Exhibit 4.1
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SERIES 1998-1 SUPPLEMENT
Dated as of April 1, 1998
to
POOLING AND SERVICING AGREEMENT
Dated as of September 30, 1993
$591,016,549
CAPITAL ONE MASTER TRUST
SERIES 1998-1
among
CAPITAL ONE BANK
Seller and Servicer
and
THE BANK OF NEW YORK
Trustee
on behalf of the Series 1998-1 Certificateholders
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TABLE OF CONTENTS
ARTICLE I
Creation of the Series 1998-1 Certificates
Section 1.01. Designation........................................................................................ 1
ARTICLE II
Definitions
Section 2.01. Definitions........................................................................................ 2
Section 2.02. Amendment to Section 2.08 of the Agreement......................................................... 18
ARTICLE III
Servicer and Trustee
Section 3.01. Servicing Compensation............................................................................. 19
ARTICLE IV
Rights of Series 1998-1 Certificateholders and
Class C Interest Holders and
Allocation and Application of Collections
Section 4.01. Collections and Allocations........................................................................ 20
Section 4.02. Determination of Monthly Interest.................................................................. 20
Section 4.03. Determination of Monthly Principal; Series 1998-1 Accounts; Class A Accumulation Period............ 22
Section 4.04. Required Amount.................................................................................... 24
Section 4.05. Application of Class A Available Funds, Class B Available Funds, Class C Available Funds,
Available Investor Principal Collections and Class C Principal Collections......................... 25
Section 4.06. Defaulted Amounts; Investor Charge-Offs............................................................ 28
Section 4.07. Excess Spread; Excess Finance Charges.............................................................. 29
Section 4.08. Reallocated Principal Collections.................................................................. 31
Section 4.09. Excess Finance Charges............................................................................. 32
Section 4.10. Shared Principal Collections....................................................................... 33
Section 4.11. Reserve Account.................................................................................... 33
Section 4.12. Cash Collateral Account............................................................................ 35
ARTICLE V
Distributions and Reports to
Series 1998-1 Certificateholders
Section 5.01. Distributions..................................................................................... 37
Section 5.02. Reports and Statements to Series 1998-1 Certificateholders........................................ 38
ARTICLE VI
Additional Pay Out Events
Section 6.01. Additional Pay Out Events
ARTICLE VII
Optional Repurchase; Series Termination
Section 7.01. Optional Repurchase............................................................................... 40
Section 7.02. Series Termination................................................................................ 41
ARTICLE VIII
Final Distributions
Section 8.01. Sale of Receivables or Certificateholders' Interest pursuant to Section 2.06
or 9.01 of the Agreement.......................................................................... 41
Section 8.02. Distribution of Proceeds of Sale, Disposition or Liquidation of
the Receivables pursuant to Section 9.02 of the Agreement......................................... 43
ARTICLE IX
New Issuances; Addition of Accounts; Additional Issuances
Section 9.01. New Issuances...................................................................................... 45
Section 9.02. Addition of Accounts............................................................................... 45
Section 9.03. Additional Issuances of Series 1998-1 Certificates................................................. 45
ARTICLE X
Miscellaneous Provisions
Section 10.01. Ratification of Agreement......................................................................... 47
Section 10.02. Counterparts...................................................................................... 47
Section 10.03. Governing Law..................................................................................... 47
Section 10.04. Determination of Material Adverse Effect.......................................................... 48
Section 10.05. Book-Entry Certificates........................................................................... 48
Section 10.06. Uncertificated Securities......................................................................... 48
Section 10.07. Seller's Direction to the Trustee................................................................. 48
EXHIBITS
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EXHIBIT A-1 Form of Class A Certificate
EXHIBIT A-2 Form of Class B Certificate
EXHIBIT B Form of Notification to the Trustee
EXHIBIT C Form of Monthly Certificateholders' Statement
EXHIBIT D Form of Monthly Servicing Officer's Certificate
SERIES 1998-1 SUPPLEMENT, dated as of April 1, 1998 (the
"Supplement"), between CAPITAL ONE BANK, a Virginia banking
corporation, as Seller and Servicer, and THE BANK OF NEW YORK, a
New York banking corporation, as Trustee.
Pursuant to the Pooling and Servicing Agreement dated as of September
30, 1993 (as amended and supplemented, the "Agreement"), among the Seller, the
Servicer and the Trustee, the Seller has created Capital One Master Trust (the
"Trust"). Section 6.03 of the Agreement provides that the Seller may from time
to time direct the Trustee to authenticate one or more new Series of Investor
Certificates representing fractional undivided interests in the Trust. The
Principal Terms of any new Series are to be set forth in a Supplement to the
Agreement.
Pursuant to this Supplement, the Seller and the Trustee shall create a
new Series of Investor Certificates and specify the Principal Terms thereof. In
addition, certain terms of the Class C Interests and certain related matters
shall be specified in the Class C Supplemental Agreement, which is a supplement
to this Supplement.
ARTICLE I
Creation of the Series 1998-1 Certificates
------------------------------------------
Section 1.01. Designation.
-----------
(a) There is hereby created a Series of Investor Certificates to be
issued pursuant to the Agreement and this Supplement to be known as "Capital One
Master Trust, Series 1998-1". The Series 1998-1 Certificates shall be issued in
two Classes, the first of which shall be known as the "Class A 6.310% Asset
Backed Certificates, Series 1998-1" and the second of which shall be known as
the "Class B 6.356% Asset Backed Certificates, Series 1998-1". In addition,
there is hereby created a third Class of uncertificated interests in the Trust
which, except as expressly provided herein, shall be deemed to be "Investor
Certificates" for all purposes under the Agreement and this Series Supplement
and which shall be known as the "Floating Rate Class C Asset Backed Interests,
Series 1998-1".
(b) Series 1998-1 shall be included in Group One and shall be a
Principal Sharing Series and a Subordinated Excess Principal Series. Series
1998-1 shall not be subordinated to any other Series. Notwithstanding any
provision in the Agreement or in this Supplement to the contrary, the first
Distribution Date with respect to Series 1998-1 shall be the May 1998
Distribution Date.
(c) In the event that any term or provision contained herein shall
conflict with or be inconsistent with any term or provision contained in the
Agreement, the terms and provisions of this Supplement shall govern.
(d) The Class C Interest Holders, as holders of an "Investor
Certificate" shall be entitled to the benefits of the Agreement and this
Supplement (including the Class C Supplemental Agreement). Notwithstanding the
foregoing, except as expressly provided herein, the provisions of Article VI and
Article XII of the Agreement relating to the registration, authentication,
delivery, presentation, cancellation and surrender of Registered Certificates
and clauses (a) and (c) of the definition of "Tax Opinion" in Section 1.01 of
the Agreement shall not be applicable to the Class C Interests. The Class C
Interests shall be deemed to arise upon the payment of the amounts due on the
Closing Date pursuant to the Class C Purchase Agreement.
ARTICLE II
Definitions
-----------
Section 2.01. Definitions.
-----------
(a) Whenever used in this Supplement, the following words and phrases
shall have the following meanings, and the definitions of such terms are
applicable to the singular as well as the plural forms of such terms and the
masculine as well as the feminine and neuter genders of such terms.
"Accumulation Period" shall mean the Class A Accumulation Period.
-------------------
"Additional Class A Certificates" shall have the meaning specified in
-------------------------------
Section 9.03(a).
"Additional Class B Certificates" shall have the meaning specified in
-------------------------------
Section 9.03(a).
"Additional Interest" shall mean, at any time of determination, the
-------------------
Class A Additional Interest, the Class B Additional Interest and the Class C
Additional Interest.
"Additional Investor Certificates" shall mean any one of the
--------------------------------
Additional Class A Certificates or the Additional Class B Certificates.
"Additional Issuance" shall have the meaning specified in Section
-------------------
9.03(a).
"Additional Issuance Date" shall have the meaning specified in Section
------------------------
9.03(a).
"Adjusted Invested Amount" shall mean, with respect to any date of
------------------------
determination, an amount equal to the Invested Amount less the Principal Funding
Account Balance on such date of determination.
"Available Cash Collateral Amount" shall mean, with respect to any
--------------------------------
Distribution Date, the lesser of (a) the amount on deposit in the Cash
Collateral Account on such date (before
2
giving effect to any deposit to, or withdrawal from, the Cash Collateral Account
to be made with respect to such date) and (b) the Required Cash Collateral
Amount as of such date.
"Available Expected Principal" for any date of determination with
----------------------------
respect to each Monthly Period shall be equal to the excess of (a) the Expected
Monthly Principal for such Monthly Period over (b) the sum of, without
duplication, all scheduled amortizations or accumulations of principal,
including past due shortfalls as of such date of determination, for all Non-
Variable Accumulation Series which are not scheduled to be in their revolving
periods as of such Monthly Period.
"Available Investor Principal Collections" shall mean, with respect to
----------------------------------------
any Monthly Period, an amount equal to the sum of (a) (i) an amount equal to the
Principal Allocation Percentage of all Collections of Principal Receivables
received during such Monthly Period, minus (ii) the amount of Reallocated
-----
Principal Collections with respect to such Monthly Period which pursuant to
Section 4.08(a) or (b) are required to fund any deficiency in the amount to be
distributed pursuant to Sections 4.05(a)(i), (ii) and (iii), 4.05(b)(i) and (ii)
and 4.07(c)(II) for the related Distribution Date, plus (b) the amount of
----
Miscellaneous Payments, if any, for such Monthly Period that are allocated to
Series 1998-1 pursuant to Section 4.03 of the Agreement, plus (c) any Shared
----
Principal Collections with respect to other Series that are allocated to Series
1998-1 in accordance with Section 4.04 of the Agreement and Section 4.10 hereof,
plus (d) the amount of funds to be distributed pursuant to Section 4.05(a)(iii)
----
with respect to the related Distribution Date, plus (e) any other amounts which
----
pursuant to Section 4.07 hereof are to be treated as Available Investor
Principal Collections with respect to the related Distribution Date plus (f) the
----
proceeds of any withdrawal from the Class C Spread Account in respect of the
Class C Investor Default Amount (which proceeds will only be used to make
principal payments on the Class C Interests).
"Available Reserve Account Amount" shall mean, with respect to any
--------------------------------
Distribution Date, the lesser of (a) the amount on deposit in the Reserve
Account on such date (before giving effect to any deposit to be made to the
Reserve Account on such Distribution Date) and (b) the Required Reserve Account
Amount for such Distribution Date.
"Base Rate" shall mean, with respect to any Monthly Period, the
---------
annualized percentage equivalent of a fraction, the numerator of which is equal
to the sum of the Class A Monthly Interest, the Class B Monthly Interest, the
Class C Monthly Interest and the Monthly Servicing Fee with respect to the
related Distribution Date and the denominator of which is the Invested Amount as
of the last day of the preceding Monthly Period.
"Book-Entry Register" shall mean the register maintained pursuant to
---------------------
the Class C Supplemental Agreement providing for the registration of the Class C
Interests and transfers thereof.
"Cash Collateral Account" shall have the meaning specified in Section
-----------------------
4.12(a).
"Cash Collateral Account Investments" shall mean Eligible Investments.
-----------------------------------
3
"Cash Collateral Surplus" shall mean, as of any date of determination,
-----------------------
the amount, if any, by which the amount on deposit in the Cash Collateral
Account on such date (before giving effect to any deposit to, or withdrawal
from, the Cash Collateral Account on such date) exceeds the Required Cash
Collateral Amount. Any Cash Collateral Surplus shall be applied in accordance
with the Class C Supplemental Agreement.
"Class A Accumulation Period" shall mean, unless a Pay Out Event shall
---------------------------
have occurred prior thereto, the period commencing at the close of business on
the last day of the July 2006 Monthly Period or such later date as is determined
in accordance with Section 4.03(f) and ending on the first to occur of (a) the
commencement of the Early Amortization Period, (b) the payment in full to Class
A Certificateholders of the Class A Invested Amount or (c) the Termination Date.
"Class A Accumulation Period Amount" shall mean for each Monthly
----------------------------------
Period, an amount equal to the product of (i) Available Expected Principal for
such Monthly Period and (ii) a fraction, the numerator of which is the Class A
Initial Invested Amount and the denominator of which is the sum of (a) the Class
A Initial Invested Amount and (b) the invested amounts of all other Variable
Accumulation Series which are not scheduled to be in their revolving periods as
of such Monthly Period; provided that, for purposes of this definition, the
--------
commencement date of the accumulation period of each such Variable Accumulation
Series shall be deemed to have been postponed to the latest permissible date,
determined as if the provisions of Section 4.03(f) applied to each such Series
with such changes as may be specified with respect to such Series (applying such
provisions first to the Variable Accumulation Series with the latest expected
final payment date and next to each Series with the next preceding expected
final payment date).
"Class A Accumulation Period Length" shall have the meaning specified
----------------------------------
in Section 4.03(f).
"Class A Additional Interest" shall have the meaning specified in
---------------------------
Section 4.02(a).
"Class A Adjusted Invested Amount" shall mean, with respect to any
--------------------------------
date of determination, an amount equal to the Class A Invested Amount less the
Principal Funding Account Balance on such date.
"Class A Available Funds" shall mean, with respect to any Monthly
-----------------------
Period, an amount equal to the sum of (a) the amount of Principal Funding
Investment Proceeds, if any, with respect to such Distribution Date, (b) the
Class A Floating Percentage of the Collections of Finance Charge Receivables
(other than Finance Charge Receivables allocated to Servicer Interchange with
respect to such Monthly Period) allocated to the Series 1998-1 Certificates
(including any investment earnings that are to be treated as Collections of
Finance Charge Receivables in accordance with the Agreement and this Supplement)
and (c) the amount of funds, if any, to be withdrawn from the Reserve Account
which, pursuant to Section 4.11(d), are required to be included in Class A
Available Funds with respect to such Distribution Date.
"Class A Certificate Rate" shall mean 6.310% per annum, calculated on
------------------------
the basis of a 360-day year consisting of twelve 30-day months.
4
"Class A Certificateholder" shall mean the Person in whose name a
-------------------------
Class A Certificate is registered in the Certificate Register.
"Class A Certificates" shall mean any of Certificates executed by the
--------------------
Bank and authenticated by or on behalf of the Trustee, substantially in the form
of Exhibit A-1. For the avoidance of doubt, when used in this Supplement the
term "Class A Certificates" shall include any Additional Class A Certificates.
"Class A Expected Final Payment Date" shall mean the April 2008
-----------------------------------
Distribution Date.
"Class A Floating Percentage" shall mean, with respect to any Monthly
---------------------------
Period, the percentage equivalent (which percentage shall never exceed 100%) of
a fraction, the numerator of which is equal to the Class A Adjusted Invested
Amount as of the close of business on the last day of the preceding Monthly
Period and the denominator of which is equal to the Adjusted Invested Amount as
of such day; provided, however, that, with respect to the first Monthly Period,
-------- -------
the Class A Floating Percentage shall mean the Class A Initial Percentage.
"Class A Initial Invested Amount" shall mean the aggregate initial
-------------------------------
principal amount of the Class A Certificates, which is $500,000,000, and the
aggregate initial principal amount of any Additional Class A Certificates.
"Class A Initial Percentage" shall mean the percentage equivalent of a
--------------------------
fraction, the numerator of which is the Class A Initial Invested Amount and the
denominator of which is the Initial Invested Amount.
"Class A Interest Shortfall" shall have the meaning specified in
--------------------------
Section 4.02(a).
"Class A Invested Amount" shall mean, on any date of determination, an
-----------------------
amount equal to (a) the Class A Initial Invested Amount, minus (b) the aggregate
-----
amount of principal payments made to the Class A Certificateholders on or prior
to such date, minus (c) the excess, if any, of the aggregate amount of Class A
-----
Investor Charge-Offs for all prior Distribution Dates over the aggregate amount
----
of Class A Investor Charge-Offs reimbursed pursuant to Section 4.06(a) prior to
such date.
"Class A Investor Charge-Offs" shall have the meaning specified in
----------------------------
Section 4.06(a).
"Class A Investor Default Amount" shall mean, with respect to each
-------------------------------
Distribution Date, an amount equal to the product of (i) the Investor Default
Amount for the related Monthly Period and (ii) the Class A Floating Percentage
for such Monthly Period.
"Class A Monthly Interest" shall have the meaning specified in Section
------------------------
4.02(a).
"Class A Monthly Principal" shall have the meaning specified in
-------------------------
Section 4.03(a).
5
"Class A Outstanding Additional Interest" shall mean, with respect to
---------------------------------------
any Distribution Date, the amount of Class A Additional Interest previously due
but not paid to the Class A Certificateholders.
"Class A Outstanding Monthly Interest" shall mean, with respect to any
------------------------------------
Distribution Date, the amount of Class A Monthly Interest previously due but not
paid to the Class A Certificateholders.
"Class A Penalty Rate" shall mean the sum of the Class A Certificate
--------------------
Rate and 2.00% per annum.
"Class A Principal Percentage" shall mean, with respect to any Monthly
----------------------------
Period (i) during the Revolving Period, the percentage equivalent (which
percentage shall never exceed 100%) of a fraction, the numerator of which is the
Class A Invested Amount as of the last day of the immediately preceding Monthly
Period (or, in the case of the first Monthly Period, the Closing Date) and the
denominator of which is the Invested Amount as of such day and (ii) during the
Class A Accumulation Period, Class B Amortization Period, Class C Amortization
Period or the Early Amortization Period, the percentage equivalent (which
percentage shall never exceed 100%) of a fraction, the numerator of which is the
Class A Invested Amount as of the last day of the Revolving Period, and the
denominator of which is the Invested Amount as of such last day; provided,
--------
however, that, with respect to the first Monthly Period, the Class A Principal
-------
Percentage shall mean the Class A Initial Percentage.
"Class A Required Amount" shall have the meaning specified in Section
-----------------------
4.04(a).
"Class A Servicing Fee" shall have the meaning specified in Section
---------------------
3.01.
"Class B Additional Interest" shall have the meaning specified in
---------------------------
Section 4.02(b).
"Class B Amortization Period" shall mean the period commencing on the
---------------------------
Class B Principal Commencement Date and ending on the first to occur thereafter
of (a) the commencement of the Early Amortization Period, (b) the payment in
full to the Class B Certificateholders of the Class B Invested Amount or (c) the
Termination Date.
"Class B Available Funds" shall mean, with respect to any Monthly
-----------------------
Period, an amount equal to the Class B Floating Percentage of the Collections of
Finance Charge Receivables (other than Finance Charge Receivables allocated to
Servicer Interchange with respect to such Monthly Period) allocated to the
Series 1998-1 Certificates (including any investment earnings that are to be
treated as Collections of Finance Receivables in accordance with the Agreement).
"Class B Certificate Rate" shall mean 6.356% per annum, calculated on
------------------------
the basis of a 360-day year of twelve 30-day months.
6
"Class B Certificateholder" shall mean the Person in whose name a
-------------------------
Class B Certificate is registered in the Certificate Register.
"Class B Certificates" shall mean any one of the Certificates executed
--------------------
by the Bank and authenticated by or on behalf of the Trustee, substantially in
the form of Exhibit A-2. For the avoidance of doubt, the term "Class B
Certificates" when used in this Supplement shall include any Additional Class B
Certificates.
"Class B Expected Final Payment Date" shall mean the June 2008
-----------------------------------
Distribution Date.
"Class B Floating Percentage" shall mean, with respect to any Monthly
---------------------------
Period, the percentage equivalent (which percentage shall never exceed 100%) of
a fraction, the numerator of which is equal to the Class B Invested Amount as of
the close of business on the last day of the preceding Monthly Period and the
denominator of which is equal to the Adjusted Invested Amount as of the close of
business on such day; provided, however, that, with respect to the first Monthly
Period, the Class B Floating Percentage shall mean the Class B Initial
Percentage.
"Class B Initial Invested Amount" shall mean the aggregate initial
-------------------------------
principal amount of the Class B Certificates, which is $50,236,407, and the
aggregate initial principal amount of any Additional Class B Certificates.
"Class B Initial Percentage" shall mean the percentage equivalent of a
--------------------------
fraction, the numerator of which is the Class B Initial Invested Amount and the
denominator of which is the Initial Invested Amount.
"Class B Interest Shortfall" shall have the meaning specified in
---------------------------
Section 4.02(b).
"Class B Invested Amount" shall mean, on any date of determination, an
------------------------
amount equal to (a) the Class B Initial Invested Amount, minus (b) the aggregate
-----
amount of principal payments made to the Class B Certificateholders prior to
such date, minus (c) the excess, if any, of the aggregate amount of Class B
-----
Investor Charge-Offs for all prior Distribution Dates over the aggregate amount
of any reimbursement of Class B Investor Charge-Offs for all Distribution Dates
preceding such date, minus (d) the aggregate amount of Reallocated Principal
-----
Collections allocated on all prior Distribution Dates pursuant to Section
4.08(a) (excluding any Reallocated Principal Collections that have resulted in a
reduction in the Class C Invested Amount pursuant to Section 4.06(c)), minus (e)
-----
an amount equal to the amount by which the Class B Invested Amount has been
reduced on all prior Distribution Dates pursuant to Section 4.06(a), plus (f)
----
the amount of Excess Spread and Excess Finance Charges allocated and available
on all prior Distribution Dates pursuant to Section 4.07(d) for the purpose of
reimbursing amounts deducted pursuant to the foregoing clauses (c), (d) and (e).
"Class B Investor Charge-Offs" shall have the meaning specified in
-----------------------------
Section 4.06(b).
7
"Class B Investor Default Amount" shall mean, with respect to each
-------------------------------
Distribution Date, an amount equal to the product of (i) the Investor Default
Amount for the related Monthly Period and (ii) the Class B Floating Percentage
for such Monthly Period.
"Class B Monthly Interest" shall have the meaning specified in Section
------------------------
4.02(b).
"Class B Monthly Principal" shall have the meaning specified in
-------------------------
Section 4.03(b).
"Class B Outstanding Additional Interest" shall mean, with respect to
---------------------------------------
any Distribution Date, the amount of Class B Additional Interest previously due
but not paid to the Class B Certificateholders.
"Class B Outstanding Monthly Interest" shall mean, with respect to any
------------------------------------
Distribution Date, the amount of Class B Monthly Interest previously due but not
paid to the Class B Certificateholders.
"Class B Penalty Rate" shall mean the sum of the Class B Certificate
--------------------
Rate and 2.00% per annum.
"Class B Principal Commencement Date" shall mean the Distribution Date
-----------------------------------
on which the Class A Invested Amount is paid in full.
"Class B Principal Percentage" shall mean, with respect to any Monthly
----------------------------
Period (i) during the Revolving Period, the percentage equivalent (which
percentage shall never exceed 100%) of a fraction, the numerator of which is the
Class B Invested Amount as of the last day of the immediately preceding Monthly
Period (or, in the case of the first Monthly Period, the Closing Date) and the
denominator of which is the Invested Amount as of such day and (ii) during the
Class A Accumulation Period, the Class B Amortization Period, the Class C
Amortization Period or the Early Amortization Period, the percentage equivalent
(which percentage shall never exceed 100%) of a fraction, the numerator of which
is the Class B Invested Amount as of the last day of the Revolving Period, and
the denominator of which is the Invested Amount as of such last day; provided,
however, that, with respect to the first Monthly Period, the Class B Principal
Percentage shall mean the Class B Initial Percentage.
"Class B Required Amount" shall have the meaning specified in Section
-----------------------
4.04(b).
"Class B Servicing Fee" shall have the meaning specified in Section
---------------------
3.01.
"Class C Additional Interest" shall have the meaning specified in
---------------------------
Section 4.02(c).
"Class C Amortization Period" shall mean the period beginning on the
---------------------------
Class C Principal Commencement Date and ending on the first to occur thereafter
of (a) the commencement of the Early Amortization Period, (b) the payment in
full to the Class C Interest Holders of the Class C Invested Amount or (c) the
Termination Date.
8
"Class C Available Funds" shall mean, with respect to any Monthly
-----------------------
Period, an amount equal to the Class C Floating Percentage of the Collections of
Finance Charge Receivables (other than Finance Charge Receivables allocated to
Servicer Interchange with respect to such Monthly Period) allocated to the
Series 1998-1 Certificates (including any investment earnings that are to be
treated as Collections of Finance Charge Receivables in accordance with the
Agreement).
"Class C Floating Percentage" shall mean, with respect to any Monthly
---------------------------
Period, the percentage equivalent (which percentage shall never exceed 100%) of
a fraction, the numerator of which is the Class C Invested Amount as of the
close of business on the last day of the preceding Monthly Period and the
denominator of which is equal to the Adjusted Invested Amount as of such day;
provided, however, that with respect to the first Monthly Period, the Class C
-------- -------
Floating Percentage shall mean the percentage equivalent of a fraction, the
numerator of which is the Class C Initial Invested Amount and the denominator of
which is the Initial Invested Amount.
"Class C Initial Invested Amount" shall mean $40,780,142.
-------------------------------
"Class C Interest" shall mean a fractional undivided interest in the
----------------
Trust which shall consist of the right to receive, to the extent necessary to
make the required payments to a Class C Interest Holder under this Supplement
and under the Class C Supplemental Agreement, the portion of Collections
allocable thereto under the Agreement and this Supplement, funds on deposit in
the Collection Account allocable thereto pursuant to the Agreement and this
Supplement and, subject to the rights of the other Series 1998-1
Certificateholders with respect thereto, funds on deposit in the Cash Collateral
Account and funds on deposit in the Class C Spread Account available pursuant to
the Class C Supplemental Agreement.
"Class C Interest Holder" shall mean the Person in whose name a Class
-----------------------
C Interest is registered in the Book-Entry Register.
"Class C Interest Rate" shall mean the rate designated as such in the
---------------------
Class C Supplemental Agreement, such rate not to exceed LIBOR plus 1.00% per
annum.
"Class C Interest Shortfall" shall have the meaning specified in
--------------------------
subsection 4.02(c).
"Class C Invested Amount" shall mean, when used with respect to any
-----------------------
date, an amount equal to (a) the Class C Initial Invested Amount, minus (b) the
-----
aggregate amount of principal payments made to the Class C Interest Holders
prior to such date (other than principal payments made from the proceeds of any
withdrawal from the Class C Spread Account for the purpose of reimbursing
previous reductions in the Class C Invested Amount as provided in the Class C
Supplemental Agreement), minus (c) an amount equal to the aggregate amount by
-----
which the Class C Invested Amount has been reduced on all prior Distribution
Dates pursuant to Section 4.06, plus (d) the aggregate amount of Excess Finance
----
Charges and Excess Spread allocated and available on all prior Distribution
Dates pursuant to Section 4.07(h) for the purpose
9
of reimbursing amounts deducted pursuant to the foregoing clause (c); provided,
--------
however, that the Class C Invested Amount may not be reduced below zero.
-------
"Class C Investor Default Amount" shall mean, with respect to each
-------------------------------
Distribution Date, an amount equal to the product of (i) the Investor Default
Amount for the related Monthly Period and (ii) the Class C Floating Percentage
for such Monthly Period.
"Class C Monthly Interest" shall have the meaning specified in Section
------------------------
4.02(c).
"Class C Monthly Principal" shall have the meaning specified in
-------------------------
Section 4.03(c).
"Class C Outstanding Additional Interest" shall mean, with respect to
---------------------------------------
any Distribution Date, the amount of Class C Additional Interest previously due
but not paid to the Class C Interest Holders.
"Class C Outstanding Monthly Interest" shall mean, with respect to any
------------------------------------
Distribution Date, the amount of Class C Monthly Interest previously due but not
paid to the Class C Interest Holders.
"Class C Principal Commencement Date" shall mean the Distribution Date
-----------------------------------
on which the Class B Invested Amount is paid in full.
"Class C Servicing Fee" shall have the meaning specified in Section
---------------------
3.01.
"Class C Spread Account" shall mean the Spread Account as defined in
----------------------
the Class C Supplemental Agreement.
"Class C Supplemental Agreement" shall mean the agreement among the
------------------------------
Seller, the Servicer and the Trustee, dated the date hereof, as amended,
supplemented or otherwise modified from time to time in accordance with its
terms.
"Closing Date" shall mean April 1, 1998.
------------
"Controlled Accumulation Amount" shall mean for any Distribution Date
------------------------------
with respect to the Class A Accumulation Period, U.S. $25,000,000; provided,
--------
however, that, if the Class A Accumulation Period is modified pursuant to
-------
Section 4.03(f), (i) the Controlled Accumulation Amount for each Distribution
Date with respect to the Class A Accumulation Period shall mean the amount
specified in accordance with such Section on the date on which the Class A
Accumulation Period has most recently been modified, (ii) the Controlled
Accumulation Amount for each related Monthly Period shall be no greater than the
Class A Accumulation Period Amount for such Monthly Period and (iii) the sum of
the Controlled Accumulation Amounts for all Distribution Dates with respect to
the modified Class A Accumulation Period shall not be less than the Class A
Initial Invested Amount.
"Controlled Deposit Amount" shall mean, for any Distribution Date with
-------------------------
respect to the Class A Accumulation Period, an amount equal to the sum of the
Controlled Accumulation
10
Amount for such Distribution Date and any Deficit Controlled Accumulation Amount
for the immediately preceding Distribution Date.
"Covered Amount" shall mean for any Distribution Date with respect to
--------------
the Class A Accumulation Period or the first Special Payment Date, if such
Special Payment Date occurs prior to the Class B Principal Commencement Date, an
amount equal to the product of (i) the Class A Certificate Rate, (ii) a
fraction, the numerator of which is the actual number of days from and including
the preceding Distribution Date to but excluding such Distribution Date and the
denominator of which is 360 and (iii) the Principal Funding Account Balance, if
any, as of the preceding Distribution Date.
"Cut-Off Date" shall mean April 1, 1998.
------------
"Deficit Controlled Accumulation Amount" shall mean (a) on the first
--------------------------------------
Distribution Date with respect to the Class A Accumulation Period, the excess,
if any, of the Controlled Accumulation Amount for such Distribution Date over
the amount distributed from the Collection Account as Class A Monthly Principal
for such Distribution Date and (b) on each subsequent Distribution Date with
respect to the Class A Accumulation Period, the excess, if any, of the
Controlled Deposit Amount for such subsequent Distribution Date plus any Deficit
Controlled Accumulation Amount for the prior Distribution Date over the amount
distributed from the Collection Account as Class A Monthly Principal for such
subsequent Distribution Date.
"Early Amortization Period" shall mean the period commencing at the
-------------------------
close of business on the Business Day immediately preceding the day on which a
Pay Out Event with respect to Series 1998-1 is deemed to have occurred, and
ending on the first to occur of (i) the payment in full to the Class A
Certificateholders and the Class B Certificateholders of the Class A Invested
Amount and the Class B Invested Amount, respectively, and the payment in full to
the Class C Interest Holders of the Class C Invested Amount, if any, or (ii) the
Termination Date.
"Excess Shared Principal Collections" shall mean the excess of the
-----------------------------------
Shared Principal Collections over the aggregate amount of Principal Shortfalls
for all Series, as defined in each related Supplement, which are Principal
Sharing Series for such Distribution Date.
"Excess Spread" shall mean, with respect to any Distribution Date, the
-------------
sum of the amounts, if any, specified pursuant to Sections 4.05(a)(iv),
4.05(b)(iii) and 4.05(c)(ii) with respect to such Distribution Date.
"Expected Monthly Principal" shall be equal to the product of (i) the
--------------------------
lowest of the monthly principal payment rates (determined by dividing
Collections of Principal Receivables during a calendar month by the amount of
Principal Receivables in the Trust as of the last day of the preceding month,
adjusted for additions and removals occurring after such last day), expressed as
a decimal for the 12 calendar months preceding the date of such calculation (or
such lower principal payment rate as the Servicer may select) and (ii) the sum
of the Initial Invested Amounts (as defined in the related Supplement) of all
outstanding Series, other than Variable Funding Series.
11
"Finance Charge Shortfall" shall have the meaning specified in Section
------------------------
4.09.
"Fitch" shall mean Fitch IBCA, Inc..
-----
"Floating Allocation Percentage" shall mean, with respect to any
------------------------------
Monthly Period, the percentage equivalent (which percentage shall never exceed
100%) of a fraction, the numerator of which is the Adjusted Invested Amount as
of the last day of the preceding Monthly Period and the denominator of which is
the sum of the total amount of Principal Receivables in the Trust and the
principal amount on deposit in the Excess Funding Account as of such last day;
provided, however, that, with respect to the first Monthly Period, the Floating
-------- -------
Allocation Percentage shall mean the percentage equivalent of a fraction, the
numerator of which is the Initial Invested Amount and the denominator of which
is the sum of the total amount of Principal Receivables in the Trust on the Cut-
Off Date and the principal amount on deposit in the Excess Funding Account as of
such day.
"Group One" shall mean Series 1998-1 and each other series specified
---------
in the related Supplement to be included in Group One.
"Initial Cash Collateral Amount" shall mean $9,456,265.
------------------------------
"Initial Invested Amount" shall mean the sum of the Class A Initial
-----------------------
Invested Amount, the Class B Initial Invested Amount and the Class C Initial
Invested Amount.
"Initial Servicing Fee" shall have the meaning specified in Section
---------------------
3.01.
"Interest Payment Date" shall mean, with respect to the Class A
---------------------
Certificates, the Class B Certificates and the Class C Interests, the 15th day
of each month (or, if such day is not a Business Day, the next succeeding
Business Day), commencing on the May 1998 Distribution Date.
"Interest Period" shall mean with respect to any Payment Date, the
---------------
period from and including the Payment Date immediately preceding such Payment
Date (or, in the case of the first Payment Date, from and including the Closing
Date) to but excluding such Payment Date.
"Invested Amount" shall mean, as of any date of determination, an
---------------
amount equal to the sum of (a) the Class A Invested Amount as of such date, (b)
the Class B Invested Amount as of such date and (c) the Class C Invested Amount
as of such date.
"Investor Charge-Offs" shall mean Class A Investor Charge-Offs and
--------------------
Class B Investor Charge-Offs.
"Investor Default Amount" shall mean, with respect to any Distribution
-----------------------
Date, an amount equal to the product of (a) the Defaulted Amount for the related
Monthly Period and (b) the Floating Allocation Percentage for such Monthly
Period.
12
"LIBOR" shall mean, as of any LIBOR Determination Date, the rate for
-----
deposits in U.S. dollars for a period equal to the relevant Interest Period
(commencing on the first day of such Interest Period) which appears on Telerate
Page 3750 as of 11:00 a.m., London time, on such date. If such rate does not
appear on Telerate Page 3750, the rate for that day shall be determined on the
basis of the rates at which deposits in U.S. dollars are offered by the
Reference Banks at approximately 11:00 a.m., London time, on that day to prime
banks in the London interbank market for a period equal to the relevant Interest
Period (commencing on the first day of such Interest Period). The Servicer
shall request the principal London office of each of the Reference Banks to
provide a quotation of its rate. If at least two such quotations are provided,
the rate for that day shall be the arithmetic mean of the quotations. If fewer
than two quotations are provided as requested, the rate for that day shall be
the arithmetic mean of the rates quoted by three major banks in New York City,
selected by the Servicer, at approximately 11:00 a.m., New York City time, on
that day for loans in U.S. dollars to leading international banks for a period
equal to the relevant Interest Period (commencing on the first day of such
Interest Period); provided, however, that if the banks selected as aforesaid by
-------- -------
the Servicer are not quoting as mentioned, the rate for that day shall be the
rate then in effect on such LIBOR Determination Date.
"LIBOR Determination Date" shall mean, with respect to any Interest
------------------------
Period, the second London Business Day prior to the commencement of such
Interest Period (or, in the case of the initial Interest Period, the second
London Business Day prior to the Closing Date).
"London Business Day" shall mean a day on which dealings in deposits
-------------------
in United States dollars are transacted in the London interbank market.
"Monthly Interest" means, with respect to any Distribution Date, the
----------------
Class A Monthly Interest, the Class B Monthly Interest and Class C Monthly
Interest for such Distribution Date.
"Monthly Servicing Fee" shall have the meaning specified in Section
---------------------
3.01.
"Net Servicing Fee Rate" shall mean (i) so long as the Seller is the
----------------------
Servicer, 0.75%, (ii) if The Bank of New York is the Servicer, 1.25% per annum
and (iii) if the Seller or The Bank of New York is no longer the Servicer, 2.00%
per annum.
"Nonvariable Accumulation Series" shall mean Series 1993-1 and 1993-4
-------------------------------
and each outstanding Series that is not a Variable Funding Series or a Variable
Accumulation Series.
"Payment Date" shall mean any Interest Payment Date and any Special
------------
Payment Date.
"Portfolio Adjusted Yield" shall mean, with respect to any
------------------------
Distribution Date, the average of the percentages obtained for each of the three
preceding Monthly Periods by subtracting the Base Rate for each such Monthly
Period from the Portfolio Yield for each such Monthly Period.
13
"Portfolio Yield" shall mean, with respect to any Monthly Period, the
---------------
annualized percentage equivalent of a fraction, the numerator of which is equal
to (a) an amount equal to the product obtained by multiplying the Floating
Allocation Percentage with respect to such Monthly Period and the amount of
Collections of Finance Charge Receivables with respect to such Monthly Period
(including any investment earnings that are to be treated as Collections of
Finance Charge Receivables in accordance with the Agreement) calculated on a
billed basis, or, in the case of any such Collections consisting of annual
membership fees, on an amortized (rather than billed) basis, plus (b) the amount
----
of any Principal Funding Investment Proceeds for the related Distribution Date,
plus (c) any Excess Finance Charges that are allocated to Series 1998-1 with
----
respect to such Monthly Period, plus (d) the amount of funds, if any, withdrawn
----
from the Reserve Account which, pursuant to Section 4.11(d), are required to be
included as Class A Available Funds for the Distribution Date with respect to
such Monthly Period, minus (e) the Investor Default Amount for the Distribution
-----
Date with respect to such Monthly Period, and the denominator of which is the
Invested Amount as of the last day of the preceding Monthly Period.
"Principal Allocation Percentage" shall mean, with respect to any day
-------------------------------
during a Monthly Period, the percentage equivalent (which percentage shall never
exceed 100%) of a fraction, the numerator of which is (a) during the Revolving
Period, the Invested Amount as of the last day of the immediately preceding
Monthly Period (or, in the case of the first Monthly Period, the Cut-Off Date)
and (b) after the end of the Revolving Period, the Invested Amount as of the
last day of the Revolving Period and the denominator of which is the greater of
(i) the sum of the total amount of Principal Receivables in the Trust as of the
last day of the immediately preceding Monthly Period and the principal amount on
deposit in the Excess Funding Account as of such last day (or, in the case of
the first Monthly Period, the Cut-Off Date) and (ii) the sum of the numerators
used to calculate the principal allocation percentages for all Series
outstanding as of the date as to which such determination is being made;
provided, however, that if after the commencement of the Class A Accumulation
-------- -------
Period or the Early Amortization Period a Pay Out Event occurs with respect to
another Series that was designated in the Supplement therefor as a Series that
is a "Paired Series" with respect to Series 1998-1, the Seller may, by written
notice delivered to the Trustee and the Servicer, designate a different
numerator for the foregoing fraction, provided that (x) such numerator is not
less than the Adjusted Invested Amount as of the last day of the revolving
period for such Paired Series and (y) the Seller shall have received written
notice from each Rating Agency that such designation will not have a Ratings
Effect and shall have delivered copies of each such written notice to the
Servicer and the Trustee.
"Principal Funding Account" shall have the meaning set forth in
-------------------------
Section 4.03(d)(i).
"Principal Funding Account Balance" shall mean, with respect to any
---------------------------------
date of determination during the Class A Accumulation Period, the principal
amount, if any, on deposit in the Principal Funding Account on such date of
determination.
"Principal Funding Investment Proceeds" shall have the meaning
-------------------------------------
specified in Section 4.03(d)(ii).
14
"Principal Shortfall" shall have the meaning specified in Section
-------------------
4.10.
"Reallocated Principal Collections" shall mean, with respect to any
---------------------------------
Monthly Period, the product of (a) the Principal Allocation Percentage with
respect to such Monthly Period, (b) the aggregate amount of Collections in
respect of Principal Receivables deposited in the Collection Account for such
Monthly Period and (c) the sum of the Class B Floating Percentage and the Class
C Floating Percentage with respect to such Monthly Period.
"Reassignment Amount" shall mean, with respect to any Distribution
-------------------
Date, after giving effect to any deposits and distributions otherwise to be made
on such Distribution Date, the sum of (i) the Adjusted Invested Amount on such
Distribution Date, plus (ii) Monthly Interest for such Distribution Date and any
----
Monthly Interest previously due but not distributed to the Series 1998-1
Certificateholders and the Class C Interest Holders on a prior Distribution
Date, plus (iii) the amount of Additional Interest, if any, for such
----
Distribution Date and any Additional Interest previously due but not distributed
to the Series 1998-1 Certificateholders and the Class C Interest Holders on a
prior Distribution Date.
"Reference Banks" shall mean four major banks in the London interbank
---------------
market selected by the Servicer.
"Required Cash Collateral Amount" shall mean, with respect to any
-------------------------------
Distribution Date, the greater of (i) the product of (a) the sum of the Class A
Adjusted Invested Amount, the Class B Invested Amount and the Class C Invested
Amount, each as of such Distribution Date after taking into account
distributions made on such date, and (b) 1.6% and (ii) $1,112,502; provided,
--------
however, that (i) if there are any withdrawals from the Cash Collateral Account
-------
pursuant to Section 4.12(c), or a Pay Out Event occurs with respect to Series
1998-1, then the Required Cash Collateral Amount for any Distribution Date shall
equal the Required Cash Collateral Amount on the Distribution Date immediately
preceding such withdrawal or Pay Out Event, (ii) in no event shall the Required
Cash Collateral Amount exceed the sum of the Class A Adjusted Invested Amount,
Class B Invested Amount and the Class C Invested Amount on any such date and
(iii) the Required Cash Collateral Amount may be reduced without the consent of
the Series 1998-1 Certificateholders or the Class C Interest Holders, if (q) the
Seller shall have received written notice from each Rating Agency that such
reduction will not result in the reduction or withdrawal of the then current
rating of the Series 1998-1 Certificates or the Class C Interests and (r) the
Seller 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 Seller, such reduction will not cause a
Pay Out Event or an event that, after the giving of notice or the lapse of time,
would constitute a Pay Out Event, to occur with respect to Series 1998-1.
"Required Draw Amount" shall have the meaning specified in Section
--------------------
4.12(c).
"Required Reserve Account Amount" shall mean, with respect to any
-------------------------------
Distribution Date prior to the Reserve Account Funding Date, $0, and on or after
the Reserve Account Funding Date, an amount equal to (a) the product of (i) 1.0%
of the Class A Invested Amount as of the preceding Distribution Date (after
giving effect to all changes therein on such date) and
15
(ii) the Reserve Account Factor for such Distribution Date, or (b) any other
amount designated by the Seller, provided that, if such designation is of a
lesser amount, the Seller (i) shall have received written notice from each
Rating Agency that such designation will not have a Ratings Effect and shall
have delivered copies of each such written notice to the Servicer and the
Trustee, and (ii) 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 Seller, such designation will not
cause a Pay Out Event or an event that, after the giving of notice or the lapse
of time, would cause a Pay Out Event, to occur with respect to Series 1998-1.
"Reserve Account" shall have the meaning specified in Section 4.11(a).
---------------
"Reserve Account Factor" shall mean, with respect to any date of
----------------------
determination, the percentage equivalent (which percentage shall never exceed
100%) of a fraction, the numerator of which is the number of Monthly Periods
scheduled to be included in the Class A Accumulation Period as of such date and
the denominator of which is twenty.
"Reserve Account Funding Date" shall mean the Distribution Date with
----------------------------
respect to the Monthly Period which commences 12 months prior to the Monthly
Period which as of the related Determination Date is scheduled to commence the
Class A Accumulation Period in accordance with Section 4.03(f) provided that the
Seller may delay the Reserve Account Funding Date to the Distribution Date which
occurs not later than the number of months prior to the scheduled commencement
date of the Class A Accumulation Period determined in accordance with the
following schedule:
=============================================================================
Portfolio Adjusted Yield Number of Months
(rounded up to nearest whole number)
=============================================================================
Less than 2% 12 x Reserve Account Factor
-----------------------------------------------------------------------------
2% or more, but less than 3% 6 x Reserve Account Factor
-----------------------------------------------------------------------------
3% or more, but less than 4% 4 x Reserve Account Factor
-----------------------------------------------------------------------------
4% or more 3 x Reserve Account Factor
=============================================================================
"Reserve Account Surplus" shall mean, as of any date of determination,
-----------------------
the amount, if any, by which the amount on deposit in the Reserve Account
exceeds the Required Reserve Account Amount.
"Reserve Draw Amount" shall have the meaning specified in Section
-------------------
4.11(c).
"Revolving Period" shall mean the period beginning at the close of
----------------
business on the Cut-Off Date and ending on the earlier of (a) the close of
business on the day the Class A Accumulation Period commences and (b) the close
of business on the day the Early Amortization Period commences.
"Series 1998-1" shall mean the Series of Investor Certificates
-------------
(including any Additional Investor Certificates), the terms of which are
specified in this Supplement (and, for the Class C Interests, in the Class C
Supplemental Agreement), and shall include the Class A Certificates, the Class B
Certificates and the Class C Interests.
16
"Series 1998-1 Certificateholder" shall mean a Class A
--------------------------------
Certificateholder or a Class B Certificateholder.
"Series 1998-1 Certificate" shall mean a Class A Certificate or a
-------------------------
Class B Certificate.
"Series 1998-1 Holder" shall mean a Class A Certificateholder, a Class
--------------------
B Certificateholder or a Class C Interest Holder.
"Servicer Interchange" shall mean, for any Monthly Period, the product
--------------------
of (a) the Floating Allocation Percentage for such Monthly Period and (b) the
portion of collections of Finance Charge Receivables allocated to the Series
1998-1 Certificates and the Class C Interests with respect to such Monthly
Period that is attributable to Interchange; provided, however, that Servicer
-------- -------
Interchange for a Monthly Period shall not exceed one-twelfth of the product of
(i) the Invested Amount as of the last day of such Monthly Period and (ii)
0.75%.
"Servicing Base Amount" shall have the meaning specified in Section
---------------------
3.01.
"Servicing Fee Rate" shall mean 2.00%.
------------------
"Special Payment Date" shall mean each Distribution Date with respect
--------------------
to the Early Amortization Period.
"Subordinated Excess Principal Series", shall mean Series 1998-1 and
------------------------------------
each other Series specified in the related supplement to be a Subordinated
Excess Principal Series.
"Subordinated Excess Principal Shortfall" shall have the meaning
---------------------------------------
specified in Section 4.10.
"Telerate Page 3750" shall mean the display page currently so
------------------
designated on the Dow Xxxxx Telerate Service (or such other page as may replace
that page on that service for purpose of displaying comparable rates or prices).
"Termination Date" shall mean the June 2011 Distribution Date.
----------------
"Variable Accumulation Series" shall mean each outstanding Series,
----------------------------
other than Series 1993-1 and 1993-4 and any Variable Funding Series, for which,
pursuant to the terms of the related Supplement, at the time a determination is
made pursuant to Section 4.03(f), the commencement date of the Accumulation
Period may be changed.
"Variable Funding Series" shall mean any Series designated in the
-----------------------
related Supplement as a Variable Funding Series.
(b) Notwithstanding anything to the contrary in this Supplement or
the Agreement, the term "Rating Agency" shall mean, whenever used in this
Supplement or the
17
Agreement with respect to Series 1998-1, Xxxxx'x and Standard & Poor's and
Fitch. As used in this Supplement and in the Agreement with respect to Series
1998-1, "highest investment category" shall mean (i) in the case of Standard &
Poor's, A-1+, AAA, AAAm or AAAm-G, as applicable, (ii) in the case of Xxxxx'x,
P-1 or Aaa, as applicable and (iii) in the case of Fitch, if rated by Fitch,
F-1+ or AAA, as applicable; provided, however, that notwithstanding any other
-------- -------
provision of the Agreement or this Supplement to the contrary, for purposes of
the investment of funds in the Cash Collateral Account on and after the Class B
Principal Commencement Date, "highest investment category" as used in the
definition of "Eligible Investments" shall mean (i) in the case of Standard &
Xxxx'x, X-0, A-1+ or AAA, as applicable, (ii) in the case of Xxxxx'x, P-1 or
Aaa, as applicable and (iii) in the case of Fitch, if rated by Fitch, F-1 or F-
1+, or AAA, as applicable.
(c) Notwithstanding any provision of the Agreement or this
Supplement, the term "Paying Agent" when used in the Agreement or this
Supplement with respect to Series 1998-1, shall mean, the Paying Agent specified
pursuant to the Agreement, and any successor paying agents with respect to the
Class A Certificates, the Class B Certificates and the Class C Interests as the
Seller may appoint from time to time in accordance with the provisions of the
Pooling and Servicing Agreement.
(d) All capitalized terms used herein and not otherwise defined
herein have the meanings ascribed to them in the Agreement.
(e) The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Supplement shall refer to this Supplement as a whole
and not to any particular provision of this Supplement; references to any
Article, Section or Exhibit are references to Articles, Sections and Exhibits in
or to this Supplement unless otherwise specified; and the term "including" means
"including without limitation".
Section 2.02. Amendment to Section 2.08 of the Agreement. Section
------------------------------------------
2.08(c)(i) of the Agreement is hereby amended and restated in its entirety to
read as follows:
(c) Automatic Additional Accounts. (i) The Seller may from time to
-----------------------------
time, at its sole discretion, subject to and in compliance with the
limitations specified in clause (ii) below and the applicable conditions
specified in paragraph (d) below, designate Eligible Accounts to be
included as Accounts as of the applicable Additional Cut-Off Date. For
purposes of this paragraph, Eligible Accounts shall be deemed to include
only consumer revolving credit card accounts or other consumer revolving
credit accounts which (x) are originated by the Seller or any Affiliate of
the Seller, (y) are of a type included as Initial Accounts or which have
previously been included in any Addition which has been effected in
accordance with all of the conditions specified in paragraph (d) below and
(z) have a designation other than "Associate 20", "Associate 21",
"Associate 195", "Associate 196" or "Associate 197" marketing programs in
the Seller's credit card master file.
18
ARTICLE III
Servicer and Trustee
--------------------
Section 3.01. Servicing Compensation. The share of the Servicing Fee
----------------------
allocable to the Series 1998-1 Certificateholders and the Class C Interest
Holders with respect to any Distribution Date (the "Monthly Servicing Fee")
shall be equal to one-twelfth the product of (a) the Servicing Fee Rate and (b)
the Adjusted Invested Amount, if any, as of the last day of the Monthly Period
preceding such Distribution Date (the amount calculated pursuant to this clause
(b) is referred to as the "Servicing Base Amount"); provided, however, with
-------- -------
respect to the first Distribution Date, the Monthly Servicing Fee (the "Initial
Servicing Fee") shall be equal to the Servicing Fee accrued on the Initial
Invested Amount at the Net Servicing Fee Rate for the period from the Closing
Date to but excluding the first Distribution Date. On each Distribution Date,
but only if the Seller or The Bank of New York is the Servicer, Servicer
Interchange with respect to the related Monthly Period that is on deposit in the
Collection Account shall be withdrawn from the Collection Account and paid to
the Servicer in payment of a portion of the Monthly Servicing Fee with respect
to such Monthly Period. In the case of any insufficiency of Servicer
Interchange on deposit in the Collection Account a portion of the Monthly
Servicing Fee with respect to such Monthly Period will not be paid to the extent
of such insufficiency of Servicer Interchange. The share of the Monthly
Servicing Fee allocable to the Class A Certificateholders (after giving effect
to the distribution of Servicer Interchange, if any, to the Servicer) with
respect to any Distribution Date (the "Class A Servicing Fee") shall be equal to
one-twelfth of the product of (a) the Class A Floating Percentage, (b) the Net
Servicing Fee Rate and (c) the Servicing Base Amount; provided, however, that
-------- -------
with respect to the first Distribution Date, the Class A Servicing Fee shall be
equal to the product of the Class A Floating Percentage as of the first
Distribution Date and the Initial Servicing Fee, and provided further, that with
-------- -------
respect to the first Distribution Date following the Monthly Period in which an
Additional Issuance Date occurs the Class A Servicing Fee shall be increased by
an amount equal to the product of (a) the Net Servicing Fee Rate, (b) a
fraction, the numerator of which is the actual number of days in the period from
and including such Additional Issuance Date to but excluding such Distribution
Date and the denominator of which is 360, (c) the increase in the Invested
Amount as a result of such Additional Issuance and (d) the Class A Floating
Percentage with respect to such Distribution Date. The share of the Monthly
Servicing Fee allocable to the Class B Certificateholders (after giving effect
to the distribution of Servicer Interchange, if any, to the Servicer) with
respect to any Distribution Date (the "Class B Servicing Fee") shall be equal to
one-twelfth of the product of (a) the Class B Floating Percentage, (b) the Net
Servicing Fee Rate and (c) the Servicing Base Amount; provided, however, that
-------- -------
with respect to the first Distribution Date, the Class B Servicing Fee shall be
equal to product of the Class B Floating Percentage as of the first Distribution
Date and the Initial Servicing Fee, and provided, further, that with respect to
-------- -------
the first Distribution Date following the Monthly Period in which an Additional
Issuance Date occurs, the Class B Servicing Fee shall be increased by an amount
equal to the product of (a) the Net Servicing Fee Rate, (b) a fraction, the
numerator of which is the actual number of days in the period from and including
such Additional Issuance Date to but excluding such Distribution Date and the
denominator of which is 360, (c) the increase in the Invested Amount as a result
of such Additional Issuance and (d) the Class B Floating Percentage with respect
to such Distribution Date. The share of the Monthly Servicing Fee allocable to
the Class
19
C Interest Holders (after giving effect to the distribution of Servicer
Interchange, if any, to the Servicer) with respect to such Distribution Date
(the "Class C Servicing Fee") shall be equal to one-twelfth of the product of
(c) the Class C Floating Percentage, (b) the Net Servicing Fee Rate and (c)
the Servicing Base Amount, provided, however, that with respect to the first
-------- -------
Distribution Date, the Class C Servicing Fee shall be equal to the product of
the Class C Floating Percentage as of the first Distribution Date and the
Initial Servicing Fee. The remainder of the Servicing Fee shall be paid by the
Seller or the Certificateholders of other Series (as provided in the related
Supplements) and in no event shall the Trust, the Trustee, the Series 1998-1
Certificateholders or the Class C Interest Holders be liable for the share of
the Servicing Fee to be paid by the Seller or the Certificateholders of any
other Series. The (i) Class A Servicing Fee shall be payable to the Servicer
solely to the extent amounts are available for distribution in respect thereof
pursuant to Section 4.05(a)(ii), 4.07(a), 4.08(a) or 4.12(c); (ii) the Class B
Servicing Fee shall be payable solely to the extent amounts are available for
distribution in respect thereof pursuant to Section 4.05(b)(ii), 4.07(c),
4.08(b) or 4.12(c); and (iii) the Class C Servicing Fee shall be payable solely
to the extent amounts are available for distribution in respect thereof pursuant
to Section 4.05(c)(i), 4.07(f) or 4.12(c).
ARTICLE IV
Rights of Series 1998-1 Certificateholders and
Class C Interest Holders and
Allocation and Application of Collections
-----------------------------------------
Section 4.01. Collections and Allocations. The Servicer will apply,
---------------------------
or will instruct the Trustee to apply, all collections and other funds on
deposit in the Collection Account that are allocated to the Series 1998-1
Certificates and the Class C Interests as described in this Article IV.
Section 4.02. Determination of Monthly Interest.
---------------------------------
(a) The amount of monthly interest ("Class A Monthly Interest")
distributable from the Collection Account with respect to the Class A
Certificates on any Distribution Date shall be an amount equal to one-twelfth of
the product of (i) the Class A Certificate Rate and (ii) the outstanding
principal balance of the Class A Certificates as of the preceding Record Date;
provided, however, that, with respect to the first Distribution Date, Class A
Monthly Interest shall be equal to $ 3,856,111.11; and provided further, that
-------- -------
with respect to the first Distribution Date following the Monthly Period in
which an Additional Issuance Date occurs, Class A Monthly Interest shall be
increased by the amount equal to the product of (a) a fraction, the numerator of
which is the actual number of days in the period from and including such
Additional Issuance Date to but excluding such Distribution Date and the
denominator of which is 360, (b) the Class A Certificate Rate and (c) the
increase in the outstanding principal balance of the Class A Certificates as a
result of such Additional Issuance.
On the Determination Date preceding each Payment Date, the Servicer
shall determine the excess, if any (the "Class A Interest Shortfall"), of (x)
the Class A Monthly
20
Interest for the Interest Period applicable to such Payment Date over (y) the
----
aggregate amount of funds allocated and available to pay such Class A Monthly
Interest on such Payment Date. If the Class A Interest Shortfall with respect to
any Payment Date is greater than zero, an additional amount ("Class A Additional
Interest") equal to the product of (i) a fraction, the numerator of which is the
actual number of days from and including the preceding Distribution Date to but
excluding such Distribution Date and the denominator of which is 360, (ii) the
Class A Penalty Rate and (iii) such Class A Interest Shortfall (or the portion
thereof which has not been paid to Class A Certificateholders) shall be payable
as provided herein with respect to the Class A Certificates on each Distribution
Date following such Payment Date to and including the Payment Date on which such
Class A Interest Shortfall is paid to Class A Certificateholders.
Notwithstanding anything to the contrary herein, Class A Additional Interest
shall be payable or distributed to Class A Certificateholders only to the extent
permitted by applicable law.
(b) The amount of monthly interest ("Class B Monthly Interest")
distributable from the Collection Account with respect to the Class B
Certificates on any Distribution Date shall be an amount equal to one-twelfth of
the product of (i) the Class B Certificate Rate and (ii) the outstanding
principal balance of the Class B Certificates as of the preceding Record Date;
provided, however, with respect to the first Distribution Date, Class B Monthly
-------- -------
Interest shall be equal to $390,258.74; and provided further, that with respect
-------- -------
to the first Distribution Date following the Monthly Period in which an
Additional Issuance Date occurs, Class B Monthly Interest shall be increased by
the amount equal to the product of (a) a fraction, the numerator of which is the
actual number of days in the period from and including such Additional Issuance
Date to but excluding such Distribution Date and the denominator of which is
360, (b) the Class B Certificate Rate and (c) the increase in the outstanding
principal balance of the Class B Certificates as a result of such Additional
Issuance.
On the Determination Date preceding each Payment Date, the Servicer
shall determine the excess, if any (the "Class B Interest Shortfall"), of (x)
the Class B Monthly Interest for the Interest Period applicable to such Payment
Date over (y) the aggregate amount of funds allocated and available to pay such
----
Class B Monthly Interest on such Payment Date. If the Class B Interest
Shortfall with respect to any Payment Date is greater than zero, an additional
amount ("Class B Additional Interest") equal to the product of (i) a fraction,
the numerator of which is the actual number of days from and including the
preceding Distribution Date to but excluding such Distribution Date and the
denominator of which is 360, (ii) the Class B Penalty Rate and (iii) such Class
B Interest Shortfall (or the portion thereof which has not been paid to Class B
Certificateholders) shall be payable as provided herein with respect to the
Class B Certificates on each Distribution Date following such Payment Date to
and including the Payment Date on which such Class B Interest Shortfall is paid
to Class B Certificateholders. Notwithstanding anything to the contrary herein,
Class B Additional Interest shall be payable or distributed to Class B
Certificateholders only to the extent permitted by applicable law.
(c) The amount of monthly interest ("Class C Monthly Interest")
distributable from the Collection Account with respect to the Class C Interests
on any Distribution Date shall be an amount equal to the product of (i) (A) a
fraction, the numerator of which is the actual number of days in the period from
and including the preceding Distribution Date to but excluding such Distribution
Date and the denominator of which is 360, times (B) the Class C
21
Interest Rate and (ii) the outstanding principal balance of the Class C
Interests as of the preceding Record Date; provided, however, with respect to
-------- -------
the first Distribution Date, Class C Monthly Interest shall be equal to the
interest accrued on the Class C Initial Invested Amount at the Class C Interest
Rate for the period from the Closing Date to but excluding the first
Distribution Date.
On the Determination Date preceding each Distribution Date, the
Servicer shall determine the excess, if any (the "Class C Interest Shortfall"),
of (x) the Class C Monthly Interest for such Distribution Date over (y) the
----
aggregate amount of funds allocated and available to pay such Class C Monthly
Interest on such Distribution Date (including the proceeds of any draw made on
the Class C Spread Account as provided in the Class C Supplemental Agreement).
If the Class C Interest Shortfall with respect to any Distribution Date is
greater than zero, an additional amount ("Class C Additional Interest") equal to
the product of (i) a fraction, the numerator of which is the actual number of
days in the period from and including the preceding Distribution Date to but
excluding such Distribution Date and the denominator of which is 360, (ii) the
Class C Interest Rate and (iii) such Class C Interest Shortfall (or the portion
thereof which has not been paid to the Class C Interest Holders) shall be
payable as provided herein with respect to the Class C Interests on each
Distribution Date following such Distribution Date to and including the
Distribution Date on which such Class C Interest Shortfall is paid to the Class
C Interest Holders. Notwithstanding anything to the contrary herein, Class C
Additional Interest shall be payable or distributed to the Class C Interest
Holders only to the extent permitted by applicable law.
Section 4.03. Determination of Monthly Principal; Series 1998-1
-------------------------------------------------
Accounts; Class A Accumulation Period.
-------------------------------------
(a) The amount of monthly principal ("Class A Monthly Principal")
distributable from the Collection Account with respect to the Class A
Certificates on each Distribution Date, beginning with the first to occur of (i)
the first Special Payment Date, if any, and (ii) the first Distribution Date
with respect to the Class A Accumulation Period, shall be equal to the least of
(x) the Available Investor Principal Collections on deposit in the Collection
Account with respect to such Distribution Date, (y) for each Distribution Date
with respect to the Class A Accumulation Period (and on or prior to the Class A
Expected Final Payment Date), the Controlled Deposit Amount for such
Distribution Date and (z) the Class A Adjusted Invested Amount on such
Distribution Date.
(b) The amount of monthly principal ("Class B Monthly Principal")
distributable from the Collection Account with respect to the Class B
Certificates on each Distribution Date, beginning with the Class B Principal
Commencement Date, shall be equal to the lesser of (x) the Available Investor
Principal Collections on deposit in the Collection Account with respect to such
Distribution Date (minus the portion of such Available Investor Principal
-----
Collections applied to Class A Monthly Principal on such Distribution Date) and
(y) the Class B Invested Amount on such Distribution Date.
(c) The amount of monthly principal ("Class C Monthly Principal")
distributable from the Collection Account with respect to the Class C Invested
Amount on each Distribution
22
Date, beginning with the Class C Principal Commencement Date, shall be equal to
the lesser of (x) the Available Investor Principal Collections on deposit in the
Collection Account with respect to such Distribution Date (minus the portion of
-----
such Available Investor Principal Collections applied to Class A Monthly
Principal and Class B Monthly Principal on such Distribution Date) and (y) the
Class C Invested Amount on such Distribution Date.
(d)(i) The Servicer, for the benefit of the Class A
Certificateholders, shall establish and maintain in the name of the
Trustee, on behalf of the Trust, an Eligible Deposit Account (the
"Principal Funding Account"), bearing a designation clearly indicating
that the funds deposited therein are held for the benefit of the Class A
Certificateholders. The Principal Funding Account shall initially be
established with Xxxxxx Trust and Savings Bank.
(ii) At the direction of the Servicer, funds on deposit in the
Principal Funding Account shall be invested by the Trustee in Eligible
Investments selected by the Servicer. All such Eligible Investments
shall be held by the Trustee for the benefit of the Class A
Certificateholders; provided, that on each Distribution Date all interest
--------
and other investment income (net of losses and investment expenses)
("Principal Funding Investment Proceeds") on funds on deposit therein
shall be applied as set forth in paragraph (iii) below. Funds on deposit
in the Principal Funding Account shall be invested in Eligible
Investments that will mature so that such funds will be available at the
close of business on the Transfer Date preceding the following
Distribution Date. No Eligible Investment shall be disposed of prior to
its maturity; provided, however, that the Trustee may sell, liquidate or
-------- -------
dispose of an Eligible Investment before its maturity, if so directed by
the Servicer, the Servicer having reasonably determined that the interest
of the Class A Certificateholders may be adversely affected if such
Eligible Investment is held to its maturity. Unless the Servicer directs
otherwise, funds deposited in the Principal Funding Account on a Transfer
Date (which immediately precedes a Payment Date) upon the maturity of any
Eligible Investments are not required to be invested overnight.
(iii) On each Distribution Date with respect to the Class A
Accumulation Period, the Servicer shall direct the Trustee to withdraw
from the Principal Funding Account and deposit into the Collection
Account all Principal Funding Investment Proceeds then on deposit in the
Principal Funding Account and such Principal Funding Investment Proceeds
shall be treated as a portion of Class A Available Funds.
(iv) Reinvested interest and other investment income on funds
deposited in the Principal Funding Account shall not be considered to be
principal amounts on deposit therein for purposes of this Supplement.
(e)(i) The Trustee shall possess all right, title and interest in all
funds on deposit from time to time in the Principal Funding Account and
in all proceeds thereof. The Principal Funding Account shall be under
the sole dominion and control of the Trustee for the benefit of the Class
A Certificateholders. If, at any time, the Principal Funding Account
ceases to be an Eligible Deposit Account, the Trustee (or the
23
Servicer on its behalf) shall within 10 Business Days (or such longer
period, not to exceed 30 calendar days, as to which each Rating Agency
may consent) establish a new Principal Funding Account meeting the
conditions specified in paragraph (d)(i) above as an Eligible Deposit
Account and shall transfer any cash and/or any investments to such new
Principal Funding Account.
(ii) Pursuant to the authority granted to the Servicer in Section
3.01(b) of the Agreement, the Servicer shall have the power, revocable by
the Trustee, to make withdrawals and payments or to instruct the Trustee
to make withdrawals and payments from the Principal Funding Account for
the purposes of carrying out the Servicer's or Trustee's duties
hereunder. Pursuant to the authority granted to the Paying Agent in
Section 5.01 of this Supplement and Section 6.07 of the Agreement, the
Paying Agent shall have the power, revocable by the Trustee, to withdraw
funds from the Principal Funding Account for the purpose of making
distributions to the Class A Certificateholders.
(f) The Class A Accumulation Period is scheduled to commence at the
close of business on the last Business Day of July 2006; provided, however, that
-------- -------
if the Class A Accumulation Period Length on any Determination Date (determined
as described below) is less than twenty months, upon notice to the Trustee, the
Seller and each Rating Agency, the Servicer, at its option, may elect to modify
the date on which the Class A Accumulation Period actually commences to the last
Business Day of any month that precedes the month that is the number of months
prior to the Class A Expected Final Payment Date equal to the Class A
Accumulation Period Length; provided, however, that (i) the length of the Class
-------- -------
A Accumulation Period will not be less than one month; and (ii) notwithstanding
any other provision of this Supplement to the contrary, no election to postpone
the commencement of the Class A Accumulation Period shall be made after a Pay
Out Event (as defined in the related Supplement) shall have occurred and is
continuing with respect to any other Series. On each Determination Date, the
Servicer will determine the "Class A Accumulation Period Length" which will
equal the number of months such that the Class A Accumulation Period Amount for
the Monthly Period immediately preceding the Class A Expected Final Payment
Date, when aggregated with the Class A Accumulation Period Amounts for each
preceding Monthly Period, will equal or exceed the Class A Initial Invested
Amount. Any notice by the Servicer electing to modify the commencement of the
Class A Accumulation Period pursuant to this subsection (f) shall specify (i)
the Class A Accumulation Period Length, (ii) the commencement date of the Class
A Accumulation Period and (iii) the Controlled Accumulation Amount with respect
to each Monthly Period during the Class A Accumulation Period.
Section 4.04. Required Amount.
---------------
(a) With respect to each Distribution Date, on the related
Determination Date, the Servicer shall determine the amount (the "Class A
Required Amount"), if any, by which (x) the sum of (i) Class A Monthly Interest
for such Distribution Date, (ii) any Class A Outstanding Monthly Interest, (iii)
any Class A Additional Interest for such Distribution Date and any Class A
Outstanding Additional Interest, (iv) the Class A Servicing Fee for such
Distribution Date, (v) any Class A Servicing Fee previously due but not paid to
the Servicer and (vi) the Class A
24
Investor Default Amount, if any, for such Distribution Date exceeds (y) the
Class A Available Funds. In the event that the Class A Required Amount for such
Distribution Date is greater than zero, the Servicer shall give written notice
to the Trustee of such positive Class A Required Amount on the date of
computation and all or a portion of the Excess Spread and the Excess Finance
Charges allocable to Series 1998-1 with respect to the related Monthly Period in
an amount equal to the Class A Required Amount for such Distribution Date shall
be distributed from the Collection Account on such Distribution Date pursuant to
Section 4.07(a). In the event that the Class A Required Amount for such
Distribution Date exceeds the amount of Excess Spread and the amount of Excess
Finance Charges allocable to Series 1998-1 with respect to the related Monthly
Period, all or a portion of the Available Cash Collateral Amount with respect to
such Distribution Date in an amount equal to such excess shall be applied to
fund the Class A Required Amount. In the event that the Class A Required Amount
for such Distribution Date exceeds the amount of Excess Spread, the amount of
Excess Finance Charges allocable to Series 1998-1 with respect to the related
Monthly Period and the Available Cash Collateral Amount with respect to such
Distribution Date, all or a portion of the Reallocated Principal Collections
with respect to such Monthly Period in an amount equal to such excess shall be
distributed from the Collection Account on such Distribution Date pursuant to
Section 4.08(a).
(b) With respect to each Distribution Date, on the related
Determination Date, the Servicer shall determine the amount (the "Class B
Required Amount"), if any, by which the sum of (x) the amount, if any, by which
(A) the sum of (i) Class B Monthly Interest for such Distribution Date, (ii) any
Class B Outstanding Monthly Interest, (iii) any Class B Additional Interest for
such Distribution Date and any Class B Outstanding Additional Interest, (iv) the
Class B Servicing Fee for such Distribution Date and (v) any Class B Servicing
Fee previously due but not paid to the Servicer exceeds (B) the Class B
Available Funds and (y) the Class B Investor Default Amount for such
Distribution Date. In the event that the difference between the Class B
Required Amount for such Distribution Date and the Excess Spread and Excess
Finance Charges applied with respect thereto pursuant to subsection 4.07(c) on
such Distribution Date is greater than zero, the Servicer shall give written
notice to the Trustee of such excess Class B Required Amount on the date of
computation and all or a portion of the Available Cash Collateral Amount with
respect to such Distribution Date pursuant to Section 4.12(c) shall be applied
to fund such excess Class B Required Amount. In the event that the Class B
Required Amount for such Distribution Date exceeds the portion of Excess Spread
and Excess Finance Charges allocated to Series 1998-1 with respect to such
Monthly Period and not used to fund the Class A Required Amount and the portion
of the Available Cash Collateral Amount with respect to such Distribution Date
withdrawn from the Cash Collateral Account to fund the Class B Required Amount,
then a portion of the Reallocated Principal Collections with respect to such
Monthly Period shall be distributed from the Collection Account on such
Distribution Date pursuant to Section 4.08(b).
Section 4.05. Application of Class A Available Funds, Class B
-----------------------------------------------
Available Funds, Class C Available Funds, Available Investor Principal
----------------------------------------------------------------------
Collections and Class C Principal Collections. The Servicer shall apply (if the
---------------------------------------------
Seller is the Servicer and the Collection Account is maintained with the Seller)
or shall cause the Trustee to apply, on each Distribution Date, Class A
Available Funds, Class B Available Funds, Class C Available Funds, and Available
Investor
25
Principal Collections on deposit in the Collection Account with respect to such
Distribution Date to make the following distributions:
(a) On each Distribution Date, an amount equal to the Class A
Available Funds with respect to such Distribution Date will be distributed
in the following priority:
(i) an amount equal to Class A Monthly Interest for such Distribution
Date, plus the amount of any Class A Outstanding Monthly Interest, plus
---- ----
the amount of any Class A Additional Interest for such Distribution Date
and any Class A Outstanding Additional Interest, shall be deposited in
the Class A Interest Funding Account;
(ii) an amount equal to the Class A Servicing Fee for such
Distribution Date, plus the amount of any Class A Servicing Fee
----
previously due but not distributed to the Servicer on a prior
Distribution Date, shall be distributed to the Servicer (unless such
amount has been netted against deposits to the Collection Account in
accordance with Section 4.03 of the Agreement);
(iii) an amount equal to the Class A Investor Default Amount for such
Distribution Date shall be treated as a portion of Available Investor
Principal Collections for such Distribution Date; and
(iv) the balance, if any, shall constitute Excess Spread and shall be
allocated and distributed as set forth in Section 4.07.
(b) On each Distribution Date, an amount equal to the Class B
Available Funds with respect to such Distribution Date will be distributed
in the following priority:
(i) an amount equal to Class B Monthly Interest for such Distribution
Date, plus the amount of any Class B Outstanding Monthly Interest, plus
the amount of any Class B Additional Interest for such Distribution Date
and any Class B Outstanding Additional Interest, shall be distributed to
the Paying Agent with respect to the Class B Certificates for payment to
the Class B Certificateholders;
(ii) an amount equal to the Class B Servicing Fee for such
Distribution Date, plus the amount of any Class B Servicing Fee
previously due but not distributed to the Servicer on a prior
Distribution Date, shall be distributed to the Servicer (unless such
amount has been netted against deposits to the Collection Account in
accordance with Section 4.03 of the Agreement); and
(iii) the balance, if any, shall constitute Excess Spread and shall
be allocated and distributed as set forth in Section 4.07.
(c) On each Distribution Date, an amount equal to the Class C
Available Funds with respect to such Distribution Date will be distributed
in the following priority:
26
(i) an amount equal to the Class C Servicing Fee for such
Distribution Date, plus the amount of any Class C Servicing Fee
previously due but not distributed to the Servicer on a prior
Distribution Date, shall be distributed to the Servicer (unless such
amount has been netted against deposits to the Collection Account in
accordance with Section 4.03 of the Agreement); and
(ii) the balance, if any, shall constitute Excess Spread and shall be
allocated and distributed as set forth in Section 4.07.
(d) On each Distribution Date with respect to the Revolving Period,
an amount equal to the Available Investor Principal Collections deposited
in the Collection Account for the related Monthly Period shall be treated
as Shared Principal Collections and applied in accordance with Section 4.04
of the Agreement.
(e) On each Distribution Date with respect to the Class A
Accumulation Period, the Class B Amortization Period, the Class C
Amortization Period or the Early Amortization Period, an amount equal to
the Available Investor Principal Collections deposited in the Collection
Account for the related Monthly Period will be distributed in the following
priority:
(i) an amount equal to Class A Monthly Principal for such
Distribution Date, up to the Class A Adjusted Invested Amount, on such
Distribution Date, shall be deposited in the Principal Funding Account
or, if such Distribution Date is a Special Payment Date on which the
Principal Funding Account Balance is zero, shall be distributed to the
Paying for payment to the Class A Certificateholders;
(ii) for each Distribution Date beginning on the Class B Principal
Commencement Date, an amount equal to Class B Monthly Principal for such
Distribution Date, up to the Class B Invested Amount on such Distribution
Date, shall be distributed to the Paying Agent for payment to the Class B
Certificateholders;
(iii) for each Distribution Date beginning on the Class C Principal
Commencement Date, an amount equal to Class C Monthly Principal for such
Distribution Date, up to the Class C Invested Amount for such
Distribution Date, plus the proceeds of any withdrawal from the Class C
Spread Account for the purpose of reimbursing previous reductions in the
Class C Invested Amount as provided in the Class C Supplemental
Agreement, shall be distributed to the Paying Agent for payment to the
Class C Interest Holders; and
(iv) for each Distribution Date, after giving effect to paragraphs
(i), (ii) and (iii) above, an amount equal to the balance, if any, of
such Available Investor Principal Collections then on deposit in the
Collection Account shall be treated as Shared Principal Collections and
applied in accordance with Section 4.04 of the Agreement.
27
Section 4.06. Defaulted Amounts; Investor Charge-Offs.
---------------------------------------
(a) On each Determination Date, the Servicer shall calculate the
Class A Investor Default Amount, if any, for the related Distribution Date. If,
on any Distribution Date, the Class A Required Amount for the related Monthly
Period exceeds the sum of (x) the amount of Reallocated Principal Collections
with respect to such Monthly Period, (y) the amount of Excess Spread and the
Excess Finance Charges allocable to Series 1998-1 with respect to such
Distribution Date and (z) the Available Cash Collateral Amount with respect to
such Distribution Date, the Class C Invested Amount will be reduced by the
amount of such excess, but not by more than the excess of the Class A Investor
Default Amount for such Distribution Date over the amount of Reallocated
----
Principal Collections, the amount of Excess Spread and Excess Finance Charges
and the amount withdrawn from the Cash Collateral Account used to fund the Class
A Investor Default Amount for such Distribution Date. In the event that such
reduction would cause the Class C Invested Amount to be a negative number, the
Class C Invested Amount will be reduced to zero and the Class B Invested Amount
shall be reduced by the amount by which the Class C Invested Amount would have
been reduced below zero, but not by more than the excess, if any, of the Class A
Investor Default Amount for such Distribution Date over the amount of such
----
reduction, if any, of the Class C Invested Amount with respect to such
Distribution Date and the amount of Reallocated Principal Collections, the
amount of Excess Spread and Excess Finance Charges and the amount withdrawn from
the Cash Collateral Account used to fund the Class A Investor Default Amount for
such Distribution Date. In the event that such reduction would cause the Class
B Invested Amount to be a negative number, the Class B Invested Amount shall be
reduced to zero, and the Class A Invested Amount shall be reduced by the amount
by which the Class B Invested Amount would have been reduced below zero, but not
by more than the excess, if any, of the Class A Investor Default Amount for such
Distribution Date over the aggregate amount of the reductions, if any, of the
----
Class C Invested Amount and the Class B Invested Amount for such Distribution
Date and the amount of Reallocated Principal Collections, the amount of Excess
Spread and Excess Finance Charges and the amount withdrawn from the Cash
Collateral Account used to fund the Class A Investor Default Amount for such
Distribution Date (a "Class A Investor Charge-Off"). Class A Investor Charge-
Offs shall thereafter be reimbursed and the Class A Invested Amount increased
(but not by an amount in excess of the aggregate unreimbursed Class A Investor
Charge-Offs) on any Distribution Date by the amount of Excess Spread and Excess
Finance Charges allocated and available for that purpose pursuant to Section
4.07(b).
(b) On each Determination Date, the Servicer shall calculate the
Class B Required Amount, if any, for the related Distribution Date. If, on any
Distribution Date, the Class B Required Amount for such Distribution Date
exceeds the sum of (x) the amount of Excess Spread and Excess Finance Charges
allocated to Series 1998-1 with respect to the related Monthly Period which are
not used to fund the Class A Required Amount and Class A Investor Charge-Offs on
the related Distribution Date, (y) the portion, if any, of the Available Cash
Collateral Amount to be withdrawn from the Cash Collateral Account pursuant to
Section 4.12(c) which is remaining after applying such amounts to fund any
deficiency of amounts payable pursuant to Section 4.07(a) with respect to such
Distribution Date and (z) the amount of Reallocated Principal Collections which
are available to fund the Class B Required Amount on such Distribution Date
pursuant to Section 4.08(b), then the Class C Invested Amount shall be
28
reduced by the amount of such excess, but not by more than the excess of the
Class B Investor Default Amount for such Distribution Date over the amount of
----
Reallocated Principal Collections, the amount of Excess Spread and Excess
Finance Charges, and the amount withdrawn from the Cash Collateral Account used
to fund the Class B Investor Default Amount for such Distribution Date. In the
event that such reduction would cause the Class C Invested Amount to be a
negative number, the Class C Invested Amount shall be reduced to zero, and the
Class B Invested Amount shall be reduced by the amount than the excess, if any,
of the Class B Investor Default Amount for such Distribution Date over the
----
amount by which the Class C Invested Amount would have been reduced below zero,
but not by more than the amount of such reduction, if any, of the Class C
Invested Amount with respect to such Distribution Date and the amount of
Reallocated Principal Collections, the amount of Excess Spread and Excess
Finance Charges, and the amount withdrawn from the Cash Collateral Account used
to fund the Class B Investor Default Amount for such Distribution Date (a "Class
B Investor Charge-Off"). Class B Investor Charge-Offs shall thereafter be
reimbursed and the Class B Invested Amount increased (but not by an amount in
excess of the aggregate unreimbursed Class B Investor Charge-Offs) on any
Distribution Date by the amount of Excess Spread and Excess Finance Charges
allocated and available for that purpose pursuant to Section 4.07(d).
(c) If, on any Distribution Date, Reallocated Principal Collections
for such Distribution Date are applied pursuant to Section 4.08(a) or (b), the
Class C Invested Amount shall be reduced by the amount of such Reallocated
Principal Collections. In the event that such reduction would cause the Class C
Invested Amount to be a negative number, the Class C Invested Amount shall be
reduced to zero, and the Class B Invested Amount shall be reduced by the amount
by which the Class C Invested Amount would have been reduced below zero.
(d) If, on any Distribution Date, the Class C Investor Default Amount
exceeds the sum of (x) the amount of Excess Spread and Excess Finance Charges
available to fund the Class C Investor Default Amount pursuant to Section
4.07(g) on such Distribution Date, (y) the portion, if any, of the Available
Cash Collateral Amount to be withdrawn from the Cash Collateral Account to fund
the Class C Investor Default Amount pursuant to Section 4.07(g) on such
Distribution Date and (z) funds withdrawn from the Class C Spread Account
pursuant to the Class C Supplemental Agreement to fund the Class C Investor
Default Amount, then the Class C Invested Amount shall be reduced by the amount
of such excess; provided, however, that the Class C Invested Amount shall not be
-------- -------
reduced below zero.
Section 4.07. Excess Spread; Excess Finance Charges. The Servicer
-------------------------------------
shall apply (if the Seller is the Servicer and the Collection Account is
maintained with the Seller) or shall cause the Trustee to apply, on each
Distribution Date, Excess Spread and Excess Finance Charges allocated to Series
1998-1 with respect to the related Monthly Period, to make the following
distributions in the following priority:
(a) an amount equal to the Class A Required Amount, if any, with
respect to such Distribution Date shall be distributed by the Trustee to
fund any deficiency pursuant to Sections 4.05(a)(i), (ii) and (iii);
provided that, in the event the Class A Required Amount for such
--------
Distribution Date exceeds the amount of Excess Spread and Excess Finance
Charges allocated to Series 1998-1, such Excess Spread and Excess Finance
Charges
29
shall be applied first to pay amounts due with respect to such Distribution
Date pursuant to Section 4.05(a)(i), second to pay the Class A Servicing
Fee pursuant to Section 4.05(a)(ii) and third to pay the Class A Investor
Default Amount for such Distribution Date pursuant to Section 4.05(a)(iii);
(b) an amount equal to the aggregate amount of Class A Investor
Charge-Offs which have not been previously reimbursed as provided in
Section 4.06(a) (after giving effect to the allocation on such Distribution
Date of any amount for that purpose pursuant to Section 4.06(a)) shall be
treated as a portion of Available Investor Principal Collections for such
Distribution Date;
(c) an amount equal to the Class B Required Amount, if any, with
respect to such Distribution Date shall be distributed by the Trustee (I)
to fund any deficiency pursuant to Sections 4.05(b)(i) and (ii) and (II)
for application, up to the Class B Investor Default Amount, as a portion of
Available Investor Principal Collections for such Distribution Date;
provided, that in the event the Class B Required Amount for such
--------
Distribution Date exceeds the amount of Excess Spread and Excess Finance
Charges allocated to Series 1998-1 and available to pay such amount
pursuant to this clause (c), such Excess Spread and Excess Finance Charges
shall be applied first to pay amounts due with respect to such Distribution
Date pursuant to Section 4.05(b)(i), second to pay the Class B Servicing
Fee pursuant to Section 4.05(b)(ii) and third as a portion of Available
Investor Principal Collections for such Distribution Date pursuant to
clause (II) above;
(d) an amount equal to the aggregate amount by which the Class B
Invested Amount has been reduced pursuant to clauses (c), (d) and (e) of
the definition of "Class B Invested Amount" in Section 2.01 of this
Supplement (but not in excess of the aggregate amount of such reductions
which have not been previously reimbursed) shall be treated as a portion of
Available Investor Principal Collections for such Distribution Date;
(e) an amount equal to the sum of Class C Monthly Interest for such
Distribution Date, plus the amount of any Class C Outstanding Monthly
----
Interest, plus the amount of any Class C Additional Interest for such
----
Distribution Date and any Class C Outstanding Additional Interest shall be
distributed to the Paying Agent for payment to the Class C Interest
Holders;
(f) an amount equal to the Class C Servicing Fee due but not paid to
the Servicer either on such Distribution Date or a prior Distribution Date
shall be paid to the Servicer;
(g) an amount equal to the Class C Investor Default Amount for such
Distribution Date shall be treated as a portion of Available Investor
Principal Collections with respect to such Distribution Date;
(h) an amount equal to the aggregate amount by which the Class C
Invested Amount has been reduced pursuant to clause (c) of the definition
of "Class C Invested Amount" (but not in excess of the aggregate amount of
such reductions which have not
30
been previously reimbursed) shall be treated as a portion of Available
Investor Principal Collections with respect to such Distribution Date;
(i) an amount up to the excess, if any, of the Required Cash
Collateral Amount over the Available Cash Collateral Amount (without giving
----
effect to any deposit made on such date hereunder) shall be deposited into
the Cash Collateral Account;
(j) on each Distribution Date from and after the Reserve Account
Funding Date, but prior to the date on which the Reserve Account terminates
as described in Section 4.11(f), an amount up to the excess, if any, of the
Required Reserve Account Amount over the Available Reserve Account Amount
----
shall be deposited into the Reserve Account;
(k) amounts required to be deposited in the Class C Spread Account
pursuant to the Class C Supplemental Agreement shall be deposited into the
Class C Spread Account;
(l) an amount equal to the aggregate of any amounts then due to the
depositor of funds into the Cash Collateral Account (or any successor
thereto or assignee thereof) pursuant to an agreement, as amended from time
to time, among the Seller, the Servicer, such depositor and the Trustee (to
the extent such amounts are payable pursuant to the terms of such agreement
out of Excess Spread or Excess Finance Charges) will be distributed to the
depositor or its designee for application in accordance with such
agreement; and
(m) the balance, if any, will constitute Excess Finance Charges for
such Distribution Date and will be available for allocation to other Series
in Group One or to the Seller as described in Section 4.05 of the
Agreement.
Section 4.08. Reallocated Principal Collections. The Servicer shall
---------------------------------
apply (if the Seller is the Servicer and the Collection Account is maintained
with the Seller) or shall cause the Trustee to apply on each Distribution Date
Reallocated Principal Collections (applying all such Collections with respect to
the Class C Invested Amount prior to applying any such Collections with respect
to the Class B Invested Amount and applying no such Collections with respect to
the Class B Invested Amount pursuant to clause (b) below) with respect to such
Distribution Date, to make the following distributions in the following
priority:
(a) an amount equal to the excess, if any, of (i) the Class A
Required Amount, if any, with respect to such Distribution Date over (ii)
----
the sum of (x) the amount of Excess Spread and Excess Finance Charges
allocated to Series 1998-1 with respect to the related Monthly Period and
(y) the Available Cash Collateral Amount with respect to such Distribution
Date, shall be distributed by the Trustee to fund any deficiency pursuant
to Sections 4.05(a)(i), (ii) and (iii); provided that, in the event the
--------
Class A Required Amount for such Distribution Date exceeds the sum of the
Available Cash Collateral Amount for such Distribution Date, the amount of
Excess Spread and Excess Finance Charges allocated to Series 1998-1 and the
amount of Reallocated Principal Collections for such Distribution Date, the
amount withdrawn from the Cash Collateral Account with respect
31
to such Class A Required Amount, such Excess Spread and Excess Finance
Charges allocated to Series 1998-1 and Reallocated Principal Collections
shall be applied first to pay amounts due with respect to such Distribution
Date pursuant to Section 4.05(a)(i), second to pay the Class A Servicing
Fee pursuant to Section 4.05(a)(ii) and third to pay the Class A Investor
Default Amount for such Distribution Date pursuant to Section 4.05(a)(iii);
(b) an amount equal to the excess, if any, of (i) the Class B
Required Amount, if any, with respect to such Distribution Date over (ii)
----
the sum of (x) the amount of Excess Spread and Excess Finance Charges to be
allocated and available to the Class B Certificateholder's Interest
pursuant to Section 4.07(c) on such Distribution Date and (y) the amount
withdrawn from the Cash Collateral Account pursuant to Section 4.12(c)
which is remaining after application pursuant to Section 4.07(a) with
respect to such Distribution Date, shall be distributed by the Trustee to
fund any deficiency pursuant to Sections 4.05(b)(i) and (ii) and Section
4.07(c)(II); provided that, in the event the Class B Required Amount for
--------
such Distribution Date exceeds the sum of the amount to be withdrawn from
the Cash Collateral Account pursuant to Section 4.12(c) which is remaining
after application pursuant to Section 4.08(a) with respect to such
Distribution Date, the amount of Excess Spread and Excess Finance Charges
to be allocated to the Class B Certificateholders' Interest on such
Distribution Date and the amount of Reallocated Principal Collections
(other than Reallocated Principal Collections distributed pursuant to
clause (a) above) for such Distribution Date, the amount withdrawn from the
Cash Collateral Account with respect to the Class B Required Amount, such
Excess Spread and Excess Finance Charges and such Reallocated Principal
Collections shall be applied first to pay the amounts due with respect to
such Distribution Date pursuant to Section 4.05(b)(i), second to pay the
Class B Servicing Fee pursuant to Section 4.05(b)(ii) and third to apply
any remaining amount as a portion of Available Investor Principal
Collections for such Distribution Date pursuant to Section 4.07(c)(II); and
(c) the balance, if any, of such Reallocated Principal Collections
shall be treated as a portion of Available Investor Principal Collections
to be applied in accordance with Sections 4.05(d) and (e).
Section 4.09. Excess Finance Charges. Series 1998-1 shall be
----------------------
included in Group One. Subject to Section 4.05 of the Agreement, Excess Finance
Charges with respect to the Series in Group One for any Distribution Date will
be allocated to Series 1998-1 in an amount equal to the product of (x) the
aggregate amount of Excess Finance Charges with respect to all the Series in
Group One for such Distribution Date and (y) a fraction, the numerator of which
is the Finance Charge Shortfall for Series 1998-1 for such Distribution Date and
the denominator of which is the aggregate amount of Finance Charge Shortfalls
for all the Series in Group One for such Distribution Date. The "Finance Charge
Shortfall" for Series 1998-1 for any Distribution Date will be equal to the
excess, if any, of (a) the full amount required to be paid, without duplication,
pursuant to Sections 4.05(a), 4.05(b), 4.05(c) and 4.07 on such Distribution
Date over (b) the Floating Allocation Percentage of Collections of Finance
----
Charge Receivables with respect to the related Monthly Period.
32
Section 4.10. Shared Principal Collections. Subject to Section 4.04
----------------------------
of the Agreement, Shared Principal Collections for any Distribution Date will be
allocated to Series 1998-1 in an amount equal to the product of (x) the
aggregate amount of Shared Principal Collections with respect to all Series for
such Distribution Date and (y) a fraction, the numerator of which is the
Principal Shortfall for Series 1998-1 for such Distribution Date and the
denominator of which is the aggregate amount of Principal Shortfalls for all the
Series which are Principal Sharing Series for such Distribution Date. The
"Principal Shortfall" for Series 1998-1 will be equal to (a) for any
Distribution Date with respect to the Revolving Period, zero, (b) for any
Distribution Date with respect to the Class A Accumulation Period and the Class
B Amortization Period (but not including the Class B Expected Final Payment
Date), the excess, if any, of the sum of (i) the Controlled Deposit Amount with
respect to such Distribution Date and (ii) if such Distribution Date is the
Distribution Date immediately following the Class A Expected Final Payment Date,
one-half of the Class B Initial Invested Amount, over the amount of Available
----
Investor Principal Collections for such Distribution Date (excluding any portion
thereof attributable to Shared Principal Collections) and (c) for any
Distribution Date with respect to the Early Amortization Period and for each
Distribution Date on or after the Class B Expected Final Payment Date, the
excess, if any, of the Invested Amount over the amount of Available Investor
----
Principal Collections for such Distribution Date (excluding any portion thereof
attributable to Shared Principal Collections).
Series 1998-1 is a Subordinated Excess Principal Series. Excess
Shared Principal Collections for the Distribution Date, if any, will be
allocated to Series 1998-1 in an amount equal to the lesser of (i) the
Subordinated Excess Principal Shortfall of Series 1998-1 for such Distribution
Date and (ii) the product of (x) Excess Shared Principal Collections and (y) a
fraction, the numerator of which is the Subordinated Excess Principal Shortfall
of Series 1998-1 for such Distribution Date and the denominator of which is the
aggregate amount of Subordinated Excess Principal Shortfalls (as defined in each
related Supplement) of all Subordinated Excess Principal Series. The
"Subordinated Excess Principal Shortfall" of Series 1998-1 for any Distribution
Date from and including the Class B Principal Commencement Date shall equal the
excess of the Invested Amount over the sum of (i) Available Investor Principal
Collections for such Distribution Date (excluding any portion thereof
attributable to Subordinated Excess Principal Collections) and (ii) the
Principal Shortfall for such Distribution Date.
Section 4.11. Reserve Account.
---------------
(a) The Servicer shall establish and maintain, in the name of the
Trustee, on behalf of the Trust, for the benefit of the Class A
Certificateholders, an Eligible Deposit Account (the "Reserve Account") bearing
a designation clearly indicating that the funds deposited therein are held for
the benefit of the Class A Certificateholders. The Reserve Account shall
initially be established with The Bank of New York. The Trustee shall possess
all right, title and interest in all funds on deposit from time to time in the
Reserve Account and in all proceeds thereof. The Reserve Account shall be under
the sole dominion and control of the Trustee for the benefit of the Class A
Certificateholders. If at any time the Reserve Account ceases to be an Eligible
Deposit Account, the Trustee (or the Servicer on its behalf) shall within 10
Business Days (or
33
such longer period, not to exceed 30 calendar days, as to
which each Rating Agency may consent) establish a new Reserve Account meeting
the conditions specified above as an Eligible Deposit Account, and shall
transfer any cash and/or any investments to such new Reserve Account. The
Trustee, at the direction of the Servicer, shall (i) make withdrawals from the
Reserve Account from time to time in an amount up to the Available Reserve
Account Amount at such time, for the purposes set forth in this Supplement, and
(ii) on each Distribution Date (from and after the Reserve Account Funding Date)
prior to the termination of the Reserve Account make a deposit into the Reserve
Account in the amount specified in, and otherwise in accordance with, Section
4.07(j).
(b) Funds on deposit in the Reserve Account shall be invested at the
direction of the Servicer by the Trustee in Eligible Investments. Funds on
deposit in the Reserve Account on any Transfer Date, after giving effect to any
withdrawals from the Reserve Account on such Transfer Date, shall be invested in
such investments that will mature so that such funds will be available for
withdrawal on or prior to the following Transfer Date. The Trustee shall
maintain for the benefit of the Class A Certificateholders possession of the
negotiable instruments or securities, if any, evidencing such Eligible
Investments. No Eligible Investment shall be disposed of prior to its maturity;
provided, however, that the Trustee may sell, liquidate or dispose of an
-------- -------
Eligible Investment before its maturity, if so directed by the Servicer, the
Servicer having reasonably determined that the interest of the Class A
Certificateholders may be adversely affected if such Eligible Investment is held
to its maturity. On each Distribution Date, all interest and earnings (net of
losses and investment expenses) accrued since the preceding Distribution Date on
funds on deposit in the Reserve Account shall be retained in the Reserve Account
(to the extent that the Available Reserve Account Amount is less than the
Required Reserve Account Amount) and the balance, if any, shall be deposited in
the Collection Account and treated as Collections of Finance Charge Receivables
allocable to Series 1998-1. For purposes of determining the availability of
funds or the balance in the Reserve Account for any reason under this
Supplement, except as otherwise provided in the preceding sentence, investment
earnings on such funds shall be deemed not to be available or on deposit.
(c) On the Determination Date preceding each Distribution Date with
respect to the Class A Accumulation Period and the first Special Payment Date,
the Servicer shall calculate the "Reserve Draw Amount" which shall be equal to
the excess, if any, of the Covered Amount with respect to such Distribution Date
or Special Payment Date over the Principal Funding Investment Proceeds with
----
respect to such Distribution Date or Special Payment Date; provided that such
--------
amount will be reduced to the extent that funds otherwise would be available for
deposit in the Reserve Account under Section 4.07(j) with respect to such
Distribution Date or Special Payment Date.
(d) In the event that for any Distribution Date the Reserve Draw
Amount is greater than zero, the Reserve Draw Amount, up to the Available
Reserve Account Amount, shall be withdrawn from the Reserve Account on the
related Transfer Date by the Trustee (acting in accordance with the instructions
of the Servicer), deposited into the Collection Account and included in Class A
Available Funds.
34
(e) In the event that the Reserve Account Surplus on any Distribution
Date, after giving effect to all deposits to and withdrawals from the Reserve
Account with respect to such Distribution Date, is greater than zero, the
Trustee, acting in accordance with the instructions of the Servicer, shall
withdraw from the Reserve Account, and pay to the Seller, an amount equal to
such Reserve Account Surplus.
(f) Upon the earliest to occur of (i) the termination of the Trust
pursuant to Article XII of the Agreement, (ii) the day on which the Class A
Invested Amount is paid in full to the Class A Certificateholders, (iii) if the
Class A Accumulation Period has not commenced, the occurrence of a Pay Out Event
with respect to Series 1998-1 and (iv) if the Class A Accumulation Period has
commenced, the earlier of the first Special Payment Date and the Class A
Expected Final Payment Date, the Trustee, acting in accordance with the
instructions of the Servicer, after the prior payment of all amounts owing to
the Class A Certificateholders which are payable from the Reserve Account as
provided herein, shall withdraw from the Reserve Account and pay to the Seller
all amounts, if any, on deposit in the Reserve Account and the Reserve Account
shall be deemed to have terminated for purposes of this Supplement.
Section 4.12. Cash Collateral Account.
-----------------------
(a) The Servicer shall establish and maintain, in the name of the
Trustee, on behalf of the Trust, for the benefit of the Series 1998-1
Certificateholders and the Class C Interest Holders, as their interests appear
herein and in the Class C Supplemental Agreement, an Eligible Deposit Account
(the "Cash Collateral Account") bearing a designation clearly indicating that
the funds deposited therein are held for the benefit of the Series 1998-1
Certificateholders and the Class C Interest Holders. The Cash Collateral
Account shall initially be established with the Trustee. The Trustee shall
possess all right, title and interest in all funds on deposit from time to time
in the Cash Collateral Account and in all proceeds thereof. The Cash Collateral
Account shall be under the sole dominion and control of the Trustee for the
benefit of the Series 1998-1 Certificateholders and the Class C Interest
Holders. The interest of the Class C Interest Holders in the Cash Collateral
Account shall be subordinated to the interests of the Series 1998-1
Certificateholders as provided herein and in the Class C Supplemental Agreement.
If at any time the Cash Collateral Account ceases to be an Eligible Deposit
Account, the Trustee (or the Servicer on its behalf) shall within 10 Business
Days (or such longer period, not to exceed 30 calendar days, as to which each
Rating Agency may consent) establish a new Cash Collateral Account meeting the
conditions specified above as an Eligible Deposit Account, and shall transfer
any cash and/or any investments to such new Cash Collateral Account. The
Trustee, at the direction of the Servicer, shall make deposits to and
withdrawals from the Cash Collateral Account in the amounts and at the times set
forth in this Supplement and the Class C Supplemental Agreement. All
withdrawals from the Cash Collateral Account shall be made in the priority set
forth below. The Class C Interest Holders shall not be entitled to
reimbursement from the Trust Assets for any withdrawals from the Cash Collateral
Account except as specifically provided in this Supplement and the Class C
Supplemental Agreement.
(b) On the Closing Date, the Trustee shall deposit the Initial Cash
Collateral Amount received by it from the Seller in immediately available funds
into the Cash Collateral Account. Funds on deposit in the Cash Collateral
Account shall be invested at the direction of
35
the Servicer by the Trustee in Cash Collateral Account Investments. Funds on
deposit in the Cash Collateral Account on any Transfer Date, after giving effect
to any withdrawals from the Cash Collateral Account on such Transfer Date, shall
be invested in such investments that will mature so that such funds will be
available for withdrawal on or prior to the following Transfer Date. No Eligible
Investment shall be disposed of prior to its maturity; provided, however, that
-------- -------
the Trustee may sell, liquidate or dispose of an Eligible Investment before its
maturity, if so directed by the Servicer, the Servicer having reasonably
determined that the interest of the 1998-1 Certificateholders may be adversely
affected if such Eligible Investment is held to its maturity. The proceeds of
any such investments shall be invested in such investments that will mature so
that such funds will be available for withdrawal on or prior to the Transfer
Date immediately following the date of such investment. The Trustee shall
maintain for the benefit of the Series 1998-1 Certificateholders and the Class C
Interest Holders possession of the negotiable instruments or securities, if any,
evidencing the Cash Collateral Account Investments. On each Transfer Date, all
interest and earnings (net of losses and investment expenses) accrued since the
preceding Transfer Date on funds on deposit in the Cash Collateral Account shall
be paid to the Seller. For purposes of determining the availability of funds or
the balances in the Cash Collateral Account for any reason under this
Supplement, all investment earnings on such funds shall be deemed not to be
available or on deposit.
(c) On each Determination Date, the Servicer shall calculate the
amount (the "Required Draw Amount") by which the amounts specified in clauses
(a) through (g) of Section 4.07 with respect to the related Distribution Date
exceed the amount of Excess Spread and Excess Finance Charges allocated with
respect to the related Monthly Period. In the event that for any Distribution
Date the Required Draw Amount is greater than zero, the Servicer shall give
written notice to the Trustee, in substantially the form of Exhibit B, of such
positive Required Draw Amount on the related Determination Date. On the related
Transfer Date, the Required Draw Amount, if any, up to the Available Cash
Collateral Amount shall be withdrawn from the Cash Collateral Account and
distributed to fund any deficiency pursuant to Section 4.07(a) through (g) (in
the order of priority set forth in Section 4.07).
(d) In the event that the Cash Collateral Surplus on any Distribution
Date, after giving effect to all deposits to and withdrawals from the Cash
Collateral Account with respect to such Distribution Date, is greater than zero,
the Trustee, acting in accordance with the instructions of the Servicer, shall
withdraw from the Cash Collateral Account, and apply in accordance with the
Class C Supplemental Agreement, an amount equal to such Cash Collateral Surplus.
36
ARTICLE V
Distributions and Reports to
Series 1998-1 Certificateholders
--------------------------------
Section 5.01. Distributions.
-------------
(a) On each Payment Date, the Paying Agent shall distribute to each
Class A Certificateholder of record on the related Record Date (other than as
provided in Section 12.02 of the Agreement) such Class A Certificateholder's pro
rata share of the amounts that are allocated and available on such Payment Date
to pay interest on the Class A Certificates pursuant to this Supplement.
(b) On each Special Payment Date and on the Class A Expected Final
Payment Date, the Paying Agent shall distribute to each Class A
Certificateholder of record on the related Record Date (other than as provided
in Section 12.02 of the Agreement) such Class A Certificateholder's pro rata
share of the amounts on deposit in the Principal Funding Account or otherwise
held by the Paying Agent and which are allocated and available on such date to
pay principal of the Class A Certificates pursuant to this Supplement up to a
maximum amount on any such date equal to the Class A Invested Amount on such
date (unless there has been an optional repurchase of the Series 1998-1
Certificateholders' Interest pursuant to Section 10.01 of the Agreement, in
which event the foregoing limitation will not apply).
(c) On each Payment Date, the Paying Agent shall distribute to each
Class B Certificateholder of record on the related Record Date (other than as
provided in Section 12.02 of the Agreement) such Class B Certificateholder's pro
rata share of the amounts that are allocated and available on such Payment Date
to pay interest on the Class B Certificates pursuant to this Supplement.
(d) On each Distribution Date commencing with the Class B Principal
Commencement Date, the Paying Agent shall distribute to each Class B
Certificateholder of record on the related Record Date (other than as provided
in Section 12.02 of the Agreement) such Class B Certificateholder's pro rata
share of the amounts held by the Paying Agent and which are allocated and
available on such date to pay principal of the Class B Certificates pursuant to
this Supplement up to a maximum amount on any such date equal to the Class B
Invested Amount on such date (unless there has been an optional repurchase of
the Series 1998-1 Certificateholders' Interest pursuant to Section 10.01 of the
Agreement, in which event the foregoing limitation will not apply).
(e) On each Payment Date, the Paying Agent shall distribute to each
Class C Interest Holder of record on the related Record Date such Class C
Interest Holder's pro rata share of the amounts that are allocated and available
on such Payment Date to pay interest on the Class C Interests pursuant to this
Supplement and the Class C Supplemental Agreement (including amounts available
from any withdrawal from the Class C Spread Account for the purpose of paying
such interest).
37
(f) On each Distribution Date commencing with the Class C Principal
Commencement Date, the Paying Agent shall distribute to each Class C Interest
Holder of record on the related Record Date such Class C Interest Holder's pro
rata share of the amounts, if any, that are allocated and available on such date
to pay principal of the Class C Interests pursuant to this Supplement and the
Class C Supplemental Agreement (including amounts available from any withdrawal
from the Class C Spread Account for the purpose of paying such principal) up to
a maximum amount on any such date equal to the Class C Invested Amount (unless
there has been an optional repurchase of the Series 1998-1 Certificateholders'
Interest pursuant to Section 10.01 of the Agreement, in which event the
foregoing limitation will not apply).
(g) The distributions to be made pursuant to this Section 5.01 are
subject to the provisions of Sections 2.06, 9.02, 10.01 and 12.02 of the
Agreement and Sections 8.01 and 8.02 of this Supplement.
(h) Except as provided in Section 12.02 of the Agreement with respect
to a final distribution, distributions to each Series 1998-1 Certificateholder
hereunder shall be made by check mailed to each Series 1998-1 Certificateholder
at such Series 1998-1 Certificateholder's address appearing in the Certificate
Register without presentation or surrender of any Series 1998-1 Certificate or
the making of any notation thereon; provided, however, that with respect to the
-------- -------
Series 1998-1 Certificates registered in the name of a Clearing Agency, such
distributions shall be made to such Clearing Agency in immediately available
funds. Distributions to each Class C Interest Holder hereunder shall be made
(i) by wire transfer in same day funds to an account at a bank or other
depository institution located within the United States as shall have been
designated by such Class C Interest Holder by notice in writing on or before the
related Payment Date or (ii) in the absence of such designation, by check mailed
to each Class C Interest Holder at the address appearing in the Book-Entry
Register.
Section 5.02. Reports and Statements to Series 1998-1
---------------------------------------
Certificateholders.
------------------
(a) On each Distribution Date, the Paying Agent, on behalf of the
Trustee, shall make available for inspection upon request to each Series 1998-1
Holder free of charge at the office of such Paying Agent a statement
substantially in the form of Exhibit C prepared by the Servicer for a period of
six months commencing on such Distribution Date.
(b) Not later than each Determination Date, the Servicer shall
deliver to the Trustee, the Paying Agent and each Rating Agency (i) a statement
substantially in the form of Exhibit C prepared by the Servicer and (ii) a
certificate of a Servicing Officer substantially in the form of Exhibit D.
(c) On or before January 31 of each calendar year, beginning with the
calendar year next succeeding the Closing Date, the Paying Agent, on behalf of
the Trustee, shall make available for inspection upon request to each Person who
at any time during the preceding calendar year was a Series 1998-1 Holder free
of charge at the office of such Paying Agents, a statement prepared by the
Servicer containing the information which is required to be contained in the
statement to Series 1998-1 Holders, as set forth in paragraph (a) or (b) above,
as applicable, aggregated for such calendar year or the applicable portion
thereof during which such
38
Person was a Series 1998-1 Holder, together with other information as is
required to be provided by an issuer of indebtedness under the Internal Revenue
Code for a period of eighteen months commencing on February 1 of such calendar
year. Such obligation of the Servicer shall be deemed to have been satisfied to
the extent that substantially comparable information shall be made available for
inspection by the Paying Agent pursuant to any requirements of the Internal
Revenue Code as from time to time in effect.
ARTICLE VI
Additional Pay Out Events
-------------------------
Section 6.01. Additional Pay Out Events. If any one of the following
-------------------------
events shall occur with respect to the Series 1998-1 Certificates:
(a) failure on the part of the Seller (i) to make any payment or
deposit required by the terms of the Agreement or this Supplement on or
before the date occurring five Business Days after the date such payment or
deposit is required to be made therein or herein or (ii) duly to observe or
perform any other covenants or agreements of the Seller set forth in the
Agreement or this Supplement (including the covenants of the Seller
contained in Article IX of this Supplement), which failure has a material
adverse effect on the Series 1998-1 Holders and which continues unremedied
for a period of 60 days after the date on which written notice of such
failure, requiring the same to be remedied, shall have been given to the
Seller by the Trustee, or to the Seller and the Trustee by any Series 1998-
1 Holder;
(b) any representation or warranty made by the Seller in the Agreement
or this Supplement, or any information contained in a computer file or
microfiche list required to be delivered by the Seller pursuant to Section
2.01 or 2.08(g) of the Agreement shall prove to have been incorrect in any
material respect when made or when delivered, which continues to be
incorrect in any material respect for a period of 60 days after the date on
which written notice of such failure, requiring the same to be remedied,
shall have been given to the Seller by the Trustee, or to the Seller and
the Trustee by any Holder of the Series 1998-1 Interests and as a result of
which the interests of the Series 1998-1 Holders are materially and
adversely affected and continue to be materially and adversely affected for
such period; provided, however, that a Pay Out Event pursuant to this
-------- -------
Section 6.01(b) shall not be deemed to have occurred hereunder if the
Seller has accepted reassignment of the related Receivable, or all of such
Receivables, if applicable, during such period in accordance with the
provisions of the Agreement;
(c) a failure by the Seller to convey Receivables in Additional
Accounts or Participation Interests to the Trust within five Business Days
after the day on which it is required to convey such Receivables or
Participation Interests pursuant to Section 2.08(a) of the Agreement or
Section 9.02 of this Supplement;
(d) any Servicer Default shall occur;
39
(e) a Transfer Restriction Event shall occur;
(f) the average Portfolio Yield for any three consecutive Monthly
Periods is reduced to a rate which is less than the average Base Rate for
such three Monthly Periods; or
(g) the Class A Invested Amount shall not be paid in full on the
Class A Expected Final Payment Date or the Class B Invested Amount shall
not be paid in full on the Class B Expected Final Payment Date;
then, in the case of any event described in subparagraph (a), (b) or (d), after
the applicable grace period, if any, set forth in such subparagraphs, either the
Trustee or the holders of Investor Certificates (including the Class C Interest
Holders) of Series 1998-1 evidencing more than 50% of the aggregate unpaid
principal amount of Investor Certificates (including the Class C Interests) by
notice then given in writing to the Seller and the Servicer (and to the Trustee
if given by the holders of Investor Certificates (including the Class C Interest
Holders) of Series 1998-1) may declare that a Pay Out Event has occurred with
respect to Series 1998-1 as of the date of such notice, and, in the case of any
event described in subparagraph (c), (e), (f) or (g) a Pay Out Event shall occur
with respect to Series 1998-1 without any notice or other action on the part of
the Trustee or holders of Investor Certificates (including the Class C Interest
Holders) of Series 1998-1 immediately upon the occurrence of such event.
ARTICLE VII
Optional Repurchase; Series Termination
---------------------------------------
Section 7.01. Optional Repurchase.
-------------------
(a) On any day occurring on or after the date on which the Invested
Amount is reduced to 5% or less of the Initial Invested Amount, the Seller shall
have the option to purchase the interest of the Series 1998-1 Holders, at a
purchase price equal to (i) if such day is a Distribution Date, the Reassignment
Amount for such Distribution Date or (ii) if such day is not a Distribution
Date, the Reassignment Amount for the Distribution Date following such day.
(b) The Seller shall give the Servicer and the Trustee at least 30
days prior written notice of the date on which the Seller intends to exercise
such purchase option. Not later than 12:00 noon, Richmond time, on such day the
Seller shall deposit the Reassignment Amount into the Collection Account in
immediately available funds. Such purchase option is subject to payment in full
of the Reassignment Amount. Following the deposit of the Reassignment Amount
into the Collection Account in accordance with the foregoing, the Invested
Amount for Series 1998-1 shall each be reduced to zero and the Series 1998-1
Certificateholders and the Class C Interest Holders shall have no further
interest in the Receivables. The Reassignment Amount shall be distributed as
set forth in Section 8.01(b).
40
Section 7.02. Series Termination.
------------------
(a) If, on the April 2011 Distribution Date, the Invested Amount
(after giving effect to all changes therein on such Distribution Date) would be
greater than zero, the Servicer, on behalf of the Trustee, shall, within the 40-
day period which begins on such Distribution Date, solicit bids for the sale of
Principal Receivables and the related Finance Charge Receivables (or interests
therein) in an amount equal to the Invested Amount at the close of business on
the last day of the Monthly Period preceding the Termination Date (after giving
effect to all distributions required to be made on the Termination Date, except
pursuant to this Section 7.02). Such bids shall require that such sale shall
(subject to Section 7.02(b)) occur on the Termination Date. The Seller shall be
entitled to participate in, and to receive from the Trustee a copy of each other
bid submitted in connection with, such bidding process.
(b) The Servicer, on behalf of the Trustee, shall sell such
Receivables (or interests therein) on the Termination Date to the bidder who
made the highest cash purchase offer. The proceeds of any such sale shall be
treated as Collections on the Receivables allocated to the Series 1998-1 Holders
pursuant to the Agreement and this Supplement; provided, however, that the
-------- -------
Servicer shall determine conclusively the amount of such proceeds which are
allocable to Finance Charge Receivables and the amount of such proceeds which
are allocable to Principal Receivables. During the period from the April 2011
Distribution Date to the Termination Date, the Servicer shall continue to
collect payments on the Receivables and allocate and deposit such collections in
accordance with the provisions of the Agreement and the Supplements.
ARTICLE VIII
Final Distributions
-------------------
Section 8.01. Sale of Receivables or Certificateholders' Interest
---------------------------------------------------
pursuant to Section 2.06 or 9.01 of the Agreement.
-------------------------------------------------
(a) Purchase Price. (i) The amount to be paid by the Seller with
--------------
respect to Series 1998-1 in connection with a reassignment of Receivables
to the Seller pursuant to Section 2.06 of the Agreement shall equal the
Reassignment Amount for the first Distribution Date following the Monthly
Period in which the reassignment obligation arises under the Agreement.
(ii) The amount to be paid by the Seller with respect to Series 1998-
1 in connection with a repurchase of the Certificateholders' Interest
pursuant to Section 10.01 of the Agreement shall equal the sum of (x) the
Reassignment Amount for the Distribution Date of such repurchase and (y)
the sum of (A) the excess, if any, of (I) a price equivalent to the average
of bids quoted on the Record Date preceding the date of repurchase (or, if
not a Business Day, on the next succeeding Business Day) by at least two
recognized dealers selected by the Trustee (which may be selected from the
list attached as Schedule 1), for the purchase by such dealers of a
security which is similar to
41
the Class A Certificates with a remaining maturity approximately equal to
the remaining maturity of the Class A Certificates and rated by each Rating
Agency in the rating category originally assigned to the Class A
Certificates over (II) the Reassignment Amount attributable to the Class A
----
Certificates and (B) the excess, if any, of (I) a price equivalent to the
average of bids quoted on such Record Date or, if not a Business Day, on
the next succeeding Business Day by at least two recognized dealers
selected by the Trustee (which may be selected from the list attached as
Schedule 1), for the purchase by such dealers of a security which is
similar to the Class B Certificates with a remaining maturity approximately
equal to the remaining maturity of the Class B Certificates and rated by
each Rating Agency in the rating category originally assigned to the Class
B Certificates over (II) the portion of the Reassignment Amount
----
attributable to the Class B Certificates.
(b) Distributions Pursuant to Section 7.01 or 7.02 of this Supplement
-----------------------------------------------------------------
and Section 10.01 of the Agreement. With respect to the Reassignment. Amount
----------------------------------
deposited into the Collection Account pursuant to Section 7.01 or 8.01(a)(ii) or
any amounts allocable to the Series 1998-1 Certificateholders' Interest
deposited into the Collection Account pursuant to Section 7.02, the Trustee
shall, not later than 12:00 noon, Richmond time, on the related Distribution
Date, make deposits or distributions of the following amounts (in the priority
set forth below and, in each case, after giving effect to any deposits and
distributions otherwise to be made on such date) in immediately available funds:
(i) (x) the Class A Invested Amount on such Distribution Date will be
distributed to the Paying Agent for payment to the Class A Certificateholders
and (y) an amount equal to the sum of (A) Class A Monthly Interest for such
Distribution Date, (B) any Class A Outstanding Monthly Interest and (C) the
amount of Class A Additional Interest, if any, for such Distribution Date and
any Class A Outstanding Additional Interest, will be distributed to the Paying
Agent for payment to the Class A Certificateholders, (ii) (x) the Class B
Invested Amount on such Distribution Date will be distributed to the Paying
Agent for payment to the Class B Certificateholders and (y) an amount equal to
the sum of (A) Class B Monthly Interest for such Distribution Date, (B) any
Class B Outstanding Monthly Interest and (C) the amount of Class B Additional
Interest, if any, for such Distribution Date and any Class B Outstanding
Additional Interest, will be distributed to the Paying Agent for payment to the
Class B Certificateholders and (iii) (x) the Class C Invested Amount on such
Distribution Date will be distributed to the Paying Agent for payment to the
Class C Interest Holders and (y) an amount equal to the sum of (A) Class C
Monthly Interest for such Distribution Date, (B) any Class C Outstanding Monthly
Interest and (C) the amount of Class C Additional Interest, if any, for such
Distribution Date and any Class C Outstanding Additional Interest, will be
distributed to the Paying Agent for payment to the Class C Interest Holders.
Notwithstanding anything to the contrary contained in this Supplement or the
Agreement, the amount of any excess determined pursuant to paragraph (a)(ii)(y)
shall be distributed to the Series 1998-1 Certificateholders.
(c) Distributions Pursuant to Section 2.06 of the Agreement. With
-------------------------------------------------------
respect to any amounts deposited into the Collection Account pursuant to Section
8.01(a)(i), the Trustee shall, not later than 12:00 noon, Richmond time, on the
related Distribution Date, deposit the principal portion of such amounts that
are allocable to the Class A Certificateholders' Interest into the Principal
Funding Account and the principal portion of such amounts allocable to the Class
B Certificateholders shall be distributed to the Paying Agent for payment to the
Class B
42
Certificateholders and the principal portion of such amounts that are allocable
to the Class C Interests shall be distributed to the Paying Agent for payment to
the Class C Interest Holders.
(d) Notwithstanding anything to the contrary in this Supplement or
the Agreement, all amounts distributed to the Paying Agent pursuant to Section
8.01(b) for payment to the Series 1998-1 Holders shall be deemed distributed in
full to the Series 1998-1 Holders on the date on which such funds are
distributed to the Paying Agent pursuant to this Section and shall be deemed to
be a final distribution pursuant to Section 12.02 of the Agreement.
Section 8.02. Distribution of Proceeds of Sale, Disposition or
------------------------------------------------
Liquidation of the Receivables pursuant to Section 9.02 of the Agreement.
------------------------------------------------------------------------
(a) Not later than 12:00 noon, Richmond time, on the Distribution
Date following the date on which the Insolvency Proceeds are deposited into the
Collection Account pursuant to Section 8.02(b) of the Agreement, the Trustee
shall (in the following priority and, in each case, after giving effect to any
deposits and distributions otherwise to be made on such Distribution Date) (i)
deduct an amount equal to the Class A Invested Amount on such Distribution Date
from the portion of the Insolvency Proceeds allocated to Collections of
Principal Receivables and distribute such amount to the Paying Agent for payment
to the Class A Certificateholders, provided that the amount of such distribution
shall not exceed the product of (x) the portion of the Insolvency Proceeds
allocated to Collections of Principal Receivables and (y) the Principal
Allocation Percentage with respect to the related Monthly Period, (ii) deduct an
amount equal to the Class B Invested Amount on such Distribution Date from the
portion of the Insolvency Proceeds allocated to Collections of Principal
Receivables and distribute such amount to the Paying Agent for payment to the
Class B Certificateholders, provided that the amount of such distribution shall
not exceed (x) the product of (A) the portion of such Insolvency Proceeds
allocated to Collections of Principal Receivables and (B) the Principal
Allocation Percentage with respect to the related Monthly Period minus (y) the
-----
amount distributed to the Paying Agent pursuant to clause (i) of this sentence
and (iii) deduct an amount equal to the Class C Invested Amount, if any, on such
Distribution Date from the portion of the Insolvency Proceeds allocated to
Collections of Principal Receivables and distribute such amount to the Paying
Agent for payment to the Class C Interest Holders, provided that the amount of
such distribution shall not exceed (x) the product of (1) the portion of the
Insolvency Proceeds allocated to Collections of Principal Receivables and (2)
the Principal Allocation Percentage with respect to such Monthly Period minus
-----
(y) the amounts distributed to the Paying Agent pursuant to clauses (i) and (ii)
of this sentence. To the extent that the product of (A) the portion of the
Insolvency Proceeds allocated to Collections of Principal Receivables and (B)
the Principal Allocation Percentage with respect to the related Monthly Period
exceeds the aggregate amounts distributed to the Paying Agent pursuant to the
preceding sentence, the excess shall be allocated to the Seller's Interest and
shall be released to the Seller on such Distribution Date.
(b) Not later than 12:00 noon, Richmond time, on such Distribution
Date, the Trustee shall (in the following priority and, in each case, after
giving effect to any deposits and distributions otherwise to be made on such
Distribution Date) (i) deduct an amount equal to the sum of (w) Class A Monthly
Interest for such Distribution Date, (x) any Class A Outstanding Monthly
Interest and (y) the amount of Class A Additional Interest, if any, for such
Distribution
43
Date and any Class A Outstanding Additional Interest, from the portion of the
Insolvency Proceeds allocated to Collections of Finance Charge Receivables and
distribute such amount to the Paying Agent for payment to the Class A
Certificateholders, provided that the amount of such distribution shall not
exceed the product of (A) the portion of the Insolvency Proceeds allocated to
Collections of Finance Charge Receivables, (B) the Floating Allocation
Percentage with respect to the related Monthly Period and (C) the Class A
Floating Percentage with respect to such Monthly Period, (ii) deduct an amount
equal to the sum of (w) Class B Monthly Interest for such Distribution Date,
(x) Class B Outstanding Monthly Interest and (y) the amount of Class B
Additional Interest, if any, for such Distribution Date and any Class B
Outstanding Additional Interest, from the portion of the Insolvency Proceeds
allocated to Collections of Finance Charge Receivables and distribute such
amount to the Paying Agent for payment to the Class B Certificateholders,
provided that the amount of such distribution shall not exceed the product of
(A) the portion of the Insolvency Proceeds allocated to Collections of Finance
Charge Receivables, (B) the Floating Allocation Percentage with respect to the
related Monthly Period and (C) the Class B Floating Percentage with respect to
such Monthly Period and (iii) deduct an amount equal to the sum of (w) Class C
Monthly Interest for such Distribution Date, (x) Class C Outstanding Monthly
Interest and (y) the amount of Class C Additional Interest, if any, for such
Distribution Date and any Class C Outstanding Additional Interest, from the
portion of the Insolvency Proceeds allocated to Collections of Finance Charge
Receivables and distribute such amount to the Paying Agent for payment to the
Class C Interest Holders, provided that the amount of such distribution shall
not exceed the product of (A) the portion of the Insolvency Proceeds allocated
to Collections of Finance Charge Receivables, (B) the Floating Allocation
Percentage with respect to the related Monthly Period and (C) the Class C
Floating Percentage with respect to such Monthly Period. To the extent that the
product of (x) the portion of the Insolvency Proceeds allocated to Collections
of Finance Charge Receivables and (y) the Floating Allocation Percentage with
respect to the related Monthly Period exceeds the aggregate amount distributed
to the Paying Agent pursuant to the preceding sentence, the excess shall be
allocated to the Sellers' Interest and shall be released to the Seller on such
Distribution Date.
(c) Notwithstanding anything to the contrary in this Supplement or
the Agreement, all amounts distributed to the Paying Agent pursuant to this
Section for payment to the Series 1998-1 Holders shall be distributed in full to
the Series 1998-1 Holders on the date on which funds are distributed to the
applicable Paying Agents pursuant to this Section and shall be deemed to be a
final distribution pursuant to Section 12.02 of the Agreement.
(d) Notwithstanding any provision of the Agreement or this
Supplement, for purposes of Section 9.02(a) of the Agreement, the Holders of the
Series 1998-1 Certificates shall not be deemed to have disapproved a liquidation
of the Receivables following an Insolvency Event with respect to the Seller
unless (i) holders of more than 50% of the aggregate unpaid principal amount of
each of the Class A Certificates and the Class B Certificates and (ii)
beneficial owners of more than 50% of the Class C Interests shall have
disapproved of such liquidation.
44
ARTICLE IX
New Issuances; Addition of Accounts; Additional Issuances
---------------------------------------------------------
Section 9.01. New Issuances. The obligation of the Trustee to
-------------
authenticate the Investor Certificates of a new Series and to execute and
deliver the related Supplement shall be subject to the conditions set forth in
Section 6.03(b) of the Agreement and to the additional condition that, as of the
Series Issuance Date and after giving effect to such issuance, the aggregate
amount of Principal Receivables equals or exceeds the Required Principal
Balance.
Section 9.02. Addition of Accounts.
--------------------
(i) If, as of the close of business on the last Business Day of any
Monthly Period, the aggregate amount of Principal Receivables is less than
the Required Principal Balance on such date, the Seller shall on or prior
to the close of business on the 10th Business Day following the last
Business Day of such Monthly Period (the "Required Designation Date"),
unless the aggregate amount of Principal Receivables exceeds the Required
Principal Balance as of the close of business on any day after the last
Business Day of such Monthly Period and prior to the Required Designation
Date, designate additional Eligible Accounts to be included as Accounts as
of the Required Designation Date or any earlier date in a sufficient amount
such that, after giving effect to such addition, the aggregate amount of
Principal Receivables equals or exceeds the Required Principal Balance on
such date. Each such addition shall be subject to the same conditions
applicable to any Addition required to be made pursuant to Section 2.08(a)
of the Agreement. The failure of any condition set forth in Section
2.08(c) or (d) of the Agreement, as the case may be, shall not relieve the
Seller of its obligation pursuant to this paragraph; provided, however,
-------- -------
that the failure of the Seller to transfer Receivables to the Trust as
provided in this paragraph solely as a result of the unavailability of a
sufficient amount of Eligible Receivables shall not constitute a breach of
this Supplement; provided further, that any such failure which has not been
-------- -------
timely cured will nevertheless result in the occurrence of a Pay Out Event
with respect to Series 1998-1.
(ii) In lieu of, or in addition to, designating Additional Accounts
pursuant to clause (i) above, the Seller may, subject to the conditions
specified in Section 2.03(d) of the Agreement, convey to the Trust
Participation Interests. The addition of Participation Interests in the
Trust pursuant to this paragraph shall be effected by an amendment to the
Agreement and this Supplement, dated the applicable Addition Date, pursuant
to Section 13.01(a) of the Agreement.
Section 9.03. Additional Issuances of Series 1998-1 Certificates.
--------------------------------------------------
(a) Subject to Sections 9.03(b) and (c), the Seller may at any time,
or from time to time, during the Revolving Period direct the Trustee, on
behalf of the Trust, to authenticate additional Class A Certificates (the
"Additional Class A Certificates") and additional Class B Certificates (the
"Additional Class B Certificates") on the first day of any Monthly Period
(each such day, an "Additional Issuance Date"). Any such issuance of
Additional Investor
45
Certificates is referred to herein as an "Additional Issuance". The
outstanding Investor Certificates of each Class and the Additional Investor
Certificates of that Class shall be equally and ratably entitled as provided
herein to the benefits of the Agreement and this Supplement without
preference, priority or distinction, all in accordance with the terms and
provisions of the Agreement and this Supplement.
(b) The obligation of the Trustee to authenticate Additional Investor
Certificates is subject to the satisfaction of the following conditions:
(i) on or before the fifth Business Day immediately preceding the
Additional Issuance Date, the Seller shall have given the Trustee, the
Servicer and each Rating Agency written notice of such Additional Issuance
and the Additional Issuance Date;
(ii) the Seller shall have delivered to the Trustee an amended
Supplement, in form satisfactory to the Trustee, executed by each party
hereto other than the Trustee;
(iii) after giving effect to the Additional Issuance, the total
amount of Principal Receivables shall be equal to, or greater than, the
Required Principal Balance;
(iv) the Seller shall have obtained additional Series Enhancement for
the benefit of the Series 1998-1 Certificateholders; provided that the
ratio of the sum of the Class C Invested Amount and the amount of such
Series Enhancement to the Invested Amount (after giving effect to such
Additional Issuance) shall be greater than or equal to the ratio of the
Class C Invested Amount to the Invested Amount (before giving effect to
such Additional Issuance);
(v) the Seller shall have delivered to the Trustee and each Rating
Agency a Tax Opinion dated the Additional Issuance Date, with respect to
such Additional Issuance;
(vi) the Seller shall have delivered to each Rating Agency (a) an
Opinion of Counsel to the effect that such Additional Issuance will not
violate applicable Federal securities laws and (b) such other documents as
the Rating Agencies may request;
(vii) the Seller shall have received written notice from each Rating
Agency that such Additional Issuance will not have a Ratings Effect;
(viii) the Seller 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 the time, in the reasonable belief of the Seller, such
Additional Issuance will not cause a Pay Out Event or an event that, after
the giving of notice or the lapse of time, would constitute a Pay Out Event
to occur with respect to Series 1998-1;
(ix) as of the Additional Issuance Date all amounts due and owing to
the Series 1998-1 Holders on or prior to such date shall have been paid to
such Holders and there shall not be any unreimbursed Investor Charge-Offs;
46
(x) the excess of the principal amount of the Additional Investor
Certificates over the issue price of the Additional Investor Certificates
----
shall not exceed the maximum amount permitted under the Internal Revenue
Code without the creation of original issue discount;
(xi) the Seller's Interest shall not be less than 2% of the total
amount of Principal Receivables, in each case as of the Additional Issuance
Date, after giving effect to such Additional Issuance;
(xii) the ratio of the Controlled Accumulation Amount (after giving
effect to such Additional Issuance) to the Invested Amount (after giving
effect to such Additional Issuance) shall be equal to the ratio of the
Controlled Accumulation Amount (before giving effect to such Additional
Issuance) to the Invested Amount (before giving effect to such Additional
Issuance); and
(xiii) the Seller shall have delivered to the Trustee an Officer's
Certificate, dated the Additional Issuance Date, confirming that the
conditions referred to above have been satisfied.
Upon satisfaction of the above conditions, the Trustee shall
authenticate the Additional Investor Certificates upon execution thereof by
the Seller.
(c) Notwithstanding any provision of the Agreement or this
Supplement, this Supplement may be amended by the Servicer, the Seller and the
Trustee, without the consent of any of the Certificateholders, to provide for
an Additional Issuance, provided that the conditions set forth in Section
9.03(b) have been satisfied.
ARTICLE X
Miscellaneous Provisions
------------------------
Section 10.01. Ratification of Agreement. As supplemented by this
-------------------------
Supplement and the Class C Supplemental Agreement, the Agreement is in all
respects ratified and confirmed and the Agreement as so supplemented by this
Supplement and the Class C Supplemental Agreement shall be read, taken and
construed as one and the same instrument.
Section 10.02. Counterparts. This Supplement may be executed in two
------------
or more counterparts, and by different parties on separate counterparts, each of
which shall be an original, but all of which shall constitute one and the same
instrument.
Section 10.03. Governing Law. THIS SUPPLEMENT SHALL BE CONSTRUED IN
-------------
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
47
Section 10.04. Determination of Material Adverse Effect. Any
----------------------------------------
determination of material adverse effect on the Series 1998-1 Certificateholders
under the Agreement or this Supplement shall be made assuming the Class C
Invested Amount is zero and without regard to whether funds are available in the
Cash Collateral Account (including, without limitation, any determination of
whether a representation or warranty made therein is correct or whether a Seller
or the Servicer has duly performed a covenant contained therein or herein).
Section 10.05. Book-Entry Certificates. The Class A Certificates and
-----------------------
the Class B Certificates shall be delivered as Book-Entry Certificates. The
Clearing Agency for the Class A Certificates and the Class B Certificates shall
be The Depository Trust Company, and the Class A Certificates and the Class B
Certificates shall be initially registered in the name of Cede & Co., its
nominee. The Series 1998-1 Certificates are issuable only in minimum
denominations of $1,000 and integral multiples of $1,000; provided, however,
-------- -------
that one Class B Certificate may be issued in a denomination that, together with
the other Class B Certificates, equals the outstanding principal balance of the
Class B Certificates.
Section 10.06. Uncertificated Securities. The Class C Interests
-------------------------
shall be delivered in uncertificated form as provided in the Class C
Supplemental Agreement.
Section 10.07. Seller's Direction to the Trustee. The Seller hereby
---------------------------------
directs the Trustee to enter into the Class C Supplemental Agreement pursuant to
this Supplement and the Agreement. The Trustee hereby agrees and covenants to
perform its obligations in accordance with such document.
48
IN WITNESS WHEREOF, the undersigned have caused this Supplement to be
duly executed and delivered by their respective duly authorized officers on the
day and year first above written.
CAPITAL ONE BANK,
Seller and Servicer
By:
---------------------
Name:
Title:
THE BANK OF NEW YORK,
Trustee
By:
---------------------
Name:
Title:
[Signature Page to Series 1998-1 Supplement]
49
