FINGERHUT RECEIVABLES, INC.
Transferor
FINGERHUT NATIONAL BANK
Servicer
and
THE BANK OF NEW YORK (DELAWARE)
Trustee
on behalf of the Series 1998-3 Securityholders
SERIES 1998-3 SUPPLEMENT
Dated as of July 30, 1998
to
AMENDED AND RESTATED POOLING AND SERVICING AGREEMENT
Dated as of March 18, 1998
____________________________________
FINGERHUT MASTER TRUST
Variable Funding Asset Backed Securities,
Series 1998-3, Class A
Variable Funding Asset Backed Securities,
Series 1998-3, Class B
Variable Funding Asset Backed Securities,
Series 1998-3, Class C
0% Variable Funding Asset Backed Securities,
Series 1998-3, Class D
_________________________________________________________
TABLE OF CONTENTS
Page
SECTION 1. Designation 1
SECTION 2. Definitions 1
SECTION 3. Reassignment Terms 35
SECTION 3A Conveyance of Interest in Interest Rate Cap;
Cap Proceeds Account 36
SECTION 4. Delivery and Payment for the Series 1998-3
Securities 40
SECTION 5. Form of Delivery of Series 1998-3 Securities;
Denominations; Depositary 40
SECTION 6. Article IV of Agreement 40
ARTICLE IV
RIGHTS OF SECURITYHOLDERS AND
ALLOCATION AND APPLICATION OF COLLECTIONS
SECTION 4.4 Rights of Securityholders 40
SECTION 4.5 Collections and Allocation; Payments on
Exchangeable Transferor Security 41
SECTION 4.6 Determination of Interest for the Series
1998-3 Securities 42
SECTION 4.7 Determination of Principal Amounts 44
SECTION 4.8 Shared Principal Collections 48
SECTION 4.9 Application of Funds on Deposit in the
Collection Account for the Securities 48
SECTION 4.10 Coverage of Required Amount for the Series
1998-3 Securities 56
SECTION 4.11 Payment of Interest 57
SECTION 4.12 Payment of Principal 59
SECTION 4.13 Series Charge-Offs 62
SECTION 4.14 Redirected Principal Collections for the
Series 1998-3 Securities 63
SECTION 4.15 Class C Trigger Event 65
SECTION 4.16 Class C Reserve Account 65
SECTION 4.17 Payment Reserve Account 67
SECTION 4.18 Revolving Receivables Reserve Account 68
SECTION 4.19 Principal Funding Account 70
SECTION 4.20 Constituent Class D Securities 71
SECTION 4.21 Determination of LIBOR 72
SECTION 7. Article V of the Agreement 72
ARTICLE V
DISTRIBUTIONS AND REPORTS TO INVESTOR
SECURITYHOLDERS
SECTION 5.1 Distributions 73
SECTION 5.2 Securityholders' Statement 74
SECTION 7A. Article VI of the Agreement 76
ARTICLE VI
THE SECURITIES
SECTION 6.1 Additional Invested Amounts 77
SECTION 6.2 Additional Class D Invested Amounts 81
SECTION 6.3 Extension 82
SECTION 8. Series Pay Out Events 84
SECTION 9. Series 1998-3 Termination 85
SECTION 9A Pre-Payment 86
SECTION 10. Legends; Transfer and Exchange; Restrictions
on Transfer of Series 1998-3 Securities;
Tax Treatment 86
SECTION 11.Ratification of Agreement 94
SECTION 12.Counterparts 95
SECTION 13.FCI Note 95
SECTION 14.Governing Law 95
SECTION 15. Instructions in Writing 95
EXHIBITS
Exhibit A-1 Form of Class A Investor Security
Exhibit A-2 Form of Class B Investor Security
Exhibit A-3 Form of Class C Investor SEcurity
Exhibit A-4 Form of Class D Investor Security
Exhibit B [Reserved]
Exhibit C Form of Monthly Securityholders' Statement
Exhibit D Form of Securityholder Investor Letter
Exhibit E Form of Extension
Exhibit F Form of Investor Securityholder Election Notice
SERIES 1998-3 SUPPLEMENT, dated as of July 30, 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 of Investor Securities to be issued pursuant to the
Agreement and this Series Supplement to be known generally as the
"Series 1998-3 Securities." The Series 1998-3 Securities shall
be issued in four Classes, which shall be designated generally as
the Variable Funding Asset Backed Securities, Series 1998-3,
Class A (the "Class A Securities"), the Variable Funding Asset
Backed Securities, Series 1998-3, Class B (the "Class B
Securities"), the Variable Funding Asset Backed Securities,
Series 1998-3, Class C (the "Class C Securities") and the 0%
Variable Funding Asset Backed Securities, Series 1998-3, 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 1998-3 Securities. All Article, Section or subsection
references herein shall mean Article, Section or subsections of
the Agreement, as amended or supplemented by this Series
Supplement, except as otherwise provided herein. All capitalized
terms not otherwise defined herein are defined in the Agreement.
Each capitalized term defined herein shall relate only to the
Series 1998-3 Securities and no other Series of Securities issued
by the Trust.
"ABC Invested Amount" shall mean, with respect to any
Business Day, the sum of the Class A Invested Amount, the Class B
Invested Amount and the Class C Invested Amount after giving
effect to all adjustments of such amounts on such Business Day.
"Additional Class A Invested Amounts" shall have the
meaning specified in Section 6.15 of the Agreement.
"Additional Class B Invested Amounts" shall have the
meaning specified in Section 6.15 of the Agreement.
"Additional Class C Invested Amounts" shall have the
meaning specified in Section 6.15 of the Agreement.
"Additional Class D Invested Amounts" shall have the
meaning specified in Section 6.16 of the Agreement.
"Additional Invested Amounts" shall have the meaning
specified in Section 6.15 of the Agreement.
"Adjusted Invested Amount" shall mean as of any
Business Day the Invested Amount minus the sum of the Principal
Funding Account Balance and the Series 1998-3 Percentage of the
amount then on deposit in the Excess Funding Account.
"Administrative Agent" shall mean NationsBank, N.A. and
any successor thereto under the Security Purchase Agreement.
"Aggregate ABC Principal Amount" shall mean with
respect to any date of determination an amount equal to the sum
of the Class A Outstanding Principal Amount, the Class B
Outstanding Principal Amount and the Class C Outstanding
Principal Amount, each as of such date of determination.
"Aggregate Interest Component" shall mean the aggregate
sum of the Interest Components of all issued and outstanding
Commercial Paper.
"Aggregate Interest Rate Caps Notional Amount" shall
mean with respect to any date of determination an amount equal to
the sum of the notional amounts or equivalent amounts of all
outstanding Cap Agreements, Replacement Interest Rate Caps and
Qualified Substitute Arrangements, each as of such date of
determination.
"Alternate Purchasers" shall have the meaning set forth
in the Security Purchase Agreement.
"Amortization Period" shall mean the period beginning
on the day following the last day of the Revolving Period and
ending on the Series 1998-3 Termination Date.
"Amortization Period Commencement Date" shall mean (i)
the earlier of the first day of the August 2001 Monthly Period
and the Pay Out Commencement Date or (ii) if there is any
Extension, the earlier of the date specified as such in the most
recent Extension Notice and the Pay Out Commencement Date.
"Available Series 1998-3 Finance Charge Collections"
shall have the meaning specified in subsection 4.9(a) of the
Agreement.
"Available Series 1998-3 Principal Collections" shall
mean, with respect to any Business Day in the Amortization
Period, an amount equal to the sum of (i) an amount equal to the
Fixed/Floating Percentage on such Business Day of all Principal
Collections (less the amount of Redirected Principal Collections)
received on such Business Day, (ii) any amount on deposit in the
Excess Funding Account allocated to the Series 1998-3 Securities
pursuant to subsection 4.3(f) of the Agreement with respect to
such Business Day, (iii) an amount equal to the sum of the
aggregate Series Default Amount with respect to such Business Day
and the Series 1998-3 Percentage of any unpaid Adjustment
Payments to be treated as Available Series 1998-3 Principal
Collections pursuant to subsections 4.9(a)(v) and 4.9(a)(vi) of
the Agreement with respect to such Business Day and any
reimbursements of unreimbursed Series Charge-Offs to be treated
as Available Series 1998-3 Principal Collections pursuant to
subsections 4.9(a)(vii), (viii), (ix) and (x) of the Agreement
with respect to such Business Day plus in each case, amounts
applied with respect thereto pursuant to subsections 4.10(a) and
(b), 4.14(a), (b) and (c) and 4.16(b) of the Agreement, (iv)
amounts specified in the last sentence of Section 3A(h) of this
Series Supplement and (v) the aggregate Shared Principal
Collections allocated to the Series 1998-3 Securities pursuant to
Section 4.8 of the Agreement with respect to such Business Day.
"Bank Rate" shall mean, for any Funding Period, an
interest rate per annum equal to the sum of (a) LIBOR and (b)
0.45% per annum, provided, however, that:
(i) if any Purchaser or Liquidity Provider determines
that (A) it would be contrary to law or to the directive of any
central bank or other governmental authority to obtain United
Stated dollars in the London interbank market to fund its
investment in a Senior Security for such Funding Period, or (B)
it is unable, by reason of circumstances affecting the London
interbank market generally, to obtain United States dollars in
such market to fund its investment in such Senior Security for
such Funding Period, then the Bank Rate for such Funding Period
shall be the Federal Funds Effective Rate plus 0.45%; and
(ii) following the occurrence and during the
continuance of a Pay Out Event, the Bank Rate shall be an
interest rate per annum equal to the sum of (A) the Prime Rate
and (B) two percent (2%) per annum.
"Base Rate" shall mean, as of any Business Day, the sum
of (i) the weighted average of (A) the Class A Interest Rate, (B)
the Class B Interest Rate, (C) the Class C Interest Rate and (D)
if an interest rate is assigned to the Class D Securities
pursuant to Section 4.20 of the Agreement, the Class D Interest
Rate, each as of such Business Day, plus (ii) the product of 2%
per annum and the percentage equivalent of a fraction the
numerator of which is the Adjusted Invested Amount and the
denominator of which is the Invested Amount.
"Benefit Plan" shall mean (i) an employee benefit plan
(as defined in Section 3(3) of ERISA that is subject to the
provisions of Title I of ERISA, (ii) a plan described in Section
4975(e)(1) of the Code or (iii) any entity whose underlying
assets include plan assets by reason of a plan's investment in
the entity.
"Cap Agreements" shall mean the interest rate cap
agreements, between the Transferor and a Cap Provider, as amended
from time to time, and any additional interest rate protection
agreement or agreements, entered into between the Transferor and
a Cap Provider, as the same may from time to time be amended,
restated, modified and in effect.
"Cap Proceeds Account" shall have the meaning specified
in subsection 3A(b) of this Series Supplement.
"Cap Provider" shall mean a third party cap provider
having a senior unsecured debt rating of at least "Aa2" by
Moody's.
"Cap Receipt Amount" shall mean, with respect to any
Business Day the amount on deposit in the Cap Proceeds Account.
"Cap Settlement Date" shall have the meaning specified
in subsection 3A(b) of this Series Supplement.
"Capped Interest Rate" shall mean LIBOR plus 0.45%.
"Capped Class A Interest" shall mean, with respect to a
Business Day, an amount equal to the product of (i) the Capped
Interest Rate and (ii) a fraction the numerator of which is the
actual number of days from and including the immediately
preceding Business Day to but excluding such Business Day and the
denominator of which is 365 or 366, as the case may be, and (iii)
the Class A Outstanding Principal Amount.
"Capped Class A Interest Shortfall" shall mean, with
respect to a Business Day, the amount equal to the excess, if
any, of (x) the Capped Class A Interest for such Business Day
plus the Capped Class A Interest Shortfall for the preceding
Business Day over (y) the amount available to be paid to the
Class A Securityholders in respect thereof on such Business Day.
The Capped Class A Interest Shortfall shall initially be zero.
"Capped Class B Interest" shall mean, with respect to a
Business Day, an amount equal to the product of (i) the Capped
Interest Rate and (ii) a fraction the numerator of which is the
actual number of days from and including the immediately
preceding Business Day to but excluding such Business Day and the
denominator of which is 365 or 366, as the case may be, and (iii)
the Class B Outstanding Principal Amount.
"Capped Class B Interest Shortfall" shall mean, with
respect to a Business Day, the amount equal to the excess, if
any, of (x) the Capped Class B Interest for such Business Day
plus the Capped Class B Interest Shortfall for the preceding
Business Day over (y) the amount available to be paid to the
Class B Securityholders in respect thereof on such Business Day.
The Capped Class B Interest Shortfall shall initially be zero.
"Capped Class C Interest" shall mean, with respect to a
Business Day, an amount equal to the product of (i) the Capped
Interest Rate and (ii) a fraction the numerator of which is the
actual number of days from and including the immediately
preceding Business Day to but excluding such Business Day and the
denominator of which is 365 or 366, as the case may be, and (iii)
the Class C Outstanding Principal Amount.
"Capped Class C Interest Shortfall" shall mean, with
respect to a Business Day, the amount equal to the excess, if
any, of (x) the Capped Class C Interest for such Business Day
plus the Capped Class C Interest Shortfall for the preceding
Business Day over (y) the amount available to be paid to the
Class C Securityholders in respect thereof on such Business Day.
The Capped Class C Interest Shortfall shall initially be zero.
"Class A Adjusted Invested Amount" shall mean, with
respect to any date of determination, an amount equal to the
Class A Invested Amount minus the product of (a) the Class A
Percentage and (b) the Principal Funding Account Balance on such
date of determination.
"Class A Charge-Offs" shall have the meaning specified
in subsection 4.13(d) of the Agreement.
"Class A Enhancement Interest" shall mean, for any
Business Day, an amount equal to the interest accrued from and
including the preceding Business Day to but excluding such
Business Day on any conduit program enhancement disbursement
related to an amount equal to the excess of (i) the aggregate
amount of draws on the conduit program enhancement facility
supporting each Conduit Purchaser's Commercial Paper over (ii)
the sum of the Class B Outstanding Principal Amount and the Class
C Outstanding Principal Amount.
"Class A Facility Usage Fee" shall mean, for any
Business Day, an amount equal to the product of (i) a fraction
the numerator of which is the actual number of days from and
including the preceding Business Day to but excluding such
Business Day and the denominator of which is 360, (ii) .125% and
(iii) the Class A Invested Amount on the preceding Business Day.
"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 taking into account all
adjustments of the Class A Adjusted Invested Amount on such day
and the denominator of which is the greater of (a) the sum of the
aggregate amount of Principal Receivables as of the beginning of
such Business Day and the amounts on deposit in the Excess
Funding Account as of the beginning of such Business Day after
giving effect to any deposits or withdrawals to be made to the
Excess Funding Account on such Business Day and (b) the sum of
the numerators used to calculate the applicable floating or
fixed/floating percentages with respect to all Participations and
all Classes of all Series then outstanding.
"Class A Funding Interest" shall mean, with respect to
any day, the sum of (i) the Interest Component accrued for such
day with respect to Commercial Paper issued to fund any Class A
Funding Shortfall and (ii) the interest accrued for such day
under a Liquidity Provider Agreement on amounts drawn to fund any
Class A Funding Shortfall.
"Class A Funding Shortfall" shall mean, with respect to
any Business Day, an amount equal to the excess, if any, of (x)
the portion of Class A Interest accrued with respect to Funding
Periods ending on such Business Day plus Class A Funding Interest
for such Business Day plus the Class A Funding Shortfall for the
preceding Business Day over (y) the amount paid to the
Administrative Agent, for the benefit of the Class A
Securityholders, in respect thereof on such Business Day. The
Class A Funding Shortfall shall initially be zero.
"Class A Initial Invested Amount" shall mean
$76,522,727.27.
"Class A Interest" shall have the meaning specified in
subsection 4.6(a) of the Agreement.
"Class A Interest Rate" shall mean with respect to any
Business Day, a per annum interest rate equal to the rate which
if multiplied by the Class A Outstanding Principal Amount as of
the close of business on the preceding Business Day, would
produce, on the basis of a 365- or 366-day year, as the case may
be, an amount equal to the sum of (i) the product of (a) the
Class A Percentage and (b) the Cost of Funds for the period from
and including the immediately preceding Business Day to but
excluding such Business Day, (ii) if the Bank Rate is not used to
determine the Daily Accrued Interest for such Business Day, the
Class A Program Fee for such Business Day, (iii) the Class A
Facility Usage Fee for such Business Day and (iv) the Class A
Enhancement Interest for such Business Day.
"Class A Interest Shortfall" shall have the meaning
specified in subsection 4.6(a) of the Agreement.
"Class A Invested Amount" shall mean, when used with
respect to any Business Day, an amount equal to (a) the Class A
Initial Invested Amount minus (b) the aggregate amount of
principal payments made to Class A Securityholders through and
including such Business Day, minus (c) the aggregate amount of
Class A Charge-Offs for all prior Distribution Dates, plus (d)
the sum of the aggregate amount applied through and including
such Business Day pursuant to subsection 4.9(a)(vii) of the
Agreement (including, with respect to such subsection, amounts
applied thereto pursuant to Sections 4.10 and 4.14 of the
Agreement), for the purpose of reinstating amounts reduced
pursuant to the foregoing clause (c) and plus (e) the aggregate
principal amount of any Additional Class A Invested Amounts
purchased pursuant to Section 6.15 of the Agreement; provided,
however, that the Class A Invested Amount shall in no event be
reduced below zero or greater than the Class A Maximum Invested
Amount.
"Class A Maximum Invested Amount" shall mean
$336,363,636 or such lesser amount as is specified in writing by
the Transferor from time to time upon 30 days prior written
notice to the Trustee and the Senior Securityholders.
"Class A Outstanding Principal Amount" shall mean, when
used with respect to any Business Day, an amount equal to (a) the
Class A Initial Invested Amount, plus (b) the aggregate principal
amount of any Additional Class A Invested Amounts purchased by
the Class A Securityholders on or prior to such Business Day
pursuant to Section 6.15 of the Agreement minus (c) the aggregate
amount of principal payments made to the Class A 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 Class C 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 Program Fee" shall mean, for any Business Day,
an amount equal to the product of (i) a fraction the numerator of
which is the actual number of days from and including the
preceding Business Day to but excluding such Business Day and the
denominator of which is 360, (ii) .075% and (iii) the Class A
Invested Amount on the preceding Business Day.
"Class A Required Amount" shall mean the amount
determined by the Servicer on each Business Day equal to the
excess, if any, of (x) the sum of (i) the amount described in
subsection 4.9(a)(i)(y) for such Business Day, (ii) the Class A
Percentage of the Daily Portion of the Servicing Fee for the then
current Monthly Period, (iii) the Class A Percentage of the
Series Default Amount, if any, for such Business Day and, to the
extent not previously paid, for any previous Business Day in such
Monthly Period and (iv) on each Transfer Date the Class A
Percentage of the Series 1998-3 Percentage of the Adjustment
Payment required to be made by the Transferor but not made on
such Transfer Date, over (y) the Available Series 1998-3 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 (iv).
"Class A Securities" shall mean the variable funding
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 Securityholders" shall mean each 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 1998-3 Securityholders' Interest evidenced
by the Class A Securities.
"Class B Adjusted Invested Amount" shall mean, with
respect to any date of determination, an amount equal to the
Class B Invested Amount minus the product of (a) the Class B
Percentage and (b) the Principal Funding Account Balance on such
date of determination.
"Class B Charge-Offs" shall have the meaning specified
in subsection 4.13(c) of the Agreement.
"Class B Enhancement Interest" shall mean, for any
Business Day, an amount equal to the interest accrued from and
including the preceding Business Day to but excluding such
Business Day on any conduit program enhancement disbursement
related to an amount equal to the excess of (i) the aggregate
amount of draws on the conduit program enhancement facility
supporting each Conduit Purchaser's Commercial Paper over (ii)
the Class C Outstanding Principal Amount (such excess not to
exceed an amount equal to the Class B Outstanding Principal
Amount).
"Class B Facility Usage Fee" shall mean, for any
Business Day, an amount equal to the product of (i) a fraction
the numerator of which is the actual number of days from and
including the preceding Business Day to but excluding such
Business Day and the denominator of which is 360, (ii) .1875% and
(iii) the Class B Invested Amount on the preceding Business Day.
"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 Adjusted 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 as of the beginning of such Business Day and the
amount on deposit in the Excess Funding Account as of the
beginning of such Business Day after giving effect to any
deposits or withdrawals to be made to the Excess Funding Account
on such Business Day and (b) the sum of the numerators used to
calculate the applicable floating or fixed/floating percentages
with respect to all Participations and all Classes of all Series
then outstanding.
"Class B Floating Percentage" shall mean, with respect
to any Business Day, the percentage equivalent of a fraction, the
numerator of which is the Class B Adjusted Invested Amount as of
the beginning of such Business Day after taking into account all
adjustments of the Class B Adjusted Invested Amount on such day
and the denominator of which is the greater of (a) the sum of the
aggregate amount of Principal Receivables as of the beginning of
such Business Day and the amount on deposit in the Excess Funding
Account as of the beginning of such Business Day after giving
effect to any deposits or withdrawals to be made to the Excess
Funding 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.
"Class B Funding Interest" shall mean, with respect to
any day, the sum of (i) the Interest Component accrued for such
day with respect to Commercial Paper issued to fund any Class B
Funding Shortfall and (ii) the interest accrued for such day
under a Liquidity Provider Agreement on amounts drawn to fund any
Class B Funding Shortfall.
"Class B Funding Shortfall" shall mean, with respect to
any Business Day, an amount equal to the excess, if any, of (x)
the portion of Class B Interest accrued with respect to Funding
Periods ending on such Business Day plus Class B Funding Interest
for such Business Day plus the Class B Funding Shortfall for the
preceding Business Day over (y) the amount paid to the
Administrative Agent, for the benefit of the Class B
Securityholders, in respect thereof on such Business Day. The
Class B Funding Shortfall shall initially be zero.
"Class B Initial Invested Amount" shall mean
$2,068,181.82.
"Class B Interest" shall have the meaning specified in
subsection 4.6(b) of the Agreement.
"Class B Interest Rate" shall mean with respect to any
Business Day, a per annum interest rate equal to the rate which
if multiplied by the Class B Outstanding Principal Amount as of
the close of business on the preceding Business Day, would
produce, on the basis of a 365- or 366-day year, as the case may
be, an amount equal to the sum of (i) the product of (a) the
Class B Percentage and (b) the Cost of Funds for the period from
and including the immediately preceding Business Day to but
excluding such Business Day, (ii) if the Bank Rate is not used to
determine the Daily Accrued Interest for such Business Day, the
Class B Program Fee for such Business Day, (iii) the Class B
Facility Usage Fee for such Business Day and (iv) the Class B
Enhancement Interest for such Business Day.
"Class B Interest Shortfall" shall have the meaning
specified in subsection 4.6(b) of the Agreement.
"Class B Invested Amount" shall mean, when used with
respect to any Business Day, an amount equal to (a) the Class B
Initial Invested Amount, minus (b) the aggregate amount of
principal payments made to Class B Securityholders 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
for which neither the Class D Invested Amount nor the Class C
Invested Amount has been reduced on all prior Distribution Dates
pursuant to Section 4.14(d) of the Agreement, plus (e) the sum of
the aggregate amount applied through and including such Business
Day pursuant to subsection 4.9(a)(viii) of the Agreement
(including with respect to such subsection, amounts applied
thereto pursuant to Sections 4.10 and 4.14 of the Agreement), for
the purpose of reinstating amounts reduced pursuant to the
foregoing clauses (c) and (d), and plus (f) the aggregate
principal amount of any Additional Class B Invested Amounts
purchased pursuant to Section 6.15 of the Agreement; provided,
however, that the Class B Invested Amount shall in no event be
reduced below zero or greater than the Class B Maximum Invested
Amount.
"Class B Maximum Invested Amount" shall mean $9,090,909
or such lesser amount as is specified in writing by the
Transferor from time to time upon 30 days prior written notice to
the Trustee and the Senior Securityholders.
"Class B Outstanding Principal Amount" shall mean, when
used with respect to any Business Day, an amount equal to (a) the
Class B Initial Invested Amount, plus (b) the aggregate principal
amount of any Additional Class B Invested Amounts purchased by
the Class B Securityholders on or prior to such Business Day
pursuant to Section 6.15 of the Agreement minus (c) the aggregate
amount of principal payments made to 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 Class C Invested Amount.
"Class B Principal" shall mean the principal
distributable in respect of the Class B Securities as calculated
in accordance with subsection 4.7(b) of the Agreement.
"Class B Principal Payment Commencement Date" shall
mean the earlier of (a) the first Business Day in the
Amortization Period on which the Class A Invested Amount is paid
in full or, if there are no Principal Collections allocable to
the Series 1998-3 Securities remaining after payments have been
made to the Class A Securities on such Business Day, the Business
Day following the Business Day on which the Class A Invested
Amount is paid in full, and (b) the Business Day following a sale
or repurchase of the Receivables as set forth in Section 2.4(e),
9.2, 10.2, 12.1 or 12.2 of the Agreement or Section 3 of this
Series Supplement.
"Class B Program Fee" shall mean, for any Business Day,
an amount equal to the product of (i) a fraction the numerator of
which is the actual number of days from and including the
preceding Business Day to but excluding such Business Day and the
denominator of which is 360, (ii) .250% and (iii) the Class B
Invested Amount on the preceding Business Day.
"Class B Required Amount" shall mean the amount
determined by the Servicer on each Business Day equal to the
excess, if any, of (x) the sum of (i) the amount described in
subsection 4.9(a)(ii)(y) for such Business Day, (ii) the Class B
Percentage of the Daily Portion of the Servicing Fee for the then
current Monthly Period, (iii) the Class B Percentage of the
Series Default Amount, if any, for such Business Day and, to the
extent not previously paid, for any previous Business Day in such
Monthly Period and (iv) the Class B Percentage of the Series 1998-
3 Percentage of the Adjustment Payment required to be made by the
Transferor but not made on the related Transfer Date, over (y)
the Available Series 1998-3 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 (iv).
"Class B Securities" shall mean the variable funding
securities executed by the Transferor and authenticated by or on
behalf of the Trustee, substantially in the form of Exhibit A-2
hereto.
"Class B Securityholders" shall mean each 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 1998-3 Securityholders' Interest evidenced
by the Class B Securities.
"Class C Adjusted Invested Amount" shall mean, with
respect to any date of determination, an amount equal to the
Class C Invested Amount minus the product of (a) the Class C
Percentage and (b) the Principal Funding Account Balance on such
date of determination.
"Class C Charge-Offs" shall have the meaning specified
in subsection 4.13(b) of the Agreement.
"Class C Enhancement Interest" shall mean, for any
Business Day, an amount equal to the interest accrued from and
including the preceding Business Day to but excluding such
Business Day on any conduit program enhancement disbursement
related to an amount equal to the lesser of (i) the aggregate
amount of draws on the conduit program enhancement facility
supporting each Conduit Purchaser's Commercial Paper and (ii) the
Class C Outstanding Principal Amount.
"Class C Facility Usage Fee" shall mean, for any
Business Day, an amount equal to the product of (i) a fraction
the numerator of which is the actual number of days from and
including the preceding Business Day to but excluding such
Business Day and the denominator of which is 360, (ii) .1875% and
(iii) the Class C Invested Amount on the preceding Business Day.
"Class C 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 C Adjusted 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 as of the beginning of such Business Day and the
amount on deposit in the Excess Funding Account as of the
beginning of such Business Day after giving effect to any
deposits or withdrawals to be made to the Excess Funding Account
on such Business Day and (b) the sum of the numerators used to
calculate the floating or fixed/floating percentages with respect
to all Participations and all Classes of all Series then
outstanding.
"Class C Floating Percentage" shall mean, with respect
to any Business Day, the percentage equivalent of a fraction, the
numerator of which is the Class C Adjusted Invested Amount as of
the beginning of such Business Day after taking into account all
adjustments of the Class C Adjusted Invested Amount on such day
and the denominator of which is the greater of (a) the sum of the
aggregate amount of Principal Receivables as of the beginning of
such Business Day and the amount on deposit in the Excess Funding
Account as of the beginning of such Business Day after giving
effect to any deposits or withdrawals to be made to the Excess
Funding Account on such Business Day and (b) the sum of the
numerators used to calculate the applicable floating or
fixed/floating percentages with respect to all Participations and
all Classes of all Series then outstanding.
"Class C Funding Interest" shall mean, with respect to
any day, (i) the Interest Component accrued for such day with
respect to Commercial Paper issued to fund any Class C Funding
Shortfall and (ii) the interest accrued for such day under a
Liquidity Provider Agreement on amounts drawn to fund any Class A
Funding Shortfall.
"Class C Funding Shortfall" shall mean, with respect to
any Business Day, an amount equal to the excess, if any, of (x)
the portion of Class C Interest accrued with respect to Funding
Periods ending on such Business Day plus Class C Funding Interest
for such Business Day plus the Class C Funding Shortfall for the
preceding Business Day over (y) the amount paid to the
Administrative Agent, for the benefit of the Class C
Securityholders, in respect thereof on such Business Day. The
Class C Funding Shortfall shall initially be zero.
"Class C Initial Invested Amount" shall mean
$12,409,090.91.
"Class C Interest" shall have the meaning specified in
subsection 4.6(c) of the Agreement.
"Class C Interest Rate" shall mean with respect to any
Business Day, a per annum interest rate equal to the rate which
if multiplied by the Class C Outstanding Principal Amount as of
the close of business on the preceding Business Day, would
produce, on the basis of a 365- or 366 -day year, as the case may
be, an amount equal to the sum of (i) the product of (a) the
Class C Percentage and (b) the Cost of Funds for the period from
and including the immediately preceding Business Day to but
excluding such Business Day, (ii) if the Bank Rate is not used to
determine the Daily Accrued Interest for such Business Day, the
Class C Program Fee for such Business Day, (iii) the Class C
Facility Usage Fee for such Business Day and (iv) the Class C
Enhancement Interest for such Business Day.
"Class C Interest Shortfall" shall have the meaning
specified in subsection 4.6(c) of the Agreement.
"Class C Invested Amount" shall mean, when used with
respect to any Business Day, an amount equal to (a) the Class C
Initial Invested Amount, minus (b) the aggregate amount of
principal payments made to Class C Securityholders through and
including such Business Day, minus (c) the aggregate amount of
Class C Charge-Offs for all prior Distribution Dates, minus (d)
the aggregate amount of Redirected Class B Principal Collections
and Redirected Class C Principal Collections for which the Class
D Invested Amount has not been reduced on all prior Distribution
Dates pursuant to Section 4.14(d) of the Agreement, plus (e) the
sum of the aggregate amount applied through and including such
Business Day pursuant to subsections 4.9(a)(ix) of the Agreement
(including, with respect to such subsection, amounts applied
thereto pursuant to subsections 4.10(a) and (b), 4.16(b) and
Section 4.14 of the Agreement), for the purpose of reinstating
amounts reduced pursuant to the foregoing clauses (c) and (d),
and plus (f) the aggregate principal amount of any Additional
Class C Invested Amounts purchased pursuant to Section 6.15 of
the Agreement; provided, however, that the Class C Invested
Amount shall in no event be reduced below zero or greater than
the Class C Maximum Invested Amount.
"Class C Maximum Invested Amount" shall mean
$54,545,455 or such lesser amount as is specified in writing by
the Transferor from time to time upon 30 days prior written
notice to the Trustee and the Senior Securityholders.
"Class C Outstanding Principal Amount" shall mean, when
used with respect to any Business Day, an amount equal to (a) the
Class C Initial Invested Amount, plus (b) the aggregate principal
amount of any Additional Class C Invested Amounts purchased by
the Class C Securityholders on or prior to such Business Day
pursuant to Section 6.15 of the Agreement, minus (c) the
aggregate amount of principal payments made to Class C
Securityholders on or prior to such Business Day.
"Class C Percentage" shall mean a fraction the
numerator of which is the Class C Invested Amount and the
denominator of which is the sum of the Class A Invested Amount,
the Class B Invested Amount and the Class C Invested Amount.
"Class C Principal" shall mean the principal
distributable in respect of the Class C Securities as calculated
in accordance with subsection 4.7(c) of the Agreement.
"Class C Principal Payment Commencement Date" shall
mean the earlier of (a) the first Business Day in the
Amortization Period on which the Class B Invested Amount is paid
in full or, if there are no Principal Collections allocable to
the Series 1998-3 Securities remaining after payments have been
made to the Class B Securities on such Business Day, the Business
Day following the Business Day on which the Class B Invested
Amount is paid in full, and (b) the Business Day following a sale
or repurchase of the Receivables as set forth in Sections 2.4(e),
9.2, 10.2, 12.1 or 12.2 of the Agreement and Section 3 of this
Series Supplement.
"Class C Program Fee" shall mean, for any Business Day,
an amount equal to the product of (i) a fraction the numerator of
which is the actual number of days from and including the
preceding Business Day to but excluding such Business Day and the
denominator of which is 360, (ii) .450% and (iii) the Class C
Invested Amount on the preceding Business Day.
"Class C Required Amount" shall mean the amount
determined by the Servicer on each Business Day equal to the
excess, if any, of (x) the sum of (i), the amount described in
subsection 4.9(a)(iii)(y) for such Business Day, (ii) the Class C
Percentage of the Daily Portion of the Servicing Fee for the then
current Monthly Period, (iii) the Class C Percentage of the
Series Default Amount, if any, for such Business Day and, to the
extent not previously paid, for any previous Business Day in such
Monthly Period and (iv) the Class C Percentage of the Series 1998-
3 Percentage of the Adjustment Payment required to be made by the
Transferor but not made on the related Transfer Date, over (y)
the Available Series 1998-3 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 (iv).
"Class C Reserve Account" shall have the meaning
specified in subsection 4.16(a) of the Agreement.
"Class C Securityholders" shall mean each Person in
whose name a Class C Security is registered in the Security
Register.
"Class C Securityholders' Interest" shall mean the
portion of the Series 1998-3 Securityholders' Interest evidenced
by the Class C Securities.
"Class C Securities" shall mean the variable funding
securities executed by the Transferor and authenticated by or on
behalf of the Trustee, substantially in the form of Exhibit A-3
hereto.
"Class C Trigger Event" shall have the meaning
specified in Section 4.15 of the Agreement.
"Class D Charge-Offs" shall have the meaning specified
in subsection 4.13(a) of the Agreement.
"Class D Excess Amount" 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 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 as of the beginning of such Business Day and the
amount on deposit in the Excess Funding Account as of the
beginning of such Business Day after giving effect to any
deposits or withdrawals to be made to the Excess Funding Account
on such Business Day and (b) the sum of the numerators used to
calculate the applicable floating or fixed/floating percentages
with respect to all 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
beginning of such Business Day after taking into account all
adjustments of the Class D Invested Amount on such day and the
denominator of which is the greater of (a) the sum of the
aggregate amount of Principal Receivables as of the beginning of
such Business Day and the amount on deposit in the Excess Funding
Account as of the beginning of such Business Day after giving
effect to any deposits or withdrawals to be made to the Excess
Funding Account on such Business Day and (b) the sum of the
numerators used to calculate the applicable floating or
fixed/floating percentages with respect to all Participations and
all Classes of all Series then outstanding.
"Class D Initial Invested Amount" shall mean
$12,409,090.91.
"Class D Interest Rate" shall have the meaning
specified in subsection 4.20 of the Agreement.
"Class D Invested Amount" shall mean, when used with
respect to any Business Day, an amount equal to (a) the Class D
Initial Invested Amount, plus (b) the aggregate principal amount
of any Additional Class D Invested Amounts pursuant to Section
6.16 of the Agreement, minus (c) the aggregate amount of
principal payments made to Class D Securityholders and reductions
of the Class D Invested Amount pursuant to subsection 4.7(d) of
the Agreement through and including such Business Day, minus (d)
the aggregate amount of Class D Charge-Offs for all prior
Distribution Dates, minus (e) the aggregate amount of Redirected
Principal Collections for which the Class D Invested Amount has
been reduced on all prior Distribution Dates, and plus (f) the
sum of the aggregate amount applied through and including such
Business Day pursuant to subsections 4.9(a)(x) of the Agreement
(including, with respect to such subsection, amounts applied
thereto pursuant to subsections 4.10(a) and (b) of the
Agreement), for the purpose of reinstating amounts reduced
pursuant to the foregoing clauses (d) and (e); provided, however,
that the Class D Invested Amount shall in no event be reduced
below zero.
"Class D Maximum Invested Amount" shall mean
$54,545,455 or such lesser amount as is specified in writing by
the Transferor from time to time upon 30 days prior written
notice to the Trustee and the Securityholders.
"Class D Outstanding Principal Amount" shall mean, when
used with respect to any Business Day, an amount equal to (a) the
Class D Initial Invested Amount, plus (b) the aggregate principal
amount of any Additional Class D Invested Amounts pursuant to
Section 6.16 of the Agreement, minus (c) the aggregate amount of
principal payments made to Class D Securityholders and reductions
of the Class D Invested Amount pursuant to subsection 4.7(d) of
the Agreement through and including such Business Day.
"Class D Principal" shall mean the principal
distributable in respect of the Class D Securities as specified
in subsection 4.7(d) of the Agreement.
"Class D Principal Payment Commencement Date" shall
mean the earlier of (a) the first Business Day in the
Amortization Period on which the Class C Invested Amount is paid
in full or, if there are no Principal Collections allocable to
the Series 1998-3 Securities remaining after payments have been
made to the Class C Securities on such Business Day, the Business
Day following the Business Day on which the Class C Invested
Amount is paid in full, and (b) the Business Day following a sale
or repurchase of the Receivables as set forth in Sections 2.4(e),
9.2, 10.2, 12.1 and 12.2 of the Agreement and Section 3 of this
Series Supplement.
"Class D Securityholders" shall mean each 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 1998-3 Securityholders' Interest evidenced
by the Class D Securities.
"Class D Securities" shall mean the Securities executed
by the Transferor and authenticated by or on behalf of the
Trustee, substantially in the form of Exhibit A-4 hereto.
"Closing Date" shall mean the date of initial issuance
of Securities of Series 1998-3.
"Commercial Paper" shall mean the promissory notes
issued by the Conduit Purchasers in the commercial paper market
pursuant to the related facility documentation.
"Conduit Purchasers" shall have the meaning given to
such term in the Security Purchase Agreement.
"Cost of Funds" shall mean, with respect to any day
during each Monthly Period, the greater of (a) the sum of the
Daily Accrued Interest for each Purchaser Group on such day and
(b) the Servicer's most recent estimate, delivered to the Trustee
from time to time, of the average daily amount of the Daily
Accrued Interest for each Purchaser Group during such Monthly
Period.
"Daily Accrued Interest" shall mean, for each Purchaser
Group with respect to any day, the sum of (a) the Interest
Component accrued with respect to such day of outstanding
Commercial Paper which has been issued by the Conduit
Purchaser(s) in such Purchaser Group to fund all or a portion of
such Purchaser Group's Percentage of the ABC Invested Amount, (b)
the interest accrued at the Bank Rate with respect to such day on
amounts borrowed by the Conduit Purchaser(s) in such Purchaser
Group under a Liquidity Provider Agreement to fund all or a
portion of the ABC Invested Amount and (c) the interest accrued
at the Bank Rate with respect to such day on amounts funded by
Alternate Purchasers in such Purchaser Group with respect to all
or a portion of such Purchaser Group's Percentage of the ABC
Invested Amount.
"Daily Portion" shall mean, with respect to any amount
determined pursuant hereto, the product of such amount and a
fraction the numerator of which shall be the number of days from
and including the preceding Business Day to but excluding such
Business Day and the denominator of which shall be the number of
days in the then current Monthly Period.
"Distribution Date" shall mean September 15, 1998, and
the fifteenth day of each month thereafter, or if such day is not
a Business Day, the next succeeding Business Day; provided,
however, that the final Distribution Date with respect to the
payment of principal and interest shall be the Scheduled Series
1998-3 Termination Date.
"Early Amortization Period" shall mean the period
beginning on the day on which a Pay Out Event occurs or is deemed
to have occurred and ending on the earlier of (i) the date on
which the Class A Invested Amount, the Class B Invested Amount,
the Class C Invested Amount and the Class D Invested Amount have
been paid in full and (ii) the Series 1998-3 Termination Date.
"Election Date" shall have the meaning specified in
subsection 6.17(a) of the Agreement.
"Election Notice" shall have the meaning specified in
subsection 6.17(a) of the Agreement.
"Enhancement" shall mean, with respect to the Class A
Securities, the subordination of the Class B Invested Amount, the
Class C Invested Amount, and the Class D Invested Amount, with
respect to the Class B Securities, the subordination of the Class
C Invested Amount and the Class D Invested Amount, and with
respect to the Class C Securities, the subordination of the Class
D Invested Amount.
"Excess Finance Charge Collections" shall mean, with
respect to any Business Day, as the context requires, either (x)
the amount described in subsection 4.9(a)(xx) of the Agreement
allocated to the Series 1998-3 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 1998-3 Securities.
"Extension" shall mean the procedure by which the
Series 1998-3 Securityholders consent to the extension of the
Revolving Period to the new Amortization Period Commencement Date
set forth in the Extension Notice, pursuant to Section 6.17 of
the Agreement.
"Extension Date" shall mean the first day of the August
2001 Monthly Period or if an Extension has already occurred, the
date of the next Extension Date set forth in the Extension Notice
relating to the Extension then in effect (or, if any such date is
not a Business Day, the next preceding Business Day).
"Extension Notice" shall have the meaning specified in
subsection 6.17(a) of the Agreement.
"Extension Opinion" shall have the meaning specified in
subsection 6.17(a) of the Agreement.
"Extension Tax Opinion" shall have the meaning
specified in subsection 6.17(a) of the Agreement.
"Facility Limit" shall mean $400,000,000; provided,
that such amount may not at any time exceed the aggregate of the
Class A Commitment Amounts, the Class B Commitment Amounts and
the Class C Commitment Amounts (as each is defined in the
Security Purchase Agreement) at any time in effect; provided,
further, that from and after the Increase Termination Date the
Facility Limit shall at all times equal the Aggregate ABC
Principal Amount plus the Aggregate Interest Component; provided,
further, that the Transferor may, from time to time upon at least
thirty (30) days prior written notice to each Managing Agent,
elect to reduce the Facility Limit to an amount no less than the
outstanding Invested Amount after giving effect to any Additional
Invested Amounts requested on such date.
"Facility Unused Fee" shall mean, for any Business Day,
an amount equal to the sum of (A) the product of (i) a fraction
the numerator of which is the actual number of days from and
including the preceding Business Day to but excluding such
Business Day and the denominator of which is 360, (ii) 0.125% and
(iii) the excess of (a) the Class A Maximum Invested Amount minus
the Class A Invested Amount as of the preceding Business Day and
(B) the product of (i) a fraction the numerator of which is the
actual number of days from and including the preceding Business
Day to but excluding such Business Day and the denominator of
which is 360, (ii) .1875% and (iii) the excess of (x)the sum of
the Class B Maximum Invested Amount and the Class C Maximum
Invested Amount over (y) the sum of the Class B Invested Amount
and the Class C Invested Amount, each as of the preceding
Business Day.
"FCI Note" shall have the meaning specified in Section
13 of this Series Supplement.
"FCI Note Required Amount" shall have the meaning
specified in Section 13 of this Series Supplement.
"Federal Funds Effective Rate" shall mean, for any day,
the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged
by Federal funds brokers, as published on the next succeeding
Business Day by the Federal Reserve Bank of New York, or, if such
rate is not so published for any day which is a Business Day, the
average of the quotations for the day of such transactions
received by the Administrative Agent from three Federal funds
brokers of recognized standing selected by it.
"Fixed/Floating Percentage" shall mean for any Business
Day the percentage equivalent of a fraction, the numerator of
which is the sum of the Class A Adjusted Invested Amount, the
Class B Adjusted Invested Amount, the Class C Adjusted Invested
Amount and the Class D Invested Amount, in each case 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 applicable
floating or fixed/floating percentages with respect to all
Participations and all Classes of all Series then outstanding.
"Floating Percentage" shall mean for any Business Day
the sum of the applicable Class A Floating Percentage, Class B
Floating Percentage, Class C Floating Percentage, and Class D
Floating Percentage for such Business Day.
"Funding Period" shall have the meaning specified in
the Security Purchase Agreement.
"Increased Costs" shall have the meaning specified in
the Security Purchase Agreement.
"Increase Termination Date" shall mean the earliest to
occur of (i) the Amortization Period Commencement Date, (ii) that
Business Day which the Transferor designates as the "Increase
Termination Date" by written notice to the Administrative Agent
at least 30 days prior to such date or (iii) the Specified
Termination Date.
"Interest Accrual Period" shall mean a Monthly Period
and, with respect to a Distribution Date, the preceding Monthly
Period; provided, however, that the initial Interest Accrual
Period shall be the period from the Closing Date to and including
the last day of the Monthly Period preceding the initial
Distribution Date.
"Interest Component" shall mean, with respect to any
Commercial Paper (i) issued on a discount basis, the portion of
the face amount of such Commercial Paper representing the
discount incurred in respect thereof and (ii) issued on an
interest-bearing basis, the interest payable on such Commercial
Paper (in each case including the related Commercial Paper dealer
fees payable in connection with the issuance of such Commercial
Paper).
"Interest Rate Caps" shall mean the interest rate caps
provided pursuant to Cap Agreements by one or more Cap Providers
to the Transferor and assigned to the Trustee on behalf of any of
the Securityholders which shall entitle the Trust to receive
monthly payments equal to the product of (i) the positive
difference, if any, between LIBOR in effect for each applicable
Interest Period and 6.05%, (ii) the notional amount of such
interest rate cap and (iii) the actual number of days in the
Interest Period divided by 360.
"Invested Amount" shall mean, when used with respect to
any Business Day, an amount equal to the sum of (a) the Class A
Invested Amount as of such Business Day, (b) the Class B Invested
Amount as of such Business Day, (c) the Class C Invested Amount
as of such Business Day and (d) the Class D Invested Amount as of
such Business Day; provided, however, that for purposes of
determining the Servicing Fee and the Aggregate Invested Amount,
the Invested Amount shall mean an amount equal to the sum of (a)
the Class A Adjusted Invested Amount as of such Business Day, (b)
the Class B Adjusted Invested Amount as of such Business Day, (c)
the Class C Adjusted Invested Amount as of such Business Day and
(d) the Class D Invested Amount as of such Business Day.
"LIBOR" shall mean, for any Interest Accrual Period,
the London interbank offered quotations for one-month Dollar
deposits determined by the Trustee for each Interest Accrual
Period in accordance with the provisions of Section 4.21 of the
Agreement.
"LIBOR Determination Date" shall mean the second
Business Day prior to the commencement of each Interest Accrual
Period; provided, however, that with respect to the initial
Interest Accrual Period for the Series 1998-3 Securities, LIBOR
Determination Date shall mean a date selected by the Transferor
which shall not be in excess of two Business Days prior to the
date of initial issuance of Securities of the applicable Class.
For purposes of this definition, a Business Day is any day on
which banks in London and New York are open for the transaction
of international business.
"Liquidity Provider" shall have the meaning given to
such term in the Security Purchase Agreement.
"Liquidity Provider Agreement" shall have the meaning
given to such term in the Security Purchase Agreement.
"Managing Agent" shall have the meaning given to such
term in the Security Purchase Agreement.
"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 1998-3 Securities shall begin on and include the
Closing Date and shall end on and include the last day of the
then current fiscal month of the Transferor.
"Moody's" shall mean Moody's Investors Service, Inc.
and any successor thereto.
"NationsBank" shall mean NationsBank, N.A., a national
banking association.
"Negative Carry Amount" shall have the meaning
specified in subsection 4.10(a) of the Agreement.
"Net Revolving Principal Collections" shall have the
meaning specified in Section 4.9(b) of the Agreement.
"Paying Agent" shall mean, for the Series 1998-3
Securities, The Bank of New York.
"Payment Reserve Account" shall have the meaning
specified in Section 4.17 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 Pay Out Event is deemed
to occur pursuant to Section 8 of this Series Supplement.
"Portfolio Yield" shall mean for the Series 1998-3
Securities, with respect to any Monthly Period, the annualized
percentage equivalent of a fraction, the numerator of which is an
amount equal to the aggregate amount of Available Series 1998-3
Finance Charge Collections for such Monthly Period (not including
(a) the amounts withdrawn from the Payment Reserve Account, (b)
Adjustment Payments made by 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), calculated on a
cash basis, after subtracting the aggregate Series Default Amount
for such Monthly Period and the Series 1998-3 Percentage of any
Adjustment Payments which the Transferor is required but fails to
make pursuant to the Agreement for such Monthly Period, and the
denominator of which is the average daily Invested Amount for
such Monthly Period; provided, however, that Excess Finance
Charge Collections applied for the benefit of the Series 1998-3
Securityholders may be added to the numerator if (i) the
Transferor shall have provided ten Business Days prior written
notice of such action to each Rating Agency and the Senior
Securityholders and (ii) the Required Senior Securityholders
shall have given their written consent to such action.
"Prime Rate" shall mean, a rate per annum equal to the
greater of (i) the prime rate of interest announced by
NationsBank from time to time, changing when and as said prime
rate changes (such rate not necessarily being the lowest or best
rate charged by NationsBank) and (ii) the sum of (a)0.50% and (b)
the rate equal to the weighted average of the rates on overnight
Federal funds transactions with members of the Federal Reserve
System arranged by Federal funds brokers, as published for such
day (or, if such day is not a Business Day, for the immediately
preceding Business Day) by the Federal Reserve Bank of New York,
or, if such rate is not so published for any day that is a
Business Day, the average of the quotations for such day for such
transactions received by NationsBank from three Federal funds
brokers of recognized standing selected by it.
"Principal Funding Account" shall have the meaning
specified in Section 4.19 of the Agreement.
"Principal Funding Account Balance" shall mean, with
respect to any date of determination, the principal amount, if
any, on deposit in the Principal Funding Account on such date of
determination.
"Principal Shortfalls" shall mean on any Business Day
(i) prior to the Amortization Period Commencement Date, zero, and
(ii) after the Amortization Period Commencement Date, the
Invested Amount after the application of Principal Collections on
such Business Day.
"Prior Tax Year" shall have the meaning specified in
Section 10(k) of this Series Supplement.
"Program Support Provider Agreement" has the meaning
given to such term in the Security Purchase Agreement.
"Program Support Provider" has the meaning given to
such term in the Security Purchase Agreement.
"Purchaser" shall mean a Conduit Purchaser or an
Alternate Purchaser, as the context requires.
"Purchaser Group" shall have the meaning given to such
term in the Security Purchase Agreement.
"Purchaser Group Percentage" shall mean (a) 37.5% with
respect to Kitty Hawk Funding Corporation and the related
Purchaser Group, (b) 37.5% with respect to Falcon Asset
Securitization Corporation and the related Purchaser Group and
(c) 25% with respect to Four Winds Funding Corporation and the
related Purchaser Group.
"Qualified Substitute Arrangement" shall have the
meaning specified in Section 3A(d) of this Series Supplement.
"Rating Agency" shall mean Moody's.
"Redirected Class B Principal Collections" shall have
the meaning specified in subsection 4.14(c) of the Agreement.
"Redirected Class C Principal Collections" shall have
the meaning specified in subsection 4.14(b) of the Agreement.
"Redirected Class D Principal Collections" shall have
the meaning specified in subsection 4.14(a) of the Agreement.
"Redirected Principal Collections" shall mean the sum
of Redirected Class B Principal Collections, Redirected Class C
Principal Collections and Redirected Class D Principal
Collections.
"Replacement Interest Rate Cap" shall mean one or more
Interest Rate Caps, which in combination with all other Interest
Rate Caps then in effect, after giving effect to any planned
cancellations of any presently outstanding Interest Rate Caps,
satisfies the Transferor's covenant contained in Section 3A of
this Series Supplement to maintain Interest Rate Caps.
"Required Amount" shall have the meaning specified in
Section 4.10 of the Agreement.
"Required Senior Securityholders" shall mean the
Holders of Senior Securities evidencing undivided interests
aggregating more than 50% of the sum of the Class A Invested
Amount, the Class B Invested Amount and the Class C Invested
Amount.
"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 Section 4.18 of the Agreement.
"Scheduled Series 1998-3 Termination Date" shall mean
the first day of the February 2006 Monthly Period unless a
different date shall be set forth in any Extension Notice.
"Security Purchase Agreement" shall mean the Security
Purchase Agreement, dated as of July 30, 1998, by and among the
Transferor, the Conduit Purchasers, the financial institutions
from time to time parties thereto as Alternate Purchasers, the
Managing Agents and the Administrative Agent, as the same may
from time to time be amended, restated, modified and in effect.
"Senior Security" shall mean a Class A Security, Class
B Security or Class C Security.
"Senior Securityholder" means the holder of record of
any Class A Security, Class B Security or Class C Security.
"Series Default Amount" shall mean, with respect to
each Business Day, an amount equal to the product of the Default
Amount identified since the prior reporting date and the Floating
Percentage applicable for such Business Day.
"Series 1998-3" shall mean the Series of the Fingerhut
Master Trust represented by the Series 1998-3 Securities.
"Series 1998-3 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 Series
then outstanding.
"Series 1998-3 Securities" shall mean the Class A
Securities, the Class B Securities, the Class C Securities and
the Class D Securities.
"Series 1998-3 Securityholder" shall mean the holder of
record of any Series 1998-3 Security.
"Series 1998-3 Securityholders' Interest" shall have
the meaning specified in Section 4.4 of the Agreement.
"Series 1998-3 Termination Date" shall mean the earlier
to occur of (i) the day after the Distribution Date on which the
Series 1998-3 Securities are paid in full or (ii) the Scheduled
Series 1998-3 Termination Date.
"Series Pay Out Event" shall have the meaning specified
in Section 8 of this Series Supplement.
"Series Servicing Fee Percentage" shall mean 2.00% per
annum.
"Servicing Fee" shall mean, for any Business Day, an
amount equal to the product of (i) a fraction the numerator of
which is the actual number of days from but excluding the next
preceding Business Day to and including such Business Day and the
denominator of which is 365 or 366, as the case may be, (ii) the
applicable Series Servicing Fee Percentage and (iii) the Adjusted
Invested Amount on such Business Day after giving effect to all
transactions on such Business Day.
"Shared Principal Collections" shall mean, as the
context requires, either (A) the sum of (x) the amount of
Principal Collections for any Business Day allocated to the
Series 1998-3 Securities which, in accordance with subsections
4.9(b) and 4.12(g) of the Agreement, may be applied in accordance
with Section 4.3(e) of the Agreement, and (y) the amounts treated
as Shared Principal Collections pursuant to subsections
4.9(a)(v), (vi), (vii), (viii), (ix) and (x) of the Agreement,
(B) the amounts allocated to the Investor Securities of other
Series which the applicable Series Supplements for such Series
specify are to be treated as "Shared Principal Collections" 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
1998-3 Securities.
"Specified Class C Reserve Amount" shall mean zero
prior to the occurrence of a Class C Trigger Event and thereafter
the amount, if any, which if added to the numerator of the Target
Percentage would cause such percentage to be equal to 5%.
"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.
"Specified Termination Date" shall mean July 29, 1999,
or such later date to which the Specified Termination Date may be
extended pursuant to Section 2.05 of the Security Purchase
Agreement.
"Stated Class B Amount" shall mean on any date of
determination the greater of (i) zero and (ii) a number rounded
to the nearest dollar obtained by multiplying the Class A
Invested Amount by a fraction the numerator of which is 2 and the
denominator of which is 74; provided, however, that in no event
shall the Stated Class B Amount exceed the Class B Maximum
Invested Amount.
"Stated Class C Amount" shall mean on any date of
determination the greater of (i) zero and (ii) a number rounded
to the nearest dollar obtained by multiplying the sum of the
Class A Invested Amount and the Class B Invested Amount by a
fraction the numerator of which is 12 and the denominator of
which is 76; provided, however, that in no event shall the Stated
Class C Amount exceed the Class C Maximum Invested Amount.
"Stated Class D Amount" shall mean on any date of
determination the greater of (i) zero and (ii) a number rounded
to the nearest dollar obtained by multiplying the sum of the
Class A Invested Amount, the Class B Invested Amount and the
Class C Invested Amount by a fraction the numerator of which is
12 and the denominator of which is 88; provided, however, that in
no event shall the Stated Class D Amount exceed the Class D
Maximum Invested Amount; and provided further 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; and provided
further, that on and after the Amortization Period Commencement
Date, the Stated Class D Amount shall not be less than 3% (or
such lesser percentage specified by Transferor which shall not be
less than zero if the Trustee shall have received written
confirmation from Moody's that the reduction of such percentage
shall not cause Moody's to lower or withdraw its then current
rating of the Class A Securities, the Class B Securities or the
Class C Securities) of the Invested Amount on the last day of the
Revolving Period.
"Target Percentage" shall have the meaning specified in
Section 4.15 of the Agreement.
"Targeted Holder" shall mean (i) each holder of a right
to receive interest or principal with respect to investor
securities (or other interests in the Trust), including the
Senior Securities and any Participations, other than securities
(or other such interests) with respect to which an opinion is
rendered that such securities (or other such interests) will be
treated as debt for Federal income tax purposes and (ii) any
holder of a right to receive any amount in respect of the
Transferor Interest; provided, that any person holding more than
one interest each of which would cause such person to be a
Targeted Holder shall be treated as a single Targeted Holder.
"Transfer" shall have the meaning specified in Section
10(i) of this Series Supplement.
"Transferor Cap Proceeds Percentage" shall mean on any
Business Day a fraction equal to one minus a fraction, the
numerator of which is the weighted average ABC Invested Amount
for the preceding Monthly Period based on the ABC Invested Amount
outstanding on each Business Day during such Monthly Period and
the denominator of which is the weighted average Aggregate
Interest Rate Caps Notional Amount for the preceding Monthly
Period based on the Aggregate Interest Rate Caps Notional Amount
outstanding on each Business Day during such Monthly Period.
"Transferor Finance Charge Collections" shall mean on
any Business Day the product of (a) the Finance Charge
Collections for such Business Day, (b) the Transferor Percentage
and (c) the Series 1998-3 Percentage.
"Transferor Retained Securities" shall mean Investor
Securities of any Series, including the Class D Securities, which
the Transferor retains, but only to the extent that and for so
long as the Transferor is the Holder of such Securities.
"Withholding Event" shall have the meaning specified in
Section 10(k) of this Series Supplement.
"Withholding Tax" shall have the meaning specified in
Section 10(k) of this Series Supplement.
SECTION 3 Reassignment Terms. The Series 1998-3
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 Business Day on or after the
Business Day on which the sum of the Class A Invested Amount, the
Class B Invested Amount and the Class C Invested Amount is
reduced to an amount less than or equal to 10% of the sum of the
highest Class A Invested Amount, the highest Class B Invested
Amount and the highest Class C Invested Amount during the
Revolving Period. The deposit required in connection with any
such termination and final distribution shall be equal to the sum
of the unpaid Class A Invested Amount, the unpaid Class B
Invested Amount and the unpaid Class C Invested Amount plus
accrued and unpaid interest on the Series 1998-3 Securities
through the day prior to the Business Day on which the final
distribution occurs, in each case after giving effect to any
payments on such date.
SECTION 3A. Conveyance of Interest in Interest Rate
Cap; Cap Proceeds Account. (a) The Transferor hereby covenants
and agrees that, on or prior to the issuance of any of the Series
1998-3 Securities, it shall obtain, and at all times prior to the
close of business on the Series 1998-3 Termination Date maintain,
one or more Interest Rate Caps whose notional amounts singly or
taken as a group equal or exceed the Aggregate ABC Principal
Amount. The Transferor hereby assigns, sets-over, conveys,
pledges and grants a security interest and lien (free and clear
of all other Liens) to the Trustee for the benefit of the Series
1998-3 Securityholders, in all of the Transferor's right, title
and interest now existing or hereafter arising in and to the Cap
Agreements and the Interest Rate Caps arising thereunder,
together with the Cap Proceeds Account and all other proceeds
thereof, as collateral security for the benefit of the Series
1998-3 Securityholders. The Transferor hereby further agrees to
execute all such instruments, documents and financing statements
and take all such further action requested by the Trustee to
evidence and perfect the assignment of the Cap Agreements and the
Interest Rate Caps pursuant to this Section 3A. The Transferor
agrees that each Interest Rate Cap shall provide for payments to
the Trustee and that the Trust's interest in respect of such
payments shall be deposited into the Cap Proceeds Account.
(b) The Trustee, for the benefit of the Series 1998-3
Securityholders, shall establish and maintain with a Qualified
Institution, which may be the Trustee, in the name of the
Trustee, on behalf of the Securityholders, a certain segregated
trust account (the "Cap Proceeds Account"). The amounts paid to
the Trustee pursuant to the Interest Rate Caps or any Qualified
Substitute Arrangement on any settlement date set forth therein
(a "Cap Settlement Date") shall be deposited by the Trustee in
the Cap Proceeds Account, and the Transferor Cap Proceeds
Percentage of such amounts, on such Cap Settlement Date or
promptly thereafter, shall be paid from the Cap Proceeds Account
to the Transferor. Any amounts paid pursuant to the Interest
Rate Caps or any Qualified Substitute Arrangement on the first
Business Day of any Monthly Period shall be treated for all
purposes herein, including application in accordance with Section
4.9 of the Agreement, as if they had been received on the last
Business Day of the preceding Monthly Period. Funds in the Cap
Proceeds Account shall be invested at the direction of the
Servicer, in Cash Equivalents with maturities not later than the
next succeeding Business Day. Any earnings on such invested
funds shall be deposited and held in the Cap Proceeds Account and
applied in the same manner and priority as payments pursuant to
the Interest Rate Caps.
(c) In the event that the Cap Provider defaults in its
obligation to make a payment to the Trustee under one or more Cap
Agreements on any Cap Settlement Date, the Trustee shall make a
demand on such Cap Provider, or any guarantor, if applicable,
demanding payment by 12:30 p.m., New York time, on such date.
The Trustee shall give notice to the Securityholders upon the
continuing failure by any Cap Provider to perform its obligation
during the two Business Days following a demand made by the
Trustee on such Cap Provider, and shall take such action with
respect to such continuing failure directed to be taken by the
Securityholders.
(d) In the event that the senior unsecured debt rating
of a Cap Provider is withdrawn or reduced below Aa2 by Moody's,
then within 30 days after receiving notice of such decline in the
creditworthiness of the Cap Provider as determined by the Rating
Agency, either (x) the Cap Provider, with the prior written
confirmation of the Rating Agency that such arrangement will not
result in the reduction or withdrawal of the rating of the Class
A Securities, the Class B Securities or the Class C Securities,
will enter into an arrangement the purpose of which shall be to
assure performance by the Cap Provider of its obligations under
the Interest Rate Cap; or (y) the Servicer shall at its option
either (i) with the prior written confirmation of the Rating
Agency that such action will not result in a reduction or
withdrawal of the rating of the Class A Securities, the Class B
Securities or the Class C Securities, cause the Cap Provider to
pledge securities in the manner provided by applicable law, which
shall be held by the Trustee or its agent free and clear of the
Lien of any third party, in a manner conferring on the Trustee a
perfected first Lien in such securities securing the Cap
Provider's performance of its obligations under the applicable
Interest Rate Cap, or (ii) provided that a Replacement Interest
Rate Cap or Qualified Substitute Arrangement meeting the
requirements of Section 3A(e) has been obtained, direct the
Trustee (A) to provide written notice to the Cap Provider of its
intention to terminate the applicable Interest Rate Cap within
such 30-day period and (B) to terminate the applicable Interest
Rate Cap within such 30-day period, to request the payment to the
Trustee of all amounts due to the Trust under the applicable
Interest Rate Cap through the termination date and resulting from
the termination of such Interest Rate Cap and to deposit any such
amounts so received, on the day of receipt, to the Cap Proceeds
Account to be used first to obtain a Replacement Interest Rate
Cap or Qualified Substitute Arrangement meeting the requirements
of subsection 3A(e)(ii) and then as Available Series 1998-3
Finance Charge Collections, or (iii) establish any other
arrangement (including an arrangement or arrangements in addition
to or in substitution for any prior arrangement made in
accordance with the provisions of this Section 3A(d))
satisfactory to the Rating Agency such that the Rating Agency
will not reduce or withdraw the rating of the Class A Securities,
the Class B Securities or the Class C Securities (a "Qualified
Substitute Arrangement"); provided, however, that in the event at
any time any alternative arrangement established pursuant to
clause (x) or (y)(i) or (y)(iii) above shall cease to be
satisfactory to the Rating Agency then the provisions of this
Section 3A(d) shall again be applied and in connection therewith
the 30-day period referred to above shall commence on the date
the Servicer receives notice of such cessation or termination, as
the case may be.
(e) Unless an alternative arrangement pursuant to
clause (x) or (y)(i) of Section 3A(d) is being established, the
Servicer shall use its best efforts to obtain a Replacement
Interest Rate Cap or Qualified Substitute Arrangement meeting the
requirements of this subsection 3A(e) during the 30-day period
referred to in subsection 3A(d) from the funds received from the
termination of the applicable Interest Rate Cap referred to in
subsection 3A(d); provided, that the Servicer shall not be
required to use its own funds to obtain a Replacement Interest
Rate Cap or Qualified Substitute Arrangement. The Trustee shall
not terminate the Interest Rate Cap unless, prior to the
expiration of the 30-day period referred to in said Section
3A(d), the Servicer delivers to the Trustee (i) a Replacement
Interest Rate Cap or Qualified Substitute Arrangement and (ii) a
letter from the Rating Agency confirming that the termination of
the Interest Rate Cap and its replacement with such Replacement
Interest Rate Cap or Qualified Substitute Arrangement will not
adversely affect its rating of the Class A Securities, the Class
B Securities or the Class C Securities.
(f) The Servicer shall notify the Trustee, the Rating
Agency and each Managing Agent within five Business Days after
obtaining knowledge that the senior unsecured debt rating of the
Cap Provider has been withdrawn or reduced by Moody's.
(g) Notwithstanding the foregoing, the Servicer may at
any time obtain a Replacement Interest Rate Cap, provided that
the Servicer delivers to the Trustee a letter from the Rating
Agency confirming that the termination of the then current
Interest Rate Cap and its replacement with such Replacement
Interest Rate Cap will not adversely affect its rating of the
Class A Securities, the Class B Securities or the Class C
Securities.
(h) The Trustee, on behalf of the Securityholders,
upon notification from the Servicer, shall sell all or a portion
of the Interest Rate Caps subject to the following conditions
having been met:
(x) the Aggregate Interest Rate Caps Notional
Amount after giving effect to such sale shall equal or exceed the
Aggregate ABC Principal Amount as of the date of such sale after
giving effect to all payments and allocations made pursuant to
this Agreement;
(y) such sale will not result in a downgrading or
withdrawal of the then current rating on any Class of the
Securities by the Rating Agencies; and
(z) the minimum notional amount denomination of
any Interest Rate Cap to be sold is $500,000.
The Servicer shall have the duty of obtaining a fair
market value price for the sale of the Trust's rights under any
Interest Rate Cap, notifying the Trustee of prospective
purchasers and bids, and selecting the purchaser of such Interest
Rate Cap. The Trustee upon receipt of the purchase price in the
Collection Account shall execute all documentation necessary to
effect the transfer of the Trust's rights under the Interest Rate
Cap and to release the Lien of the Trustee on the Interest Rate
Cap and proceeds thereof.
Funds deposited in the Collection Account in respect of
the sale of all or a portion of an Interest Rate Cap shall be
applied as Principal Collections allocable to Series 1998-3 and
shall be applied on the next Distribution Date in accordance with
subsections 4.7(a), (b) and (c) and 4.9(b) and (c).
SECTION 4 Delivery and Payment for the Series 1998-3
Securities. The Transferor shall execute and deliver the Series
1998-3 Securities to the Trustee for authentication in accordance
with Section 6.1 of the Agreement. The Trustee shall deliver the
Series 1998-3 Securities to or upon the order of the Transferor
when authenticated in accordance with Section 6.2 of the
Agreement.
SECTION 5 Form of Delivery of Series 1998-3 Securities.
The Class A Securities, the Class B Securities, the Class C
Securities and the Class D Securities shall be delivered as
Registered Securities as provided in Section 6.1 of the
Agreement.
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 1998-3
Securities:
ARTICLE IV
RIGHTS OF SECURITYHOLDERS AND
ALLOCATION AND APPLICATION OF COLLECTIONS
Section 4.4 Rights of Securityholders. The Series
1998-3 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 1998-3
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
available in the Collection Account, (b) funds allocable to the
Series 1998-3 Securities on deposit in the Excess Funding Account
and (c) funds on deposit in the Interest Funding Account, the
Principal Account, the Distribution Account, the Cap Proceeds
Account, the Payment Reserve Account, the Class C Reserve
Account, the Revolving Receivables Reserve Account, and the
Principal Funding Account (for such Series, the "Series 1998-3
Securityholders' Interest"). The Class B Invested Amount, the
Class C Invested Amount and the Class D Invested Amount shall be
subordinated to the Class A Securities; the Class C 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 Class C Securities, in each case to the
extent specified in this Article IV.
Section 4.5 Collections and Allocation;Payments on
Exchangeable Transferor Security.
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 1998-3 Securities, and all funds on
deposit in the Interest Funding Account, the Principal Account,
the Cap Proceeds Account, the Distribution Account, the Payment
Reserve Account, the Class C Reserve Account, the Revolving
Receivables Reserve Account and the Principal Funding Account
maintained for this Series, as described in this Article IV. On
each Business Day, (i) the amount of Finance Charge Collections
available in the Collection Account allocable to the Series 1998-
3 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 1998-3 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 1998-3 Securities shall be
determined by multiplying the Default Amount by the Floating
Percentage.
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 Series 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.
(c) Investment Earnings. Notwithstanding Section
4.2(e) of the Agreement, amounts on deposit in the Interest
Funding Account and the Principal Account shall be invested by
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 next 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 Available Series 1998-3 Finance Charge
Collections.
Section 4.6 Determination of Interest for the Series
1998-3 Securities. The amount of interest (the "Class A
Interest") allocable to the Class A Securities with respect to
any Business Day shall be an amount equal to the product of (i)
the Class A Interest Rate and (ii) a fraction the numerator of
which is the actual number of days from and including the
immediately preceding Business Day to but excluding such Business
Day and the denominator of which is 365 or 366, as the case may
be, and (iii) the Class A Outstanding Principal Amount on such
Business Day after giving effect to all transactions on such
Business Day.
On each Business Day, the Servicer shall determine an
amount (the "Class A Interest Shortfall") equal to the excess, if
any, of (x) the Class A Interest for such Business Day plus the
Class A Interest Shortfall for the preceding Business Day over
(y) the amount available to be paid to the Class A
Securityholders in respect thereof on such Business Day. The
Class A Interest Shortfall shall initially be zero.
The amount of interest (the "Class B Interest")
allocable to the Class B Securities with respect to any Business
Day shall be an amount equal to the product of (i) the Class B
Interest Rate, (ii) a fraction the numerator of which is the
actual number of days from and including the immediately
preceding Business Day to but excluding such Business Day and the
denominator of which is 365 or 366, as the case may be, and (iii)
the Class B Outstanding Principal Amount on such Business Day
after giving effect to all transactions on such Business Day.
On each Business Day, the Servicer shall determine an
amount (the "Class B Interest Shortfall") equal to the excess, if
any, of (x) the Class B Interest for such Business Day plus the
Class B Interest Shortfall for the preceding Business Day over
(y) the amount available to be paid to the Class B
Securityholders in respect thereof on such Business Day. The
Class B Interest Shortfall shall initially be zero.
The amount of interest (the "Class C Interest")
allocable to the Class C Securities with respect to any Business
Day shall be an amount equal to the product of (i) the Class C
Interest Rate and (ii) a fraction the numerator of which is the
actual number of days from and including the immediately
preceding Business Day to but excluding such Business Day and the
denominator of which is 365 or 366, as the case may be, and
(iii) the Class C Outstanding Principal Amount on such Business
Day after giving effect to all transactions on such Business Day.
On each Business Day, the Servicer shall determine an
amount (the "Class C Interest Shortfall") equal to the excess, if
any, of (x) the Class C Interest for such Business Day plus the
Class C Interest Shortfall for the preceding Business Day over
(y) the amount available to be paid to the Class C
Securityholders in respect thereof on such Business Day. The
Class C Interest Shortfall shall initially be zero.
Section 4.7 Determination of Principal Amounts.
The amount of principal (the "Class A Principal") distributable
from the Distribution Account with respect to the Class A
Securities shall be the following:
On each Business Day with respect to the Revolving
Period an amount equal to the Class A Percentage of the amounts
deposited into the Principal Account from the Principal Funding
Account pursuant to Section 9A of this Series Supplement;
On each Business Day designated by the Transferor
during the Amortization Period an amount equal to the amount
designated by the Transferor pursuant to subsection 4.12(f) of
the Agreement; and
With respect to each Distribution Date during the
Amortization Period an amount equal to (i) the Available Series
1998-3 Principal Collections on deposit in the Principal Account
pursuant to subsection 4.9(c) of the Agreement with respect to
each Business Day in the related Monthly Period less (ii) the
aggregate amount withdrawn from the Principal Account for payment
to the Class A Securityholders pursuant to subsection 4.12(f) of
the Agreement with respect to funds deposited in the Principal
Account pursuant to subsection 4.9(c) of the Agreement during the
related Monthly Period;
provided, however, that with respect to any Business
Day, Class A Principal may not exceed the Class A Invested
Amount; provided, further, that with respect to the Scheduled
Series 1998-3 Termination Date, the Class A Principal shall be an
amount equal to the Class A Invested Amount.
The amount of principal (the "Class B Principal")
distributable from the Distribution Account with respect to the
Class B Securities shall be the following:
On each Business Day with respect to the Revolving
Period an amount equal the lesser of (i) the excess of the Class
B Invested Amount over the Stated Class B Amount on such Business
Day after taking into account all distributions with respect to
the Class A Invested Amount on such Business Day and (ii) the
Class B Percentage of the amounts deposited into the Principal
Account from the Principal Funding Account pursuant to Section 9A
of this Series Supplement, to be distributed only after any such
distributions with respect to the Class A Invested Amount;
On each Business Day designated by the Transferor on
and after the Class B Principal Payment Commencement Date an
amount equal to the amount designated by the Transferor pursuant
to subsection 4.12(f) of the Agreement after application thereof
to Class A Principal; and
With respect to each Distribution Date beginning with
the Class B Principal Payment Commencement Date, an amount equal
to (i) the Available Series 1998-3 Principal Collections
remaining on deposit in the Principal Account pursuant to
subsection 4.9(c) of the Agreement with respect to each Business
Day in the related Monthly Period after application thereof to
Class A Principal less (ii) the aggregate amount withdrawn from
the Principal Account for payment to the Class B Securityholders
pursuant to subsection 4.12(f) of the Agreement with respect to
funds deposited in the Principal Account pursuant to subsection
4.9(c) of the Agreement during the related Monthly Period;
provided, however, that with respect to any
Distribution Date, Class B Principal may not exceed the Class B
Invested Amount; provided, further, that with respect to the
Scheduled Series 1998-3 Termination Date, the Class B Principal
shall be an amount equal to the Class B Invested Amount.
The amount of principal (the "Class C Principal")
distributable from the Distribution Account with respect to the
Class C Securities shall be the following:
On each Business Day with respect to the Revolving
Period an amount equal the lesser of (i) the excess of the Class
C Invested Amount over the Stated Class C Amount on such Business
Day after taking into account all distributions with respect to
the Class A Invested Amount and the Class B Invested Amount on
such Business Day and (ii) the Class C Percentage of the amounts
deposited into the Principal Account from the Principal Funding
Account pursuant to Section 9A of this Series Supplement, to be
distributed only after any such distributions with respect to the
Class A Invested Amount and the Class B Invested Amount;
On each Business Day designated by the Transferor on
and after the Class C Principal Payment Commencement Date an
amount equal to the amount designated by the Transferor pursuant
to subsection 4.12(f) of the Agreement after application thereof
to Class A Principal and Class B Principal; and
With respect to each Distribution Date, beginning with
the Class C Principal Payment Commencement Date, an amount equal
to (i) the Available Series 1998-3 Principal Collections
remaining on deposit in the Principal Account pursuant to
subsection 4.9(c) of the Agreement with respect to each Business
Day in the related Monthly Period after application thereof to
Class A Principal and Class B Principal less (ii) the aggregate
amount withdrawn from the Principal Account for payment to the
Class C Securityholders pursuant to subsection 4.12(f) of the
Agreement with respect to funds deposited in the Principal
Account pursuant to subsection 4.9(c) of the Agreement during the
related Monthly Period;
provided, however, that with respect to any
Distribution Date, Class C Principal may not exceed the Class C
Invested Amount; provided, further, that with respect to the
Scheduled Series 1998-3 Termination Date, the Class C Principal
shall be an amount equal to the Class C Invested Amount.
The amount of principal (the "Class D Principal")
distributable from the Distribution Account with respect to the
Class D Securities shall be the following:
On each Business Day during the Revolving Period an
amount equal the lesser of (i) the excess of the Class D Invested
Amount over the Stated Class D Amount on such Business Day after
taking into account all distributions with respect to the Class A
Invested Amount, the Class B Invested Amount and the Class C
Invested Amount on such Business Day and (ii) the amounts
deposited into the Principal Account from the Principal Funding
Account after any such distributions in respect of the Class A
Invested Amount, the Class B Invested Amount and the Class C
Invested Amount;
On each Business Day designated by the Transferor on
and after the Class D Principal Payment Commencement Date an
amount equal to the amount designated by the Transferor pursuant
to subsection 4.12(f) of the Agreement after application thereof
to Class A Principal, Class B Principal and Class C Principal;
and
With respect to each Distribution Date beginning with
the Class D Principal Payment Commencement Date, on each Business
Day, an amount equal to (i) the Available Series 1998-3 Principal
Collections remaining on deposit in the Principal Account
pursuant to subsection 4.9(c) of the Agreement with respect to
each Business Day in the related Monthly Period after application
thereof to Class A Principal, Class B Principal and Class C
Principal less (ii) the aggregate amount withdrawn from the
Principal Account for payment to the Class D Securityholders
pursuant to subsection 4.12(f) of the Agreement with respect to
funds deposited in the Principal Account pursuant to subsection
4.9(c) of the Agreement with respect to the related Monthly
Period;
provided, however, that with respect to the Scheduled
Series 1998-3 Termination Date, the Class D Principal shall be an
amount equal to the Class D Invested Amount; provided further,
that on any Business Day during any period other than an Early
Amortization Period, the Transferor may designate that an amount
up to the excess of the Class D Invested Amount over the Stated
Class D Amount on such day after taking into account all
adjustments of the Class A Invested Amount, Class B Invested
Amount and Class C Invested Amount on such day shall be
subtracted from the Class D Invested Amount and added to the
Transferor Interest.
Section 4.8 Shared Principal Collections. Shared
Principal Collections allocated to Available Series 1998-3
Principal Collections for the Series 1998-3 Securities on any
Business Day and to be treated as Available Series 1998-3
Principal Collections or applied pursuant to subsections 4.9(b)
and 4.12(g) for any Business Day shall mean the amount specified
in subsection 4.3(e) of the Agreement, including the amount
designated, at the option of the Transferor, to be applied as
Shared principal Collections for the benefit of the Series 1998-3
Securities.
Section 4.9 Application of Funds on Deposit in the
Collection Account for the Securities. On each Business Day,
the Servicer shall deliver to the Trustee a Daily Report in which
it shall instruct the Trustee to withdraw, and the Trustee,
acting in accordance with such instructions, shall withdraw from
the appropriate accounts, to the extent of the sum of (s) the
amount of Finance Charge Collections allocated to the Series 1998-
3 Securities pursuant to subsection 4.5(a) of the Agreement, (t)
the investment earnings on amounts on deposit in the Class C
Reserve Account pursuant to subsection 4.16(c), (u) the
investment earnings on amounts on deposit in the Payment Reserve
Account pursuant to subsection 4.17(d), (v) the investment
earnings on amounts on deposit in the Revolving Receivables
Reserve Account pursuant to subsection 4.18(d), (w) the
investment earnings on amounts on deposit in the Principal
Funding Account pursuant to subsection 4.19(c), (x) the
investment earnings on amounts on deposit in the Interest Funding
Account and the Principal Account pursuant to subsection 4.5(c),
(y) amounts on deposit in the Payment Reserve Account, if any, if
and to the extent so designated by the Transferor and (z) the Cap
Receipt Amount, if any, for such Business Day (collectively, the
"Available Series 1998-3 Finance Charge Collections"); provided,
that with respect to any Business Day, amounts applied pursuant
to Sections 4.10 and 4.14 and subsection 4.16(b) of the Agreement
shall be applied as if such amounts were Available Series 1998-3
Finance Charge Collections. The Trustee shall apply Available
Series 1998-3 Finance Charge Collections and, with respect to
clause (ix) below, amounts on deposit in the Class C Reserve
Account to the extent of the aggregate amount of Class C Charge-
Offs resulting from unpaid Adjustment Payments, if any, in the
priority set forth below:
Class A 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, an amount equal to the lesser of (x) the
Available Series 1998-3 Finance Charge Collections and (y) the
sum of (A) the Class A Interest for such Business Day, (B) the
Class A Interest Shortfall for such Business Day and (C) accrued
and unpaid Class A Funding Interest as of such Business Day;
provided, however, that in the event a Pay-Out Event has occurred
and is continuing, the amount deposited in the Interest Funding
Account pursuant to this subsection 4.9(a)(i) shall not exceed
the sum of (a) the Capped Class A Interest for such Business Day
and (b) the Capped Class A Interest Shortfall for such Business
Day.
Class B 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, an amount equal to the lesser of (x) any
Available Series 1998-3 Finance Charge Collections remaining
after giving effect to the application pursuant to subsection
4.9(a)(i) and (y) the sum of (A) the Class B Interest for such
Business Day, (B) the Class B Interest Shortfall for such
Business Day and (C) accrued and unpaid Class B Funding Interest
as of such Business Day; provided, however, that in the event a
Pay-Out Event has occurred and is continuing, the amount
deposited in the Interest Funding Account pursuant to this
subsection 4.9(a)(ii) shall not exceed the sum of (a) the Capped
Class B Interest for such Business Day and (b) the Capped Class B
Interest Shortfall for such Business Day.
Class C 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, an amount equal to the lesser of (x) any
Available Series 1998-3 Finance Charge Collections remaining
after giving effect to the application pursuant to subsections
4.9(a)(i) and (ii) and (y) the sum of (A) the Class C Interest
for such Business Day, (B) the Class C Interest Shortfall for
such Business Day and (C) accrued and unpaid Class C Funding
Interest as of such Business Day; provided, however, that in the
event a Pay-Out Event has occurred and is continuing, the amount
deposited in the Interest Funding Account pursuant to this
subsection 4.9(a)(iii) shall not exceed the sum of (a) the Capped
Class C Interest for such Business Day and (b) the Capped Class C
Interest Shortfall for such Business Day.
Servicing Fee. On each Business Day, the Trustee,
acting in accordance with instructions from the Servicer, shall
distribute to the Servicer, an amount equal to the lesser of (x)
any Available Series 1998-3 Finance Charge Collections remaining
after giving effect to the applications pursuant to subsections
4.9(a)(i) through (iii) and (y) the Servicing Fee for such
Business Day plus any Servicing Fees due with respect to any
prior Business Day but not distributed to the Servicer.
Series Default Amount. On each Business Day, the
Trustee, acting in accordance with instructions from the
Servicer, shall apply, an amount equal to the lesser of (x) any
Available Series 1998-3 Finance Charge Collections remaining
after giving effect to the applications pursuant to subsections
4.9(a)(i) through (iv) and (y) the sum of (1) the aggregate
Series Default Amount for such Business Day plus (2) the unpaid
Series Default Amount for each previous Business Day during such
Monthly Period, such amount to be (A) treated as Shared Principal
Collections during the Revolving Period and (B) treated as
Available Series 1998-3 Principal Collections during the
Amortization Period.
Adjustment Payment Shortfalls. On each Business Day,
the Trustee, acting in accordance with instructions from the
Servicer, shall apply, an amount equal to the lesser of (x) any
Available Series 1998-3 Finance Charge Collections remaining
after giving effect to the applications pursuant to subsections
4.9(a)(i) through (v) and (y) an amount equal to the Series 1998-
3 Percentage of any Adjustment Payment which the Transferor is
required but fails to make pursuant to subsection 3.8(a) of the
Agreement, such amount, (A) to be treated as Shared Principal
Collections during the Revolving Period and (B) to be treated as
Available Series 1998-3 Principal Collections during the
Amortization Period.
Reimbursement of Class A Charge-Offs. On each
Business Day, the Trustee, acting in accordance with instructions
from the Servicer, shall apply, an amount equal to the lesser of
(x) any Available Series 1998-3 Finance Charge Collections
remaining after giving effect to the applications pursuant to
subsections 4.9(a)(i) through (vi) and (y) the unreimbursed Class
A Charge-Offs, if any; such amount will be applied to reimburse
Class A Charge-Offs, and will be treated as Shared Principal
Collections during the Revolving Period, and will be treated as
Available Series 1998-3 Principal Collections during the
Amortization Period.
Reimbursement of Class B Charge-Offs. On each
Business Day, the Trustee, acting in accordance with instructions
from the Servicer, shall apply, an amount equal to the lesser of
(x) any Available Series 1998-3 Finance Charge Collections
remaining after giving effect to the applications pursuant to
subsections 4.9(a)(i) through (vii) and (y) the unreimbursed
amount by which the Class B Invested Amount has been reduced on
prior Business Days pursuant to clauses (c) and (d) of the
definition of Class B Invested Amount, if any, such amount, (i)
to be treated as Shared Principal Collections during the
Revolving Period, and (ii) to be treated as Available Series 1998-
3 Principal Collections during the Amortization Period.
Reimbursement of Class C Charge-Offs. On each
Business Day, the Trustee, acting in accordance with instructions
from the Servicer, shall apply, an amount equal to the lesser of
(x) the sum of (A) any Available Series 1998-3 Finance Charge
Collections remaining after giving effect to the applications
pursuant to subsections 4.9(a)(i) through (viii) and (B) any
amounts on deposit in the Class C Reserve Account to the extent
of the aggregate amount of Class C Charge-Offs resulting from
unpaid Adjustment Payments, if any, and (y) the unreimbursed
amount by which the Class C Invested Amount has been reduced on
prior Business Days pursuant to clauses (c) and (d) of the
definition of Class C Invested Amount, if any, such amount,
(i) to be treated as Shared Principal Collections during the
Revolving Period, and (ii) to be treated as Available Series 1998-
3 Principal Collections during the Amortization Period.
Reimbursement of Class D Charge-Offs. On each
Business Day, the Trustee, acting in accordance with instructions
from the Servicer, shall apply an amount equal to the lesser of
(x) any Available Series 1998-3 Finance Charge Collections
remaining after giving effect to the applications pursuant to
subsections 4.9(a)(i) through (ix) and (y) the unreimbursed
amount by which the Class D Invested Amount has been reduced on
prior Business Days pursuant to clauses (d) and (e) of the
definition of Class D Invested Amount, if any, such amount (A) to
be treated as Shared Principal Collections during the Revolving
Period and (B) to be treated as Available Series 1998-3 Principal
Collections during the Amortization Period.
Class C Reserve Account. On each Business Day
following the occurrence of a Class C Trigger Event, the Trustee
acting in accordance with instructions from the Servicer, shall
deposit in the Class C Reserve Account an amount equal to the
lesser of (x) any Available Series 1998-3 Finance Charge
Collections remaining after giving effect to the applications
pursuant to subsections 4.9(a)(i) through (x) and (y) the amount
by which the Specified Class C Reserve Amount exceeds the amount
on deposit in the Class C Reserve Account and deposit such
amount, if any, into the Class C Reserve Account.
Facility Unused Fees. On each Business Day, 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 Administrative
Agent for the benefit of the Senior Securityholders, an amount
equal to the lesser of (x) any Available Series 1998-3 Finance
Charge Collections remaining after giving effect to the
applications pursuant to subsections 4.9(a)(i) through (xi) and
(y) the sum of (A) the Facility Unused Fee for such Business Day
and (B) the Facility Unused Fee accrued but not deposited into
the Interest Funding Account with respect to any prior Business
Day.
Excess Class A Interest. In the event a Pay-Out
Event has occurred and is continuing, 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 an amount equal to the lesser of (x) the
Available Series 1998-3 Finance Charge Collections remaining
after giving effect to the applications pursuant to subsections
4.9(a)(i) through (xii) and (y) the excess of (A) the sum of the
Class A Interest for such Business Day and the Class A Interest
Shortfall for such Business Day over (B) the amount applied
pursuant to subsection 4.9(a)(i) hereof for such Business Day.
Excess Class B Interest. In the event a Pay-Out
Event has occurred and is continuing, 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 an amount equal to the lesser of (x) the
Available Series 1998-3 Finance Charge Collections remaining
after giving effect to the applications pursuant to subsections
4.9(a)(i) through (xiii) and (y) the excess of (A) the sum of the
Class B Interest for such Business Day and the Class B Interest
Shortfall for such Business Day over (B) the amount applied
pursuant to subsection 4.9(a)(ii) for such Business Day.
Excess Class C Interest. In the event a Pay-Out
Event has occurred and is continuing, 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 an amount equal to the lesser of (x) the
Available Series 1998-3 Finance Charge Collections remaining
after giving effect to the applications pursuant to subsections
4.9(a)(i) through (xiv) and (y) the excess of (A) the sum of the
Class C Interest for such Business Day and the Class C Interest
Shortfall for such Business Day over (B) the amount applied
pursuant to subsection 4.9(a)(iii) for such Business Day.
Increased Costs. On each Business Day, the Trustee
acting in accordance with instructions from the Servicer, shall
deposit into the Interest Funding Account for distribution to the
Administrative Agent for the benefit of the Senior
Securityholders, an amount equal to the lesser of (x) any
Available Series 1998-3 Finance Charge Collections remaining
after giving effect to the applications pursuant to subsections
4.9(a)(i) through (xv) and (y) the amount of Increased Costs for
such Business Day and the Increased Costs accrued but not
distributed to the Administrative Agent with respect to any prior
Business Day.
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, an amount equal to the lesser of
(x) any Available Series 1998-3 Finance Charge Collections
remaining after giving effect to the applications pursuant to
subsections 4.9(a)(i) through (xvi) and (y) the sum of (1) the
amount of interest which has accrued with respect to the Class D
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.
Revolving Receivables Reserve Account. On each
Business Day, the Trustee acting in accordance with instructions
from the Servicer, shall deposit into the Revolving Receivables
Reserve Account, an amount equal to the lesser of (x) any
Available Series 1998-3 Finance Charge Collections remaining
after giving effect to the applications pursuant to subsections
4.9(a)(i) through (xvii) 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
Receivable Reserve Account.
Payment Reserve Account. On each Business Day, the
Trustee acting in accordance with instructions from the Servicer,
shall deposit in the Payment Reserve Account, an amount equal to
the lesser of (x) any Available Series 1998-3 Finance Charge
Collections remaining after giving effect to the applications
pursuant to subsections 4.9(a)(i) through (xviii) and (y) the
amount designated by the Transferor in writing (which include
facsimile transmission) in its instructions to the Trustee on
such Business Day.
Excess Finance Charge Collections. Any Available
Series 1998-3 Finance Charge Collections remaining after giving
effect to the applications pursuant to subsection 4.9(a)(i)
through (xix), 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, and 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 Period and then on each Business Day to
pay any remaining Excess Finance Charge Collections to the
Transferor.
For each Business Day with respect to the Revolving
Period, the funds on deposit in the Collection Account to the
extent of the lesser of (A) the sum of the Class A Invested
Amount, the Class B Invested Amount and the Class C Invested
Amount and (B) the sum of (x) product of (i) the Floating
Percentage and (ii) the amount of Principal Collections on such
Business Day (less the amount of Redirected Principal Collections
on such Business Day) (such product, the "Net Revolving Principal
Collections"), (y) the amount then on deposit in the Collection
Account pursuant to subsection 3A(h) of this Series Supplement
and (z) the amount of Shared Principal Collections allocated to
the Series 1998-3 Securities in accordance with Section 4.8 on
such Business Day may, at the option of the Transferor or shall,
(I) if the Specified Class C Reserve Amount exceeds the amount on
deposit in the Class C Reserve Account on such Business Day or
(II) if the Aggregate ABC Principal Amount exceeds the Aggregate
Interest Rate Caps Notional Amount on such Business Day, pursuant
to instructions delivered to the Servicer and the Trustee by
facsimile or other similar means of documented communication, be
deposited into the Principal Funding Account and applied as
provided in subsection 9A(b) of this Series Supplement. During
the Revolving Period, an amount equal to the Net Revolving
Principal Collections less any amount deposited to the Principal
Funding Account pursuant to the immediately preceding sentence
shall be treated as Shared Principal Collections and applied
pursuant to the written direction of the Servicer in the Daily
Report for such Business Day, as provided in Section 4.3(e) of
the Agreement.
For each Business Day on and after the Amortization
Period Commencement Date, pursuant to the written direction of
the Servicer in the Daily Report for such Business Day, an amount
(not in excess of the Invested Amount) equal to the Available
Series 1998-3 Principal Collections for such Business Day will be
deposited into the Principal Account.
Section 4.10 Coverage of Required Amount for the
Series 1998-3 Securities. 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 1998-3
Finance Charge Collections in subsections 4.9(a)(i) through
(xvii), 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 amounts on deposit in the Excess
Funding Account and (c) the number of days elapsed since the
previous Business Day divided by the actual number of days in
such year over (y) the aggregate amount of all earnings since the
previous Business Day available from the Cash Equivalents in
which funds on deposit in the Excess Funding Account are
invested.
Required Amounts 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 (xvii), 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 1998-3 Finance Charge Collections in subsections
4.9(a)(i) through (xvii), all or a portion of the Excess Finance
Charge Collections from other Series with respect to such
Business Day allocable to the Series 1998-3 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 1998-3 Finance
Charge Collections and Transferor Finance Charge Collections on
such Business Day (the "Required Amount"). Excess Finance Charge
Collections allocated to the Series 1998-3 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 each day
specified below, 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 allocable to the Series 1998-3 Securities and
deposit such amount in the Distribution Account. The Paying
Agent shall pay in accordance with Section 5.1 of the Agreement
to the Administrative Agent for the benefit of the Senior
Securityholders from the Distribution Account the amount
deposited into the Interest Funding Account pursuant to
subsection 4.9(a) (including, with respect to such subsection,
amounts applied thereto pursuant to subsections 4.10(a) and (b),
4.16(b) and Section 4.14 of the Agreement) in the manner set
forth below.
(a) Interest Payments and Other Payments Between
Distribution Dates. Pursuant to instructions from the Servicer
set forth in the Daily Report for such day, on any Business Day
the Trustee shall withdraw an amount on deposit in the Interest
Funding Account and distribute such amount as follows:
(i) pay to the Administrative Agent for the
benefit of the Class A Securityholders first the Class A Funding
Shortfall, if any, for the previous Business Day, and then the
portion of Class A Interest accrued with respect to Funding
Periods ending on such Business Day;
(ii) pay to the Administrative Agent for the
benefit of the Class B Securityholders first the Class B Funding
Shortfall, if any, for the previous Business Day, and then the
portion of Class B Interest accrued with respect to Funding
Periods ending on such Business Day;
(iii) pay to the Administrative Agent for the
benefit of the Class C Securityholders first the Class C Funding
Shortfall, if any, for the previous Business Day, and then the
portion of Class C Interest accrued with respect to Funding
Periods ending on such Business Day; and
(iv) at the option of the Transferor, pay to the
Administrative Agent for the benefit of the Senior
Securityholders, an amount equal to the portion of Increased
Costs accrued and unpaid on such Business Day.
(b) Interest Payments and Other Payments on
Distribution Dates. 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
previous Monthly Period remaining after the applications pursuant
to subsection 4.11(a) and deposit such amount in the Distribution
Account. On each Distribution Date, the Paying Agent shall make
the following payments in accordance with Section 5.1 of the
Agreement to the extent of such deposit into the Distribution
Account:
(i) first, to the Administrative Agent for the
benefit of the Class A Securityholders, an amount equal to the
lesser of (A) the amounts on deposit in the Interest Funding
Account remaining after giving effect to the payment pursuant to
subsection 4.11(a) and (B) the excess of (x) the Class A Interest
accrued with respect to the preceding Monthly Period and any
Class A Interest Shortfalls with respect to the preceding Monthly
Period over (y) the aggregate interest payments made with respect
thereto pursuant to subsection 4.11(a) prior to such Distribution
Date;
(ii) second, to the Administrative Agent for the
benefit of the Class B Securityholders, an amount equal to the
lesser of (A) the amounts on deposit in the Interest Funding
Account remaining after giving effect to the payment pursuant to
subsections 4.11(a) and 4.11(b)(i) and (B) the excess of (x) the
Class B Interest accrued with respect to the preceding Monthly
Period and any Class B Interest Shortfalls with respect to the
preceding Monthly Period over (y) the aggregate interest payments
made with respect thereto pursuant to subsection 4.11(a) prior to
such Distribution Date;
(iii) third, to the Administrative Agent for the
benefit of the Class C Securityholders, an amount equal to the
lesser of (A) the amounts on deposit in the Interest Funding
Account remaining after giving effect to the payment pursuant to
subsections 4.11(a) and 4.11(b)(i) and (ii) and (B) the excess of
(x) the Class C Interest accrued with respect to the preceding
Monthly Period and any Class C Interest Shortfalls with respect
to the preceding Monthly Period over (y) the aggregate interest
payments made with respect thereto pursuant to subsection 4.11(a)
prior to such Distribution Date;
(iv) fourth, to the Administrative Agent for the
benefit of the Senior Securityholders, an amount equal to the
Facility Unused Fees accrued with respect to the preceding
Monthly Period;
(v) fifth, to the extent not paid pursuant to
subsection 4.11(a)(iv) above, to the Administrative Agent for the
benefit of the Senior Securityholders, an amount equal to the
Increased Costs, if any, accrued with respect to the preceding
Monthly Period; and
(vi) sixth, to the Class D Securityholder, an
amount equal to the Class D Interest, if any, accrued with
respect to the preceding Monthly Period.
Section 4.12 Payment of Principal.
On each Business Day during the Revolving 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 the amount deposited therein pursuant to
subsection 9A(b) of the Agreement and pay such amount to the
Administrative Agent pursuant to Section 5.1 of the Agreement on
the next Business Day. If so designated in writing by the
Transferor with respect to such Business Day, after giving effect
to the payments described in the preceding sentence, the Class D
Excess Amount, if any, may be subtracted from the Class D
Invested Amount and added to the Transferor Interest.
On the Transfer Date preceding each Distribution Date
during 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, to the
extent of funds available, an amount equal to the Class A
Principal for such Distribution Date and deposit such amount in
the Distribution Account. 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 Administrative Agent from the
Distribution Account such amounts deposited with respect to Class
A Principal into the Distribution Account on the related Transfer
Date.
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, to the extent of funds available, an
amount equal to the Class B Principal for such Distribution Date
and deposit such amount in the Distribution Account. 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 Administrative Agent from the
Distribution Account such amounts deposited with respect to Class
B Principal into the Distribution Account on the related Transfer
Date.
On the Transfer Date preceding the Class C 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, to the extent of funds available, an
amount equal to the Class C Principal for such Distribution Date
and deposit such amount in the Distribution Account. On and
after the Class C Principal Payment Commencement Date, on each
Distribution Date until the Class C Invested Amount is paid in
full, the Paying Agent shall pay in accordance with Section 5.1
of the Agreement to the Administrative Agent from the
Distribution Account such amounts deposited with respect to Class
C Principal into the Distribution Account on the related Transfer
Date.
On the Transfer Date preceding the Class D 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 and deposit in the Distribution Account, to
the extent of funds available, 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 Class C Securities on such day, and on each
Distribution Date thereafter until the Class D Invested Amount is
paid in full, 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 on each Transfer Date Class D Excess
Amounts may be subtracted from the Class D Invested Amount and
added to the Transferor Interest whether or not such amount has
been deposited into the Distribution Account.
(f) On any Business Day during the Amortization
Period, upon the direction of the Transferor any amounts on
deposit in the Principal Account pursuant to subsection 4.9(c) of
the Agreement may be withdrawn from the Principal Account and
deposited in the Distribution Account, to the extent of funds
available, for distribution on the next Business Day, pursuant to
Section 5.1 of the Agreement, to be applied to the payment of
Class A Principal until the Class A Invested Amount is paid in
full, then to the payment of Class B Principal until the Class B
Invested Amount is paid in full, then to the payment of Class C
Principal until the Class C Invested Amount is paid in full, and
then to the payment of Class D Principal until the Class D
Invested Amount is paid in full.
(g) Any amounts remaining in the Principal Account and
allocable to the Series 1998-3 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. If, on any
Determination Date, the sum of the aggregate Series Default
Amount and the Series 1998-3 Percentage of unpaid Adjustment
Payments, if any, for all Business Days in the preceding Monthly
Period exceeded the sum of (x) the aggregate Available Series
1998-3 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 amount of such excess (a "Class D
Charge-Off").
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 Class C Invested Amount will be reduced by the
amount by which the Class D Invested Amount would have been
reduced below zero, but not more than the aggregate Series
Default Amount and Series 1998-3 Percentage of unpaid Adjustment
Payments for such Monthly Period (a "Class C Charge-Off").
In the event that any such reduction of the Class C
Invested Amount would cause the Class C Invested Amount to be a
negative number, the Class C Invested Amount will be reduced to
zero, and, the Class B Invested Amount will be reduced by the
amount by which the Class C Invested Amount would have been
reduced below zero, but not more than the remaining aggregate
Series Default Amount and Series 1998-3 Percentage of unpaid
Adjustment Payments for such Monthly Period (a "Class B Charge-
Off").
In the event that any such reduction of the Class B
Invested Amount would cause the Class B Invested Amount to be a
negative number, the Class B Invested Amount will be reduced to
zero, and the Class A Invested Amount will be reduced by the
amount by which the Class B Invested Amount would have been
reduced below zero, but not more than the remaining aggregate
Series Default Amount and Series 1998-3 Percentage of unpaid
Adjustment Payments for such Monthly Period (a "Class A Charge-
Off").
Section 4.14 Redirected Principal Collections for the
Series 1998-3 Securities. On each Business Day, the Servicer
will determine an amount equal to the least of (i) the Class D
Invested Amount, (ii) the product of (x)(I) during the Revolving
Period, the Class D Floating Percentage or (II) during an
Amortization Period, the Class D Fixed/Floating Percentage and
(y) the amount of Principal Collections with respect to such
Business Day and (iii) an amount equal to the sum of (a) the
Class A Required Amount for such Business Day, (b) the Class B
Required Amount for such Business Day and (c) the Class C
Required Amount for such Business Day (such amount called
"Redirected Class D Principal Collections") and shall apply
Principal Collections allocable to the Series 1998-3 Securities
in an amount equal to such amount in accordance with subsection
4.9(a) as if such amounts were Available Series 1998-3 Finance
Charge Collections.
On each Business Day, the Servicer will determine an
amount equal to the least of (i) the Class C Invested Amount,
(ii) the product of (x)(I) during the Revolving Period, the Class
C Floating Percentage or (II) during an Amortization Period, the
Class C 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 Class C Principal
Collections") and shall apply Principal Collections allocable to
the Series 1998-3 Securities in an amount equal to such amount in
accordance with subsection 4.9(a) as if such amounts were
Available Series 1998-3 Finance Charge Collections.
On each Business Day, the Servicer will determine an
amount equal to the least of (i) the Class B Invested Amount,
(ii) the product of (x)(I) during the Revolving Period, the Class
B Floating Percentage or (II) during an Amortization Period, the
Class B Fixed/Floating Percentage and (y) the amount of Principal
Collections for such Business Day and (iii) an amount equal to
the excess, if any, of the Class A Required Amount for such
Business Day over the sum of the amount of Redirected Class D
Principal Collections and Redirected Class C 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 Series
1998-3 Securities in an amount equal to such amount in accordance
with subsection 4.9(a) as if such amounts were Available Series
1998-3 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 Class C 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 Class C Invested Amount to be a
negative number, the Class C Invested Amount will be reduced to
zero and the Class B Invested Amount will be reduced by the
amount by which the Class C 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 Class C Trigger Event. If (i) the
rating from Moody's of Fingerhut Companies, Inc.'s most senior
notes and, if rated, the rating of Fingerhut Companies, Inc.'s
corporate revolving lines of credit facility are reduced below
Baa2 (a "Class C Trigger Event"), and (ii) with respect to any
Business Day, the percentage equivalent of a fraction the
numerator of which is the Series 1998-3 Percentage of the
Transferor Interest and the denominator of which is the sum of
the Invested Amount and the Series 1998-3 Percentage of the
Transferor Interest (the "Target Percentage") is less than 5%,
(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 5% or (b) the
Servicer shall cause amounts available pursuant to subsection
4.9(a)(xi) of the Agreement to be deposited in the Class C
Reserve Account until the amount on deposit therein is equal to
the Specified Class C Reserve Amount. The Servicer shall provide
to Moody's and the Trustee prompt written notice of any
downgrading of the rating of Fingerhut Companies, Inc.'s most
senior rated notes. The Transferor may allow the Transferor
Interest to decrease on any Business Day, to the extent that it
exceeds the Minimum Transferor Interest and the amount on deposit
in the Class C 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 Class C Reserve Amount.
Section 4.16 Class C Reserve Account.
Establishment of the Class C Reserve Account. The
Servicer, for the benefit of the Class C Securityholders, shall,
upon the occurrence of a Class C 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 Class C Securityholders, the "Class
C 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 Class C
Securityholders. The Trustee shall possess all right, title and
interest in all funds on deposit from time to time in the Class C
Reserve Account and in all proceeds thereof. The Class C Reserve
Account shall be under the sole dominion and control of the
Trustee for the benefit of the Class C Securityholders. If, at
any time, the institution holding the Class C Reserve Account
ceases to be a Qualified Institution, the Trustee shall within 10
Business Days establish a new Class C Reserve Account meeting the
conditions specified above with a Qualified Institution, and
shall transfer any cash or any investments to such new Class C
Reserve Account. From the date such new Class C Reserve Account
is established, it shall be the "Class C Reserve Account."
Administration of the Class C Reserve Account. On
each Business Day following the occurrence of a Class C Trigger
Event, the Servicer shall deposit in the Class C Reserve Account
an amount equal to the excess of the Specified Class C Reserve
Amount over the amount on deposit in the Class C Reserve Account
to the extent of funds available therefor pursuant to subsection
4.9(a)(xi). Funds on deposit in the Class C Reserve Account
shall be withdrawn by the Servicer and applied in accordance with
subsection 4.9(a)(ix) to the extent of the aggregate amount of
Class C Charge-Offs resulting from unpaid Adjustment Payments, if
any. Amounts on deposit in the Class C Reserve Account may be
subsequently released therefrom to the extent that the amount on
deposit in the Class C Reserve Account exceeds the Specified
Class C Reserve Amount and paid to the Transferor. The amount on
deposit in the Class C Reserve Account may also be released
therefrom and paid to the Transferor, and the Target Percentage
of the Transferor Interest may equal zero, if the rating of
Fingerhut Companies, Inc.'s most senior rated notes or, if rated,
the rating of Fingerhut Companies, Inc.'s corporate revolving
lines of credit facility, is subsequently increased to Baa2 or
higher by Moody's or the Class C Invested Amount has been paid in
full.
Investment of Funds in the Class C Reserve Account.
Funds on deposit in the Class C 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 Class C Reserve Account (to the extent that
the amount on deposit in the Class C Reserve Account is less than
the Specified Class C Reserve Amount)or applied on each Business
Day as Available Series 1998-3 Finance Charge Collections.
Termination of the Class C Reserve Account. The Class
C 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 Class C Invested Amount
is paid in full. Upon the termination of the Class C Reserve
Account, all amounts on deposit therein (after giving effect to
any withdrawal from the Class C Reserve Account on such date as
described above) shall be released therefrom and paid to the
Transferor.
Section 4.17 Payment Reserve Account.
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
Securityholders, the "Payment Reserve Account," which shall be a
segregated trust account with the corporate trust department of
such Qualified Institution, bearing a designation clearly
indicating that the funds deposited therein are held for the
benefit of the Securityholders. The Trustee shall possess all
right, title and interest in all funds on deposit from time to
time in the Payment Reserve Account and in all proceeds thereof.
The Payment Reserve Account shall be under the sole dominion and
control of the Trustee for the benefit of the Securityholders.
If, at any time, the institution holding the Payment Reserve
Account ceases to be a Qualified Institution, the Trustee shall
within 20 Business Days establish a new Payment Reserve Account
meeting the conditions specified above with a Qualified
Institution, and shall transfer any cash or any investments to
such new Payment Reserve Account. From the date such new Payment
Reserve Account is established, it shall be the "Payment Reserve
Account."
Administration of the Payment Reserve Account. The
Transferor, at its discretion, may withdraw on any Determination
Date a part or all of any amounts remaining in the Payment
Reserve Account after giving effect to any withdrawals required
to be made under Section 4.9(a) above.
Investment of Funds on Deposit in the 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 Available Series 1998-3
Finance Charge Collections.
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 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 1998-3 Finance Charge Collections available to be applied
pursuant to subsection 4.9(a) on the last Business Day of the
preceding Monthly Period.
Section 4.18 Revolving Receivables Reserve Account.
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 1998-3 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 1998-3 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 1998-3
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."
Deposits. On the Closing Date, the Transferor shall
make an initial deposit of $100,000 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)(xviii) of the Agreement.
Withdrawals. 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
(xvii) 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 (xvii) of the
Agreement as Available Series 1998-3 Finance Charge Collections
as if such amounts were available on the last Business Day of the
preceding Monthly Period. To the extent that the amount on
deposit in the Revolving Receivables Reserve Account is greater
than the Specified Revolving Receivables Reserve Amount such
amount may be released to the Transferor.
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, (i) to the extent the amount on deposit therein is less than
the Specified Revolving Receivables Reserve Amount, retained in
the Revolving Receivables Reserve Account and, (ii) to the extent
the amount on deposit therein is greater than the Specified
Revolving Receivables Reserve Amount, the aggregate proceeds of
any such investment shall be applied on each Transfer Date as
Investment Earnings for application as Available Series 1998-3
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.
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
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 1998-3 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 4.19 Principal Funding Account.
Establishment of the Principal 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-
3 Securityholders, the "Principal Funding Account," which shall
be a segregated trust account with the corporate trust department
of such Qualified Institution, bearing a designation clearly
indicating that the funds deposited therein are held for the
benefit of the Series 1998-3 Securityholders. The Trustee shall
possess all right, title and interest in all funds on deposit
from time to time in the Principal Funding Account and in all
proceeds thereof. The Principal Funding Account shall be under
the sole dominion and control of the Trustee for the benefit of
the Series 1998-3 Securityholders. If at any time, the
institution holding the Principal Funding Account ceases to be a
Qualified Institution, the Trustee shall within 10 Business Days
establish a new Principal Funding Account meeting the conditions
specified above with a Qualified Institution, and shall transfer
any cash or any investments to such new Principal Funding
Account. From the date such new Principal Funding Account is
established, it shall be the "Principal Funding Account."
Investment of Funds in the Principal Funding Account.
Funds on deposit in the Principal Funding Account shall be
invested by the Trustee at the direction of the Servicer in Cash
Equivalents maturing no later than the next 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 Available Series 1998-3 Finance Charge
Collections.
Termination of the Principal Funding Account. The
Principal Funding 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 Invested Amount is
paid in full. Upon the termination of the Principal Funding
Account, all amounts on deposit therein (after giving effect to
any withdrawal from the Principal Funding Account on such date as
described above) shall be applied as Available Series 1998-3
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 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 1998-3
Securities and available pursuant to subsection 4.9(a)(xiv).
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 1998-3 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 Pay Out Event to occur, or an event which, with
notice or lapse of time or both, would constitute a Trust Pay Out
Event or a Series Pay Out Event, and (ii) the Rating Agency
Condition shall have been satisfied.
Section 4.21 Determination of LIBOR.
"LIBOR" shall mean, for a specific Interest Accrual
Period, the rate for deposits in United States dollars for one
month (commencing on the first day of the relevant Interest
Accrual Period) which appears on the Dow Jones Telerate Page 3750
(or a similar replacement page) 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 the Dow Jones Telerate Page 3750
(or a similar replacement page), the rate for such Interest
Accrual Period will be determined on the basis of the rates at
which deposits in the United States dollars are offered by four
major banks in the London interbank market selected by the
Trustee at approximately 11:00 a.m., London time, on such LIBOR
Determination Date to prime banks in the London interbank market
for a period equal to one month (commencing on the first day of
Interest Accrual Period). The Trustee will request the principal
London office of each such bank to provide a quotation of its
rate. If at least two such quotations are provided, the rate for
such Interest Accrual Period will be the arithmetic mean of the
quotations. If fewer than two quotations are provided as
requested, the rate for such Interest Accrual Period will be the
arithmetic mean of the rates quoted by four major banks in New
York City, selected by the Trustee, at approximately 11:00 a.m.,
New York City time, on the LIBOR Determination Date for loans in
United States dollars to leading European banks for a period
equal to one month (commencing on the first day of such Interest
Accrual Period).
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 1998-3 Securities:
ARTICLE V
DISTRIBUTIONS AND REPORTS TO INVESTORSECURITYHOLDERS
Section 5.1 Distributions. On each Business Day,
the Paying Agent shall distribute (in accordance with the
Settlement Statement delivered by the Servicer to the Trustee and
the Paying Agent pursuant to subsection 3.4(c)) to the
Administrative Agent 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 wire transfer to an
account or accounts designated by the Administrative Agent by
written notice given to the Paying Agent not less than five days
prior to such Business Day; provided, however, that the final
payment in retirement of the Class A 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.
On each Business Day, the Paying Agent shall
distribute (in accordance with the Settlement Statement delivered
by the Servicer to the Trustee and the Paying Agent pursuant to
subsection 3.4(c)) to the Administrative Agent amounts on deposit
in the Distribution Account as are payable to the Class B
Securityholders pursuant to Sections 4.11 and 4.12 of the
Agreement by wire transfer to an account or accounts designated
by the Administrative Agent 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.
On each Business Day, the Paying Agent shall
distribute (in accordance with the Settlement Statement delivered
by the Servicer to the Trustee and the Paying Agent pursuant to
subsection 3.4(c)) to the Administrative Agent amounts on deposit
in the Distribution Account as are payable to the Class C
Securityholders pursuant to Sections 4.11 and 4.12 of the
Agreement by wire transfer to an account or accounts designated
by the Administrative Agent 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 C Securities will be made only upon presentation and
surrender of the Class C Securities at the office or offices
specified in the notice of such final distribution delivered by
the Trustee pursuant to Section 12.3.
On each Business Day on which payments are made
pursuant to Section 4.11 or Section 4.12 of the Agreement, 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 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 pursuant to Section 4.11 or 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. 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 C prepared by the
Servicer and delivered to the Trustee and the Paying Agent on the
preceding Determination Date setting forth the following
information:
the total amount distributed;
the amount of such distribution allocable to the
payment of principal on the Series 1998-3 Securities;
the amount of such distribution allocable to the
payment of interest on the Series 1998-3 Securities;
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 Class C Securities and the Class D Securities,
respectively;
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 Class C
Securities and the Class D Securities, respectively;
the aggregate amount of Principal Receivables, the
Invested Amount, the Class A Invested Amount, the Class B
Invested Amount, the Class C Invested Amount, the Class D
Invested Amount, the Floating Percentage and, during the
Amortization Period, the Fixed/Floating Percentage as applicable,
as of the end of the day on the last day of the related Monthly
Period;
the aggregate outstanding balance of Receivables
which are current, 0-29, 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;
the aggregate Series Default Amount for the preceding
Monthly Period;
the aggregate amount of Class A Charge-Offs, Class B
Charge-Offs, Class C Charge-Offs and Class D Charge-Offs for the
preceding Monthly Period;
the amount of the Servicing Fee for the preceding
Monthly Period;
the amount of unreimbursed Redirected Class B
Principal Collections, Redirected Class C Principal Collections
and Redirected Class D Principal Collections for the related
Monthly Period;
the aggregate amount of funds in the Excess Funding
Account and the Revolving Receivables Reserve Account as of the
last day of the Monthly Period immediately preceding the
Distribution Date;
the Specified Revolving Receivables Reserve Amount as
of such date;
whether a Class C Trigger Event has occurred and if
so the Specified Class C Reserve Amount and the amount then on
deposit in the Class C Reserve Account; and
the Aggregate Interest Rate Caps Notional Amount and
the amount deposited in the Cap Proceeds Account during the
related Monthly Period.
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-
3 Securityholder, a statement prepared by the Servicer containing
the information required to be contained in the regular report to
Series 1998-3 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
1998-3 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 1998-3 Securityholders to prepare their tax returns.
Such obligations of the Trustee shall be deemed to have been
satisfied to the extent that substantially comparable information
shall be provided by the Trustee pursuant to any requirements of
the Internal Revenue Code as from time to time in effect.
SECTION 7A. Article VI of the Agreement. Article VI
(except for Sections 6.01 through 6.14 thereof) shall read in its
entirety as follows and shall be applicable only to the Series
1998-3:
ARTICLE VI
THE SECURITIES
Section 6.15 Additional Invested Amounts. (a) Each
Senior Securityholder agrees, by acceptance of a Senior Security,
that the Transferor may from time to time, prior to an Increase
Termination Date, upon one Business Day's prior written notice,
request that such Senior Securityholder acquire on any Business
Day, and such Senior Securityholder may (if it is a Conduit
Purchaser) and shall (if it is an Alternate Purchaser and the
related Conduit Purchaser determines not to so purchase) acquire
additional Series 1998-3 Securities of the same Class previously
held by such Senior Securityholder in an amount, subject to
Section 6.15(b) hereof, equal to its Purchaser Group Percentage
of the total amount of such Class of such Senior Securities that
the Transferor requests be purchased by Senior Securityholders
(such acquired amounts, the "Additional Class A Invested Amounts"
with respect to the Class A Securities, the "Additional Class B
Invested Amounts" with respect to the Class B Securities and the
"Additional Class C Invested Amounts" with respect to the Class C
Securities, and collectively, the "Additional Invested
Amounts")subject to the following restrictions:
no Servicer Default, or event which, with the giving
of notice or lapse of time, or both, would constitute a Servicer
Default, with respect to the Servicer shall have occurred and be
continuing (unless such Servicer Default or event, as applicable,
has been waived in writing by the Senior Securityholders);
the Agreement, the Senior Securities and the Security
Purchase Agreement shall be in full force and effect;
each of the Transferor's and the Servicer's
representations and warranties in the Agreement and the Security
Purchase Agreement shall be true and correct in all material
respects as of the dates they were so made (unless they
specifically refer to another date in which case they shall be
true and correct as of such earlier date), each of the
Transferor's representations and warranties in clauses (a), (c),
(e) and (g) of Section 4.01 of the Security Purchase Agreement
shall be true and correct in all material respects as of the date
of the proposed increase in the Invested Amount and each of the
Transferor and the Servicer shall have complied with all the
agreements and satisfied all of the conditions under the
Agreement and the Security Purchase Agreement, in all material
respects, on its part to be performed or satisfied at or prior to
the date hereof or such Business Day, as applicable;
no action, proceeding or investigation shall have
been instituted or threatened, nor shall any order, judgment or
decree have ben issued or proposed to be issued by any court,
agency or authority to set aside, restrain, enjoin or prevent the
consummation of any transaction contemplated hereby or seeking
material damages against the Trust, the Trustee, the Managing
Agents, the Administrative Agent or the Conduit Purchasers in
connection with the transactions contemplated in the Agreement
and the Security Purchase Agreement;
the Class A Securities, the Class B Securities and
the Class C Securities shall be rated at least "Aa2," "A2" and
"Baa2," respectively, by Moody's;
except as provided in subsection 6.15(b) hereof, any
such request by the Transferor for any Senior Securityholder to
acquire Series 1998-3 Securities of any Class shall be made
concurrently with requests for all Senior Securityholders of such
Class of Securities to acquire additional amounts of such Class
of Series 1998-3 Securities;
except as provided in subsection 6.15(b) hereof, any
such request by the Transferor for Senior Securityholders to
acquire Series 1998-3 Securities of any Class shall be made
concurrently with requests for Senior Securityholders and,
pursuant to subsection 6.16, the Class D Securityholder to
acquire proportional amounts of each Class of Series 1998-3
Securities;
if such an increase in the Class A Invested Amount,
Class B Invested Amount or Class C Invested Amount would cause a
Trust Pay Out Event or a Series Pay Out Event to occur, then the
amount of the increase in the Class A Invested Amount, the Class
B Invested Amount and the Class C Invested Amount, shall be
limited on such Business Day to the maximum increase in the Class
A Invested Amount, the Class B Invested Amount and the Class C
Invested Amount that may be obtained without causing a Pay Out
Event to occur;
in no case shall the Class A Invested Amount, Class B
Invested Amount or Class C Invested Amount be increased above the
Class A Maximum Invested Amount, Class B Maximum Invested Amount
or Class C Maximum Invested Amount, respectively;
in no case shall the sum of the Aggregate ABC
Principal Amount and the Aggregate Interest Component exceed the
Facility Limit;
in no case shall the Additional Invested Amounts on any
Business Day exceed an amount equal to the excess of the
aggregate amount of Principal Receivables over the greater of (x)
the sum of (i) the aggregate invested amount of each Series then
outstanding as of such day including the Class A Securities,
Class B Securities and Class C Securities (prior to the addition
of such Additional Invested Amounts) minus amounts on deposit in
the Principal Account or Principal Funding Account for any
Series, if any, and (ii) the Minimum Transferor Interest as of
such day or (y) the Minimum Aggregate Principal Receivables;
the Class B Invested Amount, the Class C Invested
Amount and the Class D Invested Amount following the acquisition
of such Additional Invested Amounts shall be at least equal to
the Stated Class B Amount, the Stated Class C Amount and the
Stated Class D Amount (including increases to the Class D
Invested Amount pursuant to Section 6.16 of the Agreement),
respectively;
the notional amount of the Interest Rate Caps shall
be at least equal to the Aggregate ABC Principal Amount after
giving effect to the proposed increase in the Class A Invested
Amount, Class B Invested Amount and Class C Invested Amount; and
after giving effect to the proposed increase in the
Invested Amounts no Series Pay Out Event shall occur as a result
of such increase.
If the Securityholders acquire such Additional Invested
Amounts, such Securityholders shall pay an amount equal to the
Additional Invested Amounts to the Transferor and, in
consideration of such Securityholders' payment of the Additional
Invested Amounts, the Servicer shall appropriately note such
Additional Invested Amount (and the increased Class A Invested
Amount, Class B Invested Amount and Class C Invested Amount) on
the next succeeding Servicer's report and the Invested Amount of
the Class A Securities, Class B Securities and Class C Securities
will be equal to the Invested Amount of such Series 1998-3
Securities stated in such Servicer's report.
The outstanding amounts of any Additional Invested
Amounts acquired by a Series 1998-3 Securityholder shall be
evidenced by the Series 1998-3 Securities to be issued on the
Closing Date. The Series 1998-3 Securityholders shall be and are
hereby authorized to record on the grid attached to their
respective Series 1998-3 Securities (or at such Series 1998-3
Securityholder's option, in its internal books and records) the
date and amount of any Additional Invested Amount acquired by it,
and each repayment thereof; provided that failure to make any
such recordation on such grid or any error in such grid shall not
adversely affect the Series 1998-3 Securityholder's rights with
respect to its Class A Invested Amount, Class B Invested Amount
or Class C Invested Amount, as appropriate, and its right to
receive interest payments in respect of the Class A Invested
Amount, Class B Invested Amount or Class C Invested Amount, as
appropriate, held by the Series 1998-3 Securityholder.
Notwithstanding anything in Section 6.15(a) hereof to
the contrary, any acquisition of Additional Invested Amounts
pursuant to Section 6.15(a) hereof (x) less than an aggregate
Additional Invested Amount of $4,000,000 or (y) greater than
$4,000,000 in other than an integral multiple of $2,000,000, in
each case may be allocated other than pursuant to the Purchaser
Group Percentages; provided, however, that no Series 1998-3
Securityholder may be allocated more than $5,000,000 dollars in
excess of its Purchaser Group Percentage of the sum of the Class
A Invested Amount, the Class B Invested Amount and the Class C
Invested Amount; provided, further, that in the case of clause
(y) above, any Additional Invested Amount in an integral multiple
of $2,000,000 shall be allocated pursuant to the Purchaser Group
Percentages; provided, further, that no Series 1998-3
Securityholder shall be allocated more than the Purchaser Group
Percentage of the Facility Limit; provided, further, that the
Invested Amounts of each Class of Series 1998-3 Securities are
increased proportionately.
The purchase of any Additional Invested Amount shall be
in an aggregate principal amount that is not less than $1,000,000
or integral multiples of $250,000 in excess thereof.
Section 6.16 Additional Class D Invested Amounts.
On any Business Day while any Series 1998-3
Securities are outstanding, the Transferor may elect to increase
the Class D Invested Amount (such additional amounts, "Additional
Class D Invested Amounts") by written notice to the Trustee on
such date which notice shall specify the effective date and the
amount of such increase in the Class D Invested Amount; provided,
however, that if such an increase in the Class D Invested Amount
would cause a Trust Pay Out Event or a Series Pay Out Event to
occur, then the amount of the increase in the Class D Invested
Amount shall be limited on such Business Day to the maximum
increase in the Class D Invested Amount that may be obtained
without causing either a Trust Pay Out Event or a Series Pay Out
Event to occur; and provided further, that in no case shall the
Class D Invested Amount be increased above the Class D Maximum
Invested Amount; provided further that no such increase in the
Class D Invested Amount shall be permitted under this Section
6.16 unless: (i) after giving effect to the proposed increase in
Class D Invested Amount the Transferor Interest shall equal or
exceed the Minimum Transferor Interest, (ii) no Series Pay Out
Event will occur as a result of such increase in the Class D
Invested Amount and (iii) such increase in the Class D Invested
Amount shall be made concurrently with a proportional increase in
the Class A Invested Amount, Class B Invested Amount and Class C
Invested Amount pursuant to Section 6.15 of the Agreement.
Section 6.17 Extension. If a Pay Out Event has not
occurred or has occurred but has been remedied on or before the
30th Business Day preceding the Extension Date, the Transferor,
in its sole discretion, may deliver to the Trustee on or before
such date a notice substantially in the form of Exhibit E (the
"Extension Notice") to this Series Supplement. The Trustee shall
deliver a copy of the Extension Notice and all documents annexed
thereto to the Series 1998-3 Securityholders of record on the
date of receipt thereof. The Transferor shall state in the
Extension Notice that it intends to extend the Revolving Period
until the later Amortization Period Commencement Date set forth
in the Extension Notice. The Extension Notice shall also set
forth the next Extension Date. The following documents shall be
annexed to the Extension Notice: (i) a form of the Opinion of
Counsel addressed to the Transferor and the Trustee to the effect
that despite the extension the Trust will not be treated as an
association taxable as a corporation (the "Extension Tax
Opinion"); (ii) a form of the Opinion of Counsel addressed to the
Transferor and the Trustee (the "Extension Opinion") to the
effect that (A) the Transferor has the corporate power and
authority to effect the Extension, (B) the extension has been
duly authorized by the Transferor, and (C) all conditions
precedent to the Extension required by this Section 6.17 have
been fulfilled; (iii) a form of Series 1998-3 Securityholder
Election Notice substantially in the form of Exhibit F (the
"Election Notice") to this Series Supplement; and (iv) a schedule
setting forth the Aggregate Interest Rate Caps Notional Amount
for the period or periods as indicated from the Extension Date
through the new Scheduled Series 1998-3 Termination Date, each as
specified in the related Extension Notice. In addition, the
Extension Notice shall state that any Series 1998-3
Securityholder electing to approve the Extension must do so on or
before the Election Date (as defined below) by returning the
annexed Election Notice properly executed to the Trustee in the
manner described below. The Extension Notice shall also state
that a Series 1998-3 Securityholder may withdraw any such
election in whole or in part on or before the Election Date, and
the Transferor, in its sole discretion, may, prior to the
Election Date, withdraw its election to extend the Revolving
Period. Any Holder that elects to approve an Extension hereunder
shall deliver a duly executed Election Notice to the Trustee at
the address designated in the Extension Notice on or before 3:00
p.m., New York City time, on or before the fifth Business Day
preceding the Extension Date (such Business Day constituting the
"Election Date").
No extension shall occur unless each of the following
conditions have been satisfied prior to the close of business on
the Election Date:
no Pay Out Event shall have occurred and be continuing;
there shall have been delivered to the Trustee (A) the
Extension Tax Opinion and the Extension Opinion, each addressed
to the Trustee and (B) written confirmation from the Rating
Agency that the Extension will not cause such Rating Agency to
lower or withdraw its then current rating of such Series 1998-3
Securities; and
each of the holders of the Class A Securities, the
Class B Securities, and the Class C Securities shall have elected
to approve the Extension by returning to the Trustee on or before
the Election Date the executed Election Notice annexed to the
Extension Notice delivered to the Securityholders pursuant to
subsection 6.17(a) of the Agreement.
If, by the close of business on the Election Date, all
of the conditions stated in this subsection 6.17(b) of the
Agreement have not been satisfied and all such documents
delivered to the Trustee pursuant to this subsection 6.17(b) of
the Agreement are not in form satisfactory to it, or if the
Transferor has notified the Trustee, prior to the Election Date,
that the Transferor has exercised its right to withdraw its
election of an Extension, no Extension shall occur.
The execution by the Series 1998-3 Securityholders of
the applicable Election Notice and return thereof to the Trustee
by the required Date and time, the continued election by the
Transferor to extend the Revolving Period at the Election Date,
and the compliance with all of the provisions of this Section
6.17, shall evidence an extension or renewal of the obligations
represented by the Series 1998-3 Securities, and not a novation
or extinguishment of such obligations or a substitution with
respect thereto.
To the extent required by applicable laws and
regulations, as evidenced by an Opinion of Counsel delivered by
the Transferor to the Trustee, the provisions of this Section
6.17 shall or may be modified to comply with all applicable laws
and regulations in effect at the time of the Extension.
SECTION 8. Series Pay Out Events. If any one of the
following events shall occur with respect to the Series 1998-3
Securities:
failure on the part of the Transferor (i) to make
any payment or deposit required to be made by the Transferor by
the terms of the Agreement or this Series Supplement, on or
before the date occurring five Business Days after the date such
payment or deposit is required to be made therein or herein, (ii)
to perform in all material respects the Transferor's covenant not
to sell, pledge, assign, or transfer to any person, or grant any
unpermitted lien on, any Receivable; or (iii) duly to observe or
perform in any material respect any covenants or agreements of
the Transferor set forth in the Agreement or this Series
Supplement, which failure has a material adverse effect on the
Series 1998-3 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 Required Senior Securityholders, and continues
to affect materially and adversely the interests of the Series
1998-3 Securityholders for such period;
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 Required Senior Securityholders, and (ii) as a
result of which the interests of the Series 1998-3
Securityholders are materially and adversely affected and
continue to be materially and adversely affected for such period;
provided, however, that a Series 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;
the average of the Portfolio Yields for any three
consecutive Monthly Periods is reduced to a rate which is less
than the weighted average of the weighted average Base Rates for
such three consecutive Monthly Periods;
(i) the Transferor Interest shall be less than the
Minimum Transferor Interest, (ii) the Series 1998-3 Percentage of
the sum of the total amount of Principal Receivables plus amounts
on deposit in the Excess Funding Account shall be less than the
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; or
any Servicer Default shall occur which would have
a material adverse effect on the Series 1998-3 Securityholders;
then, in the case of any event described in subparagraph (a), (b)
or (e), after the applicable grace period, if any, set forth in
such subparagraphs, the Required Senior Securityholders by notice
then given in writing to the Trustee, the Transferor, the Cap
Provider and the Servicer may declare that a pay out event (a
"Series Pay Out Event") has occurred as of the date of such
notice, and in the case of any event described in subparagraphs
(c) or (d), a Series Pay Out Event shall occur without any notice
or other action on the part of the Trustee or the Series 1998-3
Securityholders immediately upon the occurrence of such event.
SECTION 9. Series 1998-3 Termination. The right of
the Series 1998-3 Securityholders to receive payments from the
Trust will terminate on the first Business Day following the
Series 1998-3 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 1998-3 Securityholders shall remain entitled to
receive proceeds of such sale when such sale occurs.
SECTION 9A. Pre-Payment. During the Revolving
Period, the Holder of the Exchangeable Transferor Security may
specify upon an Exchange, pursuant to Section 6.9 of the
Agreement, that the purchaser of a newly issued Series deposit
payment therefor, in full or in part, in the Principal Funding
Account in an amount not to exceed the sum of the Class A
Invested Amount, Class B Invested Amount and Class C Invested
Amount on such date. In addition, during the Revolving Period
amounts may be deposited in the Principal Funding Account at the
direction of the Transferor pursuant to subsection 4.9(b) of the
Agreement.
During the Revolving Period, upon the direction of
the Transferor any amounts on deposit in the Principal Funding
Account, up to the sum of the Class A Invested Amount, Class B
Invested Amount and Class C Invested Amount, may, or upon the
occurrence of a Pay Out Event shall, be deposited in the
Principal Account for distribution to be applied to the payment,
on a pro rata basis, of Class A Principal, Class B Principal and
Class C Principal. Such amounts shall be applied and paid in
accordance with Section 5.1 of the Agreement. Subsequent to any
reduction of the Class A Invested Amount, Class B Invested Amount
and Class C Invested Amount as a result of payments pursuant to
this Section 9A, the Class A Invested Amount, Class B Invested
Amount and Class C Invested Amount may be increased pursuant to
the terms and conditions set forth in Section 6.15 of the
Agreement.
(c) Notwithstanding anything else in the
Agreement to the contrary, during the Revolving Period no amounts
may be applied to the payment of Class A Principal, Class B
Principal or Class C Principal pursuant to this Section 9A if
such payment would reduce the ABC Invested Amount to below
$4,000,000 unless such payment shall be made on the Business Day
immediately preceding to the Series 1998-3 Termination Date.
SECTION 10. Legends; Transfer and Exchange;
Restrictions on Transfer of Series 1998-3 Securities; Tax
Treatment.
Each Class A Security, Class B Security and
Class C Security will bear a legend substantially in the
following form:
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 LAW. 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 PURSUANT TO
RULE 144A UNDER THE SECURITIES ACT TO AN INSTITUTIONAL INVESTOR
THAT THE HOLDER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL
BUYER WITHIN THE MEANING OF RULE 144A ("QIB") PURCHASING FOR ITS
OWN ACCOUNT OR A QIB PURCHASING FOR THE ACCOUNT OF A QIB, WHOM
THE HOLDER HAS INFORMED, IN EACH CASE, THAT THE REOFFER, RESALE,
PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A,
OR TO THE TRANSFEROR. EACH SECURITY OWNER BY ACCEPTING A
BENEFICIAL INTEREST IN THIS SECURITY IS DEEMED TO REPRESENT AND
WARRANT THAT IT IS A QIB PURCHASING FOR ITS OWN ACCOUNT OR A QIB
PURCHASING FOR THE ACCOUNT OF ANOTHER QIB. THE TRANSFER OF THIS
SECURITY IS SUBJECT TO CERTAIN CONDITIONS SET FORTH IN THE
POOLING AND SERVICING AGREEMENT REFERRED TO HEREIN. EACH CLASS
[A] [B] [C] SECURITY OWNER BY ACCEPTING A BENEFICIAL INTEREST IN
THIS SECURITY FURTHER REPRESENTS AND WARRANTS FOR THE BENEFIT OF
FINGERHUT RECEIVABLES, INC. THAT SUCH PURCHASER IS NOT AND WILL
NOT BECOME A PARTNERSHIP, SUBCHAPTER S CORPORATION OR GRANTOR
TRUST FOR UNITED STATES FEDERAL INCOME TAX PURPOSES FOR SO LONG
AS SUCH PURCHASER HOLDS A BENEFICIAL INTEREST IN THIS SECURITY.
THIS SECURITY MAY NOT BE ACQUIRED BY OR SOLD, TRADED OR
TRANSFERRED TO A PERSON WHO IS NOT EITHER (A)(I) A CITIZEN OR
RESIDENT OF THE UNITED STATES, (II) A CORPORATION, PARTNERSHIP OR
OTHER ENTITY ORGANIZED IN OR UNDER THE LAWS OF THE UNITED STATES
OR ANY POLITICAL SUBDIVISION THEREOF OR (III) A PERSON NOT
DESCRIBED IN (I) OR (II) WHOSE OWNERSHIP OF THE CLASS [A] [B] [C]
SECURITIES IS EFFECTIVELY CONNECTED WITH SUCH PERSON'S CONDUCT OF
A TRADE OR BUSINESS WITHIN THE UNITED STATES (WITHIN THE MEANING
OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"))
AND ITS OWNERSHIP OF ANY INTEREST IN A CLASS [A] [B] [C] SECURITY
WILL NOT RESULT IN ANY WITHHOLDING OBLIGATION WITH RESPECT TO ANY
PAYMENTS WITH RESPECT TO THE CLASS [A] [B] [C] SECURITIES BY ANY
PERSON (OTHER THAN WITHHOLDING, IF ANY, UNDER SECTION 1446 OF THE
CODE) OR (B) AN ESTATE THE INCOME OF WHICH IS INCLUDIBLE IN GROSS
INCOME FOR UNITED STATES FEDERAL INCOME TAX PURPOSES OR ANY TRUST
IF A COURT WITHIN THE UNITED STATES IS ABLE TO EXERCISE PRIMARY
SUPERVISION OVER THE ADMINISTRATION OF THE TRUST AND ONE OR MORE
UNITED STATES FIDUCIARIES HAVE THE AUTHORITY TO CONTROL ALL
SUBSTANTIAL DECISIONS OF THE TRUST.
NO SALE, ASSIGNMENT, PARTICIPATION, PLEDGE, HYPOTHECATION,
TRANSFER OR OTHER DISPOSITION OF THIS SECURITY (OR ANY INTEREST
THEREIN) SHALL BE MADE UNLESS THE TRANSFEROR SHALL HAVE GRANTED
ITS PRIOR CONSENT THERETO, WHICH CONSENT MAY NOT BE UNREASONABLY
WITHHELD. THIS SECURITY MAY NOT BE ACQUIRED, SOLD, TRADED OR
TRANSFERRED, NOR MAY AN INTEREST IN THIS SECURITY BE MARKETED, ON
OR THROUGH (I) AN "ESTABLISHED SECURITIES MARKET" WITHIN THE
MEANING OF SECTION 7704(b)(1) OF THE CODE AND ANY PROPOSED,
TEMPORARY OR FINAL TREASURY REGULATION THEREUNDER, INCLUDING,
WITHOUT LIMITATION, AN OVER-THE-COUNTER-MARKET OR AN INTERDEALER
QUOTATION SYSTEM THAT REGULARLY DISSEMINATES FIRM BUY OR SELL
QUOTATIONS OR (II) A "SECONDARY MARKET" WITHIN THE MEANING OF
SECTION 7704(b)(2) OF THE CODE AND ANY PROPOSED, TEMPORARY OR
FINAL TREASURY REGULATION THEREUNDER, INCLUDING A MARKET WHEREIN
INTERESTS IN THE CLASS [A] [B] [C] SECURITIES ARE REGULARLY
QUOTED BY ANY PERSON MAKING A MARKET IN SUCH INTERESTS AND A
MARKET WHEREIN ANY PERSON REGULARLY MAKES AVAILABLE BID OR OFFER
QUOTES WITH RESPECT TO INTERESTS IN THE CLASS [A] [B] [C]
SECURITIES AND STANDS READY TO EFFECT BUY OR SELL TRANSACTIONS AT
THE QUOTED PRICES FOR ITSELF OR ON BEHALF OF OTHERS.
Each Class A Security, Class B Security and Class
C Security will bear a legend substantially in the following
form:
EACH PURCHASER REPRESENTS AND WARRANTS FOR THE BENEFIT OF
FINGERHUT RECEIVABLES, INC. THAT SUCH PURCHASER IS NOT (I) AN
EMPLOYEE BENEFIT PLAN (AS DEFINED IN SECTION 3(3) OF ERISA) THAT
IS SUBJECT TO THE PROVISIONS OF TITLE I OF ERISA, (II) A PLAN
DESCRIBED IN SECTION 4975(e)(1) OF THE CODE, (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
FOR PURPOSES OF CLAUSES (IV) AND (V), ANY INSURANCE COMPANY
GENERAL ACCOUNT, BUT EXCLUDING ANY ENTITY REGISTERED UNDER THE
INVESTMENT COMPANY ACT OF 1940, AS AMENDED).
Each Class D Security will bear a legend
substantially in the following form:
THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"). THIS SECURITY HAS NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OR ANY APPLICABLE STATE
SECURITIES LAW OF ANY STATE AND MAY NOT BE OFFERED, SOLD, PLEDGED
OR OTHERWISE TRANSFERRED UNLESS REGISTERED PURSUANT TO OR EXEMPT
FROM REGISTRATION UNDER THE SECURITIES ACT AND ANY OTHER
APPLICABLE SECURITIES LAW. FINGERHUT RECEIVABLES, INC. SHALL BE
PROHIBITED FROM TRANSFERRING ANY INTEREST IN OR PORTION OF THIS
SECURITY UNLESS, PRIOR TO SUCH TRANSFER, IT SHALL HAVE DELIVERED
TO THE TRUSTEE AN OPINION OF COUNSEL TO THE EFFECT THAT SUCH
PROPOSED TRANSFER WILL NOT ADVERSELY AFFECT THE FEDERAL INCOME
TAX CHARACTERIZATION OF ANY OUTSTANDING SERIES OF INVESTOR
SECURITIES. THE TRANSFER OF THIS SECURITY IS SUBJECT TO CERTAIN
CONDITIONS SET FORTH IN THE POOLING AND SERVICING AGREEMENT
REFERRED TO HEREIN.
NO SALE, ASSIGNMENT, PARTICIPATION, PLEDGE, HYPOTHECATION,
TRANSFER OR OTHER DISPOSITION OF THIS SECURITY (OR ANY INTEREST
THEREIN) SHALL BE MADE UNLESS THE TRANSFEROR SHALL HAVE GRANTED
ITS PRIOR CONSENT THERETO, WHICH CONSENT MAY NOT BE UNREASONABLY
WITHHELD. NOR MAY AN INTEREST IN THIS SECURITY BE MARKETED, ON
OR THROUGH (I) AN "ESTABLISHED SECURITIES MARKET" WITHIN THE
MEANING OF SECTION 7704(b)(1) OF THE INTERNAL REVENUE CODE OF
1986, AS AMENDED (THE "CODE") AND ANY PROPOSED, TEMPORARY OR
FINAL TREASURY REGULATION THEREUNDER, INCLUDING, WITHOUT
LIMITATION, AN OVER-THE-COUNTER-MARKET OR AN INTERDEALER
QUOTATION SYSTEM THAT REGULARLY DISSEMINATES FIRM BUY OR SELL
QUOTATIONS OR (II) A "SECONDARY MARKET" WITHIN THE MEANING OF
SECTION 7704(b)(2) OF THE CODE AND ANY PROPOSED, TEMPORARY OR
FINAL TREASURY REGULATION THEREUNDER, INCLUDING A MARKET WHEREIN
INTERESTS IN THE CLASS D SECURITIES ARE REGULARLY QUOTED BY ANY
PERSON MAKING A MARKET IN SUCH INTERESTS AND A MARKET WHEREIN ANY
PERSON REGULARLY MAKES AVAILABLE BID OR OFFER QUOTES WITH RESPECT
TO INTERESTS IN THE CLASS D SECURITIES AND STANDS READY TO EFFECT
BUY OR SELL TRANSACTIONS AT THE QUOTED PRICES FOR ITSELF OR ON
BEHALF OF OTHERS.
Fingerhut Receivables, Inc. shall be prohibited
from transferring any interest in or portion of the Class D
Securities unless, prior to such Transfer, it shall have
delivered to the Trustee an Opinion of Counsel to the effect that
such proposed Transfer will not adversely affect the Federal,
Minnesota or Delaware income tax characterization of any
outstanding Series of Investor Securities or the taxability (or
tax characterization) of the Trust under Federal, Minnesota or
Delaware income tax laws. In no event shall any interest in or
portion of the Class D Securities be transferred to Fingerhut.
As a condition to transfer of an interest in or portion of the
Class D Securities the transferee shall be required to agree not
to institute against, or join any other Person in instituting
against, the Trust any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceeding, or other proceeding under
any federal or state bankruptcy or similar law, for one year and
one day after all Investor Securities are paid in full. The
Transferor shall provide prompt written notice to the Rating
Agencies of any such transfer.
Transfers and exchanges of Class A Securities,
Class B Securities and Class C Securities shall be subject to the
restrictions set forth in this Section 10, to such restrictions
as shall be set forth in the text of the Class A Securities,
Class B Securities and Class C Securities, and, such reasonable
regulations as may be prescribed by the Transferor. Upon
surrender for registration of transfer of a Class A Security,
Class B Security or Class C Security at the office of the
Transfer Agent and Registrar, accompanied by a certification by
the potential purchaser substantially in the form attached as
Exhibit D executed by such purchaser or by such purchaser's
attorney thereunto duly authorized in writing, such Class A
Security, Class B Security or Class C Security shall be
transferred upon the register, and the Transferor shall execute,
and the Trustee shall authenticate and deliver, in the name of
the designated transferees one or more new registered Class A
Securities, Class B Securities or Class C Securities of any
authorized denominations and of a like aggregate principal amount
and tenor. Successive registrations and registrations of
transfers as aforesaid may be made from time to time as desired,
and each such registration shall be noted on the register.
No transfer of a Class A Security, Class B
Security or Class C Security will be permitted to be made to a
Benefit Plan. Each person acquiring a Class A Security, Class B
Security or Class C Security or the beneficial ownership of a
Class A Security, Class B Security or Class C Security will be
deemed to represent to the Trustee, the Transferor and the
Servicer that it is not (i) an employee benefit plan (as defined
in Section 3(3) of ERISA) that is subject to the provisions of
Title I of ERISA, (ii) a plan described in Section 4975(e)(1) of
the Internal Revenue 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 Internal Revenue
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 for
purposes of clauses (iv) and (v), insurance company general
account, but excluding any entity registered under the Investment
Company Act of 1940, as amended).
The Class A Securityholders, Class B
Securityholders or Class C Securityholders shall comply with
their obligations under Section 3.7 of the Agreement with respect
to the tax treatment of the Class A Securities, Class B
Securities or Class C Securities, except to the extent that a
relevant taxing authority has disallowed such treatment.
In accordance with Section 6.2 of the Agreement,
no sale, assignment, participation, pledge, hypothecation,
transfer or other disposition (a "Transfer") of a Class A
Security, Class B Security or Class C Security (or any interest
therein) shall be made unless the Transferor shall have granted
its prior consent thereto, which consent may not be unreasonably
withheld; provided, however, that for purposes of this sentence,
it shall in all cases be reasonable for the Transferor to
withhold consent to such proposed sale, assignment,
participation, pledge, hypothecation, transfer or other
disposition of all or any part of a Class A Security, Class B
Security or Class C Security (or any interest therein) if the
transaction would, if effected, give rise to any adverse tax
consequence or if such Transfer would create more than an
insubstantial risk that the Trust would be classified for federal
or any applicable state tax purposes as an association or
publicly traded partnership taxable as a corporation, each as
determined in the sole and absolute discretion of the Transferor;
provided, further, that any attempted Transfer that would cause
the number of Targeted Holders (as defined herein) to exceed one-
hundred shall be void.
Each purchaser of an interest in a Class A
Security, Class B Security or Class C Security shall certify that
it is a Person who is either (A)(i) a citizen or resident of the
United States, (ii) a corporation or other entity organized in or
under the laws of the United States or any political subdivision
thereof or (iii) a Person not described in (i) or (ii) whose
ownership of the Class A Securities, Class B Securities or Class
C Securities is effectively connected with such person's conduct
of a trade or business within the United States (within the
meaning of the Internal Revenue Code) and whose ownership of any
interest in a Class A Security, Class B Security or Class C
Security will not result in any withholding obligation with
respect to any payments with respect to the Class A Securities,
Class B Securities or Class C Securities, as applicable, by any
Person or (B) an estate the income of which is includible in
gross income for United States federal income tax purposes or any
trust if a court within the United States is able to exercise
primary supervision over the administration of the trust and one
or more United States fiduciaries have the authority to control
all substantial decisions of the trust. Each such purchaser
shall agree that if they are a Person described in clause
(A)(iii) above, they will furnish to the Person from whom they
are acquiring a Class A Security, Class B Security or Class C
Security, the Servicer and the Trustee, a properly executed U.S.
Internal Revenue Service Form 4224 and a new Form 4224, or any
successor applicable form, upon the expiration or obsolescence of
any previously delivered form (and such other certifications,
representations or opinions of counsel as may be requested by the
Transferor, the Servicer or the Trustee).
Each purchaser of an interest in a Class A
Security, Class B Security or Class C Security shall certify that
if it is not created or organized under the laws of the United
States or any State thereof (including the District of Columbia)
it will, upon written notice by the Transferor that the
Transferor intends, pursuant to Section 1446 or other applicable
section of the Internal Revenue Code, to withhold U.S. tax (a
"Withholding Tax") from amounts paid or accruing hereunder to
such purchaser (such determination being a "Withholding Event"),
for tax years for which the purchaser has already filed U.S.
federal income tax returns (each a "Prior Tax Year") prior to
proper notice of such Withholding Event, provide (A) a signed
officer's certificate of such purchaser stating that amounts paid
or accruing hereunder have been included in such purchaser's U.S.
federal income tax returns for each such Prior Tax Year, which
certificate may be relied on by the Transferor in asserting to
the Internal Revenue Service the applicability of Section 1463 of
the Internal Revenue Code with respect to any Withholding Tax for
each such Prior Tax Year and (B) provide information to the
Transferor or, at the option of such purchaser, to the Internal
Revenue Service in support of the application of Section 1463 of
the Internal Revenue Code for each such Prior Tax Year.
Each purchaser of an interest in a Class A
Security, Class B Security or Class C Security shall certify that
it is not and will not become a partnership, subchapter S
corporation or grantor trust for United States federal income tax
purposes for so long as such purchaser holds a beneficial
interest in such Class A Security, Class B Security or Class C
Security, respectively.
Each purchaser of an interest in a Class A
Security, Class B Security or Class C Security shall certify that
it has neither acquired nor will it Transfer the Class A
Security, Class B Security or Class C Security (or any interest
therein) or cause the Class A Security, Class B Security or Class
C Security (or any interest therein) to be marketed on or through
an "established securities market" within the meaning of Section
7704(b)(1) of the Internal Revenue Code, and any treasury
regulation thereunder, including, without limitation, an over-the-
counter market or an interdealer quotation system that regularly
disseminates firm buy or sell quotations. Such purchaser shall
acknowledge that it is aware that the opinion of special tax
counsel to the Transferor regarding the Trust's status is
dependent in part on the accuracy of the preceding sentence.
Each of the Transferor and the Servicer hereby
agrees and consents to the assignment by each Conduit Purchaser
from time to time of all or any part of its rights under,
interest in and title to this Agreement and the Senior Securities
of its Purchaser Group to any Liquidity Provider or Program
Support Provider for such Conduit Purchaser. In addition, each
of the Transferor and the Servicer hereby consents to the
assignment by each Conduit Purchaser of all of its rights under,
interest in and title to its Purchaser Group Percentage of the
Class A Invested Amount, the Class B Invested Amount and/or the
Class C Invested Amount, as applicable, to the related Alternate
Purchaser in the event such Conduit Purchaser determines not to
fund any Additional Invested Amount hereunder. Notwithstanding
anything to the contrary in this subsection 10(n), the Transferor
and the Servicer do not consent to the assignment by each Conduit
Purchaser of all or any part of its rights under, interest in and
title to (i) the Senior Securities of its Purchaser Group or (ii)
its Purchaser Group Percentage of the Class A Invested Amount,
the Class B Invested Amount and/or the Class C Invested Amount,
as applicable, in each case if (A) such attempted assignment will
cause the number of Persons in any Purchaser Group holding any
interests described above to exceed five (5) or (B) such
attempted transfer would cause the number of Targeted Holders to
exceed one-hundred.
SECTION 11. Ratification of Agreement. As
supplemented by this Series Supplement, the Agreement is in all
respects ratified and confirmed and the Agreement as so
supplemented by this Series Supplement shall be read, taken, and
construed as one and the same instrument.
SECTION 12. Counterparts. This Series Supplement may
be executed in any number of counterparts, each of which so
executed shall be deemed to be an original, but all of such
counterparts shall together constitute but one and the same
instrument.
SECTION 13. FCI Note. The Transferor has received a
note from Fingerhut Companies Inc. in the amount of $18,000,000
(such note, together with any additional notes of Fingerhut
Companies Inc. held by the Transferor at any time, the "FCI
Note"). The Transferor hereby agrees that at no time shall the
aggregate principal amount of the FCI Note be less than
$1,000,000 (the "FCI Note Required Amount"). The FCI Note may
not be sold, transferred, assigned, pledged, hypothecated,
participated or otherwise conveyed or encumbered, nor may the
Transferor grant any security interest in the FCI Note.
SECTION 14. 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 15. 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.
IN WITNESS WHEREOF, the Transferor, the Servicer and
the Trustee have caused this Series Supplement to be duly
executed by their respective officers as of the day and year
first above written.
FINGERHUT RECEIVABLES, INC.
Transferor
By: /s/ James M. Wehmann
Name: James M. Wehmann
Title: President and Treasurer
FINGERHUT NATIONAL BANK
Servicer
By: /s/ James M. Wehman
Name: James M. Wehmann
Title: Treasurer
THE BANK OF NEW YORK (DELAWARE)
Trustee
By: /s/ Cheryl L. Laser
Name: Cheryl L. Laser
Title: Assistant Vice President
EXHIBIT A-1
[FORM OF VARIABLE FUNDING ASSET BACKED SECURITY, CLASS A]
FINGERHUT MASTER TRUST
VARIABLE FUNDING TRUST SECURITY
SERIES 1998-3, CLASS A
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 LAW. 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 PURSUANT TO RULE 144A UNDER THE SECURITIES ACT TO
AN INSTITUTIONAL INVESTOR THAT THE HOLDER REASONABLY
BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE
MEANING OF RULE 144A ("QIB") PURCHASING FOR ITS OWN ACCOUNT
OR A QIB PURCHASING FOR THE ACCOUNT OF A QIB, WHOM THE
HOLDER HAS INFORMED, IN EACH CASE, THAT THE REOFFER, RESALE,
PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE
144A, OR TO THE TRANSFEROR. EACH SECURITY OWNER BY
ACCEPTING A BENEFICIAL INTEREST IN THIS SECURITY IS DEEMED
TO REPRESENT AND WARRANT THAT IT IS A QIB PURCHASING FOR ITS
OWN ACCOUNT OR A QIB PURCHASING FOR THE ACCOUNT OF ANOTHER
QIB. THE TRANSFER OF THIS SECURITY IS SUBJECT TO CERTAIN
CONDITIONS SET FORTH IN THE POOLING AND SERVICING AGREEMENT
REFERRED TO HEREIN. EACH CLASS A SECURITY OWNER BY
ACCEPTING A BENEFICIAL INTEREST IN THIS SECURITY FURTHER
REPRESENTS AND WARRANTS FOR THE BENEFIT OF FINGERHUT
RECEIVABLES, INC. THAT SUCH PURCHASER IS NOT AND WILL NOT
BECOME A PARTNERSHIP, SUBCHAPTER S CORPORATION OR GRANTOR
TRUST FOR UNITED STATES FEDERAL INCOME TAX PURPOSES FOR SO
LONG AS SUCH PURCHASER HOLDS A BENEFICIAL INTEREST IN THIS
SECURITY.
THIS SECURITY MAY NOT BE ACQUIRED BY OR SOLD, TRADED OR
TRANSFERRED TO A PERSON WHO IS NOT EITHER (A)(I) A CITIZEN OR
RESIDENT OF THE UNITED STATES, (II) A CORPORATION, PARTNERSHIP OR
OTHER ENTITY ORGANIZED IN OR UNDER THE LAWS OF THE UNITED STATES
OR ANY POLITICAL SUBDIVISION THEREOF OR (III) A PERSON NOT
DESCRIBED IN (I) OR (II) WHOSE OWNERSHIP OF THE CLASS A
SECURITIES IS EFFECTIVELY CONNECTED WITH SUCH PERSON'S CONDUCT OF
A TRADE OR BUSINESS WITHIN THE UNITED STATES (WITHIN THE MEANING
OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"))
AND ITS OWNERSHIP OF ANY INTEREST IN A CLASS A SECURITY WILL NOT
RESULT IN ANY WITHHOLDING OBLIGATION WITH RESPECT TO ANY PAYMENTS
WITH RESPECT TO THE CLASS A SECURITIES BY ANY PERSON (OTHER THAN
WITHHOLDING, IF ANY, UNDER SECTION 1446 OF THE CODE) OR (B) AN
ESTATE THE INCOME OF WHICH IS INCLUDIBLE IN GROSS INCOME FOR
UNITED STATES FEDERAL INCOME TAX PURPOSES OR ANY TRUST IF A COURT
WITHIN THE UNITED STATES IS ABLE TO EXERCISE PRIMARY SUPERVISION
OVER THE ADMINISTRATION OF THE TRUST AND ONE OR MORE UNITED
STATES FIDUCIARIES HAVE THE AUTHORITY TO CONTROL ALL SUBSTANTIAL
DECISIONS OF THE TRUST.
NO SALE, ASSIGNMENT, PARTICIPATION, PLEDGE, HYPOTHECATION,
TRANSFER OR OTHER DISPOSITION OF THIS SECURITY (OR ANY INTEREST
THEREIN) SHALL BE MADE UNLESS THE TRANSFEROR SHALL HAVE GRANTED
ITS PRIOR CONSENT THERETO, WHICH CONSENT MAY NOT BE UNREASONABLY
WITHHELD. THIS SECURITY MAY NOT BE ACQUIRED, SOLD, TRADED OR
TRANSFERRED, NOR MAY AN INTEREST IN THIS SECURITY BE MARKETED, ON
OR THROUGH (I) AN "ESTABLISHED SECURITIES MARKET" WITHIN THE
MEANING OF SECTION 7704(b)(1) OF THE CODE AND ANY PROPOSED,
TEMPORARY OR FINAL TREASURY REGULATION THEREUNDER, INCLUDING,
WITHOUT LIMITATION, AN OVER-THE-COUNTER-MARKET OR AN INTERDEALER
QUOTATION SYSTEM THAT REGULARLY DISSEMINATES FIRM BUY OR SELL
QUOTATIONS OR (II) A "SECONDARY MARKET" WITHIN THE MEANING OF
SECTION 7704(b)(2) OF THE CODE AND ANY PROPOSED, TEMPORARY OR
FINAL TREASURY REGULATION THEREUNDER, INCLUDING A MARKET WHEREIN
INTERESTS IN THE CLASS A SECURITIES ARE REGULARLY QUOTED BY ANY
PERSON MAKING A MARKET IN SUCH INTERESTS AND A MARKET WHEREIN ANY
PERSON REGULARLY MAKES AVAILABLE BID OR OFFER QUOTES WITH RESPECT
TO INTERESTS IN THE CLASS A SECURITIES AND STANDS READY TO EFFECT
BUY OR SELL TRANSACTIONS AT THE QUOTED PRICES FOR ITSELF OR ON
BEHALF OF OTHERS.
EACH PURCHASER REPRESENTS AND WARRANTS FOR THE BENEFIT OF
FINGERHUT RECEIVABLES, INC. THAT SUCH PURCHASER IS NOT (I) AN
EMPLOYEE BENEFIT PLAN (AS DEFINED IN SECTION 3(3) OF ERISA) THAT
IS SUBJECT TO THE PROVISIONS OF TITLE I OF ERISA, (II) A PLAN
DESCRIBED IN SECTION 4975(e)(1) OF THE CODE, (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
FOR PURPOSES OF CLAUSES (IV) AND (V), ANY INSURANCE COMPANY
GENERAL ACCOUNT, BUT EXCLUDING ANY ENTITY REGISTERED UNDER THE
INVESTMENT COMPANY ACT OF 1940, AS AMENDED).
No. Percentage Interest: ___%
FINGERHUT MASTER TRUST
VARIABLE FUNDING TRUST SECURITY
SERIES 1998-3, 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 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 any 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
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 Fingerhut Receivables, Inc., as
Transferor (the "Transferor"), Fingerhut National Bank, as the
Servicer (the "Servicer"), and The Bank of New York (Delaware),
as Trustee (the "Trustee"), and the Series 1998-3 Supplement,
dated as of July 30, 1998 (the "Series 1998-3 Supplement"), among
the Transferor, the Servicer and the Trustee (the Pooling and
Servicing Agreement, as supplemented by the Series 1998-3
Supplement, is herein referred to as the "Agreement"). The
corpus of the Trust consists of all of the Transferor's right,
title and interest in, to and under (i) the Trust Property (as
defined in the Agreement) and (ii) the property described in
Section 3A of the Series 1998-3 Supplement and Section 4.5 of the
Agreement.
This Security does not purport to summarize the Agreement and
reference is made to the Agreement for information with respect
to the interests, rights, benefits, obligations, proceeds, and
duties evidenced hereby and the rights, duties and obligations of
the Trustee. To the extent not defined herein, the capitalized
terms used herein have the meanings ascribed to them in the
Agreement. This Security is one of a series of securities
entitled the "Fingerhut Master Trust Variable Funding Asset
Backed Security, Series 1998-3, Class A" (the "Class A
Securities"), and represents a fractional undivided interest in
the Trust, and is issued under and is subject to the terms,
provisions and conditions of the Agreement, to which Agreement,
as amended from time to time, the Securityholder by virtue of the
acceptance hereof assents and by which the Securityholder is
bound. In the case of any conflict between terms specified in
this Security and terms specified in the Agreement, the terms of
the Agreement shall govern.
The Transferor has structured the Agreement, the Class A
Securities, the Fingerhut Master Trust Variable Funding Asset
Backed Securities, Series 1998-3, Class B (the "Class B
Securities") and the Fingerhut Master Trust Variable Funding
Asset Backed Securities, Series 1998-3, Class C (the "Class C
Securities") with the intention that the Class A Securities, the
Class B Securities and the Class C Securities will qualify under
applicable tax law as indebtedness, and both the Transferor and
each holder of a Class A Security (a "Class A Securityholder") or
any interest therein by acceptance of its Security or any
interest therein, agrees to treat the Class A Security for
purposes of federal, state and local income or franchise taxes
and any other tax imposed on or measured by income, as
indebtedness.
Upon issuance, the Class A Security represents the right to
receive, on each Business Day, an amount equal to the lesser of
(x) the Available Series 1998-3 Finance Charge Collections for
such Business Day and (y) the sum of (A) an amount equal to the
product of (i) the Class A Interest Rate and (ii) a fraction the
numerator of which is the actual number of days from and
including the immediately preceding Business Day to but excluding
such Business Day and the denominator of which is 365 or 366, as
the case may be, and (iii) the Class A Outstanding Principal
Amount on such Business Day after giving effect to all
transactions on such Business Day plus (B) the excess, if any, of
the amount payable to the Class A Securityholders pursuant to
clause (A) on each prior Business Day over the amount which has
been paid to the Class A Securityholders with respect thereto on
each prior Business Day. Such amounts shall be payable on the
15th day of each month commencing September 15, 1998, or if such
day is not a business day, on the next succeeding business day
(each, a "Distribution Date") or on such other, more frequent,
dates as described in Section 4.11 of the Agreement.
Unless there is any Extension, on the earlier of the first day of
the August 2001 Monthly Period and the Pay Out Commencement Date,
interest and principal will be distributed to the Class A
Securityholders on each Business Day prior to the Series 1998-3
Termination Date. If in accordance with Section 6.17 of the
Agreement, the Transferor elects to issue an Extension Notice and
the conditions precedent for Extension specified therein have
been satisfied, no principal will be payable with respect to the
Class A Securities until the date specified in such Extension
Notice or in the last of any subsequent Extension Notices.
Interest for any Business Day due but not paid on any Business
Day will be due on the next succeeding Business Day.
On any Business Day during the Revolving Period, the Transferor
may specify an amount, to be deposited into the Principal Funding
Account. Any amounts so deposited, shall be paid, on a pro rata
basis, to the Class A Securityholders, the Class B
Securityholders and the Class C Securityholders in accordance
with Section 9A of the Agreement and upon payment shall reduce
the Class A Invested Amount, the Class B Invested Amount and the
Class C Invested Amount by amounts equal to any such payments.
In addition the Transferor may specify, upon the issuance of a
new Series pursuant to an Exchange made at any time during the
Revolving Period, that the proceeds of such issuance be deposited
into the Principal Funding Account for payment to the Senior
Securityholders pursuant to Section 9A of the Agreement. The
Class A Invested Amount will be reduced by an amount equal to the
amount of any such payments made to the Class A Securityholder.
During the Amortization Period, no principal will be payable to
the Class B Securityholders, or Class C Securityholders until all
principal payments have been made to the Class A Securityholders.
In addition, pursuant to Section 6.15 of the Agreement, the
holders of this Security may from time to time be required, prior
to the Increase Termination Date, to purchase Additional Class A
Invested Amounts on the terms and conditions specified therein.
The holder of this Security is authorized to record on the grid
attached to its Class A Security (or at such Securityholder's
option, in its internal books and records) the date and amount of
any Additional Invested Amount purchased by it, and each
repayment thereof; provided that failure to make any such
recordation on such grid or any error in such grid shall not
adversely affect such Securityholder's rights with respect to its
Class A Invested Amount and its right to receive interest
payments in respect of the Class A Invested Amount held by such
Securityholder.
"Class A Invested Amount" shall mean, when used with respect to
any Business Day, an amount equal to (a) the Class A Initial
Invested Amount minus (b) the aggregate amount of principal
payments made to Class A Securityholders through and including
such Business Day, minus (c) the aggregate amount of Class A
Charge-Offs for all prior Distribution Dates, plus (d) the sum of
the aggregate amount applied through and including such Business
Day pursuant to subsection 4.9(a)(vii) of the Agreement
(including, with respect to such subsection, amounts applied
thereto pursuant to subsections 4.10(a) and (b) and Section 4.14
of the Agreement), for the purpose of reinstating amounts reduced
pursuant to the foregoing clause (c) and plus (e) the aggregate
principal amount of any Additional Class A Invested Amounts
purchased pursuant to Section 6.15 of the Agreement; provided,
however, that the Class A Invested Amount shall in no event be
reduced below zero or greater than the Class A Maximum Invested
Amount.
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
of and interest on the Class A Securities are due and payable no
later than the earlier to occur of (i) the day after the
Distribution Date on which the Series 1998-3 Securities are paid
in full or (ii) the first day of the February 2006 Monthly Period
or such earlier date set forth in an Extension Notice, if any
(the "Series 1998-3 Termination Date"). After the Series 1998-3
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 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 Class C 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
1998-3 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 Class C
Securityholders pro rata in final payment of the Class C
Securities 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.
IN WITNESS WHEREOF, the Transferor has caused this Security to be
duly executed under its official seal.
FINGERHUT RECEIVABLES, INC.
By:____________________________
Name:
Title:
Dated:
CERTIFICATE OF AUTHENTICATION
This is the Class A Security referred to in the within-
mentioned Pooling and Servicing Agreement.
THE BANK OF NEW YORK
By:___________________________
Name:
Title:
Date Beginning Additions Payments Ending
Principal Principal
Balance Balance
Exhibit A-2
[FORM OF VARIABLE FUNDING ASSET BACKED SECURITY, CLASS B]
FINGERHUT MASTER TRUST
VARIABLE FUNDING ASSET BACKED SECURITY
SERIES 1998-3, CLASS B
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 LAW. 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 PURSUANT TO RULE
144A UNDER THE SECURITIES ACT TO AN INSTITUTIONAL
INVESTOR THAT THE HOLDER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF
RULE 144A ("QIB") PURCHASING FOR ITS OWN ACCOUNT OR A
QIB PURCHASING FOR THE ACCOUNT OF A QIB, WHOM THE
HOLDER HAS INFORMED, IN EACH CASE, THAT THE REOFFER,
RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN
RELIANCE ON RULE 144A, OR TO THE TRANSFEROR. EACH
SECURITY OWNER BY ACCEPTING A BENEFICIAL INTEREST IN
THIS SECURITY IS DEEMED TO REPRESENT AND WARRANT THAT
IT IS A QIB PURCHASING FOR ITS OWN ACCOUNT OR A QIB
PURCHASING FOR THE ACCOUNT OF ANOTHER QIB. THE
TRANSFER OF THIS SECURITY IS SUBJECT TO CERTAIN
CONDITIONS SET FORTH IN THE POOLING AND SERVICING
AGREEMENT REFERRED TO HEREIN. EACH CLASS B SECURITY
OWNER BY ACCEPTING A BENEFICIAL INTEREST IN THIS
SECURITY FURTHER REPRESENTS AND WARRANTS FOR THE
BENEFIT OF FINGERHUT RECEIVABLES, INC. THAT SUCH
PURCHASER IS NOT AND WILL NOT BECOME A PARTNERSHIP,
SUBCHAPTER S CORPORATION OR GRANTOR TRUST FOR UNITED
STATES FEDERAL INCOME TAX PURPOSES FOR SO LONG AS SUCH
PURCHASER HOLDS A BENEFICIAL INTEREST IN THIS SECURITY.
THIS SECURITY MAY NOT BE ACQUIRED BY OR SOLD, TRADED OR
TRANSFERRED TO A PERSON WHO IS NOT EITHER (A)(I) A CITIZEN
OR RESIDENT OF THE UNITED STATES, (II) A CORPORATION,
PARTNERSHIP OR OTHER ENTITY ORGANIZED IN OR UNDER THE LAWS
OF THE UNITED STATES OR ANY POLITICAL SUBDIVISION THEREOF OR
(III) A PERSON NOT DESCRIBED IN (I) OR (II) WHOSE OWNERSHIP
OF THE CLASS B SECURITIES IS EFFECTIVELY CONNECTED WITH SUCH
PERSON'S CONDUCT OF A TRADE OR BUSINESS WITHIN THE UNITED
STATES (WITHIN THE MEANING OF THE INTERNAL REVENUE CODE OF
1986, AS AMENDED (THE "CODE")) AND ITS OWNERSHIP OF ANY
INTEREST IN A CLASS B SECURITY WILL NOT RESULT IN ANY
WITHHOLDING OBLIGATION WITH RESPECT TO ANY PAYMENTS WITH
RESPECT TO THE CLASS B SECURITIES BY ANY PERSON (OTHER THAN
WITHHOLDING, IF ANY, UNDER SECTION 1446 OF THE CODE) OR (B)
AN ESTATE THE INCOME OF WHICH IS INCLUDIBLE IN GROSS INCOME
FOR UNITED STATES FEDERAL INCOME TAX PURPOSES OR ANY TRUST
IF A COURT WITHIN THE UNITED STATES IS ABLE TO EXERCISE
PRIMARY SUPERVISION OVER THE ADMINISTRATION OF THE TRUST AND
ONE OR MORE UNITED STATES FIDUCIARIES HAVE THE AUTHORITY TO
CONTROL ALL SUBSTANTIAL DECISIONS OF THE TRUST.
NO SALE, ASSIGNMENT, PARTICIPATION, PLEDGE,
HYPOTHECATION, TRANSFER OR OTHER DISPOSITION OF THIS
SECURITY (OR ANY INTEREST THEREIN) SHALL BE MADE UNLESS THE
TRANSFEROR SHALL HAVE GRANTED ITS PRIOR CONSENT THERETO,
WHICH CONSENT MAY NOT BE UNREASONABLY WITHHELD. THIS
SECURITY MAY NOT BE ACQUIRED, SOLD, TRADED OR TRANSFERRED,
NOR MAY AN INTEREST IN THIS SECURITY BE MARKETED, ON OR
THROUGH (I) AN "ESTABLISHED SECURITIES MARKET" WITHIN THE
MEANING OF SECTION 7704(b)(1) OF THE CODE AND ANY PROPOSED,
TEMPORARY OR FINAL TREASURY REGULATION THEREUNDER,
INCLUDING, WITHOUT LIMITATION, AN OVER-THE-COUNTER-MARKET OR
AN INTERDEALER QUOTATION SYSTEM THAT REGULARLY DISSEMINATES
FIRM BUY OR SELL QUOTATIONS OR (II) A "SECONDARY MARKET"
WITHIN THE MEANING OF SECTION 7704(b)(2) OF THE CODE AND ANY
PROPOSED, TEMPORARY OR FINAL TREASURY REGULATION THEREUNDER,
INCLUDING A MARKET WHEREIN INTERESTS IN THE CLASS B
SECURITIES ARE REGULARLY QUOTED BY ANY PERSON MAKING A
MARKET IN SUCH INTERESTS AND A MARKET WHEREIN ANY PERSON
REGULARLY MAKES AVAILABLE BID OR OFFER QUOTES WITH RESPECT
TO INTERESTS IN THE CLASS B SECURITIES AND STANDS READY TO
EFFECT BUY OR SELL TRANSACTIONS AT THE QUOTED PRICES FOR
ITSELF OR ON BEHALF OF OTHERS.
EACH PURCHASER REPRESENTS AND WARRANTS FOR THE BENEFIT OF
FINGERHUT RECEIVABLES, INC. THAT SUCH PURCHASER IS NOT (I)
AN EMPLOYEE BENEFIT PLAN (AS DEFINED IN SECTION 3(3) OF
ERISA) THAT IS SUBJECT TO THE PROVISIONS OF TITLE I OF
ERISA, (II) A PLAN DESCRIBED IN SECTION 4975(e)(1) OF THE
CODE, (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
FOR PURPOSES OF CLAUSES (IV) AND (V), ANY INSURANCE COMPANY
GENERAL ACCOUNT, BUT EXCLUDING ANY ENTITY REGISTERED UNDER
THE INVESTMENT COMPANY ACT OF 1940, AS AMENDED).
No. Percentage Interest: ___%
FINGERHUT MASTER TRUST
VARIABLE FUNDING ASSET BACKED SECURITY
SERIES 1998-3, 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 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 any 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
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 Fingerhut Receivables, Inc., as
Transferor (the "Transferor"), Fingerhut National Bank, as
Servicer (the "Servicer"), and The Bank of New York (Delaware),
as Trustee (the "Trustee"), and the Series 1998-3 Supplement,
dated as of July 30, 1998 (the "Series 1998-3 Supplement"), among
the Transferor, the Servicer and the Trustee (the Pooling and
Servicing Agreement, as supplemented by the Series 1998-3
Supplement, is herein referred to as the "Agreement"). The
corpus of the Trust consists of all of the Transferor's right,
title and interest in, to and under (i) the Trust Property (as
defined in the Agreement) and (ii) the property described in
Section 3A of the Series 1998-3 Supplement and Section 4.5 of the
Agreement.
This Security does not purport to summarize the
Agreement and reference is made to the Agreement for information
with respect to the interests, rights, benefits, obligations,
proceeds, and duties evidenced hereby and the rights, duties and
obligations of the Trustee. To the extent not defined herein,
the capitalized terms used herein have the meanings ascribed to
them in the Agreement. This Security is one of a series of
Securities entitled "Fingerhut Master Trust Variable Funding
Asset Backed Securities, Series 1998-3, Class B" (the "Class B
Securities"), each of which represents a fractional undivided
interest in the Trust, and is issued under and is subject to the
terms, provisions and conditions of the Agreement, to which
Agreement, as amended from time to time, the Securityholder by
virtue of the acceptance hereof assents and by which the
Securityholder is bound. In the case of any conflict between
terms specified in this Security and terms specified in the
Agreement, the terms of the Agreement shall govern.
The Transferor has structured the Agreement, the Class
B Securities, the Fingerhut Master Trust Variable Funding Asset
Backed Securities, Series 1998-3, Class A (the "Class A
Securities") and the Fingerhut Master Trust Variable Funding
Asset Backed Securities, Series 1998-3, Class C (the "Class C
Securities") with the intention that the Class A Securities, the
Class B Securities and the Class C Securities will qualify under
applicable tax law as indebtedness, and both the Transferor and
each holder of a Class B Security (a "Class B Securityholder") or
any interest therein by acceptance of its Security or any
interest therein, agrees to treat the Class B Security for
purposes of federal, state and local income or franchise taxes
and any other tax imposed on or measured by income, as
indebtedness.
Upon issuance, the Class B Security represents the
right to receive, on each Business Day, an amount equal to the
lesser of (x) the Available Series 1998-3 Finance Charge
Collections for such Business Day and (y) the sum of (A) an
amount equal to the product of (i) the Class B Interest Rate and
(ii) a fraction the numerator of which is the actual number of
days from and including the immediately preceding Business Day to
but excluding such Business Day and the denominator of which is
365 or 366, as the case may be, and (iii) the Class B Outstanding
Principal Amount on such Business Day after giving effect to all
transactions on such Business Day plus (B) the excess, if any, of
the amount payable to the Class A Securityholders pursuant to
clause (A) on each prior Business Day over the amount which has
been paid to the Class B Securityholders with respect thereto on
each prior Business Day. Such amounts shall be payable on the
15th day of each month commencing September 15, 1998, or if such
day is not a business day, on the next succeeding business day
(each, a "Distribution Date") or on such other, more frequent,
dates as described in Section 4.11 of the Agreement.
On the Class B Principal Payment Commencement Date
interest and principal will be distributed to the Class B
Securityholders on each Business Day prior to the Series 1998-3
Termination Date. Interest for any Business Day due but not paid
on any Business Day will be due on the next succeeding Business
Day.
On any Business Day during the Revolving Period, the
Transferor may specify an amount, to be deposited into the
Principal Funding Account. Any amounts so deposited, shall be
paid, on a pro rata basis, to the Class A Securityholders, the
Class B Securityholders and the Class C Securityholders in
accordance with Section 9A of the Agreement and upon payment
shall reduce the Class A Invested Amount, the Class B Invested
Amount and the Class C Invested Amount by amounts equal to any
such payments. In addition the Transferor may specify, upon the
issuance of a new Series pursuant to an Exchange made at any time
during the Revolving Period, that the proceeds of such issuance
be deposited into the Principal Funding Account for payment to
the Senior Securityholders pursuant to Section 9A of the
Agreement. The Class B Invested Amount will be reduced by an
amount equal to the amount of any such payments made to the Class
B Securityholder.
After the Amortization Period Commencement Date no
principal will be payable to the Class B Securityholders until
the Class B Principal Payment Commencement Date, which is the
Business Day either on or following the Distribution Date, on
which the Class A Invested Amount had been paid in full. During
the Amortization Period, no principal will be payable to the
Class B Securityholders until all principal payments have been
made to the Class A Securityholders and no principal payments
will be made to the Class C Securityholder until the Business Day
either on or following the Business Day on which the Class B
Invested Amount has been paid in full.
In addition, pursuant to Section 6.15 of the Agreement,
the holders of this Security may from time to time be required,
prior to the Increase Termination Date, to purchase Additional
Class B Invested Amounts on the terms and conditions specified
therein. The holder of this Security is authorized to record on
the grid attached to its Class B Security (or at such
Securityholder's option, in its internal books and records) the
date and amount of any Additional Invested Amount purchased by
it, and each repayment thereof; provided that failure to make any
such recordation on such grid or any error in such grid shall not
adversely affect such Securityholder's rights with respect to its
Class B Invested Amount and its right to receive interest
payments in respect of the Class B Invested Amount held by such
Securityholder.
"Class B Invested Amount" shall mean, when used with
respect to any Business Day, an amount equal to (a) the Class B
Initial Invested Amount, minus (b) the aggregate amount of
principal payments made to Class B Securityholders 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
for which neither the Class D Invested Amount nor the Class C
Invested Amount has been reduced on all prior Distribution Dates
pursuant to Section 4.14(d) of the Agreement, plus (e) the sum of
the aggregate amount applied through and including such Business
Day pursuant to subsection 4.9(a)(viii) of the Agreement
(including with respect to such subsection, amounts applied
thereto pursuant to subsections 4.10(a) and (b) and Section 4.14
of the Agreement), for the purpose of reinstating amounts reduced
pursuant to the foregoing clauses (c) and (d), and plus (f) the
aggregate principal amount of any Additional Class B Invested
Amounts purchased pursuant to Section 6.15 of the Agreement;
provided, however, that the Class B Invested Amount shall in no
event be reduced below zero or greater than the Class B Maximum
Invested Amount.
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 of and interest on the Class B Securities are due and
payable no later than the earlier to occur of (i) the day after
the Business Day on which the Series 1998-3 Securities are paid
in full or (ii) the first day of the February 2006 Monthly Period
or such earlier date set forth in an Extension Notice, if any
(the "Series 1998-3 Termination Date"). After the Series 1998-3
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 1998-3 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 Class C Invested Amount and the
Class D Invested Amount at the close of business on such date
(but not more than the total amount of Receivables allocable to
the Investor Securities), and shall pay the proceeds to the Class
A Securityholders pro rata in final payment of the Class A
Securities, then to the Class B Securityholders pro rata in final
payment of the Class B Securities, then to the Class C
Securityholders pro rata in final payment of the Class C
Securities 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.
IN WITNESS WHEREOF, the Transferor has caused this
Security to be duly executed under its official seal.
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
By: _______________________
Name:
Title:
Date Beginning Additions Payments Ending
Principal Principal
Balance Balance
Exhibit A-3
[FORM OF VARIABLE FUNDING ASSET BACKED SECURITY, CLASS C]
FINGERHUT MASTER TRUST
VARIABLE FUNDING TRUST SECURITY
SERIES 1998-3, CLASS C
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 LAW. 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 PURSUANT TO RULE 144A UNDER
THE SECURITIES ACT TO AN INSTITUTIONAL INVESTOR THAT THE
HOLDER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL
BUYER WITHIN THE MEANING OF RULE 144A ("QIB") PURCHASING FOR
ITS OWN ACCOUNT OR A QIB PURCHASING FOR THE ACCOUNT OF A
QIB, WHOM THE HOLDER HAS INFORMED, IN EACH CASE, THAT THE
REOFFER, RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN
RELIANCE ON RULE 144A, OR TO THE TRANSFEROR. EACH SECURITY
OWNER BY ACCEPTING A BENEFICIAL INTEREST IN THIS SECURITY IS
DEEMED TO REPRESENT AND WARRANT THAT IT IS A QIB PURCHASING
FOR ITS OWN ACCOUNT OR A QIB PURCHASING FOR THE ACCOUNT OF
ANOTHER QIB. THE TRANSFER OF THIS SECURITY IS SUBJECT TO
CERTAIN CONDITIONS SET FORTH IN THE POOLING AND SERVICING
AGREEMENT REFERRED TO HEREIN. EACH CLASS C SECURITY OWNER
BY ACCEPTING A BENEFICIAL INTEREST IN THIS SECURITY FURTHER
REPRESENTS AND WARRANTS FOR THE BENEFIT OF FINGERHUT
RECEIVABLES, INC. THAT SUCH PURCHASER IS NOT AND WILL NOT
BECOME A PARTNERSHIP, SUBCHAPTER S CORPORATION OR GRANTOR
TRUST FOR UNITED STATES FEDERAL INCOME TAX PURPOSES FOR SO
LONG AS SUCH PURCHASER HOLDS A BENEFICIAL INTEREST IN THIS
SECURITY.
THIS SECURITY MAY NOT BE ACQUIRED BY OR SOLD, TRADED OR
TRANSFERRED TO A PERSON WHO IS NOT EITHER (A)(I) A CITIZEN
OR RESIDENT OF THE UNITED STATES, (II) A CORPORATION,
PARTNERSHIP OR OTHER ENTITY ORGANIZED IN OR UNDER THE LAWS
OF THE UNITED STATES OR ANY POLITICAL SUBDIVISION THEREOF OR
(III) A PERSON NOT DESCRIBED IN (I) OR (II) WHOSE OWNERSHIP
OF THE CLASS C SECURITIES IS EFFECTIVELY CONNECTED WITH SUCH
PERSON'S CONDUCT OF A TRADE OR BUSINESS WITHIN THE UNITED
STATES (WITHIN THE MEANING OF THE INTERNAL REVENUE CODE OF
1986, AS AMENDED (THE "CODE")) AND ITS OWNERSHIP OF ANY
INTEREST IN A CLASS C SECURITY WILL NOT RESULT IN ANY
WITHHOLDING OBLIGATION WITH RESPECT TO ANY PAYMENTS WITH
RESPECT TO THE CLASS C SECURITIES BY ANY PERSON (OTHER THAN
WITHHOLDING, IF ANY, UNDER SECTION 1446 OF THE CODE) OR (B)
AN ESTATE THE INCOME OF WHICH IS INCLUDIBLE IN GROSS INCOME
FOR UNITED STATES FEDERAL INCOME TAX PURPOSES OR ANY TRUST
IF A COURT WITHIN THE UNITED STATES IS ABLE TO EXERCISE
PRIMARY SUPERVISION OVER THE ADMINISTRATION OF THE TRUST AND
ONE OR MORE UNITED STATES FIDUCIARIES HAVE THE AUTHORITY TO
CONTROL ALL SUBSTANTIAL DECISIONS OF THE TRUST.
NO SALE, ASSIGNMENT, PARTICIPATION, PLEDGE,
HYPOTHECATION, TRANSFER OR OTHER DISPOSITION OF THIS
SECURITY (OR ANY INTEREST THEREIN) SHALL BE MADE UNLESS THE
TRANSFEROR SHALL HAVE GRANTED ITS PRIOR CONSENT THERETO,
WHICH CONSENT MAY NOT BE UNREASONABLY WITHHELD. THIS
SECURITY MAY NOT BE ACQUIRED, SOLD, TRADED OR TRANSFERRED,
NOR MAY AN INTEREST IN THIS SECURITY BE MARKETED, ON OR
THROUGH (I) AN "ESTABLISHED SECURITIES MARKET" WITHIN THE
MEANING OF SECTION 7704(b)(1) OF THE CODE AND ANY PROPOSED,
TEMPORARY OR FINAL TREASURY REGULATION THEREUNDER,
INCLUDING, WITHOUT LIMITATION, AN OVER-THE-COUNTER-MARKET OR
AN INTERDEALER QUOTATION SYSTEM THAT REGULARLY DISSEMINATES
FIRM BUY OR SELL QUOTATIONS OR (II) A "SECONDARY MARKET"
WITHIN THE MEANING OF SECTION 7704(b)(2) OF THE CODE AND ANY
PROPOSED, TEMPORARY OR FINAL TREASURY REGULATION THEREUNDER,
INCLUDING A MARKET WHEREIN INTERESTS IN THE CLASS C
SECURITIES ARE REGULARLY QUOTED BY ANY PERSON MAKING A
MARKET IN SUCH INTERESTS AND A MARKET WHEREIN ANY PERSON
REGULARLY MAKES AVAILABLE BID OR OFFER QUOTES WITH RESPECT
TO INTERESTS IN THE CLASS C SECURITIES AND STANDS READY TO
EFFECT BUY OR SELL TRANSACTIONS AT THE QUOTED PRICES FOR
ITSELF OR ON BEHALF OF OTHERS.
EACH PURCHASER REPRESENTS AND WARRANTS FOR THE BENEFIT
OF FINGERHUT RECEIVABLES, INC. THAT SUCH PURCHASER IS NOT
(I) AN EMPLOYEE BENEFIT PLAN (AS DEFINED IN SECTION 3(3) OF
ERISA) THAT IS SUBJECT TO THE PROVISIONS OF TITLE I OF
ERISA, (II) A PLAN DESCRIBED IN SECTION 4975(e)(1) OF THE
CODE, (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
FOR PURPOSES OF CLAUSES (IV) AND (V), ANY INSURANCE COMPANY
GENERAL ACCOUNT, BUT EXCLUDING ANY ENTITY REGISTERED UNDER
THE INVESTMENT COMPANY ACT OF 1940, AS AMENDED).
No. Percentage Interest: ___%
FINGERHUT MASTER TRUST
VARIABLE FUNDING TRUST SECURITY
SERIES 1998-3, CLASS C
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 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 any 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
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 Fingerhut Receivables, Inc., as
Transferor (the "Transferor"), Fingerhut National Bank, as the
Servicer (the "Servicer"), and The Bank of New York (Delaware),
as Trustee (the "Trustee"), and the Series 1998-3 Supplement,
dated as of July 30, 1998 (the "Series 1998-3 Supplement"), among
the Transferor, the Servicer and the Trustee (the Pooling and
Servicing Agreement, as supplemented by the Series 1998-3
Supplement, is herein referred to as the "Agreement"). The
corpus of the Trust consists of all of the Transferor's right,
title and interest in, to and under (i) the Trust Property (as
defined in the Agreement) and (ii) the property described in
Section 3A of the Series 1998-3 Supplement and Section 4.5 of the
Agreement.
This Security does not purport to summarize the
Agreement and reference is made to the Agreement for information
with respect to the interests, rights, benefits, obligations,
proceeds, and duties evidenced hereby and the rights, duties and
obligations of the Trustee. To the extent not defined herein,
the capitalized terms used herein have the meanings ascribed to
them in the Agreement. This Security is one of a series of
Securities entitled "Fingerhut Master Trust Variable Funding
Asset Backed Securities, Series 1998-3, Class C" (the "Class C
Securities"), each of which represents a fractional undivided
interest in the Trust, and is issued under and is subject to the
terms, provisions and conditions of the Agreement, to which
Agreement, as amended from time to time, the Securityholder by
virtue of the acceptance hereof assents and by which the
Securityholder is bound. In the case of any conflict between
terms specified in this Security and terms specified in the
Agreement, the terms of the Agreement shall govern.
The Transferor has structured the Agreement, the Class
C Securities, the Fingerhut Master Trust Variable Funding Asset
Backed Securities, Series 1998-3, Class A (the "Class A
Securities") and the Fingerhut Master Trust Variable Funding
Asset Backed Securities, Series 1998-3, Class B (the "Class B
Securities") with the intention that the Class A Securities, the
Class B Securities and the Class C Securities will qualify under
applicable tax law as indebtedness, and both the Transferor and
each holder of a Class C Security (a "Class C Securityholder") or
any interest therein by acceptance of its Security or any
interest therein, agrees to treat the Class C Security for
purposes of federal, state and local income or franchise taxes
and any other tax imposed on or measured by income, as
indebtedness.
Upon issuance, the Class C Security represents the
right to receive, on each Business Day, an amount equal to the
lesser of (x) the Available Series 1998-3 Finance Charge
Collections for such Business Day and (y) the sum of (A) an
amount equal to the product of (i) the Class C Interest Rate and
(ii) a fraction the numerator of which is the actual number of
days from and including the immediately preceding Business Day to
but excluding such Business Day and the denominator of which is
365 or 366, as the case may be, and (iii) the Class C Outstanding
Principal Amount on such Business Day after giving effect to all
transactions on such Business Day plus (B) the excess, if any, of
the amount payable to the Class A Securityholders pursuant to
clause (A) on each prior Business Day over the amount which has
been paid to the Class C Securityholders with respect thereto on
each prior Business Day. Such amounts shall be payable on the
15th day of each month commencing September 15, 1998, or if such
day is not a business day, on the next succeeding business day
(each, a "Distribution Date") or on such other, more frequent,
dates as described in Section 4.11 of the Agreement.
On the Class C Principal Payment Commencement Date
interest and principal will be distributed to the Class C
Securityholders on each Business Day prior to the Series 1998-3
Termination Date. Interest for any Business Day due but not paid
on any Business Day will be due on the next succeeding Business
Day.
On any Business Day during the Revolving Period, the
Transferor may specify an amount, to be deposited into the
Principal Funding Account. Any amounts so deposited, shall be
paid, on a pro rata basis, to the Class A Securityholders, the
Class B Securityholders and the Class C Securityholders in
accordance with Section 9A of the Agreement and upon payment
shall reduce the Class A Invested Amount, the Class B Invested
Amount and the Class C Invested Amount by amounts equal to any
such payments. In addition the Transferor may specify, upon the
issuance of a new Series pursuant to an Exchange made at any time
during the Revolving Period, that the proceeds of such issuance
be deposited into the Principal Funding Account for payment to
the Senior Securityholders pursuant to Section 9A of the
Agreement. The Class C Invested Amount will be reduced by an
amount equal to the amount of any such payments made to the Class
C Securityholder.
After the Amortization Period Commencement Date no
principal will be payable to the Class C Securityholders until
the Class C Principal Payment Commencement Date, which is the
Business Day either on or following the Business Day, on which
the Class B Invested Amount had been paid in full. During the
Amortization Period, no principal will be payable to the Class C
Securityholders until all principal payments have been made to
the Class B Securityholders.
In addition, pursuant to Section 6.15 of the Agreement,
the holders of this Security may from time to time be required,
prior to the Increase Termination Date, to purchase Additional
Class C Invested Amounts on the terms and conditions specified
therein. The holder of this Security is authorized to record on
the grid attached to its Class C Security (or at such
Securityholder's option, in its internal books and records) the
date and amount of any Additional Invested Amount purchased by
it, and each repayment thereof; provided that failure to make any
such recordation on such grid or any error in such grid shall not
adversely affect such Securityholder's rights with respect to its
Class C Invested Amount and its right to receive interest
payments in respect of the Class C Invested Amount held by such
Securityholder.
"Class C Invested Amount" shall mean, when used with
respect to any Business Day, an amount equal to (a) the Class C
Initial Invested Amount, minus (b) the aggregate amount of
principal payments made to Class C Securityholders through and
including such Business Day, minus (c) the aggregate amount of
Class C Charge-Offs for all prior Distribution Dates, minus (d)
the aggregate amount of Redirected Class B Principal Collections
and Redirected Class C Principal Collections for which the Class
D Invested Amount has not been reduced on all prior Distribution
Dates pursuant to Section 4.14(d) of the Agreement, plus (e) the
sum of the aggregate amount applied through and including such
Business Day pursuant to subsections 4.9(a)(ix) of the Agreement
(including, with respect to such subsection, amounts applied
thereto pursuant to subsections 4.10(a) and (b), 4.16(b) and
Section 4.14 of the Agreement), for the purpose of reinstating
amounts reduced pursuant to the foregoing clauses (c) and (d),
and plus (f) the aggregate principal amount of any Additional
Class C Invested Amounts purchased pursuant to Section 6.15 of
the Agreement; provided, however, that the Class C Invested
Amount shall in no event be reduced below zero or greater than
the Class C Maximum Invested Amount.
Subject to the Agreement, payments of principal are
limited to the unpaid Class C Invested Amount of the Class C
Securities, which may be less than the unpaid balance of the
Class C Securities pursuant to the terms of the Agreement. All
principal of and interest on the Class C Securities are due and
payable no later than the earlier to occur of (i) the day after
the Business Day on which the Series 1998-3 Securities are paid
in full or (ii) the first day of the February 2006 Monthly Period
or such earlier date set forth in an Extension Notice, if any
(the "Series 1998-3 Termination Date"). After the Series 1998-3
Termination Date neither the Trust nor the Transferor will have
any further obligation to distribute principal or interest on the
Class C Securities. In the event that the Class C Invested
Amount is greater than zero on the Series 1998-3 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 Class C Invested Amount and the
Class D Invested Amount at the close of business on such date
(but not more than the total amount of Receivables allocable to
the Investor Securities), and shall pay the proceeds to the Class
A Securityholders pro rata in final payment of the Class A
Securities, then to the Class B Securityholders pro rata in final
payment of the Class B Securities, then to the Class C
Securityholders pro rata in final payment of the Class C
Securities 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.
IN WITNESS WHEREOF, the Transferor has caused this
Security to be duly executed under its official seal.
FINGERHUT RECEIVABLES, INC.
By:_____________________________
Name:
Title:
Dated:
CERTIFICATE OF AUTHENTICATION
This is one of the Class C Securities referred to
in the within-mentioned Pooling and Servicing Agreement.
THE BANK OF NEW YORK
By: _______________________
Name:
Title:
Date Beginning Additions Payments Ending
Principal Principal
Balance Balance
Exhibit A-4
[FORM OF VARIABLE FUNDING ASSET BACKED SECURITY, CLASS D]
FINGERHUT MASTER TRUST
VARIABLE FUNDING ASSET BACKED SECURITY
SERIES 1998-3, CLASS D
THIS SECURITY (OR ITS PREDECESSOR) WAS
ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"). THIS SECURITY HAS NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OR ANY
APPLICABLE STATE SECURITIES LAW OF ANY STATE AND MAY
NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED
UNLESS REGISTERED PURSUANT TO OR EXEMPT FROM
REGISTRATION UNDER THE SECURITIES ACT AND ANY OTHER
APPLICABLE SECURITIES LAW. FINGERHUT RECEIVABLES, INC.
SHALL BE PROHIBITED FROM TRANSFERRING ANY INTEREST IN
OR PORTION OF THIS SECURITY UNLESS, PRIOR TO SUCH
TRANSFER, IT SHALL HAVE DELIVERED TO THE TRUSTEE AN
OPINION OF COUNSEL TO THE EFFECT THAT SUCH PROPOSED
TRANSFER WILL NOT ADVERSELY AFFECT THE FEDERAL INCOME
TAX CHARACTERIZATION OF ANY OUTSTANDING SERIES OF
INVESTOR SECURITIES. THE TRANSFER OF THIS SECURITY IS
SUBJECT TO CERTAIN CONDITIONS SET FORTH IN THE POOLING
AND SERVICING AGREEMENT REFERRED TO HEREIN.
NO SALE, ASSIGNMENT, PARTICIPATION, PLEDGE,
HYPOTHECATION, TRANSFER OR OTHER DISPOSITION OF THIS
SECURITY (OR ANY INTEREST THEREIN) SHALL BE MADE UNLESS THE
TRANSFEROR SHALL HAVE GRANTED ITS PRIOR CONSENT THERETO,
WHICH CONSENT MAY NOT BE UNREASONABLY WITHHELD. NOR MAY AN
INTEREST IN THIS SECURITY BE MARKETED, ON OR THROUGH (I) AN
"ESTABLISHED SECURITIES MARKET" WITHIN THE MEANING OF
SECTION 7704(b)(1) OF THE INTERNAL REVENUE CODE OF 1986, AS
AMENDED (THE "CODE") AND ANY PROPOSED, TEMPORARY OR FINAL
TREASURY REGULATION THEREUNDER, INCLUDING, WITHOUT
LIMITATION, AN OVER-THE-COUNTER-MARKET OR AN INTERDEALER
QUOTATION SYSTEM THAT REGULARLY DISSEMINATES FIRM BUY OR
SELL QUOTATIONS OR (II) A "SECONDARY MARKET" WITHIN THE
MEANING OF SECTION 7704(b)(2) OF THE CODE AND ANY PROPOSED,
TEMPORARY OR FINAL TREASURY REGULATION THEREUNDER, INCLUDING
A MARKET WHEREIN INTERESTS IN THE CLASS D SECURITIES ARE
REGULARLY QUOTED BY ANY PERSON MAKING A MARKET IN SUCH
INTERESTS AND A MARKET WHEREIN ANY PERSON REGULARLY MAKES
AVAILABLE BID OR OFFER QUOTES WITH RESPECT TO INTERESTS IN
THE CLASS D SECURITIES AND STANDS READY TO EFFECT BUY OR
SELL TRANSACTIONS AT THE QUOTED PRICES FOR ITSELF OR ON
BEHALF OF OTHERS.
No. ___ $_________
FINGERHUT MASTER TRUST
VARIABLE FUNDING ASSET BACKED SECURITY
SERIES 1998-3, 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 credit card accounts and closed-end installment sale or
closed-end loan contracts transferred or to be transferred by
Fingerhut Receivable, 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 any of them.)
This certifies that FINGERHUT RECEIVABLES, INC. (the
"Securityholder") is the registered owner of a fractional
undivided interest in the Fingerhut Master Trust (the "Trust")
issued pursuant to the Pooling and Servicing Agreement, dated as
of March 18, 1998(the "Pooling and Servicing Agreement"; such
term to include any amendment or Series Supplement thereto) by
and between Fingerhut Receivables, Inc., as Transferor (the
"Transferor"), Fingerhut National Bank as Servicer (the
"Servicer"), and The Bank of New York (Delaware), as Trustee (the
"Trustee"), and the Series 1998-3 Supplement, dated as of July
30, 1998 (the "Series 1998-3 Supplement"), among the Transferor,
the Servicer and the Trustee (the Pooling and Servicing
Agreement, as supplemented by the Series 1998-3 Supplement, is
herein referred to as the "Agreement"). The corpus of the Trust
consists of all of the Transferor's right, title and interest in,
to and under (i) the Trust Property (as defined in the Agreement)
and (ii) the property described in Section 3A of the Series 1998-
3 Supplement and Section 4.5 of the Agreement.
This Security does not purport to summarize the
Agreement and reference is made to the Agreement for information
with respect to the interests, rights, benefits, obligations,
proceeds, and duties evidenced hereby and the rights, duties and
obligations of the Trustee. To the extent not defined herein,
the capitalized terms used herein have the meanings ascribed to
them in the Agreement. This Security is one of a series of
Securities entitled "Fingerhut Master Trust Variable Funding
Asset Backed Securities, Series 1998-3, Class D" (the "Class D
Security"), each of which represents a fractional undivided
interest in the Trust, and is issued under and is subject to the
terms, provisions and conditions of the Agreement, to which
Agreement, as amended from time to time, the Securityholder by
virtue of the acceptance hereof assents and by which the
Securityholder is bound.
Fingerhut Receivables, Inc. shall be prohibited from
Transferring any interest in or portion of the Class D Security
unless, prior to such Transfer, it shall have delivered to the
Trustee an Opinion of Counsel to the effect that such proposed
Transfer will not adversely affect the Federal, Minnesota or
Delaware income tax characterization of any outstanding Series of
Investor Security or the taxability (or tax characterization) of
the Trust under Federal, Minnesota or Delaware income tax laws.
Interest will not accrue on the unpaid principal amount
of the Class D Security.
Pursuant to Section 6.16 of the Agreement, the holders
of this Security may from time to time be required, prior to the
Increase Termination Date, to purchase Additional Class D
Invested Amounts on the terms and conditions specified therein.
The holder of this Security is authorized to record on the grid
attached to its Class D Security (or at such Securityholder's
option, in its internal books and records) the date and amount of
any Additional Invested Amount purchased by it, and each
repayment thereof; provided that failure to make any such
recordation on such grid or any error in such grid shall not
adversely affect such Securityholder's rights with respect to its
Class D Invested Amount and its right to receive interest
payments in respect of the Class D Invested Amount held by such
Securityholder.
"Class D Invested Amount" shall mean, when used with
respect to any Business Day, an amount equal to (a) the Class D
Initial Invested Amount, plus (b) the aggregate principal amount
of any Additional Class D Invested Amounts pursuant to Section
6.16 of the Agreement, minus (c) the aggregate amount of
principal payments made to Class D Securityholders and reductions
of the Class D Invested Amount pursuant to subsection 4.7(d) of
the Agreement through and including such Business Day, minus (d)
the aggregate amount of Class D Charge-Offs for all prior
Distribution Dates, minus (e) the aggregate amount of Redirected
Principal Collections for which the Class D Invested Amount has
been reduced on all prior Distribution Dates, and plus (f) the
sum of the aggregate amount applied through and including such
Business Day pursuant to subsections 4.9(a)(x) of the Agreement
(including, with respect to such subsection, amounts applied
thereto pursuant to subsections 4.10(a) and (b) of the
Agreement), for the purpose of reinstating amounts reduced
pursuant to the foregoing clauses (d) and (e); provided, however,
that the Class D Invested Amount shall in no event be reduced
below zero.
Subject to the Agreement, payments of principal are
limited to the unpaid Class D Invested Amount of the Class D
Security, which may be less than the unpaid balance of the Class
D Security pursuant to the terms of the Agreement. All principal
of and interest on the Class D Security is due and payable no
later than the earlier to occur of (i) the day after the Business
Day on which the Series 1998-3 Securities are paid in full or
(ii) the first day of the February 2006 Monthly Period or such
earlier date set forth in an Extension Notice, if any (the
"Series 1998-3 Termination Date"). After the Series 1998-3
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 1998-3 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 Class C Invested Amount and the
Class D Invested Amount at the close of business on such date
(but not more than the total amount of Receivables allocable to
the Investor Securities), and shall pay the proceeds to the Class
A Securityholders pro rata in final payment of the Class A
Securities, then to the Class B Securityholders pro rata in final
payment of the Class B Securities, then to the Class C
Securityholders pro rata in final payment of the Class C
Securities and finally to the Class D Securityholders pro rata in
final payment of the Class D Security.
Unless the certificate of authentication hereon has
been executed by or on behalf of the Trustee, by manual
signature, this Security shall not be entitled to any benefit
under the Agreement, or be valid for any purpose.
IN WITNESS WHEREOF, the Transferor has caused this
Security to be duly executed under its official seal.
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
By:________________________
Name:
Title:
Date Beginning Additions Payments Ending
Principal Principal
Balance Balance
EXHIBIT B
[RESERVED]
EXHIBIT C
[Form of Monthly Securityholders' Statement]
Exhibit D
____________, ____
Fingerhut Receivables, Inc.
4400 Baker Road
Suite F480
Minnetonka, MN 55343
The Bank of New York (Delaware)
White Clay Center
Route 273
Newark, Delaware 19711
Re: Fingerhut Master Trust, Class [A] [B] [C]
Securities, Series 1998-3
Ladies and Gentlemen:
In connection with our proposed purchase of Fingerhut Master
Trust, Variable Funding Asset Backed Securities, Series 1998-3,
Class [A] [B] [C] (the "Class [A] [B] [C] Securities"), we
confirm that:
1. We have received such information and documentation as
we deem necessary in order to make our investment decision. We
understand that such information and documentation speaks only as
of its date and that such information and documentation may not
be correct or complete as of any time subsequent to such date.
2.
3. We agree to be bound by the restrictions and conditions
set forth in the Amended and Restated Pooling and Servicing Agree
ment, dated as of March 18, 1998, as supplemented by the Series
1998-3 Supplement dated as of July 30, 1998 (the "Series 1998-3
Supplement" and together with the Pooling and Servicing
Agreement, each as amended from time to time, 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, relating to the
Class [A] [B] [C] Securities, including the obligation to pur
chase Additional Class A Invested Amounts, Additional Class B
Invested Amounts and Additional Class C Invested Amounts as speci
fied in Section 6.15 of the Pooling and Servicing Agreement, and
agree to be bound by, and not reoffer, resell, pledge or other
wise transfer (any such act, a "Transfer") the Class [A] [B]
Securities except in compliance with, such restrictions and condi
tions including but not limited to those in Section 10 of the
Series 1998-3 Supplement.
4.
5. We understand that the Class [A] [B] [C] Securities
have not been and will not be registered under the Securities Act
of 1933, as amended (the "Securities Act") or any state securi
ties law and agree that the Class [A] [B] [C] Securities may be
reoffered, resold, pledged or otherwise transferred only in
compliance with the Securities Act and other applicable laws and
only (i) to the Transferor or (ii) pursuant to Rule 144A under
the Securities Act to an institutional investor that we reason
ably believe is a qualified institutional buyer within the
meaning of Rule 144A ("QIB") purchasing for its own account or a
QIB purchasing for the account of a QIB, whom we have informed,
in each case, that the reoffer, resale, pledge or other transfer
is being made in reliance on Rule 144A.
6.
7. We have neither acquired nor will we Transfer any
Class [A] [B] [C] Securities we acquire (or any interest therein)
or cause any Class [A] [B] [C] Security (or any interest therein)
to be marketed on or through (i) an "established securities mar
ket" within the meaning of Section 7704(b)(1) of the Internal
Revenue Code of 1986, as amended (the "Code") and any proposed,
temporary or final treasury regulation thereunder, including,
without limitation, an over-the-counter-market or an interdealer
quotation system that regularly disseminates firm buy or sell
quotations or (ii) a "secondary market" within the meaning of Sec
tion 7704(b)(2) of the Code and any treasury regulation there
under, including a market wherein the Class [A] [B] [C]
Securities (or any interest therein) are regularly quoted by any
person making a market in such interests and a market wherein any
person regularly makes available bid or offer quotes with respect
to the Class [A] [B] [C] Securities (or any interest therein) and
stands ready to effect buy or sell transactions at the quoted
prices for itself or on behalf of others. We acknowledge that we
are aware that the opinion of special tax counsel to the
Transferor regarding the Trust's status is dependent in part on
the accuracy of the preceding sentence.
8.
9. We are not and will not become, for so long as we hold
any interest in the Class [A] [B] [C] Securities, a partnership,
Subchapter S corporation or grantor trust for United States feder
al income tax purposes.
10.
11. We are a person who is either (A)(i) a citizen or resi
dent of the United States, (ii) a corporation or other entity
organized in or under the laws of the United States or any politi
cal subdivision thereof or (iii) a person not described in (i) or
(ii) whose ownership of the Class [A] [B] [C] Securities is effec
tively connected with a such person's conduct of a trade or busi
ness within the United States (within the meaning of the Code)
and our ownership of any interest in a Class [A] [B] [C] Security
will not result in any withholding obligation with respect to any
payments with respect to the Class [A] [B] [C] Securities by any
person or (B) an estate the income of which is includible in
gross income for United States federal income tax purposes or any
trust if a court within the United States is able to exercise
primary supervision over the administration of the trust and one
or more United States fiduciaries have the authority to control
all substantial decisions of the trust. We agree that if we are
a person described in clause (A)(iii) above, we will furnish to
the person from whom we are acquiring a Class [A] [B] [C]
Security, the Servicer and the Trustee, a properly executed U.S.
Internal Revenue Service Form 4224 and a new Form 4224, or any
successor applicable form, upon the expiration or obsolescence of
any previously delivered form (and such other certifications,
representations or opinions of counsel as may be requested by the
Transferor, the Servicer or the Trustee). We recognize that if
we are a tax-exempt entity, payments with respect to the Class
[A] [B] [C] Securities may constitute unrelated business taxable
income.
12.
13. We understand that if we are not created or orga
nized under the laws of the United States or any State thereof
(including the District of Columbia) we will, upon written notice
by the Transferor that the Transferor intends, pursuant to
Section 1446 or other applicable section of the Internal Revenue
Code, to withhold U.S. tax (a "Withholding Tax") from amounts
paid or accruing hereunder to us (such determination being a
"Withholding Event"), for tax years for which we have already
filed U.S. federal income tax returns (each a "Prior Tax Year")
prior to proper notice of such Withholding Event, provide (A) a
signed officer's certificate stating that amounts paid or
accruing under the Securities have been included in such
purchaser's U.S. federal income tax returns for each such Prior
Tax Year, which certificate may be relied on by the Transferor in
asserting to the Internal Revenue Service the applicability of
Section 1463 of the Internal Revenue Code with respect to any
Withholding Tax for each such Prior Tax Year and (B) provide
information to the Transferor or, at our option, to the Internal
Revenue Service in support of the application of Section 1463 of
the Internal Revenue Code for each such Prior Tax Year.
14.
15. We understand that no subsequent Transfer of a Class
[A] [B] [C] Security is permitted unless the Transferor consents
in writing to the proposed Transfer; provided, that any attempted
Transfer that would cause the number of Targeted Holders to
exceed one-hundred shall be void.
16.
17. We are a "qualified institutional buyer" (as defined
in Rule 144A under the Securities Act) purchasing for our own
account or for the account of a "qualified institutional buyer"
and we understand that the sale to us is being made in reliance
on Rule 144A under the Securities Act.
18.
19. We are acquiring each of the Class [A] [B] [C]
Securities purchased by us for our own account or for a single
account (each of which is a "qualified institutional buyer") as
to which we exercise sole investment discretion.
20.
21. We are 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 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 for purposes of clauses (iv)
and (v) any insurance company general account, but excluding any
entity registered under the Investment Company Act of 1940, as
amended).
22.
23. We understand that any purported Transfer of any Class
[A] [B] [c] Security in contravention of the restrictions and
conditions in paragraphs 1 through 11 above shall be null and
void and the purported transferee shall not be recognized by the
Trust or any other person as a holder of Class [A] [B] [C]
Securities for any purpose.
24.
25. We further understand that, promptly following any pro
posed resale, pledge or transfer of any Class [A] [B] [C]
Securities, we will be required to furnish to the Trustee and the
Registrar, such certification and other information as the
Trustee or the Registrar may reasonably require to confirm that
the proposed sale complies with the foregoing restrictions and
with the restrictions and conditions of the Class [A] [B] [C]
Securities and the Pooling and Servicing Agreement pursuant to
which the Class [A] [B] [C] Securities were issued and we agree
that if we determine to Transfer any Class [A] [B] [C] Security,
we will cause our proposed transferee to provide the Transferor,
the Servicer and the Trustee with a letter substantially in the
form of this letter. We further understand that Class [A] [B]
[C] Securities purchased by us will bear a legend to the forego
ing effect.
26.
27. The person signing this letter on behalf of the
ultimate beneficial purchaser of the Class [A] [B] [C] Securities
has been duly authorized by such beneficial purchaser of the
Class [A] [B] [C] Securities to do so.
28.
29. 15. The Class [A] [B] [C] Securities purchased by us
should be registered in the name and issued in the denominations
set forth on Schedule 1 hereto. All payments on the Class [A]
[B] [C] Securities held by us should be wired to us in accordance
with the instructions set forth on Schedule 1 hereto unless we
otherwise notify the Transferor, the Servicer and the Trustee in
writing.
30.
You are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to
any interested party in any administrative or legal proceeding or
official inquiry with respect to the matters covered hereby.
1.
2.
Very truly yours
[NAME OF PURCHASER]
By:
Name:
Title:
Schedule 1
Registration and Payment Instructions
Registration Instructions:
Full Legal Name of Purchaser:__________________________
Number of Securities:________________
Payment Instructions:
Name of Bank: ____________________
Address of Bank:____________________
Account Name: ___________________
Account Number:___________________
ABA Number: ___________________
Reference: ___________________
Exhibit E
FORM OF EXTENSION NOTICE
FINGERHUT MASTER TRUST, SERIES 1998-3
The undersigned, a duly authorized representative of
Fingerhut Receivables, Inc., a Delaware corporation (the
"Transferor"), as Transferor pursuant to the Amended and Restated
Pooling and Servicing Agreement dated as of March 18, 1998 (the
"Pooling and Servicing Agreement"), by and between the
Transferor, as transferor, Fingerhut National Bank, as servicer
(the "Servicer"), and The of New York (Delaware), as trustee
(the "Trustee"), as supplemented by the Series 1998-3 Supplement,
dated July 30, 1998 (the "Series 1998-3 Supplement"), by and
between the Transferor, the Servicer and the Trustee (the Pooling
and Servicing Agreement, as supplemented by the Series 1998-3
Supplement, or as the Pooling and Servicing Agreement may from
time to time be amended, supplemented, or modified, the
"Agreement"), does hereby notify the Trustee (or any successor
Trustee) and the Investor Securityholders:
A. Capitalized terms used but not
defined in this Security shall have the respective meanings set
forth in the Agreement. References herein to certain sections
and subsections are references to the respective sections and
subsections of the Agreement.
B.
C. The undersigned is a [Vice President] or more senior
officer of the Transferor who is duly authorized to execute and
deliver this Security on behalf of the Transferor.
D.
E. This Security is being delivered pursuant to Section
6.17(a) of the Agreement.
F.
G. The Transferor is the Transferor under the Agreement.
H.
I. No Pay Out Event has occurred that has not been
remedied pursuant to the provisions of the Agreement.
J.
K. The Security is being delivered to the Trustee on or
before the date specified in subsection 6.17(a) for delivery.
L.
M. NOTIFICATION OF EXTENSION
N. Pursuant to subsection 6.17(a) and in respect of
[ , ] (the "Current Extension Date"), the Transferor
hereby notifies the Trustee and the Investor Securityholders of
the Transferor's intention to extend the Revolving Period in
respect of Series 1998-3 on the Current Extension Date pursuant
to the provisions of Section 6.17, until the date set forth below
(such extension, the "Extension").
O.
P. REQUIREMENTS TO COMPLETE EXTENSION
Q.
(1) Annexed hereto is an election
notice (an "Election Notice") to be returned by any Investor
Securityholder electing to approve the Extension. No Extension
shall occur unless Investor Securityholders holding at least more
than fifty percent of each of the aggregate principal amount of
Class A Securities, Class B Securities, Class C Securities and
Class D Securities, respectively, shall return properly executed
Election Notices approving the Extension by the Election Date (as
defined below). Any Investor Securityholder electing to approve
the Extension must deliver a properly executed Election Notice at
the office of the Trustee, [ ] on or
before 3:00 p.m., [ ] time, on [
, ] (the "Election Date"). Any Investor Securityholder may
withdraw any Election Notice delivered by it to the Trustee by
notifying the Trustee in writing at the address set forth in the
previous sentence on or prior to the Election Date.
(2)
(3) THE EXTENSION SHALL NOT OCCUR UNTIL PRIOR
SATISFACTION OF CERTAIN CONDITIONS PRECEDENT BY THE CLOSE OF
BUSINESS ON THE ELECTION DATE, INCLUDING THE APPROVAL OF SUCH
EXTENSION BY THE INVESTOR SECURITYHOLDERS HOLDING THE REQUIRED
AGGREGATE PRINCIPAL AMOUNT OF CLASS A SECURITIES, CLASS B
SECURITIES, CLASS C SECURITIES AND CLASS D SECURITIES, THAT NO
PAY OUT EVENT SHALL HAVE OCCURRED AND BE CONTINUING, AND THAT
CERTAIN LEGAL OPINIONS AND RATING AGENCY CONFIRMATIONS SHALL HAVE
BEEN DELIVERED TO THE TRANSFEROR AND THE TRUSTEE PURSUANT TO
SECTION 6.17(b). THE TRANSFEROR MAY IN ITS SOLE DISCRETION
WITHDRAW THIS EXTENSION NOTICE AT ANY TIME ON OR PRIOR TO THE
ELECTION DATE BY DELIVERING NOTICE OF SUCH WITHDRAWAL IN WRITING
TO THE TRUSTEE. IF ANY SUCH NOTICE OF WITHDRAWAL SHALL BE SO
DELIVERED, NO EXTENSION SHALL OCCUR.
(4)
R. NEW PROVISIONS TO BECOME
EFFECTIVE ON THE EXTENSION DATE
S.
(1) The new Amortization Period
Commencement Date shall be the earlier of (a) [ , ] or
(b) the Pay Out Commencement Date.
(2)
(3) The new Extension Date shall be [ , ].
(4)
(5) [ The new Scheduled Series 1998-3 Termination Date
shall be [ , ].]
(6)
(7) The new Class A Expected Payment Date is ______.
(8)
(9) The new Class B Expected Payment Date is ______.
(10)
(11) The new Class C Expected Payment Date is ______.
(12)
(13) [ The following are additional provisions that will
apply to the Investor Securities on and after the Extension Date:
(14)
(15) INSERT PROVISIONS]
(16)
T. Annexed hereto are the following:
U.
(1) the form of Extension Tax
Opinion.
(2)
(3) the form of Extension Opinion.
(4)
(5) the Election Notice.
(6)
(1) IN WITNESS WHEREOF, the undersigned has duly executed this
certificate this [ ] day of [ , ].
(2)
(3)
(4) FINGERHUT RECEIVABLES, INC.
(5)
By:________________________
Name:
Title:
EXHIBIT F
FORM OF INVESTOR SECURITYHOLDER ELECTION NOTICE
[INSERT NAME
AND ADDRESS OF TRUSTEE]
Re: Fingerhut Master Trust:
Election Notice to Extend Series 1998-3
Ladies and Gentlemen:
The undersigned hereby elects to approve the extension of
the Revolving Period for Series 1998-3 until the Amortization
Period Commencement Date set forth in the Extension Notice dated
[ , ] (the "Extension Notice") and
delivered to the undersigned pursuant Section 6.17(a) of the
Amended and Restated Pooling and Servicing Agreement, dated as of
March 18, 1998, including the Series 1998-3 Supplement thereto,
dated as of July 30, 1998, each by and among Fingerhut
Receivables, Inc., as transferor, Fingerhut National Bank, as
servicer, and The Bank of New York (Delaware), as trustee (the
"Pooling and Servicing Agreement"). The undersigned hereby
acknowledges that, commencing on the Current Extension Date (as
defined in the Extension Notice), the terms and provisions of the
Pooling and Servicing Agreement shall be modified as set forth in
the Extension Notice.
IN WITNESS WHEREOF, the undersigned registered owner(s) has
[have] executed this Election Notice as of the date set forth
below.
Dated:
Name(s):_______________________
Address:_______________________
(Please
Print)
Signature(s):__________________