Proceeds with respect to such Transfer Date, and the amount of such withdrawal
shall be applied as if such amount were Available Series 1998-2 Finance Charge
Collections available to be applied pursuant to subsection 4.9(a) on the last
Business Day of the preceding Monthly Period.
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(d) The Accumulation Period Reserve Account shall be
terminated following the earliest to occur of (a) the termination of the Trust
pursuant to the Agreement, (b) the date on which the Invested Amount is paid in
full, (c) if the Accumulation Period has not commenced, the occurrence of a Pay
Out Event with respect to the Series 1998-2 Securities and (d) if the
Accumulation Period has commenced, the earlier of the first Transfer Date with
respect to the Early Amortization Period and the Expected Final Payment Date.
Upon the termination of the Accumulation Period Reserve Account, all amounts on
deposit therein (after giving effect to any withdrawal from the Accumulation
Period Reserve Account on such date as described above) shall be applied as if
they were Available Series 1998-2 Finance Charge Collections available to be
applied pursuant to subsection 4.9(a) on the last Business Day of the preceding
Monthly Period.
SECTION 4.19. Postponement of Accumulation Period. The
Accumulation Period is scheduled to commence at the close of business on the
last day of the April 2000 Monthly Period; provided, however, that, if the
Accumulation Period Length (determined as described below) is less than 12
months, the date on which the Accumulation Period actually commences may, at the
option of the Servicer, upon written notice to the Trustee, be delayed to the
first Business Day of the month that is the number of months prior to the
Expected Final Payment Date at least equal to the Accumulation Period Length
and, as a result, the number of Monthly Periods in the Accumulation Period will
at least equal the Accumulation Period Length. On each Determination Date until
the Accumulation Period begins, the Servicer will determine the "Accumulation
Period Length" which will equal the number of months such that the sum of the
Accumulation Period Factors for each Monthly Period during such period will be
equal to or greater than the Required Accumulation Factor Number; provided,
however, that the Accumulation Period Length will not be less than one month.
SECTION 4.20. Defeasance. On the date that the following
conditions shall have been satisfied: (i) the Transferor shall have deposited
(x) in the Principal Funding Account, an amount such that the amount on de-
52
posit in the Principal Funding Account following such deposit is equal to the
sum of the Class A Outstanding Principal Amount and the Class B Outstanding
Principal Amount, and (y) in the Accumulation Period Reserve Account, an amount
equal to or greater than the Covered Amount, as estimated by the Transferor, for
the period from the date of such deposit to the Principal Funding Account
through the Expected Final Payment Date; (ii) the Transferor shall have
delivered to the Trustee (a) an Opinion of Counsel to the effect that such
deposit will not result in the Trust being required to register as an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended, (b) an Opinion of Counsel to the effect that following such deposit
none of the Trust, the Accumulation Period Reserve Account or the Principal
Funding Account will be deemed to be an association (or publicly traded
partnership) taxable as a corporation, (c) a certificate of an officer of the
Transferor stating that the Transferor reasonably believes that such deposit
will not cause a Pay Out Event or any event that, with the giving of notice or
the lapse of time, or both, would constitute a Pay Out Event, to occur; and (iv)
a Ratings Event will not occur, the Series 1998-2 Securities will no longer be
entitled to the security interest of the Trust in the Receivables and, except
those set forth in clause (i) above, other Trust assets and the percentages
applicable to the allocation to the Series 1998-2 Securityholders of Principal
Collections, Finance Charge Collections and Defaulted Receivables will be
reduced to zero. Upon the satisfaction of the foregoing conditions, the Class B
Invested Amount will be reduced to zero.
SECTION 7. Article V of the Agreement. Article V of the
Agreement shall read in its entirety as follows and shall be applicable only to
the Series 1998-2 Securities:
53
ARTICLE V
DISTRIBUTIONS AND REPORTS TO INVESTOR
SECURITYHOLDERS
SECTION 5.1. Distributions. (a) On each Distribution Date, the
Paying Agent shall distribute (in accordance with the Settlement Statement
delivered by the Servicer to the Trustee and the Paying Agent pursuant to
subsection 3.4(c)) to each Class A Securityholder of record on the preceding
Record Date (other than as provided in subsection 2.4(e) or in Section 12.3
respecting a final distribution) such Securityholder's pro rata share (based on
the aggregate Undivided Interests represented by each Class A Security held by
such Securityholder) of amounts on deposit in the Distribution Account as are
payable to each Class A Securityholders pursuant to Sections 4.11 and 4.12 of
the Agreement by check mailed to each Class A Securityholder at such
Securityholder's address as it appears on the Security Register or, in the case
of Class A Securityholders holding Class A Securities evidencing not less than
80% of the Class A Invested Amount, by wire transfer, at the expense of such
Class A Securityholder, to the Spread Account or to such other account or
accounts designated by such Class A Securityholder by written notice given to
the Paying Agent not less than five days prior to the related Distribution Date;
provided, however, that the final payment in retirement of the Class A
Securities will be made only upon presentation and surrender of the Class A
Securities at the office or offices specified in the notice of such final
distribution delivered by the Trustee pursuant to Section 12.3.
(b) On each Distribution Date, the Paying Agent shall
distribute (in accordance with the Settlement Statement delivered by the
Servicer to the Trustee and the Paying Agent pursuant to subsection 3.4(c)) to
the Insurer the amounts on deposit in the Distribution Account as are payable to
the Insurer for application in accordance with the Insurance Agreement pursuant
to subsection 4.11(b) of the Agreement by wire transfer to the Spread Account or
to such other account or accounts designated by the Insurer by written notice
given to the
54
Paying Agent not less than five days prior to the related Distribution Date.
(c) On each Distribution Date, the Paying Agent shall
distribute (in accordance with the Settlement Statement delivered by the
Servicer to the Trustee and the Paying Agent pursuant to subsection 3.4(c)) to
each Class B Securityholder of record other than the Transferor on the preceding
Record Date (other than as provided in subsection 2.4(e) or in Section 12.3
respecting a final distribution) such Securityholder's pro rata share (based on
the aggregate Undivided Interests represented by Class B Securities held by such
Securityholder) of amounts on deposit in the Distribution Account as are payable
to the Class B Securityholders pursuant to Sections 4.11 and 4.12 of the
Agreement by wire transfer to each Class B Securityholder to an account or
accounts designated by such Class B Securityholder by written notice given to
the Paying Agent not less than five days prior to the related Distribution Date;
provided, however, that the final payment in retirement of the Class B
Securities will be made only upon presentation and surrender of the Class B
Securities at the office or offices specified in the notice of such final
distribution delivered by the Trustee pursuant to Section 12.3.
SECTION 5.2. Securityholders' Statement. (a) On the twentieth
day of each calendar month (or if such day is not a Business Day the next
succeeding Business Day), the Paying Agent shall forward to each Securityholder
and the Rating Agencies a statement substantially in the form of Exhibit B
prepared by the Servicer and delivered to the Trustee and the Paying Agent on
the preceding Determination Date setting forth the following information (which,
in the case of (i), (ii) and (iii) below, shall be stated on the basis of an
original principal amount of $1,000 per Security and, in the case of (ix) and
(x), shall be stated on an aggregate basis and on the basis of an original
principal amount of $1,000 per Security):
(i) the total amount distributed;
55
(ii) the amount of such distribution allocable to
Class A Principal and Class B Principal;
(iii) the amount of such distribution allocable to
Class A Monthly Interest and Carryover Class A Monthly Interest and any
amounts payable to the Class B Securityholders with respect to
interest;
(iv) the amount of Principal Collections received in
the Collection Account during the preceding Monthly Period and
allocated in respect of the Class A Securities, and the Class B
Securities, respectively;
(v) the amount of Finance Charge Collections
processed during the preceding Monthly Period and allocated in respect
of the Class A Securities and the Class B Securities, respectively, and
the amount of Principal Funding Account Investment Proceeds and
investment earnings on amounts on deposit in the Accumulation Period
Reserve Account;
(vi) the aggregate amount of Principal Receivables,
the Invested Amount, the Class A Invested Amount, the Class B Invested
Amount, the Floating Percentage and, during the Amortization Period,
the Fixed/Floating Percentage, as of the end of the day on the last day
of the related Monthly Period;
(vii) the aggregate outstanding balance of
Receivables which are current, 30- 59, 60-89, and 90 days and over
delinquent as of the end of the day on the last day of the related
Monthly Period;
(viii) the aggregate Series Default Amount for the
preceding Monthly Period;
56
(ix) the aggregate amount of Class A Charge-Offs and
Class B Charge-Offs for the preceding Monthly Period;
(x) the amount of the Servicing Fee for the preceding
Monthly Period;
(xi) the amount of unreimbursed Redirected Principal
Collections for the related Monthly Period;
(xii) the aggregate amount of funds in the Excess
Funding Account as of the last day of the Monthly Period immediately
preceding the Distribution Date;
(xiii) the number of new Accounts the Receivables in
which have been added to the Trust during the related Monthly Period;
(xiv) the Portfolio Yield for the related Monthly
Period;
(xv) the Base Rate for the related Monthly Period;
(xvi) the Principal Funding Account Balance on the
related Transfer Date;
(xvii) the Accumulation Shortfall;
(xviii) the scheduled date for the commencement of
the Accumulation Period and the Accumulation Period Length;
(xix) the amount of Principal Funding Account
Investment Proceeds deposited in the Collection Account on the related
Transfer Date, the Required Reserve Account Amount and the Available
Reserve Account Amount as of the related Transfer Date, and the Covered
Amount for the related Interest Accrual Period;
57
(xx) the Aggregate Interest Rate Caps Notional Amount
and the amount deposited in the Cap Proceeds Account during the related
Monthly Period; and
(xxi) the amount of claims, if any, on the Policy on
such Distribution Date.
(b) Annual Securityholders' Tax Statement. On or before
January 31 of each calendar year, beginning with calendar year 1999, the Paying
Agent shall distribute to each Person who at any time during the preceding
calendar year was a Series 1998-2 Securityholder, a statement prepared by the
Servicer containing the information required to be contained in the regular
report to Series 1998-2 Securityholders, as set forth in subclauses (i), (ii)
and (iii) above, aggregated for such calendar year or the applicable portion
thereof during which such Person was a Series 1998-2 Securityholder, together
with, on or before January 31 of each year, beginning in 1999, such other
customary information (consistent with the treatment of the Series 1998-2
Securities as debt) as the Trustee or the Servicer deems necessary or desirable
to enable the Series 1998-2 Securityholders to prepare their tax returns. Such
obligations of the Trustee shall be deemed to have been satisfied to the extent
that substantially comparable information shall be provided by the Trustee
pursuant to any requirements of the Internal Revenue Code as from time to time
in effect.
SECTION 8. Series 1998-2 Pay Out Events. If any one of the
following events shall occur with respect to the Series 1998-2 Securities:
(a) failure on the part of the Transferor (i) to make any
payment or deposit required to be made by the Transferor by the terms of the
Agreement or this Series Supplement, on or before the date occurring five
Business Days after the date such payment or deposit is required to be made
herein, (ii) to perform in all material respects the Transferor's covenant not
to sell, pledge, assign, or transfer to any person, or grant any unpermitted
lien on, any Receivable; or (iii) duly to observe or perform in any material
respect any covenants
58
or agreements of the Transferor set forth in the Agreement or this Series
Supplement, which failure has a material adverse effect on the Series 1998-2
Securityholders or the Insurer and which continues unremedied for a period of
sixty days after the date on which written notice of such failure, requiring the
same to be remedied, shall have been given to the Transferor by the Trustee or
the Insurer, or to the Transferor, the Insurer and the Trustee by the Holders of
Series 1998-2 Securities evidencing Undivided Interests aggregating not less
than 50 percent of the Invested Amount and continues to affect materially and
adversely the interests of the Series 1998-2 Securityholders for such period;
(b) any representation or warranty made by the Transferor in
the Agreement or this Series Supplement, (i) shall prove to have been incorrect
in any material respect when made, which continues to be incorrect in any
material respect for a period of 60 days after the date on which written notice
of such failure, requiring the same to be remedied, shall have been given to the
Transferor by the Trustee, or to the Transferor and the Trustee by the Insurer
or by the Holders of Series 1998-2 Securities evidencing Undivided Interests
aggregating more than 50% of the Invested Amount of this Series 1998- 2, and
(ii) as a result of which the interests of the Series 1998-2 Securityholders are
materially and adversely affected and continue to be materially and adversely
affected for such period; provided, however, that a Series 1998-2 Pay Out Event
pursuant to this subsection 8(b) shall not be deemed to have occurred hereunder
if the Transferor has accepted reassignment of the related Receivable, or all of
such Receivables, if applicable, during such period (or such longer period as
the Trustee may specify) in accordance with the provisions of the Agreement;
(c) the average of the Portfolio Yields for any three
consecutive Monthly Periods is reduced to a rate which is less than the weighted
average Base Rates for such three consecutive Monthly Periods;
(d) (i) the Transferor Interest shall be less than the Minimum
Transferor Interest, (ii) the Series
59
1998-2 Percentage of the sum of the total amount of Principal Receivables plus
amounts on deposit in the Excess Funding Account shall be less than the sum of
the Class A Outstanding Principal Amount and the Class B Outstanding Principal
Amount, (iii) the total amount of Principal Receivables and the amounts on
deposit in the Excess Funding Account and the Principal Funding Account shall be
less than the Minimum Aggregate Principal Receivables or (iv) the Retained
Percentage shall be equal to or less than 2%, in each case as of any
Determination Date; or
(e) any Servicer Default shall occur which would have a
material adverse effect on the Series 1998-2 Securityholders;
then, in the case of any event described in subparagraph (a), (b) or (e), after
the applicable grace period, if any, set forth in such subparagraphs, the
Holders of Series 1998-2 Securities evidencing Undivided Interests aggregating
more than 50% of the Invested Amount of this Series 1998-2, by notice then given
in writing to the Trustee, the Transferor, any Cap Providers and the Servicer
may declare that a pay out event (a "Series 1998-2 Pay Out Event") has occurred
as of the date of such notice, and in the case of any event described in
subparagraphs (c) or (d), a Series 1998-2 Pay Out Event shall occur without any
notice or other action on the part of the Trustee or the Series 1998-2
Securityholders immediately upon the occurrence of such event.
SECTION 9. Series 1998-2 Termination. The right of the Series
1998-2 Securityholders to receive payments from the Trust will terminate on the
first Business Day following the Series 1998-2 Termination Date unless such
Series is an Affected Series as specified in Section 12.1(c) of the Agreement
and the sale contemplated therein has not occurred by such date, in which event
the Series 1998-2 Securityholders shall remain entitled to receive proceeds of
such sale when such sale occurs.
SECTION 10. Legends; Transfer and Exchange; Restrictions on
Transfer of Series 1998-2 Securities. (a)
60
Each Class A Security that is a Global Security deposited with DTC, or a
custodian on behalf of DTC, shall bear the following legend:
UNLESS THIS SECURITY IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION
("DTC"), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE OR PAYMENT, AND ANY SECURITY ISSUED IS REGISTERED IN THE NAME
OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH
OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC),
ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR
TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE
& CO., HAS AN INTEREST HEREIN.
(a) Each Class B Security will bear legends substantially in
the following form:
THIS SECURITY WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT
FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"). THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAW OF ANY STATE AND
MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED UNLESS
REGISTERED PURSUANT TO OR EXEMPT FROM REGISTRATION UNDER THE SECURITIES
ACT AND ANY OTHER APPLICABLE SECURITIES LAW. TRANSFERS OF THIS SECURITY
SHALL BE SUBJECT TO THE RESTRICTIONS SET FORTH IN THE POOLING AND
SERVICING AGREEMENT.
EACH PURCHASER REPRESENTS AND WARRANTS FOR THE BENEFIT OF
METRIS RECEIVABLES, INC. AND THE TRUSTEE THAT SUCH PURCHASER IS NOT (I)
AN EMPLOYEE BENEFIT PLAN (AS DEFINED IN SECTION 3(3) OF THE EMPLOYEE
RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA")) THAT IS
SUBJECT TO THE PROVISIONS OF
61
TITLE I OF ERISA, (II) A PLAN DESCRIBED IN SECTION 4975(e)(1) OF THE
INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") THAT IS SUBJECT
TO SECTION 4975 OF THE CODE, (III) A GOVERNMENTAL PLAN, AS DEFINED IN
SECTION 3(32) OF ERISA, SUBJECT TO ANY FEDERAL, STATE OR LOCAL LAW
WHICH IS, TO A MATERIAL EXTENT, SIMILAR TO THE PROVISIONS OF SECTION
406 OF ERISA OR SECTION 4975 OF THE CODE, (IV) AN ENTITY WHOSE
UNDERLYING ASSETS INCLUDE PLAN ASSETS (AS DEFINED IN 29 C.F.R. SECTION
2510.3-101 OR OTHERWISE UNDER ERISA) BY REASON OF A PLAN'S INVESTMENT
IN THE ENTITY OR (V) A PERSON INVESTING PLAN ASSETS OF ANY SUCH PLAN
(INCLUDING WITHOUT LIMITATION, FOR PURPOSES OF CLAUSE (IV) AND THIS
CLAUSE (V), AS APPLICABLE, AN INSURANCE COMPANY GENERAL ACCOUNT, BUT
EXCLUDING ANY ENTITY REGISTERED UNDER THE INVESTMENT COMPANY ACT OF
1940, AS AMENDED).
SECTION 11. The Policy.
(a) The Transferor hereby represents that (i) it has obtained
the Policy in the name of the Trustee and solely for the benefit of the Series
1998-2 Securityholders, (ii) that it has entered into the Insurance Agreement
which provides for the issuance of the Policy by the Insurer and (iii) that the
Policy permits the Trustee (or the Servicer on its behalf) to draw on the Policy
from time to time for the purposes set forth in this Supplement. The Insurer
shall not be entitled to reimbursement for any draws, interest or fees with
respect to the Policy from the corpus of the Trust, except as specifically
provided herein.
(b) Pursuant to the Policy, if on any Determination Date the
Servicer notifies the Trustee that on the related Distribution Date (i) the
funds that will be on deposit in the Interest Funding Account available for
distribution are insufficient to pay the Class A Monthly Interest with respect
to such Monthly Period or the Servicing Fee with respect to such Monthly Period
will not otherwise be paid in full or (ii) a Potential Class A Charge-Off shall
occur, then the Trustee shall give notice to the Insurer by telecopy or other
writing by the
62
close of business on the second Business Day prior to the Distribution Date
demanding payment of an amount equal to the deficiency (the "Policy Claim
Amount"). Following receipt by the Insurer of such notice, the Insurer will pay
the Policy Claim Amount before 12:00 noon on the Business Day preceding the
Distribution Date (i) with respect to funds to be applied to the payment of
Class A Monthly Interest, to the Trustee for deposit in the Distribution
Account, (ii) with respect to funds to be applied to the payment of the Monthly
Servicing Fee, to the Servicer and (iii) with respect to funds to be applied
with respect to a Potential Class A Charge-Off, to the Trustee to be treated as
Available Series 1998-2 Principal Collections and deposited in the Distribution
Account.
(c) In the event that the claims paying ability rating of the
Insurer is downgraded and such downgrade would result in a downgrading of the
then current rating of the Class A Securities (a "Replacement Event"), the
Transferor, in accordance with and upon satisfaction of the conditions set forth
in the Policy, including payment in full of all amounts owed to the Insurer, may
but shall not be required to, substitute a new surety bond or surety bonds for
the existing Policy or may arrange for any other form of Enhancement; provided,
however, that in each case the Class A Securities shall be rated no lower than
the rating assigned by each Rating Agency to the Class A Securities prior to
such Replacement Event and the timing and mechanism for drawing on such new
credit enhancement shall be reasonably acceptable to the Trustee. Upon receipt
of the new Enhancement, the Trustee shall surrender the replaced Policy to the
Insurer.
(d) So long as the Insurer has not defaulted on its
obligations under the Policy, the Insurer will be entitled to exercise all
voting rights of the Series 1998-2 Securityholders without the consent of the
Class A Securityholders (including any voting rights with respect to amending
the Agreement or this Supplement or terminating a Servicer) and the Class A
Securityholders may only exercise such voting rights with the prior written
consent of the Insurer. In determining whether the required
63
percentage of Securityholders have given their approval or consent with respect
to an action requiring the consent of a majority of the Securityholders, except
as otherwise specified, the Class A Securityholders will be treated as a single
Series.
SECTION 12. Ratification of Agreement. As supplemented by this
Series Supplement, the Agreement is in all respects ratified and confirmed and
the Agreement as so supplemented by this Series Supplement shall be read, taken,
and construed as one and the same instrument. The Transferor hereby confirms the
conveyance of the Trust Property to the Trustee for the benefit of the Series
1998-2 Securityholders.
SECTION 13. Registration of the Class A Securities under the
Securities Exchange Act of 1934. The Transferor shall cause the Class A
Securities to be registered under the Securities Exchange Act of 1934, as
amended, on or before April 30, 1999 and thereafter maintain such registration
until the Class A Invested Amount has been reduced to zero.
SECTION 14. Counterparts. This Series Supplement may be
executed in any number of counterparts, each of which so executed shall be
deemed to be an original, but all of such counterparts shall together constitute
but one and the same instrument.
SECTION 15. GOVERNING LAW. THIS SERIES SUPPLEMENT SHALL BE
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE WITHOUT REFERENCE
TO ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF
THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
SECTION 16. Instructions in Writing. All instructions or other
communications given by the Servicer or any other person to the Trustee pursuant
to this Series Supplement shall be in writing, and, with respect to the
Servicer, may be included in a Daily Report or Settlement Statement.
64
SECTION 17. Amendment for FASIT Purposes. Each Series 1998-2
Securityholder, by acquiring an interest in a Series 1998-2 Security, is deemed
to consent to any amendment to the Agreement or this Series Supplement necessary
for the Transferor to elect for the Trust or any portion thereof to be treated
as a financial asset securitization investment trust ("FASIT") within the
meaning of Section 860L of the Internal Revenue Code (or any successor provision
thereto), provided, that such election may not be made unless the Transferor
delivers an opinion to the Trustee and the Servicer to the effect that such
election will not adversely affect the Federal or Applicable Tax State income
tax characterization of any outstanding Series of Investor Securities or the
taxability of the Trust under Federal or Applicable Tax State income tax laws.
SECTION 18. Paired Series. Subject to obtaining confirmation
by each Rating Agency of the then existing ratings of each class of Securities
which is then rated, and prior to the commencement of the Early Amortization
Period, the Series 1998-2 Securities may be paired with one or more other Series
(each a "Paired Series"). Each Paired Series either will be pre-funded with an
initial deposit to a pre-funding account in an amount up to the initial
principal balance of such Paired Series and primarily from the proceeds of the
sale of such Paired Series or will have a variable principal amount. Any such
pre-funding account will be held for the benefit of such Paired Series and not
for the benefit of the Securityholders. As principal is paid with respect to the
Series 1998-2 Securities, either (i) in the case of a pre-funded Paired Series,
an equal amount of funds on deposit in any pre-funding account for such
pre-funded Paired Series will be released (which funds will be distributed to
the Transferor) or (ii) in the case of a Paired Series having a variable
principal amount, an interest in such variable Paired Series in an equal or
lesser amount may be sold by the Trust (and the proceeds thereof will be
distributed to the Transferor) and, in either case, the invested amount in the
Trust of such Paired Series will increase by up to a corresponding amount. Upon
payment in full of the Series 1998-2 Securities, assuming that there have been
no unreimbursed
65
charge-offs with respect to any related Paired Series, the aggregate invested
amount of such related Paired Series will have been increased by an amount up to
an aggregate amount equal to the Invested Amount paid to the Securityholders
since the issuance of such Paired Series. The issuance of a Paired Series will
be subject to the conditions described in subsection 6.9(b) of the Agreement.
66
IN WITNESS WHEREOF, the Transferor, the Servicer and the
Trustee have caused this Series 1998-2 Supplement to be duly executed by their
respective officers as of the day and year first above written.
METRIS RECEIVABLES, INC.
Transferor
By:
----------------------------------
Name:
Title:
DIRECT MERCHANTS CREDIT CARD BANK,
NATIONAL ASSOCIATION
Servicer
By:
----------------------------------
Name:
Title:
THE BANK OF NEW YORK (DELAWARE)
Trustee
By:
----------------------------------
Name:
Title:
Exhibit A-1
FORM OF CLASS A INVESTOR SECURITY
UNLESS THIS SECURITY IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION
("DTC"), TO THE TRUSTEE OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE, OR PAYMENT, AND ANY SECURITY ISSUED IS REGISTERED IN THE NAME
OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH
OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC),
ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR
TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE
& CO. HAS AN INTEREST HEREIN.
No. ___ $_________
CUSIP NO. ________
METRIS MASTER TRUST
FLOATING RATE ASSET BACKED
SECURITY, SERIES 1998-2, CLASS A
Evidencing an undivided interest in a trust, the corpus of
which consists of receivables generated from time to time in the ordinary course
of business from a portfolio of revolving consumer credit card accounts
transferred or to be transferred by Metris Receivables, Inc. (the "Transferor")
and other assets and interests constituting the Trust under the Agreement
described below.
(Not an interest in or a recourse obligation of Metris
Receivables, Inc., Direct Merchants Credit Card Bank, National Association or
any affiliate of either of them.)
This certifies that _________ (the "Securityholder") is the
registered owner of a fractional undivided interest in the Metris Master Trust
(the "Trust") issued pursuant to the Amended and Restated
A-1-1
Pooling and Servicing Agreement, dated as of July 30, 1998 (the "Pooling and
Servicing Agreement"; such term to include any amendment thereto) by and between
the Transferor, Direct Merchants Credit Card Bank, National Association, as
Servicer (the "Servicer"), and The Bank of New York (Delaware) as Trustee (the
"Trustee"), and the Series 1998-2 Supplement, dated as of (the Series 1998-2
Supplement"), among the Transferor, the Servicer and the Trustee. The Pooling
and Servicing Agreement, as supplemented by the Series 1998-2 Supplement, is
herein referred to as the "Agreement"). The corpus of the Trust consists of all
of the Transferor's right, title and interest in, to and under the Trust
Property (as defined in the Agreement).
This Security does not purport to summarize the Agreement and
reference is made to that Agreement for information with respect to the
interests, rights, benefits, obligations, proceeds, and duties evidenced hereby
and the rights, duties and obligations of the Trustee. To the extent not defined
herein, the capitalized terms used herein have the meanings ascribed to them in
the Agreement. This Security is one of a series of Securities entitled "Metris
Master Trust Floating Rate Asset Backed Securities, Series 1998-2, Class A" (the
"Class A Securities"), each of which represents a fractional undivided interest
in the Trust, and is issued under and is subject to the terms, provisions and
conditions of the Agreement, to which Agreement, as amended from time to time,
the Securityholder by virtue of the acceptance hereof assents and by which the
Securityholder is bound.
The Transferor has structured the Agreement, the Class A
Securities, the Metris Master Trust Floating Rate Asset Backed Securities,
Series 1998-2, Class B (the "Class B Securities" and collectively with the Class
A Securities, the "Offered Securities") with the intention that the Offered
Securities will qualify under applicable tax law as indebtedness, and both the
Transferor and each holder of a Class A Security (a "Class A Securityholder") or
any interest therein by acceptance of its Securities or any interest therein,
agrees to treat the Class A Securities for purposes of federal, state and local
income or franchise taxes and any other tax imposed on or measured by income, as
indebtedness.
A-1-2
No principal will be payable to the Class A Securityholders
until the earlier of the Expected Final Payment Date and, upon the occurrence of
a Pay Out Event, the Distribution Date following the Monthly Period in which the
Pay Out Event occurs. No principal will be payable to the Class B
Securityholders (other than with respect to Class B Excess Amounts) until all
principal payments have been made to the Class A Securityholders.
Interest on the Class A Securities will be payable on January
20, 1999 and on the 20th day of each month thereafter or, if such day is not a
business day, on the next succeeding business day (each, a "Distribution Date"),
in an amount equal to the product of (i) the Class A Interest Rate, (ii) a
fraction the numerator of which is the actual number of days in the related
Interest Accrual Period and the denominator of which is 360 and (iii) the
outstanding principal balance of the Class A Securities as of the close of
business on the first day of such Interest Accrual Period provided that interest
for the first Distribution Date will be an amount equal to the product of (u)
the Class A Initial Invested Amount, (v) __ divided by 360, and (w) the Class A
Interest Rate determined on _____, 1998.
Interest payments on the Class A Securities on each
Distribution Date will be funded from Available Series 1998-2 Finance Charge
Collections with respect to the preceding Monthly Period (or, with respect to
the first Distribution Date, such collections from and including the Closing
Date to and including December 31, 1998 plus the amount of the initial deposit
to the Interest Funding Account to be made on the Closing Date) and from certain
other funds allocated as set forth in the Pooling and Servicing Agreement to the
respective classes of the Series 1998-2 Securities and deposited on each
business day during such Monthly Period in the Interest Funding Account.
"Class A Invested Amount" shall mean, when used with respect
to any Business Day, the greater of (x) zero and (y) an amount equal to (a) the
Class A Initial Invested Amount, minus (b) the aggregate amount of principal
payments made to Class A Securityholders through and including such Business
Day, minus (c) the aggregate
A-1-3
amount of Class A Charge-Offs for all prior Distribution Dates, plus (d) the sum
of the aggregate amount reimbursed with respect to reductions of the Class A
Invested Amount through and including such Business Day pursuant to subsection
4.9(a)(xi) of the Agreement plus with respect to such subsection, amount applied
thereto pursuant to subsections 4.10(a) and (b), 4.14(a), (b) and (c), 4.17(b),
4.18(b), (c) and (d) and 4.23 (c) of the Agreement, for the purpose of
reimbursing amounts deducted pursuant to the foregoing clause (c) plus (e) the
Policy Claim Amount paid by the Insurer to the Trustee with respect to any
Potential Class A Charge-Off pursuant to subsection 11(b) of the Series
Supplement; provided, however that the Class A Invested Amount may not be
reduced below zero.
Subject to the Agreement, payments of principal are limited to
the unpaid Class A Invested Amount of the Class A Securities, which may be less
than the unpaid balance of the Class A Securities pursuant to the terms of the
Agreement. All principal on the Class A Securities is due and payable no later
than the October 2004 Distribution Date (or if such day is not a Business Day,
the next succeeding Business Day) (the "Scheduled Series 1998-2 Termination
Date"). After the earlier to occur of (i) the Scheduled Series 1998-2
Termination Date and (ii) the day after the Distribution Date on which the
Series 1998-2 Securities are paid in full (the "Series 1998-2 Termination Date")
neither the Trust nor the Transferor will have any further obligation to
distribute principal or interest on the Class A Securities. In the event that
the Class A Invested Amount is greater than zero on the Series 1998-2
Termination Date, the Trustee will sell or cause to be sold, to the extent
necessary, an amount of interests in the Receivables or certain of the
Receivables up to 110% of the Class A Invested Amount and the Class B Invested
Amount at the close of business on such date (but not more than the total amount
of Receivables allocable to the Investor Securities), and shall pay the proceeds
to the Class A Securityholders pro rata in final payment of the Class A
Securities, then to the Class B Securityholders pro rata in final payment of the
Class B Securities.
A-1-4
Unless the certificate of authentication hereon has been
executed by or on behalf of the Trustee, by manual signature, this Security
shall not be entitled to any benefit under the Agreement, or be valid for any
purpose.
A-1-5
IN WITNESS WHEREOF, the Transferor has caused this Security to
be duly executed.
METRIS RECEIVABLES, INC.
By:
----------------------------------
Name:
Title:
Dated:
CERTIFICATE OF AUTHENTICATION
This is one of the Class A Securities referred to in the
within-mentioned Pooling and Servicing Agreement.
THE BANK OF NEW YORK
By:
----------------------------------
Name:
Title:
A-1-6
Exhibit A-2
FORM OF CLASS B INVESTOR SECURITY
THIS SECURITY WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT
FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"). THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OR ANY
APPLICABLE STATE SECURITIES LAW OF ANY STATE AND MAY NOT BE OFFERED, SOLD,
PLEDGED OR OTHERWISE TRANSFERRED UNLESS REGISTERED PURSUANT TO OR EXEMPT FROM
REGISTRATION UNDER THE SECURITIES ACT AND ANY OTHER APPLICABLE SECURITIES LAW.
TRANSFERS OF THIS SECURITY SHALL BE SUBJECT TO THE RESTRICTIONS SET FORTH IN THE
POOLING AND SERVICING AGREEMENT.
EACH PURCHASER REPRESENTS AND WARRANTS FOR THE BENEFIT OF
METRIS RECEIVABLES, INC. AND THE TRUSTEE THAT SUCH PURCHASER IS NOT (I) AN
EMPLOYEE BENEFIT PLAN (AS DEFINED IN SECTION 3(3) OF THE EMPLOYEE RETIREMENT
INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA")) THAT IS SUBJECT TO THE
PROVISIONS OF TITLE I OF ERISA, (II) A PLAN DESCRIBED IN SECTION 4975(e)(1) OF
THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") THAT IS SUBJECT TO
SECTION 4975 OF THE CODE, (III) A GOVERNMENTAL PLAN, AS DEFINED IN SECTION 3(32)
OF ERISA, SUBJECT TO ANY FEDERAL, STATE OR LOCAL LAW WHICH IS, TO A MATERIAL
EXTENT, SIMILAR TO THE PROVISIONS OF SECTION 406 OF ERISA OR SECTION 4975 OF THE
CODE, (IV) AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE PLAN ASSETS (AS DEFINED IN
29 C.F.R. SECTION 2510.3-101 OR OTHERWISE UNDER ERISA) BY REASON OF A PLAN'S
INVESTMENT IN THE ENTITY OR (V) A PERSON INVESTING PLAN ASSETS OF ANY SUCH PLAN
(INCLUDING WITHOUT LIMITATION, FOR PURPOSES OF CLAUSE (IV) AND THIS CLAUSE (V),
AS APPLICABLE, AN INSURANCE COMPANY GENERAL ACCOUNT, BUT EXCLUDING ANY ENTITY
REGISTERED UNDER THE INVESTMENT COMPANY ACT OF 1940, AS AMENDED).
A-2-1
No. ___ $_________
METRIS MASTER TRUST
ASSET BACKED
SECURITY, SERIES 1998-2, CLASS B
Evidencing an undivided interest in a trust, the corpus of
which consists of receivables generated from time to time in the ordinary course
of business from a portfolio of revolving consumer credit card accounts
transferred or to be transferred by Metris Receivables, Inc. (the "Transferor")
and other assets and interests constituting the Trust under the Agreement
described below.
(Not an interest in or a recourse obligation of Metris
Receivables, Inc., Direct Merchants Credit Card Bank, National Association or
any affiliate of either of them.)
This certifies that ______________ (the "Securityholder") is
the registered owner of a fractional undivided interest in the Metris Master
Trust (the "Trust") issued pursuant to the Amended and Restated Pooling and
Servicing Agreement, dated as of July 30, 1998 (the "Pooling and Servicing
Agreement"; such term to include any amendment or Supplement thereto) by and
between the Transferor, Direct Merchants Credit Card Bank, National Association,
as Servicer (the "Servicer"), and The Bank of New York (Delaware), as Trustee
(the "Trustee"), and the Series 1998-2 Supplement, dated as of (the
"Series 1998-2 Supplement"), among the Transferor, the Servicer and the
Trustee. The Pooling and Servicing Agreement, as supplemented by the Series
1998-2 Supplement, is herein referred to as the "Agreement." The corpus of
the Trust consists of all of the Transferor's right, title and interest in,
to and under the Trust Property (as defined in the Agreement).
This Security does not purport to summarize the Agreement and
reference is made to that Agreement for information with respect to the
interests, rights, benefits, obligations, proceeds, and duties evidenced hereby
and the rights, duties and obligations of the Trustee. To the extent not defined
herein, the capitalized terms used herein have the meanings ascribed to them in
the Agreement. This Securities is one of a series of Securities
A-2-2
entitled "Metris Master Trust Asset Backed Securities, Series 1998-2, Class B"
(the "Class B Securities"), each of which represents a fractional undivided
interest in the Trust, and is issued under and is subject to the terms,
provisions and conditions of the Agreement, to which Agreement, as amended from
time to time, the Securityholder by virtue of the acceptance hereof assents and
by which the Securityholder is bound.
Metris Receivables, Inc. shall be prohibited from transferring
any interest in or portion of the Class B Securities.
No principal will be payable to the Class B Securityholders
(other than with respect to Class B Excess Amounts) until the earlier of the
Expected Final Payment Date and, upon the occurrence of a Pay Out Event, the
Distribution Date following the Monthly Period in which the Pay Out Event occurs
but in no event earlier than the Distribution Date either on or following the
Distribution Date on which Class A Invested Amount has been paid in full. No
principal will be payable to the Class B Securityholders until all principal
payments have first been made to the Class A Securityholders.
"Class B Invested Amount" shall mean, when used with respect
to any Business Day, the greater of (x) zero and (y) an amount equal to (a) the
initial principal balance of the Class B Securities, minus (b) the aggregate
amount of principal payments made to Class B Securityholders through and
including such Business Day, minus (c) the aggregate amounts by which the
Transferor has reduced the Class B Invested Amount pursuant to subsection
4.12(d) of the Agreement, minus (d) the aggregate amount of Class B Charge-Offs
for all prior Distribution Dates, minus (e) the aggregate amount of Redirected
Principal Collections for all prior Business Days.
Subject to the Agreement, payments of principal are limited to
the unpaid Class B Invested Amount of the Class B Securities, which may be less
than the unpaid balance of the Class B Securities pursuant to the terms of the
Agreement. All principal on the Class B Securities is due and payable no later
than the October 2004 Distribution Date (or if such day is not a Business Day,
the next succeeding Business Day) (the "Scheduled Series 1998-2 Termination
Date"). After the earlier to occur of (i) the Scheduled Series 1998-2
Termination Date or (ii)
A-2-3
the day after the Distribution Date on which the Series 1998-2 Securities are
paid in full (the "Series 1998-2 Termination Date") neither the Trust nor the
Transferor will have any further obligation to distribute principal or interest
on the Class B Securities. In the event that the Class B Invested Amount is
greater than zero on the Series Termination Date, the Trustee will sell or cause
to be sold, to the extent necessary, an amount of interests in the Receivables
or certain of the Receivables up to 110% of the Class A Invested Amount and the
Class B Invested Amount at the close of business on such date (but not more than
the total amount of Receivables allocable to the Investor Securities), and shall
pay the proceeds to the Class A Securityholders pro rata in final payment of the
Class A Securities and then to the Class B Securityholders pro rata in final
payment of the Class B Securities.
Unless the certificate of authentication hereon has been
executed by or on behalf of the Trustee, by manual signature, this Security
shall not be entitled to any benefit under the Agreement, or be valid for any
purpose.
A-2-4
IN WITNESS WHEREOF, the Transferor has caused this Security to
be duly executed.
METRIS RECEIVABLES, INC.
By:
----------------------------------
Name:
Title:
Dated:
CERTIFICATE OF AUTHENTICATION
This is one of the Class B Securities referred to in the
within-mentioned Pooling and Servicing Agreement.
THE BANK OF NEW YORK
By:
----------------------------------
Name:
Title:
A-2-5
EXHIBIT B
[Form of Monthly Securityholders' Statement]
B-1
