EXHIBIT 4(b)
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FINGERHUT RECEIVABLES, INC.
Transferor
FINGERHUT NATIONAL BANK
Servicer
and
THE BANK OF NEW YORK (DELAWARE)
Trustee
on behalf of the Series 1998-1 Securityholders
SERIES 1998-1 SUPPLEMENT
Dated as of _____________, 1998
to
AMENDED AND RESTATED
POOLING AND SERVICING AGREEMENT
Dated as of March 18, 1998
____________________________________
FINGERHUT MASTER TRUST
$337,500,000 __% Asset Backed
Securities, Series 1998-1, Class A
$51,136,000 __% Asset Backed
Securities, Series 1998-1, Class B
$61,364,000 Floating Rate Asset Backed
Collateralized Trust Obligation, Series 1998-1
$61,364,000 0% Asset Backed Securities,
Series 1998-1, Class D
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TABLE OF CONTENTS
Page
SECTION 1. Designation . . . . . . . . . . . . . . . . . . . . . . . . . .1
SECTION 2. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . .1
SECTION 3. Reassignment Terms. . . . . . . . . . . . . . . . . . . . . . 24
SECTION 4. Delivery and Payment for the Series 1998-1 Securities . . . . 24
SECTION 5. Form of Delivery of Series 1998-1 Securities; Denominations;
Depositary. . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 6. Article IV of Agreement . . . . . . . . . . . . . . . . . . . 27
ARTICLE IV
RIGHTS OF SECURITYHOLDERS AND
ALLOCATION AND APPLICATION OF COLLECTIONS
SECTION 4.4 Rights of Securityholders. . . . . . . . . . . . . . . . 27
SECTION 4.5 Collections and Allocation; Payments on Exchangeable
Transferor Security. . . . . . . . . . . . . . . . . . . 27
SECTION 4.6 Determination of Interest for the Series 1998-1
Securities . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 4.7 Determination of Principal Amounts . . . . . . . . . . . 30
SECTION 4.8 Shared Principal Collections . . . . . . . . . . . . . . 32
SECTION 4.9 Application of Funds on Deposit in the Collection
Account for the Securities . . . . . . . . . . . . . . . 32
SECTION 4.10 Coverage of Required Amount for the Series 1998-1
Securities . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 4.11 Payment of Interest on Securities. . . . . . . . . . . . 41
SECTION 4.12 Payment of Security Principal. . . . . . . . . . . . . . 42
SECTION 4.13 Series Charge-Offs . . . . . . . . . . . . . . . . . . . 43
SECTION 4.14 Redirected Principal Collections for the Series 1998-1
Securities . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 4.15 Determination of LIBOR . . . . . . . . . . . . . . . . . 46
SECTION 4.16 Defeasance Funding Account . . . . . . . . . . . . . . . 47
SECTION 4.17 Defeasance Reserve Account . . . . . . . . . . . . . . . 48
(i)
SECTION 4.18 Defeasance . . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 4.19 Revolving Receivables Reserve Account. . . . . . . . . . 50
SECTION 4.20 CTO Trigger. . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 4.21 CTO Reserve Account. . . . . . . . . . . . . . . . . . . 52
SECTION 4.22 Payment Reserve Account. . . . . . . . . . . . . . . . . 54
SECTION 4.23 Constituent Class D Securities . . . . . . . . . . . . . 55
SECTION 7. Article V of the Agreement . . . . . . . . . . . . . . . . . . . 55
ARTICLE V
DISTRIBUTIONS AND REPORTS TO INVESTOR
SECURITYHOLDERS
SECTION 5.1 Distributions. . . . . . . . . . . . . . . . . . . . . . 56
SECTION 5.2 Securityholders' Statement . . . . . . . . . . . . . . . 58
SECTION 8. Series 1998-1 Pay Out Events. . . . . . . . . . . . . . . . . 60
SECTION 9. Collateralized Trust Obligation Defaults and Remedies . . . . 62
SECTION 10. Series 1998-1 Termination . . . . . . . . . . . . . . . . . . 63
SECTION 11. Legends; Transfer and Exchange; Restrictions on Transfer of
Series 1998-1 Securities; Tax Treatment . . . . . . . . . . . 63
SECTION 12. Compliance with Withholding Requirements. . . . . . . . . . . 67
SECTION 13. Ratification of Agreement . . . . . . . . . . . . . . . . . . 67
SECTION 14. Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . 68
SECTION 15. GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . 68
SECTION 16. Instructions in Writing . . . . . . . . . . . . . . . . . . . 68
SECTION 17. Paired Series . . . . . . . . . . . . . . . . . . . . . . . . 68
ii
EXHIBITS
Exhibit A-1 Form of Class A Investor Security
Exhibit A-2 Form of Class B Investor Security
Exhibit A-3 Form of CTO Investor Security
Exhibit A-4 Form of Class D Investor Security
Exhibit B Form of Monthly Securityholder's Statement
Exhibit C Form of Clearing System Certificate
Exhibit D Form of Member Organization Certificate
Exhibit E Form of Regulation S Transfer Certificate
Exhibit F Form of Rule 144A Transfer Certificate
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SERIES 1998-1 SUPPLEMENT, dated as of ___________, 1998 (this "SERIES
SUPPLEMENT") by and among FINGERHUT RECEIVABLES, INC., a corporation organized
and existing under the laws of the State of Delaware, as Transferor (the
"TRANSFEROR"), FINGERHUT NATIONAL BANK, a national banking association organized
under the laws of the United States, as Servicer (the "SERVICER"), and THE BANK
OF NEW YORK (DELAWARE), a Delaware banking corporation organized and existing
under the laws of the State of Delaware as trustee (together with its successors
in trust thereunder as provided in the Agreement referred to below, the
"TRUSTEE"), under the Amended and Restated Pooling and Servicing Agreement dated
as of March 18, 1998, as amended, supplemented or otherwise modified from time
to time (the "AGREEMENT"), among the Transferor, the Servicer and the Trustee.
Section 6.9 of the Agreement provides, among other things, that the
Transferor and the Trustee may at any time and from time to time enter into a
supplement to the Agreement for the purpose of authorizing the issuance by the
Trustee to the Transferor, for execution and redelivery to the Trustee for
authentication, of one or more Series of Securities.
Pursuant to this Series Supplement, the Transferor and the Trustee
shall create a new Series of Investor Securities and shall specify the Principal
Terms thereof.
Section 1. DESIGNATION. There is hereby created a Series to be issued
pursuant to the Agreement and this Series Supplement to be known generally as
the "SERIES 1998-1 SECURITIES." Series 1998-1 shall consist of four Classes,
which shall be designated generally as the % Asset Backed Securities, Series
1998-1, Class A (the "CLASS A SECURITIES"), the % Asset Backed Securities,
Series 1998-1, Class B (the "CLASS B SECURITIES"), the Floating Rate Asset
Backed Collateralized Trust Obligations, Series 1998-1 (the "COLLATERALIZED
TRUST OBLIGATIONS") and the 0% Asset Backed Securities, Series 1998-1, Class D
(the "CLASS D SECURITIES").
Section 2. DEFINITIONS. In the event that any term or provision
contained herein shall conflict with or be inconsistent with any provision
contained in the Agreement, the terms and provisions of this Series Supplement
shall govern with respect to the Series 1998-1 Securities. All Article, Section
or subsection references herein shall mean Articles, Sections or subsections of
the Agreement, as amended or supplemented by this Series Supplement, except as
otherwise provided herein. All capitalized terms not otherwise defined herein
are defined in the
Agreement. Each capitalized term defined herein shall relate only to the Series
1998-1 Securities and no other Series of Securities issued by the Trust.
"ABC ADJUSTED INVESTED AMOUNT" shall mean as of any Business Day the
sum of the Class A Adjusted Invested Amount, the Class B Adjusted Invested
Amount and the CTO Adjusted Invested Amount minus the amount then on deposit in
the Defeasance Funding Account.
"ABC INVESTED AMOUNT" shall mean as of any Business Day the sum of the
Class A Invested Amount, the Class B Invested Amount and the Class C Invested
Amount.
"ADDITIONAL INTEREST" shall mean, at any time of determination, the
sum of the Class A Additional Interest, Class B Additional Interest and CTO
Additional Interest.
"ADJUSTED INVESTED AMOUNT" shall mean as of any Business Day the
Invested Amount minus the sum of the amount then on deposit in the Principal
Account and the Series Allocation Percentage of the amount then on deposit in
the Excess Funding Account.
"AMORTIZATION PERIOD" shall mean the period commencing on the
Amortization Period Commencement Date and continuing until the earlier of (x)
the Invested Amount of the Securities being paid in full or (y) the Series
1998-1 Termination Date.
"AMORTIZATION PERIOD COMMENCEMENT DATE" shall mean the earlier of the
first day of the August 2000 Monthly Period or the Pay Out Commencement Date.
"AVAILABLE DEFEASANCE RESERVE ACCOUNT AMOUNT" shall mean, with respect
to any Business Day, the lesser of (a) the amount on deposit in the Defeasance
Reserve Account as of such Business Day (before giving effect to any withdrawal
made or to be made pursuant to Section 4.17 of the Agreement from the Defeasance
Reserve Account on such Transfer Date) and (b) the Required Defeasance Reserve
Account Amount for such Transfer Date.
"AVAILABLE SERIES 1998-1 FINANCE CHARGE COLLECTIONS" shall have the
meaning specified in subsection 4.9(a) of the Agreement.
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"AVAILABLE SERIES 1998-1 PRINCIPAL COLLECTIONS" shall mean, with
respect to any Monthly Period or portion thereof commencing on the Amortization
Period Commencement Date, an amount equal to the sum of (i) an amount equal to
the Fixed/ Floating Percentage on each Business Day during such period of all
Principal Collections (less the amount of Redirected Principal Collections)
received during such period, (ii) any amount on deposit in the Excess Funding
Account allocated to the Series 1998-1 Securities pursuant to subsection 4.3(f)
of the Agreement with respect to such period , (iii) an amount equal to the sum
of the aggregate Series Default Amount with respect to such period and the
Series 1998-1 Percentage of any unpaid Adjustment Payments paid pursuant to
subsections 4.9(a)(v) and 4.9(a)(vi) of the Agreement with respect to such
period and any reimbursements of unreimbursed Series Charge-Offs pursuant to
subsections 4.9(a)(vii), (x), (xi) and (xii) of the Agreement with respect to
such period plus in each case, amounts applied with respect thereto pursuant to
subsections 4.10(a) and (b), 4.14(a), (b) and (c), 4.16(b) and 4.17(b), (c) and
(d) of the Agreement, and (iv) the aggregate Shared Principal Collections
allocated to the Series 1998-1 Securities pursuant to Section 4.8 of the
Agreement with respect to such period.
"BASE RATE" shall mean, with respect to any Monthly Period, the sum of
(i) the weighted average of the Class A Interest Rate, the Class B Interest
Rate, the CTO Interest Rate and, if an interest rate is assigned to the Class D
Securities pursuant to Section 4.23 of the Agreement, the Class D Interest Rate
as of the last day of such Monthly Period (weighted based on the Class A
Invested Amount, the Class B Invested Amount, the CTO Invested Amount and,
following the assignment of an interest rate to the Class D Securities, the
Class D Invested Amount or portion thereof with respect to which an interest
rate has been assigned, respectively, as of the last day of such Monthly Period)
plus (ii) the product of 2.00% per annum and the percentage equivalent of a
fraction the numerator of which is the Adjusted Invested Amount and the
denominator of which is the Invested Amount, each as of the beginning of the day
on the first day of such Monthly Period.
"CARRYOVER CLASS A MONTHLY INTEREST" shall mean with respect to any
Business Day (a) any Class A Monthly Interest Shortfall with respect to the
Distribution Date in the then current Monthly Period PLUS (b) any Class A
Additional Interest due on the Distribution Date in the next succeeding Monthly
Period.
"CARRYOVER CLASS B MONTHLY INTEREST" shall mean with respect to any
Business Day (a) any Class B Monthly Interest Shortfall with respect to the
Distribution Date in the then current Monthly Period PLUS (b) any Class B
Additional
3
Interest due on the next succeeding Distribution Date in the next succeeding
Monthly Period.
"CARRYOVER CTO MONTHLY INTEREST" shall mean with respect to any
Business Day (a) any CTO Monthly Interest Shortfall with respect to the
Distribution Date in the then current Monthly Period PLUS (b) any CTO Additional
Interest due on the next succeeding Distribution Date in the next succeeding
Monthly Period.
"CLASS A ADDITIONAL INTEREST" shall have the meaning specified in
subsection 4.6(a) of the Agreement.
"CLASS A ADJUSTED INVESTED AMOUNT" shall mean, for any date of
determination, an amount not less than zero equal to the then current Class A
Invested Amount minus the amount then on deposit in the Principal Account on
such date of determination.
"CLASS A CHARGE-OFFS" shall have the meaning specified in subsection
4.13(d) of the Agreement.
"CLASS A CONTROLLED AMORTIZATION AMOUNT" shall mean $22,500,000.
"CLASS A CONTROLLED DISTRIBUTION AMOUNT" shall mean, with respect to
any Distribution Date, an amount equal to the Class A Controlled Amortization
Amount plus any existing Class A Deficit Controlled Amortization Amount
determined on the preceding Distribution Date, if any.
"CLASS A DEFICIT CONTROLLED AMORTIZATION AMOUNT" shall mean zero on
the initial Distribution Date with respect to the Controlled Amortization Period
and, on any subsequent Distribution Date, the excess, if any, of (i) the Class A
Controlled Distribution Amount over (ii) the Available Series 1998-1 Principal
Collections with respect to the related Monthly Period.
"CLASS A EXPECTED FINAL PAYMENT DATE" shall mean the November 2001
Distribution Date.
"CLASS A FIXED/FLOATING PERCENTAGE" shall mean for any Business Day on
or after the Amortization Period Commencement Date, the percentage equivalent of
a fraction, the numerator of which is the Class A Invested Amount at the end of
the last day of the Revolving Period and the denominator of which is the greater
of
4
(a) the sum of the aggregate amount of Principal Receivables and the amount on
deposit in the Excess Funding Account at the end of the preceding Business Day
and (b) the sum of the numerators used to calculate the applicable floating or
fixed/floating percentages with respect to all Participations and all Classes of
all Series then outstanding.
"CLASS A FLOATING PERCENTAGE" shall mean, with respect to any Business
Day, the percentage equivalent of a fraction, the numerator of which is the
Class A Adjusted Invested Amount as of the beginning of such Business Day after
giving effect to any deposits to be made to the Principal Account on such
Business Day and the denominator of which is the greater of (a) the sum of the
aggregate amount of Principal Receivables and the amount on deposit in the
Excess Funding Account as of the end of the preceding Business Day and (b) the
sum of the numerators used to calculate the applicable floating or
fixed/floating percentages with respect to all Participations and all Classes of
all Series then outstanding.
"CLASS A INITIAL INVESTED AMOUNT" shall mean $337,500,000.
"CLASS A INTEREST RATE" shall mean ______% per annum.
"CLASS A INVESTED AMOUNT" shall mean, with respect to any Business
Day, an amount equal to (a) the Class A Initial Invested Amount MINUS (b) the
aggregate amount of principal payments made to Class A Securityholders through
and including such Business Day, MINUS (c) the aggregate amount of Class A
Charge-Offs for all prior Distribution Dates, PLUS (d) the sum of the aggregate
amount reimbursed with respect to reductions of the Class A Invested Amount
through and including such Business Day pursuant to subsection 4.9(a)(vii) of
the Agreement PLUS, with respect to such subsection, amounts applied thereto
pursuant to subsections 4.10(a) and (b) and 4.14(a), (b) and (c) of the
Agreement, for the purpose of reimbursing amounts deducted pursuant to the
foregoing clause (c); PROVIDED, HOWEVER, that the Class A Invested Amount may
not be reduced below zero.
"CLASS A MONTHLY INTEREST" shall mean the interest distributable in
respect of the Class A Securities as calculated in accordance with subsection
4.6(a) of the Agreement.
"CLASS A MONTHLY INTEREST SHORTFALL" shall have the meaning specified
in subsection 4.6(a) of the Agreement.
5
"CLASS A OUTSTANDING PRINCIPAL AMOUNT" shall mean, with respect to the
Class A Securities, when used with respect to any Business Day, an amount equal
to (a) the Class A Initial Invested Amount MINUS (b) the aggregate amount of
principal payments made to the Class A Securityholders on or prior to such
Business Day.
"CLASS A PERCENTAGE" shall mean a fraction the numerator of which is
the Class A Invested Amount and the denominator of which is the sum of the Class
A Invested Amount, the Class B Invested Amount and the CTO Invested Amount.
"CLASS A PRINCIPAL" shall mean the principal distributable in respect
of the Class A Securities as calculated in accordance with subsection 4.7(a) of
the Agreement.
"CLASS A REQUIRED AMOUNT" shall mean the amount determined by the
Servicer for each Business Day equal to the excess, if any, of (x) the sum of
(i) the Class A Monthly Interest for the Interest Accrual Period beginning in
the then current Monthly Period, (ii) any Carryover Class A Monthly Interest,
(iii) the Class A Percentage of the Monthly Servicing Fee for the then current
Monthly Period, (iv) the Class A Percentage of the Series Default Amount, if
any, for such Business Day and for any previous Business Day in such Monthly
Period and (v) the Class A Percentage of the Series 1998-1 Percentage of any
Adjustment Payment the Transferor is required but fails to make pursuant to
subsection 3.8(a) of the Agreement on such Business Day and on each previous
Business Day during such Monthly Period over (y) the Available Series 1998-1
Finance Charge Collections plus any Excess Finance Charge Collections from other
Series and any Transferor Finance Charge Collections allocated with respect to
the amounts described in clauses (x)(i) through (v) above with respect to such
Business Day and all previous Business Days in such Monthly Period.
"CLASS A SECURITIES" shall mean any of the Securities executed by the
Transferor and authenticated by or on behalf of the Trustee, substantially in
the form of Exhibit A-1 hereto.
"CLASS A SECURITYHOLDER" shall mean the Person in whose name a Class A
Security is registered in the Security Register.
"CLASS A SECURITYHOLDERS' INTEREST" shall mean the portion of the
Series 1998-1 Securityholders' Interest evidenced by the Class A Securities.
6
"CLASS B ADDITIONAL INTEREST" shall have the meaning specified in
subsection 4.6(b) of the Agreement.
"CLASS B ADJUSTED INVESTED AMOUNT" shall mean, for any date of
determination, an amount not less than zero equal to the then current Class B
Invested Amount minus the excess, if any, of the amount on deposit in the
Principal Account over the Class A Invested Amount on such date of
determination.
"CLASS B CHARGE-OFFS" shall have the meaning specified in subsection
4.13(c) of the Agreement.
"CLASS B CONTROLLED AMORTIZATION AMOUNT" shall mean $17,045,333.33.
"CLASS B CONTROLLED DISTRIBUTION AMOUNT" shall mean, with respect to
any Distribution Date, an amount equal to the Class B Controlled Amortization
Amount plus any existing Class B Deficit Controlled Amortization Amount
determined on the preceding Distribution Date, if any.
"CLASS B DEFICIT CONTROLLED AMORTIZATION AMOUNT" shall mean zero on
the Class B Principal Payment Commencement Date and, on any subsequent
Distribution Date, means the excess, if any, of (i) the Class B Controlled
Distribution Amount over (ii) the Available Series 1998-1 Principal Collections
with respect to the related Monthly Period.
"CLASS B EXPECTED FINAL PAYMENT DATE" shall mean the February 2002
Distribution Date.
"CLASS B FIXED/FLOATING PERCENTAGE" shall mean for any Business Day on
or after the Amortization Period Commencement Date, the percentage equivalent of
a fraction, the numerator of which is the Class B Invested Amount at the end of
the last day of the Revolving Period and the denominator of which is the greater
of (a) the sum of the aggregate amount of Principal Receivables and the amount
on deposit in the Excess Funding Account at the beginning of such Business Day
after giving effect to any deposit to be made to the Principal Account over the
Class A Invested Amount on such Business Day and (b) the sum of the numerators
used to calculate the applicable floating or fixed/floating percentages with
respect to all Participations and all Classes of all Series then outstanding.
7
"CLASS B FLOATING PERCENTAGE" shall mean, with respect to any Business
Day, the percentage equivalent of a fraction, the numerator of which is the
Class B Adjusted Invested Amount as of the end of the preceding Business Day and
the denominator of which is the greater of (a) the sum of the aggregate amount
of Principal Receivables and the amount on deposit in the Excess Funding Account
as of the end of the preceding Business Day and (b) the sum of the numerators
used to calculate the applicable floating or fixed/floating percentages with
respect to all Participations and all Classes of all Series then outstanding.
"CLASS B INITIAL INVESTED AMOUNT" shall mean $51,136,000.
"CLASS B INTEREST RATE" shall mean ____% per annum.
"CLASS B INVESTED AMOUNT" shall mean, with respect to any Business
Day, an amount equal to (a) the Class B Initial Invested Amount, MINUS (b) the
aggregate amount of principal payments made to Class B Securityholders through
and including such Business Day, MINUS (c) the aggregate amount of Class B
Charge-Offs for all prior Distribution Dates, MINUS (d) the aggregate amount of
Redirected Class B Principal Collections through and including such Business Day
for which neither the Class D Invested Amount nor the CTO Invested Amount has
been reduced on all prior Distribution Dates pursuant to subsection 4.14(d) of
the Agreement, PLUS (e) the sum of the aggregate amount reimbursed with respect
to reductions of the Class B Invested Amount through and including such Business
Day pursuant to subsection 4.9(a)(x) of the Agreement PLUS, with respect to such
subsection, amounts applied thereto pursuant to subsections 4.10(a) and (b) and
4.14(a) and (b) of the Agreement, for the purpose of reimbursing amounts
deducted pursuant to the foregoing clauses (c) and (d); PROVIDED, HOWEVER, that
the Class B Invested Amount may not be reduced below zero.
"CLASS B MONTHLY INTEREST" shall mean the interest distributable in
respect of the Class B Securities as calculated in accordance with subsection
4.6(b) of the Agreement.
"CLASS B MONTHLY INTEREST SHORTFALL" shall have the meaning specified
in subsection 4.6(b) of the Agreement.
"CLASS B OUTSTANDING PRINCIPAL AMOUNT" shall mean, with respect to the
Class B Securities, when used with respect to any Business Day, an amount equal
to (a) the Class B Initial Invested Amount MINUS (b) the aggregate amount of
8
principal payments made to the Class B Securityholders on or prior to such
Business Day.
"CLASS B PERCENTAGE" shall mean a fraction the numerator of which is
the Class B Invested Amount and the denominator of which is the sum of the Class
A Invested Amount, the Class B Invested Amount and the CTO Invested Amount.
"CLASS B PRINCIPAL" shall mean the principal distributable in respect
of the Class B Securities as calculated in accordance with subsection 4.7(b) of
the Agreement.
"CLASS B PRINCIPAL PAYMENT COMMENCEMENT DATE" shall mean the earlier
of (a) the Distribution Date on which the Class A Invested Amount is paid in
full or, if the Class A Invested Amount is paid in full on the Class A Expected
Final Payment Date, and the Early Amortization Period has not commenced, the
Distribution Date following the Class A Expected Final Payment Date and (b) the
Distribution Date following a sale or repurchase of the Receivables as set forth
in Section 2.4(e), 10.2(a), 12.1 or 12.2 of the Agreement or Section 3 of this
Series Supplement.
"CLASS B REQUIRED AMOUNT" shall mean the amount determined by the
Servicer for each Business Day equal to the excess, if any, of (x) the sum of
(i) the Class B Monthly Interest for the Interest Accrual Period beginning in
the then current Monthly Period, (ii) any Carryover Class B Monthly Interest,
(iii) the Class B Percentage of the Monthly Servicing Fee for the then current
Monthly Period, (iv) the Class B Percentage of the Series Default Amount, if
any, for such Business Day and for any previous Business Day in such Monthly
Period and (v) the Class B Percentage of the Series 1998-1 Percentage of any
Adjustment Payment the Transferor is required but fails to make pursuant to
subsection 3.8(a) of the Agreement on such Business Day and on each previous
Business Day during such Monthly Period over (y) the Available Series 1998-1
Finance Charge Collections plus any Excess Finance Charge Collections from other
Series and any Transferor Finance Charge Collections allocated with respect to
the amounts described in clauses (x)(i) through (v) above with respect to such
Business Day and on all previous Business Days in such Monthly Period.
"CLASS B SECURITIES" shall mean any of the Securities executed by the
Transferor and authenticated by or on behalf of the Trustee, substantially in
the form of Exhibit A-2 hereto.
9
"CLASS B SECURITYHOLDER" shall mean the Person in whose name a Class B
Security is registered in the Security Register.
"CLASS B SECURITYHOLDERS' INTEREST" shall mean the portion of the
Series 1998-1 Securityholders' Interest evidenced by the Class B Securities.
"CLASS D CHARGE-OFFS" shall have the meaning specified in subsection
4.13(a) of the Agreement.
"CLASS D EXCESS AMOUNTS" shall mean, with respect to any Business Day,
the excess of the Class D Invested Amount over the Stated Class D Amount on such
Business Day after taking into account all adjustments of the ABC Adjusted
Invested Amount on such day.
"CLASS D FIXED/FLOATING PERCENTAGE" shall mean for any Business Day on
or after the Amortization Period Commencement Date, the percentage equivalent of
a fraction, the numerator of which is the Class D Invested Amount at the end of
the last day of the Revolving Period and the denominator of which is the greater
of (a) the sum of the aggregate amount of Principal Receivables and the amount
on deposit in the Excess Funding Account as of the end of the beginning of such
Business Day after giving effect to any payments or reductions to be made to
pursuant to subsection 4.12(d) of the Agreement and (b) the sum of the
numerators used to calculate the applicable floating or fixed/floating
percentages with respect to all Participations and all Classes of all Series
then outstanding.
"CLASS D FLOATING PERCENTAGE" shall mean, with respect to any Business
Day, the percentage equivalent of a fraction, the numerator of which is the
Class D Invested Amount as of the end of the preceding Business Day and the
denominator of which is the greater of (a) the sum of the aggregate amount of
Principal Receivables and the amount on deposit in the Excess Funding Account as
of the end of the preceding Business Day and (b) the sum of the numerators used
to calculate the applicable floating or fixed/floating percentages with respect
to all Participations and all Classes of all Series then outstanding.
"CLASS D INITIAL INVESTED AMOUNT" shall mean $61,364,000.
"CLASS D INTEREST RATE" shall have the meaning specified in subsection
4.23 of the Agreement.
10
"CLASS D INVESTED AMOUNT" shall mean with respect to any Business Day,
an amount equal to (a) the Class D Initial Invested Amount, MINUS (b) the
aggregate amount of principal payments made to Class D Securityholders through
and including such Business Day and reductions of the Class D Invested Amount
pursuant to subsection 4.12(d), MINUS (c) the aggregate amount of Class D
Charge-Offs for all prior Distribution Dates, MINUS (d) the aggregate amount of
Redirected Principal Collections through and including such Business Day for
which the Class D Invested Amount has been reduced pursuant to subsection
4.14(d) of the Agreement, PLUS (e) the aggregate amount reimbursed with respect
to reductions of the Class D Invested Amount through and including such Business
Day pursuant to subsection 4.9(a)(xii) of the Agreement PLUS, with respect to
such subsection, amounts applied thereto pursuant to subsections 4.10(a) and (b)
of the Agreement, for the purpose of reimbursing amounts deducted pursuant to
the foregoing clauses (c) and (d); PROVIDED, HOWEVER, that the Class D Invested
Amount may not be reduced below zero.
"CLASS D OUTSTANDING PRINCIPAL AMOUNT" shall mean, with respect to the
Class D Securities, when used with respect to any Business Day, an amount equal
to (a) the Class D Initial Invested Amount MINUS (b) the aggregate amount of
principal payments made to Class D Securityholders prior to such Business Day.
"CLASS D PRINCIPAL" shall mean the principal distributable in respect
of the Class D Security as specified in subsection 4.7(d) of the Agreement.
"CLASS D PRINCIPAL PAYMENT COMMENCEMENT DATE" shall mean the earlier
of (a) during the Amortization Period, the first Distribution Date on which the
CTO Invested Amount is paid in full or, if there are no Principal Collections
allocable to the Series 1998-1 Securities remaining after payments have been
made to the Collateralized Trust Obligations on such Distribution Date, the
Distribution Date following the first Distribution Date on which the CTO
Invested Amount is paid in full and (b) the Distribution Date following a sale
or repurchase of the Receivables as set forth in Section 2.4(e), 10.2(a), 12.1
or 12.2 of the Agreement or Section 3 of this Series Supplement.
"CLASS D SECURITIES" shall mean any of the Securities executed by the
Transferor and authenticated by or on behalf of the Trustee, substantially in
the form of Exhibit A-4 hereto.
11
"CLASS D SECURITYHOLDER" shall mean the Person in whose name a Class D
Security is registered in the Security Register.
"CLASS D SECURITYHOLDERS' INTEREST" shall mean the portion of the
Series 1998-1 Securityholders' Interest evidenced by the Class D Security.
"CLEARING SYSTEM CERTIFICATE" shall mean a certificate in
substantially the form of Exhibit C hereto or such other form of certificate as
shall be satisfactory to the Trustee, the Euroclear Operator and Cedel.
"CLOSING DATE" shall mean ___________, 1998.
"COLLATERALIZED TRUST OBLIGATIONS" shall mean any of the Securities
executed by the Transferor and authenticated by or on behalf of the Trustee,
substantially in the form of Exhibit A-3 hereto.
"CONTROLLED AMORTIZATION PERIOD" shall mean, with respect to the
Series 1998-1 Securities, unless a Pay Out Event shall have occurred with
respect to such Series prior thereto, the period commencing on the Amortization
Period Commencement Date and ending upon the earliest to occur of (x) the
payment in full to the Series 1998-1 Securityholders of the Invested Amount, and
(y) the Series 1998-1 Termination Date.
"CTO ADDITIONAL INTEREST" shall have the meaning specified in
subsection 4.6(c) of the Agreement.
"CTO ADJUSTED INVESTED AMOUNT" shall mean, for any date of
determination, an amount not less than zero equal to the then current CTO
Invested Amount minus the excess, if any, of the amount then on deposit in the
Principal Account over the Class A Invested Amount and the Class B Invested
Amount on such date of determination.
"CTO CHARGE-OFFS" shall have the meaning specified in subsection
4.13(b) of the Agreement.
"CTO DEFAULT" shall have the meaning specified in Section 9.
"CTO EXCHANGE DATE" shall mean the 40th day after the later of the
commencement of the offering and the Closing Date.
12
"CTO EXPECTED FINAL PAYMENT DATE" means the April 2002 Distribution
Date.
"CTO FIXED/FLOATING PERCENTAGE" shall mean for any Business Day on or
after the Amortization Period Commencement Date, the percentage equivalent of a
fraction, the numerator of which is the CTO Invested Amount at the end of the
last day of the Revolving Period and the denominator of which is the greater of
(a) the sum of the aggregate amount of Principal Receivables and the amount on
deposit in the Excess Funding Account as of the end of the preceding Business
Day and (b) the sum of the numerators used to calculate the floating or
fixed/floating percentages with respect to all Participations and all Classes of
all Series then outstanding.
"CTO FLOATING PERCENTAGE" shall mean, with respect to any Business
Day, the percentage equivalent of a fraction, the numerator of which is the CTO
Adjusted Invested Amount as of the beginning of such Business Day after giving
effect to any deposit to be made to the Principal Account over the Class A
Invested Amount and the Class B Invested Amount on such Business Day and the
denominator of which is the greater of (a) the sum of the aggregate amount of
Principal Receivables and the amount on deposit in the Excess Funding Account as
of the end of the preceding Business Day and (b) the sum of the numerators used
to calculate the applicable floating or fixed/floating percentages with respect
to all Participations and all Classes of all Series then outstanding.
"CTO GLOBAL SECURITY" shall mean a CTO Temporary Regulation S Global
Security, a CTO Regulation S Global Security or a CTO Rule 144A Global Security.
"CTO INITIAL INVESTED AMOUNT" shall mean $61,364,000.
"CTO INTEREST RATE" shall mean % per annum from the Closing
Date through and including June 14, 1998 and, with respect to each Interest
Accrual Period thereafter, a per annum rate % in excess of LIBOR as
determined on the related LIBOR Determination Date.
"CTO INVESTED AMOUNT" shall mean with respect to any Business Day, an
amount equal to (a) the CTO Initial Invested Amount MINUS (b) the aggregate
amount of principal payments made to CTO Securityholders through and including
such Business Day, MINUS (c) the aggregate amount of CTO Charge-Offs
13
for all prior Distribution Dates, MINUS (d) the aggregate amount of Redirected
CTO Principal Collections and Redirected Class B Principal Collections through
and including such Business Day for which the Class D Invested Amount has not
been reduced pursuant to subsection 4.14(d) of the Agreement, PLUS (e) the
aggregate amount reimbursed with respect to reductions of the CTO Invested
Amount through and including such Business Day pursuant to subsection 4.9(a)(xi)
of the Agreement PLUS, with respect to such subsection, amounts applied thereto
pursuant to subsections 4.10(a) and (b) and 4.14(a) of the Agreement, for the
purpose of reimbursing amounts deducted pursuant to the foregoing clauses (c)
and (d); PROVIDED, HOWEVER, that the CTO Invested Amount may not be reduced
below zero.
"CTO MONTHLY INTEREST" shall mean the interest distributable in
respect of the Collateralized Trust Obligations as calculated in accordance with
subsection 4.6(c) of the Agreement.
"CTO MONTHLY INTEREST SHORTFALL" shall have the meaning specified in
subsection 4.6(c) of the Agreement.
"CTO OUTSTANDING PRINCIPAL AMOUNT" shall mean, with respect to the
Collateralized Trust Obligations when used with respect to any Business Day, an
amount equal to (a) the CTO Initial Invested Amount MINUS (b) the aggregate
amount of principal payments made to CTO Securityholders prior to such Business
Day.
"CTO PERCENTAGE" shall mean a fraction the numerator of which is the
CTO Invested Amount and the denominator of which is the sum of the Class A
Invested Amount, the Class B Invested Amount and the CTO Invested Amount.
"CTO PRINCIPAL" shall mean the principal distributable in respect of
the Collateralized Trust Obligations as calculated in accordance with subsection
4.7(c) of the Agreement.
"CTO PRINCIPAL PAYMENT COMMENCEMENT DATE" shall mean the earlier of
(a) the Distribution Date on which the Class A Invested Amount and the Class B
Invested Amount have each been paid in full or, if the Class B Invested Amount
is paid in full on the Class B Expected Final Payment Date and the Early
Amortization Period has not commenced, the Distribution Date following the Class
B Expected Final Payment Date and (b) the Distribution Date following a sale or
repurchase of
14
the Receivables as set forth in subsections 2.4(e), 10.2(a), 12.1 or 12.2 of the
Agreement or Section 3 of this Series Supplement.
"CTO REGULATION S GLOBAL SECURITY" shall mean a Collateralized Trust
Obligation, sold in an offshore transaction in reliance on Regulation S under
the Securities Act, represented by one or more Global Securities in definitive,
fully registered form without interest coupons, deposited with DTC, as initial
Clearing Agency, or any successor, with the applicable legends set forth in
Exhibit A-3 hereto included in the form of such Collateralized Trust Obligation.
"CTO REQUIRED AMOUNT" shall mean the amount determined by the Servicer
for each Business Day equal to the excess, if any, of (x) the sum of (i) the CTO
Monthly Interest for the Interest Accrual Period beginning in the then current
Monthly Period, (ii) any Carryover CTO Monthly Interest, (iii) the CTO
Percentage of the Monthly Servicing Fee for the then current Monthly Period,
(iv) the CTO Percentage of the Series Default Amount, if any, for such Business
Day and for any previous Business Day in such Monthly Period and (v) the CTO
Percentage of the Series 1998-1 Percentage of any Adjustment Payment the
Transferor is required but fails to make pursuant to subsection 3.8(a) of the
Agreement on such Business Day and on each previous Business Day during such
Monthly Period over (y) the Available Series 1998-1 Finance Charge Collections
plus any Excess Finance Charge Collections from other Series and any Transferor
Finance Charge Collections allocated with respect to the amounts described in
clauses (x)(i) through (v) above with respect to such Business Day and all
previous Business Days in such Monthly Period.
"CTO RESERVE ACCOUNT" shall have the meaning specified in subsection
4.21(a) of the Agreement.
"CTO RULE 144A GLOBAL SECURITY" shall mean a Collateralized Trust
Obligation, sold within the United States to U.S. persons that are QIBs, issued
in definitive, fully registered form without interest coupons, in the form of
beneficial interests in one or more Global Securities, deposited with DTC, as
initial Clearing Agency, or any successor, with the applicable legends set forth
in Exhibit A-3 hereto included in the form of such Collateralized Trust
Obligation.
"CTO SECURITYHOLDER" shall mean the Person in whose name a
Collateralized Trust Obligation is registered in the Security Register.
15
"CTO SECURITYHOLDERS' INTEREST" shall mean the portion of the Series
1998-1 Securityholders' Interest evidenced by the Collateralized Trust
Obligations.
"CTO TEMPORARY REGULATION S GLOBAL SECURITY" shall mean a
Collateralized Trust Obligation, sold in an offshore transaction in reliance on
Regulation S under the Securities Act, represented by one or more Global
Securities in definitive, fully registered form without interest coupons,
deposited with DTC, as initial Clearing Agency , or any successor, with the
applicable legends set forth in Exhibit A-3 hereto included in the form of such
Collateralized Trust Obligation.
"CTO TRIGGER EVENT" shall have the meaning specified in subsection
4.20.
"DEFEASANCE" shall have the meaning specified in subsection 4.18 of
the Agreement.
"DEFEASANCE FUNDING ACCOUNT" shall have the meaning set forth in
subsection 4.16 of the Agreement.
"DEFEASANCE FUNDING ACCOUNT BALANCE" shall mean, with respect to any
date of determination during the Amortization Period, the principal amount, if
any, on deposit in the Defeasance Funding Account on such date of determination.
"DEFEASANCE FUNDING ACCOUNT INVESTMENT PROCEEDS" shall mean, with
respect to each Transfer Date following the initial deposit to the Defeasance
Funding Account, the investment earnings on funds on deposit in the Defeasance
Funding Account, if any, (net of investment losses and expenses) for the related
Interest Accrual Period.
"DEFEASANCE RESERVE ACCOUNT" shall have the meaning set forth in
subsection 4.17 of the Agreement.
"DEFEASANCE RESERVE ACCOUNT FUNDING DATE" shall mean the first day of
the Monthly Period prior to the Defeasance, or such earlier date as the
Transferor may determine.
"DISTRIBUTION DATE" shall mean June 15, 1998 and the fifteenth day of
each month thereafter, or if such day is not a Business Day, the next succeeding
Business Day.
16
"DTC" shall mean The Depository Trust Company.
"EARLY AMORTIZATION PERIOD" shall mean the period beginning on the
earlier of (a) the day on which a Pay Out Event occurs or is deemed to have
occurred and (b) the CTO Expected Final Payment Date if the CTO Invested Amount
has not been paid in full on or prior to such date, and ending on the earlier of
(i) the date on which the Class A Invested Amount, the Class B Invested Amount,
the CTO Invested Amount and the Class D Invested Amount have been paid in full
and (ii) the Scheduled Series 1998-1 Termination Date.
"ENHANCEMENT" shall mean, with respect to each Class, the amount, if
any, on deposit from time to time in the Revolving Receivables Reserve Account
and with respect to the Class A Securities, the subordination of the Class B
Invested Amount, the CTO Invested Amount, and the Class D Invested Amount, with
respect to the Class B Securities, the subordination of the CTO Invested Amount
and the Class D Invested Amount, and with respect to the Collateralized Trust
Obligations, the subordination of the Class D Invested Amount and the amount, if
any, on deposit from time to time in the CTO Reserve Account.
"EXCESS FINANCE CHARGE COLLECTIONS" shall mean, with respect to any
Business Day, as the context requires, either (x) the amount described in
subsection 4.9(a)(xviii) of the Agreement allocated to the Series 1998-1
Securities but available to cover shortfalls in amounts paid from Finance Charge
Collections for other Series, if any, or (y) the aggregate amount of Finance
Charge Collections allocable to other Series in excess of the amounts necessary
to make required payments with respect to such Series, if any, and available to
cover shortfalls with respect to the Series 1998-1 Securities.
"FIXED/FLOATING PERCENTAGE" shall mean for any Business Day on or
after the Amortization Period Commencement Date, the sum of the Class A
Fixed/Floating Percentage, the Class B Fixed/Floating Percentage, the CTO
Fixed/Floating Percentage and the Class D Fixed/Floating Percentage.
"FLOATING PERCENTAGE" shall mean for any Business Day the sum of the
applicable Class A Floating Percentage, Class B Floating Percentage, CTO
Floating Percentage, and Class D Floating Percentage.
17
"INITIAL INVESTED AMOUNT" shall mean an amount equal to the sum of
(i) the Class A Initial Invested Amount; (ii) the Class B Initial Invested
Amount; (iii) the CTO Initial Invested Amount; and (iv) the Class D Initial
Invested Amount.
"INTEREST ACCRUAL PERIOD" shall mean, with respect to a Distribution
Date, the period from and including the preceding Distribution Date to but
excluding such Distribution Date; PROVIDED, HOWEVER, that the initial Interest
Accrual Period shall be the period from the Closing Date to but excluding the
initial Distribution Date.
"INVESTED AMOUNT" shall mean, when used with respect to any Business
Day, an amount equal to the sum of (a) the Class A Invested Amount as of such
Business Day, (b) the Class B Invested Amount as of such Business Day, (c) the
CTO Invested Amount as of such Business Day and (d) the Class D Invested Amount
as of such Business Day.
"INVESTOR PERCENTAGE" shall mean, (a) with respect to Finance Charge
Collections prior to the commencement of the Early Amortization Period, Default
Amounts at any time and Principal Collections during the Revolving Period, the
Floating Percentage and (b) with respect to Finance Charge Collections during
the Early Amortization Period and Principal Collections during the Amortization
Period, the Fixed/Floating Percentage, and with respect to any other Series of
Securities, the percentage specified in the related Supplement.
"INVESTOR SECURITYHOLDER" shall mean the Holder of record of an
Investor Security of Series 1998-1.
"LIBOR" shall have the meaning specified in subsection 4.15(a) of the
Agreement.
"LIBOR DETERMINATION DATE" shall mean the second Business Day prior to
the commencement of the second and each subsequent Interest Accrual Period. For
purposes of this definition, a Business Day is any day on which banks in London
and New York are open for the transaction of international business.
"MEMBER ORGANIZATION CERTIFICATE" shall mean a certificate
substantially in the form of Exhibit D hereto or such other form of certificate
as shall be satisfactory to the Trustee, the Euroclear Operator and Cedel.
18
"MINIMUM RETAINED PERCENTAGE" shall mean 2%.
"MINIMUM TRANSFEROR PERCENTAGE" shall mean 0%; PROVIDED, HOWEVER, that
in certain circumstances such percentage may be increased.
"MONTHLY PERIOD" shall have the meaning specified in the Agreement,
except that the first Monthly Period with respect to the Series 1998-1
Securities shall begin on and include the Closing Date and shall end on and
include May 29, 1998.
"MONTHLY SERVICING FEE" shall mean for any Monthly Period, an amount
equal to the product of (i) a fraction, the numerator of which is the actual
number of days in such Monthly Period and the denominator of which is 365 or
366, (ii) the Series Monthly Servicing Fee Percentage and (iii) the Adjusted
Invested Amount as of the beginning of the day on the first day of such Monthly
Period, or, in the case of the first Distribution Date, the Initial Invested
Amount.
"NEGATIVE CARRY AMOUNT" shall have the meaning specified in subsection
4.10(a) of the Agreement.
"PAIRED SERIES" shall have the meaning specified in Section 17 of this
Series Supplement.
"PAYING AGENT" shall mean, for the Series 1998-1 Securities, initially
The Bank of New York and in certain limited circumstances the Banque Generale du
Luxembourg, S.A.
"PAYMENT RESERVE ACCOUNT" shall have the meaning specified in
subsection 4.22 of the Agreement.
"PAY OUT COMMENCEMENT DATE" shall mean the date on which a Trust Pay
Out Event is deemed to occur pursuant to Section 9.1 of the Agreement or a
Series 1998-1 Pay Out Event is deemed to occur pursuant to Section 8 of this
Series Supplement.
"PORTFOLIO YIELD" shall mean, with respect to any Monthly Period, the
annualized percentage equivalent of a fraction, the numerator of which is the
sum of (i) the aggregate amount of Available Series 1998-1 Finance Charge
Collections for each Business Day during such Monthly Period (not including (a)
the amounts withdrawn from the Payment Reserve Account, (b) Adjustment Payments
made by
19
the Transferor with respect to Adjustment Payments required to be made but not
made in prior Monthly Periods, if any, and (c) the amount of any Finance Charge
Collections received with respect to the final payment of any Closed End
Receivable that is refinanced with a receivable arising under a revolving credit
card account) and (ii) amounts withdrawn from the Defeasance Reserve Account
with respect to such Monthly Period calculated on a cash basis after subtracting
the aggregate Series Default Amount for such Monthly Period and the Series
1998-1 Percentage of any Adjustment Payments which the Transferor is required
but fails to make pursuant to the Pooling and Servicing Agreement for each
Business Day during such Monthly Period, and the denominator of which is the
average daily Invested Amount during such Monthly Period; PROVIDED, HOWEVER,
that Excess Finance Charge Collections applied for the benefit of the Series
1998-1 Securityholders may be added to the numerator if the Transferor shall
have provided ten Business Days prior written notice of such action to each
Rating Agency and the Transferor, the Servicer and the Trustee shall have
received notification in writing that such action will not result in Standard &
Poor's reducing or withdrawing its then existing rating of the Investor
Securities of any outstanding Series or Class with respect to which it is a
Rating Agency.
"PRINCIPAL SHORTFALLS" shall mean for any Business Day (x) for Series
1998-1, (i) during the Controlled Amortization Period on or prior to the CTO
Principal Payment Commencement Date, the excess of the Class A Controlled
Distribution Amount or the Class B Controlled Distribution Amount, as
applicable, over the aggregate amount applied with respect thereto for such
Business Day and for each prior Business Day in such Monthly Period, and (ii) at
all other times, the Invested Amount of the Class then receiving principal
payments, if any, after the application of Principal Collections on such
Business Day or (y) for any other Series the amounts specified as such in the
Supplement for such other Series.
"QIB" shall mean a "qualified institutional buyer" within the meaning
of Rule 144A under the Securities Act.
"RATING AGENCY" shall mean Standard & Poor's and Moody's
"REDIRECTED CLASS B PRINCIPAL COLLECTIONS" shall have the meaning
specified in subsection 4.14(c) of the Agreement.
"REDIRECTED CLASS D PRINCIPAL COLLECTIONS" shall have the meaning
specified in subsection 4.14(a) of the Agreement.
20
"REDIRECTED CTO PRINCIPAL COLLECTIONS" shall have the meaning
specified in subsection 4.14(b) of the Agreement.
"REDIRECTED PRINCIPAL COLLECTIONS" shall mean the sum of Redirected
Class B Principal Collections, Redirected CTO Principal Collections and
Redirected Class D Principal Collections.
"REGULATION S TRANSFER CERTIFICATE" shall mean a certificate
substantially in the form of Exhibit E hereto.
"REQUIRED AMOUNT" shall have the meaning specified in subsection
4.10(b) of the Agreement.
"REQUIRED DEFEASANCE RESERVE ACCOUNT AMOUNT" shall mean, with respect
to any Business Day on or after the Defeasance Reserve Account Funding Date, an
amount equal to the excess of the sum of the Class A Monthly Interest, the Class
B Monthly Interest and the estimated amount of the CTO Monthly Interest over the
estimated amount of investment earnings on amounts in the Defeasance Funding
Account, as estimated by the Transferor, for each of the Interest Accrual
Periods during the period from the date of the deposit to the Defeasance Funding
Account through the April 2002 Distribution Date.
"RESERVE ACCOUNT INVESTMENT PROCEEDS" shall mean, with respect to any
Business Day, the sum of the investment earnings on funds on deposit in (i) the
CTO Reserve Account available in accordance with subsection 4.21(c) of the
Agreement on such Business Day and (ii) the Payment Reserve Account available in
accordance with subsection 4.22(c) of the Agreement on such Business Day.
"REVOLVING PERIOD" shall mean the period from and including the
Closing Date to, but not including, the Amortization Period Commencement Date.
"REVOLVING RECEIVABLES RESERVE ACCOUNT" shall have the meaning
specified in subsection 4.19 of the Agreement.
"RULE 144A TRANSFER CERTIFICATE" shall mean a certificate
substantially in the form of Exhibit F hereto.
"SCHEDULED SERIES 1998-1 TERMINATION DATE" shall mean the
February 2005 Distribution Date.
21
"SERIES 1998-1" shall mean the Series of the Fingerhut Master Trust
represented by the Series 1998-1 Securities.
"SERIES 1998-1 PAY OUT EVENT" shall have the meaning specified in
Section 8 of this Series Supplement.
"SERIES 1998-1 PERCENTAGE" shall mean, on any date of determination,
the percentage equivalent of a fraction the numerator of which is the Invested
Amount and the denominator of which is the sum of the Invested Amounts relating
to all other Series then outstanding.
"SERIES 1998-1 SECURITIES" shall mean the Class A Securities, the
Class B Securities, the Collateralized Trust Obligations and the Class D
Security.
"SERIES 1998-1 SECURITYHOLDER" shall mean the holder of record of any
Series 1998-1 Security.
"SERIES 1998-1 SECURITYHOLDERS' INTEREST" shall have the meaning
specified in Section 4.4 of the Agreement.
"SERIES 1998-1 TERMINATION DATE" shall mean the earlier to occur of
(i) the day after the Distribution Date on which the Series 1998-1 Securities
are paid in full, or (ii) the Scheduled Series 1998-1 Termination Date.
"SERIES CHARGE-OFFS" shall mean the sum of Class A Charge-Offs, Class
B Charge-Offs, CTO Charge-Offs and Class D Charge-Offs.
"SERIES DEFAULT AMOUNT" shall mean, with respect to each Business Day,
an amount equal to the product of the Default Amount identified since the prior
reporting date and the Floating Percentage for such Business Day.
"SERIES MONTHLY SERVICING FEE PERCENTAGE" shall mean 2.00% per annum.
"SHARED PRINCIPAL COLLECTIONS" shall mean, as the context requires,
(a) the amount of Principal Collections for any Business Day allocated to the
Series 1998-1 Securities which, in accordance with subsections 4.9(b) and
4.9(c)(ii) of the Agreement, may be applied in accordance with Section 4.3(d) of
the Agreement or (b) the amounts allocated to the Investor Securities of other
Series which the
22
applicable Series Supplements for such Series specify are to be treated as
"Shared Principal Collections" or (c) the amounts specified in any Participation
Supplement to be treated as "Shared Principal Collections" and which may be
applied to cover Principal Shortfalls with respect to the Series 1998-1
Securities.
"SPECIFIED CTO RESERVE AMOUNT" shall mean, on any date of
determination following a CTO Trigger Event, subject to Section 9 of this
Supplement, the amount, if any, which if added to the numerator of the Target
Percentage on such date would cause such percentage to be equal to 6%; PROVIDED,
HOWEVER, that except as specified in the immediately succeeding proviso, the
Specified CTO Reserve Amount shall not exceed the product of 5% and the Invested
Amount on any Business Day; and PROVIDED, FURTHER, that following a CTO Default,
in the circumstances specified in Section 9 of this Series Supplement, the
Specified CTO Reserve Amount will be equal to the CTO Outstanding Principal
Amount.
"SPECIFIED REVOLVING RECEIVABLES RESERVE AMOUNT" shall mean, on any
date of determination, an amount equal to the product of (x) the Floating
Percentage on such date and (y) 1% of the aggregate amount of Principal
Receivables which are Revolving Receivables on such date; PROVIDED, HOWEVER,
that such percentage may be reduced at the option of the Transferor at any time
if the Rating Agency Condition shall have been satisfied with respect thereto.
"STATED CLASS D AMOUNT" shall mean on any Business Day the greater of
(i) zero and (ii) a number rounded to the nearest Dollar equal to 13.64% of the
ABC Adjusted Invested Amount as of such Business Day; PROVIDED, HOWEVER, that
during any Early Amortization Period the Stated Class D Amount shall be equal to
the Stated Class D Amount immediately preceding the commencement of the Early
Amortization Period; PROVIDED, FURTHER, that on any Business Day after the
earlier of (a) the Class A Expected Final Payment Date if the Class A Invested
Amount was not paid in full on the Class A Expected Final Payment Date or
(b) the Class B Expected Final Payment Date if the Class B Invested Amount was
not paid in full on the Class B Expected Final Payment Date the Stated Class D
Amount shall be equal to the Stated Class D Amount on the Class A Expected Final
Payment Date or the Class B Expected Final Payment Date, as applicable; and
PROVIDED, FURTHER, that there shall be no reduction in the Stated Class D Amount
on any day on which the amount on deposit in the Revolving Receivables Reserve
Account is less than the Specified Revolving Receivables Reserve Amount or the
amount on deposit in the CTO Reserve Account is less than the Specified CTO
Reserve Amount and; PROVIDED, FURTHER, that the Stated Class D Amount shall not
be less than $15,340,920 prior to
23
the date on which each of the Class A Outstanding Principal Balance, the Class B
Outstanding Principal Balance and the CTO Outstanding Principal Balance have
been reduced to zero.
"TARGET PERCENTAGE" shall have the meaning specified in subsection
4.20 of the Agreement.
"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 the purpose of displaying comparable rates or
prices).
"TRANSFEROR FINANCE CHARGE COLLECTIONS" shall mean on any Business Day
the Series 1998-1 Percentage of the Finance Charge Collections allocable to the
Exchangeable Transferor Security.
"TRANSFEROR RETAINED SECURITIES" shall mean Investors Securities of
any Series which the Transferor retains, including the Class D Securities for so
long as they are held by the Transferor, but only to the extent that and for so
long as the Transferor is the Holder of such Securities.
Section 3. REASSIGNMENT TERMS. The Series 1998-1 Securities shall be
subject to termination by the Transferor at its option, in accordance with the
terms specified in subsection 12.2(a) of the Agreement, on any Distribution Date
on or after the Distribution Date on which the sum of the Class A Invested
Amount, the Class B Invested Amount and the CTO Invested Amount would be reduced
to an amount less than or equal to 10% of the sum of the Class A Initial
Invested Amount, the Class B Initial Invested Amount and the CTO Initial
Invested Amount. The deposit required in connection with any such termination
and final distribution shall be equal to the sum of the unpaid Class A Invested
Amount, the unpaid Class B Invested Amount and the unpaid CTO Invested Amount
plus accrued and unpaid interest on the Class A Securities, Class B Securities
and Collateralized Trust Obligations through the day prior to the Distribution
Date on which the final distribution occurs, in each case after giving effect to
any payments on such date.
Section 4. DELIVERY AND PAYMENT FOR THE SERIES 1998-1 SECURITIES. The
Transferor shall execute and deliver the Series 1998-1 Securities to the Trustee
for authentication in accordance with Section 6.1 of the Agreement. The Trustee
shall deliver the Series 1998-1 Securities to or upon the order of the
Transferor when authenticated in accordance with Section 6.2 of the Agreement.
24
Section 5. FORM OF DELIVERY OF SERIES 1998-1 SECURITIES;
DENOMINATIONS; DEPOSITARY. (a) The Class A Securities, the Class B Securities
and the Collateralized Trust Obligations shall be delivered as Book-Entry
Securities as provided in Sections 6.1 and 6.10 of the Agreement. The Class
A Securities and the Class B Securities shall be issued in minimum
denominations of $1,000 and integral multiples thereof. The Collateralized
Trust Obligations shall be issued in minimum denominations of $100,000 and
integral multiples of $1,000 in excess thereof. The Class D Security shall
be delivered as a Registered Security as provided in Section 6.1 of the
Agreement.
(b) The Depositary for Series 1998-1 shall be DTC and the Class A
Securities and the Class B Securities shall be initially registered in the name
of Cede & Co., its nominee and will initially be held by the Trustee as
custodian for DTC.
(c) The Transferor shall execute and the Trustee shall authenticate
(i) one or more CTO Temporary Regulation S Global Securities, (ii) one or more
CTO Regulation S Global Securities, and (iii) one or more CTO Rule 144A Global
Securities, each having a principal balance as shall have been indicated to the
Trustee by the Transferor and having an aggregate principal balance equal to the
CTO Invested Amount as of the date of execution of such Global Securities by the
Transferor.
The CTO Global Securities (i) shall be delivered by the Trustee to DTC
acting as the initial Clearing Agency, and (ii) in each case shall be registered
in the name of Cede & Co. The CTO Global Securities shall bear a legend
substantially in the form set forth in Exhibit A-3. The CTO Global Securities
initially will be held by the Trustee as custodian for DTC.
(d) So long as any of the CTO Global Securities remains outstanding
and are held by or on behalf of the Clearing Agency, transfers of beneficial
interests in any of such CTO Global Securities may be made only in accordance
with this Section 5 and in accordance with the rules of the Clearing Agency and
the Euroclear Operator or Cedel.
(i) A beneficial interest in the CTO Temporary Regulation S
Global Security may be transferred to a transferee that takes delivery in
the form of a beneficial interest in the CTO Rule 144A Global Securities
only upon receipt by the Trustee of a Rule 144A Transfer Certificate.
25
(ii) On and after the CTO Exchange Date, a beneficial interest in
the CTO Temporary Regulation S Global Security may be transferred to a
transferee that takes delivery in the form of a beneficial interest in the
CTO Regulation S Global Security only upon receipt by the Trustee of a
Clearing System Certificate from the Euroclear Operator or Cedel, as
applicable, and a Member Organization Certificate, relating to the
appropriate portion of the CTO Temporary Regulation S Global Security.
(iii) A beneficial interest in a CTO Rule 144A Global Security
may be transferred to a transferee that takes delivery in the form of a
beneficial interest in a CTO Regulation S Global Security or CTO Temporary
Regulation S Global Security only upon receipt by the Transfer Agent and
Registrar of a Regulation S Transfer Certificate.
(iv) No restrictions shall apply with respect to the transfer or
registration of transfer of (x) a beneficial interest in a CTO Rule 144A
Global Security to a transferee that takes delivery in the form of a
beneficial interest in the CTO Rule 144A Global Security, or (y) a
beneficial interest in a CTO Regulation S Global Security to a transferee
that takes delivery in the form of a beneficial interest in the CTO
Regulation S Global Security.
(e) An exchange of a beneficial interest in the CTO Temporary
Regulation S Global Security for a beneficial interest in the CTO Regulation S
Global Security, may be made only on or after the CTO Exchange Date and only
upon receipt by the Trustee of a Clearing System Certificate from the Euroclear
Operator or Cedel, as applicable, relating to the appropriate portion of the CTO
Temporary Regulation S Global Security.
(f) Upon acceptance for transfer of a beneficial interest in any CTO
Global Security for a beneficial interest in another CTO Global Security as
provided herein, the Trustee shall (or shall request the Clearing Agency to)
endorse on the schedules affixed to each of such CTO Global Securities (or on
continuations of such schedules affixed to each of such CTO Global Securities
and made parts thereof) appropriate notations evidencing the date of such
transfer and (x) in the case of the CTO Global Security from which such transfer
is made, a decrease in the outstanding balance of such CTO Global Security equal
to the outstanding balance being transferred and (y) in the case of the CTO
Global Security into which such transfer is made, an increase in the outstanding
balance of such CTO Global Security equal to the outstanding balance being
transferred.
26
Section 6. ARTICLE IV OF AGREEMENT. Sections 4.1, 4.2 and 4.3 of the
Agreement shall read in their entirety as provided in the Agreement. Article IV
of the Agreement (except for Sections 4.1, 4.2 and 4.3 thereof) shall read in
its entirety as follows and shall be applicable only to the Series 1998-1
Securities:
ARTICLE IV
RIGHTS OF SECURITYHOLDERS AND
ALLOCATION AND APPLICATION OF COLLECTIONS
Section 4.4 RIGHTS OF SECURITYHOLDERS. The Series 1998-1 Securities
shall represent undivided interests in the Trust, including the right to
receive, to the extent necessary to make the required payments with respect to
such Series 1998-1 Securities at the times and in the amounts specified in this
Agreement, (a) the Floating Percentage and the Fixed/Floating Percentage (as
applicable from time to time) of Collections (including Finance Charge
Collections) available in the Collection Account, (b) funds allocable to the
Series 1998-1 Securities on deposit in the Excess Funding Account and (c) funds
on deposit in the Interest Funding Account, the Principal Account, the Revolving
Receivables Reserve Account, the Defeasance Funding Account, the Defeasance
Reserve Account, the Distribution Account, the CTO Reserve Account and the
Payment Reserve Account (for such Series, the "Series 1998-1 Securityholders'
Interest"). The Class B Invested Amount, the CTO Invested Amount and the Class
D Invested Amount shall be subordinated to the Class A Securities; the CTO
Invested Amount and the Class D Invested Amount shall be subordinated to the
Class B Securities; and the Class D Invested Amount shall be subordinated to the
Collateralized Trust Obligations, in each case to the extent provided in this
Article IV. The Class B Securities will not have the right to receive payments
of principal until the Class A Invested Amount has been paid in full. The
Collateralized Trust Obligations will not have the right to receive payments of
principal until the Class A Invested Amount and the Class B Invested Amount have
been paid in full. The Class D Securities will not have the right to receive
payments of principal, other than to the extent of Class D Excess Amounts, until
the Class A Invested Amount, the Class B Invested Amount and the CTO Invested
Amount have been paid in full.
Section 4.5. COLLECTIONS AND ALLOCATION; PAYMENTS ON EXCHANGEABLE
TRANSFEROR SECURITY.
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(a) COLLECTIONS AND ALLOCATIONS. The Servicer will apply or will
instruct the Trustee to apply all funds on deposit in the Collection Account and
the Excess Funding Account allocable to the Series 1998-1 Securities, and all
funds on deposit in the Interest Funding Account, the Principal Account, the
Revolving Receivables Reserve Account, the Defeasance Funding Account, the
Defeasance Reserve Account, the Distribution Account, the CTO Reserve Account
and the Payment Reserve Account, as described in this Article IV. On each
Business Day, (i) the amount of Finance Charge Collections available in the
Collection Account allocable to the Series 1998-1 Securities shall be determined
by multiplying the aggregate amount of such Finance Charge Collections by (x)
prior to the Pay Out Commencement Date, the Floating Percentage and (y) on and
after the Pay Out Commencement Date, the Fixed/Floating Percentage, (ii) the
amount of Principal Collections available in the Collection Account allocable to
the Series 1998-1 Securities shall be determined by multiplying the aggregate
amount of such Principal Collections by (x) during the Revolving Period, the
Floating Percentage and (y) during any Amortization Period, the Fixed/Floating
Percentage, and (iii) the Default Amount on such Business Day allocable to the
Series 1998-1 Securities shall be determined by multiplying the Default Amount
by the Floating Percentage. In addition, on the Closing Date the Transferor
shall make a deposit to the Interest Funding Account in the amount of $2,000,000
to be allocated to the Series 1998-1 Securities and applied as Available Series
1998-1 Finance Charge Collections in accordance with subsection 4.9(a) of the
Agreement.
(b) PAYMENTS TO THE HOLDER OF THE EXCHANGEABLE TRANSFEROR SECURITY.
On each Business Day, the Servicer shall allocate and pay Collections in
accordance with the Daily Report to the Holder of the Exchangeable Transferor
Security in accordance with subsection 4.3(b) of the Agreement; PROVIDED,
HOWEVER, that such amounts shall be applied in accordance with Section 4.10
hereof to the extent specified therein.
Notwithstanding the foregoing and any other provisions of this
Supplement, amounts payable to the Transferor shall instead be deposited in the
Excess Funding Account to the extent necessary to prevent the Transferor
Interest from being less than the Minimum Transferor Interest.
Section 4.6 DETERMINATION OF INTEREST FOR THE SERIES 1998-1
SECURITIES. (a) The amount of monthly interest (the "Class A Monthly Interest")
which shall accrue for the benefit of the Class A Securities with respect to any
Interest Accrual Period shall be an amount equal to one-twelfth of the product
of
28
(i) the Class A Interest Rate and (ii) the Class A Outstanding Principal Amount
as of the close of business on the first day of such Interest Accrual Period (or
in the case of the initial Distribution Date, an amount equal to the product of
(u) the Class A Initial Invested Amount, (v) ___ divided by 360, and (w) the
Class A Interest Rate).
On the first Business Day of each Monthly Period, the Servicer shall
determine an amount (the "Class A Monthly Interest Shortfall") with respect to
the Distribution Date in such Monthly Period equal to the excess, if any, of (x)
the Class A Monthly Interest for the Interest Accrual Period ending in such
Monthly Period OVER (y) the amount available to be paid to the Class A
Securityholders in respect of interest on such Distribution Date. If there is a
Class A Monthly Interest Shortfall with respect to any Distribution Date, an
additional amount ("Class A Additional Interest") shall be payable as provided
herein with respect to the Class A Securities on each Distribution Date
following such Distribution Date, to and including the Distribution Date on
which such Class A Monthly Interest Shortfall is paid to Class A
Securityholders, equal to one-twelfth of the product of (i) the Class A Interest
Rate and (ii) such Class A Monthly Interest Shortfall remaining unpaid.
Notwithstanding anything to the contrary herein, Class A Additional Interest
shall be payable or distributed to Class A Securityholders only to the extent
permitted by applicable law.
(b) The amount of monthly interest (the "Class B Monthly Interest")
which shall accrue for the benefit of the Class B Securities with respect to any
Interest Accrual Period shall be an amount equal to one-twelfth of the product
of (i) the Class B Interest Rate and (ii) the Class B Invested Amount as of the
close of business on the first day of such Interest Accrual Period (or in the
case of the initial Distribution Date, an amount equal to the product of (u) the
Class B Initial Invested Amount, (v) __ divided by 360, and (w) the Class B
Interest Rate).
On the first Business Day of each Monthly Period, the Servicer shall
determine an amount (the "Class B Monthly Interest Shortfall") with respect to
the Distribution Date in such Monthly Period equal to the excess, if any, of (x)
the aggregate Class B Monthly Interest for the Interest Accrual Period ending in
such Monthly Period OVER (y) the amount available to be paid to the Class B
Securityholders in respect of interest on such Distribution Date. If there is a
Class B Monthly Interest Shortfall with respect to any Distribution Date, an
additional amount ("Class B Additional Interest") shall be payable as provided
herein with respect to the Class B Securities on each Distribution Date
following such Distribution Date, to and including the Distribution Date on
which such Class B Monthly Interest Shortfall is paid to Class B
Securityholders, equal to one-twelfth of
29
the product of (i) the Class B Interest Rate and (ii) such Class B Monthly
Interest Shortfall remaining unpaid. Notwithstanding anything to the contrary
herein, Class B Additional Interest shall be payable or distributed to Class B
Securityholders only to the extent permitted by applicable law.
(c) The amount of monthly interest (for the Series 1998-1 Securities,
the "CTO Monthly Interest") which shall accrue for the benefit of the
Collateralized Trust Obligations with respect to any Interest Accrual Period
shall be an amount equal to the product of (i) the CTO Interest Rate for the
related Interest Accrual Period, (ii) a fraction the numerator of which is the
actual number of days in the related Interest Accrual Period and the denominator
of which is 360 and (iii) the CTO Invested Amount as of the close of business on
the first day of such Interest Accrual Period (or in the case of the initial
Distribution Date, an amount equal to the product of (u) the CTO Initial
Invested Amount, (v) __ divided by 360, and (w) the CTO Interest Rate for the
initial Interest Accrual Period).
On the first Business Day of each Monthly Period, the Servicer shall
determine an amount (the "CTO Monthly Interest Shortfall") with respect to the
Distribution Date in such Monthly Period equal to the excess, if any, of (x) the
aggregate CTO Monthly Interest for the Interest Accrual Period ending in such
Monthly Period OVER (y) the amount available to be paid to the CTO
Securityholders in respect of interest on such Distribution Date. If there is a
CTO Monthly Interest Shortfall with respect to any Distribution Date, an
additional amount ("CTO Additional Interest") shall be payable as provided
herein with respect to the Collateralized Trust Obligations on each Distribution
Date following such Distribution Date, to and including the Distribution Date on
which such CTO Monthly Interest Shortfall is paid to CTO Securityholders, equal
to the product of (i) the CTO Interest Rate, (ii) such CTO Monthly Interest
Shortfall remaining unpaid and (iii) a fraction the numerator of which is the
actual number of days in the related Interest Accrual Period and the denominator
of which is 360. Notwithstanding anything to the contrary herein, CTO
Additional Interest shall be payable or distributed to CTO Securityholders only
to the extent permitted by applicable law.
Section 4.7 DETERMINATION OF PRINCIPAL AMOUNTS. (a) The amount of
principal (the "Class A Principal") distributable from the Distribution Account
with respect to the Class A Securities for each Distribution Date with respect
to the Amortization Period shall be equal to the Available Series 1998-1
Principal Collections on deposit in the Principal Account with respect to the
related Monthly Period; PROVIDED, HOWEVER, that with respect to any Distribution
Date during the
30
Controlled Amortization Period, Class A Principal shall not exceed the lesser of
(i) the Class A Controlled Distribution Amount and (ii) the Class A Invested
Amount; PROVIDED, FURTHER that with respect to any Distribution Date with
respect to the Early Amortization Period following a Defeasance, Class A
Principal shall be equal to the lesser of (i) the Defeasance Funding Account
Balance and (ii) the Class A Invested Amount; PROVIDED, FURTHER that with
respect to the Series 1998-1 Termination Date, Class A Principal shall be an
amount equal to the Class A Invested Amount.
(b) The amount of principal (the "Class B Principal") distributable
from the Distribution Account with respect to the Class B Securities for each
Distribution Date, beginning on the Class B Principal Payment Commencement Date,
shall be equal to the Available Series 1998-1 Principal Collections remaining on
deposit in the Principal Account with respect to the related Monthly Period
after application thereof to Class A Principal, if any; PROVIDED, HOWEVER, that
with respect to any Distribution Date during the Controlled Amortization Period,
Class B Principal shall not exceed the lesser of (i) the Class B Controlled
Distribution Amount and (ii) the Class B Invested Amount; PROVIDED, FURTHER that
with respect to any Distribution Date with respect to the Early Amortization
Period following a Defeasance, Class B Principal shall be equal to the lesser of
(i) the Defeasance Funding Account Balance after application of amounts on
deposit therein to Class A Principal and (ii) the Class B Invested Amount;
PROVIDED, FURTHER that with respect to the Series 1998-1 Termination Date, Class
B Principal shall be an amount equal to the Class B Invested Amount.
(c) The amount of principal (the "CTO Principal") distributable from
the Distribution Account with respect to the Collateralized Trust Obligations
for each Distribution Date, beginning on or after the CTO Principal Payment
Commencement Date, shall be equal to the Available Series 1998-1 Principal
Collections remaining on deposit in the Principal Account with respect to the
related Monthly Period after application thereof to Class A Principal and Class
B Principal, if any; PROVIDED that with respect to any Distribution Date with
respect to the Early Amortization Period following a Defeasance, CTO Principal
shall be equal to the lesser of (i) the Defeasance Funding Account Balance after
application of amounts on deposit therein to Class A Principal and Class B
Principal and (ii) the CTO Invested Amount; PROVIDED, FURTHER with respect to
the Series 1998-1 Termination Date, CTO Principal shall be an amount equal to
the CTO Invested Amount.
31
(d) The amount of principal (the "Class D Principal") distributable
from the Distribution Account with respect to the Class D Securities for each
Distribution Date, beginning on the Class D Principal Payment Commencement Date,
and on each Distribution Date thereafter until the Trust is terminated or until
the Class D Invested Amount is paid in full, shall be equal to the Available
Series 1998-1 Principal Collections remaining on deposit in the Principal
Account with respect to the related Monthly Period after application thereof to
Class A Principal, Class B Principal and CTO Principal, if any, and the Trustee,
acting in accordance with instructions from the Servicer, will withdraw such
amounts from the Principal Account and, to the extent of the Class D Invested
Amount, deposit such amounts in the Distribution Account for distribution to the
Class D Securityholder on the next succeeding Distribution Date.
Section 4.8 SHARED PRINCIPAL COLLECTIONS. Shared Principal
Collections allocated to Available Series 1998-1 Principal Collections for the
Series 1998-1 Securities and to be applied to Class A Principal, Class B
Principal, CTO Principal and Class D Principal pursuant to subsection
4.9(c)(i)(y) of the Agreement for any Business Day with respect to the
Amortization Period shall be equal to the product of (x) Shared Principal
Collections for all Series for such Business Day and (y) a fraction, the
numerator of which is the Principal Shortfall for the Series 1998-1 Securities
for such Business Day and the denominator of which is the aggregate amount of
Principal Shortfalls for all Series for such Business Day. For any Business Day
with respect to the Revolving Period, Shared Principal Collections allocated to
Available Series 1998-1 Principal Collections for the Series 1998-1 Securities
shall be zero.
Section 4.9 APPLICATION OF FUNDS ON DEPOSIT IN THE COLLECTION ACCOUNT
FOR THE SECURITIES. (a) AVAILABLE SERIES 1998-1 FINANCE CHARGE COLLECTIONS. On
each Business Day, the Servicer shall deliver to the Trustee a Daily Report in
which it shall instruct the Trustee to withdraw, and the Trustee, acting in
accordance with such instructions, shall withdraw amounts from the appropriate
accounts, to the extent of the sum of (i) the amount of Finance Charge
Collections allocated to the Series 1998-1 Securities pursuant to subsection
4.5(a) of the Agreement, (ii) amounts on deposit in the Payment Reserve Account,
if any, if and to the extent the Transferor designates that such amounts are to
be so applied, (iii) Reserve Account Investment Proceeds and investment
earnings on amounts on deposit in the Interest Funding Account and the Principal
Account and (iv) Defeasance Funding Account Investment Proceeds and amounts
withdrawn from the Defeasance Reserve Account pursuant to subsections 4.17(b),
(c) and (d) and the Revolving Receivables Reserve Account
32
pursuant to subsections 4.19(c), (d) and (e), which amounts shall be applied on
each Transfer Date as if such amounts had been available on the last Business
Day of the preceding Monthly Period (collectively, the "Available Series 1998-1
Finance Charge Collections"; PROVIDED that with respect to the Closing Date the
amount deposited by the Transferor into the Interest Funding Account pursuant to
subsection 4.5(a) of the Agreement shall also constitute Available Series 1998-1
Finance Charge Collections; and PROVIDED FURTHER that, with respect to any
Business Day, amounts applied pursuant to Section 4.10 and Section 4.14 of the
Agreement shall be applied as if such amounts were Available Series 1998-1
Finance Charge Collections). The Trustee shall apply Available Series 1998-1
Finance Charge Collections in the priority set forth below:
(i) CLASS A MONTHLY INTEREST. On each Business Day during a
Monthly Period, the Trustee, acting in accordance with instructions from
the Servicer, shall deposit into the Interest Funding Account for
distribution on the next Distribution Date to the Class A Securityholders,
to the extent of the Available Series 1998-1 Finance Charge Collections for
such Business Day, an amount equal to the lesser of (x) the Available
Series 1998-1 Finance Charge Collections and (y) the excess of (1) the sum
of Class A Monthly Interest for the Interest Accrual Period beginning in
such Monthly Period and Carryover Class A Monthly Interest OVER (2) any
amounts with respect thereto previously deposited into the Interest Funding
Account during such Monthly Period. Notwithstanding anything to the
contrary herein, the portion of Carryover Class A Monthly Interest that
constitutes Class A Additional Interest shall be payable or distributable
to Class A Securityholders only to the extent permitted by applicable law.
(ii) CLASS B MONTHLY INTEREST. On each Business Day during a
Monthly Period, the Trustee, acting in accordance with instructions from
the Servicer, shall deposit into the Interest Funding Account for
distribution on the next Distribution Date to the Class B Securityholders,
to the extent of any Available Series 1998-1 Finance Charge Collections
remaining after giving effect to the application pursuant to subsection
4.9(a)(i) of the Agreement, an amount equal to the lesser of (x) any such
remaining Available Series 1998-1 Finance Charge Collections and (y) the
excess of (1) the sum of Class B Monthly Interest for the Interest Accrual
Period beginning in such Monthly Period and Carryover Class B Monthly
Interest OVER (2) any amounts with respect thereto previously deposited
into the Interest Funding Account during such Monthly Period.
Notwithstanding anything to the contrary herein, the
33
portion of Carryover Class B Monthly Interest that constitutes Class B
Additional Interest shall be payable or distributable to Class B
Securityholders only to the extent permitted by applicable law.
(iii) CTO MONTHLY INTEREST. On each Business Day during a
Monthly Period, the Trustee, acting in accordance with instructions from
the Servicer, shall deposit into the Interest Funding Account for
distribution on the next Distribution Date to the CTO Securityholders, to
the extent of any Available Series 1998-1 Finance Charge Collections
remaining after giving effect to the applications pursuant to subsections
4.9(a)(i) and (ii) of the Agreement, an amount equal to the lesser of (x)
any such remaining Available Series 1998-1 Finance Charge Collections and
(y) the excess of (1) the sum of CTO Monthly Interest for the Interest
Accrual Period beginning in such Monthly Period and Carryover CTO Monthly
Interest OVER (2) any amounts with respect thereto previously deposited
into the Interest Funding Account during such Monthly Period.
Notwithstanding anything to the contrary herein, the portion of Carryover
Class C Monthly Interest that constitutes CTO Additional Interest shall be
payable or distributable to CTO Securityholders only to the extent
permitted by applicable law.
(iv) MONTHLY SERVICING FEE. On each Business Day during a
Monthly Period, the Trustee, acting in accordance with instructions from
the Servicer, shall distribute to the Servicer, to the extent of any
Available Series 1998-1 Finance Charge Collections remaining after giving
effect to the applications pursuant to subsections 4.9(a)(i) through (iii)
of the Agreement, an amount equal to the lesser of (x) any such remaining
Available Series 1998-1 Finance Charge Collections and (y) the excess of
(i) the Monthly Servicing Fee for such Monthly Period plus any unpaid
Monthly Servicing Fees from prior Monthly Periods over (ii) any amounts
with respect thereto previously distributed to the Servicer during such
Monthly Period.
(v) SERIES DEFAULT AMOUNT. On each Business Day during a Monthly
Period, the Trustee, acting in accordance with instructions from the
Servicer, shall apply to the extent of any Available Series 1998-1 Finance
Charge Collections remaining after giving effect to the applications
pursuant to subsections 4.9(a)(i) through (iv) of the Agreement, an amount
equal to the lesser of (x) any such remaining Available Series 1998-1
Finance Charge Collections and (y) the sum of (1) the aggregate Series
Default Amount for such Business Day PLUS (2) the unpaid Series Default
Amount for each
34
previous Business Day during such Monthly Period, such amount to be
(A) treated as Shared Principal Collections during the Revolving Period,
and (B) treated as Available Series 1998-1 Principal Collections during the
Amortization Period.
(vi) ADJUSTMENT PAYMENT SHORTFALLS. On each Business Day, the
Trustee, acting in accordance with instructions from the Servicer, shall
apply to the extent of any Available Series 1998-1 Finance Charge
Collections remaining after giving effect to the applications pursuant to
subsections 4.9(a)(i) through (v) of the Agreement, an amount equal to the
lesser of (x) any such remaining Available Series 1998-1 Finance Charge
Collections and (y) an amount equal to the Series 1998-1 Percentage of any
Adjustment Payment which the Transferor is required but fails to make
pursuant to subsection 3.8(a) of the Agreement on such Business Day and on
each previous Business Day during such Monthly Period less any amounts
previously withdrawn pursuant to this subsection 4.9(a)(vi) on account of
such unpaid Adjustment Payments, such amount to be (i) treated as Shared
Principal Collections during the Revolving Period, and (ii) treated as
Available Series 1998-1 Principal Collections during the Amortization
Period.
(vii) REIMBURSEMENT OF CLASS A CHARGE-OFFS. On each Business
Day, the Trustee, acting in accordance with instructions from the Servicer,
shall apply to the extent of any Available Series 1998-1 Finance Charge
Collections remaining after giving effect to the applications pursuant to
subsections 4.9(a)(i) through (vi) of the Agreement, an amount equal to the
lesser of (x) any such remaining Available Series 1998-1 Finance Charge
Collections and (y) the unreimbursed Class A Charge-Offs, if any, in order
to reimburse Class A Charge-Offs, such amount to be (A) treated as Shared
Principal Collections during the Revolving Period, and (B) treated as
Available Series 1998-1 Principal Collections during the Amortization
Period.
(viii) UNPAID CLASS B MONTHLY INTEREST. On each Business Day,
the Trustee, acting in accordance with the instructions from the Servicer,
shall deposit in the Interest Funding Account for distribution to the Class
B Securityholders on the next Distribution Date, to the extent of any
Available Series 1998-1 Finance Charge Collections remaining after giving
effect to the applications pursuant to subsections 4.9(a)(i) through (vii)
of the
35
Agreement, an amount equal to the lesser of (x) any such remaining
Available Series 1998-1 Finance Charge Collections and (y) the sum of (1)
the amount of interest which would accrue with respect to the Class B
Securities on the Class B Outstanding Principal Amount at the Class B
Interest Rate during the related Interest Accrual Period beginning in the
then Current Monthly Period but which has not been deposited into the
Interest Funding Account or paid to the Class B Securityholders and (2) any
additional interest (to the extent permitted by applicable law) at the
Class B Interest Rate on interest that was payable on any prior
Distribution Date pursuant to this subsection but was not deposited in the
Interest Funding Account or paid to the Class B Securityholders.
(ix) UNPAID CTO MONTHLY INTEREST. On each Business Day, the
Trustee, acting in accordance with the instructions from the Servicer,
shall deposit in the Interest Funding Account for distribution to the CTO
Securityholders on the next Distribution Date, to the extent of any
Available Series 1998-1 Finance Charge Collections remaining after giving
effect to the applications pursuant to subsections 4.9(a)(i) through (viii)
of the Agreement, an amount equal to the lesser of (x) any such remaining
Available Series 1998-1 Finance Charge Collections and (y) the sum of (1)
the amount of interest which would accrue with respect to the
Collateralized Trust Obligations on the CTO Outstanding Principal Amount at
the CTO Interest Rate during the Interest Accrual Period beginning in the
then Current Monthly Period but which has not been deposited into the
Interest Funding Account or paid to the CTO Securityholders and (2) any
additional interest (to the extent permitted by applicable law) at the CTO
Interest Rate on interest that was payable on any prior Distribution Date
pursuant to this subsection but was not deposited in the Interest Funding
Account or paid to the CTO Securityholders.
(x) REIMBURSEMENT OF CERTAIN REDUCTIONS OF CLASS B INVESTED
AMOUNT. On each Business Day, the Trustee, acting in accordance with
instructions from the Servicer, shall apply, to the extent of any Available
Series 1998-1 Finance Charge Collections remaining after giving effect to
the applications pursuant to subsections 4.9(a)(i) through (ix) of the
Agreement, an amount equal to the lesser of (x) any such remaining
Available Series 1998-1 Finance Charge Collections and (y) the unreimbursed
amount by which the Class B Invested Amount has been reduced on prior
Business Days pursuant to clauses (c) and (d) of the definition of Class B
Invested Amount,
36
if any, such amount to be (A) treated as Shared Principal Collections
during the Revolving Period, and (B) treated as Available Series 1998-1
Principal Collections during the Amortization Period.
(xi) REIMBURSEMENT OF CERTAIN REDUCTIONS OF CTO INVESTED AMOUNT.
On each Business Day, the Trustee, acting in accordance with instructions
from the Servicer, shall apply, to the extent of any Available Series
1998-1 Finance Charge Collections remaining after giving effect to the
applications pursuant to subsections 4.9(a)(i) through (x) of the
Agreement, an amount equal to the lesser of (x) any such remaining
Available Series 1998-1 Finance Charge Collections and (y) the unreimbursed
amount by which the CTO Invested Amount has been reduced on prior Business
Days pursuant to clauses (c) and (d) of the definition of CTO Invested
Amount, if any, such amount to be (A) treated as Shared Principal
Collections during the Revolving Period, and (B) treated as Available
Series 1998-1 Principal Collections during the Amortization Period.
(xii) REIMBURSEMENT OF CERTAIN REDUCTIONS OF CLASS D INVESTED
AMOUNT. On each Business Day, the Trustee, acting in accordance with
instructions from the Servicer, shall apply, to the extent of any Available
Series 1998-1 Finance Charge Collections remaining after giving effect to
the applications pursuant to subsections 4.9(a)(i) through (xi) of the
Agreement, an amount equal to the lesser of (x) any such remaining
Available Series 1998-1 Finance Charge Collections and (y) the unreimbursed
amount by which the Class D Invested Amount has been reduced on prior
Business Days pursuant to clauses (c) and (d) of the definition of Class D
Invested Amount, if any, such amount to be (A) treated as Shared Principal
Collections during the Revolving Period, and (B) treated as Available
Series 1998-1 Principal Collections during the Amortization Period.
(xiii) CLASS D INTEREST. On each Business Day during a Monthly
Period, the Trustee, acting in accordance with the instructions from the
Servicer, shall deposit in the Interest Funding Account for distribution to
the Class D Securityholders on the next Distribution Date, to the extent of
any Available Series 1998-1 Finance Charge Collections remaining after
giving effect to the applications pursuant to subsections 4.9(a)(i) through
(xii) of the Agreement, an amount equal to the lesser of (x) any such
remaining Available Series 1998-1 Finance Charge Collections and (y) the
sum of (1) the amount of interest which has accrued with respect to the
Class D
37
Securities on the Class D Outstanding Principal Amount at the applicable
Class D Interest Rate but which has not been deposited into the Interest
Funding Account on any prior Business Day or paid to the Class D
Securityholders and (2) any additional interest (to the extent permitted by
applicable law) at the Class D Interest Rate on interest that was payable
during a prior Monthly Period pursuant to this subsection but was not
deposited in the Interest Funding Account or paid to the Class D
Securityholders.
(xiv) REVOLVING RECEIVABLES RESERVE ACCOUNT. On each Business
Day, the Trustee, acting in accordance with instructions from the Servicer,
shall deposit in the Revolving Receivables Reserve Account, to the extent
of any Available Series 1998-1 Finance Charge Collections remaining after
giving effect to the applications pursuant to subsections 4.9(a)(i) through
(xiii) of the Agreement an amount equal to the lesser of (x) any such
remaining Available Series 1998-1 Finance Charge Collections and (y) an
amount equal to the excess, if any, of the Specified Revolving Receivables
Reserve Amount on such date over the amount then on deposit in the
Revolving Receivables Reserve Account.
(xv) DEFEASANCE RESERVE ACCOUNT. At the option of the
Transferor, on each Business Day on and after the Defeasance Reserve
Account Funding Date, but prior to the date on which a Defeasance occurs
pursuant to subsection 4.18 of the Agreement, the Trustee, acting in
accordance with instructions from the Servicer, shall deposit in the
Defeasance Reserve Account, to the extent of any Available Series 1998-1
Finance Charge Collections remaining after giving effect to the
applications pursuant to subsections 4.9(a)(i) through (xiv) of the
Agreement, an amount equal to the lesser of (x) any such remaining
Available Series 1998-1 Finance Charge Collections and (y) the excess, if
any, of the Required Defeasance Reserve Account Amount over the Available
Defeasance Reserve Account Amount.
(xvi) CTO RESERVE ACCOUNT. Following the occurrence of a CTO
Trigger Event, on each Business Day, the Trustee, acting in accordance with
instructions from the Servicer, shall deposit in the CTO Reserve Account,
to the extent of any Available Series 1998-1 Finance Charge Collections
remaining after giving effect to the applications pursuant to subsections
4.9(a)(i) through (xv) of the Agreement, an amount equal to the
38
lesser of (x) any such remaining Available Series 1998-1 Finance Charge
Collections and (y) an amount equal to the excess, if any, of the Specified
CTO Reserve Amount on such date over the amount then on deposit in the CTO
Reserve Account.
(xvii) PAYMENT RESERVE ACCOUNT. On each Business Day, the
Trustee, acting in accordance with instructions from the Transferor, shall
deposit in the Payment Reserve Account, to the extent of any Available
Series 1998-1 Finance Charge Collections remaining after giving effect to
the applications pursuant to subsections 4.9(a)(i) through (xvi) of the
Agreement, an amount equal to the lesser of (x) any such remaining
Available Series 1998-1 Finance Charge Collections and (y) the amount, if
any, designated by the Transferor in writing (which includes facsimile
transmission) in its instructions to the Trustee on such Business Day.
(xviii) EXCESS FINANCE CHARGE COLLECTIONS. Any Available Series
1998-1 Finance Charge Collections remaining after giving effect to the
applications pursuant to subsection 4.9(a)(i) through (xvii) of the
Agreement shall be treated as Excess Finance Charge Collections, and the
Servicer shall direct the Trustee in writing on each Business Day to first
make such amounts available to pay to Securityholders of other Series to
the extent of shortfalls, if any, in amounts payable to such
Securityholders from Finance Charge Collections allocated to such other
Series, then to pay any unpaid commercially reasonable costs and expenses
of a Successor Servicer, if any, then to reserve for (or pay when due) any
taxes and related expenses anticipated by the Servicer to be payable by the
Trust with respect to the related Monthly Period or prior Monthly Periods
and then on each Business Day to pay any remaining Excess Finance Charge
Collections to the Transferor.
(b) REVOLVING PERIOD PRINCIPAL COLLECTIONS. For each Business Day
with respect to the Revolving Period, the funds on deposit in the Collection
Account to the extent of the product of (i) the Floating Percentage and (ii)
Principal Collections with respect to such Business Day (less the amount of
Redirected Principal Collections on such Business Day) will be treated as Shared
Principal Collections and applied, pursuant to the written direction of the
Servicer in the Daily Report for such Business Day, as provided in Section
4.3(e) of the Agreement.
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(c) AMORTIZATION PERIOD PRINCIPAL COLLECTIONS AND OTHER FUNDS. For
each Business Day on and after the Amortization Period Commencement Date, the
amount of funds on deposit in the Collection Account or the Excess Funding
Account as described below will be distributed, pursuant to the written
direction of the Servicer in the Daily Report for such Business Day in the
following priority:
(i) an amount (not in excess of the Invested Amount) equal to the
sum of (v) the product of the Fixed/Floating Percentage and Principal
Collections (less the amount thereof applied as Redirected Principal
Collections) for such Business Day, (w) any amount on deposit in the Excess
Funding Account allocated to the Series 1998-1 Securities on such Business
Day pursuant to subsection 4.3(f) of the Agreement, (x) amounts to be
treated as Available Series 1998-1 Principal Collections for such Business
Day pursuant to subsections 4.9(a)(v), (vi), (vii), (x), (xi) and (xii) of
the Agreement (including amounts available pursuant to subsections 4.10(a)
and (b) and 4.14(a), (b) and (c) of the Agreement for such Business Day)
and (y) the amount of Shared Principal Collections allocated to the Series
1998-1 Securities in accordance with Section 4.8 of the Agreement for such
Business Day, will be deposited into the Principal Account; PROVIDED,
HOWEVER, that with respect to any Monthly Period during the Controlled
Amortization Period, the aggregate amount required to be deposited in the
Principal Account pursuant to this subsection 4.9(c)(i) shall not exceed
the sum of (I) (A) prior to the Monthly Period related to the Class B
Principal Payment Commencement Date, the Class A Controlled Distribution
Amount, (B) during and after the Monthly Period related to the Class B
Principal Payment Commencement Date but prior to the Monthly Period related
to the CTO Principal Payment Commencement Date, the Class B Controlled
Distribution Amount or (C) during and after the Monthly Period related to
the CTO Principal Payment Commencement Date but prior to the Monthly Period
related to the Class D Principal Payment Commencement Date, the CTO
Invested Amount and (II) at the option of the Transferor, the Class D
Excess Amount; and
(ii) an amount equal to the excess, if any, of (A) the sum of the
amounts described in subsection 4.9(c)(i)(v) and (x) above over (B) the sum
of Class A Principal, Class B Principal, CTO Principal and Class D
Principal will be treated as Shared Principal Collections and applied as
provided in subsection 4.3(e) of the Agreement.
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Section 4.10 COVERAGE OF REQUIRED AMOUNT FOR THE SERIES 1998-1
SECURITIES. (a) COVERAGE OF NEGATIVE CARRY AMOUNT. To the extent that any
amounts are on deposit in the Excess Funding Account on any Business Day, the
Servicer shall apply, in the manner specified for application of Available
Series 1998-1 Finance Charge Collections in subsections 4.9(a)(i) through (xiii)
of the Agreement, Transferor Finance Charge Collections in an amount (the
"Negative Carry Amount") equal to the excess of (x) the product of (a) the Base
Rate, (b) the product of (i) the amounts on deposit in the Excess Funding
Account and (ii) the number of days elapsed since the previous Business Day
DIVIDED by 360 over (y) the aggregate amount of all earnings since the previous
Business Day available from the Cash Equivalents in which funds on deposit in
the Excess Funding Account are invested.
(b) REQUIRED AMOUNT FROM OTHER SERIES EXCESS FINANCE CHARGE
COLLECTIONS. To the extent that on any Business Day payments are being made
pursuant to any of subsections 4.9(a)(i) through (xiii) of the Agreement,
respectively, and the full amount to be paid pursuant to any such subsection
receiving payments on such Business Day is not paid in full on such Business
Day, the Servicer shall apply, in the manner specified for application of
Available Series 1998-1 Finance Charge Collections in subsections 4.9(a)(i)
through (xiii) of the Agreement, all or a portion of the Excess Finance Charge
Collections from other Series with respect to such Business Day allocable to the
Series 1998-1 Securities in an amount equal to the excess of the full amount to
be allocated or paid pursuant to the applicable subsection over the amount
applied with respect thereto from Available Series 1998-1 Finance Charge
Collections and Transferor Finance Charge Collections on such Business Day (the
"Required Amount"). Excess Finance Charge Collections allocated to the Series
1998-1 Securities for any Business Day shall mean an amount equal to the product
of (x) Excess Finance Charge Collections available from all other Series for
such Business Day and (y) a fraction, the numerator of which is the Required
Amount for such Business Day and the denominator of which is the aggregate
amount of shortfalls in required amounts or other amounts to be paid from
Finance Charge Collections for all Series for such Business Day.
Section 4.11 PAYMENT OF INTEREST ON SECURITIES . On each Transfer
Date, the Trustee, acting in accordance with instructions from the Servicer set
forth in the Daily Report for such day, shall withdraw the amount on deposit in
the Interest Funding Account with respect to the preceding Monthly Period
allocable to the Series 1998-1 Securities and deposit such amount in the
Distribution Account. On each Distribution Date, the Paying Agent shall pay in
accordance with Section 5.1 of the Agreement to (w) the Class A Securityholders
from the Distribution Account
41
such amount deposited into the Distribution Account on the related Transfer Date
allocable thereto from amounts deposited in the Interest Funding Account
pursuant to subsection 4.9(a)(i) of the Agreement, (x) the Class B
Securityholders from the Distribution Account the amount deposited into the
Distribution Account on the related Transfer Date allocable thereto from amounts
deposited in the Interest Funding Account pursuant to subsections 4.9(a)(ii) and
(viii) of the Agreement, (y) the CTO Securityholders from the Distribution
Account the amount deposited into the Distribution Account on the related
Transfer Date allocable thereto from amounts deposited in the Interest Funding
Account pursuant to subsections 4.9(a)(iii) and (ix) of the Agreement, and (z)
the Class D Securityholder from the Distribution Account the amount deposited
into the Distribution Account on the related Transfer Date allocable thereto
from amounts deposited in the Interest Funding Account pursuant to subsection
4.9(a)(xiii) of the Agreement.
Section 4.12 PAYMENT OF SECURITY PRINCIPAL.
(a) CLASS A PRINCIPAL. On the Transfer Date preceding each
Distribution Date with respect to the Amortization Period, the Trustee, acting
in accordance with instructions from the Servicer set forth in the Daily Report
for such day, shall withdraw from the Principal Account or, following the
occurrence of a Defeasance, from the Defeasance Funding Account, and deposit
into the Distribution Account, to the extent of funds available, an amount equal
to the Class A Principal for such Distribution Date. On each Distribution Date
with respect to the Amortization Period until the Class A Invested Amount is
paid in full, the Paying Agent shall pay in accordance with Section 5.1 of the
Agreement to the Class A Securityholders from the Distribution Account such
amounts deposited with respect to Class A Principal into the Distribution
Account on the related Transfer Date.
(b) CLASS B PRINCIPAL. On the Transfer Date preceding the Class B
Principal Payment Commencement Date and each Transfer Date thereafter, the
Trustee, acting in accordance with instructions from the Servicer set forth in
the Daily Report for such day, shall withdraw from the Principal Account or,
following the occurrence of a Defeasance, the Defeasance Funding Account and
deposit in the Distribution Account, to the extent of funds available, an amount
equal to the Class B Principal for the related Distribution Date. On and after
the Class B Principal Payment Commencement Date, on each Distribution Date until
the Class B Invested Amount is paid in full, the Paying Agent shall pay in
accordance with Section 5.1 of the Agreement to the Class B Securityholders from
the Distribution Account such
42
amounts deposited with respect to Class B Principal into the Distribution
Account on the related Transfer Date.
(c) CTO PRINCIPAL. On the Transfer Date preceding the CTO Principal
Payment Commencement Date and each Transfer Date thereafter, the Trustee, acting
in accordance with instructions from the Servicer set forth in the Daily Report
for such day, shall withdraw from the Principal Account or, following the
occurrence of a Defeasance, the Defeasance Funding Account and deposit in the
Distribution Account, to the extent of funds available, an amount equal to the
CTO Principal for the related Distribution Date. On and after the CTO Principal
Payment Commencement Date, on each Distribution Date until the CTO Invested
Amount is paid in full, the Paying Agent shall pay in accordance with Section
5.1 of the Agreement to the CTO Securityholders from the Distribution Account
such amounts deposited with respect to CTO Principal into the Distribution
Account on the related Transfer Date.
(d) CLASS D PRINCIPAL. On the Transfer Date preceding the Class D
Principal Payment Commencement Date and each Transfer Date thereafter, or, in
the case of distributions of Class D Excess Amounts, on each Transfer Date
during the Controlled Amortization Period preceding a Distribution Date on which
a distribution shall be made of Class D Excess Amounts, the Trustee, acting in
accordance with instructions from the Servicer set forth in the Daily Report for
such day, shall withdraw from the Principal Account and deposit in the
Distribution Account, to the extent of funds available after giving effect to
withdrawals pursuant to subsections 4.12(a), (b) or (c) of the Agreement, an
amount equal to the Class D Principal for the related Distribution Date. On the
Class D Principal Payment Commencement Date after the payment of any principal
amounts to the Class A Securities, the Class B Securities and the Collateralized
Trust Obligations on such day, and on each Distribution Date thereafter until
the Class D Invested Amount is paid in full and on each Distribution Date during
the Controlled Amortization Period on which amounts are to be distributed with
respect to Class D Excess Amounts, the Paying Agent shall pay in accordance with
Section 5.1 of the Agreement to the Class D Securityholder from the Distribution
Account such amounts deposited with respect to Class D Principal into the
Distribution Account on the related Transfer Date. Notwithstanding the
foregoing, if so designated in writing by the Transferor with respect to any
such Transfer Date, any such payment of Class D Principal shall not be made to
the Class D Securityholder but such amount shall nonetheless be subtracted from
the Class D Invested Amount and added to the Transferor Interest and Class D
Excess Amounts may be subtracted from the Class D Invested Amount
43
and added to the Transferor Interest whether or not such amount has been
deposited into the Distribution Account.
(e) Any amounts remaining in the Principal Account and allocable to
the Series 1998-1 Securities, after the Class D Invested Amount has been paid in
full, will be treated as Shared Principal Collections and applied in accordance
with Section 4.3(e) of the Agreement.
Section 4.13 SERIES CHARGE-OFFS. (a) If, on any Determination Date,
the sum of the aggregate Series Default Amount and the Series 1998-1 Percentage
of unpaid Adjustment Payments, if any, required to be made by the Transferor but
not made for all Business Days in the preceding Monthly Period exceeds the sum
of (x) the aggregate amount of the Available Series 1998-1 Finance Charge
Collections applied to the payment thereof pursuant to subsections 4.9(a)(v) and
(vi) of the Agreement, (y) the aggregate amount of Transferor Finance Charge
Collections and Excess Finance Charge Collections allocated thereto pursuant to
Section 4.10 of the Agreement, and (z) the aggregate amount of Redirected
Principal Collections applied with respect thereto pursuant to Section 4.14 of
the Agreement, the Class D Invested Amount will be reduced by the aggregate
amount of such excess (a "Class D Charge-Off").
(b) In the event that any such reduction of the Class D Invested
Amount would cause the Class D Invested Amount to be a negative number, the
Class D Invested Amount will be reduced to zero, and the CTO Invested Amount
will be reduced by the amount by which the Class D Invested Amount would have
been reduced below zero, but not by more than the remaining aggregate Series
Default Amount and Series 1998-1 Percentage of unpaid Adjustment Payments for
such Monthly Period (a "CTO Charge-Off").
(c) In the event that any such reduction of the CTO Invested Amount
would cause the CTO Invested Amount to be a negative number, the CTO Invested
Amount will be reduced to zero, and the Class B Invested Amount will be reduced
by the amount by which the CTO Invested Amount would have been reduced below
zero, but not by more than the remaining aggregate Series Default Amount and
Series 1998-1 Percentage of unpaid Adjustment Payments for such Monthly Period
(a "Class B Charge-Off").
(d) In the event that any such reduction of the Class B Invested
Amount would cause the Class B Invested Amount to be a negative number, the
44
Class B Invested Amount will be reduced to zero, and the Class A Invested Amount
will be reduced by the amount by which the Class B Invested Amount would have
been reduced below zero, but not by more than the remaining aggregate Series
Default Amount and Series 1998-1 Percentage of unpaid Adjustment Payments for
such Monthly Period (a "Class A Charge-Off").
Section 4.14 REDIRECTED PRINCIPAL COLLECTIONS FOR THE SERIES 1998-1
SECURITIES. (a) On each Business Day, the Servicer will apply or cause the
Trustee to apply an amount equal to the least of (i) the Class D Invested
Amount, (ii) the product of (x)(I) during the Revolving Period, the Class D
Floating Percentage or (II) during an Amortization Period, the Class D
Fixed/Floating Percentage and (y) the amount of Principal Collections with
respect to such Business Day and (iii) an amount equal to the sum of (a) the
Class A Required Amount for such Business Day, (b) the Class B Required Amount
for such Business Day and (c) the CTO Required Amount for such Business Day
(such amount called "Redirected Class D Principal Collections") and shall apply
Principal Collections allocable to the Securities in an amount equal to such
amount in accordance with subsection 4.9(a) as if such amounts were Available
Series 1998-1 Finance Charge Collections.
(b) On each Business Day, the Servicer will apply or cause the Trustee
to apply an amount equal to the least of (i) the CTO Invested Amount, (ii) the
product of (x)(I) during the Revolving Period, the CTO Floating Percentage or
(II) during an Amortization Period, the CTO Fixed/Floating Percentage and
(y) the amount of Principal Collections for such Business Day and (iii) an
amount equal to the sum of (a) the excess, if any, of the Class A Required
Amount for such Business Day over the amount of Redirected Class D Principal
Collections applied with respect thereto for such Business Day and (b) the
excess, if any, of the Class B Required Amount for such Business Day over the
amount of Redirected Class D Principal Collections applied with respect thereto
for such Business Day (such amount called "Redirected CTO Principal
Collections") and shall apply Principal Collections allocable to the Securities
in an amount equal to such amount in accordance with subsection 4.9(a) as if
such amounts were Available Series 1998-1 Finance Charge Collections.
(c) On each Business Day, the Servicer will apply or cause the Trustee
to apply an amount equal to the least of (i) the Class B Invested Amount,
(ii) the product of (x)(I) during the Revolving Period, the Class B Floating
Percentage or (II) during an Amortization Period, the Class B Fixed/Floating
Percentage and (y) the amount of Principal Collections for such Business Day and
45
(iii) an amount equal to the excess, if any, of the Class A Required Amount for
such Business Day over the sum of the amount of Redirected Class D Principal
Collections and Redirected CTO Principal Collections applied with respect
thereto for such Business Day (such amount called "Redirected Class B Principal
Collections") and shall apply Principal Collections allocable to the Securities
equal to such amount in accordance with subsection 4.9(a) as if such amounts
were Available Series 1998-1 Finance Charge Collections.
(d) On each Distribution Date, the Class D Invested Amount will be
reduced by the aggregate amount of unreimbursed Redirected Principal Collections
for the related Monthly Period. In the event that such reduction would cause the
Class D Invested Amount to be a negative number, the Class D Invested Amount
will be reduced to zero and the CTO Invested Amount will be reduced by the
amount by which the Class D Invested Amount would have been reduced below zero.
In the event that the amount of unreimbursed Redirected Principal Collections
for such Distribution Date would cause the CTO Invested Amount to be a negative
number, the CTO Invested Amount will be reduced to zero and the Class B Invested
Amount will be reduced by the amount by which the CTO Invested Amount would have
been reduced below zero. In the event that the amount of unreimbursed Redirected
Principal Collections would cause the Class B Invested Amount to be a negative
number on any Distribution Date, the amount of Class B Redirected Principal
Collections on such Distribution Date will be an amount not to exceed the amount
which would cause the Class B Invested Amount to be reduced to zero.
Section 4.15 DETERMINATION OF LIBOR. (a) "LIBOR" shall mean, as of any
LIBOR Determination Date, the rate for deposits in United States dollars for one
month (commencing on the first day of the relevant Interest Accrual Period)
which appears on Telerate Page 3750 as of 11:00 A.M., London time, on the LIBOR
Determination Date for such Interest Accrual Period. If such rate does not
appear on Telerate Page 3750, the rate for such LIBOR Determination Date will be
determined on the basis of the rates at which deposits in United States dollars
are offered by four major banks in the London interbank market selected by the
Servicer at approximately 11:00 a.m., London time, on such LIBOR Determination
Date to prime banks in the London interbank market for a period equal to one
month (commencing on the first day of the relevant Interest Accrual Period).
The Trustee will request the principal London office of each such bank to
provide a quotation of its rate. If at least two such quotations are provided,
the rate for such LIBOR Determination Date will be the arithmetic mean of the
quotations. If fewer than two quotations are provided as requested, the rate
for such LIBOR Determination Date
46
will be the arithmetic mean of the rates quoted by four major banks in New York
City, selected by the Trustee, at approximately 11:00 a.m., New York City time,
on the LIBOR Determination Date for loans in United States dollars to leading
European banks for a period equal to one month (commencing on the first day of
such Interest Accrual Period).
(b) The CTO Interest Rate applicable to the then current and the
immediately preceding Interest Accrual Periods may be obtained by any CTO
Securityholder by telephoning the Trustee at (000) 000-0000.
(c) On each LIBOR Determination Date, the Trustee shall send to the
Servicer by facsimile notification of LIBOR for such LIBOR Determination Date.
Section 4.16 DEFEASANCE FUNDING ACCOUNT.
(a) ESTABLISHMENT OF THE DEFEASANCE FUNDING ACCOUNT. The Servicer
shall establish and maintain or cause to be established and maintained with a
Qualified Institution, which may be the Trustee, in the name of the Trustee, on
behalf of the Series 1998-1 Securityholders, the "Defeasance Funding Account,"
which shall be a segregated trust account with the corporate trust department of
such Qualified Institution, bearing a designation clearly indicating that the
funds deposited therein are held for the benefit of the Series 1998-1
Securityholders. The Trustee shall possess all right, title and interest in all
funds on deposit from time to time in the Defeasance Funding Account and in all
proceeds thereof. The Defeasance Funding Account shall be under the sole
dominion and control of the Trustee for the benefit of the Series 1998-1
Securityholders. If, at any time, the institution holding the Defeasance
Funding Account ceases to be a Qualified Institution, the Trustee shall within
10 Business Days establish a new Defeasance Funding Account meeting the
conditions specified above with a Qualified Institution, and shall transfer any
cash or any investments to such new Defeasance Funding Account. From the date
such new Defeasance Funding Account is established, it shall be the "Defeasance
Funding Account." The Trustee and the Transferor shall have the right to make
deposits to the Defeasance Funding Account in accordance with Section 4.18. The
Trustee, at the written direction of the Servicer, shall (i) make withdrawals
from the Defeasance Funding Account from time to time, in the amounts and for
the purposes set forth in this Series Supplement, and (ii) on each Transfer Date
from and after the commencement of the Defeasance and prior to termination of
the Defeasance Funding Account make a deposit into the Principal Account in the
amount specified in, and otherwise in accordance with, subsection 4.12 of the
Agreement.
47
(b) INVESTMENT OF FUNDS IN DEFEASANCE FUNDING ACCOUNT. Funds on
deposit in the Defeasance Funding Account shall be invested by the Trustee at
the direction of the Servicer in Cash Equivalents maturing no later than the
following Transfer Date. Investment earnings (net of investment losses and
expenses) on funds on deposit in the Defeasance Funding Account (the "Defeasance
Funding Account Investment Proceeds") will be applied on each Transfer Date as
if such amount were Available Series 1998-1 Finance Charge Collections on the
last Business Day of the preceding Monthly Period. If, for any Interest Accrual
Period, the Defeasance Funding Account Investment Proceeds for the related
Monthly Period are less than the sum of the Class A Monthly Interest, the Class
B Monthly Interest and the CTO Monthly Interest for such Interest Accrual
Period, the amount of such deficiency will be paid from the Defeasance Reserve
Account to the extent of the Available Defeasance Reserve Account Amount and
applied on the applicable Transfer Date as Available Series 1998-1 Finance
Charge Collections as if such amounts were available to be applied pursuant to
subsection 4.9(a) on the last Business Day of the preceding Monthly Period.
(c) TERMINATION OF DEFEASANCE FUNDING ACCOUNT. The Defeasance Funding
Account shall be terminated following the earliest to occur of (a) the
termination of the Trust pursuant to the Agreement, (b) the date on which the
ABC Invested Amount is paid in full and (c) after Defeasance, the earlier of the
first Transfer Date with respect to the Early Amortization Period and the CTO
Expected Final Payment Date. Upon the termination of the Defeasance Funding
Account, all amounts remaining on deposit therein after the payment in full of
the Series 1998-1 Securities shall be treated as Shared Principal Collections.
Section 4.17 DEFEASANCE RESERVE ACCOUNT. (a) ESTABLISHMENT OF THE
DEFEASANCE RESERVE ACCOUNT. The Servicer shall establish and maintain or cause
to be established and maintained with a Qualified Institution, which may be the
Trustee, in the name of the Trustee, on behalf of the Series 1998-1
Securityholders, the "Defeasance Reserve Account," which shall be a segregated
trust account with the corporate trust department of such Qualified Institution,
bearing a designation clearly indicating that the funds deposited therein are
held for the benefit of the Series 1998-1 Securityholders. The Trustee shall
possess all right, title and interest in all funds on deposit from time to time
in the Defeasance Reserve Account and in all proceeds thereof. The Defeasance
Reserve Account shall be under the sole dominion and control of the Trustee for
the benefit of the Series 1998-1 Securityholders. If, at any time, the
institution holding the Defeasance Reserve Account ceases to be a Qualified
Institution, the Trustee shall within 10 Business
48
Days establish a new Defeasance Reserve Account meeting the conditions specified
above with a Qualified Institution, and shall transfer any cash or any
investments to such new Defeasance Reserve Account. From the date such new
Defeasance Reserve Account is established, it shall be the "Defeasance Reserve
Account." The Trustee, at the written direction of the Servicer, shall (i) make
withdrawals from the Defeasance Reserve Account from time to time, in the
amounts and for the purposes set forth in this Series Supplement, and (ii) on
each Transfer Date (from and after the Defeasance Reserve Account Funding Date)
prior to termination of the Defeasance Reserve Account make a deposit into the
Defeasance Reserve Account in the amount specified in, and otherwise in
accordance with, subsection 4.9(a)(xv) of the Agreement.
(b) ADMINISTRATION OF DEFEASANCE RESERVE ACCOUNT. On or before each
Transfer Date following Defeasance and on the first Transfer Date with respect
to the Early Amortization Period, the Trustee at the direction of the Servicer
shall withdraw from the Defeasance Reserve Account, up to the Available
Defeasance Reserve Account Amount, an amount equal to the excess of the sum of
the Class A Monthly Interest, the Class B Monthly Interest, the CTO Monthly
Interest and the amount of monthly interest payable with respect to the Class D
Securities for the related Interest Accrual Period over the Defeasance Funding
Account Investment Proceeds with respect to such Transfer Date, and the amount
of such withdrawal shall be applied as Available Series 1998-1 Finance Charge
Collections as if such amounts were available to be applied pursuant to
subsection 4.9(a) on the last Business Day of the preceding Monthly Period.
(c) INVESTMENT OF FUNDS IN DEFEASANCE RESERVE ACCOUNT. Funds on
deposit in the Defeasance Reserve Account shall be invested by the Trustee at
the direction of the Servicer in Cash Equivalents maturing no later than the
following Transfer Date. The interest and other investment income (net of
investment expenses and losses) earned on such investments will be retained in
the Defeasance Reserve Account (to the extent the amount on deposit therein is
less than the Required Defeasance Reserve Account Amount) or applied on each
Transfer Date as Available Series 1998-1 Finance Charge Collections as if such
amounts were available to be applied pursuant to subsection 4.9(a) on the last
Business Day of the preceding Monthly Period.
(d) TERMINATION OF DEFEASANCE RESERVE ACCOUNT. The Defeasance Reserve
Account shall be terminated following the earliest to occur of (a) the
termination of the Trust pursuant to the Agreement, (b) the date on which the
ABC
49
Invested Amount is paid in full, (c) prior to Defeasance, the Pay Out
Commencement Date and (d) after Defeasance, the earlier of the first Transfer
Date with respect to the Early Amortization Period and the CTO Expected Final
Payment Date. Upon the termination of the Defeasance Reserve Account, all
amounts on deposit therein (after giving effect to any withdrawal from the
Defeasance Reserve Account on such date as described above) shall be applied as
Available Series 1998-1 Finance Charge Collections as if such amounts were
available to be applied pursuant to subsection 4.9(a) on the last Business Day
of the preceding Monthly Period.
Section 4.18 DEFEASANCE. On the date during the Amortization Period
that the following conditions shall have been satisfied: (i) an amount shall
have been deposited (x) in the Defeasance Funding Account equal to the sum of
the Class A Outstanding Principal Amount, the Class B Outstanding Principal
Amount and the CTO Outstanding Principal Amount, which amount shall be invested
in Cash Equivalents and (y) in the Defeasance Reserve Account equal to or
greater than the excess of the sum of the Class A Monthly Interest, the Class B
Monthly Interest and the estimated CTO Monthly Interest over the estimated
amount of investment earnings on amounts in the Defeasance Funding Account, as
estimated by the Transferor, for each of the Interest Accrual Periods during the
period from the date of the deposit to the Defeasance Funding Account through
the CTO Expected Final Payment Date (the "Required Defeasance Reserve Account
Amount"); (ii) the Transferor shall have delivered to the Trustee an Opinion of
Counsel to the effect that such deposit and termination of obligations will not
result in the Trust being required to register as an "investment company" within
the meaning of the Investment Company Act and an Opinion of Counsel to the
effect that following such deposit none of the Trust, the Defeasance Reserve
Account or the Defeasance Funding Account will be deemed to be an association
(or publicly traded partnership) taxable as a corporation; (iii) the Transferor
shall have delivered to the Trustee a certificate of an officer of the
Transferor stating that the Transferor reasonably believes that such deposit and
termination of its obligations will not constitute a Pay Out Event or any event
that, with the giving of notice or the lapse of time, would cause a Pay Out
Event to occur; and (iv) the Rating Agency Condition shall have been satisfied;
then, the Series 1998-1 Securities will no longer be entitled to the security
interest of the Trust in the Receivables and, except those set forth in clause
(i) above, other Trust assets ("Defeasance"), the percentages applicable to the
allocation to the Series 1998-1 Securityholders of Principal Collections,
Finance Charge Collections, unpaid Adjustment Payments and Default Amounts shall
be reduced to zero and the Monthly Servicing Fee shall be reduced to zero;
PROVIDED, HOWEVER, that no such Defeasance shall occur for so long as any Class
A
50
Charge-Offs, Class B Charge-Offs or CTO Charge-Offs exist. Upon the satisfaction
of the foregoing conditions, the Class D Invested Amount shall be reduced to
zero.
Section 4.19 REVOLVING RECEIVABLES RESERVE ACCOUNT. (a) ESTABLISHMENT
OF THE REVOLVING RECEIVABLES RESERVE ACCOUNT. The Servicer shall establish and
maintain or cause to be established and maintained with a Qualified Institution,
which may be the Trustee, in the name of the Trustee, on behalf of the Series
1998-1 Securityholders, the "Revolving Receivables Reserve Account," which shall
be a segregated trust account with the corporate trust department of such
Qualified Institution, bearing a designation clearly indicating that the funds
deposited therein are held for the benefit of the Series 1998-1 Securityholders.
The Trustee shall possess all right, title and interest in all funds on deposit
from time to time in the Revolving Receivables Reserve Account and in all
proceeds thereof. The Revolving Receivables Reserve Account shall be under the
sole dominion and control of the Trustee for the benefit of the Series 1998-1
Securityholders. If at any time, the institution holding the Revolving
Receivables Reserve Account ceases to be a Qualified Institution, the Trustee
shall within 10 Business Days establish a new Revolving Receivables Reserve
Account meeting the conditions specified above with a Qualified Institution, and
shall transfer any cash or any investments to such new Revolving Receivables
Reserve Account. From the date such new Revolving Receivables Reserve Account
is established, it shall be the "Revolving Receivables Reserve Account."
(b) DEPOSITS TO THE REVOLVING RECEIVABLES RESERVE ACCOUNT. On the
Closing Date, the Transferor shall make an initial deposit of $200,000 to the
Revolving Receivables Reserve Account. Amounts shall be deposited in the
Revolving Receivables Reserve Account on each Business Day to the extent
specified pursuant to subsection 4.9(a)(xiv) of the Agreement.
(c) WITHDRAWALS FROM THE REVOLVING RECEIVABLES RESERVE ACCOUNT. Funds
on deposit in the Revolving Receivables Reserve Account shall be withdrawn by
the Servicer on each Transfer Date to the extent of any shortfalls in amounts to
be paid or deposited pursuant to subsections 4.9(a)(i) through (xiii) of the
Agreement as of the end of the day on the last Business Day of the preceding
Monthly Period and shall be applied in accordance with subsections 4.9(a)(i)
through (xiii) of the Agreement as Available Series 1998-1 Finance Charge
Collections as if such amounts were available on the last Business Day of the
preceding Monthly Period.
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(d) INVESTMENT OF FUNDS IN REVOLVING RECEIVABLES RESERVE ACCOUNT.
Funds on deposit in the Revolving Receivables Reserve Account shall be invested
by the Trustee at the direction of the Servicer in Cash Equivalents maturing no
later than the following Transfer Date. The interest and other investment
income (net of investment expenses and losses) earned on such investments will
be retained in the Revolving Receivables Reserve Account (to the extent the
amount on deposit therein is less than the Required Reserve Account Amount) or
applied on each Transfer Date as Available Series 1998-1 Finance Charge
Collections as if such amounts were available to be applied pursuant to
subsection 4.9(a) of the Agreement on the last Business Day of the preceding
Monthly Period.
(e) TERMINATION OF REVOLVING RECEIVABLES RESERVE ACCOUNT. The
Revolving Receivables Reserve Account shall be terminated following the earliest
to occur of (a) the termination of the Trust pursuant to the Agreement and (b)
the date on which the ABC Invested Amount is paid in full. Upon the termination
of the Revolving Receivables Reserve Account, all amounts on deposit therein
(after giving effect to any withdrawal from the Revolving Receivables Reserve
Account on such date as described above) shall be applied as Available Series
1998-1 Finance Charge Collections as if such amounts were available to be
applied pursuant to subsection 4.9(a) of the Agreement on the last Business Day
of the preceding Monthly Period.
Section 4.20 CTO TRIGGER EVENT. If (i) the rating of Fingerhut
Companies, Inc.'s senior secured notes and, if rated, the rating of Fingerhut
Companies, Inc.'s corporate revolving lines of credit facility is reduced below
BBB from Standard & Poor's and below Baa2 from Moody's (a "CTO Trigger Event")
and (ii) with respect to any Business Day (x) the percentage equivalent of a
fraction the numerator of which is the Series 1998-1 Percentage of the
Transferor Interest and the denominator of which is the sum of the Invested
Amount and the Series 1998-1 Percentage of the Transferor Interest (the "Target
Percentage") is less than 6%, and (y) the amount on deposit in the CTO Reserve
Account is less than the Specified CTO Reserve Amount, then (a) the Transferor
shall, in connection with increases in the aggregate amount of Principal
Receivables in the Trust, the scheduled paydown of other Series or, with respect
to any Series of Variable Funding Securities, an optional payment of principal,
allow the Transferor Interest to increase such that the Target Percentage shall
be equal to or in excess of 6% and/or (b) the Servicer shall cause amounts
available pursuant to subsection 4.9(a)(xvi) of the Agreement to be deposited in
the CTO Reserve Account until the amount on deposit therein is equal to the
Specified CTO Reserve Amount. The Transferor may allow the Transferor Interest
to decrease on any Business Day, to the extent that it exceeds the Minimum
52
Transferor Interest and the amount on deposit in the CTO Reserve Account
following any such decrease and after giving effect to any deposit therein on
such Business Day is at least equal to the Specified CTO Reserve Amount.
Section 4.21 CTO RESERVE ACCOUNT. (a) ESTABLISHMENT OF THE CTO RESERVE
ACCOUNT. The Servicer, for the benefit of the CTO Securityholders, shall, upon
the occurrence of a CTO Trigger Event, establish and maintain or cause to be
established and maintained with a Qualified Institution, which may be the
Trustee, in the name of the Trustee, on behalf of the CTO Securityholders, the
"CTO Reserve Account," which shall be a segregated trust account with the
corporate trust department of such Qualified Institution, bearing a designation
clearly indicating that the funds deposited therein are held for the benefit of
the CTO Securityholders. The Trustee shall possess all right, title and
interest in all funds on deposit from time to time in the CTO Reserve Account
and in all proceeds thereof. The CTO Reserve Account shall be under the sole
dominion and control of the Trustee for the benefit of the CTO Securityholders.
If, at any time, the institution holding the CTO Reserve Account ceases to be a
Qualified Institution, the Trustee shall within 10 Business Days establish a new
CTO Reserve Account meeting the conditions specified above with a Qualified
Institution, and shall transfer any cash or any investments to such new CTO
Reserve Account. From the date such new CTO Reserve Account is established, it
shall be the "CTO Reserve Account."
(b) ADMINISTRATION OF CTO RESERVE ACCOUNT. On each Business Day
following the occurrence of a CTO Trigger Event, amounts will be deposited in
the CTO Reserve Account in accordance with subsection 4.9(a)(xvi) of the
Agreement. Funds on deposit in the CTO Reserve Account shall be withdrawn by
the Servicer and applied in accordance with subsection 4.9(a)(xi) of the
Agreement as if they were Available Series 1998-1 Finance Charge Collections on
any Business Day after the payment in full of the Class A Invested Amount and
the Class B Invested Amount to the extent of the aggregate amount of CTO
Charge-Offs, if any. Amounts on deposit in the CTO Reserve Account in excess of
the Specified CTO Reserve Amount on any Business Day shall be released therefrom
and paid to the Transferor. All amounts on deposit in the CTO Reserve Account
shall be released therefrom and paid to the Transferor, if the rating of
Fingerhut Companies, Inc.'s senior secured notes or, if rated, the rating of
Fingerhut Companies, Inc.'s corporate revolving lines of credit facility is
subsequently increased to BBB or higher by Standard & Poor's and Baa2 or higher
by Moody's or the CTO Invested Amount has been paid in full.
53
(c) INVESTMENT OF FUNDS IN CTO RESERVE ACCOUNT. Funds on deposit in
the CTO Reserve Account shall be invested by the Trustee (or, at the direction
of the Trustee, by the Servicer on behalf of the Trustee) at the direction of
the Servicer in Cash Equivalents that will mature so that such funds will be
available for withdrawal on or prior to the following Business Day. The
interest and other investment income (net of investment expenses and losses)
earned on such investments will be retained in the CTO Reserve Account (to the
extent the amount on deposit therein is less than the Specified CTO Reserve
Amount) or applied on each Business Day as Reserve Account Investment Proceeds.
(d) TERMINATION OF CTO RESERVE ACCOUNT. The CTO Reserve Account shall
be terminated following the earliest to occur of (a) the termination of the
Trust pursuant to the Agreement and (b) the date on which the CTO Invested
Amount is paid in full. Upon the termination of the CTO Reserve Account, all
amounts on deposit therein (after giving effect to any withdrawal from the CTO
Reserve Account on such date as described above) shall be released therefrom and
paid to the Transferor.
Section 4.22 PAYMENT RESERVE ACCOUNT. (a) ESTABLISHMENT OF THE PAYMENT
RESERVE ACCOUNT. The Servicer shall establish and maintain or cause to be
established and maintained with a Qualified Institution, which may be the
Trustee, in the name of the Trustee, on behalf of the Series 1998-1
Securityholders, the "Payment Reserve Account," which shall be a segregated
trust account with the corporate trust department of such Qualified Institution,
bearing a designation clearly indicating that the funds deposited therein are
held for the benefit of the Series 1998-1 Securityholders. The Trustee shall
possess all right, title and interest in all funds on deposit from time to time
in the Payment Reserve Account and in all proceeds thereof. The Payment Reserve
Account shall be under the sole dominion and control of the Trustee for the
benefit of the Series 1998-1 Securityholders. If, at any time, the institution
holding the Payment Reserve Account ceases to be a Qualified Institution, the
Trustee shall within 10 Business Days establish a new Payment Reserve Account
meeting the conditions specified above with a Qualified Institution, and shall
transfer any cash or any investments to such new Payment Reserve Account. From
the date such new Payment Reserve Account is established, it shall be the
"Payment Reserve Account."
(b) ADMINISTRATION OF PAYMENT RESERVE ACCOUNT. The Transferor, at its
discretion, may on any Business Day withdraw all or a part of any amounts then
on deposit in the Payment Reserve Account and apply such funds as Available
Series
54
1998-1 Finance Charge Collections in accordance with Section 4.9(a) of the
Agreement.
(c) INVESTMENT ON FUNDS IN PAYMENT RESERVE ACCOUNT. Funds on deposit
in the Payment Reserve Account shall be invested by the Trustee (or, at the
direction of the Trustee, by the Servicer on behalf of the Trustee) at the
direction of the Servicer in Cash Equivalents that will mature so that such
funds will be available for withdrawal on or prior to the following Business
Day. The interest and other investment income (net of investment expenses and
losses) earned on such investments will be applied on each Business Day as
Reserve Account Investment Proceeds.
(d) TERMINATION OF PAYMENT RESERVE ACCOUNT. The Payment Reserve
Account shall be terminated following the earliest to occur of (a) the
termination of the Trust pursuant to the Agreement and (b) the date on which the
ABC Adjusted Invested Amount is paid in full. Upon the termination of the
Payment Reserve Account, all amounts on deposit therein (after giving effect to
any withdrawal from the Payment Reserve Account on such date as described above)
shall be applied as if they were Available Series 1998-1 Finance Charge
Collections available to be applied pursuant to subsection 4.9(a) on the last
Business Day of the preceding Monthly Period.
Section 4.23 CONSTITUENT CLASS D SECURITIES. The Transferor as holder
of the Class D Securities may at any time (i) subdivide the Class D Securities
into two or more subsidiary Securities, or (ii) redirect all or any portion of
the amounts distributable to the Class D Securityholders (pursuant to the
application of collections allocable to the Class D Securityholders) to any
other Securityholder. In connection with such subdivision, the Transferor may
assign an interest rate to the Class D Securities, the "Class D Interest Rate,"
or a portion thereof and make payments of interest with respect to such
Securities from amounts initially allocated to the Series 1998-1 Securities and
available pursuant to subsection 4.9(a)(xiii). Before any Class D Securities
can be subdivided or transferred, the following conditions must be met: (i) the
Trustee and the Transferor shall have received an Opinion of Counsel that such
transfer does not adversely affect the conclusions reached in any of the federal
or state income tax opinions issued in connection with the original issuance of
the Series 1998-1 Securities, (ii) the Transferor shall deliver to the Trustee
an officers' certificate stating that in the reasonable belief of the
Transferor, such subdivision would not cause a Trust Pay Out Event or a Series
1998-1 Pay Out Event to occur, or an event which, with notice or lapse of time
or
55
both, would constitute a Trust Pay Out Event or a Series 1998-1 Pay Out Event,
and (ii) the Rating Agency Condition shall have been satisfied.
Section 7. ARTICLE V OF THE AGREEMENT. Article V of the Agreement
shall read in its entirety as follows and shall be applicable only to the Series
1998-1 Securities:
ARTICLE V
DISTRIBUTIONS AND REPORTS TO INVESTOR
SECURITYHOLDERS
Section 5.1 DISTRIBUTIONS. (a) On each Distribution Date, the Paying
Agent shall distribute (in accordance with the Settlement Statement delivered by
the Servicer to the Trustee and the Paying Agent pursuant to subsection 3.4(c))
to each Class A Securityholder of record on the preceding Record Date (other
than as provided in subsection 2.4(e) or in Section 12.3 respecting a final
distribution) such Securityholder's PRO RATA share (based on the aggregate
Undivided Interests represented by each Class A Security held by such
Securityholder) of amounts on deposit in the Distribution Account as are payable
to the Class A Securityholders pursuant to Sections 4.11 and 4.12 of the
Agreement by check mailed to each Class A Securityholder at such
Securityholder's address as it appears on the Security Register or, in the case
of Class A Securityholders holding Class A Securities evidencing not less than
80% of the Class A Invested Amount, by wire transfer, at the expense of such
Class A Securityholder, to an account or accounts designated by such Class A
Securityholder by written notice given to the Paying Agent not less than five
days prior to the related Distribution Date; PROVIDED, HOWEVER, that the final
payment in retirement of the Class A Securities will be made only upon
presentation and surrender of the Class A Securities at the office or offices
specified in the notice of such final distribution delivered by the Trustee
pursuant to Section 12.3.
(b) On each Distribution Date, the Paying Agent shall distribute (in
accordance with the Settlement Statement delivered by the Servicer to the
Trustee and the Paying Agent pursuant to subsection 3.4(c)) to each Class B
Securityholder of record on the preceding Record Date (other than as provided in
subsection 2.4(e) or in Section 12.3 respecting a final distribution) such
Securityholder's PRO RATA share (based on the aggregate Undivided Interests
represented by Class B Securities held by such Securityholder) of amounts on
deposit in the Distribution Account as are
56
payable to the Class B Securityholders pursuant to Sections 4.11 and 4.12 of the
Agreement by check mailed to each Class B Securityholder at such
Securityholder's address as it appears on the Security Register or, in the case
of Class B Securityholders holding Class B Securities evidencing not less than
80% of the Class B Invested Amount, by wire transfer, at the expense of such
Class B Securityholder, to an account or accounts designated by such Class B
Securityholder by written notice given to the Paying Agent not less than five
days prior to the related Distributed Date; PROVIDED, HOWEVER, that the final
payment in retirement of the Class B Securities will be made only upon
presentation and surrender of the Class B Securities at the office or offices
specified in the notice of such final distribution delivered by the Trustee
pursuant to Section 12.3.
(c) On each Distribution Date, the Paying Agent shall distribute (in
accordance with the Settlement Statement delivered by the Servicer to the
Trustee and the Paying Agent pursuant to subsection 3.4(c)) to each CTO
Securityholder of record on the preceding Record Date (other than as provided in
subsection 2.4(e) or in Section 12.3 respecting a final distribution) such
Securityholder's PRO RATA share (based on the aggregate Undivided Interests
represented by Collateralized Trust Obligations held by such Securityholder) of
amounts on deposit in the Distribution Account as are payable to the CTO
Securityholders pursuant to Sections 4.11 and 4.12 of the Agreement by check
mailed to each CTO Securityholder at such Securityholder's address as it appears
on the Security Register or, in the case of Securityholders holding
Collateralized Trust Obligations evidencing not less than 80% of the CTO
Invested Amount, by wire transfer, at the expense of such CTO Securityholder, to
an account or accounts designated by such CTO Securityholder by written notice
given to the Paying Agent not less than five days prior to the related
Distributed Date; PROVIDED, HOWEVER, that the final payment in retirement of the
Collateralized Trust Obligations will be made only upon presentation and
surrender of the Collateralized Trust Obligations at the office or offices
specified in the notice of such final distribution delivered by the Trustee
pursuant to Section 12.3.
(d) On each Distribution Date, the Paying Agent shall distribute (in
accordance with the Settlement Statement delivered by the Servicer to the
Trustee and the Paying Agent pursuant to subsection 3.4(c)) to each Class D
Securityholder of record other than the Transferor on the preceding Record Date
(other than as provided in subsection 2.4(e) or in Section 12.3 respecting a
final distribution) such Securityholder's PRO RATA share (based on the aggregate
Undivided Interests represented by Class D Securities held by such
Securityholder) of amounts on deposit in the Distribution Account as are payable
to the Class D Securityholders
57
pursuant to Sections 4.11 and 4.12 of the Agreement by wire transfer to each
Class D Securityholder to an account or accounts designated by such Class D
Securityholder by written notice given to the Paying Agent not less than five
days prior to the related Distribution Date; PROVIDED, HOWEVER, that the final
payment in retirement of the Class D Securities will be made only upon
presentation and surrender of the Class D Securities at the office or offices
specified in the notice of such final distribution delivered by the Trustee
pursuant to Section 12.3.
Section 5.2 SECURITYHOLDERS' STATEMENT. (a) On the 15th day of each
calendar month (or if such day is not a Business Day the next succeeding
Business Day), the Paying Agent shall forward to each Securityholder and the
Rating Agencies a statement substantially in the form of Exhibit B prepared by
the Servicer and delivered to the Trustee and the Paying Agent on the preceding
Determination Date setting forth the following information (which, in the case
of (i), (ii) and (iii) below, shall be stated on the basis of an original
principal amount of $1,000 per Security and, in the case of (ix) and (x), shall
be stated on an aggregate basis and on the basis of an original principal amount
of $1,000 per Security):
(i) the total amount distributed;
(ii) the amount of such distribution allocable to Class A
Principal, Class B Principal, CTO Principal and Class D Principal;
(iii) the amount of such distribution allocable to Class A
Monthly Interest and Carryover Class A Monthly Interest, Class B Monthly
Interest and Carryover Class B Monthly Interest, CTO Monthly Interest and
Carryover CTO Monthly Interest and any amounts payable to the Class D
Securityholders with respect to interest;
(iv) the amount of Principal Collections processed in the
Collection Account during the preceding Monthly Period and allocated in
respect of the Class A Securities, the Class B Securities, the
Collateralized Trust Obligations and the Class D Securities, respectively;
(v) the amount of Finance Charge Collections processed during
the preceding Monthly Period and allocated in respect of the Class A
Securities, the Class B Securities, the Collateralized Trust Obligations
and the Class D Securities, respectively, and, after the Defeasance Reserve
Account Funding Date, the amount of Defeasance Funding Account Investment
58
Proceeds and investment earnings on amounts on deposit in the Defeasance
Reserve Account;
(vi) the aggregate amount of Principal Receivables, the
Invested Amount, the Class A Invested Amount, the Class B Invested Amount,
the CTO Invested Amount, the Class D Invested Amount, the Floating
Percentage and, during the Amortization Period, the Fixed/Floating
Percentage as of the end of the day on the last day of the related Monthly
Period;
(vii) the aggregate outstanding balance of Receivables which are
current, 30-59, 60-89, and 90 days and over delinquent as of the end of the
day on the last day of the related Monthly Period;
(viii) the aggregate Series Default Amount for the preceding
Monthly Period;
(ix) the aggregate amount of Class A Charge-Offs, Class B
Charge-Offs, CTO Charge-Offs and Class D Charge-Offs for the preceding
Monthly Period;
(x) the amount of the Monthly Servicing Fee for the preceding
Monthly Period;
(xi) the amount of unreimbursed Redirected Class B Principal
Collections, Redirected CTO Principal Collections and Redirected Class D
Principal Collections for the related Monthly Period;
(xii) the aggregate amount of funds in the Excess Funding
Account as of the last day of the Monthly Period immediately preceding the
Distribution Date;
(xiii) whether a CTO Trigger Event has occurred and, if so, the
Specified CTO Reserve Amount and the amount then on deposit in the CTO
Reserve Account;
(xiv) the number of new Accounts the Receivables in which have
been added to the Trust during the related Monthly Period;
59
(xv) the Portfolio Yield for the related Monthly Period;
(xvi) the Base Rate for the related Monthly Period;
(xvii) the Defeasance Funding Account Balance on the related
Transfer Date;
(xviii) the Revolving Receivables Reserve Account balance on the
related Transfer Date; and
(xix) the amount of Defeasance Funding Account Investment
Proceeds deposited in the Collection Account on the related Transfer Date,
the Required Defeasance Reserve Account Amount and the Available Defeasance
Reserve Account Amount as of the related Transfer Date.
(b) ANNUAL SECURITYHOLDERS' TAX STATEMENT. On or before January 31 of
each calendar year, beginning with calendar year 1999, the Paying Agent shall
distribute to each Person who at any time during the preceding calendar year was
a Series 1998-1 Securityholder, a statement prepared by the Servicer containing
the information required to be contained in the regular report to Series 1998-1
Securityholders, as set forth in subclauses (i), (ii) and (iii) above,
aggregated for such calendar year or the applicable portion thereof during which
such Person was a Series 1998-1 Securityholder, together with, on or before
January 31 of each year, beginning in 1999, such other customary information
(consistent with the treatment of the Securities as debt) as the Trustee or the
Servicer deems necessary or desirable to enable the Series 1998-1
Securityholders to prepare their tax returns. Such obligations of the Trustee
shall be deemed to have been satisfied to the extent that substantially
comparable information shall be provided by the Trustee pursuant to any
requirements of the Internal Revenue Code as from time to time in effect.
Section 8. SERIES 1998-1 PAY OUT EVENTS. If any one of the following
events shall occur with respect to the Series 1998-1 Securities:
(a) failure on the part of the Transferor (i) to make any payment or
deposit required to be made by the Transferor by the terms of (A) the Agreement
or (B) this Series Supplement, on or before the date occurring five Business
Days after the date such payment or deposit is required to be made herein, (ii)
to perform in all material respects the Transferor's covenant not to sell,
pledge, assign, or transfer to any person, or grant any unpermitted lien on, any
Receivable; or (iii) duly to observe
60
or perform in any material respect any covenants or agreements of the Transferor
set forth in the Agreement or this Series Supplement, which failure has a
material adverse effect on the Series 1998-1 Securityholders and which continues
unremedied for a period of 60 days after the date on which written notice of
such failure, requiring the same to be remedied, shall have been given to the
Transferor by the Trustee, or to the Transferor and the Trustee by the Holders
of Series 1998-1 Securities evidencing Undivided Interests aggregating not less
than 50% of the Invested Amount of this Series 1998-1, and continues to affect
materially and adversely the interests of the Series 1998-1 Securityholders for
such period;
(b) any representation or warranty made by the Transferor in the
Agreement or this Series Supplement, (i) shall prove to have been incorrect in
any material respect when made, which continues to be incorrect in any material
respect for a period of 60 days after the date on which written notice of such
failure, requiring the same to be remedied, shall have been given to the
Transferor by the Trustee, or to the Transferor and the Trustee by the Holders
of the Series 1998-1 Securities evidencing Undivided Interests aggregating more
than 50% of the Invested Amount of this Series 1998-1, and (ii) as a result of
which the interests of the Series 1998-1 Securityholders are materially and
adversely affected and continue to be materially and adversely affected for such
period; PROVIDED, HOWEVER, that a Series 1998-1 Pay Out Event pursuant to this
subsection 8(b) shall not be deemed to have occurred hereunder if the Transferor
has accepted reassignment of the related Receivable, or all of such Receivables,
if applicable, during such period (or such longer period as the Trustee may
specify) in accordance with the provisions of the Agreement;
(c) Fingerhut shall consent to the appointment of a bankruptcy
trustee or receiver or liquidator in any bankruptcy proceeding or any other
insolvency, readjustment of debt, marshalling of assets and liabilities or
similar proceedings of or relating to all or substantially all of its property;
or a decree or order of a court or agency or supervisory authority having
jurisdiction in the premises for the appointment of a bankruptcy trustee or
receiver or liquidator in any bankruptcy proceeding or any other insolvency,
readjustment of debt, marshalling of assets and liabilities or similar
proceedings, or for the winding-up or liquidation of its affairs, shall have
been entered against Fingerhut; or Fingerhut shall admit in writing its
inability to pay its debts generally as they become due, file a petition to take
advantage of any applicable insolvency or reorganization statute including the
U.S. bankruptcy code, make an assignment for the benefit of its creditors or
voluntarily suspend payment of its obligations;
61
(d) the average of the Portfolio Yields for any three consecutive
Monthly Periods is reduced to a rate which is less than the weighted average
Base Rates for such three consecutive Monthly Periods;
(e) (i) the Transferor Interest shall be less than the Minimum
Transferor Interest, (ii) the total amount of Principal Receivables and the
amount on deposit in the Excess Funding Account shall be less than the Minimum
Aggregate Principal Receivables or (iii) the Retained Percentage shall be equal
to or less than 2%, in each case as of any Determination Date and, in each case,
shall not exceed the required amount on or prior to the tenth Business Day
following such Determination Date;
(f) any Servicer Default shall occur which would have a material
adverse effect on the Series 1998-1 Securityholders;
then, in the case of any event described in subparagraph (a), (b) or (f), after
the applicable grace period, if any, set forth in such subparagraphs, the
Holders of Series 1998-1 Securities evidencing more than 50% of the Invested
Amount of this Series 1998-1, by notice then given in writing to the Trustee,
the Transferor and the Servicer may declare that a pay out event (a "Series
1998-1 Pay Out Event") has occurred as of the date of such notice, and in the
case of any event described in subparagraphs (c), (d) or (e), a Series 1998-1
Pay Out Event shall occur without any notice or other action on the part of the
Trustee or the Series 1998-1 Securityholders immediately upon the occurrence of
such event.
Section 9. COLLATERALIZED TRUST OBLIGATION DEFAULTS AND REMEDIES. (a)
"CTO Default," wherever used herein, means any one of the following events
(whatever the reason for such CTO Default and whether it shall be voluntary or
involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(1) There is a CTO Monthly Interest Shortfall on two consecutive
Distribution Dates; or
(2) There is a CTO Charge-Off on three consecutive Distribution
Dates.
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(b) If a CTO Default shall have occurred, upon the direction of CTO
Securityholders holding more than 50% of the CTO Invested Amount:
(i) the Specified CTO Reserve Amount shall thereafter be equal
to the CTO Outstanding Principal Amount;
(ii) following the payment in full of the Class A Invested and
the Class B Invested Amount, the Trustee shall sell or cause to be sold,
and the Trustee shall pay the proceeds to the Series 1998-1 Securityholders
in final payment of all principal of and accrued interest on such Series to
be applied first to the CTO Invested Amount until paid in full and then to
the Class D Invested Amount until paid in full, an amount of Principal
Receivables and the related Finance Charge Receivables (or interests
therein) up to 110% of the Invested Amount at the close of business on such
date; PROVIDED, that the amount of such Principal Receivables shall not
exceed the sum of (1) the product of (A) the Transferor Percentage on the
date of any such sale, (B) the aggregate outstanding Principal Receivables
on such date and (C) a fraction the numerator of which is the Invested
Amount on such date and the denominator of which is the sum of the invested
amounts of all Series and the aggregate Participation Amount of all
Participations then outstanding and (2) the Invested Amount on such date.
The Transferor shall be permitted to purchase such Receivables in such case
and shall have a right of first refusal with respect thereto to the extent
of a bona fide offer by an unrelated third party for fair value. Any
proceeds of such sale in excess of such principal and interest paid shall
be paid to the Transferor. Upon such sale, final payment of all amounts
allocable to any Class of such Series shall be made in the manner provided
in Section 12.3 of the Agreement.
The Servicer shall provide written notice to the Rating Agencies of any such
direction of a majority of the CTO Invested Amount.
SECTION 10. SERIES 1998-1 TERMINATION. The right of the Series
1998-1 Securityholders to receive payments from the Trust will terminate on the
first Business Day following the Series 1998-1 Termination Date unless such
Series is an Affected Series as specified in Section 12.1(c) of the Agreement
and the sale contemplated therein has not occurred by such date, in which event
the Series 1998-1 Securityholders shall remain entitled to receive proceeds of
such sale when such sale occurs.
63
SECTION 11. LEGENDS; TRANSFER AND EXCHANGE; RESTRICTIONS ON
TRANSFER OF SERIES 1998-1 SECURITIES; TAX TREATMENT. (a) Each Class A Security,
Class B Security and Collateralized Trust Obligation will bear a legend or
legends in substantially the following form:
EACH PURCHASER REPRESENTS AND WARRANTS FOR THE BENEFIT OF
FINGERHUT RECEIVABLES, INC. AND THE TRUSTEE THAT SUCH PURCHASER IS NOT
(I) AN EMPLOYEE BENEFIT PLAN (AS DEFINED IN SECTION 3(3) OF THE
EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"))
THAT IS SUBJECT TO THE PROVISIONS OF TITLE I OF ERISA, (II) A PLAN
DESCRIBED IN SECTION 4975(e)(1) OF THE INTERNAL REVENUE CODE OF 1986,
AS AMENDED (THE "CODE") THAT IS SUBJECT TO SECTION 4975 OF THE CODE,
(III) A GOVERNMENTAL PLAN, AS DEFINED IN SECTION 3(32) OF ERISA,
SUBJECT TO ANY FEDERAL, STATE OR LOCAL LAW WHICH IS, TO A MATERIAL
EXTENT, SIMILAR TO THE PROVISIONS OF SECTION 406 OF ERISA OR SECTION
4975 OF THE CODE, (IV) AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE "PLAN
ASSETS" (AS DEFINED IN 29 C.F.R. SECTION 2510.3-101 OR OTHERWISE UNDER
ERISA) BY REASON OF A PLAN'S INVESTMENT IN THE ENTITY OR (V) A PERSON
INVESTING "PLAN ASSETS" OF ANY SUCH PLAN (INCLUDING WITHOUT
LIMITATION, FOR PURPOSES OF CLAUSE (IV) AND THIS CLAUSE (V), AS
APPLICABLE, AN INSURANCE COMPANY GENERAL ACCOUNT, BUT EXCLUDING ANY
ENTITY REGISTERED UNDER THE INVESTMENT COMPANY ACT OF 1940, AS
AMENDED).
Each Security Owner by virtue of its beneficial interest in the Class
A Securities or Class B Securities, as applicable, shall be deemed to have made
the representations and warranties stated in such legend.
(b) Each Class A Security and Class B Security and each Collateralized
Trust Obligation that is a CTO Global Security deposited with DTC, or a
custodian on behalf of DTC, shall bear the following legend:
64
UNLESS THIS SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO
THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT, AND ANY SECURITY ISSUED IS REGISTERED IN THE NAME OF CEDE &
CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO
SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE
BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
(c) Each Collateralized Trust Obligation that is issued pursuant to
Rule 144A shall bear the following legend:
THIS SECURITY HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY
STATE SECURITIES LAWS. THE HOLDER HEREOF, BY PURCHASING THIS
SECURITY, AGREES THAT THIS SECURITY MAY BE REOFFERED, RESOLD, PLEDGED
OR OTHERWISE TRANSFERRED ONLY IN COMPLIANCE WITH THE SECURITIES ACT
AND OTHER APPLICABLE LAWS AND ONLY (1) PURSUANT TO RULE 144A UNDER THE
SECURITIES ACT TO A PERSON WHO THE HOLDER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER ("QIB") WITHIN THE MEANING OF RULE 144A,
PURCHASING FOR ITS OWN ACCOUNT, OR A QIB PURCHASING FOR THE ACCOUNT OF
A QIB, WHOM THE HOLDER HAS INFORMED, IN EACH CASE, THAT SUCH REOFFER,
RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE
144A OR (2) IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 903 OR
RULE 904 OF REGULATION S UNDER THE SECURITIES ACT. EACH SECURITY
OWNER BY
65
ACCEPTING A BENEFICIAL INTEREST IN THIS SECURITY, UNLESS SUCH PERSON
ACQUIRED THIS SECURITY IN A TRANSFER DESCRIBED IN CLAUSE (2) ABOVE, IS
DEEMED TO REPRESENT THAT IT IS EITHER A QIB PURCHASING FOR ITS OWN ACCOUNT
OR A QIB PURCHASING FOR THE ACCOUNT OF ANOTHER QIB.
Each Collateralized Trust Obligation that is issued pursuant to
Regulation S shall bear the following legend:
THIS SECURITY HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND PRIOR TO THE DATE THAT IS 40 DAYS AFTER THE LATER OF THE
COMMENCEMENT OF THE OFFERING AND THE CLOSING DATE MAY NOT BE OFFERED,
SOLD, PLEDGED OR OTHERWISE TRANSFERRED IN THE UNITED STATES OR TO A
U.S. PERSON EXCEPT PURSUANT TO AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT.
(d) Each Class D Security will bear legends substantially in the
following form:
THIS SECURITY WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"). THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OR
ANY APPLICABLE STATE SECURITIES LAW OF ANY STATE AND MAY NOT BE OFFERED,
SOLD, PLEDGED OR OTHERWISE TRANSFERRED UNLESS REGISTERED PURSUANT TO OR
EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT AND ANY OTHER APPLICABLE
SECURITIES LAW. TRANSFERS OF THIS SECURITY SHALL BE SUBJECT TO THE
RESTRICTIONS SET FORTH IN THE POOLING AND SERVICING AGREEMENT.
66
EACH PURCHASER REPRESENTS AND WARRANTS FOR THE BENEFIT OF FINGERHUT
RECEIVABLES, INC. AND THE TRUSTEE THAT SUCH PURCHASER IS NOT (I) AN
EMPLOYEE BENEFIT PLAN (AS DEFINED IN SECTION 3(3) OF THE EMPLOYEE
RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA")) THAT IS
SUBJECT TO THE PROVISIONS OF TITLE I OF ERISA, (II) A PLAN DESCRIBED IN
SECTION 4975(e)(1) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE
"CODE") THAT IS SUBJECT TO SECTION 4975 OF THE CODE, (III) A GOVERNMENTAL
PLAN, AS DEFINED IN SECTION 3(32) OF ERISA, SUBJECT TO ANY FEDERAL, STATE
OR LOCAL LAW WHICH IS, TO A MATERIAL EXTENT, SIMILAR TO THE PROVISIONS OF
SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE, (IV) AN ENTITY WHOSE
UNDERLYING ASSETS INCLUDE PLAN ASSETS (AS DEFINED IN 29 C.F.R. SECTION
2510.3-101 OR OTHERWISE UNDER ERISA) BY REASON OF A PLAN'S INVESTMENT IN
THE ENTITY OR (V) A PERSON INVESTING PLAN ASSETS OF ANY SUCH PLAN
(INCLUDING WITHOUT LIMITATION, FOR PURPOSES OF CLAUSE (IV) AND THIS CLAUSE
(V), AS APPLICABLE, AN INSURANCE COMPANY GENERAL ACCOUNT, BUT EXCLUDING ANY
ENTITY REGISTERED UNDER THE INVESTMENT COMPANY ACT OF 1940, AS AMENDED).
SECTION 12. COMPLIANCE WITH WITHHOLDING REQUIREMENTS.
Notwithstanding any other provision of the Agreement, the Trustee and any Paying
Agent shall comply with all Federal withholding requirements with respect to
payments to the Series 1998-1 Securityholders of interest, original issue
discount, or other amounts that the Trustee, any Paying Agent, the Servicer or
the Transferor reasonably believes are applicable under the Internal Revenue
Code. The consent of the Series 1998-1 Securityholders shall not be required
for any such withholding. In the event the Trustee or the Paying Agent
withholds any amount from payments made to any Series 1998-1 Securityholder
pursuant to federal withholding requirements, the Trustee or the Paying Agent
shall indicate to such Series 1998-1 Securityholder the amount withheld and all
such amounts shall be deemed to have been paid to such Series 1998-1
Securityholders and the Series 1998-1 Securityholders shall have no claim
therefor.
67
SECTION 13. RATIFICATION OF AGREEMENT. (a) As supplemented by this
Series Supplement, the Agreement is in all respects ratified and confirmed and
the Agreement as so supplemented by this Series Supplement shall be read, taken,
and construed as one and the same instrument. The Transferor hereby confirms
the conveyance of the Trust Property to the Trustee for the benefit of the
Series 1998-1 Securityholders.
(b) For so long as any of the Collateralized Trust Obligations are
"restricted securities" within the meaning of Rule 144(a)(3) under the
Securities Act and during any period in which the Trust is not subject to
Section 13 or 15(d) of the Exchange Act, each of the Transferor, the Servicer
and the Trustee agree to cooperate with each other to provide to any CTO
Securityholder, and to any prospective purchaser of Collateralized Trust
Obligations designated by such CTO Securityholder upon the request of such CTO
Securityholder or prospective purchaser, the information required by Rule
144A(d)(4) under the Securities Act.
SECTION 14. COUNTERPARTS. This Series Supplement may be executed
in any number of counterparts, each of which so executed shall be deemed to be
an original, but all of such counterparts shall together constitute but one and
the same instrument.
SECTION 15. GOVERNING LAW. THIS SERIES SUPPLEMENT SHALL BE
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE WITHOUT REFERENCE
TO ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF
THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
SECTION 16. INSTRUCTIONS IN WRITING. All instructions or other
communications given by the Servicer or any other person to the Trustee pursuant
to this Series Supplement shall be in writing, and, with respect to the
Servicer, may be included in a Daily Report or Settlement Statement.
SECTION 17. PAIRED SERIES. Subject to the satisfaction of the
Rating Agency Condition, prior to the commencement of the Early Amortization
Period the Series 1998-1 Securities may be paired with one or more other Series
(each, a "Paired Series"). Each Paired Series either will be pre-funded with an
initial deposit to a pre-funding account in an amount up to the initial
principal amount of such Paired Series primarily from the proceeds of the sale
of such Paired Series or will
68
have a variable principal amount. Any such pre-funding account will be held for
the benefit of such Paired Series and not for the benefit of the Series 1998-1
Securityholders. As amounts are paid for the benefit of the Class A
Securityholders, Class B Securityholders and CTO Securityholders, either (i) in
the case of a pre-funded Paired Series, an equal amount of funds on deposit in
any pre-funding account for such pre-funded Paired Series will be released
(which funds will be distributed to the Transferor) or (ii) in the case of a
Paired Series having a variable principal amount, an interest in such variable
Paired Series in an equal or lesser amount may be sold by the Trust (and the
proceeds thereof will be distributed to the Transferor) and, in either case, the
invested amount in the Trust of such Paired Series will increase by up to a
corresponding amount. Upon payment in full of the Series 1998-1 Securities,
assuming that there have been no unreimbursed charge-offs with respect to any
related Paired Series, the aggregate invested amount of such related Paired
Series will have been increased by an amount up to an aggregate amount equal to
the Invested Amount paid to the Series 1998-1 Securityholders since the issuance
of such Paired Series. The issuance of a Paired Series will be subject to the
conditions described in subsection 6.9(b) of the Agreement.
69
IN WITNESS WHEREOF, the Transferor, the Servicer and the Trustee have
caused this Series 1998-1 Supplement to be duly executed by their respective
officers as of the day and year first above written.
FINGERHUT RECEIVABLES, INC.
Transferor
By:
-----------------------------------
Name: Xxxxx X. Xxxxxxx
Title: President and Treasurer
FINGERHUT NATIONAL BANK
Servicer
By:
-----------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Treasurer
THE BANK OF NEW YORK (DELAWARE)
Trustee
By:
-----------------------------------
Name:
Title:
Exhibit A-1
FORM OF CLASS A INVESTOR SECURITY
UNLESS THIS SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE
TRUSTEE OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT,
AND ANY SECURITY ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH
OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS
THE REGISTERED OWNER HEREOF, CEDE & CO. HAS AN INTEREST HEREIN.
EACH PURCHASER REPRESENTS AND WARRANTS FOR THE BENEFIT OF FINGERHUT
RECEIVABLES, INC. AND THE TRUSTEE THAT SUCH PURCHASER IS NOT (I) AN
EMPLOYEE BENEFIT PLAN (AS DEFINED IN SECTION 3(3) OF THE EMPLOYEE
RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA")) THAT IS
SUBJECT TO THE PROVISIONS OF TITLE I OF ERISA, (II) A PLAN DESCRIBED IN
SECTION 4975(e)(1) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE
"CODE") THAT IS SUBJECT TO SECTION 4975 OF THE CODE, (III) A GOVERNMENTAL
PLAN, AS DEFINED IN SECTION 3(32) OF ERISA, SUBJECT TO ANY FEDERAL, STATE
OR LOCAL LAW WHICH IS, TO A MATERIAL EXTENT, SIMILAR TO THE PROVISIONS OF
SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE, (IV) AN ENTITY WHOSE
UNDERLYING ASSETS INCLUDE "PLAN ASSETS" (AS DEFINED IN 29 C.F.R. SECTION
2510.3-101 OR OTHERWISE UNDER ERISA) BY REASON OF A PLAN'S INVESTMENT IN
THE ENTITY OR (V) A PERSON INVESTING "PLAN ASSETS" OF ANY SUCH PLAN
(INCLUDING WITHOUT LIMITATION, FOR PURPOSES OF CLAUSE (IV) AND
A-1-1
THIS CLAUSE (V), AS APPLICABLE, AN INSURANCE COMPANY GENERAL ACCOUNT, BUT
EXCLUDING ANY ENTITY REGISTERED UNDER THE INVESTMENT COMPANY ACT OF 1940,
AS AMENDED).
No. ___ $_________
CUSIP NO.
FINGERHUT MASTER TRUST
__________% ASSET BACKED SECURITY,
SERIES 1998-1, CLASS A
Evidencing an undivided interest in a trust, the corpus of which
consists of receivables generated from time to time in the ordinary course of
business from a portfolio of consumer revolving consumer credit card accounts
and closed-end installment sale or closed-end loan contracts transferred or to
be transferred by Fingerhut Receivables, Inc. (the "Transferor") and other
assets and interests constituting the Trust under the Agreement described below.
(Not an interest in or a recourse obligation of Fingerhut Receivables,
Inc., Fingerhut Companies, Inc., Fingerhut National Bank or any affiliate of
either of them.)
This certifies that _________ (the "Securityholder") is the registered
owner of a fractional undivided interest in the Fingerhut Master Trust (the
"Trust") issued pursuant to the Amended and Restated Pooling and Servicing
Agreement, dated as of March 18, 1998 (the "Pooling and Servicing Agreement";
such term to include any amendment thereto) by and between the Transferor,
Fingerhut National Bank, as Servicer (the "Servicer"), and The Bank of New York
(Delaware) as Trustee (the "Trustee"), and the Series 1998-1 Supplement, dated
as of ___________, 1998 (the "Series 1998-1 Supplement"), among the Transferor,
the Servicer and the Trustee. The Pooling and Servicing Agreement, as
supplemented by the Series 1998-1 Supplement, is herein referred to as the
"Agreement"). The corpus of the Trust consists of all of the Transferor's
right, title and interest in, to and under the Trust Property (as defined in the
Agreement).
A-1-2
This Security does not purport to summarize the Agreement and
reference is made to that Agreement for information with respect to the
interests, rights, benefits, obligations, proceeds, and duties evidenced hereby
and the rights, duties and obligations of the Trustee. To the extent not
defined herein, the capitalized terms used herein have the meanings ascribed to
them in the Agreement. This Security is one of a series of Securities entitled
"Fingerhut Master Trust ___% Asset Backed Securities, Series 1998-1, Class A"
(the "Class A Securities"), each of which represents a fractional undivided
interest in the Trust, and is issued under and is subject to the terms,
provisions and conditions of the Agreement, to which Agreement, as amended from
time to time, the Securityholder by virtue of the acceptance hereof assents and
by which the Securityholder is bound.
The Transferor has structured the Agreement, the Class A Securities,
the Fingerhut Master Trust ___% Asset Backed Securities, Series 1998-1, Class B
(the "Class B Securities" and collectively with the Class A Securities, the
"Offered Securities") and the Fingerhut Master Trust Floating Rate Asset Backed
Securities, Series 1998-1, Collateralized Trust Obligations (the "Collateralized
Trust Obligations") with the intention that the Offered Securities and the
Collateralized Trust Obligations will qualify under applicable tax law as
indebtedness, and both the Transferor and each holder of a Class A Security (a
"Class A Securityholder") or any interest therein by acceptance of its Security
or any interest therein, agrees to treat the Class A Securities for purposes of
federal, state and local income or franchise taxes and any other tax imposed on
or measured by income, as indebtedness.
No principal will be payable to the Class A Securityholders until the
first Distribution Date in the Amortization Period. No principal will be
payable to the Class B Securityholders, CTO Securityholders or Class D
Securityholders (other than with respect to Class D Excess Amounts) until all
principal payments have been made to the Class A Securityholders.
Interest on the Class A Securities will be payable on June 15, 1998
and on the 15th day of each month thereafter or, if such day is not a business
day, on the next succeeding business day (each, a "Distribution Date"), in an
amount equal to the product of (i) the Class A Interest Rate, (ii) a fraction
the numerator of which is the actual number of days in the related Interest
Accrual Period and the denominator of which is 360 and (iii) the outstanding
principal balance of the Class A Securities as of the close of business on the
first day of such Interest Accrual Period PROVIDED that interest for the first
Distribution Date will be an amount equal to the product of (u) the initial
Class A Invested Amount, (v) divided by 360, and (w) %.
A-1-3
Interest payments on the Class A Securities on each Distribution Date
will be funded from Available Series 1998-1 Finance Charge Collections with
respect to the preceding Monthly Period (or, with respect to the first
Distribution Date, such collections from and including the Closing Date to and
including May 29, 1998 plus the amount of the initial deposit to the Interest
Funding Account to be made on the Closing Date) and from certain other funds
allocated as set forth in the Pooling and Servicing Agreement to the respective
classes of the Securities and deposited on each business day during such Monthly
Period in the Interest Funding Account.
"CLASS A INVESTED AMOUNT" shall mean, with respect to any Business
Day, an amount equal to (a) the Class A Initial Invested Amount MINUS (b) the
aggregate amount of principal payments made to Class A Securityholders through
and including such Business Day, MINUS (c) the aggregate amount of Class A
Charge-Offs for all prior Distribution Dates, PLUS (d) the sum of the aggregate
amount allocated with respect to Class A Charge-Offs through and including such
Business Day pursuant to subsection 4.9(a)(vii) of the Agreement PLUS, with
respect to such subsection, amounts applied thereto pursuant to subsections
4.10(a) and (b), 4.14(a), (b) and (c), 4.16(b) and 4.17(b), (c) and (d) of the
Agreement, for the purpose of reimbursing amounts deducted pursuant to the
foregoing clauses (c) and (d); PROVIDED, HOWEVER, that the Class A Invested
Amount may not be reduced below zero.
Subject to the Agreement, payments of principal are limited to the
unpaid Class A Invested Amount of the Class A Securities, which may be less
than the unpaid balance of the Class A Securities pursuant to the terms of
the Agreement. All principal on the Class A Securities is due and payable no
later than the February 2005 Distribution Date (or if such day is not a
Business Day, the next succeeding Business Day) (the "Scheduled Series 1998-1
Termination Date"). After the earlier to occur of (i) the Scheduled Series
1998-1 Termination Date and (ii) the day after the Distribution Date on which
the Series 1998-1 Securities are paid in full (the "Series 1998-1 Termination
Date") neither the Trust nor the Transferor will have any further obligation
to distribute principal or interest on the Class A Securities. In the event
that the Class A Invested Amount is greater than zero on the Series 1998-1
Termination Date, the Trustee will sell or cause to be sold, to the extent
necessary, an amount of interests in the Receivables or certain of the
Receivables up to 110% of the Class A Invested Amount, the Class B Invested
Amount, the CTO Invested Amount and the Class D Invested Amount at the close
of business on such date (but not more than the total amount of Receivables
allocable to the Series 1998-1
A-1-4
Securities), and shall pay the proceeds to the Class A Securityholders PRO RATA
in final payment of the Class A Securities, then to the Class B Securityholders
pro rata in final payment of the Class B Securities, then to the CTO
Securityholders pro rata in final payment of the Collateralized Trust
Obligations and finally to the Class D Securityholders PRO RATA in final payment
of the Class D Securities.
Unless the certificate of authentication hereon has been executed by
or on behalf of the Trustee, by manual signature, this Security shall not be
entitled to any benefit under the Agreement, or be valid for any purpose.
A-1-5
IN WITNESS WHEREOF, the Transferor has caused this Security to be duly
executed.
FINGERHUT RECEIVABLES, INC.
By:
-----------------------------------
Name:
Title:
Dated:
CERTIFICATE OF AUTHENTICATION
This is one of the Class A Securities referred to in the within-mentioned
Pooling and Servicing Agreement.
THE BANK OF NEW YORK (DELAWARE)
By:
Name:
Title:
X-0-0
Xxxxxxx X-0
FORM OF CLASS B INVESTOR SECURITY
EACH PURCHASER REPRESENTS AND WARRANTS FOR THE BENEFIT OF
FINGERHUT RECEIVABLES, INC. AND THE TRUSTEE THAT SUCH PURCHASER IS NOT
(I) AN EMPLOYEE BENEFIT PLAN (AS DEFINED IN SECTION 3(3) OF THE
EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"))
THAT IS SUBJECT TO THE PROVISIONS OF TITLE I OF ERISA, (II) A PLAN
DESCRIBED IN SECTION 4975(e)(1) OF THE INTERNAL REVENUE CODE OF 1986,
AS AMENDED (THE "CODE") THAT IS SUBJECT TO SECTION 4975 OF THE CODE,
(III) A GOVERNMENTAL PLAN, AS DEFINED IN SECTION 3(32) OF ERISA,
SUBJECT TO ANY FEDERAL, STATE OR LOCAL LAW WHICH IS, TO A MATERIAL
EXTENT, SIMILAR TO THE PROVISIONS OF SECTION 406 OF ERISA OR SECTION
4975 OF THE CODE, (IV) AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE "PLAN
ASSETS" (AS DEFINED IN 29 C.F.R. SECTION 2510.3-101 OR OTHERWISE UNDER
ERISA) BY REASON OF A PLAN'S INVESTMENT IN THE ENTITY OR (V) A PERSON
INVESTING "PLAN ASSETS" OF ANY SUCH PLAN (INCLUDING WITHOUT
LIMITATION, FOR PURPOSES OF CLAUSE (IV) AND THIS CLAUSE (V), AS
APPLICABLE, AN INSURANCE COMPANY GENERAL ACCOUNT, BUT EXCLUDING ANY
ENTITY REGISTERED UNDER THE INVESTMENT COMPANY ACT OF 1940, AS
AMENDED).
UNLESS THIS SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE
TRUSTEE OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT,
AND ANY SECURITY ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH
OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY
A-2-1
AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS
THE REGISTERED OWNER HEREOF, CEDE & CO. HAS AN INTEREST HEREIN.
No. ___ $__________
CUSIP NO.
FINGERHUT MASTER TRUST
________% ASSET BACKED SECURITY,
SERIES 1998-1, CLASS B
Evidencing an undivided interest in a trust, the corpus of which
consists of receivables generated from time to time in the ordinary course of
business from a portfolio of consumer revolving consumer credit card accounts
and closed-end installment sale or closed-end loan contracts transferred or to
be transferred by Fingerhut Receivables, Inc. (the "Transferor") and other
assets and interests constituting the Trust under the Agreement described below.
(Not an interest in or a recourse obligation of Fingerhut Receivables,
Inc., Fingerhut Companies, Inc., Fingerhut National Bank or any affiliate of
either of them.)
This certifies that __________ (the "Securityholder") is the
registered owner of a fractional undivided interest in the Fingerhut Master
Trust (the "Trust") issued pursuant to the Amended and Restated Pooling and
Servicing Agreement, dated as of March 18, 1998 (the "Pooling and Servicing
Agreement"; such term to include any amendment thereto) by and between the
Transferor, Fingerhut National Bank, as the Servicer (the "Servicer"), and The
Bank of New York (Delaware), as Trustee (the "Trustee"), and the Series 1998-1
Supplement, dated as of ___________, 1998 (the "Series 1998-1 Supplement"),
among the Transferor, the Servicer and the Trustee. The Pooling and Servicing
Agreement, as supplemented by the Series 1998-1 Supplement, is herein referred
to as the "Agreement". The corpus of the Trust consists of all of the
Transferor's right, title and interest in, to and under the Trust Property (as
defined in the Agreement).
A-2-2
This Security does not purport to summarize the Agreement and
reference is made to that Agreement for information with respect to the
interests, rights, benefits, obligations, proceeds, and duties evidenced hereby
and the rights, duties and obligations of the Trustee. To the extent not
defined herein, the capitalized terms used herein have the meanings ascribed to
them in the Agreement. This Security is one of a series of Securities entitled
"Fingerhut Master Trust ____% Asset Backed Securities, Series 1998-1, Class B"
(the "Class B Securities"), each of which represents a fractional undivided
interest in the Trust, and is issued under and is subject to the terms,
provisions and conditions of the Agreement, to which Agreement, as amended from
time to time, the Securityholder by virtue of the acceptance hereof assents and
by which the Securityholder is bound.
The Transferor has structured the Agreement, the Class B Securities,
the Fingerhut Master Trust ____% Asset Backed Securities, Series 1998-1, Class A
(the "Class A Securities" and collectively with the Class B Securities the
"Offered Securities") and the Fingerhut Master Trust Floating Rate Asset Backed
Securities, Series 1998-1, Collateralized Trust Obligations (the "Collateralized
Trust Obligations") with the intention that the Offered Securities and the
Collateralized Trust Obligations will qualify under applicable tax law as
indebtedness, and both the Transferor and each holder of a Class B Security (a
"Class B Securityholder") or any interest therein by acceptance of its Security
or any interest therein, agrees to treat the Class B Securities for purposes of
federal, state and local income or franchise taxes and any other tax imposed on
or measured by income, as indebtedness.
No principal will be payable to the Class B Securityholders until the
earlier of the Class B Expected Final Payment Date and, upon the occurrence of a
Pay Out Event, the Distribution Date following the Monthly Period in which the
Pay Out Event occurs but in no event earlier than the Distribution Date either
on or following the Distribution Date on which the Class A Invested Amount had
been paid in full. No principal will be payable to the Class B Securityholders
until all principal payments have been made to the Class A Securityholders. No
principal payments will be made to the CTO Securityholders or Class D
Securityholders (other than with respect to Class D Excess Amounts) until the
Distribution Date either on or following the Distribution Date on which the
Class B Invested Amount has been paid in full.
Interest on the Offered Securities will be payable on June 15, 1998
and on the 15th day of each month thereafter or, if such day is not a business
day, on the next succeeding business day (each, a "Distribution Date"), in an
amount equal to
A-2-3
(1) with respect to the Class A Securities an amount equal to the product of (i)
the Class A Interest Rate, (ii) a fraction the numerator of which is the actual
number of days in the related Interest Accrual Period and the denominator of
which is 360 and (iii) the outstanding principal balance of the Class A
Securities as of the close of business on the first day of such Interest Accrual
Period and (2) with respect to the Class B Securities (a) the product of (i) the
Class B Interest Rate, (ii) a fraction the numerator of which is the actual
number of days in the related Interest Accrual Period and the denominator of
which is 360 and (iii) the outstanding principal balance of the Class B
Securities as of the close of business on the first day of such Interest Accrual
Period (or in the case of the initial Distribution Date, an amount equal to the
product of (u) the initial Class B Invested Amount, (v) divided by 360, and
(w) the Class B Interest Rate.
Interest payments on the Class A Securities on each Distribution Date
will be funded from Available Series 1998-1 Finance Charge Collections with
respect to the preceding Monthly Period (or, with respect to the first
Distribution Date, such collections from and including the Closing Date to and
including May 29, 1998 plus the amount of the initial deposit to the Interest
Funding Account to be made on the Closing Date) and from certain other funds
allocated as set forth in the Pooling and Servicing Agreement to the respective
classes of the Securities and deposited on each business day during such Monthly
Period in the Interest Funding Account.
Subject to the prior payment of interest on the Class A Securities,
interest payments on the Class B Securities on each Distribution Date will be
funded from the portion of Available Series 1998-1 Finance Charge Collections
with respect to the preceding Monthly Period and from certain other funds
allocated as set forth in the Pooling and Servicing Agreement to the Class B
Securities and deposited on each business day during such Monthly Period in the
Interest Funding Account.
"CLASS B INVESTED AMOUNT" shall mean, with respect to any Business
Day, an amount equal to (a) the Class B Initial Invested Amount MINUS (b) the
aggregate amount of principal payments made to Class B Securityholders through
and including such Business Day, MINUS (c) the aggregate amount of Class B
Charge-Offs for all prior Distribution Dates, MINUS (d) the aggregate amount of
Redirected Class B Principal Collections through and including such Business Day
for which neither the Class D Invested Amount nor the CTO Invested Amount has
been reduced on all prior Distribution Dates pursuant to subsection 4.14(e) of
the Agreement, and PLUS (e) the sum of the aggregate amount allocated with
respect to
A-2-4
Class B Charge-Offs through and including such Business Day pursuant to
subsection 4.9(a)(x) of the Agreement PLUS, with respect to such subsection,
amounts applied thereto pursuant to subsections 4.10(a) and (b), 4.14(a) and
(b), 4.16(b) and 4.17(b), (c) and (d) of the Agreement, for the purpose of
reimbursing amounts deducted pursuant to the foregoing clauses (c) and (d);
PROVIDED, HOWEVER, that the Class B Invested Amount may not be reduced below
zero.
Subject to the Agreement, payments of principal are limited to the
unpaid Class B Invested Amount of the Class B Securities, which may be less
than the unpaid balance of the Class B Securities pursuant to the terms of
the Agreement. All principal on the Class B Securities is due and payable no
later than the February 2005 Distribution Date (or if such day is not a
Business Day, the next succeeding Business Day) (the "Scheduled Series 1998-1
Termination Date"). After the earlier to occur of (i) the Scheduled Series
1998-1 Termination Date and (ii) the day after the Distribution Date on which
the Series 1998-1 Securities are paid in full (the "Series 1998-1 Termination
Date") neither the Trust nor the Transferor will have any further obligation
to distribute principal or interest on the Class B Securities. In the event
that the Class B Invested Amount is greater than zero on the Series 1998-1
Termination Date, the Trustee will sell or cause to be sold, to the extent
necessary, an amount of interests in the Receivables or certain of the
Receivables up to 110% of the Class A Invested Amount, the Class B Invested
Amount, the CTO Invested Amount and the Class D Invested Amount at the close
of business on such date (but not more than the total amount of Receivables
allocable to the Series 1998-1 Securities), and shall pay the proceeds to the
Class A Securityholders PRO RATA - in final payment of the Class A
Securities, then to the Class B Securityholders PRO RATA in final payment of
the Class B Securities, then to the CTO Securityholders PRO RATA in final
payment of the Collateralized Trust Obligations and finally to the Class D
Securityholders PRO RATA in final payment of the Class D Securities.
Unless the certificate of authentication hereon has been executed by
or on behalf of the Trustee, by manual signature, this Security shall not be
entitled to any benefit under the Agreement, or be valid for any purpose.
A-2-5
IN WITNESS WHEREOF, the Transferor has caused this Security to be duly
executed.
FINGERHUT RECEIVABLES, INC.
By:
----------------------------
Name:
Title:
Dated:
CERTIFICATE OF AUTHENTICATION
This is one of the Class B Securities referred to in the
within-mentioned Pooling and Servicing Agreement.
THE BANK OF NEW YORK (DELAWARE)
By:
----------------------------
Name:
Title:
X-0-0
Xxxxxxx X-0
FORM OF COLLATERALIZED TRUST OBLIGATION
No. ___ $_________
[Each Collateralized Trust Obligation that is a CTO Global Security
deposited with DTC, or a custodian on behalf of DTC, shall bear the following
legend:]
UNLESS THIS SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER
OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
SECURITY ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER
NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF
FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
[Each Collateralized Trust Obligation that is issued pursuant to Rule
144A shall bear the following legend:]
THIS SECURITY HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY
STATE SECURITIES LAWS. THE HOLDER HEREOF, BY PURCHASING THIS
SECURITY, AGREES THAT THIS SECURITY MAY BE REOFFERED, RESOLD, PLEDGED
OR OTHERWISE TRANSFERRED ONLY IN COMPLIANCE WITH THE SECURITIES ACT
AND
A-3-1
OTHER APPLICABLE LAWS AND ONLY (1) PURSUANT TO RULE 144A UNDER THE
SECURITIES ACT TO A PERSON WHO THE HOLDER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER ("QIB") WITHIN THE MEANING OF RULE 144A,
PURCHASING FOR ITS OWN ACCOUNT, OR A QIB PURCHASING FOR THE ACCOUNT OF A
QIB, WHOM THE HOLDER HAS INFORMED, IN EACH CASE, THAT SUCH REOFFER, RESALE,
PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A OR (2) IN
AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 903 OR RULE 904 OF
REGULATION S UNDER THE SECURITIES ACT. EACH SECURITY OWNER BY ACCEPTING A
BENEFICIAL INTEREST IN THIS SECURITY, UNLESS SUCH PERSON ACQUIRED THIS
SECURITY IN A TRANSFER DESCRIBED IN CLAUSE (2) ABOVE, IS DEEMED TO
REPRESENT THAT IT IS EITHER A QIB PURCHASING FOR ITS OWN ACCOUNT OR A QIB
PURCHASING FOR THE ACCOUNT OF ANOTHER QIB.
[Each Collateralized Trust Obligation that is issued pursuant to
Regulation S shall bear the following legend:]
THIS SECURITY HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND PRIOR TO THE DATE THAT IS 40 DAYS AFTER THE LATER OF THE
COMMENCEMENT OF THE OFFERING AND THE CLOSING DATE MAY NOT BE OFFERED,
SOLD, PLEDGED OR OTHERWISE TRANSFERRED IN THE UNITED STATES OR TO A
U.S. PERSON EXCEPT PURSUANT TO AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT.
A-3-2
[Each Collateralized Trust Obligation shall bear the following
legends:]
EACH PURCHASER REPRESENTS AND WARRANTS FOR THE BENEFIT OF
FINGERHUT RECEIVABLES, INC. AND THE TRUSTEE THAT SUCH PURCHASER IS NOT
(I) AN EMPLOYEE BENEFIT PLAN (AS DEFINED IN SECTION 3(3) OF THE
EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"))
THAT IS SUBJECT TO THE PROVISIONS OF TITLE I OF ERISA, (II) A PLAN
DESCRIBED IN SECTION 4975(e)(1) OF THE INTERNAL REVENUE CODE OF 1986,
AS AMENDED (THE "CODE") THAT IS SUBJECT TO SECTION 4975 OF THE CODE,
(III) A GOVERNMENTAL PLAN, AS DEFINED IN SECTION 3(32) OF ERISA,
SUBJECT TO ANY FEDERAL, STATE OR LOCAL LAW WHICH IS, TO A MATERIAL
EXTENT, SIMILAR TO THE PROVISIONS OF SECTION 406 OF ERISA OR SECTION
4975 OF THE CODE, (IV) AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE "PLAN
ASSETS" (AS DEFINED IN 29 C.F.R. SECTION 2510.3-101 OR OTHERWISE UNDER
ERISA) BY REASON OF A PLAN'S INVESTMENT IN THE ENTITY OR (V) A PERSON
INVESTING "PLAN ASSETS" OF ANY SUCH PLAN (INCLUDING WITHOUT
LIMITATION, FOR PURPOSES OF CLAUSE (IV) AND THIS CLAUSE (V), AS
APPLICABLE, AN INSURANCE COMPANY GENERAL ACCOUNT, BUT EXCLUDING ANY
ENTITY REGISTERED UNDER THE INVESTMENT COMPANY ACT OF 1940, AS
AMENDED).
A-3-3
FINGERHUT MASTER TRUST
FLOATING RATE ASSET BACKED
COLLATERALIZED TRUST OBLIGATION, SERIES 1998-1
Evidencing an undivided interest in a trust, the corpus of which
consists of receivables generated from time to time in the ordinary course of
business from a portfolio of consumer revolving consumer credit card accounts
and closed-end installment sale or closed-end loan contracts transferred or to
be transferred by certain subsidiaries of Fingerhut Receivables, Inc. (the
"Transferor") and other assets and interests constituting the Trust under the
Agreement described below.
(Not an interest in or a recourse obligation of Fingerhut Receivables,
Inc., Fingerhut Companies, Inc., Fingerhut National Bank or any affiliate of
either of them.)
This certifies that ___________________ (the "Securityholder") is the
registered owner of a fractional undivided interest in the Fingerhut Master
Trust (the "Trust") issued pursuant to the Amended and Restated Pooling and
Servicing Agreement, dated as of March 18, 1998 (the "Pooling and Servicing
Agreement"; such term to include any amendment thereto) by and between the
Transferor, Fingerhut National Bank as the Servicer (the "Servicer"), and The
Bank of New York (Delaware), as Trustee (the "Trustee"), and the Series 1998-1
Supplement, dated as of __________, 1998 (the "Series 1998-1 Supplement"), among
the Transferor, the Servicer and the Trustee. The Pooling and Servicing
Agreement, as supplemented by the Series 1998-1 Supplement, is herein referred
to as the "Agreement." The corpus of the Trust consists of all of the
Transferor's right, title and interest in, to and under the Trust Property (as
defined in the Agreement).
This Security does not purport to summarize the Agreement and
reference is made to that Agreement for information with respect to the
interests, rights, benefits, obligations, proceeds, and duties evidenced hereby
and the rights, duties and obligations of the Trustee. To the extent not
defined herein, the capitalized terms used herein have the meanings ascribed to
them in the Agreement. This Security is one of a series of Securities entitled
"Fingerhut Master Trust Floating Rate Asset Backed Securities, Series 1998-1,
Collateralized Trust Obligations (the "Collateralized Trust Obligations"), each
of which represents a fractional undivided interest in the
A-3-4
Trust, and is issued under and is subject to the terms, provisions and
conditions of the Agreement, to which Agreement, as amended from time to time,
the CTO Securityholder by virtue of the acceptance hereof assents and by which
the CTO Securityholder is bound.
The Transferor has structured the Agreement, the Collateralized Trust
Obligations, the Fingerhut Master Trust ____% Asset Backed Securities, Series
1998-1, Class A (the "Class A Securities") and the Fingerhut Master Trust ____%
Asset Backed Securities, Series 1998-1, Class B (the "Class B Securities") with
the intention that the Class A Securities, Class B Securities and Collateralized
Trust Obligations will qualify under applicable tax law as indebtedness, and
both the Transferor and each holder of a Collateralized Trust Obligation (a "CTO
Securityholder") or any interest therein by acceptance of its Collateralized
Trust Obligation or any interest therein, agrees to treat the Collateralized
Trust Obligations for purposes of federal, state and local income or franchise
taxes and any other tax imposed on or measured by income, as indebtedness.
No principal will be payable to the CTO Securityholders until the
earlier of the Class C Expected Final Payment Date and, upon the occurrence of a
Pay Out Event, the Distribution Date following the Monthly Period in which the
Pay Out Event occurs but in no event earlier than the Distribution Date either
on or following the Distribution Date on which the Class A Invested Amount and
the Class B Invested Amount have been paid in full. No principal payments will
be payable to the CTO Securityholders until the Distribution Date either on or
following the Distribution Date on which the Class A Invested Amount and Class B
Invested Amount have been paid in full.
Interest on the Collateralized Trust Obligations will be payable on
June 15, 1998 and on each Distribution Date thereafter, in an amount equal to
the product of (i) the CTO Interest Rate, (ii) a fraction the numerator of which
is the actual number of days in the related Interest Accrual Period and the
denominator of which is 360 and (iii) the CTO Invested Amount as of the close of
business on the first day of such Interest Accrual Period (or in the case of the
initial Distribution Date, an amount equal to the sum of (I) the product of (u)
the initial CTO Invested Amount, (v) __ divided by 360, and (w) the CTO Interest
Rate.
A-3-5
Subject to the prior payment of interest on the Class A Securities and
Class B Securities, interest payments on the Class C Securities on each
Distribution Date will be funded from the portion of Available Series 1998-1
Finance Charge Collections with respect to the preceding Monthly Period and
from certain other funds allocated as set forth in the Pooling and Servicing
Agreement to the Collateralized Trust Obligations and deposited on each business
day during such Monthly Period in the Interest Funding Account.
"CTO INVESTED AMOUNT" shall mean with respect to any Business Day, an
amount equal to (a) the CTO Initial Invested Amount MINUS (b) the aggregate
amount of principal payments made to CTO Securityholders through and including
such Business Day, MINUS (c) the aggregate amount of CTO Charge-Offs for all
prior Distribution Dates, MINUS (d) the aggregate amount of Redirected CTO
Principal Collections and Redirected Class B Principal Collections through and
including such Business Day for which the Class D Invested Amount has not been
reduced for all prior Distribution Dates, and PLUS (e) the aggregate amount
allocated with respect to CTO Charge-Offs through and including such Business
Day pursuant to subsection 4.9(a)(xi) of the Agreement PLUS, with respect to
such subsection, amounts applied thereto pursuant to subsections 4.10(a) and
(b), 4.14(a), 4.16(b) and 4.17(b), (c) and (d) of the Agreement, for the purpose
of reimbursing amounts deducted pursuant to the foregoing clauses (c) and (d);
PROVIDED, HOWEVER, that the CTO Invested Amount may not be reduced below zero.
Subject to the Agreement, payments of principal are limited to the
unpaid CTO Invested Amount of the Collateralized Trust Obligations, which may
be less than the unpaid balance of the Collateralized Trust Obligations
pursuant to the terms of the Agreement. All principal on the Collateralized
Trust Obligations is due and payable no later than the February 2005
Distribution Date (or if such day is not a Business Day, the next succeeding
Business Day) (the "Scheduled Series 1998-1 Termination Date"). After the
earlier to occur of (i) the Scheduled Series 1998-1 Termination Date and (ii)
the day after the Distribution Date on which the Series 1998-1 Securities are
paid in full (the "Series 1998-1 Termination Date") neither the Trust nor the
Transferor will have any further obligation to distribute principal or
interest on the Collateralized Trust Obligations. In the event that the CTO
Invested Amount is greater than zero on the Series
A-3-6
Termination Date, the Trustee will sell or cause to be sold, to the extent
necessary, an amount of interests in the Receivables or certain of the
Receivables up to 110% of the Class A Invested Amount, the Class B Invested
Amount, the CTO Invested Amount and the Class D Invested Amount at the close of
business on such date (but not more than the total amount of Receivables
allocable to the Series 1998-1 Securities), and shall pay the proceeds to the
Class A Securityholders PRO RATA in final payment of the Class A Securities,
then to the Class B Securityholders PRO RATA in final payment of the Class B
Securities, then to the CTO Securityholders PRO RATA in final payment of the
Collateralized Trust Obligations and finally to the Class D Securityholders pro
rata in final payment of the Class D Securities.
Unless the certificate of authentication hereon has been executed by
or on behalf of the Trustee, by manual signature, this Security shall not be
entitled to any benefit under the Agreement, or be valid for any purpose.
A-3-7
IN WITNESS WHEREOF, the Transferor has caused this Security to be duly
executed.
FINGERHUT RECEIVABLES, INC.
By:
----------------------------
Name:
Title:
Dated:
CERTIFICATE OF AUTHENTICATION
This is one of the Collateralized Trust Obligations referred to in the
within-mentioned Pooling and Servicing Agreement.
THE BANK OF NEW YORK (DELAWARE)
By:
-------------------------------
Name:
Title:
X-0-0
Xxxxxxx X-0
FORM OF CLASS D INVESTOR SECURITY
THIS SECURITY WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"). THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OR
ANY APPLICABLE STATE SECURITIES LAW OF ANY STATE AND MAY NOT BE OFFERED,
SOLD, PLEDGED OR OTHERWISE TRANSFERRED UNLESS REGISTERED PURSUANT TO OR
EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT AND ANY OTHER APPLICABLE
SECURITIES LAW. TRANSFERS OF THIS SECURITY SHALL BE SUBJECT TO THE
RESTRICTIONS SET FORTH IN THE POOLING AND SERVICING AGREEMENT.
EACH PURCHASER REPRESENTS AND WARRANTS FOR THE BENEFIT OF FINGERHUT
RECEIVABLES, INC. AND THE TRUSTEE THAT SUCH PURCHASER IS NOT (I) AN
EMPLOYEE BENEFIT PLAN (AS DEFINED IN SECTION 3(3) OF THE EMPLOYEE
RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA")) THAT IS
SUBJECT TO THE PROVISIONS OF TITLE I OF ERISA, (II) A PLAN DESCRIBED IN
SECTION 4975(e)(1) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE
"CODE") THAT IS SUBJECT TO SECTION 4975 OF THE CODE, (III) A GOVERNMENTAL
PLAN, AS DEFINED IN SECTION 3(32) OF ERISA, SUBJECT TO ANY FEDERAL, STATE
OR LOCAL LAW WHICH IS, TO A MATERIAL EXTENT, SIMILAR TO THE PROVISIONS OF
SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE, (IV) AN ENTITY WHOSE
UNDERLYING ASSETS INCLUDE PLAN ASSETS (AS DEFINED IN 29 C.F.R. SECTION
2510.3-101 OR OTHERWISE UNDER ERISA) BY REASON OF A PLAN'S INVESTMENT IN
THE ENTITY OR (V) A PERSON INVESTING PLAN ASSETS OF ANY SUCH PLAN
(INCLUDING WITHOUT LIMITATION, FOR PURPOSES OF CLAUSE (IV) AND THIS CLAUSE
(V), AS APPLICABLE, AN INSURANCE COMPANY GENERAL ACCOUNT, BUT EXCLUDING ANY
ENTITY
A-4-1
REGISTERED UNDER THE INVESTMENT COMPANY ACT OF 1940, AS AMENDED).
No. ___ $_________
FINGERHUT MASTER TRUST
0% ASSET BACKED
SECURITY, SERIES 1998-1, CLASS D
Evidencing an undivided interest in a trust, the corpus of which
consists of receivables generated from time to time in the ordinary course of
business from a portfolio of consumer revolving consumer credit card accounts
and closed-end installment sale or loan contracts transferred or to be
transferred by Fingerhut Receivables, Inc. (the "Transferor") and other assets
and interests constituting the Trust under the Agreement described below.
(Not an interest in or a recourse obligation of Fingerhut Receivables,
Inc., Fingerhut National Bank or any affiliate of either of them.)
This certifies that ______________ (the "Securityholder") is the
registered owner of a fractional undivided interest in the Fingerhut Master
Trust (the "Trust") issued pursuant to the Amended and Restated Pooling and
Servicing Agreement, dated as of March 18, 1998 (the "Pooling and Servicing
Agreement"; such term to include any amendment or Supplement thereto) by and
between the Transferor, Fingerhut National Bank as the Servicer (the
"Servicer"), and The Bank of New York (Delaware), as Trustee (the "Trustee"),
and the Series 1998-1 Supplement, dated as of ___________, 1998 (the "Series
1998-1 Supplement"), among the Transferor, the Servicer and the Trustee. The
Pooling and Servicing Agreement, as supplemented by the Series 1998-1
Supplement, is herein referred to as the "Agreement." The corpus of the Trust
consists of all of the Transferor's right, title and interest in, to and under
the Trust Property (as defined in the Agreement).
This Security does not purport to summarize the Agreement and
reference is made to that Agreement for information with respect to the
interests, rights, benefits, obligations, proceeds, and duties evidenced hereby
and the rights, duties and obligations of the Trustee. To the extent not
defined herein, the capitalized terms used herein have the meanings ascribed to
them in the Agreement. This Security is one of a series of Securities entitled
"Fingerhut Master Trust 0% Asset Backed Securities, Series 1998-1, Class D" (the
"Class D Securities"), each of which represents a fractional undivided interest
in the Trust, and is issued under and
A-4-2
is subject to the terms, provisions and conditions of the Agreement, to which
Agreement, as amended from time to time, the Securityholder by virtue of the
acceptance hereof assents and by which the Securityholder is bound.
Fingerhut Receivables, Inc. shall be prohibited from transferring any
interest in or portion of the Class D Security.
No principal will be payable to the Class D Securityholders (other
than with respect to Class D Excess Amounts) until the earlier of the Expected
Final Payment Date and, upon the occurrence of a Pay Out Event, the Distribution
Date following the Monthly Period in which the Pay Out Event occurs but in no
event earlier than the Distribution Date either on or following the Distribution
Date on which Class A Invested Amount, Class B Invested Amount and the CTO
Invested Amount have been paid in full. No principal will be payable to the
Class D Securityholders until all principal payments have first been made to the
Class A Securityholders, Class B Securityholders and CTO Securityholders.
"CLASS D INVESTED AMOUNT" shall mean with respect to any Business Day,
an amount equal to (a) the initial principal balance of the Class D Securities,
MINUS (b) the aggregate amount of principal payments made to Class D
Securityholders through and including such Business Day, MINUS (c) the aggregate
amount of Class D Charge-Offs for all prior Distribution Dates, equal to the
amount by which the Class D Invested Amount has been reduced to fund the Series
Default Amount and the unpaid Adjustment Payments on all prior Distribution
Dates, MINUS (d) the aggregate amount of Redirected Principal Collections for
all prior Distribution Dates, and plus (e) the aggregate amount of Finance
Charge Collections, Transferor Finance Charge Collections, Excess Finance Charge
Collections and certain other amounts applied on all prior Distribution Dates
pursuant to subsection 4.9(a)(xii) of the Agreement and, with respect to such
subsection, pursuant to subsections 4.10(a) and (b), 4.16(b) and 4.17(b), (c)
and (d) of the Agreement, for the purpose of reimbursing amounts deducted
pursuant to the foregoing clauses (c) and (d); PROVIDED, HOWEVER, that the Class
D Invested Amount may not be reduced below zero.
Subject to the Agreement, payments of principal are limited to the
unpaid Class D Invested Amount of the Class D Securities, which may be less
than the unpaid balance of the Class D Securities pursuant to the terms of
the Agreement. All principal on the Class D Securities is due and payable no
later than the February 2005 Distribution Date (or if such day is not a
Business Day, the next succeeding Business Day) (the "Scheduled Series 1998-1
Termination Date"). After the earlier to occur of (i) the Scheduled Series
1998-1 Termination Date or (ii) the day after the
A-4-3
Distribution Date on which the Series 1998-1 Securities are paid in full (the
"Series 1998-1 Termination Date") neither the Trust nor the Transferor will have
any further obligation to distribute principal or interest on the Class D
Securities. In the event that the Class D Invested Amount is greater than zero
on the Series Termination Date, the Trustee will sell or cause to be sold, to
the extent necessary, an amount of interests in the Receivables or certain of
the Receivables up to 110% of the Class A Invested Amount, the Class B Invested
Amount, the CTO Invested Amount and the Class D Invested Amount at the close of
business on such date (but not more than the total amount of Receivables
allocable to the Investors Securities), and shall pay the proceeds to the Class
A Securityholders PRO RATA in final payment of the Class A Securities, then to
the Class B Securityholders PRO RATA in final payment of the Class B Securities,
then to the CTO Securityholders PRO RATA in final payment of the Collateralized
Trust Obligations and finally to the Class D Securityholders PRO RATA in final
payment of the Class D Securities.
Unless the certificate of authentication hereon has been executed by
or on behalf of the Trustee, by manual signature, this Security shall not be
entitled to any benefit under the Agreement, or be valid for any purpose.
A-4-4
IN WITNESS WHEREOF, the Transferor has caused this Security to be duly
executed.
FINGERHUT RECEIVABLES, INC.
By:
--------------------------------
Name:
Title:
Dated:
CERTIFICATE OF AUTHENTICATION
This is one of the Class D Securities referred to in the
within-mentioned Pooling and Servicing Agreement.
THE BANK OF NEW YORK (DELAWARE)
By:
--------------------------------
Name:
Title:
A-4-5
EXHIBIT B
[Form of Monthly Securityholders' Statement]
B-1
EXHIBIT C
FORM OF CLEARING SYSTEM CERTIFICATE
Fingerhut Receivables, Inc.
0000 Xxxxx Xxxx, Xxxxx X000
Xxxxxxxxxx, Xxxxxxxxx 00000
The Bank of New York (Delaware)
Xxxxx Xxxx Xxxxxx
Xxxxx 000
Xxxxxx, Xxxxxxxx 00000
Re: Fingerhut Master Trust
SERIES 1998-1
Ladies and Gentlemen:
Reference is hereby made to the Amended and Restated Pooling and
Servicing Agreement dated as of March 18, 1998, as supplemented by the Series
1998-1 Supplement thereto, dated , 1998 (collectively, the
"Pooling and Servicing Agreement"), each by and among Fingerhut Receivables,
Inc., as Transferor, Fingerhut National Bank, as Servicer and The Bank of New
York (Delaware), as Trustee. Capitalized terms used but not defined herein
shall have the meanings given to them in the Pooling and Servicing Agreement.
This is to certify that, based solely on certifications we have
received in writing, by telex or by electronic transmission from member
organizations appearing in our records as persons being entitled to a portion of
the principal amount set forth below (our "Member Organizations"), as of the
date hereof, $ principal amount of the Fingerhut Master Trust, Series
1998-1, Collateralized Trust Obligations (the "CTOs") (i) is beneficially owned
by persons that are not U.S. persons or (ii) is owned by U.S. persons who
purchased the CTOs in transactions that did not require registration under the
United States Securities Act of 1933, as amended (the "Securities Act"). As
used in this paragraph, the term "U.S. person" has the meaning given to it by
Regulation S under the Securities Act.
C-1
We further certify (i) that we are not making available herewith for
exchange (or, if relevant, for the payment of interest on) any portion of the
Temporary Regulation S Global Security excepted in such Member Organization
certifications and (ii) that as of the date hereof we have not received any
notification from any of our Member Organizations to the effect that the
statements made by such Member Organizations with respect to any portion of the
part submitted herewith for exchange (or, if relevant, for the payment of
interest on) are no longer true and cannot be relied upon at the date hereof.
C-2
We understand that this certification is required in connection with
certain tax laws of the United States. In connection therewith, if
administrative and legal proceedings are commenced or threatened in connection
with which this certification is or would be relevant, we irrevocably authorize
you to produce this certification to any interested party in such proceedings.
Date: ___ *
.
Yours faithfully,
[XXXXXX GUARANTY TRUST COMPANY OF
NEW YORK, Brussels office, as
operator of the Euroclear System
or
CEDEL BANK, SOCIETE ANONYME]**
By:_______________________________
________________________
* This certificate is to be dated on the CTO Exchange Date or, if applicable,
the subsequent date on which the CTO Regulation S Global Security is
delivered to the undersigned in definitive form.
** Delete the inappropriate reference.
C-3
EXHIBIT D
FORM OF MEMBER ORGANIZATION CERTIFICATE
Fingerhut Receivables, Inc.
0000 Xxxxx Xxxx, Xxxxx X000
Xxxxxxxxxx, Xxxxxxxxx 00000
The Bank of New York (Delaware)
Xxxxx Xxxx Xxxxxx
Xxxxx 000
Xxxxxx, Xxxxxxxx 00000
Re: Fingerhut Master Trust
SERIES 1998-1
Ladies and Gentlemen:
Reference is hereby made to the Amended and Restated Pooling and
Servicing Agreement dated as of March 18, 1998, as supplemented by the Series
1998-1 Supplement thereto, dated ________ __, 1998 (collectively, the "Pooling
and Servicing Agreement"), each by and among Fingerhut Receivables, Inc., as
Transferor, Fingerhut National Bank, as Servicer and The Bank of New York
(Delaware) as Trustee. Capitalized terms used but not defined herein shall have
the meanings given to them in the Pooling and Servicing Agreement.
This is to certify that, as of the date hereof and except as set forth
below, the Fingerhut Master Trust, Series 1998-1, Collateralized Trust
Obligations (the "CTOs") held by you for our account (i) are beneficially owned
by persons that are not U.S. persons or (ii) are owned by U.S. persons who
purchased the CTOs in transactions that did not require registration under the
United States Securities Act of 1933, as amended (the "Securities Act"). As
used in this paragraph, the term "U.S. person" has the meaning given to it by
Regulation S under the Securities Act.
We undertake to advise you promptly by tested telex on or prior to the
date on which you intend to submit your certification relating to the CTOs held
by you for our account in accordance with your documented procedures if any
applicable statement herein is not correct on such date, and in the absence of
any such notification it may be assumed that this certificate applies as of such
date.
D-1
This certificate excepts and does not relate to U.S. $_______ in
principal amount of CTOs held by you for our account, in respect of which we are
not able to certify beneficial ownership. We understand that exchange and
delivery of beneficial interests in the Regulation S Global Security or Rule
144A Global Security cannot be made until we do so certify.
We understand that this certificate is required in connection with
certain securities and tax laws of the United States of America. If
administrative or legal proceedings are commenced or threatened in connection
with which this certificate is or would be relevant, we irrevocably authorize
you to produce this certificate or a copy thereof to any interested party in
such proceedings. As used herein, "United States" means the United States of
America (including the States and the District of Columbia), its territories,
its possessions (including Puerto Rico, the U.S. Virgin Islands, Guam, American
Samoa, Wake Island, and Northern Mariana Islands) and other areas subject to its
jurisdiction.
Dated: , 199 *
----------- -
Yours faithfully,
[Name of Person giving
the certificate]
By:
-------------------
___________________
* This certificate must be dated no earlier than 15 days prior to the CTO
Exchange Date.
D-2
EXHIBIT E
FORM OF REGULATION S TRANSFER CERTIFICATE
Fingerhut Receivables Inc.
0000 Xxxxx Xxxx, Xxxxx X000
Xxxxxxxxxx, Xxxxxxxxx 00000
The Bank of New York (Delaware)
Xxxxx Xxxx Xxxxxx
Xxxxx 000
Xxxxxx, Xxxxxxxx 00000
Attention: Corporate Trust Division
Re: Fingerhut Master Trust
SERIES 1998-1
Ladies and Gentlemen:
Reference is hereby made to the Amended and Restated Pooling and
Servicing Agreement dated as of March 18, 1998, as supplemented by the Series
1998-1 Supplement thereto, dated ________ __, 1998 (collectively, the "Pooling
and Servicing Agreement") each by and among Fingerhut Receivables, Inc. as
Transferor, and Fingerhut National Bank, as Servicer and The Bank of New York
(Delaware), as Trustee. Capitalized terms used but not defined herein shall
have the meanings given to them in the Pooling and Servicing Agreement.
[NOTE: INSERT [A] FOR A TRANSFER PRIOR TO THE EXCHANGE DATE OF AN INTEREST IN A
RULE 144A GLOBAL SECURITY TO A TRANSFEREE THAT TAKES DELIVERY IN THE FORM OF AN
INTEREST IN A TEMPORARY REGULATION S GLOBAL SECURITY. INSERT [B] FOR A TRANSFER
ON OR AFTER THE EXCHANGE DATE OF AN INTEREST IN A RULE 144A GLOBAL SECURITY TO A
TRANSFEREE THAT TAKES DELIVERY IN THE FORM OF AN INTEREST IN A REGULATION S
GLOBAL SECURITY.]
[A] This letter relates to U.S. $______ in principal amount of
Fingerhut Master Trust, Series 1998-1, Collateralized Trust Obligations (the
"CTOs")
E-1
which are held as a beneficial interest in the CTO Rule 144A Global Security
(CUSIP No. ______) with DTC in the name of [insert name of transferor] (the
"Transferor"). The Transferor has requested an exchange or transfer of such
beneficial interest for an interest in a CTO Temporary Regulation S Global
Security (CUSIP No. ______) to be held with [the Euroclear System] [Cedel Bank,
Societe Anonyme] through DTC.
[B] This letter relates to U.S. $_________ in principal amount of
Fingerhut Master Trust, Series 1998-1, Collateralized Trust Obligations (the
"CTOs"), which are held as a beneficial interest in the CTO Rule 144A Global
Security (CUSIP No. ______) with DTC in the name of [insert name of transferor]
(the "Transferor"). The Transferor has requested an exchange or transfer of
such beneficial interest for an interest in a CTO Regulation S Global Security
(CUSIP No. ______) to be held with [the Euroclear System][Cedel Bank, Societe
Anonyme] through DTC.
[NOTE: INSERT [C] IN ALL CASES UNLESS [D] IS INSERTED IN ACCORDANCE WITH THE
NEXT SENTENCE. AT THE OPTION OF THE TRANSFEROR, [C] MAY BE INSERTED IN PLACE OF
[D] ON AND AFTER THE CTO EXCHANGE DATE IN CASES OF A TRANSFER INTO A CTO
REGULATION S GLOBAL SECURITY.]
[C] In connection with such request and in respect of such CTOs, the
Transferor does hereby certify that such exchange or transfer has been effected
in accordance with the transfer restrictions set forth in the Pooling and
Servicing Agreement and such CTOs and pursuant to and in accordance with
Regulation S under the Securities Act of 1933, as amended (the "Securities
Act"), and accordingly the Transferor does hereby certify that:
(i) the offer of the CTOs was not made to a Person in the United
States,
[(ii) at the time the buy order was originated, the transferee was
outside the United States, or the Transferor and any person acting on its
behalf reasonably believed that the transferee was outside the United
States,]**
[(2) the transaction was executed in, on or through the facilities of
a designated offshore securities market and neither the Transferor nor any
person
___________________
** Insert one of these two provisions, which come from the definition of
"offshore transaction" in Regulation S.
E-2
acting on its behalf knows that the transaction was pre-arranged with a
buyer in the United States,]*
(iii) no directed selling efforts have been made in contravention of
the requirements of Rule 903(b) or 904(b) of Regulation S, as applicable,
and
(iv) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act.
[D] In connection with such request and in respect of such CTOs, the
Transferor does hereby certify that such transfer has been effected in
accordance with the transfer restrictions set forth in the Pooling and Servicing
Agreement and the CTOs, and that the CTOs are being transferred in a transaction
permitted by Rule 144A under the Securities Act.
This certificate and the statements contained herein are made for the
benefit of the Trustee and the benefit of the Transferor and the initial
purchaser.
[Insert Name of Transferor]
By:___________________
Name:
Title:
Dated: _________________
X-0
XXXXXXX X
XXXX XX XXXX 000X TRANSFER CERTIFICATE
Fingerhut Receivables
0000 Xxxxx Xxxx, Xxxxx X000
Xxxxxxxxxx, Xxxxxxxxx 00000
The Bank of New York (Delaware)
Xxxxx Xxxx Xxxxxx
Xxxxx 000
Xxxxxx, Xxxxxxxx 00000
Re: Fingerhut Master Trust
SERIES 1998-1
Ladies and Gentlemen:
Reference is hereby made to the Amended and Restated Pooling and
Servicing Agreement, dated as of March 18, 1998, as supplemented by the Series
1998-1 Supplement thereto, dated _______ __, 1998 (collectively, the "Pooling
and Servicing Agreement"), each by and among Fingerhut Receivables, Inc., as
Transferor, Fingerhut National Bank, as Servicer and The Bank of New York
(Delaware), as Trustee. Capitalized terms used but not defined herein shall
have the meanings given to them in the Pooling and Servicing Agreement.
[NOTE: INSERT [A] FOR A TRANSFER PRIOR TO THE EXCHANGE DATE OF AN INTEREST IN A
TEMPORARY REGULATION S GLOBAL SECURITY TO A TRANSFEREE THAT TAKES DELIVERY IN
THE FORM OF AN INTEREST IN A RULE 144A GLOBAL SECURITY. INSERT [B] FOR A
TRANSFER AFTER THE EXCHANGE DATE OF AN INTEREST IN A REGULATION S GLOBAL
SECURITY TO A TRANSFEREE THAT TAKES DELIVERY IN THE FORM OF AN INTEREST IN A
RULE 144A GLOBAL SECURITY.]
[A] This letter relates to U.S. $_______ in principal amount of
Fingerhut Master Trust, Series 1998-1, Collateralized Trust Obligations (the
"CTOs") which are held in the form of a beneficial interest in the CTO Temporary
Regulation S
F-1
Global Security (CUSIP No. _________) with [The Euroclear System] [Cedel Bank,
Societe Anonyme] (Common Code No. _______) through DTC in the name of [insert
name of transferor] (the "Transferor"). The Transferor has requested a transfer
of such beneficial interest in the CTOs for a beneficial interest in the CTO
Rule 144A Global Security (CUSIP No. _________) to be held with DTC in the name
of [insert name of transferee].
[B] This letter relates to U.S. $_______ in principal amount of
Fingerhut Master Trust, Series 1998-1, Collateralized Trust Obligations (the
"CTOs") which are held in the form of a beneficial interest in the CTO
Regulation S Global Security (CUSIP No. _________) with [The Euroclear System]
[Cedel Bank, Societe anonyme] (Common Code No. _______) through the DTC in the
name of [insert name of transferor] (the "Transferor"). The Transferor has
requested a transfer of such beneficial interest in the CTOs for a beneficial
interest in the CTO Rule 144A Global Security (CUSIP No. _________) to be held
with the DTC in the name of [insert name of transferee].
In connection with such request, and in respect of such CTOs, the
Transferor does hereby certify that such CTOs are being transferred in
accordance with (i) the transfer restrictions set forth in the Pooling and
Servicing Agreement and the CTOs and (ii) Rule 144A under the Securities Act to
a transferee that the Transferor reasonably believes is purchasing the CTOs for
its own account or an account with respect to which the transferee exercises
sole investment discretion and the transferee and any such account is a
"qualified institutional buyer" within the meaning of Rule 144A, and such
transferee is aware that the sale to it is being made in reliance upon Rule
144A, in each case in a transaction meeting the requirements of Rule 144A and in
accordance with any applicable securities laws of any state of the United States
or any other jurisdiction.
F-2
This certificate and the statements contained herein are made for the
benefit of the Trustee, the benefit of the Transferor and the initial purchaser.
[Insert Name of Transferor]
By:
-----------------------------
Name:
Title:
Dated:
-----------, ----
F-3
